Commercial Division Blog
Posted: December 29, 2018 / Categories Commercial, Court Rules/Procedures, Settlements
Written Agreement Requirement of CPLR 2104 Does Not Apply to Pre-Litigation Settlements
On November 8, 2018, Justice Hudson of the Suffolk County Commercial Division issued a decision in Walter Boss, Inc. v. Roncalli Freight Co., Inc., 2018 NY Slip Op 51891(U), holding that CPLR 2104's requirement that a stipulation of settlement be in writing does not apply to the settlement of disputes before litigation, explaining:
CPLR 2104 . . . states:
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. With respect to stipulations of settlement and notwithstanding the form of the stipulation of settlement, the terms of such stipulation shall be filed by the defendant with the county clerk.
In support of this contention, Ms. Blair draws the Court's attention to the holding in Forcelli v. Gelco Corp., 109 AD3d 244, 250, 972 N.Y.S.2d 570 (2nd Dept. 2013, Sgroi J) where the Court held:
It is, of course, axiomatic that a letter can be considered subscribed, since letters are usually signed at the end by the author thereof. However, email messages cannot be signed in the traditional sense. Nevertheless, this lack of subscription in the form of a handwritten signature has not prevented other courts from concluding that an email message, which is otherwise valid as a stipulation between parties, can be enforced pursuant to CPLR 2104. In the case of Williamson v Delsener(59AD3d 291, 291 ), the Appellate Division, First Department, stated that e-mails exchanged between counsel, which contained their printed names at the end, constitute signed writings (CPLR 2104) within the meaning of the statute of frauds. In the case of Brighton Inv., Ltd. v Har-Zvi(88 AD3d 1220, 1222 ), the Appellate Division, Third Department, stated that an exchange of e-mails may constitute an enforceable contract, even if a party subsequently fails to sign implementing documents, when the communications are sufficiently clear and concrete to establish such an intent" (internal quotation marks omitted).
Ms. Blair also asks the Court to apply the rule in Diarassouba v. Urban, 71 AD3d 51, 57, 892 N.Y.S.2d 410 (2nd Dept. 2009) in which the Court set forth that:
Notwithstanding the Supreme Court's assertion that an agreement is an agreement, a settlement agreement must still be reduced to writing in order to have binding effect on the parties. For example, in Van Syckle v Powers (106 AD2d 711 ), the attorneys made an oral settlement agreement and the defendant signed all the necessary documents. Before the plaintiff signed the documents, the plaintiffs' attorney asked to hear the jury's verdict. The court informed the attorney that the verdict could not be heard if there already was a settlement and, consequently, the Plaintiff's attorney disavowed the settlement. After the jury read its verdict, which was significantly in excess of the oral settlement agreement, the plaintiff refused to sign the settlement papers. The Appellate Division, Third Department, declined to enforce the purported settlement as it had not been agreed to in writing by both parties.
Counsel's reliance on Diarassouba is most telling. In addition to the passage above which was quoted in Defendant's Post Trial Memorandum, the Appellate Court had preceded the above statement by noting at page 56:
The open-court exception to CPLR 2104 was created in order to codify the previously existing practice of enforcing oral stipulations that were made in open court in the course of judicial proceedings.
In contrast to the case at bar, the subject matter of both Diarassouba and Forcelli were settlements of pending litigation.
We draw Counsel's attention to the particular language in Rule 2104 which indicates its limitations when it states: relating to any matter in an action. The claims that the Boss Parties could make against the EVK Parties were not the subject of a pending law suit. Mr. Boss had not filed any papers to claim breach of contract for the EVK Parties' failure to compensate the Boss companies for labor and goods. This contract therefore was not to settle a lawsuit but a settlement of potential lawsuits.
CPLR 2104 does not by its terms apply outside actions or special proceedings, and would seem not to be applicable to administrative proceedings unless the applicable rules or statute cross reference to CPLR rules This leaves open to possible enforcement a whole range of other agreements not within the subset.
It has been held that CPLR 2104 is not applicable to agreements reached in an administrative proceeding. The Defendants seek to have this Court extend its reach even further, to settlements reached in pre-litigation negotiations. We decline to do so.
(Internal quotations and citations omitted) (emphasis added).
The courts favor voluntary settlements of disputes; indeed, most complex commercial litigations settle before trial. As discussed in this decision, the CPLR requires such settlements to be in writing. What the court finds here is that requirement does not apply to settlements of disputes occurring before a lawsuit has begun. Contact Schlam Stone & Dolan partner John Lundin at email@example.com if you or a client need help settling an action.