No Rule 408 Shield for Pre-Litigation Status Emails; Missing-Witness Instruction Narrowed for Foreign, Non-Employee Witnesses

Case: NHC LLC v. Centaur Construction Company Inc., et al.

Court: United States Court of Appeals for the Seventh Circuit

Date: September 24, 2025

Panel: Circuit Judges Easterbrook and Pryor (quorum under 28 U.S.C. § 46(d); Judge Flaum previously on the panel but deceased)

Disposition: Affirmed (Nonprecedential; see Fed. R. App. P. 32.1)

Introduction

This appeal arises from a high-profile construction dispute over the Nobu Hotel Chicago project. NHC LLC (the developer) engaged Centaur Construction Company, Inc. as design-builder under a “design-build” agreement. After the project derailed—amid allegations that Centaur misstated progress and budget status, diverted progress payments to unrelated debts, and failed to pay subcontractors—NHC sued Centaur and two officers, CEO Spiro Tsaparas and President Peter Alexopoulos, for breach of contract and fraud.

The district court granted partial summary judgment to NHC on several contract breaches relating to schedule, budget, and subcontractor payments. A jury later found the defendants liable for fraud and awarded over $20 million in compensatory and punitive damages. On appeal, the Seventh Circuit addressed only two evidentiary issues among ten questions presented: (1) whether a July 2019 email from Tsaparas to NHC’s principal was inadmissible under Federal Rule of Evidence 408 as a settlement communication; and (2) whether the district court erred in denying a “missing witness” instruction regarding Manuel Nuñez, a project accountant employed by NHC’s Mexican parent company, who was deposed remotely but not presented live at trial. The court affirmed across the board.

Although designated nonprecedential, the opinion offers clear guidance: merely pre-litigation communications acknowledging project costs or responsibility are not automatically shielded by Rule 408, and the missing-witness instruction remains a disfavored remedy reserved for witnesses uniquely within an opposing party’s control whose live testimony would be genuinely non-cumulative.

Summary of the Opinion

• Rule 408 (Settlement Evidence): The court held that a July 24, 2019 email from Centaur’s CEO to NHC was admissible. It contained no compromise offer, settlement terms, or involvement of counsel and did not reflect ongoing settlement negotiations under the totality of circumstances. Even if the sender wished to avoid litigation, that alone does not trigger Rule 408’s bar.
• Missing-Witness Instruction: The court upheld the refusal to give a missing-witness instruction regarding Manuel Nuñez. The instruction is disfavored and requires, among other things, that the witness be peculiarly within the opponent’s power to produce and that the testimony would be non-cumulative and elucidate material issues. Nuñez—living in Mexico, not employed by NHC, no personal stake shown, and already deposed—did not meet those criteria.
• Standard of Review: Both rulings were reviewed for abuse of discretion—a highly deferential standard. The court found no abuse and affirmed the district court’s denial of the defendants’ motions for a new trial and for judgment as a matter of law.

Analysis

Precedents Cited and Their Influence

The Seventh Circuit anchored its reasoning in a well-developed line of authority on both evidentiary issues.

• Rule 408 framework and “totality of circumstances” test
  • Raybestos Products Co. v. Younger, 54 F.3d 1234 (7th Cir. 1995): The court reaffirmed that Rule 408 excludes only compromise offers and statements made during compromise negotiations. A party opposing admission must make a “substantial showing” that the communication was part of settlement talks. Raybestos emphasizes assessing the totality of circumstances—contents and timing—to determine whether settlement negotiations had begun. There, a pre-suit letter aimed at avoiding litigation was admitted because it lacked the hallmarks of a settlement negotiation.
  • Zurich American Insurance Co. v. Watts Industries, Inc., 417 F.3d 682 (7th Cir. 2005): Cited for the proposition that Rule 408 applies when evidence is offered to prove the validity or amount of a disputed claim, but only if it arises from compromise negotiations.
  • New Burnham Homes, Inc. v. Village of Burnham, 910 F.2d 1474 (7th Cir. 1990): Supplies the “substantial showing” burden borne by the party seeking exclusion under Rule 408.
• Standard for evidentiary rulings on motions in limine
  • Stegall v. Saul, 943 F.3d 1124 (7th Cir. 2019): Reinforces the abuse-of-discretion standard for reviewing rulings on motions in limine.
  • Hernandez v. City of Peoria, 135 F.4th 517 (7th Cir. 2025), quoting Perry v. City of Chicago, 733 F.3d 248 (7th Cir. 2013): The appellate court will reverse only if no reasonable person would agree with the trial court’s ruling, and the error likely affected the outcome. This double hurdle underscores deference to trial judges on evidentiary calls.
• Missing-witness instruction—prerequisites and disfavor
  • United States v. DiSantis, 565 F.3d 354 (7th Cir. 2009), quoting United States v. Gant, 396 F.3d 906 (7th Cir. 2005): The instruction is generally disfavored and requires a showing that (1) the witness was peculiarly within the opponent’s power to produce (physically or pragmatically), and (2) the witness’s testimony would elucidate the case rather than merely repeat evidence.
  • United States v. Foster, 701 F.3d 1142 (7th Cir. 2012): Confirms broad district court discretion in deciding whether to give the instruction.
  • United States v. Christ, 513 F.3d 762 (7th Cir. 2008): Elaborates “pragmatic availability”—employment or relationship alone is insufficient; consider whether the witness has a personal stake or is otherwise practically aligned with a party such that only that party could realistically present the witness.
  • United States v. Pizarro, 717 F.2d 336 (7th Cir. 1983): No missing-witness instruction where the witness is physically unavailable to both parties “through neither party’s fault.”
  • Federal Rule of Civil Procedure 32(a)(4)(B): A witness outside the United States is “unavailable” for live testimony purposes, permitting use of deposition testimony unless the offering party procured the absence.

Legal Reasoning

A. Rule 408 and the July 24, 2019 Email

The court evaluated whether the July 24 email was made “during compromise negotiations” such that Rule 408 would bar its use to prove the validity or amount of NHC’s claims. Applying Raybestos and Zurich:

• Timing: The email predated the lawsuit. Pre-suit timing alone does not make a communication a settlement statement. The inquiry is contextual: Are the parties negotiating a compromise of a disputed claim?
• Content: The email provided an “accurate update on the final cost to complete the project” and acknowledged that Centaur’s outstanding responsibility exceeded $9 million. It made no reference to attorneys, no “without prejudice” settlement framing, and—crucially—no offer to compromise or proposed terms to resolve a disputed claim.
• Totality of circumstances: Even if sent with the goal of avoiding litigation, the court found the message to be business communications from a contractor attempting to placate a client, not compromise negotiations. Subsequent August 2019 texts asking NHC not to file suit did not retroactively convert the July email into a settlement negotiation.

Because defendants did not make a “substantial showing” that the email occurred in the course of settlement negotiations, Rule 408 did not apply. The district court therefore did not abuse its discretion in admitting the email.

B. Missing-Witness Instruction for Manuel Nuñez

Defendants argued they were entitled to an adverse inference because NHC did not present Nuñez live at trial. The court applied the two-prong test:

• (1) Peculiarly within the opponent’s power to produce
  • Physical unavailability: Nuñez resided in Mexico. Under FRCP 32(a)(4)(B), a witness outside the United States is unavailable unless the offering party procured the absence. There was no evidence NHC engineered his absence.
  • Pragmatic unavailability: Nuñez worked for NHC’s parent, RCD, not NHC; he quit before trial; and there was no showing he had a personal stake in NHC’s success. Mere corporate affiliation through a parent and prior project role does not establish that NHC could uniquely produce him. Further, Nuñez’s cooperation in a prior deposition undercuts any claim that defendants were denied access.
• (2) Non-cumulative, elucidating testimony
  • Defendants claimed that post-deposition jury instructions newly alleged misrepresentations by Alexopoulos, making live testimony essential. But they conceded that nothing “brand new” had been added—only wording changes. They had already examined Nuñez about his meetings and document requests. The court saw no demonstration that live testimony would add materially beyond the deposition record.

Given the high bar and the doctrine’s general disfavor, the district court acted within its discretion in refusing the instruction.

Impact and Practical Implications

Although nonprecedential, the opinion delivers pointed guidance for litigators, particularly in complex commercial and construction disputes.

• Rule 408 boundaries clarified:
  • Not all pre-suit communications are settlement communications. To invoke Rule 408, expect courts to look for concrete indicia of compromise negotiations—express offers, terms, counsel participation, or clear mutual engagement over a disputed claim. Business updates acknowledging costs or responsibility, without compromise posture, are likely admissible to prove liability or amount.
  • “Avoiding litigation” is not equivalent to “settlement negotiation.” Records reflecting status, responsibility, or projections may be admissible even if a party hoped to stave off suit.
  • Practitioners seeking Rule 408 protection should actively frame communications as settlement dialogue: explicitly reference compromise, define disputed claims, include counsel involvement where appropriate, and make specific settlement overtures. Labels alone do not control, but clarity helps.
• Missing-witness instruction remains a narrow remedy:
  • Foreign residence and lack of employment/control undermine the “peculiarly within power” element. Where a deposed witness is outside the subpoena power and neither party engineered the absence, the instruction is unlikely.
  • Deposition access and overlapping testimony will defeat the “non-cumulative” requirement. Build a record showing unique, material facts that only live testimony could elucidate, coupled with diligent but unsuccessful efforts to secure appearance.
• Construction and project finance cases:
  • Owner–contractor communications about budget overruns, unpaid subs, and completion costs often straddle operational updates and potential settlement. This decision indicates that candid operational updates that lack compromise markers may be admissible and potent at trial.
  • Corporate officers’ direct communications and signatures on pay apps can ground fraud exposure. While the opinion does not analyze sufficiency in detail, the affirmance of a substantial punitive award underscores jury receptivity to documentary misstatements and misuse of funds.
• Cross-border witness management:
  • For witnesses abroad, anticipate reliance on depositions under FRCP 32. The existence of a thorough deposition record undercuts later calls for adverse inferences.
  • If an adverse inference is desired, counsel should document attempts to secure attendance, show control or alignment (employment, continuing relationship, financial interest), and articulate why live testimony is uniquely necessary.

Complex Concepts Simplified

• Federal Rule of Evidence 408 (Settlement Evidence): Blocks the use of compromise offers and statements made during compromise negotiations to prove the validity or amount of a disputed claim. It does not exclude ordinary business communications, admissions outside settlement talks, or settlement evidence used for other permissible purposes (e.g., bias), and it applies only when actual compromise negotiations are shown.
• Motion in limine: A pretrial request to admit or exclude evidence. Appellate review is deferential; reversal requires showing that no reasonable judge would agree with the ruling and that the error likely affected the verdict.
• Missing-witness instruction: Allows a jury to infer that an absent witness’s testimony would be unfavorable to a party who uniquely controls that witness and fails to produce them. It is “generally disfavored” and requires proof of both unique control and non-cumulative, elucidating testimony.
• “Peculiarly within power to produce” (Control): Either physical availability (e.g., within subpoena reach) or practical control (e.g., employment with a personal stake or strong alignment) such that only one party could realistically produce the witness.
• FRCP 32(a)(4)(B) (Depositions of Unavailable Witnesses): Permits use of deposition testimony when the witness is outside the United States unless the offering party procured the absence. This undermines claims that live testimony was uniquely required.
• Abuse of discretion: A highly deferential standard. The appellate court affirms unless the decision was unreasonable and outcome-altering.
• Nonprecedential disposition: The decision is not binding precedent in the circuit, though it may be cited under Rule 32.1 and can be persuasive.

Conclusion

NHC LLC v. Centaur Construction Company Inc. fortifies two practical evidentiary guardrails. First, pre-suit operational or status communications—even if motivated by a desire to avert litigation—do not automatically fall under the settlement privilege of Rule 408. Without clear markers of compromise negotiations, such communications are admissible to establish liability and damages. Second, the missing-witness instruction retains a narrow footprint: it demands a concrete showing of unique control over the witness and a demonstration that live testimony would be non-cumulative and materially clarifying. Where the absent witness is abroad, not employed by the party, lacks a demonstrable personal stake, and has already been deposed, the instruction will almost certainly be denied.

For practitioners, the opinion underscores the need to structure bona fide settlement talks explicitly and to build a meticulous record if seeking adverse-inference relief for an absent witness. In complex construction disputes—where cost updates, pay applications, and subcontractor payments are heavily documented—the admissibility of candid pre-litigation communications can decisively shape the evidentiary landscape. While nonprecedential, this Seventh Circuit ruling provides a careful, fact-sensitive application of Rule 408 and the missing-witness doctrine likely to influence trial practice throughout the circuit.