Opinion ID: 697279
Heading Depth: 3
Heading Rank: 2

Heading: Exclusion of internal memoranda

Text: 79 AMI's second argument is that the district court erred in applying the Rule 408 exclusion to internal memoranda that were a part of the fifteen items offered for exclusion under Rule 408. AMI argues that the rule only protects conduct and statements during negotiations, and does not protect internal memoranda, or deposition testimony concerning these memoranda. Alcoa responds that such an interpretation and application of Rule 408 would contradict the rule's purpose, serving instead to discourage open settlement discussions. 80 The district court found both the Lockwood and Kasprzyk memoranda, and testimony concerning these documents, to be eligible for exclusion under Rule 408. AMI I at 8-9. The district court declined to adopt the reasoning in Blue Circle Atl., Inc. v. Falcon Materials, Inc., 760 F.Supp. 516, 522 (D.Md.1991), aff'd without op., 960 F.2d 145 (4th Cir.1992), which interpreted Rule 408 to require communication of internal memoranda to an opposing party, and instead relied upon the holding in Ramada Dev. Co. v. Rauch, 644 F.2d 1097 (5th Cir.1981). The Court of Appeals for the Fifth Circuit in Ramada upheld the district court's exclusion of an internal report made in the course of an effort to compromise. Id. at 1106-07. The Fifth Circuit quoted the text of Rule 408, that [e]vidence of conduct or statements made in compromise negotiations is likewise not admissible. Id. at 1106. In construing this language, the district court here determined that the 81 failure of Alcoa to communicate the internal memoranda to AMI is not dispositive in the context of a Rule 408 analysis; rather, any statements prepared by Alcoa representatives that function as the basis for compromise negotiations demonstrate 'evidence of conduct' in compromise negotiations. 82 AMI I at 8-9. The district court further found that the memoranda served as a basis for calculation of compromise figures. Thus, the court concluded that the Rule 408 exclusion applied. Id. at 9. 83 First, AMI argues that the legislative history of Rule 408 suggests a different result and that the district court has incorrectly broadened the language of the rule. Second, AMI asserts that the district court should have followed Blue Circle, and that the court disregarded an important fact in Ramada that narrows its application. 84 Under the common law, offers of compromise were excluded from evidence, but the exclusion did not extend to admissions of fact, even though made in the course of compromise negotiations, unless hypothetical, stated to be 'without prejudice,' or so connected with the offer as to be inseparable from it. 10 James Wm. Moore, Moore's Federal Practice Sec. 408.01 (Daniel R. Coquillette et al. eds., 2d ed. 1995) (Advisory Committee's Note on Proposed Rule 408). Thus, AMI argues, Rule 408 was intended to remedy the common law rule by expanding it merely to include evidence of conduct or statements, but not internal memoranda. Id. While Rule 408 was specifically designed to cover admissions of fact, its language is considerably broader than that necessary to accomplish this change. 85 Next, in Ramada, the report sought to be excluded was generated by an architect hired for the purpose of preparing an analysis of defects in the construction of a motel that plaintiff had contracted to have built. 644 F.2d at 1099, 1106. Testimony in Ramada indicated that the architect was commissioned by Ramada to prepare a report that would function as a basis of settlement negotiations regarding the alleged defects in the motel. Id. at 1107. Thus, the Fifth Circuit determined that because the report had been prepared as a tool for settlement negotiations, it fell within the scope of Rule 408. Id. 86 In contrast to Ramada, the District Court of Maryland in Blue Circle interpreted Rule 408 as inapplicable to internal memoranda, unless they were communicated to the other side in an attempt at settlement. 760 F.Supp. at 523, citing 23 Charles Alan Wright & Kenneth W. Graham, Jr., Federal Practice and Procedure Sec. 5303 (1980)). We reject this interpretation of Rule 408 as too broad, and find that the district court in Blue Circle overstated the meaning of the treatise citation. 4 87 AMI argues that the decision in United States v. 320.0 Acres of Land, 605 F.2d 762 (5th Cir.1979), also should have guided the district court, and that Ramada is distinguishable from the case at hand. In fact, it is 320.0 Acres that is distinguishable from both Ramada and the case at hand. In 320.0 Acres, the Fifth Circuit elected not to exclude a governmental report discussing evaluation of fair market value to be paid to a condemnee, on the basis that appraisals were not offers, but rather were statements of the amount which the Government believes the landowner is constitutionally entitled to should negotiations fail and condemnation proceedings be initiated. Id. at 823-25. These statements of amount made by the government were not compromise offers and were required by statute, a situation quite different from those of the Alcoa memoranda. 88 The court notes that the Eleventh Circuit's decision in Blu-J, Inc. v. Kemper C.P.A. Group, 916 F.2d 637, 642 (11th Cir.1990), reinforces the reasoning in Ramada. In Blu-J, the Eleventh Circuit upheld the exclusion of evidence of an accountant's evaluation prepared by mutual agreement of [the parties] as part of their settlement negotiations. Id. at 641. This independent evaluation in Blu-J was found to fall within the Rule 408 exception, and the holding in Ramada, because although the parties disagreed as to whether an offer was on the table during negotiations, both parties agreed that the evaluation was done to promote settlement of a dispute. Id. at 642. Here, the district court found the Alcoa memoranda was prepared as a basis for compromise negotiations, particularly because the memoranda appeared to be intended to assist in calculation of compromise figures discussed subsequently. AMI I at 9. The district court's analysis is consistent with the view of Rule 408 expressed in the Ramada and Blu-J decisions of our sister circuits, which we find persuasive. Thus, we hold that the district court did not abuse its discretion in excluding internal memoranda prepared for use in discussion of settlement of AMI invoice amounts. 5