Summary: This case was a breach of contract claim involving a party’s failure to comply with the terms of a settlement agreement. The Plaintiffs alleged that the Defendant agreed to make significant drainage repairs on their residential property as part of a $250,000.00 settlement payment to resolve a prior lawsuit. The repairs were never made and the Plaintiffs sought enforcement of the settlement agreement. The Defendant sought to exclude evidence of the negotiations which led to the settlement claiming they were inadmissible under Texas Rule of Evidence 408. Needing guidance, the Court ordered submissions from the parties addressing the issue. These briefs were filed by Heygood, Orr & Pearson on behalf of its clients.
|CAUSE NO. 141-228829-08|
|KENNETH P. GROSS and|
BETSY L. GROSS,Plaintiffs
WB TEXAS RESORT COMMUNITIES, LP,
|IN THE DISTRICT COURT|
TARRANT COUNTY, TEXAS
141ST JUDICIAL DISTRICT
DEFENDANTS’ RESPONSE TO PLAINTIFFS’ MOTION TO EXCLUDE EVIDENCE OF PRIOR SETTLEMENT NEGOTIATIONS UNDER RULE 408
COMES NOW, Defendant J. Scott Simmons and Susan P. Simmons (“the Simmonses”) and file this Response to Plaintiffs Kenneth P. Gross and Betsy P. Gross’ (“the Grosses”) Motion to Exclude Evidence of Prior Settlement Negotiations Under Rule 408.
I. Evidence of prior settlement negotiations is admissible to support the Simmonses’ claim to enforce the subject settlement agreement.
Rule 408 of the Texas Rules of Evidence provides that evidence of settlement offers or agreements is “not admissible to prove liability for or invalidity of the claim or its amount.” Accordingly, evidence of offers of settlement or conduct in settlement negotiations is not admissible in a suit on the subject of the settlement. See McGuire v. Commercial Union Ins. Co., 431 S.W.2d 347, 352 (Tex. 1968); Tex. R. Evid. 408. However, Rule 408 further states that exclusion of such evidence is not required when the evidence is “offered for another purpose.” Texas Courts have explicitly held that one such purpose is to support a litigant’s claim to enforce the settlement agreement. For instance, in Adams v. Petrade Int’l, Inc., 754 S.W.2d 696 (Tex. App.—Houston [1st Dist.] 1988, writ denied), the Court addressed the question of whether settlement negotiations between the parties to a contract dispute were admissible to support enforcement of a settlement. Finding in the affirmative, the Court held:
“[E]vidence relating to settlement discussions was not admitted to prove the merits of the underlying transaction, but instead was offered in support of [appellee’s] claim to enforce the settlement agreement itself. General contract principles are applicable to settlement agreements, and enforcement may be sought in a suit on the contract. Evidence of settlement negotiations would be relevant and material to prove whether a valid settlement agreement was reached, and clearly admissible in a suit to enforce the settlement agreement.
Adams, 754 S.W.2d at 722 (internal citations omitted) (emphasis added); see also, Avary v. Bank of Am., N.A., 72 S.W.3d 779, 788 (Tex. App.—Dallas 2002, pet. denied) (“Tex. R. Evid. 408 does not prevent a party from proving a separate cause of action simply because some of the acts complained of took place during compromise negotiations.”); Gibson v. Bentley, 605 S.W.2d 337 (Tex. Civ. App. 1980, writ ref’d n.r.e.) (Affirming trial court’s enforcement of a settlement agreement based on testimony from the respective parties’ attorneys about the intent of the agreement during settlement negotiations). Federal Courts have come to the same conclusion regarding the admissibility of statements made by counsel during the settlement process. See, eg. Reynolds v. Roberts, 202 F.3d 1303, 1316 (11th Cir. 2000); Waste Mgmt. of Ohio, Inc. v. City of Dayton, 2004 U.S. Dist. LEXIS 30532 (S.D. Ohio Sept. 20, 2004) (“First and foremost, the court should look to what their parties or their lawyers said to one another in fashioning [an ambiguous] consent decree… [N]egotiations between the parties is at the top of the descending order of importance of admissible extrinsic evidence.”).
In sum, Rule 408 only precludes admission of conduct during settlement negotiations to prove the merits (or demerits) of the claims which were the subject of the negotiations. In this case, however, those claims were settled and the Simmonses seek to introduce testimony from counsel involved in settlement negotiations to support enforcement of the settlement agreement. As set forth above, such evidence is clearly admissible for this purpose. Accordingly, Rule 408 does not preclude admission of testimony in this case regarding statements made by counsel for Mr. Gross during settlement negotiations.
James Craig Orr, Jr.
State Bar No. 15313550
Heygood, Orr & Pearson
2331 W. Northwest Highway, 2nd Floor
Dallas, Texas 75220
(214) 237-9001 Telephone
(214) 237-9002 Facsimile
SCOTT L. SIMMONS AND
SUSAN P. SIMMONS