AN ACT to amend the civil practice law and rules, in relation to inadmissability of settlement discussions
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:
Section 1. The civil practice law and rules is amended by adding a new section 4548 to read as follows:
§ 4548. COMPROMISE AND OFFERS TO COMPROMISE. Evidence of (1) furnishing or offering or promising to furnish, or (2) accepting or offering or promising to accept, a valuable consideration in compromising or attempting to compromise a claim which was disputed as to either validity or amount, is not admissible to prove liability for or invalidity of the claim or its amount. Evidence of conduct or statements made in compromise negotiations is likewise not admissible. This rule does not require the exclusion of any evidence otherwise discoverable merely because it is presented in the course of compromise negotiations. This rule also does not require exclusion when the evidence is offered for another purpose, such as proving bias or prejudice of a witness, negating a contention of undue delay, or proving an effort to obstruct a criminal investigation or prosecution.
§2. This act shall take effect immediately.
Supporting Memorandum
This proposal would expand the scope of immunity for settlement discussion to statements made during the course of such discussions, as opposed to the offer of compromise itself. The text of the proposed rule is identical to Federal Rule of Evidence 408, which was broaden in 1972.
New York follows the common law in excluding from evidence an offer of compromise, made for the purpose of procuring a settlement of a pending controversy. Smith v. Satterlee, 130 N.Y. 677 (1891). New York follows the common law that admissions of fact made during the course of a settlement negotiation are admissible in evidence unless stated to be without prejudice, where made in hypothetical form, or where it can be shown that it would not have been made but for the settlement negotiations and under an agreement that it would not be used afterwards to the party's prejudice. White v. Old Dominion S.S. Co., 102 N.Y. 660, 665 (1886); Paine, Webber, Jackson & Curtis, Inc. v. Alanthus Corp., 82 A.D.2d 877, 440 N.Y.S.2d 317 (2d Dep't 1981); see also Central Petroleum Corp. v Kyriakoudes, 121 AD2d 165, 502 NYS2d 1017 (1st Dep't 1986) ("while evidence of settlement negotiations are generally inadmissible, admissions of fact made in connection with settlement negotiations are admissible. "). As recent commentary has noted, "[t]he The reason why the inadmissibility of offers of settlement has not been extended to statements of fact made in the course of such offers is not entirely clear." Brodnick, Compromise with Care, Admissions During Settlement Talks, NYLJ 10/29/97 at 1 col. 1.
The proposed section would broaden the protection afforded settlement discussions, codify the provision, and make New York law consistent with the Federal Rules of Evidence. The policy for this change is succinctly stated: "The exception for factual admissions was believed by the Advisory Committee to hamper free communication between parties and thus to constitute an unjustifiable restraint upon efforts to negotiate settlements-- the encouragement of which is the purpose of the rule. Further, by protecting hypothetically phrased statements, it constituted a preference for the sophisticated, and a trap for the unwary." Advisory Committee Notes, FRE 408, 1974 Proposed Rules.
Often settlement discussions require frank and uninhibited communications between the parties, and open recognition on both sides of damaging facts. Often, it is important for the parties themselves to discuss with each other, and indeed admit, the essential facts of the case. Current law, however, requires counsel to carefully couch such discussions as "without prejudice" or require some special agreement, which can undermine the spirit the discussion and inhibits the settlement process by discouraging informal discussions. The proposed section would facilitate settlement by encouraging frank and open communications as part of settlement, without the fear that such discussions could be damaging should the case not settle.
The Committee also believes that codification of the protection for settlement discussions is important since it makes the rule more widely known to practitioners, thus further encouraging settlements. It also makes the rule clear and easily understood.
Further, since proposed section would make New York and federal law consistent, it would aid courts in interpretation of the rule, afford an easy understanding of its scope, and would permit the same set of rules to govern the settlement of a dispute where the underlying controversy might be ultimately litigated in state or federal court.
The act would have an immediate effective date. It is intended that
it would apply retroactively.