Opinion ID: 2284361
Heading Depth: 2
Heading Rank: 2

Heading: Fair Trial Issues

Text: Appellants contend that the trial court committed reversible error in admitting unfairly prejudicial evidence concerning events post-dating the Separation of Practice Agreement that had minimal probative value. They assert that any evidence concerning events that occurred after the parties negotiated and executed the agreement was essentially irrelevant on the central issue of the intended scope of the agreement at the time it was entered. In this category appellants place three items: repeated references at trial to the size of the Laker fee and its receipt more than a year after the July 6 agreement; Farmer's testimony that Beckman told him he would use the Laker fee to litigate until he saw the Farmer children starve; and testimony concerning a September 19, 1984 letter from Beckman to Farmer offering to compromise on the Laker fee. While we find no error in the admission of evidence related to the size and receipt of the Laker fee or the alleged remark concerning Farmer's children, we agree with appellants that the trial judge erred in admitting the September 19, 1984 letter and in allowing plaintiff's counsel to use it in closing argument. Moreover, the error was not harmless. We must, therefore, remand for a retrial of the issues previously submitted to the jury.
Appellants filed a motion in limine for an order prohibiting any references to the Laker litigation fee, arguing that it was irrelevant to the issues at trial and that any probative value it had would be outweighed by its potential for prejudice. After Judge Kessler denied the motion, appellants renewed the issue before Judge Weisberg, who stated: I think it is really essential to the plaintiff's case that the jury be told that there was an amount that was speculated about in June of '84 and an amount that was received in October '85[;] to the extent that any of that forms the jury assessment of what the parties intended in June of '84 or July of '84 they are entitled to know that. And also the motives of the parties in acting the way they did. [Emphasis added.] Farmer defends the latter basis for admission, arguing that a central question before the jury was whether Beckman and Kirstein had breached their fiduciary duties to him, and that evidence of the feeparticularly its sizetended to show their motive to breach those duties. We agree. By the time Farmer's cause of action went to the jury, directed verdicts had reduced it to the claim that Beckman and Kirstein wrongfully denied him his share of the Laker fee, thus breaching their fiduciary duties, and that Beckman's conduct was aggravated so as to warrant punitive damages. Farmer's evidence of the fiduciary breach spanned a time period both before and after the Separation of Practice Agreement was executed. Testimony and documents concerning receipt of the fee and its amount offered an explanation why appellants resisted his demand that they wind up and account. Beckman argues that even if the evidence was relevant on this ground, Farmer used it to argue improperly to the jury that he could not have intended to surrender his share of so large a fee in the July 6 agreement in exchange for so little. We need not decide whether the jury could have properly considered it for that purpose, because Judge Weisberg specifically instructed the jury that it was not to let the fact that a large fee was ultimately received affect its decision whether Farmer had waived a share of the fee. [34] He also instructed the jury that arguments of counsel were not evidence, and were not to be used as a basis for its findings. We presume that these instructions were followed unless the contrary appears, or the circumstances are very unusual. Weeda v. District of Columbia, 521 A.2d 1156, 1163 (D.C.1987) (citation omitted). There was no error in the admission of this evidence.
In response to an interrogatory from the defendants, Farmer stated that Beckman told him he would see the Farmer children starve before giving Farmer any portion of the Laker fee. During Farmer's deposition, he stated that Beckman had made the comment on or about July 2, 1984 at the firm's offices, with no one else present. Farmer also stated that Beckman might have repeated the remark on later occasions, perhaps in Kirstein's presence. Beckman's position was that he did not make the comment. Accordingly, the defendants moved in limine to bar testimony on the comment, claiming it was irrelevant and inflammatory. The judge indicated he would rule on its admissibility before Farmer's opening statement. While the record on the day of opening statement does not contain the judge's express ruling, it is clear from the record that he decided to admit the evidence. Again we find no error. The comment, if the jury found it had been made, was probative on whether punitive damages were appropriate, since it tended to prove malice by Beckman toward Farmer, a necessary element of a claim for punitive damages. [35] While the remark undoubtedly was prejudicial, it was not unfairly so given the likelyand permissibleuse the jury would make of it. Beckman took the stand and denied having made the statement, and Kirstein testified that he had never heard it. The jury could weigh this against Farmer's uncorroborated testimony and decide whom to believe. The judge did not abuse his discretion in admitting the evidence.

Several months after the parties executed the Separation of Practice Agreement, following several letters from Farmer demanding that Beckman cooperate in a final winding up and accounting, Beckman signed and sent a letter to Farmer dated September 19, 1984. In pertinent part, the letter read: Dear Don: David Kirstein and I have carefully considered your demands. As we have both informed you, we fundamentally disagree with your views and we believe you have no right, title or interests in any assets of our former practice.... Entirely without prejudice to our position that you are entitled to nothing, we propose the following as a full settlement of all claims: 1. You will desist from making defamatory statements about me, David Kirstein or our firm. 2. We will release you from all claims we may have against you. 3. We will give you the choice of either (a) $5,000 payable on October 1, 1984, or (b) $200,000 from the first $2 million received by Beckman & Kirstein as fees in the Laker Antitrust Litigation. 4. You will give us a full release and relinquishment of all claims, right, title or interest in any assets of our former practice. This offer will remain open until 10:00 A.M., September 27, 1984. It is contingent on you making no defamatory statements about me, David Kirstein or the firm. During his case in chief, counsel for Farmer offered the letter into evidence. Counsel for Beckman objected, arguing that the letter was a settlement offer. After reviewing the document, the trial judge overruled the objection without explanation and admitted the letter. Farmer then read it aloud to the jury. In friendly cross-examination of Beckman, counsel for Kirstein used the letter and references to the settlement offer it contained. Beckman explained the relationship of the settlement offer to the Separation of Practice Agreement. [36] When counsel for Farmer objected to attempts by Kirstein's counsel to have Beckman discuss the letter's reference to defamatory conduct by Farmer, the judge elaborated on his decision to admit the letter, which he acknowledged contained a settlement offer: THE COURT: Part of the problem, frankly, Mr. Schwartz, when wewhen I ruled earlier that what might otherwise be considered an offer of settlement and, therefore, inadmissible in evidence, would be admitted in the context of this case because it was relevant to the intention of the parties when they entered the separation of practice agreement, what is sauce for the goose is [sauce] for the gander. If offers of settlement by Mr. Beckman have to come in, they have to be entitled to show why he made such an offer. [Emphasis added.] Counsel for Farmer used the letter in closing argument to contend it was implausible that appellants would offer Farmer a share of the fee in the September letter if they believed he had given up any interest in it in the July separation of practice agreement. [37] Following closing argument, Kirstein moved for a mistrial arguing that the inference Farmer's counsel had suggested was so damaging he did not know how to address it in his own closing. Beckman concurred, calling the argument the kiss of death. The court denied the motion, concluding that the jury was not prejudiced by the argument. In denying the defendants' post-trial motion for a new trial, the judge stated that the objection to the letter as a settlement offer misconceived the grounds of its admissibility. After noting that the defendants contended Farmer had given up a share of the Laker fee in the Separation of Practice Agreement, while Farmer argued that the agreement did not even address fees expected from completion of unfinished partnership business, the judge explained: A central piece of Farmer's argument was that Beckman would stop at nothing to prevent him from sharing any part of [the Laker] recovery, and that the separation-of-practice-agreement defense was just another stumbling block erected by Beckman shortly before trial when his primary barricadethe claim that Farmer was not even a partnerwas struck down by Judge Kessler's ruling on defendant's motion for summary judgment. It was therefore important for Farmer to show that on September 19, 1984, two and a half months after the Separation of Practice Agreement, while denying that Farmer was entitled to anything, Beckman was not saying that Farmer had contracted away his rights in the earlier agreement. The fact that Beckman also offered a settlement in that letter was purely incidental, and it was not at all prejudicial to Beckman when coupled with an express denial of liability in the same letter. [Emphasis by court.]
The law of evidence, reflecting a policy to promote private resolution of civil disputes, disfavors the use of an offer to compromise a disputed claim against the party making it as an admission of liability. This rule also recognizes the minimal probative value of a settlement offer as an admission against interest. See Fed.R. Evid. 408 (1988); C. MCCORMICK, MCCORMICK ON EVIDENCE § 274(f) (3d ed. 1984). Hence this court has repeatedly held that an offer to compromise a claim is inadmissible on the issue of liability. See, e.g., Goon v. Gee Kung Tong, Inc., 544 A.2d 277, 280 (D.C.1988); Wayne Insulation Co. v. Hex Corp., 534 A.2d 1279, 1281 (D.C. 1987); Pyne v. Jamaica Nutrition Holdings, 497 A.2d 118, 126-27 (D.C.1985). Beyond question the September 19 letter was, in substance, an offer by Beckman to compromise Farmer's claim. It occurred at a time when the parties were in clear dispute as to the validity of Farmer's claim, and when relations were so acrimonious as to make litigation almost inevitable. Cf. Goon, supra, 544 A.2d at 281; 1010 Potomac Assoc. v. Grocery Mfrs., 485 A.2d 199, 211 (D.C.1984); Crain v. Allison, 443 A.2d 558, 565-66 (D.C.1982) (for exclusionary rule to apply, parties must be in apparent dispute as to amount or validity of claim). Moreover, the letter wears a characteristic badge of an offer to compromise a disputed claim: an express disclaimer of liability. See Harrison v. District of Columbia, 95 A.2d 332, 334 (D.C.1953). Farmer, however, mirroring the trial judge's reasoning in denying defendants' motions for a new trial, argues that the offer to compromise was not admitted against Beckman as an admission of liability; indeed, it was not offered for any purpose at all but rather wasas the trial judge opineda purely incidental part of a letter whose legitimate significance lay elsewhere, viz., in Beckman's failure to assert that Farmer had contracted away his rights in the earlier agreement. [38] That aspect of the letter, Farmer maintains, was relevant to the parties' intent in executing the July 1984 agreement. There are several difficulties with this argument. First, assuming the trial judge had this distinction in mind, he issued no instruction to the jury, contemporaneously or at any time, charging them to disregard the settlement offer and consider only Beckman's failure in the letter to mention the earlier separation of practice agreement. Second, Farmer's counsel made no such distinction in arguing the contents of the letter to the jury, but rather directed the jury's attention precisely to its mention of the Laker anti-trust litigation and proposal of $200,000 from [that] litigation. See note 37, supra. Third, asking the jury to consider what the letter did not say but not to consider the settlement offer would have been impractical in any event. The centerpiece of the letter was its propos[al of] the following as a full settlement of all claims.... It then listed four terms of settlement which included alternative dollar amounts, one for $200,000 of the Laker fee. If the settlement offer is removed from the letter, almost nothing remains. Moreover, consistent with the purpose of the exclusionary rule to promote settlement of disputes, Fed.R.Evid. 408 bars admission of [el vidence of conduct or statements made in compromise negotiations... (emphasis added). Beckman's failure to mention the separation practice agreement was assuredly conduct in the course of compromise negotiations, and its admission would be equally forbidden under the federal rule. We conclude that the trial court should have excluded the letter entirely as an inadmissible offer to compromise.
The remaining issue is whether admission of the letter was harmless error. To answer that question we must decide whether we can say with fair assurance, after pondering all that happened without stripping the erroneous action from the whole, that the judgment was not substantially swayed by the error.... Garvey v. O'Donoghue, 530 A.2d 1141, 1148 (D.C. 1987), quoting Kotteakos v. United States, 328 U.S. 750, 765, 66 S.Ct. 1239, 1248, 90 L.Ed. 1557 (1946). Before the advent of the Federal Rules of Evidence, Judge Learned Hand observed that questions [concerning a settlement offer] are especially apt to deflect the minds of a jury from the issues, and, because no jury instruction would cure the damage, it would seem that the only relief would be a mistrial.... Paster v. Pennsylvania R.R., 43 F.2d 908, 911 (2d Cir.1930). Since the adoption of Fed.R.Evid. 408 (Compromise and Offers to Compromise), however, federal courts have employed a more flexible standard of assessing prejudice, reflecting the fact that not only formal offers to compromise are inadmissible but also [e]vidence of conduct or statements made in compromise negotiations.... See McInnis v. A.M.F., Inc., 765 F.2d 240, 251 (1st Cir.1985). Thus, as Judge Weinstein has pointed out, [e]specially in long and hotly contested trials, a revelation about an aspect of the negotiations, or indirect references to an offer or agreement of compromise, may fade into insignificance, particularly if the court adequately instructs the jury. 2 J. WEINSTEIN, WEINSTEIN'S EVIDENCE ¶ 408[06] (1989). In the present case, however, we deal with an explicit and formal offer to compromise read fully to the jury and argued strongly by Farmer as an admission by Beckman and Kirstein that Farmer had not waived his right to the Laker fee. Moreover, as pointed out, the trial court gave no instruction to the jury about possible permissible uses of the compromise letter. It is true that the trial lasted three weeks and there was plentiful other properly admitted evidence as to what the parties understood the Separation of Practice Agreement to mean in regard to the Laker fee. In particular, Farmer had submitted written proposals for a winding up after execution of the agreement which discussed the Laker fee, and the failure of Beckman and Kirstein to raise the agreement in response to these enabled Farmer's counsel to argue that they recognized Farmer had not waived any rights to the fee. But, as we have seen, the Separation of Practice Agreementespecially its provision that work and bills from July 1, 1984 were to be for the separate accounts of RMB and DMK and the client list reserving the Laker liquidator to Beckman and Kirsteinis ambiguous and admits of contrary interpretations. Beckman's argument that Farmer gave up the still-contingent Laker fee in return for a very hefty bill submitted to Princess Casinos and other client fees, while rejected by the jury, was not frivolous. In these circumstances, we cannot be satisfied with the facts that the compromise offer was coupled with a denial of liability and that Beckman testified that it was only a price of peace. In part, it is precisely because a settlement offer includes denial of liability that it risks deflect[ing] the minds of a jury from the issues. Paster, supra, 43 F.2d at 911. And, although the jury knew that the Laker fee received exceeded $6 million, an offer to pay $200,000 from the first $2 million (when the actual fee was still unknown) could well have impressed the jury as revealing more than a desire to avoid litigation. Without doubt the trial judge, in ruling on a motion for new trial, is in a better position than this court to gauge the effect of erroneously admitted evidence or improper comment on the jury. Meyer v. Capital Transit Co., 32 A.2d 392, 393-94 (D.C.1943) (applying rule to comment on defendant's policy of settling claims). We cannot read Judge Weisberg's opinion, however, as concluding that the settlement offereven if central rather than incidental to the letterwas of no significance in the context of the entire trial. Had the judge, having [had] the opportunity to observe the trial as it unfolds and to weigh and reconcile the evidence, Davis v. United States, 564 A.2d 31, 41 (D.C.1989) (en banc), concluded the evidence overwhelmingly favored Farmer's construction of the agreement, we would owe substantial deference to that appraisal. But the court made no such determination and our own examination of the record likewise does not persuade us the issue was one-sided. Admission of an offer to compromise implicates the basic fairness of a trial. See Hiltpold v. Stern, 82 A.2d 123, 126 (D.C. 1951) (A mere offer of compromise is to be protected because a party to a controversy is permitted in the interest of peace to tender such terms as to him shall seem proper, and if rejected by the other party it would be unfair to make use of it as an admission of liability.). Since we cannot say with fair assurance that the letter, coupled with Farmer's argument to the jury, did not affect the verdict, the case must be retried without admission of the letter.