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COMPOSITE EXHIBIT B

Doe, et al. v. School Board for Santa Rosa County, et al.


Case No.: 3:08-cv-361-MCR-EMT
United States District Court, Northern District of Florida, Pensacola Division
Page 1

LEXSEE

PHILADELPHIA'S CHURCH OF OUR SAVIOR, Plaintiff, v. CONCORD


TOWNSHIP, et al., Defendants.

CIVIL ACTION NO. 03-1766

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF


PENNSY LVANlA

2004 U.S. Di.s.Fr.LEXIS 15400

July 27,2004, Decided


July 28,2004, Filed

PRIOR HISTORY: Philadelphia's Chztrch of Our Sav-


Currently before the Court is a Motion for Leave to
ior v. Concord Twp., 2004 U.S. Dist. LEXlS 1941 (E.D.
Supplement the Amended Complaint by plaintiff, Phila-
Pa., Feb. 4, 2004)
delphia's Church of Our Savior. Having considered the
arguments of both parties, the Court denies Plaintiffs
DISPOSITION: [*I] Plaintiffs motion for leave to
motion.
supplement complaint denied.
I. PROCEDURAL HlSTORY
COUNSEL: For PHILADELPHIA'S CHURCH OF On March 26, 2003, plaintiff, Philadelphia's [*2]
OUR SAVIOR, Plaintiff: CHARLES J. HARDY, Church of Our Savior (the "Church"), filed a complaint
JOSEPH J. MCALEE, RICHARD A. SPRAGUE, against defendant, Concord Township (the "Township")
STEPHEN R. KURENS, LEAD ATTORNEYS, alleging three counts of defendant's misconduct in viola-
SPRAGUE AND SPRAGUE, PHILADELPHIA, PA. tion of the Religious Land Use and Institutionalized Per-
sons Act of 2000 ("RLUIP"), 42 U.S.C. $2000cc, et seq.,
For CONCORD TOWNSHIP, Defendant: HUGH A. five counts of misconduct in violation of 42 U.S.C. $
DONAGHUE, LEAD ATTORNEY, DONAGHUE 1983, and five counts of misconduct in violation of the
AND BRADLEY, MEDIA, PA. Pennsylvania Constitution. The complaint specifically
contended that defendants (1) wrongfully rejected the
For CONCORD TOWNSHIP, HUGH A. DONAHUE, Church's request for a building permit, after promising to
MANOS KAVADIAS, JAMES W. McKINLEY, issue one; (2) improperly demanded a permanent ease-
DOMINIC J. CAPPELLI, HOWARD J. GALLAGHER, ment from the Church as a quid pro quo for the building
H. WILLIAM VOLLMER, DOMINIC A. PILEGGI, permit and; (3) improperly refused to accept for filing or
Defendants: PAOLA TRIPOD1 KACZYNSKI, to review the Church's written application for a building
WILLIAM F. HOLSTEN, HOLSTEN & ASSOCIATES, permit, despite the fact that the proposed sanctuary com-
MEDIA, PA. plied with all applicable zoning, building and safety
codes. Plaintiff asserted this Court's federal question ju-
JUDGES: CHARLES B. SMITH, UNITED STATES risdiction overall federal claims pursuant to 28 U.S.C. $
MAGISTRATE JUDGE. 1331 and 1342(3)-(4), and supplemental jurisdiction over
state law claims pursuant to 28 U.S.C. f 1367. [*3] On
OPINION BY: CHARLES B. SMITH February 4, 2004, plaintiff was granted leave to amend
its complaint in order to add the five members of the
OPINION Township's Board of Supervisors, the Township Solicitor
and the Township Building Inspector in their individual
MEMORANDUM AND ORDER capacities.
CHARLES B. SMITH Both parties met with this Court on June 23, 2003
and entered into settlement negotiations. Following dis-
UNITED STATES MAGISTRATE JUDGE
cussions, the parties agreed that plaintiff would complete
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2004 U.S. Dist. LEXlS 15400, *

an application for a building permit and plaintiff would dant Township officials, and the Defendant
pay the cost for an architectural firm to certify BOCA Township did, in fact, thereafter issue a founda-
compliance. The firm was approved by defendant and, tional permit to Plaintiff on or about August 28,
upon submission of the firm's report, the Township is- 2003 authorizing the Plaintiff to build the founda-
sued a foundational permit on August 28,2003, authoriz- tion to support the membrane structure ....
ing plaintiff to build the foundation to support the mem-
brane structure. Thereafter, it issued a Building Permit 94. Thereafter the Defendant Township is-
authorizing plaintiff to erect the proposed sanctuary. sued a building permit to the plaintiff authorizing
the plaintiff to erect the proposed sanctuary.
On June 4, 2004, plaintiff filed a Motion for Leave
95. Both the foundational permit and the
to Supplement its First Amended Complaint to include
building permit issued to the plaintiff were issued
paragraphs referring to the settlement conference and
under a process which did not require Plaintiff to
how the concessions made by the Township establish
comply with various local building requirements
that defendants had the authority to waive its application
such as the need to obtain a land development
requirements. The undersigned held oral argument on
permit, land disturbance permit or a special ex-
June 17, 2004 and, subsequently, both [*4] parties filed
post-argument briefs. The Court now considers whether ception ....
Plaintiffs request for leave to supplement the Amended 96. As permitted by the foundational permit
Complaint should be granted. and the building permit, the plaintiff has begun
the construction of its proposed 620-seat sanctu-
11. DISCUSSION ary.
Plaintiff seeks leave to supplement its Amended 97. In light of the explicit representations and
Complaint with references to the settlement proceedings actions on behalf of defendants before this Court
held before this Court ' in order to prove that defendants including the explicit waiver of various permit-
repeatedly denied, in their responsive pleading and dis- ting requirements, defendant should be and/or ju-
covery responses, that they had the authority to grant dicially and/or equitably estopped from denying
waivers of various requirements. ' such authority in this case.
[*51
I Specifically, plaintiff seeks to add the follow- 2 In its Answer to the Complaint, the Township
ing paragraphs: denied that there was "any alternative procedure
for reviewing and granting requests for building
9 I. In or about March 2003, plaintiff filed its
permits." and that "any procedure resembling
Complaint against the Defendant Township, and
what Plaintiff refers to as 'the expedited permit
in or about February 2004 plaintiff filed its First
approval procedure' exists within Concord Town-
Amended Complaint. In its responsive pleadings
ship." Answer to Complaint. at par. 24.
and discovery responses, defendants have repeat-
edly denied that defendant Concord Township, by Federal Rule of Civil Procedure 15(d) states that:
and through its Board of Supervisors, had the au-
thority to grant a waiver or waivers of various Upon motion of a party the court may,
permitting requirements such as land develop- upon reasonable notice and upon such
ment or land disturbance permits, and/or a special terms as are just, permit the party to serve
exception .... a supplemental pleading setting forth
transactions or occurrences or events
92. At a conference held before Magistrate
which have happened since the date of the
Judge Charles B. Smith on June 23,2003, Defen-
pleading sought to be supplemented.
dant Concord Township, by and through its coun-
sel, agreed to afford plaintiff a procedure to ob-
tain a building permit which would permit the
The Supreme Court has held that "leave to amend 'shall
plaintiff to construct the proposed temporary
sanctuary in question, which procedure did not be freely given when justice so requires."' Foman v.
Davis, 371 U.S. 178, 182, 83 S. Ct. 227, 230, 9 L. Ed. 2d
include any requirements that plaintiff comply
with various local building requirements such as 222 (1962). "In the absence of any apparent or declared
a the need to obtain a land development permit, reason - such as undue delay, bad faith or dilatory motive
land disturbance permit, and/or special exception. on the part of the movant, repeated failure to cure defi-
ciencies by amendments previously allowed, [*6] undue
93. Plaintiff availed itself of the opportunity prejudice to the opposing party by virtue of allowance of
afforded by Defendant Township and the Defen- the amendment, futility of the amendment, etc.--the leave
Page 3
2004 U.S. Dist. LEXIS 15400, *

sought should, as the rules require, by 'freely given."' Id. Fed. R. Evid 408. This [*8] Rule is founded on two
It "is an abuse of discretion for a district court to deny major policies: (1) "the evidence is irrelevant since the
leave to amend" without one of these reasons. Alvin v. offer may be motivated by a desire for peace rather than
Suzuki, 227 F.3d 107, I21 (3d Cir. 2000). from any concession of weakness of position ... (2) [a]
more consistently impressive ground is promotion of the
Defendants offer two arguments in opposition to
public policy favoring the compromise and settlement of
plaintiffs motion. Defendants first claim that the motion
to supplement would only . proffer
. inadmissible evidence
maki& the supplement futile. Second, defendants claim
-
rputes. Fed -
Evid. -Ad . ...

that the motion to supplement the claim with allegations


regarding the settlement proceedings is being offered in
bad faith. As the Court deems the futility argument to be
;Skk; e.g., Agnew v. ~y~
n.,Jr ullurl. ?vaa u.a. urst. LEXIS 991 1, Civ. A. No.
the more compelling claim, we deny the motion on these
88-3436, 1988 WL 92872, *4 (E.D. Pa. Sept. 6, 1988)
grounds.
(parts of a complaint may be stricken pursuant to Rule
Denying leave to amend on the ground of futility in- 408 if they are for the purpose of showing liability and
cludes those instances where: refer to settlement negotiations); United States Transmis-
sion Sys. v. Americus Ctr., Inc. 1986 U.S. Dist. LEXIS
a complaint or an answer, as amended, 17057, Civ. A. NO. 85-7044. 1986 WL 13838, *2 (E.D.
would be subject to a motion to dismiss Pa. Dec. 3, 1986) (striking allegations from a complaint
under Rule 12(b)6, or a motion to strike as they fall within Rule 408 and are thus clearly inadmis-
under 12(f), [and] it would be an idle sible); Scott v. Township of Bristol, I991 U.S. Dist.
move for the court to allow such an LEXIS 3303, Civ. A. No. 90-1412, 1991 WL 40354, *5
amendment over the objection of the op- (E.D. Pa. Mar. 20, 1991) [*9] (striking allegations ref-
posing party who could simply make a erencing settlement discussions as immaterial and of
formal motion to dismiss [*7] or strike questionable probative value); see also United States ex
after leave to amend is granted. rel. Alasker v. Centracare Health Sys., 2002 U.S. Dist.
LEXIS 10180, Civ. A. NO. 99-106, 2002 WL 1285089, *2
(D. Minn. June 5 2002) (granting defendant's motion to
3 Moore's Federal Practice P 15.080[4]; see also Liberty strike paragraphs of complaint that improperly refer to
Fish Co. v. Home Indemnity Co., 1990 U.S. Dist. LEXIS settlement negotiations and fall within the scope of Rule
7334. Civ. A. No. 89-5201, 1990 WL 83341. * I (E.D. Pa. 408); Yankelevitz v. Cornell Univ., 1997 U.S. Dist.
June 18, 1990) (leave to amend may be denied on LENS 2823, Civ. A. No. 95-4593, 1997 WL 115651, *4
grounds of futility where proposed amendment would be (S.D.N.Y. Mar. 14, 1997) (if the amendment relates to
subject to successful motion to strike under Rule 12m; settlement discussions, then it may be stricken under
Medical Graphics Corp. v. HarlJord Ins. Co., 1 71 F.R.D. Rule 12@ and would therefore be futile). Therefore, be-
254, 257 (D. Minn. 1997) (leave to amend should be cause claims in a complaint may be stricken under Rule
denied if proposed amendment would invite motion to 1267 if they violate Rule 408, they may also be found
strike). futile pursuant to Rule 408.
Defendants argue that the proposed supplemental al- The Court must now determine whether the pro-
legations are strictly prohibited by Federal Rule of Evi- posed supplement to the Amended Complaint falls
dence 408. which states: within the scope of Rule 408. As noted above, allegations
made in a complaint may not use settlement negotiations
Evidence of (I) furnishing or offering or "to prove liability for or invalidity of the claim or its
promising to furnish, or (2) accepting or amount." Fed R. Evid. 408. Plaintiff alleges in Para-
offering or promising to accept, a valuable graph One of the complaint, that defendants [*lo] vio-
consideration in compromising or at- lated the RLUlP as well as multiple constitutional rights
tempting to compromise a claim which due, in part, to defendants' "wrongful rejection of the
was disputed as to either validity or Church's request in October through December of 2002
amount, is not admissible to prove liabil- for a building permit through defendant Township's Ex-
ity for or invalidity of the claim or its pedited Permit approval procedure, after Defendant Con-
amount. Evidence or statements made in cord Township promised to issue a permit." Defendants,
compromise negotiations is likewise not in their Sixth Affirmative Defense, expressly deny that
admissible. they ever had "an expedited permit approval procedure
for Building Permits or land development." Conse-
quently, to use the settlement discussions and offers of
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2004 U.S. Dist. LEXIS 15400, *

compromise to prove that the Township did have such an 36. Under the Expedited Permit approval
expedited permit approval procedure would directly un- procedure, the Defendant Township's Board may
dermine a primary affirmative defense and go towards grant a building permit, and permit construction
proving liability under the complaint. to begin, based upon the landowner's submission
to the Supervisors of, inter alia, sealed architec-
Plaintiff asserts that it does not seek to aver an offer
tural and/or engineering drawings.
of settlement to prove liability. Rather, it plans to "attack
defendants' credibility, andlor establish that, contrary to 37. Under the Expedited Permit approval
its pleadings and discovery responses, defendant Con- procedure, the Defendant Township's Supervisors
cord Township did at the time in question have a proce- may authorize the Defendant Township's Build-
dure for the expedited processing of building permits." ing lnspector to issue the landowner a building
Plaintiffs Post-Argument Brief, at pp. 6-7. Plaintiff con- permit, and conduct a building code review dur-
tends that "despite defendant's denials, after plaintiff ing construction; if any changes in construction
[*I I ] filed suit the Defendant Township agreed to grant are required by applicable building code provi-
the Church a building permit without the Church first (a) sions, the landowner may be required by the
filing a building permit application, and (b) obtaining all building Inspector to promptly modify the con-
permits andlor approvals that would normally be re- struction.
quired." Id. at 4.
First Amended Complaint, at PP 34-37.
Yet, plaintiffs argument, which seeks to attack de- [* 121
fendants' credibility, is superfluous. Throughout its 4 For example, in its Answer to the First
pleadings and discovery requests, plaintiff has alleged Amended Complaint at paragraph 34. defendants
only that an expedited permit approval procedure existed state "It is specifically denied, and strict proof
' and repeatedly, defendants have denied those allega- demanded, that the Township's Board of Supervi-
tions, indicating only that no such expedited approval sors has implemented any alternative procedure
procedure was in place. ' For plaintiff now to argue that for reviewing and granting requests for Building
it seeks to use the settlement negotiations to contradict Permits. It is hrther denied that any procedure
Defendants' averments and judicially estop them From resembling what plaintiff refers to as 'the expe-
taking inconsistent positions before this Court is nothing dited permit approval procedure' exists within
more than an attempt at misdirection. Using the settle- Concord Township." Moreover, in its answer to
ment negotiations to attack defendants' credibility would plaintiffs Requests for Admissions, the Township
also conveniently disprove defendants' Sixth Affirmative stated "no such expedited approval procedure was
Defense and establish a primary basis of liability. As ever in effect in Concord Township."
noted, such a purpose is expressly precluded under Rule
Plaintiffs alternative claim, that it only seeks to
408.
prove that defendants had the "authority" to grant an ex-
pedited permit in order to attack defendants' credibility,
3 Paragraphs 34-37 state as follows:
is likewise fatally flawed. Primarily, plaintiff never al-
34. "... Defendant Township's Board has leged, at any point in its pleadings, that defendants pos-
adopted customs, practices andlor procedures un- sessed this expedited waiver authority. Therefore, defen-
der which the Defendant Township may exempt dants never had occasion to deny in their Answer that
landowners From the various procedural and sub- they had such authority, ' meaning that the settlement
stantive formalities set forth in Paragraphs 30-33 negotiations would not operate to contradict any [*I31
above. Pursuant to these customs, practices of defendants' averments. Moreover, as the focus of
andlor procedures, at all times material hereto the plaintiffs cause of action depends not on the Township's
Defendant Township's Board had implemented authority to grant an expedited permit, but rather whether
alternative procedures for reviewing and granting the process actually existed, the Court recognizes this
requests for building permits. The procedure has new addition of the word "authority" as a cloaked at-
been and is hereinafter referred to as the Expe- tempt to prove liability. As Rule 408 expressly precludes
dited Permit approval procedure. use of settlement negotiations to establish such liability,
the proposed supplement is futile.
35. Under the Expedited Permit approval
procedure, the Defendant Township's Board may
5 Although plaintiff vehemently argues in its
initiate and complete an expedited review of a
Post-Argument Brief that defendants have denied
landowner's request to build a structure without
their authority to grant waivers of local building
written application by the landowner.
requirements, it cites to nothing to support that
statement.
Page 5
2004 U.S. Dist. LEXIS 15400, *

To the extent plaintiff contends that its proposed are relevant and likely to lead to the discovery of admis-
supplemental allegations pertain only to admissions of sible evidence."'Key PharmaceuticaIs v. ESI-Lederle,
fact made by defendants during settlement negotiations, 1997 U.S. Dist. LEXIS 13328, Civ. A . No. 96-1219, 1997
which fall outside the scope of Rule 408, the Court finds WL 560131, *2 (E.D. Pa. Aug. 29. 1997) (citing Fidelip
that nothing in the proposed supplemental allegations Fed. Sav, & Loan Ass'n v. Felicetti, I48 F. R. D. 532
constitute such an admission. That the Township could (E.D. Pa. 1993)). Plaintiff fails to show that the discov-
waive its permit requirements in the course of a federal ery relating to these supplemental complaints will lead to
[* 141 court litigation does not mean that it had the abil- admissible evidence. Consequently, plaintiff fails to meet
ity to do otherwise outside of litigation. In several cases its burden of showing that the discovery of these sup-
cited by defendants, the Pennsylvania Commonwealth plemental complaints will lead to any admissible evi-
Court, albeit in dicta, took judicial notice that variance dence not shielded by Rule 408.
decisions in the context of the settlement of a judicial
In sum, plaintiff has neglected to overcome defen-
proceeding are distinct from zoning board variances. See
dants' contention that the proposed supplemental allega-
Summit Township Taxpayers Asso. v. Summit Township
tions are, in fact, futile for purposes of Federal Rule r,S
Board of Supervisors, 49 Pa. Commw. 459, 411 A.2d
Civil Procedure 15. Accordingly, the Court denies the
1263. 1266 (Pa. Commw. 1980) ("Because court-
Motion for Leave to Supplement the First Amended
approved settlements of zoning cases are lawful ... we
Complaint.
must recognize such settlements as being distinct from
zoning hearing board variances; even though a judicial [* 161 An appropriate order follows.
settlement may result in a departure from the ordained
zoning pattern"); Yaracs v. Summit Acadamy, 845 A.2d ORDER
203, 209 n. 6 (Pa. Commw. 2004) (citing Summit). Ac-
cordingly the mere fact that the Township could act in AND NOW this 27th day of July, 2004, upon con-
the context of a settlement agreement is not dispositive sideration of Plaintiffs Motion for Leave to Supplement
of whether it had the authority outside of federal litiga- the First Amended Complaint, the Response of Defen-
tion. dants thereto and the additional briefs and letters submit-
ted by both parties, and upon conducting oral argument
Finally, it appears that discovery would not yield on the Motion, it is hereby ORDERED that the Motion is
any information that could lead to admissible evidence. DENIED.
Nor does plaintiff offer any insight on the admissible
evidence they hope [* 151 to find. The "strong Congres- BY THE COURT:
sional policy behind Fed. R. Evid. 408 as well as the lib- CHARLES B. SMITH
eral discovery rules"' support putting the burden "on the
party seeking discovery to make a particularized showing UNITED STATES MAGISTRATE JUDGE
'that the documents relating to the settlement negotiations
Page l

LEXSEE

UNITED STATES OF AMERICA, ex rel. and JULIE ALSAKER, and LUANNE


CATON, Plaintiffs, v. CENTRACARE HEALTH SYSTEM, INC. and ST. CLOUD
HOSPITAL, INC., Defendant.

Civil No. 99-106 (JRTIRLE)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MINNESOTA

2002 U.S. Dist. LEXIS 10180

June 5,2002, Decided

DISPOSITION: [*I] Defendants' motion to strike counts of (he relators' complaint and Counts I, I1 and I l l
granted in part and denied in part. Defendants' motion to of the government's amended complaint for failure lo
dismiss granted and counts I, I1 and 111 of government's comply with Rules 9(b) and 12(b)(6) of the Federal Rules
first amended complaint dismissed without prejudice. of Civil Procedure. Defendants also move to m i k e cer-
tain paragraphs of the amended complaint. For the rea-
sons that follow, the motion to strike is granted in part
COUNSEL: For United States: D. Gerald Wilhelm, As- and denied in part. The Court also grants defendants'
sistant United States Attorney, OFFICE O F THE motion to dismiss for failure to plead fraud claims with
UNITED STATES ATTORNEY, Minneapolis, MN. suficient particulari@ under Rule 9(b), but will grant
plainliffs leave to file a second amended complaint to
For Julie Alsaker, Luanne Caton, plaintiffs: Gary Leo ,cure these deficiencies.
Manka, KATZ & MANKA, Minneapolis, MN.
BACKGROUND
For defendants: Kevin J. Hughes, Paul R. Harris, Kath-
On January 25, 1999, plaintrfs qui tam relators Julie
leen M. Premo, HUGHES MATHEWS, P.A., St. Cloud,
Alsaker and Luanne Caton ("relators") filed this action
Minnesota.
under seal pursuant to the qui tam provisions of the False
Claims Act ("FCA"). Alsaker was employed at one of
For defendants: Douglas A. Kelley, William Michael, Jr.,
defendants' facilities from 1993 through 1996. Caton is
Steven E. Wolter, DOUGLAS A. KELLEY, P.A., Min-
the daughter [*3] of a resident who lived at one of the
neapolis, MN.
facilities owned and operated by defendants. The com-
plaint alleges that since at least 1992, defendants submit-
JUDGES: JOHN R. TUNHEIM, United States District
Judge. ted claims for reimbursement of services provided by
home health aides where the aides were not trained and
certified in accordance with the provisions of 42 C.F.R. $
OPINION BY: JOHN R. TUNHEIM
484.36(a)(l). Relators also allege that defendants sub-
mitted false bills to Medicare for home health aid visits
OPINION
that were not properly reimbursable either because the
claims included "padded" time records or the services
MEMORANDUM OPINION AND ORDER
provided were custodial in nature and were not related to
This is a fraud action brought against defendants treatment of the beneficiary's illness or injury. Complaint
CentraCare Health System Inc., and St. Cloud Hospital at PP 18-23.
pursuant to the qui lam provisions of the False claims
Act, 31 U.S.C. JJ 3729 et seq. Plaintiffs allege that de- The government intervened on March 16,200 1, and
shortly thereafter, the case was unsealed. The govern-
fendants [*2] prepared and submitted false andlor
fraudulent claims for home health aid visits in violation ment served its amended complaint on defendants on
of 31 U.S.C. $ 3729. The government intervened in the October 17, 2001, after United States Magistrate Judge
action pursuant to 31 U.S.C. J 3730(b)(4)(A). Defen- Raymond L. Erickson directed the government to do so
dants have moved the Court for an order dismissing all or face a recommendation of dismissal for failure to ef-
Page 2
2002 U.S. Dist. LEXIS 10180, *

fectuate proper service and for failure to prosecute. Oc- 1 The government did not file its amended com-
tober I I, 200 1 Order at 3. ' The amended complaint al- plaint within the prescribed time period because
leges six counts, three counts of alleged violations of the the parties had agreed to defer service of the
FCA and one count each [*4] of Unjust Enrichment, complaint until January 2002 in order to attempt
Payment By Mistake, and Common Law Recoupment. It to settle the claims. However, the parties failed to
alleges that St. Cloud Hospital, acting through its agents, notify the court of this extension and in August
from "at least" 1992 to the present, filed or caused to be 2001, the Magistrate Judge issued an order to
filed claims for home health services which were not show cause why the complaint had not been filed
eligible for reimbursement under the Medicare and 120 days after the government intervened in the
Medicaid programs for, among other reasons, the follow- action.
ing:
[*6] The government thus maintains that the claims
which have so far been audited and were submitted to
a. claims were inflated by adding fif-
Medicare and Medicaid were false when submitted either
teen-minute increments of time so as to
because the service provided was not medically neces-
increase the amount claimed and reim-
sary; the service was not supported by a plan of care as
bursed for personal care attendant services
required by regulation; the beneficiary receiving the ser-
under Medicaid. Relator Julie Alsaker
vice was not eligible to receive the service; the service
was directed by agents of Defendant St.
was not provided as claimed; and/or the service repre-
Cloud Hospital, acting within the scope of
sented personal care attendance not reimbursable by
their agency, to "pad" the time she spent
providing services; Medicare. Am. Complaint P 33. The government further
maintains that defendants knew the claims were false
b. The claims submitted were for cus- when submitted. Id. P 34. Defendants responded to the
todial services unrelated to any need for government's amended complaint by filing this motion to
skilled nursing services, which makes the dismiss and motion to strike.
claims non-reimbursable under Medicare.
Relator Julie Alsaker was directed by DISCUSSION
agents of the Defendant St. Cloud Hospi-
tal to provide such services to Medicare Defendants move to dismiss all counts of the rela-
tors' complaint and Counts I, 11, and 111 of the amended
beneficiaries, and knows that those ser-
complaint for failure to state a claim. ' Defendants also
vices were billed to Medicare and/or
move to strike certain paragraphs pursuant to Rule 1203.
Medicaid.
The Court first addresses the motion to strike.

2 Although defendants also move to dismiss all


Am. Complaint P 22. The government undertook an in-
counts of the relators' complaint, only the
vestigation in June 1999 and caused a small sample of
amended complaint is legally relevant. "It is well-
claims submitted to [*5] Medicare to be selected from
established that an amended complaint super-
among those filed for residents of one of the residential
sedes an original complaint and renders the origi-
facilities owned and operated by defendants during cal-
endar year 1995. Am. Complaint P 26. This sample was nal complaint without legal effect." Atlas Van
Lines, Inc. v. Poplar Bluf Transfer Co., 209 F.3d
reviewed for compliance with Medicare requirements
1064, 1067 (8th Cir. 2000); Kenney v. Mus-
and when the analysis was completed in November 1999,
greves, 2000 U.S. App. LEXIS 27901, Nos. 00-
the fiscal intermediary determined that of the total of
2394, 00-2775, 00-2305, 00-2396, 2000 W L
approximately $ 100,000 paid by Medicare for these
1665077 at * 1 (8th Cir. Nov. 7, 2000). The gov-
claims, about $ 82,000 in claims were non-reimbursable
ernment concedes as much in its response brief.
for various reasons outlined in Exhibit A attached to the
Gov't Response to Motion to Dismiss at 1-2.
complaint. Id. In March 2000, the fiscal intermediary
completed a Comprehensive Medical Review of defen-
[*7] 1. Motion to Strike
dants' home health claims submitted during January and
early February 2000. Upon such review, the fiscal inter- Defendants move to strike certain paragraphs from
mediary determined that approximately 42% of the the amended complaint pursuant to Rule 12fl of the
claims submitted to Medicare were not reimbursable for Federal Rules of Civil Procedure. Rule I2fl authorizes
a variety of reasons, including lack of medical necessity courts to strike "redundant, immaterial, impertinent or
and missing documentation. scandalous matter" from parties' pleadings. Specifically,
defendants object to paragraphs 28-30 and 34(e) of the
amended complaint on the basis that these paragraphs
Page 3
2002 U.S. Dist. LEXlS 10 180, *

improperly describe confidential settlement discussions of fraud to include the "time place and contents of false
in violation of Rule 408 of the Federal Rules of Evi- representations, as well as the identity of the person mak-
dence. ing the false representation, and what was obtained or
given up thereby."' Commercial Prop. v. Quality Inns, 61
)8, evidence of con
n compromise negotiations is inadmissible to F.3d 639, 644 (8th Cir. 1995). Put another way, the
complaint must read like the opening paragraph of a
prove 1156ilitFFed. R. Evid. 408. Although this is a rule
L - newspaper article: it must contain the "who, what, when,
of evidence, courts have routinely granted motions to
where and how" of the alleged fraud. Bennett v. Berg
strike allegations in pleadings that fall within the scope
685 F.2d 1053, 1062 (8th Cir. 1982), adhered to on re-
ust~nv. Cornell Univ., 891 b: SUL
h'g, 710 F.2d 1361 (8th Cir.)(en banc). One of the pri-
I J V - J I (IY.u.IV.Y. 1995) (granting defendant's morlurl LU
mary purposes of the rule is to ensure that a defendant
strike paragraph of complaint that alludes to settlement
can adequately respond and prepare a defense to charges
negotiations and falls within scope of 408), rev'd on
of fraud. Greenwood v. Dittmer, 776 F.2d 785. 789 (8th
orher grounds, Walsh v. Cily of Auburn, 942 F. Supp.
Cir. 1985). As a result, "conclusory allegations that [*lo]
788, 797 n.5 (N.D.N. Y. 1996); Kelly v. L. L. Cool J.. 145
a defendant's conduct was fraudulent and deceptive are
F.R. D. 32, 40 (S.D. N. Y. 1992) [*8] (granting defendant's
not sufficient to satisfy the rule." Commercial. 61 F.3d at
motion to strike portions of complaint that refer to set-
644; Parnes v. Gafeway 2000, lnc., 122 F.3d 539, 549
tlement discussions under Rule 408 as immaterial and
(8th Cir. 1997).
potentially prejudicial); Braman v. WoodJield Gardens
Assocs. Realcorp Investors I, 715 F. Supp. 226, 230 Defendants maintain that the false claim allegations
(N. D. Ill. 1989) (same). Upon review of the paragraphs contained in both complaints fail to specify the times of
in question, the Court agrees with defendants that these occurrence of the alleged fraudulent activity (the
paragraphs improperly discuss settlement negotiations "when"), the specific identity of the fraudulent agents
prohibited by Rule 408. Paragraph 28 of the amended (the "who") and do not describe any specific circum-
complaint provides, in relevant part, that "defendants stances constituting fraud in specific cases. Such generic
were contacted by the United States by letter, and invited pleading, defendants argue, is clearly insuff~cient as
to engage in discussions relating to settlement of poten- cases like United States ex rel. Robinson v. Northrop
tial claims." Paragraph 29 states that, "during that meet- Corp., 149 F.R. D. 142 (N.D. 111. 1993), Uniled Slates ex
ing, counsel for defendants conceded that significant rel. Minnesota Assoc. of Nurse Anesthetists, 1997 U.S.
issues existed concerning the reimbursability of claims Dist. LEXIS 21402, Civ. No. 4-96-734 (ADMIJGL) at
filed by defendants for home health services." Paragraph 21-23 (D. Minn. Mar. 3. 1997) (" MANA"), UnitedStares
34(e) states that "attorneys for defendants, during the ex ref. Clausen v. Laboratory Corp. of America, Inc., 198
discussions described herein, admitted that the billing F.R.D. 560 (N.D. Ga. 2000), and United States ex rel.
practices of defendants for home health services were Cox v. Iowa Health Sys., 29 F. Supp. 2d 1022, 1024-25
deficient, and had been so at varying levels for a number (S.D. Iowa 1998), make clear.
of years." Accordingly, the Court grants the motion to
The government argues that the particularity re-
strike these paragraphs. '
quirement should be relaxed because this case involves
[*11] a "complex scheme of fraud over an extended pe-
3 Defendants also object to paragraph 3 1 which
recounts a status conference between the Magis- riod of time." ' MANA, Mar. 3 1997 Order at 22 ("Less
specificity in the complaint can be permitted when the
trate Judge and counsel. While the information
fraudulent activity involves numerous transactions or the
contained in this paragraph does not directly ad-
fraud occurred over a long period of time."); Clausen.
vance plaintiffs allegations of fraud, it does pro-
198 F.R.D. at 562 (noting that the specificity require-
vide context to the underlying action. The state-
ments are applied less stringently where the fraud oc-
ment is thus not completely immaterial. The
curred over an extended period of time and consisted of
Court therefore denies this portion of defendant's
numerous acts); United States ex rel. Johnson v. Shell Oil
motion.
Co., 183 F.R.D. 204 (E.D. Tex. 1998). Under these cir-
cumstances, the government maintains that its complaint
[*9] 11. Motion to Dismiss
satisfies the notice pleading standard.
Defendants argue that plaintiffs have not stated a
claim for fraud with sufficient particularity. Rule 9(b) 4 The government also suggests that a lesser
requires that "in all averments of fraud, or mistake, the pleading standard should apply because the in-
circumstances constituting fraud or mistake shall be formation is "uniquely within the control of the
stated with particularity." Fed. R. Civ. P. 9(b). The defendants." Am. Complaint P 32. The Court dis-
Eighth Circuit has interpreted the term "circumstances" agrees. Julie Alsaker is a former employee and is
Page 4
2002 U.S. Dist. LEXlS 10180, *

alleged to have direct knowledge of the fraudu- does not once describe a single instance of
lent activity and to have "witnessed" fraudulent the fraudulent conduct that names a spe-
conduct. Presumably, she would have more spe- cific anesthesiologist [* 141 on an exact
cific information to offer than has been plead so date at a particular hospital with reference
far. Additionally, the government has subpoena to either the procedure, patient or bill.
power to obtain documents, and in fact, previ- Failure to plead no specifics is insufficient
ously exercised this power when it conducted the to satisfy Rule 9(b), even given a lesser
first of two studies to assess the merits of relators' pleading standard for allegations of exten-
complaint. sive fraud.
[* 121 Having reviewed the amended complaint and
the relevant caselaw, the Court concludes that the
MANA, Mar. 3, 1997 Order at 23 (emphasis in original).
amended complaint fails to provide the sufficient level of
The Court agrees with this statement and finds that the
particularity to satisfy Rule 9(b). The amended complaint
complaint must at least provide some representative ex-
suffers from many of the same deficiencies identified in
amples of the alleged fraud. Counts I, I1 and 111 of the
cases mentioned above. For instance, the amended com-
amended complaint do not accomplish this and accord-
plaint pleads that "Relator Julie Alsaker was directed by
ingly must be dismissed for failure to comply with Rule
agents of Defendant St. Cloud Hospital, acting within
9(b). The Court will, however, dismiss those counts of
the scope of their agency, to 'pad' the time she spent pro-
the amended complaint without prejudice and allow the
viding services" and to provide "custodial services unre-
government an opportunity to file a second amended
lated to any need for skilled nursing services, which
complaint which complies with the requirements of Rule
makes the claims non-reimbursable under Medicare."
9(b). This practice is consistent with the procedure fol-
Am. Complaint P 22(a), (b) (emphasis added). The com-
lowed by other courts under similar circumstances. Rob-
plaint's generalized reference to "agents of defendant St.
inson, 149 F.R.D. at 146 (dismissing plaintiffs' com-
Cloud Hospital" is as deficient as was plaintiffs' refer-
plaint without prejudice but granting plaintiffs leave to
ence to "a Northrup engineer" in Robinson, or to "defen-
amend their complaint to bring it into compliance with
dant anesthesiologists" in MANA. Remarkably, the gov-
Rule 9(b)); MA NA, Mar. 3, 1997 Order at 24.
ernment suggests that this type of pleading is sufficient
because defendant St. Cloud Hospital was Alsaker's em- Because the Court finds that the complaint is subject
ployer and therefore knows with whom she had daily [*I51 to dismissal under 9(b), the Court will not now
contact. However, the burden rests with the government, address defendants' arguments under Rule 12(b)(6) raised
not the defendants, to plead their fraud allegations. [* 131 in the latter part of defendants' reply brief. Defendants
The Court presumes, and counsel for plaintiff acknowl- may renew their motion under 12(b)(6) if plaintiffs file a
edged at oral argument, that Alsaker can identify the second amended complaint which satisfies the pleading
specific "agents" who directed her to "pad" her hours and requirements of Rule 9(b). However, the Court pauses to
to conduct non-reimbursable custodial services. These remind defendants of the deferential standard of review
specifics are not peculiarly within the control of the de- that must be accorded plaintiffs on such a motion. The
fendant and they should be disclosed in the complaint. Court also notes that most of the cases relied on by de-
fendants in support of this portion of their motion were
The Court recognizes that plaintiffs' allegations in-
before the court on motions for summary judgment, not
volve over 30,000 claims submitted by defendants over
motions to dismiss. See United States ex rel. Minnesota
an approximately eight-year period. For this reason, a
Assoc, of Nurse Anesthetists v. Allina Health Sys. Corp.,
lower standard of pleading the fraud allegations is ap-
1999 U.S. Dist. LEXlS 23036, Civ. No. 4-96-734, Mar.
propriate. Nonetheless, a less stringent standard does not
17, 1999 (order granting summary judgment); ' United
alleviate the plaintiffs' burden to allege any specifics of
States ex rel. Lowell Quirk v. Madonna Towers, Inc.. 278
the fraud. As the district court in MANA explained:
F.3d 765 (Feb. 4, 2002) (appeal of order granting sum-
mary judgment); United States ex rel. Hopper v. Anton.
The Court recognizes that plaintiffs al-
91 F.3d 1261, 1263 (9th Cir. 1996) (appeal of district
lege a general practice of fraud that covers
an extensive period of time. Clearly plain- court order granting summary judgment); United States
v. Adler, 623 F.2d 1287 (8th Cir. 1980) (post-trial mo-
tiffs are not required to recite specifics for
tions).
all 28,000 allegedly fraudulent transac-
tions. Nevertheless, plaintiffs must pro-
5 In addition, the Eighth Circuit recently over-
vide some representative examples of the
turned the district court's grant of summary
fraud which detail the specifics of who,
where and when. Plaintiffs complaint judgment for the defendants. United States ex rel.
Minnesota Assoc. of Nurse Anesthetists v. Allina
Page 5
2002 U.S. Dist. LEXIS 10180, *

Health Sys. Corp, 276 F.3d 1032, 1052-56 (8th is GRANTED as to paragraphs 28-30 and 34(e) and they
Cir. Jan. 17, 2002), reh'g and reh'g en banc de- are accordingly STRICKEN from the amended com-
nied 2002 U.S. App. LEXlS 4870, (Mar. 25, plaint [Docket No. 191. Defendants' motion to strike is
2002). DENIED in all other respects.
[*I61 2. Defendants' motion to dismiss [Docket No. 221 is
6 At oral argument, the government raised ob-
GRANTED and Counts I, I1 and 111 of the government's
jection to the submission of exhibits by defen-
dants in their reply brief. Because the Court does first amended complaint [Docket No. 191 are
not reach the issues relating to defendants' motion DISMISSED WITHOUT PREJUDICE. Plaintiffs shall
have thirty (30) calendar days from the date of this Or-
under Rule 12(b)(6), to which the exhibits in
der to file a second amended complaint in this action,
question pertain, the Court need not resolve that
[*I71 Civil File No. 99-106 (JRTIRLE), and defendants
objection at this time.
may thereafter respond in a manner authorized by the
Federal Rules of Civil Procedure.
ORDER
DATED: June 5,2002
Based on the foregoing, the submissions of the par-
ties, and all of the files, records, and proceedings herein, at Minneapolis, Minnesota.
IT IS HEREBY ORDERED that:
JOHN R. TUNHEIM
I. Defendants' motion to strike [Docket No 221 is
GRANTED in part and DENIED in part. The motion United States District Judge
Page l

LEXSEE

SPlRO T. AGNEW, et al. v. AYDlN CORPORATION

Civil Action No. 88-3436

UNITED STATES DISTRICT COURT FOR T H E EASTERN DISTRICT OF


PENNSYLVANIA

1988 U.S. DisL LEMS 9911

August 31,1988, Decided; September 6,1988, Filed; September 7,1988, Entered

deceived him and concealed from him the true, correct


COUNSEL: [*I] Robert P. Knapp, Jr., Esquire, and actual amount of commission paid by Aydin to Ali-
ENGEL & MULHOLLAND, New York, NY, Lewis A. canto and Shaw. Thereafter he and Woolverton made
Grafman, Esquire, GRAFMAN & VON DREUSCHE, demands upon Aydin, Shaw and Alicanto for payment of
Bala Cynwyd, PA, for Plaintiffs the fair and just compensation to which each was entitled
pursuant to agreement and stated their intention to bring
Teresa N. Cavenagh, Esq., DUANE, MORRIS & suit therefor if necessary. In response, one Ronald F.
HECKSCHER, Phila., Pa., for Defendants Kidd, Esq., the defendant's attorney then and thereupon
revealed and disclosed the corrupt and fraudulent scheme
OPINION BY: NEWCOMER and intent of Aydin, Shaw and Alicanto when they had
engaged Agnew as aforesaid and had falsely and fraudu-
OPINION lently promised and agreed to compensate him for his
services. In or about January 1986, Kidd, acting in con-
MEMORANDUM cert and conspiracy with, and for and on behalf of Aydin,
Shaw and ~ f i c a n t o traveled
, to New York and then and
CLARENCE C. STATES
there contemptuously and insolently caused Agnew to be
DISTRICT JUDGE
informed that Aydin, Shaw and Alicanto had not thought
Plaintiffs tiled suit alleging a cause of action under of compensating him for his services because "nobody
the Rackateer Influenced Corrupt Organization Act would believe him" if he sued in view of the unfavorable
("RICO"), 18 U.S.C. j' 1961 et. seq., and common law publicity connected with prior events related to his hold-
causes of action for fraud, breach of contract, quantum ing public office [*3] and, therefore, he could not afford
meruit and return of profits. I now have before me de- to become involved in a lawsuit to enforce his right to a
fendant's motion to strike paragraphs 76-77 and 80-84 of commission on a contract that Aydin had procured by
the amended complaint pursuant to rule 12@ of the Fed- bribes and kickbacks.
era1 Rules of Civil frocedure. Defendant contends that
77. By those statements, Aydin by its attorney, Kidd,
of Evidence 408 prohibits plaintiff acknowledged admitted by, for and on behalf of it-
using statements defendant's attorney uttered at settle-
self, its co-conspirators, Shaw and Alicanto, that they
ment conferences in the complaint. For the reasons stated
had, as Shaw had previously stated for himself and on
below 1 will grant the motion.
their behalf, procured the award of the contract by bribes
and kickbacks.
Factual Background
-
80. In February 1986, Aydin's said attorney, Kidd,
On May 27, 1988, plaintiffs filed an amended com-
again traveled from Philadelphia to New York, ostensi-
plaint including several paragraphs, pertaining to the
bly to make an offer of settlement but in truth and actual-
RICO claim, which referred to statements made by attor-
ity for the conupt, unethical and criminal purpose of
neys at settlement meetings. The paragraphs in question
threatening Woolverton with prosecution if Agnew
state as follows:
should sue Aydin. Acting in concert and conspiracy with,
76. [*2] In 1985, Agnew discovered that Aydin, and for and on behalf o f ~ ~ d ihe
n ,then and there further
Shaw and Alicanto had fraudulently and maliciously revealed and disclosed Aydin's corrupt and fraudulent
Page 2
1988 U.S.Dist. LEXIS 991 1, *

purpose when for a second time, and again with the ut- U.S.C. S;S; 875 and 1952 and constituted "racketeering
most insolence and contempt, he caused Agnew to be activity" under "RICO" 18 U.S.C. S; 1961 et. seq.
informed that because of his own history and because
83. In still firther confirmation and corroboration of
Aydin, Shaw and Alicanto had procured the contract by
fraud and bribery, he could not afford to sue for his the defendant's, Shaw's and Alicanto's fraud and corrup-
tion, Aydin's attorney, Kidd, again and for a third time
commission and lacked the virility to [*4] do so. In so
traveled from Philadelphia to New York in March 1986,
saying, the defendant's attorney, Kidd, thereby reac-
knowledged and reaffirmed the fact of the defendants' again purportedly for the purpose of making a new offer
fraud and bribery. of settlement but in truth and actuality once more for the
criminal purpose of again threatening Woolverton with
8 1. In conjunction and concurrently with Kidd's said prosecution if this suit were brought. Danaher too, had
trip to New York in February 1986, and as further con- again traveled to New York from California at Kidd's
firmation and corroboration of Aydin's fraud and corrup- behest, and had again met and conferred with him pri-
tion, he caused one James Danaher, Esq. of Palo Alto, vately in advance of meeting with the plaintiffs attorney.
California, a member of the California Bar to travel from However, they made no such offer, but, Kidd, acting in
California to New York, there to foregather with him and concert and conspiracy with, for and on behalf of the
the plaintiffs and Woolverton's former attorney on that defendant, Shaw and Alicanto, and speaking in the pres-
same occasion, ostensibly for the purpose making an ence of and with the acquiescence of Danaher, threatened
offer of settlement but as events proved, actually for the the plaintiffs former attorney and Woolverton in the fol-
corrupt, unlawful, indecent and unethical purpose of lowing words, [*7] or in words to the same effect, "If
threatening Woolverton with criminal prosecution if you bring this suit [meaning the present action] I will
Agnew and he should institute suit. Danaher stated that send your father-in-law [meaning Woolverton] to
he was attorney for the defendants Schneidau and prison." By reason of the said threat, Kidd and Danaher
Sherman, Aydin officials who had been employed in again positively and conclusively confirmed, acknowl-
Aydin's Systems Division, adjacant to Palo Alto. Kidd, edged and unambiguously asserted for a third time, Ay-
acting with Danaher in concert and conspiracy with, for din's Schneidau's, Sherman's, Shaw's and Alicanto's brib-
and on behalf of Aydin, Schneidau, Sherman, Shaw and ery and corruption in procuring the contract and their
Alicanto, and by obvious and flagrant pre-arrangement guilty knowledge of the criminal and indictable nature
with Danaher, with whom he had met and conferred pri- thereof.
vately immediately prior to their [ * 5 ] meeting with the
84. Kidd's and Danaher's March 1986 travel from
plaintiffs and Woolverton's attorney, prompted and cued
Philadelphia and California to New York was for the
Danaher to threaten Woolverton through his said attor-
purpose of transmitting a communication containing a
ney, by announcing that if the plaintiff were to start this
threat to accuse Woolverton of a crime and "send him to
suit, Schneidau and Sherman would in return for grants
prison." Such travel and threat were made with the intent
of immunity from criminal prosecution and indictment
to extort from Woolverton his lawful claims against
for their criminal acts of bribery go before a grand jury
Shaw and Alicanto and to intimidate him from testifying
and accuse Woolverton of complicity in the defendant's
and assisting the plaintiff in suit against the defendants,
Shaw's and Alicanto's "illegal payments to the Argentine
and were criminal acts by Kidd, Danaher, Shaw and Ali-
general." Thereby Danaher, speaking on cue from Kidd,
canto, and the defendant, indictable under 18 U.S.C. $3
once more confirmed, acknowledged and arrested for a
875 and 1952 and constituted "racketeering activity"
second time for and on behalf of the defendant, Alicanto
under "RICO" 18 U.S.C. $1961 et. seq.
and Shaw their bribery and conuption in procuring the
contract, as well as their guilty knowledge of the crimi-
Discussion
nal and indictable nature and character of their immoral
and unlawful acts in making such corrupt payments. The sole issue here is whether the statements re-
ferred to in the [*8] above-enumerated paragraphs of the
82. The February 1986 travel by Kidd and Danaher
complaint should be stricken pursuant to Federal Rule of
from Philadelphia and California respectively to New
Evidence 408. The rule provides:
York City, acting in concert and conspiracy with, for and
on behalf of the defendants, Shaw and Alicanto was for Evidence of ( I ) furnishing or offering or promising
the purpose of transmitting a communication containing to furnish, or (2) accepting or offering or promising to
a threat to accuse Woolverton of a crime, with the intent accept, a valuable consideration in compromising or at-
thereby to extort and [*6] demand from him his lawful tempting to compromise a claim which was disputed as
claims against Shaw and Alicanto, and their making such to either validity or amount, is not admissible to prove
travel and threat were criminal acts by Kidd, Danaher, liability for or invalidity of the claim or its amount. Evi-
Shaw, Alicanto and the defendant indictable under 18 dence of conduct or statements made in compromise
Page 3
1988 U.S. Dist. LEXlS 991 1, *

negotiations is likewise not admissible. This rule does meetings among these opposing attorneys were trans-
not require the exclusion of any evidence otherwise dis- formed from settlement discussions into post-discussion
coverable merely because it is presented in the course of angry exchanges. Such a distinction is nearly impossible
compromise negotiations. his-rule also does not require to make. Angry statements may be negotiation ploys or
exclusion when the evidence is offered for another pur- natural human responses to prolonged or failing negotia-
pose, such as proving bias or prejudice of a witness, tions. In Aspen Title & Escrow. Inc. v. Jeld-Wen, Inc.,
negativing a contention of undue delay, or proving an the United States District Court for Oregon was faced
effort to ob ct a criminal investigation or PI cuti with facts similar to the instant case. One party had made
a threat during what the opposing party claimed were
settlement negotiations. Evidence of this "threat" was
Stuunron v. I arantino, 637 F.Supp. 1051, 1081 (b.L
ruled inadmissible. The Court stated:
408 Advisory Committee N a - - .
~erallybelieved zttlemer egotiatic
Even if a clear breaking point [demarking the, [ * I I ]
inhibited if the parties [*9] are aware their
end of negotiations] always existed, the courts may not
Krilikos v.
be competent to make such a determination. The same
TmerJo 8 ;, ,Cir. 1987).
policy considerations which establish the need for Rule
The Notes of the Advisory Committee explain the 408 to cover all statements, establish the need to have
broadened scope of Rule 408 over its common law settlement conferences in their entirety covered.
predecessor:
The practical value of the common law rule has been
greatly diminished by its inapplicability to admissions of
fact, even though made in the course of compromise ne-
gotiations, unless hypothetical, stated to be without
677 F.Sur- -* '485.
prejudice, or so connected with the offer as to be insepa-
rable from it. . . . An inevitable effect is to inhibit free-
dom of communication with respect to compromise even . ,..ornc,, ,..,wing that compromise
untlntln
among lawyers. Another effect is the generation of con- being pursued. Plaintiffs' response tc 1s motion
troversy over whether a given statement falls within or -. m s that the meetings in question were scheduled
without the protected area. These considerations account in tne spirit of negotiation. If the court determines if and
for the exuansion of the rule herewith to include evidence when the character of these meetings changed, a chilling
of conducl or statements made in compromise negotia- effect on the openness of discussions at hture compro-
tions. (emphasis added). mise meetings might result. In turn, the court's action
would undermine the policy behind Rule 408. The mo-
\is p 1 open discussion by ea

-4
tion to strike the relevant portions of plaintiffs' complaint
,calls tbr ( t
nPontlatlrrr ..spe,. ....- &Escrow, Inc. v. Jt.,- ,,=.,
will be granted.

Evidence para. 408[03 * 10


-
Inc.. 677 F.Supp. 1477, 1485 (D.Or. 1987); 2 Weinstein's

:lear that the statements referred to in par


ORDER - September 6 , 1988, Filed
AND NOW, this 3 1st day of August, 1988, in con-
sideration of defendant's motion to strike paragraph 76-

-
[grapls 76-77 and 80-84 are evidence used for the p 77 and 80-84 of the amended con and plaintiffs
pose of showing liability of the defendant. Thus, the on'
~determinatioKTineedmake, cons~deringthe broad sco
M e 408, is whether the statemerA-'
. . . 'ement negc ' ionp Ylalntltts contend -m
. ..., ....., ...e statement:, ... question were made by
tha. ,
defendant's attorneys the settlement conference should be
AND IT IS SO ORDERED.
deemed terminated. I disagree. Plaintiffs are, in effect,
requesting that 1 determine the instant in time when the