Hitting ‘Send’ May a Settlement Make: An Analysis of Philadelphia Insurance Indem. Co. v. Kendall
2.11.2022
Litigators, like all lawyers, routinely utilize emails to communicate with opposing counsel on the full range of matters that may arise in a lawsuit. In this, the third decade of the 21st century, the notion of typed, signed and mailed physical correspondence is a fading memory, if a memory at all, for most practitioners in most circumstances. What, then, is the consequence of counsel exchanging emails with agreed settlement terms when the emails contain at most an automatically pre-populated “signature” block but no deliberate retyping of the attorney’s name akin to a “signature”? Would an exchange of such emails constitute an enforceable settlement in accord with the requirement of Rule 2104 of the New York Civil Practice Law and Rules that a binding agreement in a case must be “subscribed” by counsel or the parties, if not made in open court or reduced to an order?
Notably, the New York Court of Appeals has not yet addressed whether emails satisfy the subscription requirement of CPLR 2104 for purposes of a binding settlement, but courts of the Appellate Division, First and Second Departments, have considered the question and, until recently, were in accord in their approach. However, the First Department recently announced a departure from its prior precedent, and that of the Second Department, in Philadelphia Ins. Indem. Co. v. Kendall,[1] an opinion authored by Justice Peter H. Moulton for a four-member panel.[2] In Philadelphia Insurance, the First Department clarified that the fact of the transmission of an email, and not whether it displays an email “signature,” is what determines that a settlement stipulation has been subscribed for purposes of CPLR 2104. The decision highlights yet another reason for care, forethought and intentionality by counsel when hitting “send” for an email in the course of litigation.
The “Subscription” Requirement of CPLR 2104
Under New York law, a settlement must comply with CPLR 2104, which provides in pertinent part:
“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.”
In the absence of a settlement agreement made in open court or reduced to the form of an order and entered, New York courts have strictly interpreted the requirement that the agreement be in writing and “subscribed” by the party or counsel. Although the New York Court of Appeals has yet to address the issue, courts of the Appellate Division have held over the years that email communications between counsel can constitute a binding settlement, where counsel physically subscribed or typed their name into the email.[3] In particular, in Forcelli v. Gelco Corp., the Second Department held that:
“where, as here, an email message contains all material terms of a settlement and a manifestation of mutual accord, and the party to be charged, or his or her agent, types his or her name under circumstances manifesting an intent that the name be treated as a signature [“Thanks Brenda Greene” typed at the end of the email], such an email message may be deemed a subscribed writing within the meaning of CPLR 2104 so as to constitute an enforceable agreement.”[4
The First Department’s recent decision in Philadelphia Insurance marked a departure from that court’s earlier agreement with the Second Department’s approach in Forcelli, and signaled instead that the key to whether an agreement is subscribed for purposes of CPLR 2104 in the case of email is the fact of the transmission and not whether counsel retyped her or his name.
The Philadelphia Insurance Decision
The Dispute: Timing Is Everything
The First Department’s analysis stemmed from an automobile accident in 2014 involving respondent Erika Kendall and non-party Khalilah T. Martin. Kendall was driving her employer’s car during the collision. Martin’s automobile liability insurance policy limits were lower than those in the insurance policy held by Kendall’s employer, issued by the petitioner-appellant in the case, Philadelphia Insurance Indemnity Company. Kendall settled her personal injury claim against Martin for $25,000 (the maximum amount under Martin’s policy), and then made a claim under the Supplementary Underinsured Motorist benefit provision in the employer’s automobile policy with Philadelphia Insurance.[5] Kendall and Philadelphia Insurance arbitrated their dispute in August 2019 before the American Arbitration Association.
The parties engaged in settlement discussions prior to, during and after the arbitration hearing. On Sept. 16, 2019, the arbitrator issued her decision and awarded Kendall $975,000. Although the arbitrator’s decision was emailed to Kendall’s attorneys and faxed to Philadelphia Insurance’s attorneys, neither counsel received the decision. Instead, they continued settlement negotiations, agreeing to a settlement of $400,000 on Sept. 19, 2019. To memorialize the agreement, Kendall’s counsel emailed Philadelphia Insurance’s counsel stating: “Confirmed – we are settled for 400K.” The email was signed “Sincerely,” and followed by Kendall’s email signature block with counsel’s name and contact information. That same day, Philadelphia Insurance’s counsel responded and attached a release and trust agreement and stated: “Get it signed quickly before any decision comes in, wouldn’t want your client reneging.” Kendall’s counsel replied: “Thank you. Will try to get her in asap.” This was again followed by “Sincerely,” and the counsel’s email signature block.
Before signing the release and trust agreement, Kendall’s counsel, meanwhile, received the arbitrator’s decision and demanded payment of the amount awarded, $975,000, and declined the $400,000 settlement amount. Philadelphia Insurance initiated special proceedings in the New York Supreme Court for New York County seeking enforcement of the settlement agreement and vacatur of the arbitration award.
The motion court (Hon. Lynn R. Kotler, J.) rejected Philadelphia Insurance’s petition and denied enforcement of the settlement agreement, finding that failure to sign the release was a necessary occurrence to complete the settlement and that the email sent by Kendall’s counsel was not “sufficient to satisfy CPLR 2104 as it does not appear to be subscribed . . . nor does it contain all the material terms of a settlement agreement between the parties[.]”[6] Relying on the Second Department’s Forcelli analysis, which indeed was at that time consistent with the First Department’s own precedent, the Supreme Court reasoned that (i) the emails were “followed by prepopulated text” and, therefore, they were not subscribed by Kendall’s attorney; and (ii) “the only term the parties seemed to agree upon was a sum of money” and the email from Philadelphia Insurance’s counsel evidenced that further things were needed to finalize the settlement and “an understanding that the settlement may not be binding.”[7]
Philadelphia Insurance appealed the trial court’s rejection of the settlement agreement. The First Department held that the email exchange constituted an enforceable settlement under CPLR 2104, and thereupon reversed the Supreme Court’s decision and directed that the insurer’s petition to enforce the settlement and to vacate the arbitral award be granted.
The “Subscription” Requirement: What Really Matters
The First Department noted that although the Court of Appeals has not opined on whether emails can satisfy CPLR 2104, in 1996 the court found in Parma Tile Mosaic & Marble Co. v. Estate of Short that a fax message with a prepopulated name did not satisfy CPLR 2104.[8] The First Department concluded that this 25-year-old authority was not controlling, because “the Parma court wrote in a different era, when paper records were still an important modality. . . . Since that time, the electronic storage of records has become the norm, email has become ubiquitous, and statutes allowing for electronic signatures have become widespread.”[9]
The First Department addressed head-on the Second Department’s Forcelli, holding that emails between counsel could constitute a binding settlement agreement under CPLR 2104 where the attorney’s name was retyped, and the court noted that “cases have found that an email in which a party’s or its attorney’s name is prepopulated in the email is not sufficiently subscribed for purposes of CPLR 2104[.]”[10]
The First Department acknowledged that the motion court’s finding that the retyping of a name was required for an email to be “subscribed” was “in accord with precedent of this Court.” Reversing the motion court, the First Department took the opportunity to “write to clarify that 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,” finding that the email communications at issue satisfied CPLR 2104. The court declared, “We now hold that this distinction between prepopulated and retyped signatures in emails reflects a needless formality that does not reflect how law is commonly practiced today. It 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.”[11]
The court also considered whether the email “signature” complied with § 304(2) of New York’s Electronic Signatures and Records Act, which provides that “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.”[12] The court looked to the statutory definition of “electronic signature,” which it found to be “extremely broad”: “an 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.”[13]
Finally, the court considered the ethical obligations of attorneys under New York’s Rules of Professional Conduct and was persuaded that these “obligations help to ensure that an attorney considers their authority before communicating settlement offers and acceptances to opponents, whatever the mode of communication.”[14]
For these reasons, the First Department concluded 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.”[15]
The Email Still Must Satisfy the Material Terms Requirement
The First Department made clear that “[w]hile we jettison the requirement that a party or a lawyer retype their name in email to show subscription, that does not mean that every email purporting to settle a dispute will be unassailable evidence of a binding settlement[,]” reminding in particular that “an email settlement must, like all enforceable settlements, set forth all material terms.”[16] The court found this requirement was satisfied because counsel’s email set forth “the sum of money” that the insurer would pay Kendall, the only material term, and Kendall’s execution of a general release was just further documentation of the agreement and “a ministerial condition precedent to payment[.]”[17]
Be Sure Before Hitting “Send” and Know What “Send” May Mean
In Philadelphia Insurance, the First Department has taken a pragmatic approach to the application of CPLR 2104 to settlement agreements made by emails. The court looked to the parties’ intent – as evidenced through their counsel’s conduct rather than a formulaic prescription – to find a binding settlement. With changes in technology come changes in practice and practical consequences. Counsel engaging in settlement discussions by email must carefully consider their language and the consequences of hitting “send.”
Steven M. Bierman is a mediator and arbitrator of commercial and other disputes and principal of Bierman ADR, and previously was a litigation partner of Sidley Austin LLP in New York. Gaëlle E. Tribié is a senior managing associate at Sidley Austin LLP in New York, where she focuses on commercial litigation and arbitration. This article appears in a forthcoming issue of “New York Dispute Resolution Lawyer,” the publication of the Dispute Resolution Section. To learn more about this section, please see NYSBA.ORG/DISPUTE.
[1] 151 N.Y.S.3d 392 (1st Dep’t 2021).
[2] Presiding Justice Rolando T. Acosta, Justice Sallie Manzanet-Daniels and Justice Saliann Scarpulla concurred.
[3] See, e.g., Herz v. Transamerica Life Ins. Co., 99 N.Y.S.3d 664, 665 (2d Dep’t 2019) (“Here, the emails were subscribed by counsel, set forth the material terms of the agreement—the acceptance by the plaintiff’s counsel of an offer in the sum of $ 12,500 to settle the case in exchange for a release in favor of Transamerica—and contained an expression of mutual assent”); Forcelli v. Gelco Corp., 972 N.Y.S.2d. 570, 575-76 (2d Dep’t 2013); Williamson v. Delsener, 874 N.Y.S.2d 41, 41 (1st Dep’t 2009) (“The 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 . . . and entitle plaintiff to judgment”) (citation omitted).
[4] Forcelli v. Gelco Corp., 972 N.Y.S.2d 570, 575–76 (2d Dep’t 2013).
[5] Philadelphia Ins. Indem. Co. v. Kendall, 151 N.Y.S.3d 392, 394 (1st Dep’t 2021).
[6] Philadelphia Ins. Indem. Co v. Kendall, No. 657200/19, 2020 WL 2842551, at *1 (Sup. Ct., N.Y. Co. May 27, 2020) (citations omitted).
[7] Id. at *1–2; see also Forcelli v. Geico Corp., 972 N.Y.S.2d 570 (2d Dep’t 2013); Jimenez v. Yanne, 55 N.Y.S.3d 652 (1st Dep’t 2017).
[8] See Philadelphia Ins. Indem. Co., 151 N.Y.S.3d at 395 (citing Parma Tile Mosaic & Marble Co. v. Estate of Short, 87 N.Y.2d 524 (1996)).
[9] Id.
[10] Id. at 396 (citing Bayerische Landesbank v. 45 John St. LLC, 960 N.Y.S.2d 64 (1st Dep’t 2013), lv dismissed, 22 N.Y.3d 926 (2013) and LIF Indus., Inc. v. Fuller, 2015 WL 1744814, at *6 (Sup. Ct., N.Y. Co. Apr. 16, 2015)).
[11] Id.
[12] ESRA § 304(2).
[13] N.Y. State Tech. Law § 302.
[14] See Philadelphia Ins. Indem. Co., 151 N.Y.S.3d at 397 (citing New York’s Rules of Professional Conduct (22 N.Y.C.R.R. § 1200.0) Rule 1.2(a) and Rule 1.4(a)(iii)).
[15] Id. at 396.
[16] Id. at 397.
[17] Id.; see also id. at 398 (“respondent’s execution of a general release was essentially a ministerial condition precedent to payment”).
Copy Direct Link
Source
Copy Link
