In the Courts

In Bailey, Steven E. Bailey appealed his conviction of wire fraud and money laundering. He argued that the court committed plain error by permitting the prosecutor to question a rebuttal witness, without objection, concerning admissions Bailey made within a settlement agreement he had entered with a number of his partners. In the settlement, Bailey had admitted many of the acts to which he was alleged to have committed. The Tenth Circuit held that Rule 408 applied in the criminal context to bar the prosecution from introducing evidence of the defendant's settlement with his partners. The court rejected decisions from the Second, Sixth, and Seventh Circuits and followed a decision from the Fifth Circuit and dicta from the Fourth and D.C. Circuits in applying Rule 408 to criminal cases. The court reasoned that Rule 1101(b) of the Federal Rules of Evidence states that the rules of evidence 'apply generally' to criminal cases and criminal proceedings and found that nothing in the language of Rule 408 explicitly excludes its application to criminal proceedings. The court further reasoned that to hold otherwise would render superfluous the clause in Rule 408 that specifically states that the rule 'does not require exclusion when the evidence is offered for another purpose, such as ' proving an effort to obstruct a criminal investigation or prosecution.' Finally, the court found that other powerful policy concerns, such as jurors drawing improper inferences of guilt from the repayment of funds, dictated that Rule 408 should bar settlement evidence in criminal cases.

Nevertheless, the court rejected the defendant's argument that it was plain error. The court concluded that there was ample other evidence establishing the substance of what the witnesses testified was contained in the settlement ' that Bailey had knowingly and intentionally taken money from the partnership accounts and placed it in his own account, in contravention of the partnership agreement; that the partners did not give him permission to do that; and that he had withdrawn in excess of $1 million without authorization from the partnership. Moreover, the court found that the testimony did not indicate that Bailey was 'furnishing or offering or promising to furnish ' a valuable consideration' under Rule 408. Rather, the testimony simply recounted Bailey's conduct in connection with the partnership. Accordingly, the court held that the testimony did not affect the outcome of the trial to constitute plain error.

Rule 408 Applies to Criminal Cases, Says Tenth Circuit

In a Matter of First Impression, the Tenth Circuit Rules that Rule 408 Applies in the Criminal Context, But Holds That Erroneous Admission of Testimony Relating to Settlement Was Not Plain Error. United States v. Bailey , 327 F.3d 1131 (10th Cir. 2003)

A panel of the Tenth Circuit, in a matter of first impression in the circuit, held that Rule 408 of the Federal Rules of Evidence applies to both criminal and civil proceedings to bar a party from introducing evidence of a settlement.

In Bailey, Steven E. Bailey appealed his conviction of wire fraud and money laundering. He argued that the court committed plain error by permitting the prosecutor to question a rebuttal witness, without objection, concerning admissions Bailey made within a settlement agreement he had entered with a number of his partners. In the settlement, Bailey had admitted many of the acts to which he was alleged to have committed. The Tenth Circuit held that Rule 408 applied in the criminal context to bar the prosecution from introducing evidence of the defendant's settlement with his partners. The court rejected decisions from the Second, Sixth, and Seventh Circuits and followed a decision from the Fifth Circuit and dicta from the Fourth and D.C. Circuits in applying Rule 408 to criminal cases. The court reasoned that Rule 1101(b) of the Federal Rules of Evidence states that the rules of evidence 'apply generally' to criminal cases and criminal proceedings and found that nothing in the language of Rule 408 explicitly excludes its application to criminal proceedings. The court further reasoned that to hold otherwise would render superfluous the clause in Rule 408 that specifically states that the rule 'does not require exclusion when the evidence is offered for another purpose, such as ' proving an effort to obstruct a criminal investigation or prosecution.' Finally, the court found that other powerful policy concerns, such as jurors drawing improper inferences of guilt from the repayment of funds, dictated that Rule 408 should bar settlement evidence in criminal cases.

Nevertheless, the court rejected the defendant's argument that it was plain error. The court concluded that there was ample other evidence establishing the substance of what the witnesses testified was contained in the settlement ' that Bailey had knowingly and intentionally taken money from the partnership accounts and placed it in his own account, in contravention of the partnership agreement; that the partners did not give him permission to do that; and that he had withdrawn in excess of $1 million without authorization from the partnership. Moreover, the court found that the testimony did not indicate that Bailey was 'furnishing or offering or promising to furnish ' a valuable consideration' under Rule 408. Rather, the testimony simply recounted Bailey's conduct in connection with the partnership. Accordingly, the court held that the testimony did not affect the outcome of the trial to constitute plain error.