Opinion
MEMORANDUM DECISION AND ORDER GRANTING MOTION TO STRIKE DECLARATION OF JAMES BASTIAN FILED IN OPPOSITION TO PLAINTIFF'S MOTION FOR ENTRY OF JUDGMENT
ROBERT KWAN, Bankruptcy Judge.
The Motion of Plaintiff Carolyn Dye, Liquidating Trustee ("Trustee") to Strike the Declaration of James Bastian Filed in Opposition to Plaintiff's Motion for Entry of Judgment (filed as Docket No. 551, hereinafter the "Motion to Strike") came on for hearing before the undersigned United States Bankruptcy Judge on May 30, 2012, June 28, 2012 and October 31, 2012 in conjunction with Plaintiff's Motion for Entry of Judgment and Defendants' Motion for Relief from Orders and Judgments Pursuant to Rule 60 of the Federal Rules of Civil Procedure. Appearances have been made as noted on the record. Having considered the moving and opposing papers, including the supplemental briefing requested by the court, the written and oral arguments of the parties, and the other papers and pleadings filed in this case, the court issues this separate memorandum decision and order granting the Motion to Strike.
The court first disagrees with Trustee's argument that the Bastian Declaration is inadmissible parol evidence. In Riverisland Cold Storage, Inc. v. Fresno-Madera Prod. Credit Assn ., 55 Cal.4th 1169 (2013), the California Supreme Court overruled its long standing case precedent in Bank of America etc. Assn. v. Pendergrass, 4 Cal.2d 258, 263 (1935), in holding that the "fraud exception" to the parol evidence rule broadly permits evidence of promissory fraud. Paragraph 6 of the Bastian Declaration is evidence that Andra Sachs was induced to sign the Global Settlement Agreement through fraud. Indeed, "although a written instrument may supersede prior negotiations and understandings leading up to it, fraud may always be shown to defeat the effect of an agreement." Riverisland, 55 Cal.4th at 333, citing, Fleury v. Ramacciotti, 8 Cal.2d 660, 662 (1937).
However, the court ultimately agrees with Trustee's argument that the Bastian Declaration, specifically paragraph 6, is inadmissible as confidential settlement communications pursuant to Federal Rule of Evidence 408. Rule 408 states, "Evidence of the following is not admissible--on behalf of any party--either to prove or disprove the validity or amount of a disputed claim or to impeach by a prior inconsistent statement or a contradiction:... conduct or a statement made during compromise negotiations about the claim...." The Andra Sachs Defendants offer numerous other purposes for the Bastian Declaration, including intent on the part of Trustee not to enforce the entire $9 million judgment against Andra Sachs. Although the Andra Sachs Defendants are correct that such evidence is indeed admissible for other purposes, "such as proving bias or prejudice of a witness, negativing a contention of undue delay, or proving an effort to obstruct a criminal investigation or prosecution," (see Fed.R.Evid. 408(b)), considering the plain language of Rule 408, as argued by Trustee, by offering the Bastian Declaration, the Andra Sachs Defendants are attempting to "dispute the validity" of the Trustee's claim to have the judgment entered pursuant to the terms of the Global Settlement Agreement. The Andra Sachs Defendants have offered the Bastian Declaration to essentially demonstrate why they should not be liable for the $9 million liability judgment as was contemplated in the Global Settlement Agreement.
Rule 408 exemplifies a "well-recognized public policy in favor of non-litigious solutions to disputes...." Southwest Nurseries, LLC v. Florists Mutual Insurance, Inc ., 266 F.Supp.2d 1253, 1257 (D. Colo. 2003), citing, Olin Corp. v. Insurance Co. of North America, 603 F.Supp. 445, 449-450 (S.D.N.Y. 1985). Evidence of settlement communications may be admissible to challenge a claim of undue delay, to prove knowledge and intent, or for purposes of impeachment or rebuttal. See Bankcard America, Inc. v. Universal Bancard Systems, Inc ., 203 F.3d 477, 484 (7th Cir. 2000). Whenever the issue of admissibility is doubtful, however, the better practice is to exclude such evidence. Southwest Nurseries, LLC, 226 F.Supp.2d at 1258, citing, Bradbury v. Phillips Petroleum Co ., 815 F.2d 1356, 1364 (10th Cir. 1987). Although the Bastian Declaration may be evidence of Trustee's intent at the time of signing the Global Settlement Agreement, this court cannot separate such a challenge to Trustee's intent from the validity of Trustee's claim against the Andra Sachs Defendants. Indeed, paragraph 6 of the Bastian Declaration begins, "During negotiations pertaining to the Settlement Agreement and Liability Judgment... [David Weinstein] told [James Bastian] that the Trusteee did not intend to use the Liability Judgment to hold Sachs liable for damages in the full principal amount of $9,000,000...." Admitting the evidence to show Trustee's intent necessarily affects Trustee's claim under the Global Settlement at this point in the litigation because Trustee is currently attempting to collect the full judgment against Andra Sachs. For these reasons, the court concludes that the Bastian Declaration is inadmissible evidence of settlement communications.
Accordingly, IT IS HEREBY ORDERED that the Motion to Strike is granted and that the Bastian Declaration is stricken from consideration with respect to Plaintiff's Motion for Entry of Judgment.
IT IS FURTHER ORDERED that the further hearing on the Motion to Strike currently set for March 5, 2013 at 3:30 p.m. is hereby vacated and that no further appearances are necessary.
IT IS SO ORDERED.