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Settlement Offer as to Claim No. 1 Admissible to Prove or Disprove Claim No. 2

Another reminder of the narrow scope of Evidence Code section 1152's protections has just come come down from California's Second District Court of Appeal in Zhou v. Unisource Worldwide, Inc. here

Before discussing the Zhou holding, we remind our readers that in California, at any rate, the differences in protections between mediated settlement communications (absolute protection from disclosure) and non-mediated settlement communications (limited protection) make it imperative that counsel clearly specify, in writing,  whether the settlement conference they are about to attend is a  "mediated" conference -- and hence protected by Evidence Code section 1119 -- or a "non-mediated" conference -- and hence protected only by Evidence Code section 1152.

Federal Practitioners should see the footnote below and read Irvine, California IP attorney Sheila Swaroop's excellent ABTL Newsletter article The Surprising Uses of Prior Settlement Negotiations under FRE 408 here.

Though I'm aware of no case law on the topic, I'll go so far as to say that an attorney's failure to make this distinction will likely be found to fall below the applicable standard of care in the event the client suffers harm as a result.  

The Zhou Holding

Briefly, Plaintiff, who was injured in two separate automobile accidents, sent the insurance carrier an offer to compromise -- which was just barely brought within section 1152's protections -- for Accident No. 2.  During the trial of Accident No. 1, the defense proferred into evidence the settlement offer made for Accident No. 2 to prove the invalidity of the claim arising from Accident No. 1. 

In holding that the trial court erroneously excluded that correspondence from evidence, the Court of Appeal explained:

[I]n this case Zhou’s letters to State Farm regarding his purported injuries
from the March 1, 2004 accident were not offered to disprove the merits of the claim under negotiation, but rather “to show the invalidity of a different claim.” *

The entire case is well worth reading as a refresher if you're about to send a settlement demand, attend an MSC or pursue mediation.

_____________________

*   The Court also cites federal law to the same effect -- Broadcort Capital Corp. v. Summa Medical Corp. (10th Cir. 1992) 972 F.2d 1183, 1194 [federal rule barring admission of evidence relating to settlement discussions does not preclude evidence of settlement of different dispute; “the evidence was not admitted to prove the validity or amount of the ‘claim under negotiation’”]; Towerridge, Inc. v. T.A.O., Inc. (10th Cir. 1997) 111 F.3d 758, 770 [“[r]ule 408 does not require the
exclusion of evidence regarding the settlement of a claim different from the one litigated”].)

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