Slip Op. 10 - 92



## UNI TED STATES COURT OF INTERNATIO NAL T RADE

____________________________________ : BP OI L SUPP L Y COMPANY, : : Plaintiff, :

: v. : Be fore : R. Kenton Musgr ave, Senior J udg e : Court No. 04-00321 UNI TED STATES, : : Def endant. : ____________________________________:

OP INION AND ORDER [Granting in part and deny ing in part the defe ndant’s motion to strike with respe ct to the plaintiff’s motion to s tay

the Court’s sche duling or der.] Dated: Aug ust 13, 2010 Galvin & Mlawski (

John Jose ph Galvin ), for

the plaintiff. Tony W est , Assistant Attorney Gene ra l ; Barbara S. W illiams , Attorney -I n-Charg e, I nterna tional Trade Field Of fice , Commercial L itigation Branc h, Civil Division, U.S. Depa rtment of Jus tice (

Marce lla Powell ), for

the def endant.
Musgr ave, Senior J udg e: O n Ju n e 1 5 , 2 0 1 0 , Pl aintiff BP Oil Supply Company (“B P”) moved to stay the Court’s scheduling order i n t h i s m at t er for the purpose of interposing on the defe ndant cer

tain reque sts for admission. See Pl.’s Mot. for Orde r Stay ing Ct.’s Scheduling Orde r to Permit Pl. Time to I nterpose Req. fo r Ad m i s . (“Pl.’s Mot.”). I n response , Def endant U.S. C ustoms and Border Protection (“CB P” or “the g overnme nt”) moved to have the entirety of BP ’s motion st ricke n from the r ecor d on the ground that evidenc e offere d there in is inadmissible underCourt No. 04-00321 Pag e 2

R u l e 408 of the Fe dera l Rules of Evidence (“F RE 408”). See Def .’s Mot. to Strike at 1. For th e

rea sons set forth below, the g overnme nt’s motion to strike will be g rante d in part and denied in part. Back ground Acc ording to the complaint, BP alleg edly imported “API Class I I I ” crude petroleum from variou s fore ign countries, paid duties there on, exported API Class I I I Alaskan North Slope crude petroleum, and filed a claim with CBP for duty draw back, claiming that the latter satisfied the statutory substitut ion require ments of the former

. Upon denial of that claim and its protest there of, BP commenced thi s action, invoki ng this Court’s jurisdiction under 28 U.S.C. § 1581(a)

. After a brief stint on the Court’s re s er v e cale ndar, the first of sever al scheduling order s was issued on November 29, 2006, and this matter has been in discovery and/or settlement neg otiations since that time. On M arc h 10, 2010, the court lifted a previously -i m p o s ed stay on the s cheduling order and g rante d BP’s consent motion in what had appea red to be the final amendment to the scheduling order befor e t ri al

. Pursuant to that order , discovery was to be completed by Marc h 20, 2010, and dispositi ve motions wer e to be filed with the Court no later than J une 15, 2010. Howeve r, on J une 1 5 , 2 0 1 0, BP ag ain moved to stay the scheduling order for the limit ed purpose of serving o n t h e defe ndant re quests for a dmission on certain issues. See Pl’s. Mot. at 3.

BP’s motion, submitt ed pursuant to Rules 6(b), 7, and 16 of the Court’s Rules, states that the court should g rant its reque st “for the rea sons set forth below.” Howeve r what follows that
statement is not rea soning per se , but a short narr ative of ev en t s co n ce rning the parties’ rec ent attempts to reso l v e which fac ts are “not in issue” for the purposes of the pending litigation. This

narr ative is pu

n c tu a te d with block-quoted emails from g overnme nt counsel expressing disag ree mentCourt No. 04-00321 Pag e 3

with, inter alia , BP’s proposed s t i p u l ati on of facts. See Pl.’s Mot. at 1, 2. The mot ion conclude s without comment, reque sting simply that the stay be g rante d “[i] n view of the fore g oing

. . . .” Pl.’s Mot. at 3. As to the s ubstance of the motion, the court notes only that BP appe ars to be f

rustrate d by the g overnme nt’s ref

usal to conce de that three of the im p o rt ed cr u de ty pes are “commer cially intercha ng eable ” with the exported crude s in spite of alleg edly contra ry views expressed by the g overnme nt’s own ex pert wit n es s es. Pl.’s Mot. at 1. Attache d to BP’s mot ion is (1) a Marc h 25, 2010 letter from BP to g overnme nt counsel discussing repor ts prepa red by g overnme nt expert witnesses; (2) a proposed “Stipulated J udg ment on Ag ree d Statement of Fa cts”; (3) a J une 11, 2010 letter from BP to g overnme nt counsel debating whether CBP may “re liquidate partial claims”; and (4) a document entitled “Schedule of Stipu[ l] able Partial Claims.” See Pl.’s Mot. at Attach. A, B, C.

By way of response , the g overnme nt has filed a motion to strike BP’s motion on the g round that it used “conf

idential settlement communications” in a manner specific ally prohibited by FRE 408. Acco rd ing to the g overnme nt, BP impermissibly offe red evidenc e of “conf idential settlement communications both as a justification for its reque st to reope n discovery and as a basis for obtaining admissions,” and asser t s t h at “[t] he underly ing premise of [BP’s] motion is that its reque st to reope n discovery is justified beca use the confide ntial settlement neg otiations demonstrate the merits of its claims

. . . .” Def ’s. Mot. at 5. Acc ording ly , states the g overnme nt, the court should strike B P’s motion i n its entirety and orde r that it be re filed without the prohibited evidenc e. BP disag ree s with the g overnme nt’ s char acte rization of its motion, arg uing that neither the letters ac company ing the motion nor the emails quoted there in constitute “confide ntial settlement communications.” Pl.’s Resp. at 4. BP asser ts that the communications contain no offe rsCourt No. 04-00321 Pag e 4

of compromise and that all of the materia ls “re ly upon or ref ere nce” testimony of the g overnme nt’s exper t s . Id

. BP contends further that, even if the disputed evidenc e wer e found to be settlement communications, it would not be ex cluded by FRE 408 beca use the materia ls (1) only contain “other wise discovera

ble” evidenc e; and (2) wer e included in the motion for the sole p u rp o s e o f “neg at[ing] any

contention of undue delay on plaintiff’s par

t.” Id

. Discussion FRE 408 provide s: Rule 408. Compromise and Offe rs to Compromise (a) P rohibited uses . Evidence of the following is not admissible on behalf of any party , when offe red to prove liability for, invalidity of, or amount of a claim that was disputed as to validity or amount, or to impeach throug h a prior inconsistent statement or c ontradiction: (1) furnishing or offe ring or promising to furnish-- or acc epting or offe ring or promising to acc ept--a valuable considera tion in compromising or attempting to c ompromise the claim; and (2) conduct or statements made in c ompromise neg otiations reg arding the claim, except when offe red in a criminal case and the neg otiations rela ted to a claim by a public office or ag ency in the exercise of regula tory , investiga tive, or enf

orce ment authority

. (b) P erm itted uses . This rule does not require exclusion if the evidenc e is offe red for purposes not prohibited by subdivision (a)

. Ex amples of permissible p u rposes include proving a witness' s bias or prejudice ; neg ating a contention of undue delay ; and proving an ef

fort to obstruct a c riminal investiga tion or prosec ution. Fe d. R. Evid. 408.

The rationale underly

ing Rule 408 is twofold: First, the rule promotes the settlement of disputes prior to litigation by rec og nizi ng that compromises are more likely to result when parties

are fre e to speak openly during settlement neg otiations and are not inhibited by t h e fea r thatCourt No. 04-00321 Pag e 5

statements made there in may later be used ag ainst them. Goodye ar Ti r e & Rubber Co. v. Chiles Power Supply, Inc., 332 F.3d 976, 980 (6th Cir. 2003). Second, the rule seeks to exclude irrele vant

or unreliable evidenc e, rec og nizi ng that parties will often settle disputes for rea sons completely unrela ted to the merits of a claim. Goodye ar , 332 F.3d a t 981. Significa ntly , FRE 408 permits th e u s e o f evidenc e of settlement neg otiations “for purposes not prohibited by subdivision (a),” i.e., for a purpose other than to pr ove or disprove the validity of the claims that the offe rs wer e meant to settle. Ex amples of uses “per mitted” by the rule include proving “ a witness’s bias or prejudice ”; “neg ating a contention of undue delay ”; or proving that a party had brea ched the settlement ag ree ment. Fe d. R. Evid. 408(b); 2006 Amendment Adv. Com. Note. Henc e, the two questions that must be resolved on the instant motion are (1) whether the evidenc e set forth in BP’s motion constitutes “conf idential settlement communications,” and (2) if so, whether that evidenc e is being offe red for an improper purpose, e . g ., “to prove liability for

. . .
or amount of” the claims at issue in this dispute. Fur ther, the court may consider whether admitting the evidenc e would be contra ry to “the public policy of enco u ra gi n g s ett lements and avoiding wastef ul litigation.” Trebor Sportswear, Starter Corp. v. Converse, Inc ., 170 F.3d 286, 293 (2d Cir. 1999). As to the letters of Marc h 25, 2010 and J une 11, 2010, the court ag ree s that they do
not fall wit hin the prohibi tion of FRE 408. Although the l etters are communication that occur red within the context of “compr omise neg otiati o n s ,” the information contained in the letters is admissible on other grounds. The March 25, 2010 letter contains only BP’s brie f summary of t heCourt No. 04-00321 Pag e 6

repor ts g ener ated by the g overnme nt’s expert witnesses. Ex pert witness repor ts are independe ntly admissible (in fac t, require d) by USCI T R. 26 and cannot be ex cl u d ed b y t h ei r use in settlement neg otiations. The J une 11, 2010 letter appea rs to be nothing more than BP’s views on a purely leg al question. Acc ording ly , these letter s are not excluded by FRE 408. Of more conce rn, howeve r, is BP’s direc t quotat i on of emails sent by g overnme nt counsel in response to cer tain of BP’s proposals. The em ai l s divulge the g overnme nt’s position reg arding which conce ssions it was willing and unwilling to make, particula rly as to the commerc ial intercha ng eability of cer

tain crude s. Although the emails may be rela ted to g overnme nt ex pert repor ts, the discussion there in is focused o n the g overnme nt’s disag ree ment with BP on sever al issues, including B P’s proposed sti pulation of m ater ial fac ts. And althoug h the emails conta in no express offe rs t o compromise, the statements t here in cer tainly appea

r t o be “ma de in compromise neg otiations reg arding the claim.” F ed. R. Evid. 408(a) (2).

Finally , althoug h the exact extent of the dispute is not entirely clea r at this point in the litigation, BP’s proposal of stipulated fac ts (and rela ted documents) is in the nature of a proposed settle m en t as ap p lied to cer tain crude s and appea

rs to be prec isely the ty

pe of communication descr ibed in FRE 408(a)

. I f used for a prohibited purpose, proposals of this nature are inadmissible even if offe red by

the par ty making the proposal. See Pierce v. F.R. Tripl er & Co. , 955 F.2d 820, 828 (2d Cir. 1992).

I n that reg ard, the court must reje ct BP’s contention that the sole purpose of the evidenc e was to “neg ate any contention of undue delay ” that could have been levied ag ainst BP for reque sting the stay

. The use of the word “neg ate” in FRE 408 is an indic at i o n t hat althoug hCourt No. 04-00321 Pag e 7

settlement-neg otiation e vidence may be used to rebut a cla im that a party eng ag ed in undue delay , the evidenc e is inadmissible “unless the door is first opened by a party raising the i s s u e o f u n d u e d el ay .” Stockman v. Oakc rest Dental Ctr., P.C. , 480 F.3d 791, 808 (6th Cir. 2007). See C h ar l es Alan W rig ht and Kenneth W

. Gra ham, J r., 23 Fed. Prac

. & Proc. § 5312 (2010) (noting that “the offe ror cannot himself raise the issue of delay as a justification for the admission of the evidenc e”)

.

Finally , th e co u rt i s compelled to observe that, althoug h unstated, the evidenc e provided in BP’s mot ion to stay the s cheduling order presumably is being offe red, at least i n part, for the purpose of convincing the court to g rant the motion, i.e ., that it somehow speaks for itself of “g ood cause ” pursuant to USCI T R. 16. Settlement-neg otiation evidenc e might be permissible for
t h at purpose under cer

tain circ umstances, but the evidenc e encompa ssed by this motion does n o t perta in solely , or even nece ssarily , to demonstrating “g ood cause ” under USCI T R. 16. Rather, the

ev i d ence appea

rs in larg e measure as “proof ” of BP’s position on the issue of the commer ci al intercha ng eability of ce rtain cr

udes. The burden is on the plaintiff to prove its case . I n the leg al course there of, the g overnme nt has ever

y rig ht, within rea son, to dispute a fac t as to its leg al conclusion, in this instance

as to those crude s’ commerc ial intercha ng eability

. Prudence there fore dictates that i t wo uld be exceeding ly unwise for the court to g ive any consideration to these mater i al s o r to allow them to become part of the rec ord. The emails, proposed stipulation of fac ts, and documents rela ted to that proposal are there fore inadmissible on this motion pursuant to FRE 408 and its underly ing policies. I n the interests of

judicial economy , howeve r, these items will be disreg arde d by the court rathe r than stricken f rom the re cord.Court No. 04-00321 Pag e 8

Conclusion Upon considera

tion of the fore g oing, the g overnme nt’s motion to strike is g rante d in part and denied in part, and the di s p u t ed ev i d en ce contained in BP’s motion will be trea ted in

acc ordanc e with the court’s finding s as discussed above. T h e go v er n m ent shall there fore either
consent to BP’s mot ion to s t ay t h e scheduling order or subm it its response to the m otion not later than 10 day s from the da te of this order

.

SO ORDERED.

/s/ R. Kenton Musgra ve R. KENTON MUSGRAVE, Senior J udg e Dated: Aug ust 13, 2010 New Y ork, Ne w York