Rule of Evidence 408: Settlement talks in debt collection case

Rule of Evidence 408: Settlement talks in a debt collection case

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In this portion of our ongoing series discussing important rules of evidence, we will be taking a closer look at Alabama Rule of Evidence 408.

There are Federal Rules of Evidence, but each state has its own tweaks to the Federal Rules of Evidence. 

Specifically, we will look at the Alabama Rules of Evidence, since this is the state where we practice. 

Alabama Rule 408 is very similar to Federal Rule 408.

Rule of Evidence 408 involves compromise and offers to compromise. 

Specifically, we are looking a how Rule of Evidence 408 works within the context of a debt collection lawsuit.

A debt buyer such as LVNV or Portfolio Recovery is suing you. 

The collection lawyer says “Let’s talk about settling this.”

Now, if you say something such as “I’ll pay $.50 on the dollar.” Is this an admission that you owe the debt?

And if you do not settle it, can the collection lawyer bring this up during the trial?

Or if you say, well I know I owe this debt but I don’t have enough money to pay it all. Can they bring this up?

Let’s look at this more closely. 

The general rule is that settlement negotiations are not allowable.

In other words, you cannot bring these settlement negotiations up in front of the judge. 

Rule 408 has two sections – Prohibited Uses and Permitted Uses.

Prohibited Uses:

You cannot use a settlement offer to say this proves the consumer owes this debt. 

You also cannot use the settlement offer to prove that the debt collector has an invalid claim to the debt. 

If someone has accepted, offered, or promised valuable consideration while attempting to compromise, this cannot be used as evidence in court. A valuable consideration would be someone paying or giving up a right to reach a compromise. 

Neither side can bring up conduct or statements made in negotiations about the claim. 

The idea is settlement negotiations are encouraged and this rule prevents them from coming back to bite you.

Permitted uses:

If there is some legitimate reason to bring this up that does not involve trying to persuade the judge or the jury that you owe or do not owe this debt, you may be able to bring up the negotiations.

The bottom line is that if the collection lawyer offers to settle the debt for less than you owe, you can’t use this to say to the judge that this is proof that you don’t owe the debt.

If this was allowed, no collection lawyer would attempt to negotiate.

On the flip side, if the collection offers to settle for $3,500, and you make an offer of $2,000, the collection lawyer cannot turn around and use this in the courtroom to say it is an admission of owing the debt. 

No consumer would ever negotiate. 

The judges want us to talk. They want us to try and settle cases.

If either party was allowed to use the negotiations against the other party, there would be no settlement discussions. 

I’ve had cases where we were suing for wrongful death in the millions of dollars. 

You could never settle that case if you could come into the courtroom and could say, “That trucking company just offered 1.5 million to us in the hallway, so they are obviously guilty.” 

We could never have mediation (confidential meetings involving a third party attempting to settle the lawsuit) if this were the case. 

The point of Rule 408 is to encourage people to talk without worrying about it coming to hurt them later.

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John Watts


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