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FIRST DEPARTMENT HOLDS THAT COUNSEL’S NAME ON AN EMAIL’S “PREPOPULATED” ADDRESS BLOCK EQUATES TO A “JOHN HANCOCK” AND SIMPLY SENDING AN EMAIL CAN OPERATE TO CREATE A BINDING SETTLEMENT AGREEMENT

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  • Posted on: Jul 9 2021

Editor’s Note: This article has been edited to make corrections.

Courts are frequently faced with the need to adapt to changing technology.  This Blog [here] previously addressed the case of Forcelli v. Gelco Corp., 109 A.D.3d 244 (2nd Dep’t 2013), in which the Second Department found that emails could satisfy the “subscribed” writing requirement of CPLR 2104.  Among other things, this Blog summarized the Forcelli Court’s analysis of the “subscription” requirement of CPLR 2104 as follows:

As to the “subscription” requirement, the Forcelli Court noted that while e-mails cannot be signed in the traditional sense, “the lack of ‘subscription’ in the form of a handwritten signature has not prevented other courts from concluding that an e-mail message, which is otherwise valid as a stipulation between parties, can be enforced pursuant to CPLR 2104.”  Forcelli, 109 A.D.3d at 248.  In reaching its decision, the Forcelli Court also recognized the “widespread use of e-mail” and how “unreasonable” it would be to determine that, due to the absence of a traditional signature, an e-mail could not conform to CPLR 2104.  The Court also noted that the adjuster purposely added her name at the end of the e-mail and that it was not automatically generated by the e-mail software.  Forcelli, 109 A.D.3d at 251.  (Emphasis supplied.)

On July 8, 2021, the First Department decided Philadelphia Insurance Indemnity Co. v. Kendall, in which the holding in supreme court, which relied on Forcelli, was “clarif[ied].”  Now, in the First Department at least, it is “the transmission of an email, and not whether an email “signature” can be shown to be retyped, is what determines that a settlement stipulation has been subscribed for purposes of CPLR 2104.”  Put another way, a “prepopulated” name on the address block of an email is sufficient to satisfy the subscription requirement of CPLR 2104, which provides:

An agreement between parties or their attorneys relating to any matter in an action, other than one made between counsel in open court, is not binding upon a party unless it is in a writing subscribed by him or his attorney or reduced to the form of an order and entered….

The plaintiff in Kendall was involved in an automobile accident while driving her employer’s car.  Kendall accepted the full policy amount ($25,000) from the other driver’s insurance and made a claim against her employer’s $1,000,000 Supplementary Underinsured Motorist (“SUM”) policy written by appellant, Philadelphia.  The SUM claim was arbitrated before the American Arbitration Association and a hearing was held on August 15, 2019.  Settlement was frequently discussed by the parties “[b]efore, during, and after the arbitration hearing.”  

On September 16, 2019, the arbitrator rendered a decision awarding Kendall $975,000 and a copy of the decision was sent to all counsel.  However, none of the counsel received the decision.  Accordingly, the parties continued to negotiate a settlement.  A settlement in the amount of $400,000 was reached on September 19, 2019, and:

[o]n that day, respondent’s counsel emailed petitioner’s counsel: “Confirmed – we are settled for 400K.” Below this appeared “Sincerely,” followed by counsel’s name and contact information. Shortly thereafter, petitioner’s counsel emailed in reply, attaching a general release, styled a “Release and Trust Agreement,” and saying, “Get it signed quickly before any decision comes in, wouldn’t want your client reneging.” Respondent’s counsel answered, “Thank you. Will try to get her in asap.” This email concluded with the same valediction, name, and contact information as had respondent’s counsel’s earlier email.  

Subsequently, but before the “Release and Trust Agreement” was executed by Kendall, her counsel received the arbitrator’s decision and advised Philadelphia’s counsel that Kendall demanded payment of $975,000 and would not execute the settlement documents.

As a result, Philadelphia commenced a special proceeding to enforce the parties’ settlement and to vacate the award of the arbitrator.  Supreme court, relying on Forcelli, denied the relief sought by Philadelphia “finding that it did not appear that respondent’s attorney had subscribed his email for purposes of CPLR 2104 by retyping his name in addition to his prepopulated contact information block.”  In addition, supreme court found that “Kendall’s failure to sign the release was a necessary occurrence to finalize the settlement, and that this fact was recognized by Philadelphia’s counsel’s email in which she urged that Kendall’s counsel get her to sign the release quickly, lest she “reneg[e].”  

In reversing supreme court, the First Department held that:

this distinction between prepopulated and retyped signatures in emails reflects a needless formality that does not reflect how law is commonly practiced today. lt is not the signoff that indicates whether the parties intended to reach a settlement via email, but rather the fact that the email was sent. Since 1999, New York State has joined other states in allowing, in most contexts, parties to accept electronic signatures in place of “wet ink” signatures. Section 304(2) of New York’s Electronic Signatures and Records Act (ESRA) provides: “unless specifically provided otherwise by law, an electronic signature may be used by a person in lieu of a signature affixed by hand. The use of an electronic signature shall have the same validity and effect as the use of a signature affixed by hand.” Moreover, the statutory definition of what constitutes an “electronic signature” is extremely broad under the ESRA, and includes any “electronic sound, symbol, or process, attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the record” (State Technology Law § 302[a]). We find that if an attorney hits “send” with the intent of relaying a settlement offer or acceptance, and their email account is identified in some way as their own, then it is unnecessary for them to type their own signature. This rule avoids unnecessary delay caused by burden-shifting “swearing contests over whether an individual typed their name or it was generated automatically by their email account” (Princeton Indus. Prods., Inc. v Precision Metals Corp., 120 F Supp 3d 812, 820 [ND Ill 2015]).

Addressing concerns that the “ubiquity and ease” of emailing may “undercut its intentionality,” the First Department stated:

It is fair to say that most email users have on occasion sent emails that they did not mean to transmit, or that they regretted soon after transmission. However, here we are considering a specific subcategory of email on a subject freighted with ethical obligations. A lawyer has ethical obligations to communicate all settlement offers to a client and to counsel the client on the consequences of settlement. New York’s Rules of Professional Conduct (22 NYCRR 1200.0) rule 1.2(a) states that “[a] lawyer shall abide by a client’s decision whether to settle a matter.” Rule 1.4(a)(iii) requires a lawyer to “promptly inform the client of … material developments in the matter including settlement or plea offers.” These ethical obligations help to ensure that an attorney considers their authority before communicating settlement offers and acceptances to opponents, whatever the mode of communication.  (Footnote omitted.)

The Court also, made plain that its holding is not meant to suggest that “every email purporting to settle a dispute will be unassailable evidence of a binding settlement.”  First, because “hacking” is a problem, such emails will have to be authenticated.  Second, settlement emails must set forth all material terms of the subject settlement.  In this regard, the Court rejected Kendall’s argument that the “settlement was conditioned on [Kendall] signing the release”; the Court finding that the return of a signed release was a “ministerial condition precedent to payment”.

Takeaway

In the context of legal settlements, business and personal affairs and otherwise, it is important to exercise caution before hitting “send” on an email.

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