Lyondell Chemical Co. v. Epec Polymers Inc.: Settlement Discussions By Any Other Name Are Off Limits
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A new case from the Fifth Circuit yesterday that would be of interest to civil practitioners. The underlying dispute in Lyondell Chemical Company v. Epec Polymers(pdf) involved allocation of responsibility under CERCLA, but the interesting part of the case to me is the application of Rule 408 of the Federal Rules of Evidence (pdf) regarding exclusion of settlement discussions.
Without numbing you with unnecessary detail, part of how the district court quantified the amounts and costs in issue was discussions, after the feds threatened suit, between some of the parties regarding a related but different portion of the same site. Although there are many more issues involved in the opinion, the Fifth Circuit found this use to be impermissible.
Judge Higginbotham wrote for the panel:
Although El Paso characterizes the reports as part of a “congenial effort by group members to fairly and cooperatively assess the contamination” unentitled to Rule 408 protection, we cannot agree. It is undisputed that the EPA threatened litigation against Occidental and other members of the task group. . . . The work of the task force was anything but business as usual and its discussions—including the Smythe Reports—went well beyond mere “business communications.”
El Paso argued that “Rule 408 only bars the use of compromise evidence to prove the validity or invalidity of the claim that was the subject of the compromise, not some other claim.” While acknowledging many different approaches courts and commentators have used to define the scope of a "claim," the court
. . . decline[d] to adopt any rigid definition of “claim.” Our application of Rule 408 has been and remains fact-specific, and tethered to the rationales underlying the rule. And here, we have no trouble concluding the Smythe Reports were created for use in negotiations regarding the “claim” now being litigated. Though separated by time and location, the disputes associated with the Highway 90 and Turtle Bay sites arise out of the same events: the repeated dumping of hazardous waste intended for Highway 90.
Mmmmm. I love the smell of evidence in the morning.
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