Embrace Settlement Negotiations '

The Rule appears to support the notion that statements or conduct by parties or their attorneys during settlement negotiations, regardless of whether a mediator is present, are inadmissible to prove liability or invalidity of a disputed claim. Most attorneys stop reading at that point and miss the important continuation that such evidence would be admissible when offered for another purpose. Last, the Rule clarifies that if the evidence is otherwise admissible, it would not be excluded merely because it is disclosed by a party or their attorney during settlement negotiations.

Differing from New Jersey's 408, the Federal Rule contains a list of prohibited uses followed by a series of exceptions in which settlement negotiations may be admissible. In reading both Rules, attorneys can easily imagine that they were drafted with an eye toward general litigation and in the absence of matrimonial settlement reality. The matrimonial attorney, however, must engraft the general concepts onto the intricacies of matrimonial settlement negotiations and the inherent risks they bring, which may not exist or manifest themselves in the same manner as in the typical civil litigation setting.

For instance, in a typical civil litigation in which damages are sought, the issues primarily revolve around liability and damages. Often, liability is not even a contested issue. Thus, the main focus of concern is damages and the amount of money the defendant will pay the plaintiff. In the matrimonial setting, however, the issue of liability generally no longer exists. Even the inexperienced matrimonial attorney realizes that divorce litigation, reduced to its simplest terms, is about money and children. In determining a resolution of those two issues, a significant number of facts are disclosed between the parties. This brings us to the first category of information that is not protected during settlement negotiations: facts.

Facts

Rule 408 clearly provides that “Evidence otherwise admissible shall not be excluded merely because it was disclosed during settlement negotiations.” This includes facts. Let us consider a couple of not uncommon scenarios: the husband or wife had unreported income ' that is a fact; the husband or wife plans to move in with a family member who has insufficient bedrooms for the children ' that is a fact; one parent plans to leave the state ' that is a fact; the husband or wife has a Swiss bank account ' that is a fact. Such facts are not inadmissible merely because they are disclosed during a settlement negotiation. Although many of these facts may already be known to the other party, it is important to remember that settlement negotiations do not protect their disclosure merely because they take place as an incident of that process. Conversely, they are not to be ignored in future litigation merely because they were disclosed in this type of forum.

Settlement Terms

The point of settlement negotiations is, of course, to settle the pending matter. There is probably not a court in the land in which amicable settlements are not favored over contested, judge-called resolutions. That brings us to the next category of admissible information: Settlement Terms. In the matrimonial setting, the people taking part in a settlement conference often will include both parties, their attorneys, and sometimes their accountants. When a “settlement” is reached following one of these conferences, it should subsequently be reduced to writing because unlike civil settlements, which may simply contain a release and a dollar figure to be paid, matrimonial settlements are inherently more complex, containing all sorts of terms and provisions.

If a party in the meantime should renege, the other party is often all too willing to enforce what is perceived to have been a binding settlement. This almost always implicates a plenary hearing. At that hearing, it is a necessary to disclose the subject matter of the settlement discussions. Only by calling the individuals and attorneys present as witnesses, hearing their testimony regarding the settlement negotiations, and reviewing the facts of the case may the trier of fact be able to determine whether or not a settlement was in fact reached and what the terms might be.

Finally, even the negotiating positions of parties can be evidential as to another issue ' such as an award of counsel fees.

Conclusion

The quick lessons to be learned (and discussed with your clients) are these:

1. The ground rules of settlement negotiations should be the subject of an agreement, or at the very least, an exchange of a writing(s) (such as e-mails) prior to engaging in the process.
2. In order to avoid a hearing at which one party claims that a verbal agreement was reached during settlement discussions, at the beginning of the case, the attorneys should exchange a writing(s) in which they agree that no verbal agreement in the nature of a final settlement is valid. In other words, only an agreement which has been reduced to writing and is signed by the parties, is enforceable.
3. Assume that all factual disclosures are evidential, and plan accordingly.

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Laurence J. Cutler, a member of this newsletter's Board of Editors, is with Laufer, Dalena, Cadicina, Jensen & Boyd, LLC, Morristown, NJ. He limits his practice to family and matrimonial law, trials and appeals, and related matters. Gregory D. R. Behringer practices family law and handles other general litigation matters at the firm.

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It is the long (and almost uni-versally)-held belief among lawyers that settlement negotiations are confidential and cloaked with evidential immunity at a later judicial proceeding. Is this really true? Is the non-admissibility of conversations that occur during settlement negotiations actually that immutable? The answer is, No. There are quite often incidents and situations in which parts or all of settlement negotiations are, in fact, admissible. The following describes a few of those instances and provides a warning to attorneys: Be careful what you say; it may be admissible against your client.

By way of example, in New Jersey, the Rule of Evidence regarding settlement offers and negotiations is Rule 408 (based, in large part, on the Federal Rule of Evidence ' also 408 ' from which it was taken), which provides (in general terms) that settlement negotiations are inadmissible to prove, among other things, liability. Specifically, Rule 408 states as follows:

When a claim is disputed as to validity or amount, evidence of statements or conduct by parties or their attorneys in settlement negotiations, with or without a mediator present, including offers of compromise or any payment in settlement of a related claim, shall not be admissible to prove liability for, or in validity of, or amount of the disputed claim. Such evidence shall not be excluded when offered for another purpose; and evidence otherwise admissible shall not be excluded merely because it was disclosed during settlement negotiations. (Emphasis added).

The Rule appears to support the notion that statements or conduct by parties or their attorneys during settlement negotiations, regardless of whether a mediator is present, are inadmissible to prove liability or invalidity of a disputed claim. Most attorneys stop reading at that point and miss the important continuation that such evidence would be admissible when offered for another purpose. Last, the Rule clarifies that if the evidence is otherwise admissible, it would not be excluded merely because it is disclosed by a party or their attorney during settlement negotiations.

Differing from New Jersey's 408, the Federal Rule contains a list of prohibited uses followed by a series of exceptions in which settlement negotiations may be admissible. In reading both Rules, attorneys can easily imagine that they were drafted with an eye toward general litigation and in the absence of matrimonial settlement reality. The matrimonial attorney, however, must engraft the general concepts onto the intricacies of matrimonial settlement negotiations and the inherent risks they bring, which may not exist or manifest themselves in the same manner as in the typical civil litigation setting.

For instance, in a typical civil litigation in which damages are sought, the issues primarily revolve around liability and damages. Often, liability is not even a contested issue. Thus, the main focus of concern is damages and the amount of money the defendant will pay the plaintiff. In the matrimonial setting, however, the issue of liability generally no longer exists. Even the inexperienced matrimonial attorney realizes that divorce litigation, reduced to its simplest terms, is about money and children. In determining a resolution of those two issues, a significant number of facts are disclosed between the parties. This brings us to the first category of information that is not protected during settlement negotiations: facts.

Facts

Rule 408 clearly provides that “Evidence otherwise admissible shall not be excluded merely because it was disclosed during settlement negotiations.” This includes facts. Let us consider a couple of not uncommon scenarios: the husband or wife had unreported income ' that is a fact; the husband or wife plans to move in with a family member who has insufficient bedrooms for the children ' that is a fact; one parent plans to leave the state ' that is a fact; the husband or wife has a Swiss bank account ' that is a fact. Such facts are not inadmissible merely because they are disclosed during a settlement negotiation. Although many of these facts may already be known to the other party, it is important to remember that settlement negotiations do not protect their disclosure merely because they take place as an incident of that process. Conversely, they are not to be ignored in future litigation merely because they were disclosed in this type of forum.

Settlement Terms

The point of settlement negotiations is, of course, to settle the pending matter. There is probably not a court in the land in which amicable settlements are not favored over contested, judge-called resolutions. That brings us to the next category of admissible information: Settlement Terms. In the matrimonial setting, the people taking part in a settlement conference often will include both parties, their attorneys, and sometimes their accountants. When a “settlement” is reached following one of these conferences, it should subsequently be reduced to writing because unlike civil settlements, which may simply contain a release and a dollar figure to be paid, matrimonial settlements are inherently more complex, containing all sorts of terms and provisions.

If a party in the meantime should renege, the other party is often all too willing to enforce what is perceived to have been a binding settlement. This almost always implicates a plenary hearing. At that hearing, it is a necessary to disclose the subject matter of the settlement discussions. Only by calling the individuals and attorneys present as witnesses, hearing their testimony regarding the settlement negotiations, and reviewing the facts of the case may the trier of fact be able to determine whether or not a settlement was in fact reached and what the terms might be.

Finally, even the negotiating positions of parties can be evidential as to another issue ' such as an award of counsel fees.

Conclusion

The quick lessons to be learned (and discussed with your clients) are these:

1. The ground rules of settlement negotiations should be the subject of an agreement, or at the very least, an exchange of a writing(s) (such as e-mails) prior to engaging in the process.
2. In order to avoid a hearing at which one party claims that a verbal agreement was reached during settlement discussions, at the beginning of the case, the attorneys should exchange a writing(s) in which they agree that no verbal agreement in the nature of a final settlement is valid. In other words, only an agreement which has been reduced to writing and is signed by the parties, is enforceable.
3. Assume that all factual disclosures are evidential, and plan accordingly.

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Laurence J. Cutler, a member of this newsletter's Board of Editors, is with Laufer, Dalena, Cadicina, Jensen & Boyd, LLC, Morristown, NJ. He limits his practice to family and matrimonial law, trials and appeals, and related matters. Gregory D. R. Behringer practices family law and handles other general litigation matters at the firm.

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