Hernandez v. State

SUPREME COURT OF ARIZONA
En Banc

MICHAEL HERNANDEZ and IDA ) Arizona Supreme Court
HERNANDEZ, husband and wife, ) No. CV-01-0437-PR
)
Plaintiffs-Appellants, ) Court of Appeals
) Division One
v. ) No. 1 CA-CV 01-0008
)
STATE OF ARIZONA, ARIZONA STATE ) Maricopa County
PARK SERVICE, ) Superior Court
) No. CV 98-20736
Defendants-Appellees. )
) O P I N I O N
____________________________________)

_________________________________________________________________

Appeal from the Superior Court of Maricopa County
Honorable Edward O. Burke, Judge
AFFIRMED

_________________________________________________________________

Opinion of the Court of Appeals, Division One
201 Ariz. 336, 35 P.3d 97 (2001)
VACATED

_________________________________________________________________

Janet Napolitano, Attorney General Phoenix
By Daniel P. Schaack, Assistant Attorney General
Attorney for the State of Arizona

Goldberg & Osborne Tucson
By Joel T. Ireland
Attorney for Michael and Ida Hernandez
_________________________________________________________________

M c G R E G O R, Vice Chief Justice
¶1 We granted review to address whether Rule 408, Arizona

Rules of Evidence (Ariz. R. Evid.), prohibits admission of evidence

contained in a notice of claim filed pursuant to Arizona Revised

Statutes (A.R.S.) section 12-821.01 (Supp. 2001) when the evidence

is introduced to impeach a party’s credibility. We conclude that,

assuming Rule 408 applies, the rule would not preclude the use of

impeachment materials contained in a notice of claim.

I.

¶2 Hernandez and his family arrived at the Patagonia Lake

State Park at dusk on Friday, August 29, 1997. Hernandez and his

son attempted to buy bait at the Patagonia Lake Camp store. The

store employee informed them that only the marina store sold bait.

¶3 The camp store was located on a hill above the marina

store. Rather than drive to the marina store, Hernandez and his

son tried to reach the store by crossing a parking lot area

adjacent to the camp store, stepping over a cable fence supported

by posts three feet high, and walking down a very steep hill

without any path or trail. Unbeknownst to Hernandez, the hill

ended at a retaining wall with a fourteen-foot drop-off to the road

below. In the approaching darkness, Hernandez stepped off the

retaining wall and fell to the road below. The fall knocked out

several of Hernandez’s front teeth and fractured his left wrist.

2
¶4 Pursuant to A.R.S. section 12-821.01,1 Hernandez filed a

notice of claim with the State on September 15, 1997. The notice

described the facts surrounding Hernandez’s fall as well as the

amount Hernandez claimed for his injuries.

¶5 After filing the notice of claim, Hernandez brought a

civil action against the State. In their joint pre-trial

statement, Hernandez and the State stipulated to the facts

underlying Hernandez’s claim. At trial, the State introduced

portions of the notice of claim to impeach Hernandez’s credibility

because the facts in the notice differed from Hernandez’s

deposition and trial testimony.2 Hernandez objected, arguing that

1
The statute requires that:

Persons who have claims against a public
entity . . . shall file claims with the person
or persons authorized to accept service for
the public entity . . . . The claim shall
contain facts sufficient to permit the public
entity . . . to understand the basis upon
which liability is claimed. The claim shall
also contain a specific amount for which the
claim can be settled and the facts supporting
that amount. Any claim which is not filed
within one hundred eighty days after the cause
of action accrues is barred and no action may
be maintained thereon.

A.R.S. § 12-821.01.A.
2
The State stipulated to redaction of Hernandez’s
statement defining the specific amount needed to settle the claim.

3
Rule 4083 barred its use. The trial court overruled Hernandez’s

objection and admitted the redacted notice of claim for impeachment

purposes. At the end of a five-day trial, the jury returned a

verdict in favor of the State.

¶6 The court of appeals upheld the trial court’s evidentiary

ruling. In its majority opinion, the court concluded that no

disputed claim exists when a party files a notice of claim, and a

notice of claim therefore cannot constitute an offer to compromise

excluded by Rule 408. Hernandez v. State, 201 Ariz. 336, 339-40 ¶¶

10-16, 35 P.3d 97, 100-01 (App. 2001). Dissenting, Judge Voss

urged that Rule 408 always requires exclusion of a notice of claim.

Id. at 342 ¶¶ 27-28, 35 P.3d at 103 (Voss, J., dissenting).

¶7 We accepted review and exercise jurisdiction pursuant to

3
Rule 408 provides:

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, negativing a contention of undue delay, or
proving an effort to obstruct a criminal investigation or
prosecution.

Ariz. R. Evid. 408.

4
Article VI, Section 5.3 of the Arizona Constitution and Rule 23 of

the Arizona Rules of Civil Appellate Procedure.

II.

A.

¶8 We begin by assuming, for purposes of this opinion, that

a notice of claim constitutes an offer of compromise under Rule

408. The plain language of Rule 408 does not exclude evidence

offered for the purpose of impeaching a party’s credibility. The

rule states, in pertinent part, that offers to compromise are “not

admissible to prove liability for or invalidity of the claim or its

amount.” Ariz. R. Evid. 408. Thus, although evidence originating

from compromise negotiations may not be admitted to prove liability

for or invalidity of a claim, the rule does not prevent the use of

such evidence in all instances.

¶9 In fact, Rule 408 expressly “does not require exclusion

when the evidence is offered for another purpose, such as proving

bias or prejudice of a witness.” Id. (emphasis added). The “such

as” language indicates that a party may introduce evidence

presented in offers to compromise for purposes other than proving

bias or prejudice, so long as the evidence is not used to prove

liability for or invalidity of a claim. Evidence admitted to

impeach party credibility, like evidence admitted to prove bias or

prejudice, does not prove liability for or invalidity of a claim.

Thus, the plain language of Rule 408 does not prohibit admission of

5
evidence disclosed in compromise negotiations for impeachment

purposes.

¶10 Other courts have interpreted the plain language of Rule

408 to permit the admission of impeachment evidence. In

interpreting Arizona’s evidentiary rules, we look to federal law

when our rule is identical to the corresponding federal rule, as is

true for Rule 408.4 State v. Green, 200 Ariz. 496, 498 ¶ 10, 29

P.3d 271, 273 (2001) (“When interpreting an evidentiary rule that

predominantly echoes its federal counterpart, we often look to the

latter for guidance.”).

¶11 Most federal circuit courts agree that Rule 408 does not

bar evidence from compromise negotiations if the evidence will be

used for impeachment purposes. For instance, the Ninth Circuit

Court of Appeals upheld the admission of an indemnity agreement

made during compromise negotiations for purposes of attacking the

credibility of witnesses, notwithstanding Rule 408, because that

purpose is “distinct from proving liability.” Brocklesby v. United

States, 767 F.2d 1288, 1292-93 (9th Cir. 1985). Similarly,

recognizing that Rule 408 prohibits an offer of compromise to prove

liability for or invalidity of a claim, the Eighth Circuit Court of

Appeals held that using an offer to compromise to rebut witness

testimony is “permissible under [Rule 408]” because “[t]he rule .

. . ‘does not require exclusion when the evidence is offered for

4
See Fed. R. Evid. 408.

6
another purpose.’” Cochenour v. Cameron Sav. & Loan, F.A., 160

F.3d 1187, 1190 (8th Cir. 1998)(quoting Fed. R. Evid. 408). See

also Wyatt v. Sec. Inn Food & Beverage Inc., 819 F.2d 69, 71 (4th

Cir. 1987) (The court held that Rule 408 “need not prevent a

litigant from offering evidence [from compromise negotiations] when

he does not seek to show the validity or invalidity of the

compromised claim.” The court, however, excluded the offered

evidence because the court did “not see . . . how [the] evidence

was relevant.”); Breuer Elec. Mfg. Co. v. Toronado Sys. of Am.,

Inc., 687 F.2d 182, 185 (7th Cir. 1982) (“In this case, the

‘settlement’ evidence was properly presented below to rebut

defendants’ assertion that they had not been aware of the issues

until the suit was filed.”). But cf. Williams v. Chevron U.S.A.,

Inc., 875 F.2d 501, 504 (5th Cir. 1989) (upholding the trial court’s

exclusion of settlement negotiations introduced for impeachment

purposes because “it [was] undoubtedly possible that the jury would

have confused [the impeachment] purpose for that precluded by Rule

408") cited with approval in EEOC v. Gear Petroleum, Inc., 948 F.2d

1542, 15 46 (10th Cir. 1991).

¶12 State courts, including the Arizona Court of Appeals,

also express general agreement that Rule 408 does not preclude the

use of impeachment evidence derived from compromise negotiations.

Considering the admission of a settlement letter for impeachment

purposes, the Arkansas Supreme Court held that Rule 408 did not

7
exclude a letter written in an attempt to settle a lawsuit because

“Rule 408 is not a blanket prohibition against the admission of all

evidence concerning offers to compromise. Instead, the rule only

prohibits the introduction of such evidence when the evidence is

offered to prove ‘liability for, invalidity of, or amount of the

claim or any other claim.’” Ozark Auto Transp., Inc. v. Starkey,

937 S.W.2d 175, 178 (Ark. 1997)(citation omitted)(quoting Ark. R.

Evid. 408). Similarly, the Idaho Supreme Court upheld “the use of

statements contained in settlement negotiations for the purpose of

impeaching witnesses who give contrary testimony” at trial.

Davidson v. Beco Corp., 753 P.2d 1253, 1256 (Idaho 1987). See also

DeForest v. DeForest, 143 Ariz. 627, 633, 694 P.2d 1241, 1247 (App.

1985) (holding that a husband’s signature agreeing to a proposed

divorce decree “was properly admitted for the limited purpose of

showing his knowledge of the proposed . . . spousal maintenance

award” when the husband testified at trial that he had never been

aware of the award); El Paso Elec. Co. v. Real Estate Mart, Inc.,

651 P.2d 105, 109 (N.M. Ct. App. 1982) (holding that evidence from

compromise negotiations “used to impeach, not to establish the

amount of the claim . . . comes within ‘another purpose’ [under

Rule 408], and is admissible”).

B.

¶13 The public policy underlying both the Arizona and the

federal rules of evidence favors allowing courts to admit evidence

8
presented during compromise negotiations for impeachment. The

purpose of the rules of evidence is to promote the “growth and

development of the law of evidence to the end that the truth may be

ascertained and proceedings justly determined.” Fed. R. Evid. 102

(emphasis added); Ariz. R. Evid. 102 (emphasis added). Moreover,

“[t]he purpose of Rule 408 is to foster ‘complete candor’ between

parties, not to protect false representations.” 23 Charles Alan

Wright & Kenneth W. Graham, Jr., Federal Practice & Procedure:

Evidence § 5314, at 286 (1980).

¶14 Excluding evidence offered solely to impeach a party’s

credibility does not encourage complete candor. To the contrary,

that approach fails to hold parties accountable for setting forth

one version of the facts to obtain a settlement and describing

another version at trial. Claimants should present their claims

truthfully. Lawyers should not lie on behalf of clients in

presenting a claim. Allowing the use of evidence from compromise

negotiations for impeachment facilitates Rule 408's goal of

encouraging truthfulness by putting parties on notice that they

should not falsely represent claims, either during compromise

negotiations or at trial.

¶15 Of course, the admission of impeachment evidence taken

from a notice of claim remains subject to Rules 401, 402 and 403,

Ariz. R. Evid. Thus, impeachment evidence must be relevant under

Rules 401 and 402, and unfair prejudice must not substantially

9
outweigh its probative value. See Graber v. City of Ankeny, 616

N.W.2d 633, 640-41 (Iowa 2000) (holding evidence disclosed during

settlement not admissible because the evidence was not relevant to

show bias); Simmons v. Small, 986 S.W.2d 452, 455 (Ky. Ct. App.

1998) (refusing to allow settlement evidence for purposes of

impeachment because “[t]here is no question that the evidence . .

. was prejudicial”); Stam v. Mack, 984 S.W.2d 747, 752 (Tex. App.

1999) (precluding evidence of settlement agreement because the

evidence did not show bias or shifting interest); Northington v.

Sivo, 8 P.3d 1067, 1069 (Wash. Ct. App. 2000) (excluding evidence

of a settlement to prove bias because the evidence “was irrelevant

and unfairly prejudicial”).5

¶16 Because the rules of evidence seek to promote

5
The dissent expresses concern that juries will use
impeachment evidence to determine the validity of a claim. The
same concern exists, of course, for all evidence admitted for a
limited purpose, and the Rules of Evidence address that concern.
Just as Rules 401, 402 and 403 preclude the admission of irrelevant
and highly prejudicial impeachment evidence, Rule 105 may be
invoked to limit a jury’s consideration of impeachment evidence.
Ariz. R. Evid. 105 (“When evidence which is admissible . . . for
one purpose but not admissible . . . for another purpose is
admitted, the court, upon request, shall restrict the evidence to
its proper scope and instruct the jury accordingly.”). See also
Readenour v. Marion Power Shovel, 149 Ariz. 442, 450, 719 P.2d
1058, 1066 (1986) (“Rule 105 is mandatory, not discretionary; ‘once
evidence admissible for one purpose but inadmissible for another is
admitted, the trial court cannot refuse a requested limiting
instruction.’”)(quoting Chemetron Corp. v. Business Funds, Inc.,
682 F.2d 1149, 1185 (5th Cir. 1982)); Joseph M. Livermore et al.,
1 Arizona Practice Law of Evidence § 105.1, at 28 (4th ed. 2000)
(“[N]otwithstanding a Rule 105 limiting instruction, the court
would have the discretion to exclude the evidence from the trial
altogether under Rule 403.").

10
truthfulness, and Rule 408 encourages candid compromise

negotiations, public policy dictates that evidence obtained in the

course of compromise negotiations should be available for

impeachment purposes.

III.

¶17 The facts underlying Hernandez’s fall as set forth in the

notice of claim differed from the facts to which Hernandez

testified prior to and during trial. Because Hernandez presented

inconsistent versions of the facts surrounding his alleged

injuries, the State sought to admit factual portions of the notice

of claim to impeach Hernandez’s credibility. Significantly, the

State did not introduce the notice to prove that it was not liable

for Hernandez’s fall or to disprove the validity of Hernandez’s

claim or its amount. Thus, even if we regard the notice of claim

as an offer to compromise under Rule 408, the trial court properly

admitted portions of the notice of claim to impeach Hernandez’s

credibility.

IV.

¶18 For the foregoing reasons, we vacate the opinion of the

Court of Appeals and affirm the judgment of the Superior Court.

____________________________________
Ruth V. McGregor, Vice Chief Justice

11
CONCURRING:

__________________________________
Charles E. Jones, Chief Justice

__________________________________
Rebecca White Berch, Justice

Joseph W. Howard, Judge, dissenting:

¶19 “‘[C]ourts have not formulated a consistent, reliable

body of doctrine to determine the extent to which [R]ule 408 bars

evidence of . . . statements made during [compromise] negotiations’

when offered [to impeach a party].” Fred S. Hjelmeset, Impeachment

of Party by Prior Inconsistent Statement in Compromise

Negotiations: Admissibility Under Federal Rule of Evidence 408, 43

Clev. St. L. Rev. 75, 108 (1995) (brackets added) (footnote

omitted) (quoting Wayne D. Brazil, Protecting the Confidentiality

of Settlement Negotiations, 39 Hastings L. J. 955, 974 (1988)).

Not surprisingly then, differences of opinion arise as to the

proper impeachment use of statements made in compromise

negotiations. I conclude that a notice of claim filed pursuant to

A.R.S. § 12-821.01 is a statement made in compromise negotiations

triggering the exclusionary principles of Rule 408, Ariz. R. Evid.,

17A A.R.S. Further, I conclude that impeachment of a plaintiff or

defendant with prior inconsistent statements made in compromise

negotiations concerning the facts of an accident is not a proper

exception to Rule 408. Such use of those statements does little to

12
foster the truth-seeking process and does far too much to frustrate

the policy of encouraging prelitigation settlements. Accordingly,

I respectfully dissent.

¶20 The majority chose not to address the issue of whether

Rule 408 applies to a notice of claim filed under § 12-821.01

because the majority concludes that Rule 408 does not bar the

admission of the prior inconsistent statements in any event.

Because I conclude that Rule 408 precludes the use of such

statements, I must first analyze whether Rule 408 in fact applies.

The state argues, and a majority of the Court of Appeals concluded,

that a dispute triggering Rule 408 does not exist when a person

files a notice of claim against a public entity or employee because

the entity or employee has not yet taken a contrary position.

Hernandez v. State, 201 Ariz. 336, ¶12, 35 P.3d 97, ¶12 (App.

2001). That construction of Rule 408 is too narrow and overly

restricts the policy underlying the rule.

¶21 Section 12-821.01 requires any person who has a claim

against a public entity or employee to file a notice of claim

within 180 days after the claim accrues. That notice of claim must

include “facts sufficient to permit the public entity or public

employee to understand the basis upon which liability is claimed.”

§ 12-821.01(A). It must also contain “a specific amount for which

the claim can be settled and the facts supporting that amount.”

Id. The purpose of the notice of claim statute “is to allow the

13
public employee and his employer to investigate and assess their

liability, to permit the possibility of settlement prior to

litigation and to assist the public entity in financial planning

and budgeting.” Crum v. Superior Court, 186 Ariz. 351, 352, 922

P.2d 316, 317 (App. 1996) (emphasis added). Consequently, the

notice constitutes a statutorily mandated commencement of

compromise negotiations.

¶22 Under the first sentence of Rule 408, evidence of

furnishing or offering to furnish, accepting or offering to accept

a compromise of a disputed claim “is not admissible to prove

liability for or invalidity of the claim or its amount.” The

Advisory Committee Notes to Rule 408, Fed. R. Evid.,6 state that

the rule is not invoked by instances such as “induc[ing] a creditor

to settle an admittedly due amount for a lesser sum,” but rather

where “the claim [is] disputed as to either validity or amount.”

See also Affiliated Mfrs., Inc. v. Aluminum Co. of America, 56 F.3d

521, 528 (3d Cir. 1995) (dispute requirement covers “both

litigation and less formal stages of a dispute,” including “an

apparent difference of opinion between the parties”); Dallis v.

Aetna Life Ins. Co., 768 F.2d 1303, 1307 (11th Cir. 1985);

Schlossman & Gunkelman, Inc. v. Tallman, 593 N.W.2d 374, 378 (N.D.

6
Because Rule 408, Fed. R. Evid., is the source of Rule
408, Ariz. R. Evid., 17A A.R.S., see Historical Notes to Ariz. R.
Evid. 408, and the two rules contain identical language, federal
authority is instructive. See State v. Green, 200 Ariz. 496, ¶10,
29 P.3d 271, ¶10 (2001).

14
1999) (for purposes of evidence rule virtually identical to Rule

408, Ariz. R. Evid., “a claim is disputed if there is a difference

in interests or views which the parties are attempting to resolve

through compromise negotiations”).

¶23 The second sentence of Rule 408 expands the exclusion

further, stating: “Evidence of conduct or statements made in

compromise negotiations is likewise not admissible.” The Advisory

Committee Notes to the federal rule explain the purpose of the

second sentence: “Another effect [of the prior rule] is the

generation of controversy over whether a given statement falls

within or without the protected area. These considerations account

for the expansion of the rule herewith to include evidence of

conduct or statements made in compromise negotiations, as well as

the offer or complete compromise itself.” See also Jack B.

Weinstein & Margaret A. Berger, Weinstein’s Federal Evidence §

408.03[5], at 408-13 (2d ed. 2001).

¶24 When Hernandez filed his notice of claim against the

state, he began settlement negotiations, as established by § 12-

821.01. See Crum, 186 Ariz. at 352, 922 P.2d at 317. The notice

therefore was a statement made in compromise negotiations and

inadmissible under the second sentence of Rule 408.

¶25 Moreover, in his notice, Hernandez did not admit the

validity of the state’s position; that it was not negligent. And

the state certainly has not admitted it was negligent or the amount

15
of Hernandez’s claim. See Advisory Committee Notes to Fed. R.

Evid. 408 (rule triggered by dispute as to validity or amount of

claim). When Hernandez filed his notice, it was entirely

reasonable to expect the state to challenge the validity or amount

of the claim. There was “an apparent difference of opinion.”

Dallis, 768 F.2d at 1307. It was not necessary that the state

specifically stake out a position contrary to Hernandez’s position.

Accordingly, I conclude that when a claimant files a notice of

claim pursuant to § 12-821.01, there is a dispute for purposes of

Rule 408.7 Further, a notice of claim is a statement made in

compromise negotiations because a person must disclose the basis

for liability and the amount for which he or she will settle the

claim, and the notice, therefore, triggers the negotiating process.

§ 12-821.01(A). Thus, the exclusionary principles of Rule 408

apply.

¶26 The remaining issue is whether, under Rule 408, factual

statements concerning the facts of an accident made in compromise

negotiations are admissible as prior inconsistent statements to

impeach a party’s testimony. As noted above, statements made in

compromise negotiations are not admissible to prove “liability for

or invalidity of the claim or its amount.” Ariz. R. Evid. 408.

7
If the notice is not protected by Rule 408, then any
initial demand letter would similarly fall outside its protection,
despite the perception of practicing attorneys that such letters
are statements made in the course of negotiations and protected.

16
But, such statements are admissible for “another purpose, 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.” Id.

¶27 Impeachment of a party with a prior inconsistent

statement concerning the facts of the accident is not necessary to

prove bias and prejudice of a witness. A party is obviously

biased by self-interest in favor of its own position. No further

proof is necessary. And proof of bias and prejudice is different

from impeaching credibility. A witness can lack credibility

without bias or be credible even though biased. Moreover, the

other examples stated in the rule are completely distinct.

Accordingly, impeachment of a party does not come within the

examples of exceptions given in Rule 408.

¶28 Additionally, impeachment of a party with a prior

inconsistent statement concerning the facts of the case made during

compromise negotiations is not the same type of “another purpose”

as the examples listed in Rule 408. The examples in Rule 408 are

not exclusive but merely illustrative of the types of other

purposes that should be excluded from rule’s protection. Each

example involves issues collateral to the disputed claim. Thus,

impeaching a party with a prior inconsistent statement about the

facts of a claim is not the same type of “purpose” as the

exceptions listed in Rule 408.

17
¶29 Furthermore, “‘[t]he clear import of the Conference

Report as well as the general understanding among lawyers is that

[inconsistent] conduct or statements [made in connection with

compromise negotiations] may not be admitted for impeachment

purposes.’” EEOC v. Gear Petroleum, Inc., 948 F.2d 1542, 1545

(10th Cir. 1991) (offer of settlement letters “a thinly veiled

attempt to get . . .‘smoking gun’ letters before the jury”)

(quoting M. Graham, Federal Rules of Evidence 116 (2d ed. 1987))

(alterations added by court in EEOC). The bases for this

conclusion are twofold. First, there is a significant danger that

a jury will use impeachment evidence substantively, and, in that

way, directly contravene Rule 408. See id. at 1546. “‘The danger

that the evidence will be used substantively as an admission is

especially great when the witness sought to be impeached . . . is

one of the litigants in the suit being tried.’” Id. (ellipses

added) (quoting Jack B. Weinstein & Margaret A. Berger, Weinstein’s

Evidence ¶ 408[05] at 408-34 (1991)); see also Schlossman &

Gunkelman, Inc., 593 N.W.2d at 380 (“When the witness sought to be

impeached is also a litigant, the admissibility of statements made

during settlement negotiations increases the risk a jury may use

the evidence substantively as an admission of liability.”); 2 John

W. Strong et al., McCormick on Evidence § 266, at 186 (5th ed.

1999) (“Use of statements made in compromise negotiations to

impeach the testimony of a party, which is not specifically treated

18
in Rule 408, is fraught with danger of misuse of the statements to

prove liability, threatens frank interchange of information during

negotiations, and generally should not be permitted.”).

¶30 In fact, if the credibility of a party is impeached with

a prior inconsistent statement concerning the facts of an accident,

the only possible relevance of such evidence is to assist the jury

in determining “liability for or invalidity of the claim or its

amount.” Ariz. R. Evid. 408. A party’s credibility is not a

separate issue required to be proven or disproven to prevail on any

particular cause of action. Evidence concerning credibility merely

assists the jury in determining which set of facts it should adopt,

which will determine liability. Furthermore, a prior inconsistent

statement may be considered as substantive evidence of the facts

contained in it. See Ariz. R. Evid. 801(d); Joseph M. Livermore,

Arizona Practice: Law of Evidence § 608.3(F) (4th ed. 2000). When

the statement is made by a party concerning the facts of the

disputed claim, it will necessarily be used by the jury to

determine validity of the claim. And, because here the facts were

stipulated, the credibility of the plaintiff was only relevant to

determine the amount of his damage, another purpose specifically

excluded by Rule 408.

¶31 The second basis for concluding that statements

concerning the facts of the accident made in compromise

negotiations are not admissible to impeach a party is that a

19
contrary conclusion undermines the purpose of Rule 408, which is to

facilitate settlements by encouraging “free communication between

parties.” Advisory Committee Notes to Fed. R. Evid. 408. “The

philosophy of [Rule 408] is to allow the parties to drop their

guard and to talk freely and loosely without fear that a concession

made to advance negotiations will be used at trial.” Steven A.

Saltzburg & Kenneth R. Redden, Federal Rules of Evidence Manual 286

(4th ed. 1986); see also EEOC, 948 F.2d at 1545-46; Jack B.

Weinstein & Margaret A. Berger, supra § 408.08[1], at 408-29 (2d

ed. 2001) (“[C]are should be taken that an indiscriminate

application of this ‘exception’ to Rule 408 does not result in

undermining the rule’s public policy objective.”); Hjelmeset, 43

Clev. St. L. Rev. at 112. If such statements are admissible to

impeach a party, the incentive to make those statements is greatly

reduced and the purpose of Rule 408 is undermined.8 See EEOC, 948

F. 2d at 1546; Saltzburg, supra. The majority opinion undermines

the purposes of Rule 408.

¶32 The majority cites DeForest v. DeForest, 143 Ariz. 627,

694 P.2d 1241 (App. 1985), for the general proposition that

“impeachment evidence derived from compromise negotiations” may be

8
Obviously, a plaintiff cannot avoid filing a notice of
claim pursuant to A.R.S. § 12-821.01. But, under the majority’s
construction, a plaintiff would be encouraged to disclose as little
as possible. And, in the broader application of Rule 408, private
parties would have less incentive to make full and frank statements
during compromise negotiations.

20
admitted. In DeForest, the trial judge in a bench trial was called

on to reconstruct a spousal maintenance agreement that had been

previously approved by another judge but not set forth in a formal

decree. In the process, the husband testified that he had “never

been aware of [a spousal maintenance agreement in the amount

suggested by the judge who had approved the agreement].” Id. at

633, 694 P.2d at 1247. And, the husband objected to the admission

of a proposed decree, which he had signed, that included such an

agreement because it was part of compromise negotiations. The

trial court admitted the proposed decree for the limited purpose of

showing the husband’s knowledge of it, but expressly noted it would

not consider it as evidence of the terms of the ultimate agreement.

In that context, the court of appeals held that the trial court was

not required to exclude that evidence merely because it had been

presented in the course of compromise negotiations. In contrast,

the evidence here was admitted in a jury trial and it did involve

the actual facts of the incident, the purpose for which the trial

court in DeForest specifically stated the evidence would not be

used. The majority’s decision today represents a significant

expansion of the exception in DeForest.

¶33 Similarly, some of the other cases cited by the majority

do not go so far as allowing a party’s statement concerning the

facts of the case to be used for impeachment. Brocklesby v. United

States, 767 F.2d 1288, 1292-93 (9th Cir. 1985) (indemnity agreement

21
between defendants admitted to show status of parties and to

impeach credibility of defendants’ witnesses); Wyatt v. Security

Inn Food & Beverage, Inc., 819 F.2d 69, 71 (4th Cir. 1987)

(upholding exclusion of settlement of two prior similar actions);

Breuer Elec. Mfg. Co. v. Toronado Sys. of Am., Inc., 687 F.2d 182,

185 (7th Cir. 1982) (settlement evidence was properly presented to

rebut defendants’ assertion, in moving to set aside default, “that

they had not been aware of the issues until the suit was filed”);

Ozark Auto Transp., Inc. v. Starkey, 937 S.W.2d 175, 178 (Ark.

1997) (court could not conduct “meaningful review of the merits of

. . . [Rule 408] issue” because letter not in record and abstracted

portion did not contain settlement negotiations). But see

Cochenour v. Cameron Sav. and Loan, F.A., 160 F.3d 1187, 1190 (8th

Cir. 1998) (supporting majority holding); Davidson v. Beco Corp.,

753 P.2d 1253, 1255 (Idaho 1987) (same); El Paso Elec. Co. v. Real

Estate Mart, Inc., 651 P.2d 105, 108-09 (N.M. Ct. App. 1982)

(same).

¶34 In sum, the majority’s construction will “eviscerate Rule

408.” Jane Michaels, Rule 408: A Litigation Mine Field, 19 No. 1

Litigation 34, 37 (1992). It presents a very real danger that a

jury will use the evidence substantively for a purpose prohibited

by Rule 408 and it significantly undermines the policy underlying

Rule 408. In addition to undermining the purpose of Rule 408, the

majority’s construction does not enhance the truth finding process.

22
The majority focuses on false representations and, if the majority

opinion were limited to instances of clear perjury, the public

policy favoring ascertainment of the truth would militate in favor

of the evidence’s admission. See Rule 102, Ariz. R. Evid. But the

more likely victim of the majority’s interpretation of Rule 408 is

the innocent claimant, or lawyer who is mistaken as to a fact at

the very early stage of the process, such as in cases requiring a

notice of claim to be file within 180 days, or the defendant whose

attorney has and uses information from various sources that later

prove to be incorrect. Penalizing this party will not enhance the

truth finding process but will impede it.

¶35 Furthermore, under the majority’s construction, attorneys

will likely revert to the common law practice of making

hypothetical statements during compromise negotiations to avoid any

future impeachment. See Advisory Committee Notes to Fed. R. Evid.

408. The purpose of the second sentence of Rule 408 is to

eliminate this common law practice, which constituted “a preference

for the sophisticated, and a trap for the unwary.” Advisory

Committee Notes. In the alternative, attorneys will severely limit

the facts and inflate the demand put in § 12-821.01 notices or

claim and response correspondence, thereby frustrating the policies

underlying it. And, because attorneys are often the ones to make

statements during compromise negotiations, the majority’s

construction creates a risk of causing the disqualification of a

23
party’s attorney of choice so that he or she may be called as a

witness to impeach the party or explain why a particular statement

was made. See Hjelmeset, 43 Clev. St. L. Rev. at 110. Clearly,

this would cause more harm than good to our adversarial system.

¶36 Finally, even under the majority’s construction,

statements made in compromise negotiations that are offered to

impeach a party’s testimony may still be excluded under Rule 403,

Ariz. R. Evid. And I hope that trial courts will vigorously

exercise their discretion to prevent admissibility of prior

inconsistent statements by a party concerning the facts of the

accident made in settlement negotiations. In conducting a Rule 403

analysis in this context, a trial court must “carefully balance the

probative value of the evidence against the danger it will be used

for an improper purpose within the context of the policies

encouraging open and frank discussions during settlement

negotiations and fostering the truth-finding process through the

evaluation of a witness’s credibility.” Schlossman & Gunkelman,

Inc., 593 N.W.2d at 380.9 The better practice is to exclude this

type of impeachment in doubtful cases. See id. And, if it is

9
In the present case, for example, the facts were
stipulated and the statement was used in argument to attack the
credibility of the plaintiff, even though the statement was made by
the plaintiff’s lawyer and no foundation was laid to establish
whether the statement was based on information obtained from the
plaintiff, or was merely attributable to error or misconduct of
counsel. Even litigants with careless or unethical lawyers are
entitled to a fair hearing on the true facts.

24
admitted, a trial court must, upon request, and in other cases

should offer an appropriate limiting instruction to the jury. See

also Ariz. R. Evid. 105 (“When evidence which is admissible as to

one party or for one purpose but not admissible as to another party

or for another purpose is admitted, the court, upon request, shall

restrict the evidence to its proper scope and instruct the jury

accordingly.”).10 Such instructions are, of course, of limited

practical value and the better practice remains exclusion of the

evidence.

¶37 Based on the foregoing reasoning, I believe the better

approach is to exclude statements made in settlement negotiations

that are offered to impeach a party’s testimony. In my view, such

a construction of Rule 408 better serves the purposes underlying

the rule. Accordingly, I would reverse the trial court’s judgment.

______________________________
Joseph W. Howard, Judge*
CONCURRING:

___________________________
Stanley G. Feldman, Justice

*Pursuant to Ariz. Const. Article VI, Section 3, the Honorable

10
The majority likens this case to any other in which
evidence is admitted for a limited purpose. Ante. at ¶15 n.5. The
difference is that, in cases involving statements made in
compromise negotiations, the admission for the limited purpose
undermines the goal of Rule 408 of allowing free and open
settlement negotiations.

25
Joseph W. Howard, Judge of the Court of Appeals, Division Two, was
designated to sit on this case.

26