## Facts

- The Federal Deposit Insurance Corporation (FDIC) obtained a jury verdict against John and Donna White on claims arising from alleged fraudulent transfers and related misconduct.
- After the verdict, the court ordered the parties to participate in confidential mediation.
- The parties signed a written settlement agreement during mediation.
- The Whites later refused to perform, asserting the agreement was induced by coercion, including alleged intimations during mediation that they could face criminal prosecution if they did not settle.
- The FDIC sought to enforce the settlement and to exclude testimony from the Whites and their attorneys about mediation communications, arguing such evidence was barred by a federal mediation privilege and related evidentiary doctrines.
- The FDIC contended no improper threats were made, that any criminal referral predated mediation and was outside FDIC control, and that the Whites raised criminal exposure as part of settlement discussions.

## Issues

1. Whether federal common law under Federal Rule of Evidence 501 recognizes a mediation privilege that categorically bars testimony about mediation communications.
2. Whether, absent such a privilege, mediation communications are admissible for the limited purpose of determining whether a settlement was induced by duress or improper threats.
3. Whether the settlement could be enforced on a record that excludes evidence of what occurred during mediation when the settlement’s voluntariness is disputed.

## Decision

- The court declined to recognize a broad federal mediation privilege on these facts and denied the FDIC’s effort to exclude mediation evidence categorically.
- The court held that testimony about mediation communications could be admitted for the limited purpose of resolving whether the settlement agreement was valid or was procured by duress or improper threats.
- The court determined that the settlement’s enforceability could not be decided solely by shielding the mediation from scrutiny; the dispute required consideration of admissible evidence about what was said and done during mediation.

## Legal Principles

- Federal privileges under Federal Rule of Evidence 501 are narrowly recognized; new privileges are disfavored and must be justified by strong policy reasons that outweigh the truth-seeking function of adjudication.
- Confidentiality in mediation (by order, local practice, or agreement) is distinct from an evidentiary privilege; confidentiality alone does not create a bar against compelled testimony.
- Federal Rule of Evidence 408 generally excludes settlement negotiations when offered to prove liability or claim amount, but it permits such evidence for other purposes, including proving or disputing the existence, terms, or validity of a settlement and claims of fraud, duress, or bad faith in inducement.
- Where a party challenges a settlement as coerced, courts may admit otherwise protected settlement communications to determine whether the agreement was voluntary and enforceable.

## Conclusion

The court refused to create a categorical federal mediation privilege and allowed mediation communications to be used to litigate whether the settlement was induced by duress, requiring the enforceability dispute to be resolved on an evidentiary record that could include relevant mediation testimony.


Fed. Deposit Ins. Corp. v. White, 76 F. Supp. 2d 736 (N.D. Tex. 1999)