Fed. R. Evid. 408 is not an absolute ban on all evidence regarding otherwise admissible settlement negotiations. Courts have admitted evidence of offers or agreements to compromise for purposes of rebuttal, for purposes of impeachment, to show the defendant's knowledge and intent, to show a continuing course of reckless conduct and negate the defense of mistake, and to prove estoppel.
In 1996, a jury found that Bankcard America, Inc. had breached its contract with Universal Bancard Systems, Inc. The jury also concluded that Bankcard’s founders violated RICO, the Racketeering Influenced and Corrupt Organizations Act. Consequently, the jury awarded Universal $ 1,115,000 for the breach of contract and $ 1,115,000 for each of the two RICO claims. However, when the case was reassigned, the new judge, citing errors at the first trial, threw out the verdict and ordered a new trial. At the second trial in 1998, the jury found in favor of Bankcard’s founders on the RICO claims, but again concluded that Bankcard breached the contract, this time awarding Universal $ 4.1 million on that claim. The presiding judge again threw out the verdict; he thereafter entered judgment for Bankcard, asserting that the evidence of damages against the company was insufficient. Universal Bancard Systems, Inc. then sought a review of the judgment.
Did the presiding judge of the district court err in its decision to order a new trial after the jury entered judgment in favor of Universal Bancard Systems, Inc.?
Yes, on the basis of breach of contract. No, on the basis of RICO violations.
A new trial should not have been ordered on breach of contract. The Court posited that although giving the jury exhibits that had not been admitted into evidence was error, they were cumulative, or had not been preserved for appeal. Admitting evidence of settlement talks was not erroneous when Universal Bancard Systems, Inc. needed to refute Bankcard America, Inc.’s charges by explaining that it had acted pursuant to the expected settlement terms. However, the Court ruled that a new trial on the issue of RICO violations was proper since original jury instructions listed many alleged predicate acts that lacked evidentiary support or did not charge indictable actions, and lacked an explanation of the requisite fraudulent intent.