United States v. James P. Roti
73 Fed. R. Serv. 779, 362 B.R. 934, 484 F.3d 934 (2007)
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Rule of Law:
Federal Rule of Evidence 408, which makes evidence of compromises or settlement negotiations inadmissible to prove liability, applies in criminal prosecutions. The advice-of-counsel defense is not available to a defendant who knowingly commits a crime, even if a lawyer assisted in the scheme.
Facts:
- James Roti personally guaranteed the debts of his small corporation.
- A creditor obtained a judgment against Roti for more than $400,000 based on this guarantee.
- To avoid paying the judgment, Roti began hiding his assets, including parking some with family members and moving others to undisclosed accounts.
- Roti hired an attorney, Andrew Werth, to assist him with his financial situation.
- Roti filed for bankruptcy, submitting schedules that did not disclose the hidden assets.
- At a meeting of creditors, Roti declared under oath that the bankruptcy schedules were complete and correct.
- After the fraud was discovered, Roti filed a civil lawsuit against his attorney, Werth.
- The civil suit between Roti and Werth was subsequently settled for $15,000.
Procedural Posture:
- James Roti was charged with bankruptcy fraud and concealing assets in the U.S. District Court.
- At trial, Roti sought to introduce evidence of a civil settlement he had reached with his former lawyer, Werth.
- The district court excluded the evidence, citing Federal Rules of Evidence 408 and 403.
- A jury found Roti guilty on both counts, and the court sentenced him to 21 months' imprisonment.
- Roti (appellant) appealed his conviction to the U.S. Court of Appeals for the Seventh Circuit, arguing the district court erred in excluding the settlement evidence.
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Issue:
Does Federal Rule of Evidence 408 apply in criminal cases to bar the admission of evidence from a civil settlement between the defendant and a third party, where the defendant seeks to use the evidence to negate his criminal intent?
Opinions:
Majority - Easterbrook, Chief Judge
No, the district court did not commit plain error by excluding the settlement evidence. Federal Rule of Evidence 408 generally applies to criminal cases, making evidence of a private civil settlement inadmissible to negate culpability. The court reasoned that a 2006 amendment to Rule 408, which created a specific, narrow exception for criminal cases involving public agencies, implicitly confirms that the rest of the rule applies to both civil and criminal litigation. This development repudiated the rationale of prior circuit precedent (Prewitt) which had held the rule was wholly inapplicable to criminal cases. Furthermore, the court held that even if Rule 408 did not apply, the evidence was properly excluded under Rule 403 as its minimal probative value was outweighed by the risk of confusing the jury and wasting time. The lawyer's potential culpability does not excuse the defendant's, and the fact of a settlement does not clearly indicate why it was made, making it irrelevant to the defendant's state of mind.
Analysis:
This decision clarifies the scope of Federal Rule of Evidence 408 following its 2006 amendment, explicitly extending its general prohibition on settlement evidence to criminal proceedings. It overturns the circuit's previous, broader interpretation from United States v. Prewitt, aligning the circuit with the rule's amended text. The case reinforces that defendants cannot easily introduce evidence of third-party settlements to shift blame or negate their own criminal intent. It also highlights the robust authority of trial judges under Rule 403 to exclude evidence that could devolve a criminal trial into a confusing 'trial within a trial' concerning a collateral civil dispute.
