disputes. Fed. R. Civ. P. 408 Advisory Committee's Note.
The Court notes at the outset that Judge Pisano did not find as a fact that the communications were offers of settlement within the scope of Rule 408. On the contrary, he expressly assumed that they were offers of settlement for the purposes of the argument. Plaintiffs assertion to the contrary has no basis. In light of its decision to modify the Order below, however, this Court must reach this issue.
Obviously this is not the type of offer of settlement that this Court sees in the typical federal litigation. However, it appears undisputed that the letters were written in an attempt to induce Mayling to forego her action for divorce. The temporary reconciliation is persuasive evidence of this fact. Plaintiff's uncontradicted representations and ordinary human nature compel the conclusion that an admission of lack of validity of his economic claims against his spouse and father-in-law were a likely quid pro quo of any reconciliation. Therefore, this Court finds that the letters were an offer of compromise of the impending divorce action as contemplated by Rule 408.
A literal reading of Judge Pisano's decision suggests that his ruling was based on a narrow legal ground. As quoted above, the Judge implies that, as a matter of law, settlement proposals in one case may not be excluded in another under Rule 408. This Court finds that the proposition so stated is against the weight of legal authority on this issue.
The only relevant Third Circuit case that the Court's research has discovered is Petruzzi's IGA Supermarkets, Inc. v. Darling-Delaware Co., 998 F.2d 1224, 1246-47 (3d Cir), cert. denied, 126 L. Ed. 2d 455, 114 S. Ct. 554 (1993). There, without extended discussion, the Court of Appeals upheld a district court ruling in an anti-trust case that evidence of settlement of prior anti-trust suits against the defendant was barred by Rule 408. In that case, however, defendant and the wrongdoing of which it stood accused in the earlier actions was the same as the case at bar. Here, the offer of settlement is proffered against a plaintiff raising a different type of claim. Moreover, there were several alternative grounds for the decision. Thus, Petruzzi's IGA is not authoritative on the issue before the Court.
Nonetheless, in light of this case and decisions from other jurisdictions, the Court finds that, where cases are related, the better view is that Rule 408 may exclude settlement proposals in one from admission into evidence in the other. In the Fourth Circuit, the Court of Appeals considered an anti-trust action that was the latest in a series of lawsuits between former business partners. Fiberglass Insulators, Inc. v. Dupuy, 856 F.2d 652 (4th Cir. 1988). The court held that settlement discussions in the prior suits were inadmissible in the case at bar. Id. at 655. The court noted that the most recent suit was really a continuation of the feud between the parties to the prior action. Id. The Fourth Circuit found that the policy rationale of Rule 408 to promote uninhibited settlement negotiations mandated the exclusion of the discussions. See also Williams v. Fermenta Animal Health Co., 984 F.2d 261, 264 (8th Cir. 1993) (settlement of prior discrimination claim properly excluded in discrimination suit against corporate successor).
The same policy considerations have been invoked to exclude evidence of settlements with third parties arising out of the same incident that is the subject of the claim being litigated. Lampliter Dinner Theater, Inc. v. Liberty Mut. Ins. Co., 792 F.2d 1036, 1042 (11th Cir. 1986); Branch v. Fidelity & Casualty Co. of N.Y., 783 F.2d 1289, 1294 (5th Cir. 1986); United States v. Contra Costa County Water Dist., 678 F.2d 90, 92 (9th Cir. 1982). In this district, Judge Sarokin held that accepting payment from an insurer was not admissible to establish that a claim existed and that a different, subsequent insurer was not liable. Fidelity & Deposit Co. of Md. v. Hudson United Bank, 493 F. Supp. 434, 445 (D.N.J. 1980), rev'd on other grounds, 653 F.2d 766 (3d Cir. 1981); see also Johnson v. Garden State Brickface & Stucco Co., 833 F. Supp. 524, 527 n.1 (D.N.J. 1993).
Other cases have held to the contrary, however. In a case that pre-dates its holding in Williams, the Eighth Circuit found that evidence of a settlement offer was inadmissible only when offered to prove liability for or invalidity of the claim under negotiation. Vulcan Hart Corp. v. N.L.R.B., 718 F.2d 269, 277 (8th Cir. 1983). The Tenth Circuit has also read the Rule narrowly. Broadcort Capital Corp. v. Summa Medical Corp., 972 F.2d 1183, 1194 (10th Cir. 1992).
This Court finds that the line of cases exemplified by Fiberglass Insulators are persuasive. The policy behind Rule 408 may be so strongly implicated in some situations that the spirit of the rule would be violated by allowing evidence of settlement negotiations in a prior case to be admitted into evidence. The disincentive to engage in settlement negotiations may be no less real when there is a prospect that one's adversary may use them as evidence in later litigation. Fiberglass Insulators, 856 F.2d at 654; Branch, 783 F.2d at 1294. Identifying such a situation is necessarily a sui generis determination. However, where the same parties are involved, or the same set of facts give rise to the claim, it may weigh in favor of a determination that the cases are too closely related to permit a settlement proposal in one to be admitted in the other.
As noted, the Third Circuit has not addressed this issue directly. Consequently, it is not surprising if Judge Pisano did not consider the possibility that the divorce and the commercial disputes are so closely related that proposals of compromise in one might be inadmissible in the other. Nonetheless, the Court is convinced that this possibility should be weighed, and so the ruling below will be vacated.
This Court has stated its intention not to allow the acrimony of the divorce to infect the litigation of the business arrangements of the parties. Summary Judgment Opinion at 34. The record presently before the Court indicates that the events concerning the alleged joint venture all precede the disintegration of the marriage. It is not clear how allegations of marital impropriety would be relevant to the contractual dispute between the parties. However, it would not be reasonable to ignore the likelihood that the disintegration of the marriage was at least in part propelled by the alleged breach of the agreement and plaintiff's threat of suit.
Moreover, an honest reading of the letters shows that the abandonment of his claims was intended by plaintiff as an inducement to reconciliation. Thus, the dual policies behind Rule 408, to encourage settlements of compromise and to recognize that an offer of compromise does not necessary constitute a valid admission as to the factual predicate of liability, are implicated here. Therefore, the Court must modify the decision below and hold that the letters are not admissible as an admission of plaintiff as to the factual predicate of his claim.
This does not mean, however, that the letters will not be admissible for some other purpose. The final sentence of Rule 408 provides that: "This rule also does not require exclusion when the evidence is offered for another purpose, such as proving bias or prejudice of a witness, negativing a contention of undue delay, or proving an effort to obstruct a criminal investigation or prosecution." Judge Pisano recognized the pertinence of this provision as an alternative ground for his ruling.
There is no question that the communications are relevant to the state of mind of Mr. Lo Bosco and the state of mind of Ms. Woo and that they could be offered for a purpose other than representing their proposals for compromise or settlement, namely, bias, prejudice or state of mind of both Mr. Lo Bosco and/or Ms. Woo and let us not forget that we are indeed concentrating, as we must in a fraud case, upon whether or not Mr. Lo Bosco relied to his detriment on any representations and communications.