Bankcard America, Inc. v. Universal Bancard Systems

United States Court of Appeals for the Seventh Circuit · 2000 · Evidence

EvidenceFederal Rule of Evidence 408settlement negotiationsplain errorwaiverharmless errornew trialsuccessor judge

Facts

Bankcard, an ISO, contracted with Universal, a sub-ISO, to place and service merchant credit-card accounts. The parties' relationship collapsed, with Bankcard claiming Universal improperly moved accounts to a competitor and Universal claiming Bankcard delayed approvals, withheld or shorted residual payments, and drove it out of business. At the first trial, the jury found for Universal on breach of contract and RICO, but the successor judge later ordered a new trial because some unadmitted exhibits reached the jury, testimony touched on settlement discussions, and the RICO instructions listed unsupported or improper predicate acts. At the second trial, Universal lost on RICO but won on contract, only to have that verdict set aside for insufficient damages evidence.

Issue

Whether the successor district judge properly ordered a complete new trial after the first trial based on unadmitted exhibits, testimony referring to settlement discussions, and erroneous RICO instructions, and whether the second jury's contract damages verdict could be set aside for insufficient evidence. Also at issue was the proper scope of any new trial and whether any party was entitled to fees or costs.

Rule

Failure to object when exhibits are sent to the jury waives the objection except for plain error, which requires exceptional circumstances, effect on substantial rights, and a miscarriage of justice. Rule 408 bars settlement statements when offered to prove liability or lack of liability, but not when offered for another purpose, and its application must serve its settlement-promoting purpose rather than permit unfairness. If trial error affects only a distinct and separable issue, any new trial should be limited to that issue alone. Lost-profit damages under Illinois law may not rest on complete speculation, but absolute certainty or mathematical precision is not required if there is evidence from which a jury can be reasonably certain of a modest award.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In a contract suit in Chicago, Orion Payment Services claims that Lakeside Merchant Group breached a non-solicitation clause by moving customer accounts to another processor. Lakeside's president wants to testify that, during discussions aimed at resolving the dispute, Orion's lawyer conveyed that Lakeside could move the accounts, and Lakeside offers the testimony only to explain why it believed its conduct was permitted.

Should the court admit the testimony under Federal Rule of Evidence 408?

Explanation. Rule 408 bars settlement statements when offered to prove liability or lack of liability, but not when offered for another purpose. The majority approved limited testimony about compromise-related discussions when used to explain why a party acted as it did and to show state of mind, especially where excluding it would create unfairness by preventing the party from explaining allegedly invited conduct. The court may limit details of the discussions while admitting the explanation. (Derived from Bankcard America, Inc. v. Universal Bancard Systems (n.d.).)