Kennon v. Slipstreamer, Inc.

• Decision Date: 23 July 1986
• Docket Number: No. 84-2270,84-2270
• Citation: 794 F.2d 1067
• Parties: , 21 Fed. R. Evid. Serv. 81 Jerry L. KENNON and Mary Ann Kennon, Individually and as Next Friend of Jerry L. Kennon, Jr., Plaintiffs-Appellees, v. SLIPSTREAMER, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1067

794 F.2d 1067

55 USLW 2096, 21 Fed. R. Evid. Serv. 81

Jerry L. KENNON and Mary Ann Kennon, Individually and as Next Friend of Jerry L. Kennon, Jr., Plaintiffs-Appellees, v. SLIPSTREAMER, INC., Defendant-Appellant.

No. 84-2270.

United States Court of Appeals, Fifth Circuit.

July 23, 1986.

Thomas O. Moses, Evans, Moses & Barkley, Beaumont, Tex., for defendant-appellant.

Dewey Gonsoulin, Mehaffy, Weber, Keith & Gonsoulin, Roger S. McCabe, Beaumont, Tex., for plaintiffs-appellees.

Appeal from the United States District Court for the Eastern District of Texas.

Before CLARK, Chief Judge, THORNBERRY and JONES, Circuit Judges.

CLARK, Chief Judge:

Texas law governs this product liability case based upon diversity jurisdiction. The jury rendered a verdict against defendant-appellant Slipstreamer, Inc. Slipstreamer appeals, alleging various errors in the conduct of the trial. Finding that the district court's improper comment to the jury on the amounts paid in plaintiff's settlements with other defendants was prejudicial to the rights of Slipstreamer, Inc., we reverse and remand for a new trial.

I

On June 12, 1980, the moped on which Jerry L. Kennon, Jr., was riding struck a chughole in a private road. A piece of the moped's windshield pierced the boy's right eye. Kennon's parents filed suit in the United States District Court for the Eastern District of Texas against Slipstreamer, the manufacturer of the windshield, and Mid-America Vespa, the windshield wholesaler. Slipstreamer cross-claimed against Mid-America Vespa and brought third-party actions against Moped Traveland, Inc., the windshield retailer, and E.I. DuPont De Nemours & Co., the manufacturer of the lucite from which the windshield was made.

After jury selection but before trial had begun, the Kennons settled with Mid-America Vespa, Moped Traveland, and DuPont for ten dollars each. The district court dismissed the three parties from the suit. The Kennons' action against Slipstreamer proceeded to trial and was submitted to the jury on a strict liability theory. The Kennons alleged that the windshield had two manufacturing defects: excessive brittleness, and three small gouge marks on the inside of one of the holes drilled in the windshield for the attachment of mounting hardware. The jury found Slipstreamer liable. It awarded Jerry L. Kennon, Jr. $1,000,000 in damages and awarded his parents $100,000 in their individual capacity. The district court entered judgment on the verdict.

II

Following the settlement and the testimony of the first witness, the district court, on its own initiative, made these comments to the jury:

Ladies and Gentlemen, before we break for lunch I want to mention one other thing. For two reasons, I want to make sure you understand the true facts and I don't want you to speculate on something that doesn't have anything to do with the job you have to perform. That relates to why the other Defendants are not here. I mentioned that casually this morning. I meant to elaborate on it a little bit at that time and I forgot to do so.

* * *

The Plaintiff has made an election in this case, which is not that unusual, that it wishes to proceed in the lawsuit against the one Defendant only, and there is a procedure available to do that, that eliminates their presence, even though the other two had been sued by this Defendant. The way that works is that the Plaintiff can accept a nominal payment, it was Ten Dollars in this case, and then they are excused from further participation in the case.

Now the effect of that is that, depending on what the evidence is, their contribution to the cause of this occurrence may still be submitted to the jury or it may not. That's a decision I will have to make at some point. You may have to make a decision in that respect. We will see how that goes later in the case. But I didn't want you speculating on why they were not here and be concerned as to whether the Court had made a ruling on the merits of the case, which I have not, or speculate on whether the Plaintiff had received substantial monies, which they have not. I wanted you to know the full facts of the matter. (emphasis added)

Slipstreamer's counsel objected to the court's disclosure of the amount of the settlement. In response to the court's inquiry as to how this disclosure prejudiced Slipstreamer, counsel argued that the disclosure constituted an impermissible comment on the weight of its third-party claims against DuPont and Moped Traveland. Slipstreamer moved for a mistrial. The court denied the motion. The court also denied Slipstreamer's subsequent motion for a new trial, in which Slipstreamer contended that the court had erred in informing the jury of the amount of the settlement.

Fed.R.Evid. 408 provides that evidence of a settlement is not admissible "to prove liability for or invalidity of the claim or its amount." While a principal purpose of Rule 408 is to encourage settlements by preventing evidence of a settlement (or its amount) from being used against a litigant who was involved in a settlement, the rule is not limited by its terms to such a situation. Even where the evidence offered favors the settling party and is objected to by a party not involved in the settlement, Rule 408 bars the admission of such evidence unless it is admissible for a purpose other than "to prove liability for or invalidity of the claim or its amount." See Belton v. Fibreboard Corp., 724 F.2d 500, 505 (5th Cir.1984). The district court has discretion to admit evidence of a settlement for other purposes. Branch v. Fidelity & Casualty Co., 783 F.2d 1289, 1294 (5th Cir.1986).

The district court's disclosure of the fact of settlement was clearly for the purpose of avoiding jury confusion, rather than for the purpose of showing liability. In a case such as this one, where the absence of defendants previously in court might confuse the jury, the district court may, in its discretion, inform the jury of the settlement in order to avoid confusion. See Belton, supra, 724 F.2d at 505. The district court did not abuse its discretion in revealing the fact of settlement in this case.

The district court's disclosure of the amount of settlement, however, is a different matter. While revealing the fact of settlement explains the absence of the settling defendants and thus tends to reduce jury confusion, disclosing the amount of settlement serves no such purpose. See Belton, supra, 724 F.2d at 505 (disclosure of the fact of settlement did not violate Rule 408 because it was offered to reduce jury confusion but disclosure of the settlement amount did not fall under any exception to Rule 408). Disclosing the amount of settlement had no proper purpose in the circumstances of this case and therefore it violated Rule 408.

The district court's disclosure of the amount of the settlement prejudiced Slipstreamer in two ways. First, the fact that the settlement was for a nominal amount suggests that the plaintiffs thought that the settling defendants were not liable for the plaintiff's injuries and therefore points the finger at Slipstreamer as the one responsible. Just as we held in McHann v. Firestone Tire & Rubber Co., 713 F.2d 161, 166-67 (5th Cir.1983), that informing the jury of a large settlement by a co-defendant might lead the jury to believe that only the co-defendant, and not the nonsettling defendant, was negligent, the disclosure of the "nominal" ten dollar settlement in this case suggests to the jury that Slipstreamer alone was liable. ¹ Furthermore, the willingness of the plaintiff to settle for a pittance with the other defendants could be taken by the jury as a reflection of the strength of the plaintiffs' case against Slipstreamer.

Second, revelation of the amount of the settlement informed the jury that if the plaintiff was to receive any compensation for his injuries, he would have to get it from Slipstreamer. Such information is clearly prejudicial in a case such as this one where a ten year old child is permanently injured and where defendant's liability is sharply contested.

We do not attribute to the district court any intention that disclosure of the settlement amount should be used by the jury to determine Slipstreamer's liability or the amount of the claim. It is nonetheless clear that Slipstreamer was prejudiced by that disclosure. No instruction was given to mitigate that prejudice. When Slipstreamer's counsel objected to the court's disclosure of the settlement amount, the court responded that it revealed the settlement amount as part of the explanation of the procedure by which the defendants were required to be removed from the case. The court then asked counsel if he wished the court to further elaborate on that Texas procedure. Slipstreamer's counsel's refusal of this offer cannot be construed as a waiver of the error. Further discussion would have re-emphasized to the jury the nominal payment involved in the settlement. The court did not offer to give any other type of instruction, and it is not apparent what other sort of instruction could have minimized the prejudice already visited on Slipstreamer. Moreover, the district court's comments may have appeared to invite the jury to consider the settlement amount in its deliberations. The court stated that it did not want the jury speculating "on whether the Plaintiff had received substantial monies, which they have not." This statement suggests that the fact that the plaintiff has received no money may be relevant to the issues before the jury.

The dissent takes the position that statements made to the jury by a district judge cannot be classified as "evidence," and, therefore, they are not subject to the Federal Rules of Evidence. We disagree. When a judge chooses to bring matters of fact to the attention of the jury, we have applied the Federal Rules of Evidence. As the dissent notes (n.2), both Belton and McHann have employed this analysis. ²

The dissent also...