## United States Court of Appeals
FOR THE EIGHTH CIRCUIT

___________ No. 10-2975

___________ Retha Weems, *

* Appellee, * * Appeal from the United States v. * District Court for the * Western District of Arkansas. Tyson Foods, Inc., *

* Appellant. *

___________ Submitted: September 20, 2011 Filed: December 28, 2011

___________ Before RILEY, Chief Judge, COLLOTON and GRUENDER, Circuit Judges.

___________
RILEY, Chief Judge.

Retha Weems brought suit against Tyson Foods, Inc., claiming workplace gender discrimination under Ti tle VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e, etseq. , and the Arkansas Civil Rights Ac t of 1993, Ark. Code Ann. § 16- 123-101, etseq. The jury returned a verdict in Weems’ favor, and the district court entered judgment against Tyson for $708,994. We reverse and rema nd for a new trial, because improperly admitted compromise ev idence materially prejudiced the jury’s verdict.I. BACKGROUND A. Facts 1 1. Early Employment In 1988, Weems began working at the Hudson Foods poultry processing plant in Noel, Missouri (Noel plant or Noel ). Weems was employed as a Hudson superintendent at Noel when Tyson purch ased the plant in 1998. Weems continued to work at Noel for Tyson, a nd received a number of promotions.

In 2005, Rusty Bowsher, the complex manager at Tyson’s poultry processing plant in Monett, Missouri, hired Weems to be the Monett plant manager. At Monett, Weems reported directly to Bowsher, and heconsistently gave her strong performance ratings.

While Weems was at the Monett plan t, the Noel plant was plagued by production and quality control problems. Tyson removed two successive plant managers between 2004 and 2006 because of the Noel plant’s poor performance

. The United States Department of Agriculture (USDA) issued two Notices of Intended Enforcement (NOIE) agains t the Noel plant in 2004 and 2006 because the plant was not complying with federal food safety regulations. These NOIEs indicated the government would suspend operations at the No el plant if Tyson failed to correct the identified violations.

Tyson believed Weems was needed to a ddress the problems at the Noel plant and offered her the position of plant manager. Tyson vi ce presidents Bernie Adcock and Donnie King encouraged her to accept th e position. Because of the Noel plant’s troubled history, Weems asked King and Adcock whether accepting the position would be a “career ending move.” They reassured her she would be given the time

1 “We recite the relevant facts in the light most favorable to the jury’s verdict.” Quigley v. Winter , 598 F.3d 938, 944 n.2 (8th Cir. 2010).

-2-and support she needed to turn the plant ar ound. In spite of her misgivings, Weems eventually agreed to accept the position, provided Tyson would change the management structure at the Noel plant, gi ve her two years to implement the necessary changes, and furnish her with a substantial salary increase. Tyson assented to these conditions, and gave Weems a raise of n early $15,000, making her the highest paid poultry plant manager of her grade level at Tyson. Weems became the Noel plant manager on September 1, 2006.

2. Noel Plant Manager Conditions at the Noel plant were atrocious when Weems took over. The equipment and facilities were in disrepai r, resulting in wasted and contaminated product. The plant’s other managers were encouraging inappropriate record-keeping to obscure the extent of employee absent eeism, contaminated and condemned poultry, and productivity problems. Weems immediately began addressing these issues.

Tyson continued to make personnel changes at Noel after Weems became plant manager. In February 2007, Tyson fired Patrick Johnston, the Noel complex manager and Weems’ supervisor, and replaced him w ith Bowsher, Weems’ former supervisor at Monett. In April 2007, Tyson createda new position at Noel—division operations manager—and appointed Tim Singleton, who had been a plant manager at a Tyson facility in Mexico. Around this same time, Adcock, who was then the division vice president responsible for the Noel plant and five other poultry processing facilities, was promoted. Chip Miller replaced Adcock as division vice president. Weems was the only female plant manager within Miller’s division.

After Miller became division vice presiden t, Weems fell out of favor with her supervisors

. Tyson argued Weems’ performance as plant manager did not meet its expectations. Tyson presente d evidence of significant healthand safety issues at the plant
, the plant’s continued poor performan ce and high operating costs, and the

-3-perception of Weems’ supervisors that she would be unable to implement the necessary changes to turn the plant around.

Weems claimed her firing was the result of gender discrimination. To refute Tyson’s claim she was underperforming, Weems presented evidence showing she successfully accomplished her primary responsibility as plant manager by overcoming the NOIEs and bringing the plant nearer to regulatory compliance. Weems also contends many of the changes she made at the Noel plant were only beginning to produce results when she was removed.

To show disparate treatment based on her gender, Weems offered evidence she was treated differently than Singleton and similarly situated male managers at another facility. Weems presented evidence Miller harbored a discriminatory, sexist attitude toward her. Weems testified (1) Miller would ignore Weems and speak directly to Singleton when Miller toured the plant; (2 ) Miller harshly accused Weems of staring at him, remarking to her “What the hell are you looking at?”; and (3) she overheard Miller tell Bowsher, “women had no business being plant managers; they couldn’t handle the heat.” 2

3. Removal as Plant Manager In October 2007, Bowsher, Miller, an d Adcock discussed removing Weems from her position as plant manager. They “vett[ed]” the decision with a Tyson human resources director, and with Tyson’s vice president of employment compliance.

On October 24, 2007, Weems heard a rumor from an outside contractor that she may be losing her job. She approached Bowsher about this news—which he confirmed. Bowsher advised Weems that M iller would meet with them the next day “to give [Weems her] options.” Miller and Bowsher informed Weems she would be

2 At trial, Miller and Bowsher denied this comment was made.

-4-placed on a thirty-day administrative leav e, during which Weems herself would be responsible for finding anothe r position within the company

. If she was unable to find a position, Tyson would terminate her employment.

In November 2007, Bowsher told Weems that Greg Nelson, Tyson’s human resources division manager, would be her human resources contact during the transition. Weems was in frequent contactwith Nelson as she searched for a new position. According to Weems’ testimony, she told Nelson about Miller’s comment to Bowsher and said she “fe lt like [she] was discriminate d against because [she] was female.” According to Weems, Nelson responded that Miller’s comment did not reflect company policy and promised to look into it and get back to her. 3

Nelson never followed up with Weems about her concerns. Nelson did, however, arrange to send Weems a “Separ ation Agreement and General Release” (separation agreement), which she recei ved around November 28, 2007. Had Weems accepted the agreement, her employment would ha ve terminated effective November 30, 2007, and Tyson would have paid her base salary a nd a portion of her medical benefits through January 4, 2008. Weems di d not sign the agreement. In December, 2007, Weems accepted a position as general production manager at a Tyson facility in Springdale, Arkansas, where she remained employed through the trial.

B. Procedural History Weems brought suit against Tyson for employment discrimination under the Civil Rights Act of 1964 and the Arkansas Civil Rights Act of 1993. At trial, Weems sought to prove (1) Miller arranged to have her removed from her position because of

3 At trial, Nelson denied Weems told him about Miller’s comment, and asserted he did not think there were any equal em ployment opportunity issues implicated by Weems’ removal.

-5-her gender, and (2) Ne lson did not adequately investig ate after Weems expressed her concern she had been the victim of gender discrimination.

To prove her allegations with respect to Nelson, Weems offered and testified about the separation agreement. Tyson objected, asserting the agreement was a compromise offer and therefore inadmissibl e under Fed. R. Evid. 408 (Rule 408). The district court held a sidebar conference to address Tyson’s objection. The parties clarified that, when Weems received th e agreement from Tyson, she was still on administrative leave seeking a new position w ith Tyson. The district court admitted the proffered testimony, reasoning Weems ha d not been told “[y]our 30 days are up and you’re out,” so the evidence was not “caught by [Rule] 408.”

During closing argument, Weems’ couns el emphasized the importance of the separation agreement for Weems’ claims, stating

The fifth reason [for finding in Weems’ favor] is this separation agreement. [Weems] met with Greg Nelson, or talked with him on November the 6th, 2007. At that time, according to his notes, she told him that she felt that she had not b een treated right. Of course, as HR manager, apparently those words di dn’t trigger anything in his thinking process. He was waiting for those magic word—or that magic word “discrimination.” Yet, after that discussion he presents [Weems] with this separation agreement.
Now, the important part here, the significant part, is that in exchange for receiving some mone y from Tyson, [Weems is] going to give up her right to sue the company for sex discrimination. Why would Mr. Nelson give this to [Weems], someone who had been removed from her job for poor performance, if she ha dn’t said something to him to the effect that she felt like she’d been discriminated against because she was a woman?

-6-. . . . Greg Nelson, the fellow from HR, I don’t think it was his job to see that th e [equal employment opportunity] policies were enforced. I’m thinking it’s his job to make sure that the company didn’ t get sued, to protect the company. That’s why thatseparation agreement was offered to [Weems].

During deliberations, the jury submitted a written question to the district court regarding the separation agreement. The jury inquired whether “all demoted/fired employees get a separation ag reement and general release.” The district court informed the jury it could not comment and directed the jury to rely on the evidence as presented by the parties.

The jury found for Weems, awarding he r $108,994 for lost wa ges and benefits and $650,001 in compensatory and punitive dama ges. The district court reduced the latter sum to $600,000 to comply w ith statutory damage limitations. 4 Tyson moved for judgment as a matter of law or for a new trial, which were denied.

II. DISCUSSION Tyson argues the district court abused its discretion under Rule 408 by admitting the separation agreement because the proposal was an offer to compromise Weems’ gender discrimination claim and was admitted to prove Tyson’s liability. We
agree.

4 Because of our disposition in this case, we need not consider Tyson’s argument the district court improperly allocated th e compensatory and punitive damages award between the state and federal causes of ac tion, thereby maximizing Weems’ recovery under the applicable damage limitations. See 42 U.S.C. § 1981a(b)(3)(D); Ark. Code Ann. § 16-123-107(c)(2)(A)(v).

-7-A. Standard of Review “We review de novo the district court’s interpretation and application of the rules of evidence, and review for an abus e of discretion the factual findings supporting its evidentiary ruling.” United States v. Allen , 540 F.3d 821, 824 (8th Cir. 2008). We will reverse only if an evidentiary ruling c onstituted “a clear and prejudicial abuse of discretion . . . affect[ing] a substantial right of the objecting party.” Vasquez v. Colores , 648 F.3d 648, 652 (8th Cir. 2011) (internal quotations omitted).

B. Federal Rule of Evidence 408 At the time of trial, Rule 408(a) prohi bited admission of evidence relating to a compromise or offers to compromise when such evidence was used “to prove liability for, invalidity of, or amount of a claim thatwas disputed as to validity or amount, or to impeach through a prior inconsistent stat ement or contradiction.” Fed. R. Evid. 408(a) (2006) (amended Dec. 1, 2011). This rule does not preclude the admission of all compromise evidence. Rule 408(b) explicitly permitted admission of such evidence if offered for another purpos e. Permissible purposes under 408(b) “include[d] proving a witness’s bias or prejudice; negating a contention of undue delay; and proving an effort to obstruct a criminal investigation or prosecution.”

Rule 408 promotes “the public policy favoring the compromise and settlement of disputes.” Fed. R. Evid. 408 advi sory committee’s note (1972). As such, we consider the district court’s application of this rule in light of its underlying purpose. Cf. Stockman v. Oakcrest Dental Ctr. , 480 F.3d 791, 798-99 (6th Cir. 2007) (recognizing the admission of compromise evidence “going to the validity or amount of a claim . . . eviscerate[s] Rule 408 ’s protection and undermine[s] its clear purpose”); Bradbury v. Phillips Petrol. Co. , 815 F.2d 1356, 1364 (10th Cir. 1987) (explaining “when the issue is doubtful, the better practice is to exclude evidence of compromises or compromise offers”).

-8-We analyze this issue in three parts. First, we must address whether the separation agreement related to a claim that was in dispute as to validity or amount at the time the agreement was proffered. S econd, assuming there was such a claim, we must assess whether Weems offered the separation agreement to prove Tyson’s liability for or the validity of the claim, rather than for another acceptable purpose. And finally, upon determining the district c ourt abused its discretion in admitting the separation agreement, we must address whether this was a materi al error for which Tyson is entitled to relief.

1. Disputed Claim The separation agreement was clearly anoffer of compromise within the meaning of Rule 408. See , e.g. , Swan v. Interstate Brands Corp. , 333 F.3d 863, 864 (8th Cir. 2003) (ruling an employee separati on agreement was an offer of compromise and “inadmissible” under Rule 408). Howe ver, Rule 408 only prohibits admitting compromise evidence relating to a “claim ” that was disputed when the settlement negotiations or offer to compromise took place. See Crues v. KFC Corp. , 768 F.2d 230, 233 (8th Cir. 1985).

We have not substantially analyzedthe “in dispute” requirement. See , e.g. , id. (applying “in dispute” analysis with limited discussion). We agree with our sister circuits in recognizing a dispute need not“crystallize to the point of threatened litigation” for the 408 exclusion rule to appl y. Affiliated Mfrs. v. Aluminum Co. of Am. , 56 F.3d 521, 527 (3d Cir. 1995); accordDallis v. Aetna Life Ins. Co. , 768 F.2d 1303, 1307 (11th Cir. 1985). A dispute exists for Rule 408 purposes so long as there is “an actual dispute or difference of opini on” regarding a party’s liability for or the amount of the claim. Affiliated Mfrs. , 56 F.3d at 527; accordDallis , 768 F.2d at 1307 (same).

On the facts of this case, Weems’ claim clearly wa s “in dispute” when Tyson offered the separation agreement. The undi sputed evidence shows, at the time Weems

-9-contacted Nelson, Weems had been remove d from her position as plant manager and placed on administrative leave. Weems knew she had only thirty days to find another position within the company to avoid termination. Weems claims she informed Nelson of her gender discrimination c oncerns, and Nelson’s notes from that conversation confirm he understood Weems felt “she was not treated right” with respect to the circumst ances of her removal.

While Nelson testified he did not r ecall Weems raising any concerns about gender discrimination, and Weems maintain s she was not contemplating legal action at the time, neither contention undermines our conclusion the claim was in dispute at the time of the offer. Ty son sent the separation agr eement to Weems after Tyson removed Weems from her position and infere ntially in response to her expressed concerns over the circumstan ces of her removal. We have no difficulty concluding, as a matter of law, there was an actua l dispute between Tyson and Weems when Tyson offered the separation agreement. See Cassino v. Reichhold Chem., Inc. , 817 F.2d 1338, 1342 (9th Cir. 1987) (stating separation agreements offered to settle employment rights disputes arising after an adverse employmen t action are generally “inadmissible to prove liability pursuant to Rule 408”).

To the extent the district court c oncluded the separation agreement was not “caught by [Rule] 408” because Weems was placed on temporary administrative leave rather than terminated, the district court’ s finding was an abuse of discretion. Weems was placed on a thirty-day administrative l eave to allow her to locate another position within Tyson and, if unsuccessful, Tyson would terminate her. If Weems accepted the separation agreement, 5 she would release her claims and be terminated.

5 The district court was correct, Tyson had not yet advised Weems “[y]our 30 days are up and you’re out.” However, the document presented to Weems was expressly labeled, and was in fact, a “SEPARATION AGREEMENT.”

-10-Not every employment separation agreemen t is an offer to settle a disputed claim under Rule 408. The district court has substantial discretion to determine whether, under the unique facts and circumstan ces of the case, a cl aim was in dispute at the time when a settlement offer was pro ffered. Based upon the facts of this case, Weems’ claim against Tyson was in dis pute when Tyson proffered the separation agreement.

2. Admissibility We now address whether evidence relating to the separation agreement was admissible for a permissible purpose under Rule 408(b). Evidence relating to a compromise offer is admissible if “offered for ‘another purpose,’ i.e. , for a purpose other than to prove or disprove the validity of the claims that the offers were meant to settle.” Trebor Sportswear Co. v. The Limited Stores, Inc. , 865 F.2d 506, 510 (2d Cir. 1989). Weems argues she offered th e separation agreement evidence to prove Tyson failed to “under[take] good faith efforts to comply w ith federal and state law.” We reject Weems’ argument because this purpose directly establishes Tyson’s liability for the same claim the agreement was meant to settle.

In certain circumstances, evidence of a compromise offer may be admitted to show a party’s lack of good faith. In Athey v. Farmers Ins. Exch. , 234 F.3d 357, 361- 62 (8th Cir. 2000), we upheld the trial c ourt’s admission of evidence from a settlement conference between an insura nce company and the insured regarding a claim arising under an automobile insurance policy. The insurer refused to settle the claim unless the insured abandoned a pending claim of bad faith against the company. Id. at 361. Applying the substantive law of South Da kota, we held “an insurer’s attempt to condition the settlement of a breach of contract claim on the release of a bad faith claim [could] be used as ev idence of bad faith.” Id. at 362. Weems has not alerted us to any authority indicating employment se paration agreements are admissible under applicable substantive law, a nd we have found none. Athey , therefore, does not control this case.

-11-The policy concerns underlying Rule 408 ar e strongly implicated where an offer of compromise is used to prove an elem ent of the claim the compromise offer was meant to settle. See , e.g. , Stockman , 480 F.3d at 797-98 (holding an employer’s offer to settle a wrongful termination suit was inadmissible to rebut an allegation the plaintiff failed to mitigate damages); Trebor , 856 F.2d at 510 (explaining a party’s letter offering to settle a contract disput e was inadmissible to prove compliance with the statute of frauds because “the two questions were so closely intertwined, admission of the documents . . . would . . . militate against the public policy considerations which favor settlement nego tiations and which under lie Rule 408”). “It would be unreasonable to expect a party to ever make a settlement offer if doing so forced it into choosing between concedi ng one or more elements of liability or damages or having the offer ad mitted against it.” Stockman , 480 F.3d at 798-99. Because Weems’ issue of Tyson’s bad faith is inseparable from the issue of liability, Rule 408(a) prohibits admission of the agreement in this case.

The settlement evidence was inadmissibl e to show Tyson’s bad faith, and Weems has suggested no other purpose for which the evidence is relevant and admissible. In furthering the public policy of Rule 408, we conclude the district court committed a clear abuse of discretion by admitting this separation agreement evidence.

C. Materiality Evidentiary errors are grounds for reversal only if the error affected a substantial right of the aggrieved party. SeeNichols v. Am. Nat. Ins. Co. , 154 F.3d 875, 889-90 (8th Cir. 1998). It is an “ unusual case where a ne w trial is needed because a full and fair presentation of the cl aims was impeded at trial, and substantial prejudice resulted.” Id. at 890. On the other hand, “[t] he parties have a right to untainted jury deliberations and a verdic t which is based upon admissible evidence.” Qualley v. Clo-Tex Int’l., Inc. , 212 F.3d 1123, 1131 (8th Cir. 2000).

-12-In this case, we are confronted with unusually clear and objective proof the improperly admitted evidence substantially in fluenced the jury’s verdict. First, Weems’ counsel emphasized the separation ag reement in his closing remarks, arguing Tyson offered the agreement because Weem s “felt like she’d been discriminated against because she was a woman,” a nd the agreement proves Tyson was more concerned with protecting itself against lia bility than with ensuring Weems had been treated fairly. Weems’ reliance on the evidence at closing suggests it materially influenced the jury verdict. See Nichols , 154 F.3d at 890 (explaining the party’s “closing argument at trial demonstrate[d] th at the [improperly admitted] evidence was intended to influence the jury’s determina tion of liability,” which indicates admission of the evidence was not harmless); Gulb ranson v. Duluth, Missabe and Iron Range Ry. , 921 F.2d 139, 142-43 (8th Cir. 1990) (similar).

During its deliberations, the jury submitted a written question to the district court, inquiring whether “all demoted/fired employees get a separation agreement and general release.” This shows the jury wa s focused on the separation agreement during deliberations, and strongly supports the infe rence the jury materially relied on this evidence in reaching their verdict. See White v. Honeywell , 141 F.3d 1270, 1280 (8th Cir. 1998).

Weems argues the error was not material because the separation agreement was a “general release” and did not contain an admission of liability, and therefore had minimal probative value. See Haun v. Ideal Indus. , 81 F.3d 541, 547-48 (5th Cir. 1996) (deciding the introduction of a similar employment separation agreement was harmless error because “the agreement did not influence the jury or had but a very slight effect on its verd ict”). We reject Weem s’ argument. Unlike Haun , where there were no objective indications the jury re lied on the separation agreement, Weems’ closing arguments and the jury’s ques tion concerning the separation agreement cogently confirm the inference the error materially affected the jury’s verdict.

-13-Weems argues the error wa s harmless because there was ample evidence apart from the separation agreement supporting th e jury’s verdict. Assuming properly admitted evidence was sufficient to support the verdict, we must reverse if the improperly admitted evidence had “a subs tantial influence on the jury verdict,” Nichols , 154 F.3d at 889. In this case it is “very likely that the [improperly admitted evidence] affected the ju ry’s deliberations and the jury verdicts.” White , 141 F.3d at 1280. Admission of the separation agreement deprived Tyson of a fair trial; thus, we

reverse.

III. CONCLUSION Under the facts of this case, we conclude the district court violated the policy and exclusionary provision of Rule 408 by admitting into evidence the separation agreement and related testimony, and it is lik ely this error materially influenced the jury’s verdict. We vacate the judgment and remand this case to the district court for a new trial.

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