Dispute resolutions and business negotiations frequently involve documents labeled “For Settlement Purposes Only” or some similar designation. Lawyers sometimes apply these designations to communications or documents (that are not only discoverable but also admissible) to prevent the receiving party from using the materials in any ongoing or potential litigation against the party who sends them.
The idea that such a designation will prohibit the receiving party from using settlement negotiations or the fact of settlement for any purpose in any litigation stems from a misunderstanding of the Rule of Evidence 408. Under Rule 408, any evidence related to settlement cannot be used in a trial to prove or disprove the validity or amount of a disputed claim if such evidence pertains to the “furnishing, promising, or offering—or accepting, promising to accept or offering to accept—a valuable considering in compromising or attempting to compromise the claim and conduct or a statement made during compromise negotiations about the claim.”
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