United States District Court, S.D. New York
April 13, 2005.
FREDERICK W. CRIGGER, DSMCKEE INVESTMENTS INC., JACK SCHUELER, EVA SCHUELER, and CSDESIGN INC., Plaintiffs,
FAHNESTOCK AND COMPANY, INC., and AURELIO VUONO, Defendants.
The opinion of the court was delivered by: JOHN KEENAN, Senior District Judge
MEMORANDUM OPINION and ORDER
Defendant Fahnestock and Company, Inc. ("Fahnestock") moves to
admit into evidence the terms of the settlement agreement between
Plaintiffs and former defendant Raymond Minicucci. Plaintiffs
object. For the reasons that follow, the Court will permit
Fahnestock to introduce evidence of the fact of Plaintiffs'
settlement with Minicucci, but not evidence of the amount of
Fahnestock makes two arguments in favor of admitting the terms
of the settlement. First, Fahnestock claims that it was unfairly
prejudiced by a portion of Plaintiffs' opening statement. Mr.
Kim, Plaintiffs' counsel, told the jury:
The reason we're here, ladies and gentlemen, is that
two of the parties involved in this scheme have
refused to take any responsibility for what happened.
(Tr. 40:23-25). The jury already knows that Plaintiffs did not
sue Messrs, Mason, Capland and Feldman, the three Canadian promoters. Fahnestock and Vuono are in Court. The jury could
infer from the foregoing facts that Minicucci is the only party
who has taken "responsibility" i.e., settled. Fahnestock
argues that the jury can further infer from Mr. Kim's statement
that Minicucci settled on "onerous" terms, leading to the
prejudicial conclusion that Fahnestock is liable under
respondeat superior for the Minicucci's "serious wrongdoing."
This inference would be incorrect because the settlement actually
was rather modest, given the amount of recovery sought in the
Complaint. Fahnestock wants to dispel this misconception, if it
exists. (See Ltr. from Proskauer Rose to Court, Apr. 12, 2005).
Second, Fahnestock seeks admission of the settlement in order
to impeach Minicucci, if he is called to the witness stand.
Fahnestock contends that Fed.R. Evid. 408 provides that evidence
of a settlement may be offered to prove the witness's bias or
prejudice. In the event that Minicucci testifies and makes
statements inconsistent with his deposition testimony, or
otherwise opens the door to impeachment, Fahnestock seeks to
prove the fact and amount of the settlement. (Id.).
Rule 408 excludes evidence of compromises or compromise
negotiations tending to prove liability for, or invalidity of, a
claim. This rule is applicable regardless of which party offers
the evidence concerning a settlement or settlement offer. Pierce
v. F.R. Tripler & Co., 955 F.2d 820, 828 (2d Cir. 1992). rule also applies with equal force whether the settlement
involves the litigants or a litigant and a third party. Kennon
v. Slipstreamer, Inc., 794 F.2d 1067, 1069 (5th Cir. 1986);
McInnis v. A.M.F., Inc., 765 F.2d 240, 247 (1st Cir. 1985).
According to Weinstein's Federal Evidence § 408.04 (2d ed.
Rule 408 codifies the general practice of the federal
courts in making compromise agreements inadmissible
in such circumstances as proof of liability for, or
invalidity of, the claim or its amount. . . . Even if
the fact of the settlement is admissible for a
purpose other than proof of liability, disclosure of
the settlement amount may constitute reversible
This is sound policy. The jury might be inclined to speculate why
a person in Mr. Minicucci's position is not in the courtroom with
Fahnestock and Mr. Vuono. Disclosure of the fact of the
settlement will prevent any juror confusion or speculation on
this front. As evidence of the Minicucci settlement would not be
offered to prove liability for, or invalidity of, the claim, Rule
408 is not offended.
Once the jury learns of the settlement, disclosure of its
amount serves no purpose and could result in additional
speculation. If the amount is high, the jury might infer that the
settling defendant bears more responsibility for the plaintiff's
injury than the nonsettling defendant; if the amount is low, the
jury might infer the opposite. Kennon, 794 F.2d at 1070. Either
inference is potentially prejudicial and best avoided by keeping the settlement amount from the jury,
regardless of who seeks to offer the evidence. See e.g.,
Vincent v. Louis & Marx & Co., 874 F.2d 36, 42 (1st Cir. 1989);
Kennon, 794 F.2d at 1070; Pioneer Hi-Bred Int'l, Inc. v.
Ottawa Plant Food, Inc., 219 F.R.D. 135, 144 (N.D. Iowa 2003).
Fahnestock's arguments do not overcome these considerations.
The Court disagrees that the jury may infer from Mr. Kim's remark
that Minicucci settled for an "onerous" amount. The most the jury
can infer from Mr. Kim's opening statement is that Minicucci
settled, and the Court is permitting evidence of the fact of the
settlement to clear up any potential confusion here. The Court
also notes that neither defendants objected to Mr. Kim's
statement when he made it. (Tr. 40:23-25).
As for Minicucci, Fahnestock surely may use the fact of his
settlement for impeachment purposes, if necessary. Fahnestock is
technically correct that Rule 408 would not prevent the
introduction of the amount of settlement for this purpose.
Nevertheless, the Court finds that the well-known factors listed
in Fed.R. Evid. 403 outweigh the probative value of the
settlement amount in this context. While Rule 403 does not govern
this issue, the Court notes that a Rule 403-type balancing of
prejudice and relevance is appropriate in resolving a Rule 408
challenge to the admissibility of a settlement amount. See
Kennon, 794 F.2d at 1076-77 (Thornberry, J., dissenting);
United States v. Am. Soc'y of Composers, Authors and Publishers, 1989
WL 222654 at *9 (S.D.N.Y. 1989), aff'd sub nom Am. Soc'y of
Composers, Authors and Publishers v. Showtime/The Movie Channel,
Inc., 912 F.2d 563 (2d Cir. 1990).
In light of the foregoing analysis, Plaintiffs' objection to
introduction of the fact of Minicucci's settlement will be
OVERRULED. Plaintiffs' objection to introduction of the amount
of Minicucci's settlement will be SUSTAINED.
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