Opinions of the United 1995 Decisions States Court of Appeals for the Third Circuit
6-6-1995
Affiliated Mfr v Alum Co Precedential or Non-Precedential:
Docket 94-5529
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Recommended Citation "Affiliated Mfr v Alum Co" (1995). 1995 Decisions. Paper 158. http://digitalcommons.law.villanova.edu/thirdcircuit_1995/158
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___________
No. 94-5529 ___________
AFFILIATED MANUFACTURERS, INC., Appellant,
v.
ALUMINUM COMPANY OF AMERICA,
On Appeal from the United States District Court for the District of New Jersey
(D.C. Civil Action No. 91-cv-02877)
Argued: March 7, 1995
BEFORE: HUTCHINSON and ALITO, Circuit Judges, and RESTANI, Judge, Court of International Trade*
(Opinion Filed June 6, 1995) ____________
Ross A. Lewin, Esquire (Argued) Jamieson, Moore, Peskin & Spicer 300 Alexander Park - CN 5276 Princeton, NJ 08543-5276 Attorney for Appellant
Stuart Alderoty, Esquire (Argued) Thomas G. Griggs, Esquire LeBoeuf, Lamb, Greene & MacRae, L.L.P. One Riverfront Plaza Newark, NJ 07102-5490 Attorneys for Appellee
* The Honorable Jane A. Restani, Judge, United States Court of International Trade, sitting by designation. ________________
OPINION OF THE COURT ________________
RESTANI, Judge.
Following a trial in this action brought by
plaintiff-appellant Affiliated Manufacturers, Inc. ("AMI")
alleging additional money was due on a contract, the jury
returned a verdict in favor of defendant-appellee Aluminum
Company of America ("Alcoa") on its counterclaim for failure to
satisfy contract specifications and breach of warranties. AMI
appeals from the district court's grant of a motion in limine
brought by Alcoa to exclude certain documents and deposition
testimony as evidence of settlement negotiations under Fed. R.
Evid. 408. For the reasons set forth herein, we affirm the
judgment of the district court.
I.
AMI originally filed its complaint on June 3, 1991,
against Alcoa in the Superior Court of New Jersey, seeking
payment of invoices amounting to $488,130. The case was removed
to the United States District Court for the District of New
Jersey on July 2, 1991. Alcoa filed a motion in limine on
November 5, 1993, and a supplemental submission dated
November 23, 1993, seeking to exclude portions of a total of
fifteen items from admission at trial, including excerpts from
correspondence between AMI and Alcoa, Alcoa internal memoranda
and deposition testimony. The district court granted this motion with respect to thirteen of the fifteen items, by memorandum
order dated December 23, 1993.
The case was tried before a jury from March 1, 1994 to
April 6, 1994. The jury returned a verdict of $100,000 for Alcoa
on its counterclaim, and rejected all of AMI's claims. AMI moved
for a new trial, but the motion was denied on July 19, 1994.
This appeal was filed on August 17, 1994.
The dispute between AMI and Alcoa arose from a contract
for design and fabrication of an automated greenline handling
system ("the system").1 The system built under this contract was
never put into production. During the construction of the
system, AMI submitted to Alcoa invoices for work not included in
the contract. Upon receipt, Alcoa processed the invoices for
payment. The parties disagree concerning one unpaid invoice for
hardware costs (four screen printers) totalling $280,000, and
another unpaid invoice for $208,130 in software costs. These two
invoices were submitted by AMI at the end of the project, on
April 5, 1990, to the attention of Thomas Pollak ("Pollak"),
Alcoa's procurement manager.
Pollak consulted with Alcoa employees Earle Lockwood
("Lockwood") and Phil Kasprzyk ("Kasprzyk") concerning the
invoices, because both were closely involved with the project.
1 / The system is designed to produce green, unframed interconnect devices for the electronics industry that are used to package computer chips. The system is intended to require a minimum of human intervention and consists of a series of mechanical components physically integrated and then coordinated through computer technology. Appellant's Br. at 6. In memoranda, Lockwood and Kasprzyk each evaluated one of the two
invoices from AMI. At a meeting between Pollak, Lockwood and
AMI's president, Benson Austin ("Austin"), on May 2, 1990, one
topic of discussion was the issue of unpaid invoices, as
reflected in handwritten contemporaneous notes. Appellant's App.
at 54-57 ("App.").
Alcoa's original motion in limine sought exclusion of
portions of the Lockwood and Kasprzyk memoranda and a letter from
Austin dated June 26, 1990, as well as portions of the meeting
notes from May 2, deposition exhibits and transcripts that were
not specifically described. App. at 3-5. At the request of the
district court, Alcoa supplied an additional submission detailing
twelve items (meeting notes, deposition testimony and letters)
for which Alcoa also sought portions excluded from admission at
trial. See App. at 17-21. Each of the thirteen items, for which
the district court ruled portions inadmissible, will be discussed
in turn.
In particular, the district court excluded portions of
the memorandum by Kasprzyk dated May 1, 1990, and Kasprzyk's
deposition testimony concerning the memorandum. Affiliated Mfrs., Inc. v. Aluminum Co. of America, Civ. No. 91-2877, at 7
(D.N.J. Dec. 23, 1993) ("AMI I"). The memorandum stated in part
AMI's claim of 6251 hours of programming time is [un]reasonable when you consider the additional 4100 hours that ALCOA personnel contributed.
. . . . Since the original purchase order for the line did not thoroughly specify the capability of the line, I feel that AMI has a legitimate claim to some software compensation. I feel that AMI should only be compensated for 1/3 of the requested amount since the line does not meet the 600 card per hour specification . . . .2
App. at 11; see AMI I at 7. The district court also excluded a
section of the handwritten notes of the May 2, 1990 meeting
between Alcoa and AMI, which contained a mathematical calculation
of numbers, as well as the terms "software proposal" and "above
settlement proposal by Alcoa unacceptable." AMI I at 12; see App. at 57.
The district court further excluded the following
excerpts of Pollak's deposition testimony regarding the purposes
of the May 2 meeting and a subsequent meeting held on January 7,
1991: Q: [W]hat was the purpose of the visit . . . on May the 2nd, 1990?
A: To the best of my recollection an attempt to reach agreement --
. . . .
Q: So this was about a month after the shipment of the equipment that you were there with Mr. Lockwood?
A: Yes.
Q: Do you recall the purpose of that visit?
2 / Parties do not dispute that the word "unreasonable" was intended. A: An attempt to reach agreement to get the equipment to perform in accordance with the specifications.
Q: The only other recorded visit that we have was on January 7th, 1991, . . . . [W]hat was the purpose of your visit?
A: My recollection is to reach settlement.
App. at 25-27 (Dep. Tr. of Thomas Pollak at 35-37); see AMI I at
9-10. The court also excluded portions of Austin's deposition
testimony regarding his discussions with Pollak, particularly the
following statements: Q. You were in the process of trying to negotiate a settlement?
A. No. [Mr. Pollak] was. I wasn't. Not at all.
Q. You had presented a demand, ALCOA had made a proposal to settle the dispute?
A. Yes. At this point, he said, I'm not going to pay you for any profits. I'm just going to pay you for your cost . . ., and I told him that I wasn't in business to supply products with manufacturing costs. I'm sorry. I have to make a profit.
A. Well, this had to do with the ALCOA offer. They offered what the cost of goods sold, $83,382. . . . The ALCOA offer of $101,000, which is from this batch, gives us a loss of $12,000.
A. I, frankly, was very surprised that we see such opposition from our, what we thought were most reasonable settlements on these, because you must remember we were still interested in doing more business with ALCOA . . . .
A. Well, Mr. Pollak accepted both bills, and his comment was I will offer you so much on the printers now. . . . I will offer you this much now, and you change your invoice and we will pay it.
A. I think that offer was either made in the meeting or it was made in the letter, I don't which.
App. at 47-52 (Dep. Tr. of Benson Austin at 74, 76-77, 88-90);
see AMI I at 11-12.
Additionally, the district court excluded portions of
four letters from Pollak to Austin dated June 11, August 22,
September 24, and October 31, 1990. These letters, respectively,
contained the following statements: As a compromise, I will split the $7,500 amortization fee, adding $15,000 to my offer.
App. at 66; AMI I at 13;
Your letter of 1990 June 26 presented your logic for turning down our third proposed settlement for the screen printers. . . . I suggest we resolve this equipment issue by agreeing on my final offer for a settlement . . . . Please cancel your invoice . . . and issue a new invoice.
App. at 63; AMI I at 13;
My offer still stands subject to potential reductions based on Alcoa's efforts in achieving an acceptable production rate. . . . .
Alcoa will inform AMI of the results of our efforts and will make a final settlement proposal taking into account all cost incurred by Alcoa.
App. at 69; AMI I at 13; and
We are now at the point where we can make our final settlement offer for the equipment furnished against our purchase order.
In an effort to finally resolve this matter, Alcoa proposes that AMI submit an invoice for $195,928 for additional hardware costs for the 1655 printers and $79,358.00 to cover the software costs . . . . Alcoa will pay this amount. Of course, Alcoa will expect AMI to execute an appropriate release.
App. at 74-75; AMI I at 13-14. The district court also excluded
a portion of a letter from Austin to Pollak dated June 26, 1990,
in which Austin explains the reasons why he chose to turn down
Alcoa's offer to pay a certain dollar amount for the screen
printers, referring to mathematical calculations concerning the
printer charges. App. at 14-15; AMI I at 7-8.
Also, the district court excluded the Lockwood
memorandum dated January 3, 1991, and Lockwood's deposition
testimony concerning the memorandum. In the memo, Lockwood
discussed Alcoa's proposal to pay "additional money," and
indicated: In the interest of getting the line into production ALCOA decided to proceed with the software optimization on its own. . . . In doing so we incurred costs totalling approximately $129,000 and informed AMI that we would subtract these costs from the amount they had requested.
App. at 7-9; AMI I at 6-7. The deposition testimony excluded
contained references to the January 3 memo, as follows:
That is the reason the bills were brought to my attention, because our costs had significantly increased and those just increased it even more. . . . I was asked an opinion . . . [about disputed billing figures].
App. at 34; AMI I at 10.
Lastly, the district court found excludable a February
15, 1991 letter from Austin to Pollak, stating in part, Without going into any further detail, I am willing to give an allowance of $12,000.00 . . .
[Y]our letter of August 22, 1990 makes an offer to cover AMI's costs . . .
Our original billing was for $488,130.00, so there is not much of a difference between now and then. You did want to know for what we would settle, without it going to litigation. This offer is being made without prejudice to AMI's normal rights in this matter.
App. at 61; AMI I at 12-13.
AMI challenges the district court's ruling as to the
portions of each of the 13 items excluded from admission at
trial. II.
Appellate jurisdiction in this case is based upon
28 U.S.C. § 1291 (1988), as the district court's order was final.
The district court had jurisdiction pursuant to 28 U.S.C. § 1332
and § 1441(a) (1988).
Abuse of discretion is the standard of review for
denial of a request for a new trial based on the district court's
alleged error in ruling on the admissibility of evidence. See
Lippay v. Christos, 996 F.2d 1490, 1496 (3d Cir. 1993). A
district court's ruling as to admissibility of evidence is
reviewed under an abuse of discretion standard, where the
question presented involves the application of the Federal Rules
of Evidence. See In re Paoli R.R. Yard PCB Litig., 35 F.3d 717,
749 (3d Cir. 1994). To the extent the district court's ruling
turns upon an interpretation of Rule 408, it is subject to
plenary review. Id. Where the trial court has made a factual
finding in determining admissibility of evidence, the clearly
erroneous standard is applied. United States v. 68.94 Acres of
Land, 918 F.2d 389, 392 (3d Cir. 1990); In re Japanese Elec. Prods. Antitrust Litig., 723 F.2d 238, 257 (3d Cir. 1983), cert.
granted in part sub nom. Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 471 U.S. 1002 (1985), rev'd on other grounds, 475
U.S. 574 (1986). Under this standard, a finding of fact may be
reversed on appeal only if "it is completely devoid of a credible
evidentiary basis or bears no rational relationship" to the
evidence in support. American Home Prods. Corp. v. Barr Labs., Inc., 834 F.2d 368, 370-71 (3d Cir. 1987). III.
A. Fed. R. Evid. 408
1. Evidence of negotiations to settle a disputed claim
AMI contends that the district court erred in its
interpretation and application of Rule 408. AMI alleges that the
court took an extreme view of the meaning of "settlement
negotiations" as contemplated within the rule. AMI asserts that
the district court incorrectly found that even an "apparent
difference of opinion between the parties" could trigger an
exclusion under the rule. See AMI I at 6 (citing Alpex Computer
Corp. v. Nintendo Co., 770 F. Supp. 161 (S.D.N.Y. 1991)).
Further, AMI argues that the district court erred in its factual
finding that a dispute existed between the parties.
The evidentiary exclusion for compromise and offers to
compromise reads as follows: Evidence of (1) furnishing or offering or promising to furnish, or (2) accepting or offering or promising to accept, a valuable consideration in compromising or attempting to compromise a claim which was disputed as to either validity or amount, is not admissible to prove liability for or invalidity of the claim or its amount. Evidence of conduct or statements made in compromise negotiations is likewise not admissible. This rule does not require the exclusion of any evidence otherwise discoverable merely because it is presented in the course of compromise negotiations. 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. Fed. R. Evid. 408. The application of the rule is limited to
evidence concerning settlement or compromise of a claim, where
the evidence is offered to establish liability, or the validity
or amount of the claim. Additionally, Rule 408 has been
interpreted as applicable to an actual dispute, or at least an
apparent difference of view between the parties concerning the
validity or amount of a claim. 2 Jack B. Weinstein & Margaret A.
Berger, Weinstein's Evidence ¶ 408[01] at 408-12 (1994); Kenneth S. Brown et al., McCormick on Evidence § 266, at 466 (John
William Strong ed., 4th ed. 1992). The policy behind Rule 408 is
to encourage freedom of discussion with regard to compromise.
See Weinstein's Evidence, supra, ¶ 408[01] at 408-10.
AMI argues that the case law clearly delineates
distinctions as to what constitutes "a claim which was disputed,"
and characterizes the excluded documents at issue as merely
evidencing discussions that had not yet reached the "dispute"
stage for Rule 408 purposes. Thus, AMI maintains that Rule 408
is inapplicable here, arguing that the intended construction of
Rule 408 is that there must be a threat or contemplation of
litigation, that goes beyond conduct or statements made to
resolve differences of opinion as to the validity or amount of a
claim. AMI relies chiefly upon the holdings from other circuits
to support its view that the district court misinterpreted the
term "dispute" and misapplied the rule. Alcoa responds that AMI has mischaracterized these decisions, as well as the district
court's reasoning, in its discussion of relevant precedent.
In reaching its conclusion to apply the Rule 408
exclusion, the district court reasoned that the Tenth Circuit's
application of Rule 408, in Big O Tire Dealers, Inc. v. Goodyear
Tire & Rubber Co., 561 F.2d 1365 (10th Cir. 1977), cert.
dismissed, 434 U.S. 1052 (1978), was too restrictive in its
establishment of "the point of threatened litigation [as] a clear
cut-off point" for application. AMI I at 5 (quoting Big O Tire,
561 F.2d at 1373). Instead, the district court adopted the view
articulated by the court in Alpex, 770 F. Supp. at 164-65,
finding that the Alpex court "considered factors apart from any
indicia of threatened litigation." AMI I at 5-6. The district
court then proceeded to analyze the facts concerning each
document and deposition excerpt that Alcoa had proposed for
exclusion.
In Big O Tire, a small tire manufacturer that had used
the term "Big Foot" in its business was approached by Goodyear
Tire, who wished to use the same term for a national ad campaign
for a new product. 561 F.2d at 1368. Both parties participated
in a series of discussions about how to proceed, and Goodyear
sought assurance from Big O Tire that it would not object to such
use. Id. In addition to phone conversations and meetings to
discuss the issue further, correspondence indicated that Big O
Tire requested that Goodyear conclude its ad campaign as soon as
possible, and that Goodyear responded it would use the concept as
long as it "continued to be a helpful advertising device." Id. The district court in Big O Tire determined that phone and letter
communications between the parties prior to litigation concerning
use of the trademark did not fall within the Rule 408 exclusion,
as the calls and letters were merely "business communications."
See id. at 1368, 1372-73. The Court of Appeals for the Tenth
Circuit concluded that the district court did not commit manifest
error in finding the disputed statements were business
communications because the discussions at issue "had not
crystallized to the point of threatened litigation." Id. at
1373.
To the extent Big O Tire establishes a strict standard
for application of Rule 408, it was rejected by Alpex. See 770
F. Supp. at 164. The plaintiff in Alpex held certain rights
relating to a patent for video games and pursued a program to
combat infringement by sending letters from counsel offering
certain alleged infringers the opportunity to settle what
plaintiff viewed as meritorious infringement claims. Id. at 162.
In some instances these notices led to extended negotiations,
licensing agreements and settlement without litigation, while in
other instances litigation was pursued. Id. at 162-63. The
Alpex court determined that certain license agreements reached in
the absence of litigation fell within the purview of the Rule 408
exclusion. Id. at 165. In its analysis, the Alpex court
examined various factors in addition to indicia of threat of
litigation, that might call for application of the exclusion.
Id. at 164-65. We believe that AMI has oversimplified the Big O Tire
and Alpex holdings. Regarding the issue of when a "dispute"
between parties exists, the Alpex court acknowledged that
litigation need not have commenced for Rule 408 to apply. 770 F.
Supp. at 164; see North Am. Biologicals, Inc. v. Illinois
Employers Ins., 931 F.2d 839, 841 (11th Cir. 1991) (finding
letter written prior to suit excludable under Rule 408 as offer
of settlement). Parties here concede this point. Further, Big O
Tire is consistent with Alpex on this point. See 561 F.2d at
1373. Because of the applicable standard of review, it is not
entirely clear how the Tenth Circuit would view exclusion, rather
than inclusion, of negotiations made prior to "the point of
threatened litigation". Furthermore, the Alpex court did not, as
AMI asserts, adopt in toto the view that a dispute must
"crystallize[] to the point of threatened litigation" before
evidence of settlement negotiations are excludable. Rather,
Alpex and other courts make clear that the Rule 408 exclusion
applies where an actual dispute or a difference of opinion
exists, rather than when discussions crystallize to the point of
threatened litigation. See Alpex, 770 F. Supp. at 163; Dallis v. Aetna Life Ins. Co., 768 F.2d 1303, 1307 (11th Cir. 1985) (citing
Weinstein's Evidence, supra, ¶ 408[01]) (affirming admission of
testimony involving settlement of similar claim between party to
action and third party, where no evidence that validity or amount
of payment had been in dispute).
Accordingly, we hold that the district court's
construction of Rule 408 did not constitute legal error. As a matter of interpretation, the meaning of "dispute" as employed in
the rule includes both litigation and less formal stages of a
dispute, and this meaning "is unchanged by the broader scope of
Rule 408." Weinstein's Evidence, supra, ¶ 408[01] at 408-12.
The district court properly interpreted the scope of the term
"dispute" to include a clear difference of opinion between the
parties here concerning payment of two invoices.
The facts of each case bear upon the trial court's
exercise of discretion to apply the exclusion. See Alpex, 770 F.
Supp. at 164-65; Bradbury v. Phillips Petroleum Co., 815 F.2d
1356, 1364 (10th Cir. 1987) (holding if application of Rule 408
exclusion doubtful, better practice is to exclude evidence of
compromise negotiations). Admittedly, it can be difficult to
discern whether an "offer" was made to attempt to "compromise a
claim." The existence of a disputed claim as well as the timing
of the offer are relevant to making this determination. Pierce
v. F.R. Tripler & Co., 955 F.2d 820, 827 (2d Cir. 1992). The
district court here found that inherent in each of the documents
presented for exclusion was the parties' disagreement or dispute
as to the amount and the validity of the invoice presented for
payment. AMI I at 6-14. The district court found that when viewed in context,
the April 5, 1990 letter from Austin at AMI was evidence of a
dispute concerning the printer design and software programming.
See id. at 2-3, 6. As this letter was not among the disputed
documents, we need not consider whether a dispute arose as early
as April 5. Following receipt of the April 5 letter and invoices, Kasprzyk described to Pollak in his May 1, 1990
memorandum his evaluation of the amount billed by AMI for
software and his assessment of the merits of AMI's claim. App.
at 11. This is the earliest document in dispute. In this
memorandum, Kasprzyk concluded that [s]ince the original purchase order for the line did not thoroughly specify the capability of the line, I feel that AMI has a legitimate claim to some software compensation. I feel that AMI should only be compensated for 1/3 of the requested amount since the line does not meet [certain specifications]. I also feel that this is appropriate due to the AMI's overall inferior performance on system software.
Id.
AMI characterizes this memorandum as an "evaluation,"
implying that it did not evidence a dispute under Rule 408. See
Appellant's Br. at 11. We also need not reach the question of
whether the mere existence of an internal evaluation such as this
memorandum provides evidence of a dispute. In his deposition
Pollak stated that "[i]n preparation for [a May 2 settlement] meeting, I asked Phil Kasprzyk, an Alcoa engineer familiar with
the project, his view of the disputed invoices."3 App. at 79.
That Kasprzyk's evaluation was written in order to prepare Pollak
for a meeting to discuss a possible compromise necessarily
3 / In an affidavit, Austin denied Pollak's statement that one purpose of the May 2 meeting was to attempt settlement of the dispute. App. at 86. As we previously indicated, however, the notes of the May 2 meeting contained mathematical calculations, as well as the terms "software proposal" and "above settlement proposal by Alcoa unacceptable." App. at 57. demonstrates that at least as of May 1 there was a dispute. We
cannot say that the district court erred in concluding that a
dispute existed as of May 1 and that the documents at issue
evidenced attempts to compromise the dispute.
2. Exclusion of internal memoranda
AMI's second argument is that the district court erred
in applying the Rule 408 exclusion to internal memoranda that
were a part of the fifteen items offered for exclusion under Rule
408. AMI argues that the rule only protects conduct and
statements during negotiations, and does not protect internal
memoranda, or deposition testimony concerning these memoranda.
Alcoa responds that such an interpretation and application of
Rule 408 would contradict the rule's purpose, serving instead to
discourage open settlement discussions.
The district court found both the Lockwood and Kasprzyk
memoranda, and testimony concerning these documents, to be
eligible for exclusion under Rule 408. AMI I at 8-9. The
district court declined to adopt the reasoning in Blue Circle Atl., Inc. v. Falcon Materials, Inc., 760 F. Supp. 516, 522 (D.
Md. 1991), aff'd without op., 960 F.2d 145 (4th Cir. 1992), which
interpreted Rule 408 to require communication of internal
memoranda to an opposing party, and instead relied upon the
holding in Ramada Dev. Co. v. Rauch, 644 F.2d 1097 (5th Cir.
1981). The Court of Appeals for the Fifth Circuit in Ramada
upheld the district court's exclusion of an internal report "made
in the course of an effort to compromise." Id. at 1106-07. The Fifth Circuit quoted the text of Rule 408, that "[e]vidence of
conduct or statements made in compromise negotiations is likewise
not admissible." Id. at 1106. In construing this language, the
district court here determined that the failure of Alcoa to communicate the internal memoranda to AMI is not dispositive in the context of a Rule 408 analysis; rather, any statements prepared by Alcoa representatives that function as the basis for compromise negotiations demonstrate 'evidence of conduct' in compromise negotiations.
AMI I at 8-9. The district court further found that the
memoranda served as a basis for calculation of compromise
figures. Thus, the court concluded that the Rule 408 exclusion
applied. Id. at 9.
First, AMI argues that the legislative history of Rule
408 suggests a different result and that the district court has
incorrectly broadened the language of the rule. Second, AMI
asserts that the district court should have followed Blue Circle,
and that the court disregarded an important fact in Ramada that narrows its application.
Under the common law, offers of compromise were
excluded from evidence, but the exclusion did not extend to
"admissions of fact, even though made in the course of compromise
negotiations, unless hypothetical, stated to be 'without
prejudice,' or so connected with the offer as to be inseparable
from it." 10 James Wm. Moore, Moore's Federal Practice
§ 408.01[9] (Daniel R. Coquillette et al. eds., 2d ed. 1995)
(Advisory Committee's Note on Proposed Rule 408). Thus, AMI argues, Rule 408 was intended to remedy the common law rule by
expanding it merely to include evidence of conduct or statements,
but not internal memoranda. Id. While Rule 408 was specifically
designed to cover admissions of fact, its language is
considerably broader than that necessary to accomplish this
change.
Next, in Ramada, the report sought to be excluded was
generated by an architect hired for the purpose of preparing an
analysis of defects in the construction of a motel that plaintiff
had contracted to have built. 644 F.2d at 1099, 1106. Testimony
in Ramada indicated that the architect was "commissioned by
Ramada to prepare a report that would function as a basis of
settlement negotiations regarding the alleged defects in the
motel." Id. at 1107. Thus, the Fifth Circuit determined that
because the report had been prepared as a tool for settlement
negotiations, it fell within the scope of Rule 408. Id.
In contrast to Ramada, the District Court of Maryland
in Blue Circle interpreted Rule 408 as inapplicable to internal
memoranda, unless they were communicated to the other side in an
attempt at settlement. 760 F. Supp. at 523, citing 23 Charles
Alan Wright & Kenneth W. Graham, Jr., Federal Practice and Procedure § 5303 (1980)). We reject this interpretation of Rule
408 as too broad, and find that the district court in Blue Circle
overstated the meaning of the treatise citation.4
4 / The treatise states that "[o]f course, the mere fact that information may be useful in compromise negotiations does not mean that it is privileged where it was never communicated to the opponent." Federal Practice and Procedure, supra, § 5303, at 179 AMI argues that the decision in United States v. 320.0
Acres of Land, 605 F.2d 762 (5th Cir. 1979), also should have
guided the district court, and that Ramada is distinguishable
from the case at hand. In fact, it is 320.0 Acres that is
distinguishable from both Ramada and the case at hand. In 320.0
Acres, the Fifth Circuit elected not to exclude a governmental
report discussing evaluation of fair market value to be paid to a
condemnee, on the basis that appraisals were not offers, but
rather were "statements of the amount which the Government
believes the landowner is constitutionally entitled to should
negotiations fail and condemnation proceedings be initiated."
Id. at 823-25. These statements of amount made by the government
were not compromise offers and were required by statute, a
situation quite different from those of the Alcoa memoranda.
(..continued) n.26 (citing United States v. Reserve Mining Co., 412 F. Supp. 705, 711-12 (D.C. Minn. 1976)). In Reserve Mining, a party facing Rule 37 sanctions raised as a last defense the argument that numerous economic and technological feasibility studies withheld from discovery fell within the Rule 408 exclusion. 412 F. Supp. at 711-12. The district court in Reserve Mining determined that the party to be sanctioned could not shield from discovery all documents that represented factual matters that might be or were incorporated in a settlement proposal. Id. at 712. Reserve Mining does not define clearly a rule for treatment of internal memoranda, as Blue Circle implies. Rather, the Reserve Mining court noted that the party's request for Rule 408 exclusion, if granted, would permit the exclusion of studies done long before any dispute arose. See 412 F. Supp. at 711-12. Such is not the case here, as the Kasprzyk memorandum was written immediately before, and in preparation for, the first meeting in which the settlement of the dispute over invoices was discussed. The Lockwood memorandum was formulated after a number of correspondence concerning settlement figures. The court notes that the Eleventh Circuit's decision in
Blu-J, Inc. v. Kemper C.P.A. Group, 916 F.2d 637, 642 (11th Cir.
1990), reinforces the reasoning in Ramada. In Blu-J, the
Eleventh Circuit upheld the exclusion of evidence of an
accountant's evaluation "prepared by mutual agreement of [the
parties] as part of their settlement negotiations." Id. at 641.
This independent evaluation in Blu-J was found to fall within the
Rule 408 exception, and the holding in Ramada, because although
the parties disagreed as to whether "an offer was on the table"
during "negotiations," both parties agreed that the evaluation
was done to promote settlement of a dispute. Id. at 642. Here,
the district court found the Alcoa memoranda was prepared as a
basis for compromise negotiations, particularly because the
memoranda appeared to be intended to assist in calculation of
compromise figures discussed subsequently. AMI I at 9. The
district court's analysis is consistent with the view of Rule 408
expressed in the Ramada and Blu-J decisions of our sister
circuits, which we find persuasive. Thus, we hold that the
district court did not abuse its discretion in excluding internal
memoranda prepared for use in discussion of settlement of AMI
invoice amounts.5
IV.
5 / Our conclusion that the district court properly excluded evidence under Rule 408 eliminates the need to reach the issue of whether the district court's decision resulted in harmless error. The district court properly interpreted and applied the
Rule 408 exclusion to suppress portions of the documents and
testimony discussed herein. Further, the court's factual finding
as to the existence of a dispute between the parties was not
clearly erroneous. Thus, the district court did not err in its
denial of the motion for new trial on the basis of its rulings as
to evidentiary exclusions. The judgment of the district court is
affirmed.