Informal E-mails Do Not Make an Enforceable Settlement

Saturday, May 5, 2007 | 0

By Larry Rogak

First, we have Weldon v. 210 East 73rd Owners Corp., NYLJ 4/26/07 (Index no. 107301/06, Supreme Court, New York Co.) (Stallman, j). The defendant cooperative corporation moved for an order confirming and enforcing what an alleged settlement agreement.

"This motion highlights a recurrent litigation issue," wrote the court, "What is the legal consequence of an exchange of e-mails between litigants? Although e-mails might best be viewed simply as correspondence in a different form, transmitted by a new medium, the prevalent informality and brevity of e-mail style and the speed of transmission - frequently without reflection time - can cause ambiguity and uncertainty in the litigation context."

"Movant alleges that the attorneys' exchange of e-mails constitutes an enforceable settlement agreement. It does not. The initiatory e- mail contains a summary or outline of a settlement proposal and requests 'Please confirm, without prejudice, that the following is the settlement proposal:' The simple one-line response was 'Confirmed without prejudice.' Thus, at most, the two parties agreed that what was contained in the first e-mail, was the 'proposal.'"

"There is no language in either e-mail evincing an intent or mutual understanding that the first e-mail was a final settlement offer capable of acceptance or that the first, upon acceptance, would be viewed as a complete, final contract. Indeed, the use of the word 'proposal,' and the request to confirm the proposal, indicated a prudent, lawyerly attempt on both sides to confirm the substance of what was 'on the table' before the final stipulation or agreement could be drafted and exchanged for the customary vetting, revision and execution."

"Moreover, the subject e-mail exchange does not conform to the requirements of CPLR 2104, for a stipulation of settlement capable of enforcement. It was not made in open court. Alternatively, it is not a subscribed writing. It was not signed by the clients or the attorneys. Under the circumstances presented, despite movants' contention that the e-mails contained electronic signatures (something that need not be ruled on here), the e-mail exchange constitutes neither an enforceable contract nor a stipulation within the requirements or contemplation of CPLR 2104. The motion is accordingly denied."

Settlement Made Without Plaintiff Present is Vacated

O'Connell v. Paris Maintenance Co. Inc., NYLJ 4/26/07 (Index no. 34556/2002, Supreme Court, Kings Co.) (Kurtz, j).

Plaintiff moved for an order vacating the settlement of this action and restoring the case to the trial calendar. Defendant cross-moved for summary judgment on the ground that the parties entered into a binding settlement agreement.

On September 3, 1999, plaintiff allegedly slipped and fell in a bathroom "which defendant was responsible for cleaning and maintaining. " On November 22, 2004, plaintiff's counsel and defendant's counsel appeared for a mediation and the attorneys entered into a "binding agreement" whereby plaintiff purportedly agreed to settle this matter for $150,000=, subject to an agreement by the Worker's Compensation carrier to reduce its lien. Thereafter, plaintiff discharged his attorney and hired new counsel, "allegedly because plaintiff did not authorize his attorney to attend the mediation or settle the matter."

Shortly after being retained, plaintiff's new attorney informed defendant's attorney that plaintiff did not intend to honor the settlement agreement. In the meantime, defendant's pending motion for summary judgment was adjourned several times until it was finally "marked-off" on February 4, 2005. On or about November 28, 2005, defendant's attorney obtained an Order to Show Cause to enforce the settlement. On December 15, 2005, the Court (Hurkin-Torres, J.) marked the motion "off-calendar" determining that it was moot and advising plaintiff's counsel to initiate the instant motion.

"Plaintiff argues that the settlement is not binding because plaintiff had filed for bankruptcy prior to the mediation and a trustee was appointed in the bankruptcy proceeding. Once the petition was filed, only the trustee in bankruptcy had the actual authority to settle a personal injury action and execute a release. See 11 USCA Section 541(a) (1), Section 542(c); Jones v. Harrell 858 F2d 667 (11th Cir 1988). Defendant does not dispute the fact that plaintiff filed for bankruptcy. However, defendant contends that it did not know that plaintiff filed for bankruptcy at the time of the mediation and settlement. It first learned of the bankruptcy proceeding sometime after February 4, 2005. Defendant argues that plaintiff's attorney had apparent authority to settle the case. Therefore, the settlement should not be vacated."

"An attorney derives authority to manage the conduct of litigation on behalf of a client from the nature of the attorney-client relationship itself. See Hallock v. State, 64 NY2d 224, 230 (1984). However, without a grant of actual authority from the client, an attorney cannot compromise or settle a claim and settlements negotiated by attorneys without authority from their clients have not been binding. See Id.; Dayho Motel v. Assessor of Town of Orangetown, 229 AD2d 435 (2d Dept 1996); Melstein v. Schmid Laboratories, Inc., 116 AD2d 632 (2d Dept 1986). An attorney does not derive this power by virtue of his general retainer to compromise and settle his client's claim. See Nash v. Y and T Distributors, 207 AD2d 779, 780 (2d Dept 1994)."

"A party who relies on the authority of an attorney to settle an action in his client's absence deals with such an attorney at his own peril. See Slavin v. Polyak, 99 AD2d 466 (2d Dept 1984); Melstein v. Schmid Laboratories, Inc. 116 AD2d at 634. If the settlement is thereafter challenged, the relying party has the burden of establishing that the attorney's actions were, in fact, authorized. See Id.; Silver v. Parkdale Bake Shop, Inc., 8 AD2d 607 (1st Dept 1959). Essential to the creation of apparent authority are 'words or conduct of the principal, communicated to a third party, that give rise to the appearance and belief that the agent possesses authority to enter into a transaction. ' The existence of apparent authority depends upon a factual showing that the third party relied upon the misrepresentation of the agent because of some misleading conduct on the part of the principal-not the agent. Therefore, in order for defendant to have reasonably relied upon an appearance of plaintiff's attorney's authority to settle this case at mediation, defendant would need to establish that the conduct of plaintiff himself created the apparent authority."

"Defendant claims that at the mediation, plaintiff's prior attorney represented to Honorable Herbert J. Dillon that he was attending the mediation with his client's knowledge and consent. Additionally, plaintiff's attorney represented that he was authorized to enter into a binding settlement agreement. Defendant maintains that both parties entered into a post-mediation agreement. However, the agreement is signed by plaintiff's attorney and not plaintiff himself. It is clear that plaintiff's attorney cannot, by his own acts or representation of authority 'imbue himself with apparent authority.' Moreover, defendant never alleges any communication by the plaintiff himself which gave rise to the appearance of authority to settle this case. Therefore, defendant did not meet his burden. Accordingly, plaintiff's motion is granted and this case is restored to the trial calendar."

Comment: A word to the wise, then: when settling, make sure that (a) the parties themselves are either present, or sign off on the settlement; and (b) make sure the settlement terms are reduced to a signed document. Otherwise you may find yourself re-litigating a case you thought was closed, which is as annoying as a mosquito in your ear when you're trying to sleep.

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