Opinion
M-74568.
Decided on February 26, 2008.
ARTHUR J. SEMETIS, P.C., By:Arthur J. Semetis, Esq., Claimant's attorney.
ANDREW M. CUOMO, ATTORNEY GENERAL, By:Eidin Beirne, Esq., Assistant Attorney General, Defendant's attorney.
This is a motion in limine before the trial of a claim which alleges "breach of an agreement to pay $997,486.55 to Arben Corporation in full settlement of Arben Corporation's claims for payment for services performed" and for the "improper withholding of payment of $78,880.51 due" under TANY 99-12B and TANY 99-74. Defendant moves in limine to exclude any testimony or documentary evidence concerning the substance of the parties' settlement discussions by Kevin Plunkett, Esq., claimant's former counsel; Darrell W. Harp, who served as third-party mediator in certain agreed upon mediation efforts of the parties, and thereafter as a paid consultant to the claimant; Richard Weller, CPA, who on behalf of defendant reviewed certain accounting records submitted by claimant following the alleged agreement; and, Philip Benza and Robert Benza, Arben officers.
Arben contends a series of meetings and writings succeeding the conclusion of mediation efforts on July 17, 2002 culminated in "a finalized letter" from the Authority's Executive Director on November 27, 2002 which constituted the settlement agreement. Arben argues the Authority subsequently took steps in partial satisfaction of the agreement, but since has withheld complete payment to Arben as required by the agreement and improperly withheld payments outside the scope of the agreement as offsets to advance payments made under the agreement. Defendant characterizes their "attempt to reconcile . . . [as] ultimately unavailing," and asserts that to the extent Arben alleges the existence of a settlement agreement, as opposed to some other kind of agreement, that the court is constrained by CPLR § 4547 and the seminal case Tennant v Dudley, 144 NY 504, 507 (1895) viz. the evidence it may consider in determining whether, in fact, such an agreement exists and was breached ("The rule is well settled that no advantage can be taken of offers made by way of compromise, that a party may, with impunity, attempt to buy his peace"). Additionally, the affirmation of Charles T. Randall, Esq., the Authority's Chief Assistant Counsel, in support of the motion describes his April 12, 2002 mediation letter, countersigned by Mr. Plunkett, as an "agreement that no verbal or written communication by anyone in connection with the mediation would be admissible."
Evidence of (a) furnishing, or offering or promising to furnish, or (b) accepting, or offering or promising to accept, any valuable consideration in compromising or attempting to compromise a claim which is disputed as to either validity or amount of damages, shall be inadmissible as proof of liability for or invalidity of the claim or the amount of damages. Evidence of any conduct or statement made during compromise negotiations shall also be inadmissible. The provisions of this section shall not require the exclusion of any evidence, which is otherwise discoverable, solely because such evidence was presented during the course of compromise negotiations. Furthermore, the exclusion established by this section shall not limit the admissibility of such evidence when it is offered for another purpose, such as proving bias or prejudice of a witness, negating a contention of undue delay or proof of an effort to obstruct a criminal investigation or prosecution.
With regard to the April 12, 2002 mediation letter which purported to establish "an understanding of the protocol" for the mediation services of Mr. Harp, it is clear there was an express agreement to exclude anything said or written in connection with the mediation from any future court action involving unresolved issues. The protocol called for Mr. Harp to issue non-binding written recommendations after hearing both sides. The parties agreed to split his fee of $1000 per day for these purposes. Mr. Harp issued his recommendations on July 17, 2002. Thereafter, he was engaged solely by Arben for purposes other than the mediation referenced in the April 12 letter. Accordingly, as to that portion of the in limine motion which relies on the April 12 mediation protocol letter, the motion in limine is GRANTED to the extent claimant seeks to introduce evidence of anything which was said or done by anyone associated with the mediation efforts of the parties during the mediation which terminated on July 17, 2002, i.e. Mr. Harp and Messrs. Philip and Robert Benza..
Turning to that portion of the in limine motion which relies on CPLR § 4547, it is first necessary to parse the provision to understand at what it is directed. The provision, which pertains to evidence adduced in the course of compromising or attempting to compromise a disputed claim, actually is comprised of four distinct parts.
The first part establishes the intent for the entire provision as it addresses proof of an underlying claim's validity or amount. It states that any evidence of consideration having been furnished, offered or promised, or having been accepted or its acceptance having been offered or promised, cannot be admitted "as proof of liability for or invalidity of the claim or the amount of damages." (emphasis added) It is clear that the exclusion is directed at the underlying claim, not one stemming from a superseding agreement.
The second part is a broad statement that evidence of "any conduct or statement made during compromise negotiations shall also be inadmissable." (emphasis added) Notwithstanding its seeming breadth if read in a vacuum, this part is related directly to the first; that is, evidence of conduct or statements is to be excluded only insofar as it pertains to the claim's validity or the damages sustained by the claimant. If evidence is sought to be introduced of something which was done or said in order to prove the validity or invalidity of the underlying claim, or of what is its actual amount, this, too, is inadmissible. But if the evidence relates to other matters, such as the alleged existence of a settlement agreement for an amount which compromised the underlying claim, this is an entirely different matter.
This interpretation is amply supported by the policy of the law which excludes certain evidence pertaining settlement efforts in order to foster such compromises. How else may settlement discussions be fostered if not by admitting evidence of those discussions which bears on whether, in fact, a settlement agreement was reached and is to be enforced in accordance with terms and intent.
Any doubt that evidence of conduct or statements made in the course of settlement negotiations is otherwise admissible is clarified by the third part of the provision. Essentially it provides that parts one and two shall not require the exclusion of any evidence " solely because such evidence was presented during the course of compromise negotiations." (emphasis added) Thus, if evidence of other conduct or statements is not offered to prove the validity or amount of the underlying claim, the fact such evidence was adduced during settlement negotiations is simply of no moment.
Finally, the fourth part of the section negates the entire exclusionary provision in certain instances. Even if the evidence does relate to the validity or amount of the underlying claim or damages, if such information is offered for another purpose, such as to prove the bias or prejudice of a witness, it is admissible.
Just as CPLR § 4547 codifies the common law exclusionary rule of Tennant v Dudley, its provisions parsed above are consistent with case law exceptions of long duration. In Armour v Gaffey, 30 App Div 121, 130 (3rd Dept 1898), an auditor was allowed to testify to a settlement meeting he attended where defendant expressed his willingness to reimburse the amount the auditor determined. The court found this to be an admission of fact and admissible "although made in a conversation respecting a compromise of a controversy." Modern courts, too, have admitted evidence pertaining to settlement discussions and negotiations as proof of facts as well as admissions. American Re-Insurance Co. v United States Fidelity Guaranty Co., 19 AD3d 103 (1st Dept 2005) ("The court properly ruled that the disputed documents relating to the settlement negotiations are discoverable since they are material and necessary to the reinsurers' defense of the action [citations omitted]. The so-called settlement privilege' is inapplicable since the reinsurers seek the settlement-related materials for a purpose other than proving USF G's liability in the underlying coverage action [ see CPLR 4547 ]"); Medallion Chemical Corp. v Chemical Resources, Inc., 58 AD2d 808 (2nd Dept 1977) ("The writings which appellant contends confirm a definite agreement settling the action and which are allegedly sufficient to satisfy the subscribed writing requirement of CPLR 2104, support the opposite conclusion"); Green v Le Beau Travel Service, 281 App Div 836 (2nd Dept 1953) ("Soon after respondent and appellants decided to sever their relations, they had a meeting with their accountant, at which an audit was had of the assets of the business and a cash offer was made by appellants to settle respondent's claim. Testimony concerning this meeting was properly admitted, not to establish an offer of settlement as an admission of liability but, rather, to show the conduct of the parties (in meeting and computing the assets), as an admission of the existence of the partnership").
Construing the statute and applying this case law as they relate to defendant's motion:
With regard to the testimony and documents of Mr. Harp as to matters that occurred after his formal role as a paid mediator for both sides terminated with his July 17, 2002 recommendations, the motion is DENIED, except to the extent such evidence pertains to the validity or amount of Arben's underlying claims as opposed to the alleged existence, interpretation and breach of a settlement agreement, subject to their relevance to these settlement agreement issues.
With regard to the testimony and documents of Messrs. Philip and Robert Benza, and of Richard Weller, CPA, the motion is likewise DENIED, except to the extent the evidence pertains to the validity or amount of Arben's underlying claims as opposed to the alleged existence, interpretation and breach of a settlement agreement, and subject to their relevance to these settlement agreement issues.