                     United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 10-2975
                                   ___________

Retha Weems,                            *
                                        *
            Appellee,                   *
                                        * Appeal from the United States
      v.                                * District Court for the
                                        * Western District of Arkansas.
Tyson Foods, Inc.,                      *
                                        *
            Appellant.                  *
                                   ___________

                             Submitted: September 20, 2011
                                 Filed: December 28, 2011
                                 ___________

Before RILEY, Chief Judge, COLLOTON and GRUENDER, Circuit Judges.
                              ___________

RILEY, Chief Judge.

      Retha Weems brought suit against Tyson Foods, Inc., claiming workplace
gender discrimination under Title VII of the Civil Rights Act of 1964, 42 U.S.C.
§ 2000e, et seq., and the Arkansas Civil Rights Act of 1993, Ark. Code Ann. § 16-
123-101, et seq. The jury returned a verdict in Weems’ favor, and the district court
entered judgment against Tyson for $708,994. We reverse and remand for a new trial,
because improperly admitted compromise evidence materially prejudiced the jury’s
verdict.
I.    BACKGROUND
      A.    Facts1
            1.     Early Employment
      In 1988, Weems began working at the Hudson Foods poultry processing plant
in Noel, Missouri (Noel plant or Noel). Weems was employed as a Hudson
superintendent at Noel when Tyson purchased the plant in 1998. Weems continued
to work at Noel for Tyson, and received a number of promotions.

       In 2005, Rusty Bowsher, the complex manager at Tyson’s poultry processing
plant in Monett, Missouri, hired Weems to be the Monett plant manager. At Monett,
Weems reported directly to Bowsher, and he consistently gave her strong performance
ratings.

       While Weems was at the Monett plant, the Noel plant was plagued by
production and quality control problems. Tyson removed two successive plant
managers between 2004 and 2006 because of the Noel plant’s poor performance. The
United States Department of Agriculture (USDA) issued two Notices of Intended
Enforcement (NOIE) against the Noel plant in 2004 and 2006 because the plant was
not complying with federal food safety regulations. These NOIEs indicated the
government would suspend operations at the Noel plant if Tyson failed to correct the
identified violations.

      Tyson believed Weems was needed to address the problems at the Noel plant
and offered her the position of plant manager. Tyson vice presidents Bernie Adcock
and Donnie King encouraged her to accept the position. Because of the Noel plant’s
troubled history, Weems asked King and Adcock whether accepting the position
would be a “career ending move.” They reassured her she would be given the time


      1
      “We recite the relevant facts in the light most favorable to the jury’s verdict.”
Quigley v. Winter, 598 F.3d 938, 944 n.2 (8th Cir. 2010).

                                         -2-
and support she needed to turn the plant around. In spite of her misgivings, Weems
eventually agreed to accept the position, provided Tyson would change the
management structure at the Noel plant, give her two years to implement the necessary
changes, and furnish her with a substantial salary increase. Tyson assented to these
conditions, and gave Weems a raise of nearly $15,000, making her the highest paid
poultry plant manager of her grade level at Tyson. Weems became the Noel plant
manager on September 1, 2006.

             2.     Noel Plant Manager
       Conditions at the Noel plant were atrocious when Weems took over. The
equipment and facilities were in disrepair, resulting in wasted and contaminated
product. The plant’s other managers were encouraging inappropriate record-keeping
to obscure the extent of employee absenteeism, contaminated and condemned poultry,
and productivity problems. Weems immediately began addressing these issues.

       Tyson continued to make personnel changes at Noel after Weems became plant
manager. In February 2007, Tyson fired Patrick Johnston, the Noel complex manager
and Weems’ supervisor, and replaced him with Bowsher, Weems’ former supervisor
at Monett. In April 2007, Tyson created a new position at Noel—division operations
manager—and appointed Tim Singleton, who had been a plant manager at a Tyson
facility in Mexico. Around this same time, Adcock, who was then the division vice
president responsible for the Noel plant and five other poultry processing facilities,
was promoted. Chip Miller replaced Adcock as division vice president. Weems was
the only female plant manager within Miller’s division.

       After Miller became division vice president, Weems fell out of favor with her
supervisors. Tyson argued Weems’ performance as plant manager did not meet its
expectations. Tyson presented evidence of significant health and safety issues at the
plant, the plant’s continued poor performance and high operating costs, and the



                                         -3-
perception of Weems’ supervisors that she would be unable to implement the
necessary changes to turn the plant around.

      Weems claimed her firing was the result of gender discrimination. To refute
Tyson’s claim she was underperforming, Weems presented evidence showing she
successfully accomplished her primary responsibility as plant manager by overcoming
the NOIEs and bringing the plant nearer to regulatory compliance. Weems also
contends many of the changes she made at the Noel plant were only beginning to
produce results when she was removed.

       To show disparate treatment based on her gender, Weems offered evidence she
was treated differently than Singleton and similarly situated male managers at another
facility. Weems presented evidence Miller harbored a discriminatory, sexist attitude
toward her. Weems testified (1) Miller would ignore Weems and speak directly to
Singleton when Miller toured the plant; (2) Miller harshly accused Weems of staring
at him, remarking to her “What the hell are you looking at?”; and (3) she overheard
Miller tell Bowsher, “women had no business being plant managers; they couldn’t
handle the heat.”2

             3.     Removal as Plant Manager
      In October 2007, Bowsher, Miller, and Adcock discussed removing Weems
from her position as plant manager. They “vett[ed]” the decision with a Tyson human
resources director, and with Tyson’s vice president of employment compliance.

       On October 24, 2007, Weems heard a rumor from an outside contractor that she
may be losing her job. She approached Bowsher about this news—which he
confirmed. Bowsher advised Weems that Miller would meet with them the next day
“to give [Weems her] options.” Miller and Bowsher informed Weems she would be


      2
       At trial, Miller and Bowsher denied this comment was made.

                                         -4-
placed on a thirty-day administrative leave, during which Weems herself would be
responsible for finding another position within the company. If she was unable to find
a position, Tyson would terminate her employment.

       In November 2007, Bowsher told Weems that Greg Nelson, Tyson’s human
resources division manager, would be her human resources contact during the
transition. Weems was in frequent contact with Nelson as she searched for a new
position. According to Weems’ testimony, she told Nelson about Miller’s comment
to Bowsher and said she “felt like [she] was discriminated against because [she] was
female.” According to Weems, Nelson responded that Miller’s comment did not
reflect company policy and promised to look into it and get back to her.3

       Nelson never followed up with Weems about her concerns. Nelson did,
however, arrange to send Weems a “Separation Agreement and General Release”
(separation agreement), which she received around November 28, 2007. Had Weems
accepted the agreement, her employment would have terminated effective November
30, 2007, and Tyson would have paid her base salary and a portion of her medical
benefits through January 4, 2008. Weems did not sign the agreement. In December,
2007, Weems accepted a position as general production manager at a Tyson facility
in Springdale, Arkansas, where she remained employed through the trial.

       B.    Procedural History
       Weems brought suit against Tyson for employment discrimination under the
Civil Rights Act of 1964 and the Arkansas Civil Rights Act of 1993. At trial, Weems
sought to prove (1) Miller arranged to have her removed from her position because of




      3
       At trial, Nelson denied Weems told him about Miller’s comment, and asserted
he did not think there were any equal employment opportunity issues implicated by
Weems’ removal.

                                         -5-
her gender, and (2) Nelson did not adequately investigate after Weems expressed her
concern she had been the victim of gender discrimination.

       To prove her allegations with respect to Nelson, Weems offered and testified
about the separation agreement. Tyson objected, asserting the agreement was a
compromise offer and therefore inadmissible under Fed. R. Evid. 408 (Rule 408). The
district court held a sidebar conference to address Tyson’s objection. The parties
clarified that, when Weems received the agreement from Tyson, she was still on
administrative leave seeking a new position with Tyson. The district court admitted
the proffered testimony, reasoning Weems had not been told “[y]our 30 days are up
and you’re out,” so the evidence was not “caught by [Rule] 408.”

      During closing argument, Weems’ counsel emphasized the importance of the
separation agreement for Weems’ claims, stating

             The fifth reason [for finding in Weems’ favor] is this separation
      agreement. [Weems] met with Greg Nelson, or talked with him on
      November the 6th, 2007. At that time, according to his notes, she told
      him that she felt that she had not been treated right. Of course, as HR
      manager, apparently those words didn’t trigger anything in his thinking
      process. He was waiting for those magic word—or that magic word
      “discrimination.” Yet, after that discussion he presents [Weems] with
      this separation agreement.

             Now, the important part here, the significant part, is that in
      exchange for receiving some money from Tyson, [Weems is] going to
      give up her right to sue the company for sex discrimination. Why would
      Mr. Nelson give this to [Weems], someone who had been removed from
      her job for poor performance, if she hadn’t said something to him to the
      effect that she felt like she’d been discriminated against because she was
      a woman?




                                         -6-
      ....          Greg Nelson, the fellow from HR, I don’t think it
             was his job to see that the [equal employment opportunity]
             policies were enforced. I’m thinking it’s his job to make
             sure that the company didn’t get sued, to protect the
             company. That’s why that separation agreement was
             offered to [Weems].

       During deliberations, the jury submitted a written question to the district court
regarding the separation agreement. The jury inquired whether “all demoted/fired
employees get a separation agreement and general release.” The district court
informed the jury it could not comment and directed the jury to rely on the evidence
as presented by the parties.

        The jury found for Weems, awarding her $108,994 for lost wages and benefits
and $650,001 in compensatory and punitive damages. The district court reduced the
latter sum to $600,000 to comply with statutory damage limitations.4 Tyson moved
for judgment as a matter of law or for a new trial, which were denied.

II.    DISCUSSION
       Tyson argues the district court abused its discretion under Rule 408 by
admitting the separation agreement because the proposal was an offer to compromise
Weems’ gender discrimination claim and was admitted to prove Tyson’s liability. We
agree.




      4
        Because of our disposition in this case, we need not consider Tyson’s argument
the district court improperly allocated the compensatory and punitive damages award
between the state and federal causes of action, thereby maximizing Weems’ recovery
under the applicable damage limitations. See 42 U.S.C. § 1981a(b)(3)(D); Ark. Code
Ann. § 16-123-107(c)(2)(A)(v).

                                          -7-
       A.     Standard of Review
       “We review de novo the district court’s interpretation and application of the
rules of evidence, and review for an abuse of discretion the factual findings supporting
its evidentiary ruling.” United States v. Allen, 540 F.3d 821, 824 (8th Cir. 2008). We
will reverse only if an evidentiary ruling constituted “a clear and prejudicial abuse of
discretion . . . affect[ing] a substantial right of the objecting party.” Vasquez v.
Colores, 648 F.3d 648, 652 (8th Cir. 2011) (internal quotations omitted).

       B.     Federal Rule of Evidence 408
       At the time of trial, Rule 408(a) prohibited admission of evidence relating to a
compromise or offers to compromise when such evidence was used “to prove liability
for, invalidity of, or amount of a claim that was disputed as to validity or amount, or
to impeach through a prior inconsistent statement or contradiction.” Fed. R. Evid.
408(a) (2006) (amended Dec. 1, 2011). This rule does not preclude the admission of
all compromise evidence. Rule 408(b) explicitly permitted admission of such
evidence if offered for another purpose. Permissible purposes under 408(b)
“include[d] proving a witness’s bias or prejudice; negating a contention of undue
delay; and proving an effort to obstruct a criminal investigation or prosecution.”

      Rule 408 promotes “the public policy favoring the compromise and settlement
of disputes.” Fed. R. Evid. 408 advisory committee’s note (1972). As such, we
consider the district court’s application of this rule in light of its underlying purpose.
Cf. Stockman v. Oakcrest Dental Ctr., 480 F.3d 791, 798-99 (6th Cir. 2007)
(recognizing the admission of compromise evidence “going to the validity or amount
of a claim . . . eviscerate[s] Rule 408’s protection and undermine[s] its clear
purpose”); Bradbury v. Phillips Petrol. Co., 815 F.2d 1356, 1364 (10th Cir. 1987)
(explaining “when the issue is doubtful, the better practice is to exclude evidence of
compromises or compromise offers”).




                                           -8-
        We analyze this issue in three parts. First, we must address whether the
separation agreement related to a claim that was in dispute as to validity or amount at
the time the agreement was proffered. Second, assuming there was such a claim, we
must assess whether Weems offered the separation agreement to prove Tyson’s
liability for or the validity of the claim, rather than for another acceptable purpose.
And finally, upon determining the district court abused its discretion in admitting the
separation agreement, we must address whether this was a material error for which
Tyson is entitled to relief.

             1.      Disputed Claim
      The separation agreement was clearly an offer of compromise within the
meaning of Rule 408. See, e.g., Swan v. Interstate Brands Corp., 333 F.3d 863, 864
(8th Cir. 2003) (ruling an employee separation agreement was an offer of compromise
and “inadmissible” under Rule 408). However, Rule 408 only prohibits admitting
compromise evidence relating to a “claim” that was disputed when the settlement
negotiations or offer to compromise took place. See Crues v. KFC Corp., 768 F.2d
230, 233 (8th Cir. 1985).

        We have not substantially analyzed the “in dispute” requirement. See, e.g., id.
(applying “in dispute” analysis with limited discussion). We agree with our sister
circuits in recognizing a dispute need not “crystallize to the point of threatened
litigation” for the 408 exclusion rule to apply. Affiliated Mfrs. v. Aluminum Co. of
Am., 56 F.3d 521, 527 (3d Cir. 1995); accord Dallis v. Aetna Life Ins. Co., 768 F.2d
1303, 1307 (11th Cir. 1985). A dispute exists for Rule 408 purposes so long as there
is “an actual dispute or difference of opinion” regarding a party’s liability for or the
amount of the claim. Affiliated Mfrs., 56 F.3d at 527; accord Dallis, 768 F.2d at 1307
(same).

      On the facts of this case, Weems’ claim clearly was “in dispute” when Tyson
offered the separation agreement. The undisputed evidence shows, at the time Weems

                                          -9-
contacted Nelson, Weems had been removed from her position as plant manager and
placed on administrative leave. Weems knew she had only thirty days to find another
position within the company to avoid termination. Weems claims she informed
Nelson of her gender discrimination concerns, and Nelson’s notes from that
conversation confirm he understood Weems felt “she was not treated right” with
respect to the circumstances of her removal.

        While Nelson testified he did not recall Weems raising any concerns about
gender discrimination, and Weems maintains she was not contemplating legal action
at the time, neither contention undermines our conclusion the claim was in dispute at
the time of the offer. Tyson sent the separation agreement to Weems after Tyson
removed Weems from her position and inferentially in response to her expressed
concerns over the circumstances of her removal. We have no difficulty concluding,
as a matter of law, there was an actual dispute between Tyson and Weems when
Tyson offered the separation agreement. See Cassino v. Reichhold Chem., Inc., 817
F.2d 1338, 1342 (9th Cir. 1987) (stating separation agreements offered to settle
employment rights disputes arising after an adverse employment action are generally
“inadmissible to prove liability pursuant to Rule 408”).

       To the extent the district court concluded the separation agreement was not
“caught by [Rule] 408” because Weems was placed on temporary administrative leave
rather than terminated, the district court’s finding was an abuse of discretion. Weems
was placed on a thirty-day administrative leave to allow her to locate another position
within Tyson and, if unsuccessful, Tyson would terminate her. If Weems accepted the
separation agreement,5 she would release her claims and be terminated.




      5
       The district court was correct, Tyson had not yet advised Weems “[y]our 30
days are up and you’re out.” However, the document presented to Weems was
expressly labeled, and was in fact, a “SEPARATION AGREEMENT.”

                                         -10-
        Not every employment separation agreement is an offer to settle a disputed
claim under Rule 408. The district court has substantial discretion to determine
whether, under the unique facts and circumstances of the case, a claim was in dispute
at the time when a settlement offer was proffered. Based upon the facts of this case,
Weems’ claim against Tyson was in dispute when Tyson proffered the separation
agreement.

              2.    Admissibility
        We now address whether evidence relating to the separation agreement was
admissible for a permissible purpose under Rule 408(b). Evidence relating to a
compromise offer is admissible if “offered for ‘another purpose,’ i.e., for a purpose
other than to prove or disprove the validity of the claims that the offers were meant
to settle.” Trebor Sportswear Co. v. The Limited Stores, Inc., 865 F.2d 506, 510 (2d
Cir. 1989). Weems argues she offered the separation agreement evidence to prove
Tyson failed to “under[take] good faith efforts to comply with federal and state law.”
We reject Weems’ argument because this purpose directly establishes Tyson’s liability
for the same claim the agreement was meant to settle.

       In certain circumstances, evidence of a compromise offer may be admitted to
show a party’s lack of good faith. In Athey v. Farmers Ins. Exch., 234 F.3d 357, 361-
62 (8th Cir. 2000), we upheld the trial court’s admission of evidence from a settlement
conference between an insurance company and the insured regarding a claim arising
under an automobile insurance policy. The insurer refused to settle the claim unless
the insured abandoned a pending claim of bad faith against the company. Id. at 361.
Applying the substantive law of South Dakota, we held “an insurer’s attempt to
condition the settlement of a breach of contract claim on the release of a bad faith
claim [could] be used as evidence of bad faith.” Id. at 362. Weems has not alerted us
to any authority indicating employment separation agreements are admissible under
applicable substantive law, and we have found none. Athey, therefore, does not
control this case.

                                         -11-
        The policy concerns underlying Rule 408 are strongly implicated where an offer
of compromise is used to prove an element of the claim the compromise offer was
meant to settle. See, e.g., Stockman, 480 F.3d at 797-98 (holding an employer’s offer
to settle a wrongful termination suit was inadmissible to rebut an allegation the
plaintiff failed to mitigate damages); Trebor, 856 F.2d at 510 (explaining a party’s
letter offering to settle a contract dispute was inadmissible to prove compliance with
the statute of frauds because “the two questions were so closely intertwined,
admission of the documents . . . would . . . militate against the public policy
considerations which favor settlement negotiations and which underlie Rule 408”). “It
would be unreasonable to expect a party to ever make a settlement offer if doing so
forced it into choosing between conceding one or more elements of liability or
damages or having the offer admitted against it.” Stockman, 480 F.3d at 798-99.
Because Weems’ issue of Tyson’s bad faith is inseparable from the issue of liability,
Rule 408(a) prohibits admission of the agreement in this case.

      The settlement evidence was inadmissible to show Tyson’s bad faith, and
Weems has suggested no other purpose for which the evidence is relevant and
admissible. In furthering the public policy of Rule 408, we conclude the district court
committed a clear abuse of discretion by admitting this separation agreement
evidence.

      C.      Materiality
      Evidentiary errors are grounds for reversal only if the error affected a
substantial right of the aggrieved party. See Nichols v. Am. Nat. Ins. Co., 154 F.3d
875, 889-90 (8th Cir. 1998). It is an “unusual case where a new trial is needed
because a full and fair presentation of the claims was impeded at trial, and substantial
prejudice resulted.” Id. at 890. On the other hand, “[t]he parties have a right to
untainted jury deliberations and a verdict which is based upon admissible evidence.”
Qualley v. Clo-Tex Int’l., Inc., 212 F.3d 1123, 1131 (8th Cir. 2000).



                                         -12-
       In this case, we are confronted with unusually clear and objective proof the
improperly admitted evidence substantially influenced the jury’s verdict. First,
Weems’ counsel emphasized the separation agreement in his closing remarks, arguing
Tyson offered the agreement because Weems “felt like she’d been discriminated
against because she was a woman,” and the agreement proves Tyson was more
concerned with protecting itself against liability than with ensuring Weems had been
treated fairly. Weems’ reliance on the evidence at closing suggests it materially
influenced the jury verdict. See Nichols, 154 F.3d at 890 (explaining the party’s
“closing argument at trial demonstrate[d] that the [improperly admitted] evidence was
intended to influence the jury’s determination of liability,” which indicates admission
of the evidence was not harmless); Gulbranson v. Duluth, Missabe and Iron Range
Ry., 921 F.2d 139, 142-43 (8th Cir. 1990) (similar).

       During its deliberations, the jury submitted a written question to the district
court, inquiring whether “all demoted/fired employees get a separation agreement and
general release.” This shows the jury was focused on the separation agreement during
deliberations, and strongly supports the inference the jury materially relied on this
evidence in reaching their verdict. See White v. Honeywell, 141 F.3d 1270, 1280 (8th
Cir. 1998).

       Weems argues the error was not material because the separation agreement was
a “general release” and did not contain an admission of liability, and therefore had
minimal probative value. See Haun v. Ideal Indus., 81 F.3d 541, 547-48 (5th Cir.
1996) (deciding the introduction of a similar employment separation agreement was
harmless error because “the agreement did not influence the jury or had but a very
slight effect on its verdict”). We reject Weems’ argument. Unlike Haun, where there
were no objective indications the jury relied on the separation agreement, Weems’
closing arguments and the jury’s question concerning the separation agreement
cogently confirm the inference the error materially affected the jury’s verdict.



                                         -13-
      Weems argues the error was harmless because there was ample evidence apart
from the separation agreement supporting the jury’s verdict. Assuming properly
admitted evidence was sufficient to support the verdict, we must reverse if the
improperly admitted evidence had “a substantial influence on the jury verdict,”
Nichols, 154 F.3d at 889. In this case it is “very likely that the [improperly admitted
evidence] affected the jury’s deliberations and the jury verdicts.” White, 141 F.3d at
1280. Admission of the separation agreement deprived Tyson of a fair trial; thus, we
reverse.

III.   CONCLUSION
       Under the facts of this case, we conclude the district court violated the policy
and exclusionary provision of Rule 408 by admitting into evidence the separation
agreement and related testimony, and it is likely this error materially influenced the
jury’s verdict. We vacate the judgment and remand this case to the district court for
a new trial.
                        ______________________________




                                         -14-
