Is It Binding? (Part One)

By: Katryna L. Kristoferson and David Paul Horowitz | May 20, 2024

Introduction

CPLR 2104 is a beautiful thing. Weighing in at a mere 81 words, an agreement between lawyers that comports with the requirements of CPLR 2104 is enforceable by the courts:

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.

Sounds simple, and it is (although part of the rule is, unfortunately, phrased in terms of what will not be a binding stipulation). So why do lawyers struggle with drafting stipulations that are enforceable? A trial decision this month highlights how a seemingly properly crafted mediation settlement agreement ends up being unenforceable, with the result that the lawsuit continues on its merry way. But first, some context.

What the Statute Requires

Open Court

CPLR 2104 provides three paths to an enforceable stipulation.

The first is “one made between counsel in open court.” Simple, except for the “open court” element, which has confused attorneys over the years. As the Court of Appeals has explained:

The term ‘open court’ as it has been used since ancient times and as, it will be suggested, it is used in CPLR 2104, is a technical term in the law. It refers to a judicial proceeding in a court, whether held in public or private, and whether held in the court house, a courtroom, or any place else, so long as it is, in an institutional sense, a court convened, with or without a jury, to do judicial business. Typically, in a court of record an open court has in attendance a clerk who makes entries of judicial events in a docket, register, or minute book, and in modern times there is a court reporter, who makes a record of all the proceedings. An open court is not a ‘judge in chambers’, in the technical sense of that phrase, and it is neither a Judge nor a clerk acting in his proper person anywhere, whether in the courtroom or elsewhere. In re Dolgin Eldert Corp., 31 N.Y.2d 1, 4–5, 286 N.E.2d 228, 229–30 (1972).

The court continued:

Judicial proceedings in ‘open court’, wherever held, including chambers of course, and informal conferences in chambers or robing rooms or even a courtroom are manifestly disparate. Even before full reporting in open court became universal in courts of record, the formality, publicity, and solemnity of an open court proceeding marked it as different from the preliminary atmosphere attached to informal conferences elsewhere. Moreover, the proceedings in open court would always have some formal entries, if only in the clerk’s minutes, to memorialize the critical litigation events. In the latter days, it has also meant an available full transcript beyond dispute and the fallibility of memory.

It’s simple: parties and/or their attorneys reach an agreement before a judge memorialized by a court reporter equals “open court.” That being said, there are extant decisions shoehorning other scenarios into the “open court” construct.

In a First Department decision decided shortly before Dolgin and cited by that court as an estoppel based exception to the “open court” construct a settlement agreement reached at the conclusion of trial was enforced notwithstanding the absence of a court reporter:

After trial to a jury lasting several days both sides rested at about 5:00 P.M. on a Friday. At the court’s suggestion the parties conducted successful settlement negotiations. At about 6:00 P.M. the court was advised that they had reached agreement. By this time the court reporter was unavailable to record the stipulation of settlement. In lieu thereof the Justice made detailed, complete notes of the settlement terms. On the following Monday, the defendant, having had a change of heart, attempted to disavow the settlement and requested that the trial continue to a conclusion. Plaintiff’s counsel dictated the terms of the settlement into the record and stated that defendant’s counsel had telephoned him on Sunday with the sole request to renegotiate the amounts of the initial payment of $10,000, which he refused to do.

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Of course, the better practice is to reduce settlement stipulations to either writing or to enter them in the record in open court. Here, however, there is no dispute that full agreement had been reached, nor is there any dispute as to the terms thereof. A record was made in written notes by the justice in his chambers.

Under the unique facts and circumstances of this case, we hold that there was substantial compliance with CPLR 2104 (citation omitted). Our affirmance herein should in no way be construed as a departure from the requirements of said rule, lest unquestionable settlements be subsequently impugned by one of the consenting parties. Golden Arrow Films Inc. v. Standard Club of California Inc., 38 A.D.2d 813, 814 (1972), lv. granted, Golden Arrow Films v. Standard Club of California, 30 N.Y.2d 486 (1972).

The Court of Appeals did not hear the appeal.

Golden Arrow was cited in a Civil Court decision in 1979, which held that “the underlying purpose of CPLR 2104 [was] substantially complied with and enforced a settlement agreement made on the record at a deposition. Hub Press v. Sun-Ray Lighting, 100 Misc. 2d 1055, 420 N.Y.S.2d 443 (Civ. Ct. 1979). When defendant contested the validity of the settlement as not enforceable under CPLR 2104, the court determined “the stipulation on its face is clear and unambiguous,” and that the unilateral mistake as conceded by defendants “is insufficient to abrogate an otherwise proper stipulation of settlement.”

In explaining their rational, the court discussed the meaning of “open court,” and explained that “the examination before trial was scheduled pursuant to statute and under the aegis of the court (citation omitted). Either party was free to obtain court rulings during the examination or to appropriately move the court regarding the conduct of the examination including a request that the court actually monitor the examination (citation omitted).

Such examinations are frequently conducted at the court but the fact that for the convenience of the parties it was held at defendants’ attorney’s office does not diminish the authorization of the court. Defendant was personally present, made no objection to the settlement stipulation, the stipulation was recorded contemporaneously, reduced to writing, is concededly accurate and is unambiguous. Solemnity, formality and accuracy have been satisfied and the underlying purpose of CPLR 2104 has been substantially complied with.”

Both Golden Arrow and Hub were cited in a Supreme Court decision where the plaintiff moved to enforce an oral settlement, which had been reported to the court by defendant, and settlement papers had been signed by plaintiff, not defendant. A. J. Tenwood Associates v. United States Fire Insurance, 104 Misc. 2d 467 (Sup. Ct. 1980). The parties reached an oral settlement of the matter of $350,000, a few days prior to jury selection. Thereafter, defendant reported the settlement to the court, and forwarded settlement documents, including assignment, release and guarantee to the plaintiff. Plaintiff executed and returned the papers to defendant’s counsel in escrow pending delivery to plaintiff of a check in the settlement.

Plaintiff alleges, without contradiction from defendant, that counsel advised the settlement check had been sent. The check had not been sent, and prior to remitter of the check, defendant became aware that the plaintiff had been indicted by a “Federal Grand Jury for allegedly taking kickbacks from the contractor whose nonperformance precipitated the instant action on the performance bond. Defendant then advised plaintiff that it would not honor the agreement of settlement.”

Despite the settlement agreement not been evidenced by a writing subscribed to by defendant, or one made in court, the Tenwood court determined “that the settlement stipulation must be enforced based upon the unique facts of this case,” noting “the attorney for the repudiating defendant prepared documents which conformed to the oral settlement agreement, and transmitted them to the attorney for the movant under circumstances which clearly justified the recipient’s assumption that after their execution and return, an agreement would be formally consummated, and the settlement proceeds forthcoming.”

We do not advise relying on these decisions, each of which describes their underlying facts as “unique.” But their reasoning may be helpful when a Hail Mary pass is in order.

Writing Subscribed

The second path is “in a writing subscribed by him or his attorney.” The Court of Appeals in Dolgin explained this requirement dates to 1796, and this is the mechanism most frequently employed by attorneys to effectuate stipulations.

A decision this month by Queens County Supreme Court Justice Tracy Catapano-Fox highlights a crucial element that can void a writing that conforms to CPLR 2104. In Nieves v. Mt. Sinai Queens Hospital, 2024 NY Slip Op 24135 (Sup. Ct., Queens Cty. 2024), the parties engaged in a private mediation in a wrongful death action and, after a settlement was agreed to, entered into a post-mediation settlement agreement, the terms of which were confidential. At the mediation, plaintiff’s counsel represented that there was no Medicare lien, based upon a “no lien” letter obtained from CMS, the entity responsible for enforcing Medicare liens for monies expended by the government.

On the same day that the Surrogate issued a final decree and approved the settlement, defendants forwarded a letter from The Rawlings Company regarding an Aetna-Medicare Advantage lien totaling approximately $907,000.00. The next day plaintiff’s counsel advised they would be moving to vacate the settlement, and made an applications to do so in Surrogate’s Court, which stayed the motion pending a determination of defendants’ motion in Supreme Court to enforce the settlement and plaintiff’s cross-motion to vacate the settlement agreement. Plaintiff argued:

[T]hat the agreement should be vacated because the parties were unaware of the Aetna Medicare lien at the time of the mediation. She argues that vacatur of the agreement because of a mutual mistake is proper, and the lack of any actual knowledge regarding a substantial lien has been recognized by the Second Department as a basis to vacate a settlement.

Catapano-Fox noted:

[S]ince settlement agreements are subject to the principles of contract law, ‘for an enforceable agreement to exist, all material terms must be set forth and there must be a manifestation of mutual assent’ (citation omitted)…An agreement may also be rescinded based on a mutual mistake by the parties when the agreement, in some material respect, does not represent the meeting of the minds of the parties (citation omitted). In that situation, the party moving for vacatur of the agreement must demonstrate that the mistake existed at the time the settlement was entered into by the parties (citation and parenthetical omitted).

In opposition:

Defendants’ arguments focus on whether the post mediation agreement constituted an enforceable settlement, which under the facts presented, might not clearly fit the requirements of CPLR §2104. However, this analysis is irrelevant because here it is undisputed that the parties intended for the post mediation agreement to constitute a binding, enforceable settlement. Based upon the email communications between the parties and orders obtained in Surrogate’s Court, it is evident that both parties demonstrated a clear, unequivocal intent to settle this action for the terms in the agreement.

Finding that “[p]laintiff demonstrated that the post mediation agreement was based on a mistake and did not represent a true meeting of the minds” and that “[d]efendants demonstrated that plaintiff testified about the existence of Aetna Medicare insurance at her deposition, and correctly noted that it was incumbent on plaintiff to pursue this potential lien prior to entering into the mediation,” Catapano-Fox concluded:

[A] plain reading of the case law shows that the mutual mistake, the Aetna Medicare lien, existed at the time of the mediation and was so substantial that the post mediation agreement failed to represent a true meeting of the parties’ minds (citation omitted). Plaintiff presented affidavits from decedent’s children Jennifer Ruiz and David Nieves, who stated they agreed to the settlement terms without knowledge of any liens, and would not have assented to the settlement if aware of the substantial Aetna Medicare lien that would severely diminish the estate’s share of the settlement (citation omitted). The email exchanges between counsel also demonstrate that neither party was aware of the existence of the Medicare lien prior to or at the time of the mediation. Therefore, plaintiff demonstrated that vacatur of the settlement based upon mutual mistake is warranted.

Both parties cited a 2003 Second Department decision, Mahon v. New York City Health & Hospitals, 303 A.D.2d 725 (2^nd Dep’t 2003), in support of their respective positions, where the court held:

In order to vacate the stipulation of settlement on the ground of mutual mistake, the plaintiff was required to demonstrate that the mistake existed at the time the stipulation was entered into and that it was so substantial that the stipulation failed to represent a true meeting of the parties’ minds (citations omitted). The plaintiff met this burden, as she established that none of the parties considered the impact of a potential Medicaid lien in negotiating the settlement and that therefore there was no true meeting of the parties’ minds with respect to the amount of damages. Moreover, under these circumstances, enforcement of the stipulation would be unjust (citations omitted).

There are additional facts and relevant case law set forth in the Nieves decision and it warrants a close reading. Bookmark it as a tutorial on the impact mutual mistakes may have on an otherwise enforceable stipulation.

Conclusion

The saying “not worth the paper it is written on” is apt when it comes to non-conforming stipulations and conforming stipulations based on, inter alia, mutual mistake. In our next column we will discuss additional considerations in drafting an enforceable stipulation as well as the third path, “reduced to the form of an order and entered.” Until then, stipulators beware.

Please see ALM.com for the full printed article.