IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

UTAH REVERSE EXCHANGE, LLC, )

et al., )

 )

Plaintiffs, )

 )

v. ) CIVIL ACTION 14-0408-WS-B

 )

LINDA DONADO, et al., ) 

 )

Defendants. )

 ORDER

This matter is before the Court on the defendants’ motions to strike and to 

dismiss. (Docs. 13, 15). The parties have filed briefs in support of their respective 

positions, (Docs. 24, 25),1 and the motions are ripe for resolution.2 

The complaint, (Doc. 1), alleges that the sole member of each of the five 

plaintiff limited liability companies is Charles Breland. In August 2014, counsel 

for Breland met with counsel for the defendants herein, during which meeting “a 

written demand was presented on behalf of the [defendants], seeking what they 

claim to be past commissions and fees allegedly owed by” the plaintiffs for 

services in connection with the sale of certain properties owned by the plaintiffs, 

pursuant to a promise made at a previous meeting. The demand was for $3.2 

million. A demand for certain expense reimbursements in connection with one of 

the properties, in the amount of $350,000 and pursuant to a promise made at a 

different previous meeting, was also made at the August 2014 meeting. The 

 1 The defendants originally supported their motions only with one-page, 

conclusory filings that did not rise to the dignity of briefs. (Docs. 14, 16). At the 

Magistrate Judge’s insistence, (Doc. 19), the defendants filed a more adequate brief. 

2 The defendants declined the opportunity to file a reply brief in support of their 

motions. (Doc. 19).

Case 1:14-cv-00408-WS-B Document 31 Filed 02/02/15 Page 1 of 4
2

plaintiffs deny any such debt and seek a declaration that they do not owe the 

defendants these amounts or any other. 

According to the defendants, in August 2014 they were involved in 

litigation with Breland concerning his IRA. “In an effort to resolve this suit,” 

defense counsel met with counsel for Breland. (Doc. 24 at 2). It was during this 

meeting that defense counsel presented the defendants’ demand regarding 

commissions, fees and expenses. (Id. at 5). The defendants argue that what 

occurred during the August 2014 meeting is protected by Rule 408; that the 

allegations of the complaint concerning that meeting should thus be stricken; and 

that, shorn of those allegations, the complaint fails to state a claim on which relief 

can be granted. 

Rule 408 makes certain evidence “not admissible ... to prove or disprove 

the validity or amount of a disputed claim.” Fed. R. Evid. 408(a). First are 

settlement offers, which in the present context means “promising to accept, or 

offering to accept ... a valuable consideration in compromising or attempting to 

compromise the claim.” Id. Rule 408(a)(1). Second is “conduct or a statement 

made during compromise negotiations about the claim.” Id. Rule 408(a)(2).

According to the complaint, the defendants did not make a settlement offer, 

that is, a proposal to compromise the claim at issue in this lawsuit; instead, the 

defendants presented their demand for the full amount they claim is owed them. 

Such a demand falls outside Rule 408.3 According to the defendants, their counsel 

“made these statements ... as an offer to accept a settlement of any and all 

differences between the parties,” (Doc. 24 at 5), but they have offered no evidence 

to support that contention and thus have not drawn the contrary allegations of the 

complaint into question. 

 3 “[A] bill that itemizes what the sender thinks the recipient owes him and 

demands – even under threat of legal action – payment is not an offer in settlement or a 

document in settlement negotiations and hence is not excludable by force of Rule 408.” 

Winchester Packaging, Inc. v. Mobil Chemical Co., 14 F.3d 316, 319 (7th Cir. 1994). 

Case 1:14-cv-00408-WS-B Document 31 Filed 02/02/15 Page 2 of 4
3

Even had the defendants shown that their counsel made a settlement 

proposal rather than a demand for full satisfaction, the plaintiffs are not using his 

statement for an impermissible purpose. By its terms, Rule 408 bars such 

evidence only as proof that a claim is valid (or invalid) or that it is worth a 

particular amount.4 The plaintiffs, however, do not cite the demand/offer as proof 

the defendants’ claim is valid (i.e., that they really do owe some or all of the 

claimed amount); on the contrary, the very purpose of the lawsuit is to obtain a 

judicial declaration that the claim is not valid. Nor do the plaintiffs cite the 

demand/offer as proof the claim is bogus. The only purpose of alleging the 

demand/offer is to establish that there is a live controversy, exceeding the 

jurisdictional amount, as to which subject matter jurisdiction can attach and 

declaratory relief can be granted. “This is perfectly acceptable under Rule 408.” 

Rhoades v. Avon Products, Inc., 504 F.3d 1151, 1161 (9th Cir. 2007). 

In a creative but ineffectual effort to shoehorn the plaintiffs’ usage into the 

language of Rule 408, the defendants argue that the plaintiffs’ purpose is to 

demonstrate “the validity of the existence of the claim.” (Doc. 24 at 5 (emphasis 

added)). Elsewhere, they argue that, because a live controversy is essential to the 

Court’s exercise of jurisdiction, the plaintiffs are using their demand/offer to 

demonstrate “the validity of this action.” (Id. at 6 (emphasis added)). To state the 

obvious, under neither of these formulations are the plaintiffs attempting to “prove 

or disprove the validity ... of a disputed claim.” Under both formulations, they are 

attempting only to show the existence of a justiciable controversy within the 

Court’s original diversity jurisdiction. 

For the reasons set forth above, the defendants’ motions to strike and to 

dismiss are denied.

 4 Accord Fed. R. Evid. 408 advisory committee notes, 2006 amendments (“The 

amendment retains the language of the original rule that bars compromise evidence only

when offered as evidence of the ‘validity,’ ‘invalidity,’ or ‘amount’ of the disputed 

claim.”) (emphasis added).

Case 1:14-cv-00408-WS-B Document 31 Filed 02/02/15 Page 3 of 4
4

DONE and ORDERED this 2nd day of February, 2015.

s/ WILLIAM H. STEELE

CHIEF UNITED STATES DISTRICT JUDGE 

Case 1:14-cv-00408-WS-B Document 31 Filed 02/02/15 Page 4 of 4