- 16 -
when it is being offered to show liability, or that some
underlying claim is invalid. Id.
The legislative history of rule 408 of the Federal Rules of
Evidence indicates that the purpose thereof is to encourage
settlements. See United States v. Contra Costa County Water
Dist., 678 F.2d 90, 92 (9th Cir. 1982); Central Soya Co. v.
Epstein Fisheries, Inc., 676 F.2d 939, 944 (7th Cir. 1982);
Hulter v. Commissioner, 83 T.C. 663, 665 (1984). The underlying
premise is that, without the rule, settlement negotiations would
be inhibited if the parties knew that statements made in the
course of settlement might later be used against them as
admissions of liability. United States v. Contra Costa County
Water Dist., supra at 92; Central Soya Co. v. Epstein Fisheries,
Inc., supra at 944; Hulter v. Commissioner, supra at 665.4
Petitioner contends that a meeting with respondent's counsel
was a settlement conference, and, hence, statements made by
4 See also Saltzburg & Redden, Federal Rules of Evidence
Manual, 191 (3d ed. 1982):
In most cases * * * the Court should
decide against admitting statements made
during settlement negotiations as impeachment
evidence when they are used to impeach a
party who tried to settle a case but failed.
The philosophy of the 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. Opening the door to
impeachment evidence on a regular basis may
well result in more restricted negotiations.
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