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October 30, 2020

What Plaintiffs call a “confidential settlement negotiation”. By any other name would be an “other paper” and establish the amount in controversy.

The Middle District of Florida recently considered the issue of whether Federal Rule of Evidence 408 and its Florida counterpart, section 90.408, Florida Statutes preclude a court from considering a confidential settlement communication as evidence of the amount in controversy in Frank Seager and Carol Seager v. Hartford Insurance Company of the Midwest, 2:20-cv-00728-SPC-MRM (M.D. Fla. October 28, 2020).1 

Before discussing the opinion itself, allow me to set the stage.  The Seagers filed a breach of contract action against Hartford Insurance Company of the Midwest for Hartford’s denial of their claim for property damage purportedly caused by Hurricane Irma.  Post-suit, Plaintiffs’ counsel sent counsel for Hartford an email containing what Plaintiffs will later categorize as a “confidential settlement communication.”  This email offered to resolve the matter for $230,000.00, inclusive of fees and costs, and provided an estimate for repairs in excess of the global demand.   

Counsel for Hartford, within 30 days of receiving this demand, and within one year of the commencement of the action, filed its Notice of Removal, and attached to the notice both the email containing the “confidential settlement communication” and the supporting estimate to demonstrate that the amount in controversy exceeded the jurisdictional threshold.  

In response to Hartford’s Notice, Plaintiffs filed their Motion to Remand and their Motion to Strike.2 Both of Plaintiffs’ Motions argued that the Court could not rely on Plaintiffs’ counsel’s email containing the “confidential settlement communication” as evidence of the amount in controversy because it was inadmissible under Federal Rule of Evidence 408 and section 90.408, Florida Statutes The Court made quick work of the inadmissibility argument, stating that the aforementioned rules of evidence neither expressly nor implicitly disallow the use of a settlement or demand letter to establish the amount in controversy for purposes of determining federal jurisdiction.  See Seager at *6-7 (citing White v. State Farm Mut. Auto. Ins. Co., No. 6: 12-CV-438-ORL-22DAB, 2012 WL 13102525, at *2 (M.D. Fla. May 16, 2012) and Stratmann v. State Farm Mut. Auto. Ins. Co., No. 6: 15-CV-1036-ORL-31KRS, 2015 WL 12861146, at *1 (M.D. Fla. July 28, 2015)).3 

Alternatively, Plaintiffs argued that, assuming the email was admissible, it does not constitute an “other paper” under 28 U.S.C. § 1446(b)(3), because a “demand” and a “settlement communication” are, as Plaintiffs put it, both plainly and legally distinct.  The Court rejected Plaintiffs’ invitation to play semantics and citied to the cannon proposition announced by the Eleventh Circuit in Lowery v. Alabama Power Co., that settlement offers, demand letters, and emails estimating damages are considered an “other paper” under the removal statute.  Seager at *7 (citing Lowery v. Alabama Power Co., 483 F.3d 1184, 1221 n. 62 (11th Cir. 2007)) (internal quotations and citations omitted).   

This is a very instructive opinion as it demonstrates the novel arguments some counsel may employ to escape the rigidity of federal court, and also echoes many of the basic tenets of proper removal.   

Should you have any questions about this or any other first party coverage matter, we invite you to contact us.

For any further questions, please contact Vincent Fernandez.

1 A copy of the Order can be found here. 

2 Within the Motion to Remand, Plaintiffs argued, in addition to the topic of this piece, that the parties were not diverse due to 28 U.S.C. § 1332(c)(1)(A), the direct action exception.  The Court quickly dispensed with this argument citing the general rule that the direct action proviso does not affect suits brought by an insured against his own insurer.  See Seager at *4.  Plaintiffs also argued in their Motion that the removal was untimely because Hartford had pre-suit knowledge of the amount in controversy, and failed to remove the case within 30 days of the complaint being filed.  It should be noted that Plaintiffs did not identify what the precise source of that pre-suit knowledge was.  Additionally, Plaintiffs complaint was devoid of such information.  Nevertheless, the Court was not persuaded by these arguments and held that neither a Defendant’s pre-suit knowledge nor pre-suit correspondence to a Defendant can trigger the 30-day clock of 28 U.S.C. § 1446(b)(1).  Seager at *5-6.  

3 The Court denied the Motion to Strike as procedurally improper as Federal Rule of Civil Procedure 12(f) governs the striking of material from pleadings, not evidence.   Seager at *7.  Elaborating that, the issue before the Court on a Rule 12(f) motion is not a question of admissibility, but whether the matter in the pleading is “redundant, immaterial, impertinent, or scandalous.  Id.