Rule 408 Settlement Letter Sample: Invocation, Purpose, and Disclaimers

A Rule 408 settlement letter sample generally has four working parts: a conspicuous header identifying the document as a confidential settlement communication, an explicit invocation of Federal Rule of Evidence 408 in the body, a short purpose clause explaining why the information is being shared, and a non-admission disclaimer. Below are the exact phrasings used by federal agencies, federal courts, and private-sector term sheets, followed by what the language actually protects and where it falls short.

Header and Label Language

The header is the first signal that Rule 408 applies. Place it at the top of the first page, and repeat it on every page and on any attached exhibits.

EPA enforcement correspondence uses the header “FEDERAL RULE 408 CONFIDENTIAL SETTLEMENT COMMUNICATION” on every page, and marks supporting exhibits with “Not Admissible Pursuant to Rule 408, Federal Rules of Evidence.”¹

The United States Court of Federal Claims uses a different formulation in its standard confidentiality agreement, requiring parties to mark all written communications with “Confidential Settlement Discussions and Communications — Do Not Disclose.”²

Private-sector term sheets often use a simpler “FOR SETTLEMENT PURPOSES ONLY” paired with “CONFIDENTIAL.”³

Labeling alone does not guarantee protection. Courts have disregarded the label when the underlying communication did not involve a genuine legal dispute, treating it as a routine business negotiation instead.⁴

Rule 408 Invocation in the Body

An effective letter states the rule’s applicability inside the text, not just in the header. Two field-tested phrasings:

The Court of Federal Claims template: “All Settlement Communications are for settlement purposes only and shall be treated as compromise negotiations under Rule 408 of the Federal Rules of Evidence.”²

A broader version drawn from a Garrett Motion Inc. term sheet: “This term sheet has been produced for discussion and settlement purposes only and is subject to the provisions of Rule 408 of the Federal Rules of Evidence and any other applicable state or federal rules or doctrines protecting the use or disclosure of information exchanged in the context of settlement discussions.”³

The Garrett Motion phrasing has the advantage of reaching state-law analogs and common-law doctrines that a federal-only citation would leave out.

Purpose Clause

A short purpose clause tells the reader (and later, a court) why the information is being shared. EPA settlement letters use this language: “This information is not part of the proposed consent decree. It is offered solely for the purpose of settlement, pursuant to Rule 408 of the Federal Rules of Evidence, and is included to help you evaluate the proposed settlement.”¹

The clause does two useful things: it ties the disclosure to the compromise process the rule is designed to protect, and it separates the settlement material from any parallel documents (like a draft consent decree) that may be admissible on their own terms.

Non-Admission and Contingency Disclaimers

Nearly every model letter includes a statement that the communication is not an admission of liability. A common formulation: “This Agreement is entered into by the Parties for settlement purposes only and does not constitute an admission of wrongdoing of any kind.”³

Settlement clauses in contract databases frequently add that “nothing herein shall be deemed an admission of any kind” and that statements or offers “shall not constitute an admission or waiver of rights by either Party.”⁵

Government offers often add a contingency clause preserving the sender’s right to withdraw. EPA letters state the offer is “contingent upon final approval by the duly authorized officials at EPA and the United States Department of Justice, and may be revoked any time prior to entry by the Court.”¹ Private parties adapt the same idea by conditioning the offer on client or board approval, or on execution of a definitive agreement within a stated window.

Putting the Pieces Together

A minimally sufficient letter looks like this in structure:

Top-of-page header identifying the letter as a Rule 408 confidential settlement communication.
An opening paragraph stating that the letter is sent for settlement purposes only, is subject to Rule 408 of the Federal Rules of Evidence, and is not an admission of liability or wrongdoing.
The substantive offer or response, kept to the compromise itself.
A closing paragraph noting any contingencies (client approval, expiration date, execution of a definitive agreement).
Signature block.

Every page should carry the header, and any exhibits should be individually labeled.

What the Label Does Not Do

The sample language above is necessary, but a searcher relying on a Rule 408 header should understand what the rule actually delivers.

Rule 408 Governs Admissibility, Not Discovery

One of the most common misunderstandings about Rule 408 is that it keeps settlement communications out of the opposing party’s hands entirely. It does not. The rule governs admissibility at trial, not discoverability during litigation. Because Federal Rule of Civil Procedure 26 permits discovery of relevant, non-privileged information even if it would be inadmissible, settlement letters and the discussions behind them can be obtained through discovery in most federal courts.⁴

Whether a broader “settlement privilege” exists that would block discovery is unsettled. The Sixth Circuit is the only federal appellate court to have recognized such a privilege, holding in Goodyear Tire & Rubber Co. v. Chiles Power Supply, Inc. (2003) that communications made in furtherance of settlement are privileged and protected from third-party discovery.⁶ The Federal Circuit rejected that approach in In re MSTG, Inc. (2012), ruling that “settlement negotiations related to reasonable royalties and damage calculations are not protected by a settlement negotiation privilege,” and reasoning that Congress addressed admissibility through Rule 408 but stopped short of creating a discovery privilege.⁷

Draft on the assumption that opposing counsel will read the letter, even if a jury never sees it.

“Other Purpose” Exceptions

Rule 408(b) allows a court to admit settlement evidence when offered for a purpose other than proving or disproving the claim’s validity or amount. The rule lists three examples: proving a witness’s bias or prejudice, negating a contention of undue delay, and proving an effort to obstruct a criminal investigation.⁸

Courts have expanded that list. Settlement communications have been admitted to prove the existence or breach of a settlement agreement, to establish a party’s intent in abuse-of-process claims, and to demonstrate bad faith by an insurer.⁴ Case law also supports admission to show notice, to define the scope of a release, and to prove fraud during negotiations.⁹

The rule also contains a carve-out in subsection (a)(2): statements made during compromise negotiations can be introduced in a criminal case if the negotiations involved a claim by a government office acting in its regulatory, investigative, or enforcement capacity.⁸ Admissions of fault made to a government regulator during civil settlement talks can later surface in a criminal prosecution.

Rule 408 Requires a “Disputed Claim”

Rule 408 only applies when there is an actual dispute as to validity or amount. Active litigation is not required. The Third Circuit held in Affiliated Manufacturers, Inc. v. Aluminum Co. that the rule does not require a threat of litigation sufficient to support a declaratory judgment action. What is needed, as the Eighth Circuit put it in Weems v. Tyson Foods, Inc., is “an actual dispute or difference of opinion regarding a party’s liability for or the amount of the claim.”¹⁰

Routine business negotiations over contract terms, payment structures, or “breakup fees” do not qualify, even if the parties label their communications as settlement discussions.⁴ The Tenth Circuit held in Big O Tire Dealers, Inc. v. Goodyear Tire & Rubber Co. that business communications were admissible when there was “no specific threat of litigation” at the time they were made.¹⁰ The status of the dispute is measured when the communication is made, not after the fact.

Drafting Practices That Make the Language Hold Up

The sample phrasings work best when the surrounding drafting choices do not undercut them.

Keep the letter focused on the compromise. A federal court has held that portions of a letter that do not contain “an actual compromise or a suggestion of a genuine willingness to resolve the dispute” may be admissible even when the letter carries a settlement caveat. Argumentative factual assertions mixed in with the offer risk being severed and admitted.¹¹
Establish a clear start to negotiations. Be explicit with opposing counsel about when compromise discussions begin, so Rule 408’s protections attach from a defined point forward.¹⁰
Avoid candid admissions of fault. Even where the letter itself is inadmissible, discovered settlement communications can reveal strategic weaknesses to opposing counsel and shape future litigation tactics.
Prefer oral discussions for the most sensitive points. Limiting the written trail reduces the material available for discovery.¹⁰
Object promptly if the other side misuses settlement evidence. A failure to object in a timely manner can be construed as a waiver of the protection.¹⁰

When the Letter Alone Is Not Enough: A Separate Confidentiality Agreement

Because Rule 408 leaves gaps around discovery and “other purpose” uses, attorneys often negotiate a standalone confidentiality agreement before substantive settlement discussions begin. These agreements function as contracts and can provide protections the rule does not.

The most effective agreements go beyond restating Rule 408. They explicitly bar the use of settlement communications for “any other purpose,” not just the purposes covered by the rule. In Apple, Inc. v. Motorola Mobility (W.D. Wis. 2012), the court enforced a “Mutual Non-Disclosure and Rule 408 Agreement” that prohibited using documents exchanged in settlement correspondence “in any manner or for any purpose other than in connection with the settlement negotiations between them.” The court excluded all evidence relating to the parties’ post-agreement conduct.¹²

Agreements can also define the scope of protected communications broadly, covering “any statement, conversation, communication, information, material, document, email, electronic file, or other disclosure” made during the process.¹³ They can specify an effective date, limit the agreement to particular meetings, or extend protection for a set period. The Court of Federal Claims template goes further, providing that confidentiality obligations survive the termination or dismissal of the case until a court orders otherwise.²

These agreements have limits. They are enforceable between the signing parties but generally cannot prevent a third party from obtaining the communications through discovery, since most federal circuits outside the Sixth Circuit do not recognize a settlement privilege that would block third-party access.¹² A well-drafted agreement can still persuade a court to exercise its discretion to protect the materials, and it obligates the counterparty to resist third-party subpoenas.

1
U.S. EPA. Skinner Landfill Settlement Communication
2
U.S. Court of Federal Claims. Standard Confidentiality Agreement
3
Fynk. Settlement Purposes Only Clauses
4
Ward and Smith. Not So Fast: Limits of Settlement Negotiation Protections
5
Law Insider. Settlement Discussions Clauses
6
Findlaw. Goodyear Tire and Rubber Co. v. Chiles Power Supply Inc.
7
Jenner & Block. In Re MSTG Inc.
8
United States Courts. Federal Rules of Evidence
9
Cornell Law Institute. Rule 408 Compromise Offers and Negotiations
10
Fish & Richardson. Settlement and Negotiations: The Limitations of Rule 408
11
The Employer Handbook. Under Rule 408
12
Porter Wright. Using a Letter Agreement to Strengthen the Confidentiality of Settlement Negotiations
13
AIRROC. Using a Letter Agreement to Strengthen the Confidentiality of Settlement Negotiations