Smith v. Waverly Partners, LLC et al

Filing 113

ORDER denying in part 100 Plaintiff's Motion in Limine. Defendant is entitled to offset any overlapping award, the amount of which shall be determined by this Court. This Order further notes the Court's rationale for denying Defendant's Motion to Amend 85 via oral order on 9/11/12. Signed by District Judge Richard Voorhees on 9/17/12. (smj)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
CASE NO. 3:10-CV-00028-RLV-DSC
SHAWN SMITH,

)
)
Plaintiff,
)
)
v.
)
)
WAVERLY PARTNERS, LLC, and )
ALLIEDBARTON SECURITY
)
SERVICES, LLC d/b/a HRPLUS, )
)
Defendants.
)
)

MEMORANDUM AND ORDER

THIS MATTER is before the Court on Defendant Waverly Partners, LLC’s
(“Waverly’s”) Motion to Amend (Doc. 85), filed August 30, 2012, and Plaintiff Shawn Smith’s
Motion in Limine to Exclude Evidence (Doc. 100), filed September 7, 2012.
Within its Motion to Amend, Defendant Waverly seeks leave to amend its Answer to
include the affirmative defense of election of remedies. “The purpose of the doctrine of election
of remedies is not to prevent recourse to any remedy, but to prevent double redress for a single
wrong.” Smith v. Gulf Oil Corp., 79 S.E.2d 880, 885 (N.C. 1954). The underlying basis of the
rule is “the maxim which forbids that one shall be twice vexed for one and the same cause.” Id.
“The clearest remedial dimension of election doctrine is found in decisions that simply seek to
prevent double recovery for a single injury.” Artis v. Norfolk & W. Ry. Co., 204 F.3d 141, 143
(4th Cir. 2000) (citing 18 Wright & Miller, Federal Practice & Procedure § 4476, at 775
(1981)).
Plaintiff’s past claim of employment discrimination against her former employer, The
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Cato Corporation, and instant claim of breach of contract are not legally inconsistent and entail
variant wrongs (namely, unlawfully disparate treatment by a qualifying employer and harm
caused by the contractual breach), though the Court acknowledges that an award of damages in
this case could overlap with the Plaintiff’s Title VII settlement. Therefore, an assertion of the
doctrine of election of remedies to bar Plaintiff’s instant claim would be futile, and Defendant
Waverly’s Motion is denied. However, to the extent Plaintiff’s Title VII settlement compensates
for lost wages, Defendant is entitled to argue for an offset of that amount against the wages-based
damages sought in the instant case.
The question remains, however, as to whom Defendant is so entitled to argue. Federal
Rule of Evidence 408 provides that evidence of a settlement offer, negotiation, or agreement is
“not admissible on behalf of any party, when offered to prove liability for, invalidity of, or
amount of a claim that was disputed as to validity or amount.” The pertinent primary rationale
underlying this rule is that exclusion of an offer to compromise or acceptance of an offer
promotes the public policy of encouraging dispute settlements. Courts are split as to whether
Rule 408 bars admission of evidence from a settlement between a plaintiff and a third party to
calculate a claim for damages against a defendant who was not a party to the original suit in
which the settlement occurred.
Some have held that Rule 408 bars evidence from a party’s settlement with a third party.
See, e.g., Portugues-Santana v. Rekomdiv Int’l, 657 F.3d 56, 63 (1st Cir. 2011) (“Instead of
allowing the settlement into evidence, the court should have examined the [third-party]
settlement agreement itself and ‘deduct[ed] the amount that [the plaintiff] ha[d] already received
from any judgment.’” (quoting McHann v. Firestone Tire & Rubber Co., 713 F.2d 161, 166 n.10
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(5th Cir. 1983))); Banker v. Nighswander, Martin & Mitchell, 37 F.3d 866, 872 (2d Cir. 1994)
(noting that the plaintiff could not rely upon his settlement amount with third parties when
calculating malpractice damages against his former attorney because they are inadmissible under
Rule 408); Kennon v. Slipstreamer, Inc., 794 F.2d 1067, 1069 (5th Cir. 1986) (“Even where the
evidence offered favors the settling party and is objected to by a party not involved in the
settlement, Rule 408 bars the admission of such evidence unless it is admissible for a purpose
other than ‘to prove liability for or invalidity of the claim or its amount.’”); Hudspeth v. C.I.R.,
914 F.2d 1207, 1213 (9th Cir. 1990) (“Rule 408 does apply to situations where the party seeking
to introduce evidence of a compromise was not involved in the original compromise.”). In this
context, the Rule is often invoked to bar the admission of agreements between a party and a third
party to compromise a claim arising out of the same transaction as the one being litigated. See
Armstrong v. HRB Royalty, Inc., 392 F. Supp. 2d 1302, 1306 (S.D. Ala. 2005) (describing the
“same transaction” test). Such courts stress that the aforementioned policy favoring out-of-court
settlements necessitates the inadmissibility of negotiations in order to foster frank discussion.
Others have suggested that Rule 408 does not bar the introduction of settlement
agreements regarding claims other than that being litigated. See, e.g., Uforma/Shelby Bus. Forms,
Inc. v. N.L.R.B., 111 F.3d 1284, 1293–94 (6th Cir. 1997) (“. . . 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.” (quoting 23 Charles Alan Wright & Kenneth W. Graham,
Jr., Federal Practice and Procedure: Evidence § 5314 (1st ed. 1980))); Towerridge, Inc. v.
T.A.O., Inc., 111 F.3d 758, 770 (10th Cir. 1997) (“Rule 408 does not require the exclusion of
evidence regarding the settlement of a claim different from the one litigated, though admission of
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such evidence may nonetheless implicate the same concerns of prejudice and deterrence of
settlements which underlie Rule 408[.]” (citations omitted)); cf. Armstrong v. HRB Royalty, Inc.,
392 F. Supp. 2d 1304–05 (deeming “Rule 408 [to] unambiguously require[] that the claim as to
which a settlement offer was made and the claim at issue in the litigation in which the offer is
proffered as evidence . . . be the same claim” while humoring the notion that “claim” within the
meaning of Rule 408 can be given a fairly expansive meaning in light of the “same transaction”
standard); Zurich Am. Ins. Co. v. Watts Indus., Inc., 417 F.3d 682, 689 (7th Cir. 2005) (“In
deciding whether Rule 408 should be applied to exclude evidence, courts must consider the spirit
and purpose of the rule and decide whether the need for the settlement evidence outweighs the
potentially chilling effect on future settlement negotiations. The balance is especially likely to tip
in favor of admitting evidence when the settlement communications at issue arise out of a dispute
distinct from the one for which the evidence is being offered.” (citations omitted)). Such courts
have based their construction of Rule 408 in part on the language of the rule, which refers first to
“a claim,” and later to “the claim.” See, e.g., Armstrong, 392 F. Supp. 2d at 1304. “In other
words, use of the phrase ‘the claim’ limits the rule’s application to the same claim as first
anticipated by use of the phrase ‘a claim.’ And the phrase ‘when offered to prove liability for,
invalidity of, or amount of’ qualifies the term ‘a claim,’ requiring that term to refer only to the
claim under litigation in the pending case.” Ostrow v. GlobeCast Am. Inc., 825 F. Supp. 2d 1267,
1273 (S.D. Fla. 2011).
Because Plaintiff’s Title VII claim arose from the same operative set of facts as the
instant claim, the Court shall adopt the position that Rule 408 bars the contemporaneous
presentation of Plaintiff’s Title VII settlement to the jury. Therefore, the Court shall examine the
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Title VII settlement agreement itself and deduce the amount of lost wages that Plaintiff had
received from that settlement.
IT IS, THEREFORE, ORDERED that Plaintiff’s Motion to Exclude Evidence (Doc.
100) be DENIED in part. Defendant is entitled to offset any overlapping award, the amount of
which shall be determined by this Court.
This Order further notes the Court’s rationale for denying Defendant’s Motion to Amend
(Doc. 85) via oral order on September 11, 2012.
Signed: September 17, 2012

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