Settlement Agreement Made In Open Court Deemed Invalid For Failure To Enter Into The Record
In Diarassouba v. Urban, 2009 NY Slip Op 09420 (2d Dep't 2009), plaintiff's counsel requested to place a settlement on the record, but the trial court directed him to do so after the jury rendered its verdict. Plaintiff's counsel even pleaded with the trial court, "[w]hy can't we put the agreement to settle the case for $150,000 on the record?" Id. at 3. The trial judge responded, "[b]ecause I said what I have to say. Lets proceed." Id. During plaintiff counsel's attempt to put the settlement on the record, defense counsel simply remained silent. The jury then rendered a verdict in favor of plaintiff for $1.45 million; $800,000 for past pain and suffering and $650,000 for future pain and suffering. Thereafter, defense counsel moved to enforce the purported settlement agreement of $150,000. The trial court granted defendant's motion and enforced the settlement. The trial court's decision was based on its finding that the settlement had been made in open court, with the Judge on the bench, the court reporter and court clerk in attendance, and therefore it was not necessary for the stipulation to be placed on the record. Id. at 2.
Plaintiff appealed and the Appellate Division, Second Department reversed. On appeal, Defendant also argued that plaintiff counsel's attempt to put the settlement on the record constituted an offer of settlement and defense counsel's silence constituted acceptance and, therefore, created a binding contract. Relying upon the rules of contract law, the court found that defense counsel's silence did not constitute acceptance. The Court concluded that "acceptance must be clear and unequivocal and, thus, cannot be ambiguous, as was the alleged assent involved here." Id. Thus, the Court rejected defendant's argument that defense counsel's silence throughout plaintiff's requests to put the settlement on the record communicated his assent to settlement.
Relying on New York's Civil Practice Law and Rules ("CPLR") §2104, the Court held that ". . . a settlement agreement is valid only if both parties stipulate to the settlement in a written agreement or it is made in open court and placed on the record." Id. at 3. The Court stated that a trial court's refusal to allow the parties to put a stipulation of settlement on the record in the moments before the jury's verdict, coupled with defense counsel's failure to acknowledge the agreement on the record, invalidates the settlement, and the jury verdict - nearly ten times the agreed upon settlement - stands. Id.
The Court stated that although CPLR 2104 does not expressly require "a record" when a settlement is made in open court, the Court refused to extend "the open-court exception of CPLR §2104 beyond its intended purpose, so as to include settlements that are not formally recorded on the court record or elsewhere." Id. citing Matter of Dolgin Eldert Corp., 31 N.Y.2d 1, 9 (1972). The Court reasoned that do so ". . .would create ‘issues of fact and creditability among the parties, the presiding Justice, and the court clerk.'" Id. citing Matter of Dolgin Eldert Corp., 31 N.Y.2d at 9. The Court further stated that it will result in additional litigation over the existence and/or terms of settlement agreements, which will run counter to the polices and purpose of the CPLR - - to reduce litigation and create certainty, judicial economy and flexibility to conduct settlement negotiations. Id. at 4 citing Bonnette v. Long Is. Coll. Hosp., 3 N.Y.3d 281, 286 (2004).
Learning Point: A settlement agreement, even when made in open court and in the presence of a judge, clerk and stenographer, must be properly placed on the record and unequivocally agreed to by each party it is intended to bind.