‘It Is Hereby … ‘ Can Emails Create a Binding Stipulation?

By: Katryna L. Kristoferson and David Paul Horowitz | July 17, 2023

Introduction

Growing up we were taught there are basic tasks we are expected to master in order to live in a civilized society: respect elders, don’t slurp your soup, and always use the Oxford comma (but see Vampire Weekend).

Growing up as lawyers there were corollary tasks we were expected to master: respect judges, dress appropriately for court, and know how to draft a binding, judicially enforceable stipulation. This last, seemingly simple task, is often done incorrectly, rendering the document, well, not worth the paper it’s written on.

Matter of Eckert, 2023 NY Slip Op 03270 (3d Dep’t 2023), a recent Third Department decision, the court split 3-2 on whether a series of email constituted a binding stipulation. The decision both recites the basic rules and highlights the risk of getting it wrong.

‘Matter of Eckert’

In a Surrogate’s Court proceeding for letters of administration, the decedent’s spouse and daughter each petitioned to be appointed administrator, the daughter commenced an action in Supreme Court for an order declaring decedent and the wife’s marriage null and void on the basis that decedent lacked the mental capacity to marry the wife, and then commenced yet another action in Supreme Court against the wife alleging conversion, undue influence, lack of mental capacity, unjust enrichment and constructive trust in relation to decedent’s nonprobate retirement accounts which was ultimately assigned to Surrogate’s Court.

The parties were referred to ADR. Shortly after the ADR session, counsel for the daughter sent an email to counsel for the wife, “‘to follow up on the settlement reached at mediation,’ which involved the wife paying the daughter $515,000, setting forth an outline of the terms of the alleged agreement and asserting that he would prepare a draft settlement agreement.” In response, counsel for the wife replied, “asking the daughter’s counsel to ‘leave the timing of payment ‘open’ and providing additional terms.’”

Thereafter, counsel for the daughter sent the draft release to counsel for the wife. After three weeks, counsel for the wife responded advising that “the wife could not settle on the proposed terms as liquidating decedent’s retirement accounts would have ‘enormous’ tax consequences.” Following this exchange, counsel for the daughter moved to enforce the settlement, claiming that the agreement was memorialized in the email exchange. The motion was opposed on the grounds that the parties did not reach a settlement. The Surrogate’s Court granted the motion and determined that “the parties had entered into a binding settlement agreement.”

On appeal, the Third Department reversed holding that the “Surrogate’s Court erred in finding that a binding agreement was formed, as the parties did not mutually assent to all material terms.”

The majority decision authored by Justice Clark first recited the policy reasons favoring judicially enforceable stipulations:

As the Court of Appeals has explained, “if settlements, once entered, are to be enforced with rigor and without a searching examination into their substance, it becomes all the more important that they be clear, final and the product of mutual accord. These concerns obviously lie at the heart of CPLR 2104, a neutral statute enacted to promote certainty in settlements, which benefits all litigants.”

The majority in Eckert outlined the procedural requirements to be followed in order to create a judicially enforceable stipulation of settlement:

To be enforceable, stipulations of settlement require more than just an agreement among the parties. Once the parties to an active litigation reach an agreement, they must place the material terms of such agreement on the record in open court, reduce them to a court order which is then signed and entered or contain them in a writing subscribed by the parties or their counsel.

As is often the case in parsing the law, determining what constitutes “material terms” to create a judicially enforceable stipulation of settlement is always clearly enunciated [defined?], and therefore there can be disagreement whether the required terms are included in a stipulation.

In Eckert, the court explained its reasons for determining that the email exchange was not binding:

Following the initial email, the wife’s counsel responded, asking the daughter’s counsel to ‘leave the timing of payment open’ in the draft settlement, and he suggested additional terms for the draft. Following the long-standing principle that ‘where the recipient of an offer is under no duty to speak, silence, when not misleading, may not be translated into acceptance merely because the offer purports to attach that effect to it,’ such response did not constitute assent. Indeed, the record is devoid of any indication that the wife’s counsel assented to the terms outlined in the initial email or in the subsequent draft settlement agreement. As such, the parties never reached the requisite meeting of the minds as to all material terms and a binding agreement was never formed.

To the extent that the daughter’s counsel asserts that the initial email set out an overview of the material terms to which the parties agreed during the ADR session, we note that such verbal out-of-court agreements are insufficient to form the basis for a stipulation of settlement. The initial email and the subsequent correspondence also fail to establish that the parties reached an agreement.

Although the daughter argues that this court should find an enforceable agreement because the parties cancelled certain depositions, this is not the type of detrimental reliance that excuses compliance with CPLR, and the parties are free to reschedule such depositions upon remittal, if they so choose. For these reasons, we reverse the order on appeal, deny the daughter’s motion and restore the proceedings and actions for further proceedings.

Justice McShan wrote the two-justice dissent, first discussing how a series of writings, in this case, emails, can create a binding stipulation:

A set of subscribed writings between parties to an action that discusses the possibility of settlement may constitute a binding agreement, provided that the discussions set forth all material terms and contain a manifestation of the parties’ mutual assent to be bound, we must look beyond ‘either party’s subjective intent, as the determination must be based on the objective manifestations of the intent of the parties as gathered by their expressed words and deeds.’ To this end, ‘[a]ssent can be manifested by words or circumstances, but a mere determination of the mind unacted on can never be acceptance.’

The dissent outlined how the email exchange reflected all material terms:

At the outset, it is our view that the primary contention of respondent (hereinafter the wife) that the email exchange did not contain all material terms is simply reflective of her buyer’s remorse incurred after the consequences of the agreement became clear. The initial email from counsel for petitioner (hereinafter the daughter) following the alternative dispute resolution session provided that a $515,000 payment would be made by certified check within 20 days of a signed discontinuance. That email further noted that the daughter could ‘be flexible on payment dates to minimize tax implications,’ and that she would be ‘willing to work in good faith to ensure that tax treatment is minimized by timing.’ In response, the wife’s counsel sent a subscribed email the following day, making no mention of any of the other terms beyond the timing of the payment, in which he specifically replied: “Leave the timing of payment open until we have more information.” Approximately three weeks after the daughter’s counsel sent over a draft settlement agreement, the wife’s counsel advised that they had engaged in significant research and discussions with tax professionals, and that ‘certain tax issues … had come up in connection with the potential settlement.’ Specifically, the wife’s counsel noted that liquidation of the assets at issue—namely, the decedent’s retirement accounts—”would trigger an enormous tax regardless of what year it is done” (emphasis added), and, therefore, the wife could not settle on the agreed-upon terms.

The dissent discussed, and rejected, the argument that the payment terms were material and found unpersuasive the claim that the “timing [of the payment] was material to the parties’ settlement agreement:

In turn, because we believe that the material terms were included within the initial email from the daughter’s counsel, we find it clear from the wife’s counsel’s response that she had assented to the settlement agreement. Our colleagues accurately note that silence cannot constitute acceptance of an offer absent a duty to speak. However, in our view, the circumstances before us do not require that we divine the wife’s acceptance in the absence of any response. To the contrary, in this instance, we may look to the responsive email from the wife’s counsel that offered no objection to the terms set forth in the initial email from the daughter’s counsel, including the total settlement figure, and simply addressed the daughter’s willingness to work with the wife to minimize the tax consequences of the agreed-upon cash payment. It could therefore be reasonably inferred by the daughter’s counsel that the wife’s counsel’s response conveyed a manifestation of assent to be bound by the terms set forth in the initial email. As we believe the parties’ email exchange constitutes a valid settlement, we would affirm.

The Basics

A judicially enforceable stipulation, whether of settlement or related to some other aspect of a litigation, is a beautiful thing. CPLR 2014 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. 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.

Bonnette v. Long Island College Hospital, 3 N.Y.3d 281, 785 N.Y.S.2d 738 (2004), cited by the majority, illustrates the danger of failing to comply with CPLR 2104. Bonnette was a medical malpractice action in which the parties reached an agreement to settle the action for $3 million, which was to include a structured settlement. No written stipulation of settlement pursuant to CPLR 2104 was executed. Settlement was delayed by plaintiff’s counsel’s efforts to reduce a Medicaid lien and to obtain an annuity plan, during which time the infant on whose behalf the action was commenced died, whereupon the hospital refused to honor the settlement agreement because a CPLR 2104 stipulation was lacking, the settlement agreement was not enforceable.

The plaintiff moved to enforce the settlement by motion in the existing action, and in opposition the hospital did not dispute that the understanding had been reached, nor did it dispute what the terms were to have been, arguing that it could not be bound by the terms since the understanding had not been reduced to writing. Supreme Court granted the plaintiff’s motion, and the Appellate Division reversed, holding that under the circumstances the hospital was within its rights to withhold its consent to the settlement. The Court of Appeals affirmed. To be enforceable, CPLR 2104 requires that the settlement agreement conform to one of the methods set forth in the statute. While the correspondence between the plaintiff and the hospital demonstrated that an agreement had been reached, it did not set forth all of the material terms and was not enforceable. Neither the doctrines of substantial compliance with CPLR 2104 nor equitable estoppel were sufficient to take the case out of the usual rule. The Court noted that the rule regarding stipulations is necessary to prevent endless satellite litigation over whether settlements have been reached, and on what terms.

Stipulating by Email

Stipulations have been with us as technology evolved from papyrus to parchment to paper. Fast forward to today, and emails are often the vehicle for stipulations.

Eckert involved an exchange of emails. In Forcelli v Gelco, 109 AD3d 244 (2d Dept, July 24, 2013), cited in the dissent, the Second Department joined the First and Third Departments (the Fourth Department is in accord, see Ehlenfield v. Kingsbury, 206 A.D.3d 1671 (4th Dep’t 2022)) in holding that when “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, such an email message may be deemed a subscribed writing within the meaning of CPLR 2104 so as to constitute an enforceable agreement.”

Stipulating by Emoji?

In a recent Canadian case arising out of a contract dispute, the court determined that the use of a thumbs up emoji “👍,” was “a valid way to convey the two purposes of a “signature.” See South West Terminal v. Achter Land & Cattle, 2023 SKKB 116 (Swift Current, Canada 2023). The court explained its determination under applicable law:

Additionally, I find under these circumstances a thumbs-up emoji is “an action in electronic form” that can be used to allow to express acceptance as contemplated under The Electronic Information and Documents Act, 2000, SS 2000, c E-7.22 [EIDA] as per s. 18:

18 (1) Unless the parties agree otherwise, an offer or the acceptance of an offer, or any other matter that is material to the formation or operation of a contract, may be expressed:

by means of information or a document in an electronic form; or

by an action in an electronic form, including touching or clicking on an appropriately designated icon or place on a computer screen or otherwise communicating electronically in a manner that is intended to express the offer, acceptance or other matter.

(2) A contract shall not be denied legal effect or enforceability solely by reason that information or a document in an electronic form was used in its formation.

Looking forward as relates to technology and the use of emojis, the court also noted:

Counsel for Achter remonstrates that allowing a simple thumbs-up emoji to signify identity and acceptance would open up the floodgates to allow all sorts of cases coming forward asking for interpretations as to what various different emojis mean—for example what does a “fist bump” 👊 emoji mean or a ”handshake” 🤝 emoji mean, etc. Counsel argues the courts will be inundated with all kinds of cases if this court finds that the thumbs-up emoji can take the place of a signature. This appears to be a sort of public policy argument. I agree that this case is novel (at least in Saskatchewan) but nevertheless this court cannot (nor should it) attempt to stem the tide of technology and common usage—this appears to be the new reality in Canadian society and courts will have to be ready to meet the new challenges that may arise from the use of emojis and the like.

As technology evolves, and communications change, its hard to say what will be construed as acceptance to contracts, or stipulations of settlement.

Conclusion

BTW, do we really need to start a stipulation with “It is hereby stipulated and agreed?” We always try and parse words and are on the lookout for unnecessary duplication. Turns out, we think you do (thank you, Oxford Dictionary of English):

stipulated /ˈstɪpjʊleɪtɪd / ▸ adjective demanded or specified, typically as part of an agreement: the stipulated time has elapsed.

agreed /əˈɡriːd / ▸ adjective [attributive] discussed or negotiated and then accepted by all parties: the agreed date. ▪ (of two or more parties) holding the same view or opinion on something: all the republics are agreed on the necessity of a common defence policy [with clause] we are agreed that what is needed is a catchy title.

CPLR 2104 is a powerful tool, when used properly. Use it properly.