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Settlement By Email . . . All The Material Terms are in There!

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  • Posted on: May 25 2022

By: Jeffrey M. Haber

In New York, as in other jurisdictions, settlement agreements “are judicially favored, will not lightly be set aside,” and will be enforced “with rigor and without a searching examination into their substance.”1 A court called upon to enforce a settlement must be satisfied that the agreement is “clear, final and the product of mutual accord.”2 Thus, an out-of-court agreement settling an action is binding on each party to the agreement only if “it is in a writing subscribed by him or his attorney.”3 “In addition, since settlement agreements are subject to the principles of contract law, for an enforceable agreement to exist, all material terms must be set forth” in that writing, “and there must be a manifestation of mutual assent.”4 

Correspondence between the parties or counsel “can qualify as an enforceable stipulation of settlement under CPLR 2104,” so long as that correspondence “set[s] forth the material terms of the stipulation” and is a properly subscribed (i.e., signed) writing. This principle also holds true where, as in DT Net Lease I REIT v. Coughlan, 2022 N.Y. Slip Op. 31381(U) (Sup. Ct., New York County Apr. 26, 2022) (here), the correspondence is by email rather than traditional physical means.

To meet the requirement of a subscribed writing in the context of email, “the party to be charged, or his or her agent,” must “type[ ] his or her name” at the end of the email “under circumstances manifesting an intent that the name be treated as a signature.” However, where the sender of the emails are identifiable and there is no contention that counsel sent the emails unintentionally, CPLR § 2104 is satisfied. In other words, when “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.”

In DT Net Lease, the Court held that the parties had reached an enforceable settlement through the exchange of email. 

DT Net Lease was an action to enforce a completion guaranty executed in connection with the development of a new office building intended to serve as the headquarters of a tenant named Dealertrack Technologies, Inc. 

Defendants maintained that the parties “settled this matter on January 25, 2022,” when defendants’ counsel “accepted [plaintiff’s] final draft of the fully-integrated [sic] settlement agreement … which … contained all material terms of the settlement.”

As with most settlement negotiations, the parties exchanged many offers and counteroffers. To put the background in perspective, we discuss the relevant dates on which the parties’ negotiations were conducted.

On January 6, 2022, plaintiff’s counsel emailed defendants’ counsel, stating that plaintiff “want[ed] to wrap things up” and would settle at the number defendants offered, “provided that we have an agreement in principle by the end of the business day tomorrow and the settlement is documented by January 11, 2022.” Both deadlines came and went. 

Notwithstanding, plaintiff continued to negotiate. In that regard, plaintiff’s counsel emailed defendants’ counsel about the date on which the settlement payment would be made, stating that the time proposed by defendants (60 days) was problematic. Plaintiff’s counsel noted that the “settlement amount was based on quick payment.” 

On January 17, 2022, plaintiff’s counsel emailed a draft settlement agreement to defendants’ counsel. Plaintiff’s counsel emailed a revised draft the following day. Defendants’ counsel provided proposed changes to the draft settlement agreement, including a proposed term of 60 days to pay the settlement amount. After further discussion, defendants’ counsel agreed to a 45-day payment window with interest accruing if the payment was not timely made. 

For the next two weeks, defendants’ counsel negotiated settlements with the third-party defendants in a related action to fund the settlement. 

On January 24, 2022, despite plaintiff’s alleged deadline to close the negotiations, plaintiff’s counsel checked in with defendants’ counsel on the settlement status by email. The following day, defendants’ counsel confirmed in an email that “the 45 days is acceptable, and this agreement can be executed.” 

On January 28, 2022, defendants’ counsel updated the Court by email, stating that he was “hopeful that the settlement of the first-party action [would] be finalized next week.”

On February 8, 2022, defendants’ counsel sent another email to the Court, stating that the settlement agreement between plaintiff and defendants had been “finalized” and that counsel were coordinating the parties’ signature on the agreement. In addition, counsel advised that the parties in the main action had agreed to the exchange of general releases. Counsel also advised that the “[t]he only hold up as to the entire main action being discontinued at this time [was] the status of general releases and a discontinuance between my clients and defendant Cox Automotive Inc. against whom my clients have indemnity and contribution crossclaims.” 

The next day, defendants’ counsel emailed plaintiff’s counsel, stating that “we were simply going to discontinue against Cox Automotive” and “having accepted your final draft, we are ready to coordinate signatures. Please let me know how you would like to go about this ministerial step.” 

On February 14, 2022, plaintiff’s counsel renounced the settlement agreement because the settlement “was not concluded timely” and that “time was of the essence and that there was a short window to settle the claims.” Plaintiff’s settlement discussions with defendants were conducted against the backdrop of the Carlyle Group’s then-pending $3 billion acquisition of plaintiff’s portfolio of assets, including its shares in REIT.

Defendants moved to enforce the settlement. Plaintiff opposed, arguing that the settlement was not contained in one writing subscribed by both parties in violation of CPLR § 2104. In that regard, plaintiff noted that defendants never signed the settlement agreement. 

Plaintiff also argued that it did not intend to be bound to a settlement until the draft settlement agreement was signed by both parties. Plaintiff interpreted the January 28, 2022, email to the Court as an acknowledgment that, of that date, the settlement had not been finalized. According to plaintiff, that email contradicted defendants’ contention that a settlement was reached by email three days earlier.

The Court found that the January 25, 2022 email, combined with the attached draft settlement agreement, satisfied CPLR § 2104. “These documents,” said the Court, “contain the entire agreement and counsels’ signatures.” The Court noted that the “execution of releases (or a discontinuance in this case) [did] not change whether the parties [had] an enforceable settlement pursuant to CPLR 2104.”8 

The Court explained that there was no evidence to show that finalization of the settlement was “of the essence” – that is, there was a hard deadline to finalize the settlement because of plaintiff’s sale transaction.9 The Court noted that plaintiff’s counsel “repeatedly adjourned her target dates.” Most significantly, said the Court, the settlement agreement did not contain any deadline to close and the words “time is of the essence” or words to that effect were never used.10

Moreover, the Court noted that an expectation to execute documents does not preclude an earlier agreement; there must be an express reservation not to be bound without a fully executed document.11 The Court found no evidence of an express indication to be bound only upon execution of the settlement agreement. Rather, said the Court, defendants’ counsel’s statement that “[t]his agreement can be executed” on January 25, 2022, was the equivalent of “confirmed” or “we are settled.”12 

Finally, the Court held that “plaintiff’s accepted offer [could not] be revoked after acceptance.”13 

Takeaway

In in Philadelphia Ins. Indemn. Co. v. Kendall, the First Department held that there are two factors the lower courts should consider in determining whether a settlement by email is binding and enforceable: whether there is an authentication issue; and whether the emails contain all the material terms of the settlement.14 In DT Net Lease, as discussed, the first factor was not at issue and the second factor was satisfied.


Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice.

  1. Forcelli v. Gelco Corp., 109 A.D.3d 244, 247-248 (2d Dept. 2013) (internal quotation marks omitted).
  2. Id.
  3. CPLR § 2014.
  4. Forcelli, 109 A.D.3d at 248 (internal quotation marks omitted).
  5. Id. at 249.
  6. Forcelli, 109 A.D.3d at 251.
  7. Philadelphia Ins. Indemn. Co. v. Kendall, 197 A.D.3d 75 (1st Dept. July 8, 2021) 
  8. Slip Op. at *5-*6 (citing, Philadelphia. Ins. lndemn., 197 A.D.3d at 81, and Rawald v. Dormitory Auth., 199 A.D.3d 477 (1st Dept. 2021)).
  9. Id. at *6.
  10. Id.
  11. Id. (citing, Kowalchuk v. Stroup, 61 A.D.3d 118, 123 (1st Dept. 2009) (citations omitted)).
  12. Id. (citations omitted).
  13. Id. at *7 (citing, Kowalchuk, 61 A.D.3d at 122).
  14. 197 A.D.3d at 81.
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