ARE SETTLEMENT NEGOTIATIONS ADMISSIBLE INTO EVIDENCE?

This may seem like an esoteric legal subject best left to law review articles but it is relevant to my clients. A federal court in Massachusetts permitted a jury to hear testimony about a plaintiff’s pre-litigation settlement demands and threats.

The facts: Ropes & Gray, a distinguished Boston firm, informed an attorney that he would be discharged at the end of a six month severance period. The attorney requested extensions, which the firm denied but it finally offered him a two month extension of he signed a general release of any claims against it. The attorney responded that he would file a charge of discrimination with the EEOC unless the severance period was extended indefinitely (meaning that the firm would have to pay him for doing absolutely nothing) or for a payment of $8.5 million. The firm discharged him and he promptly brought a lawsuit alleging employment discrimination.

The employer’s counsel sought to introduce testimony on the plaintiff’s demand. The Federal Rules of Evidence preclude the use of a settlement offer as an admission of liability but, here, the employer’s goal was to demonstrate that he had attempted to commit extortion, which formed the basis for his discharge. Under these circumstances, the trial judge concluded that testimony as to the demand would be admissible in evidence. The testimony indicated that, during settlement discussions, the plaintiff’s demand escalated up to $40 million. The jury returned a pro-employer verdict. One can well imagine how this testimony enabled it to form a negative impression of the employee’s character, profoundly damaging his case.

Moral # 1 of the case is that greed kills. Demands for exorbitant amounts of money which bear no relation to the claims made can backfire on a plaintiff.
Moral #2 is that, if this interpretation of the rules of evidence is widely adopted, settlement negotiations may become part of the court record so long as they are admitted to establish a witness’s bias or prejudice, not to the validity of the claim itself. Therefore, you are well advised to consult with employment counsel before engaging in any settlement negotiations, whether in writing or verbal. That email or text message that you send off in a pique, without a careful and calm re-reading of the language, may influence the outcome of the case.