2d Circuit: Reinstatement Offer Conditioned on Foregoing Pregnancy Discrimination Case Should Have Been Excluded; Defense Verdict Overturned

In Sheng v. M&TBank Corp., No. 14-4467-CV, 2017 WL 443641 (2d Cir. Feb. 2, 2017), a pregnancy discrimination case, the U.S. Court of Appeals for the Second Circuit held that the defendant/employer’s offer to reinstate the plaintiff/employee was conditioned on plaintiff dropping her lawsuit, and was therefore inadmissible under Federal Rule of Evidence 408.

In this case, plaintiff sued her employer, asserting claims under the Americans with Disabilities Act (ADA) and state law for disability discrimination, retaliation, and failure to accommodate based on her employer’s alleged failure to allow her to work remotely when she became pregnant.

During pre-litigation settlement negotiations, plaintiff’s counsel made a settlement offer/demand; the defendant’s counsel “responded that the bank was not prepared to agree to such a monetary settlement” and instead “suggested that appellant be reinstated and that she be allowed to work remotely … for the remainder of her pregnancy.”

Plaintiff filed a motion in limine to exclude all offers of settlement by the defendant in exchange for settling the action. The district court denied that motion and let the settlement offer in. The jury rendered a verdict for the defendant.

Plaintiff appealed, arguing that this was error. The Second Circuit agreed.

Federal Rule of Evidence 408 prohibits, among other things, the admission of “[e]vidence of the following … to prove or disprove the validity or amount of a disputed claim …: (1) … offering … valuable consideration in … attempting to compromise the claim.”

Applying the law, the court explained:

[W]e conclude that the district court erred in admitting evidence of MTBank’s reinstatement offer. … [E]ven when a lawyer informs counsel for a (potential) plaintiff that the (potential) defendant agrees to all relief believed to be demanded, some sort of release, at the very least, is expected in return. This expectation, which is almost universal, absent express reservations to the contrary, renders the offer conditional and subject to exclusion under Rule 408.

This was not harmless error, according to the court, since the improperly-admitted reinstatement offer “may … have substantially affected the jury’s verdict.”

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