## Facts

- AMI contracted to design and fabricate an automated “greenline handling system” for Alcoa; the system was never put into production.
- During performance, AMI submitted invoices it claimed covered work outside the contract; Alcoa generally processed such invoices in ordinary course.
- A dispute arose over two unpaid invoices submitted April 5, 1990: $280,000 for hardware (screen printers) and $208,130 for software.
- AMI sought to introduce correspondence, internal Alcoa memoranda, and deposition testimony to show admissions or Alcoa’s understanding of what it owed.
- Alcoa moved in limine to exclude parts of those materials as compromise negotiations barred by Federal Rule of Evidence 408.
- The district court excluded thirteen of fifteen challenged items, tried the case to a jury, and the jury rejected AMI’s claims while awarding Alcoa $100,000 on its counterclaim for failure to satisfy specifications and breach of warranties.
- After denial of AMI’s new trial motion, AMI appealed, primarily challenging the Rule 408 exclusions.

## Issues

1. Whether the district court abused its discretion by excluding documents and deposition testimony as evidence of compromise negotiations under Federal Rule of Evidence 408.
2. Whether Rule 408 can apply to pre-litigation communications when the parties have an actual dispute over liability or amount.
3. What criteria determine, under the totality of circumstances, whether communications are compromise negotiations rather than routine business communications.

## Decision

- The Third Circuit affirmed the judgment.
- The court held the Rule 408 determinations were evidentiary rulings reviewed for abuse of discretion.
- The excluded materials arose from a dispute over AMI’s invoices and reflected proposals, counterproposals, and concessions aimed at resolving the contested amounts.
- Rule 408 applied even though many communications occurred before suit, because an actual dispute existed and the communications functioned as settlement negotiations.
- Because the district court’s exclusions fell within its discretion, there was no basis for a new trial and the jury verdict remained intact.

## Legal Principles

- Federal Rule of Evidence 408 bars using compromise offers, attempted compromises, and related statements to prove or disprove the validity or amount of a disputed claim, or for impeachment by prior inconsistent statement.
- Whether communications constitute compromise negotiations is determined by the totality of circumstances, including the presence of a dispute and whether the communications objectively reflect bargaining, concessions, or attempts to resolve the dispute.
- Rule 408 is not limited to post-filing negotiations; it can cover pre-suit communications if they address an actual dispute over liability or amount.
- Trial courts have broad discretion to admit or exclude evidence under Rule 408; appellate review is for abuse of discretion.

## Conclusion

The Third Circuit upheld exclusion of pre-suit negotiation materials under Rule 408, holding that context showed the communications were efforts to settle a disputed claim and that the district court did not abuse its discretion in excluding them.


Affiliated Mfrs., Inc. v. Aluminum Co. of Am., 56 F.3d 521 (3d Cir. 1995)