Utah Reverse Exchange, LLC et al v. Donado et al
ORDER denying 13 Motion to Strike ; denying 15 Motion to Dismiss. Signed by Chief Judge William H. Steele on 2/2/2015. (tgw)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
UTAH REVERSE EXCHANGE, LLC,
LINDA DONADO, et al.,
) CIVIL ACTION 14-0408-WS-B
This matter is before the Court on the defendants’ motions to strike and to
dismiss. (Docs. 13, 15). The parties have filed briefs in support of their respective
positions, (Docs. 24, 25),1 and the motions are ripe for resolution.2
The complaint, (Doc. 1), alleges that the sole member of each of the five
plaintiff limited liability companies is Charles Breland. In August 2014, counsel
for Breland met with counsel for the defendants herein, during which meeting “a
written demand was presented on behalf of the [defendants], seeking what they
claim to be past commissions and fees allegedly owed by” the plaintiffs for
services in connection with the sale of certain properties owned by the plaintiffs,
pursuant to a promise made at a previous meeting. The demand was for $3.2
million. A demand for certain expense reimbursements in connection with one of
the properties, in the amount of $350,000 and pursuant to a promise made at a
different previous meeting, was also made at the August 2014 meeting. The
The defendants originally supported their motions only with one-page,
conclusory filings that did not rise to the dignity of briefs. (Docs. 14, 16). At the
Magistrate Judge’s insistence, (Doc. 19), the defendants filed a more adequate brief.
The defendants declined the opportunity to file a reply brief in support of their
motions. (Doc. 19).
plaintiffs deny any such debt and seek a declaration that they do not owe the
defendants these amounts or any other.
According to the defendants, in August 2014 they were involved in
litigation with Breland concerning his IRA. “In an effort to resolve this suit,”
defense counsel met with counsel for Breland. (Doc. 24 at 2). It was during this
meeting that defense counsel presented the defendants’ demand regarding
commissions, fees and expenses. (Id. at 5). The defendants argue that what
occurred during the August 2014 meeting is protected by Rule 408; that the
allegations of the complaint concerning that meeting should thus be stricken; and
that, shorn of those allegations, the complaint fails to state a claim on which relief
can be granted.
Rule 408 makes certain evidence “not admissible … to prove or disprove
the validity or amount of a disputed claim.” Fed. R. Evid. 408(a). First are
settlement offers, which in the present context means “promising to accept, or
offering to accept … a valuable consideration in compromising or attempting to
compromise the claim.” Id. Rule 408(a)(1). Second is “conduct or a statement
made during compromise negotiations about the claim.” Id. Rule 408(a)(2).
According to the complaint, the defendants did not make a settlement offer,
that is, a proposal to compromise the claim at issue in this lawsuit; instead, the
defendants presented their demand for the full amount they claim is owed them.
Such a demand falls outside Rule 408.3 According to the defendants, their counsel
“made these statements … as an offer to accept a settlement of any and all
differences between the parties,” (Doc. 24 at 5), but they have offered no evidence
to support that contention and thus have not drawn the contrary allegations of the
complaint into question.
“[A] bill that itemizes what the sender thinks the recipient owes him and
demands – even under threat of legal action – payment is not an offer in settlement or a
document in settlement negotiations and hence is not excludable by force of Rule 408.”
Winchester Packaging, Inc. v. Mobil Chemical Co., 14 F.3d 316, 319 (7th Cir. 1994).
Even had the defendants shown that their counsel made a settlement
proposal rather than a demand for full satisfaction, the plaintiffs are not using his
statement for an impermissible purpose. By its terms, Rule 408 bars such
evidence only as proof that a claim is valid (or invalid) or that it is worth a
particular amount.4 The plaintiffs, however, do not cite the demand/offer as proof
the defendants’ claim is valid (i.e., that they really do owe some or all of the
claimed amount); on the contrary, the very purpose of the lawsuit is to obtain a
judicial declaration that the claim is not valid. Nor do the plaintiffs cite the
demand/offer as proof the claim is bogus. The only purpose of alleging the
demand/offer is to establish that there is a live controversy, exceeding the
jurisdictional amount, as to which subject matter jurisdiction can attach and
declaratory relief can be granted. “This is perfectly acceptable under Rule 408.”
Rhoades v. Avon Products, Inc., 504 F.3d 1151, 1161 (9th Cir. 2007).
In a creative but ineffectual effort to shoehorn the plaintiffs’ usage into the
language of Rule 408, the defendants argue that the plaintiffs’ purpose is to
demonstrate “the validity of the existence of the claim.” (Doc. 24 at 5 (emphasis
added)). Elsewhere, they argue that, because a live controversy is essential to the
Court’s exercise of jurisdiction, the plaintiffs are using their demand/offer to
demonstrate “the validity of this action.” (Id. at 6 (emphasis added)). To state the
obvious, under neither of these formulations are the plaintiffs attempting to “prove
or disprove the validity … of a disputed claim.” Under both formulations, they are
attempting only to show the existence of a justiciable controversy within the
Court’s original diversity jurisdiction.
For the reasons set forth above, the defendants’ motions to strike and to
dismiss are denied.
Accord Fed. R. Evid. 408 advisory committee notes, 2006 amendments (“The
amendment retains the language of the original rule that bars compromise evidence only
when offered as evidence of the ‘validity,’ ‘invalidity,’ or ‘amount’ of the disputed
claim.”) (emphasis added).
DONE and ORDERED this 2nd day of February, 2015.
s/ WILLIAM H. STEELE
CHIEF UNITED STATES DISTRICT JUDGE
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