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United States District Court, S.D. New York

April 13, 2005.


The opinion of the court was delivered by: JOHN KEENAN, Senior District Judge


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 the settlement.

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. 2005):

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 error.
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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