Is It Binding? (Part Three)

By: Katryna L. Kristoferson and David Paul Horowitz | July 16, 2024

Introduction

Our last two columns have discussed CPLR 2104 and focused on how to create a binding and enforceable stipulation under the statute. Having addressed the mechanics of the three statutory methods, there remain a number of practical considerations when drafting and/or seeking enforcement of stipulations.

Equally important as understanding the express requirements of CPLR 2104 is understanding what should, and should not, be in a stipulation. For this, we leave the statute behind and look to case law. As discussed infra, the determination as to whether a stipulation contains the necessary material terms is a fact specific determination.

Even lawyers who are chronic shirkers understand the advantage to be gained by undertaking the work involved in doing the initial drafting of a stipulation. But drafters beware: even without executing a stipulation you drafted, it may be enforced against their client.

Required Contents / Material Terms

Readers of this column already know we always recommend that you do your own, independent research on any legal topic, especially one as fraught as drafting a bullet-proof stipulation. When utilizing any legal resource, including this column, recall the oft voiced maxim of President Reagan: “doveryay, no proveryay.”[i] Whether or not a stipulation contains the necessary “material terms” is a sui generis determination. There is no “one size fits all answer,” what is material will depend greatly on the specific facts of your case and the nature of the stipulation itself. As Weinstein, Korn and Miller cautions:

Whether a particular stipulation of settlement is valid requires a close reading of the decisions, for the question will often depend on other factors besides the applicability of CPLR 2104, such as whether the stipulation should be enforced regardless of its compliance with the rule because of a party’s reliance on it, and whether it is “a complete agreement, definite and intended to be binding,” or merely an agreement to agree. Thus, for example, an oral stipulation extending a defendant’s time to answer has been upheld when there was reliance upon the agreement. The distinction traditionally made between an “executory accord” and a “superseding agreement” appears to have been modified by Court of Appeals decisions.

4 New York Civil Practice: CPLR P 2104.03 (2024)(citations omitted).

While this specific commentary is focused on stipulations of settlement, the warning that determining if a particular stipulation is valid “requires a close reading of the decisions,” applies to all stipulations, not just those regarding settlement.

“This Rule Is Of Somewhat Ancient Origin”

In 1895, denying the enforcement of an oral stipulation, the Court of Appeals in Mutual Life Ins. Co. v. O’Donnell, 146 N. Y. 275 discussed the then-current civil practice rule:

Rule eleven of the general rules of practice of the Supreme Court provides that “no private agreement or consent between the parties or their attorneys, in respect to the proceedings in a cause, shall be binding, unless the same shall have been reduced to the form of an order by consent, and entered, or, unless the evidence thereof shall be in writing, subscribed by the party against whom the same shall be alleged, or by his attorney or counsel.” This rule is of somewhat ancient origin.

Mutual Life was cited by the First Department in Columbia Broad. Sys., Inc. v. Roskin Distribs., Inc., 31 A.D.2d 22 (1^st Dep’t 1968) explaining why all material terms must be set forth in a stipulation:

Stipulations of counsel must be in writing. This means that all matters claimed to be the subject of the stipulation must be set out. The court cannot be asked to divine what was in counsel’s mind or to seek the intent from other evidence; nor to resolve disputes arising from sources other than the words of the writing.

The First Department, in Columbia Broad. Sys., Inc. v. Roskin Distribs., Inc went on to hold that “[t]he original situation was materially changed — it was now possible to move in regard to the answers before completion of the examinations, and the stipulations are entirely silent as to any restriction on so moving. It is not for the court to imply what this silence means.”

In Matter of Eckert, 217 A.D. 3d 1151 (3d Dep’t 2023) a five-justice panel split three-two on whether all material terms were contained in a purported stipulation as discussed in our column from July 2023. Including the motion court, it was an even three-three split as to whether all material terms were included. Eckert serves as yet another cautionary tale in the fraught world of stipulations.

Stipulations “Agreeing To Agree” Will Not Be Enforced

The Third Department in Matter of George W. & Dacie Clements Agric. Research Inst., Inc. v Green, 130 AD3d 1422(3d Dept 2015) stated that “[s]ettlement-related writings may be deemed to have contained sufficiently detailed terms to give rise to a binding agreement when, for example, these writings explicitly incorporate the terms of other documents prepared in anticipation of settlement,” but cautioned that “settlement-related writings will not be found to have created a binding agreement if they expressly anticipate a subsequent writing that is to officially memorialize the existence of a settlement agreement and set forth all of its material terms.”

Therefore, “a mere settlement proposal, which did not fully reflect the terms of the settlement and specifically stated that it was not ‘intended as a final resolution of all issues in the case,’ and that those issues ‘shall be subject to a more formal written Stipulation of Settlement,’” Is not enforceable. (Williams v Bushman, 70 AD3d 679, 680-681, 894 NYS2d 94 [2d Dep’t 2010]). Similarly, in Vlastakis v. Mannix Family Mkt. @ Veteran’s Rd., LLC, 220 A.D.3d 908(2d Dept. 2023) the Second Department found unenforceable an “email dated October 7, 2020, purportedly confirming the settlement agreement, [which] stated that it was memorializing the ‘tentative resolution’ of the case and was sent by counsel for the defendant, which is the party seeking to enforce the agreement,” holding “[t]here is no email subscribed by the plaintiff, who is the party to be charged, or by her attorney confirming the agreement.”

Unilateral Modifications To A Stipulation Are Not Enforceable

In Klein v Mount Sinai Hosp., 61 NY2d 865 (1984) the Court of Appeals addressed the not-uncommon scenario where a stipulation is drafted by counsel for one party, transmitted to opposing counsel, who modifies the draft stipulation, signs it, and sends it back:

Defendant’s attorney sent plaintiff’s attorney a letter enclosing a proposed stipulation extending the time to file an answer or make a motion to dismiss. Plaintiff’s attorney signed the stipulation and returned it, after modifying it by striking the provision for making a motion to dismiss and by adding a provision admitting the propriety of service and jurisdiction.

Thereafter, defendant’s attorney filed an answer which asserted as an affirmative defense that plaintiff had not obtained jurisdiction over the defendant. Plaintiff contends that the dismissal of her complaint on that basis was erroneous, because defendant, by relying upon the terms of the stipulation beneficial to him, should be deemed to have waived the defense of lack of personal jurisdiction, or, at the very least, should be estopped from asserting that defense.

We conclude that the purported agreement did not amount to a valid stipulation upon which plaintiff could rely to preclude defendant’s assertion of the lack of jurisdiction or extend his time to answer . . . [t]he claimed stipulation is not binding upon defendant, because he did not sign it as modified.

But Unsigned Stipulations Can Be Enforceable Against the Drafter

We mentioned above the advantage of being the initial drafter of a stipulation. Now we address a important caveat to accompany that recommendation: should your office draft and forward a proposed stipulation to opposing counsel, who then signs the stipulation without edits or modifications, the stipulation may be binding even though not signed by the drafting attorney.

In Stefaniw v. Cerrone, 130 A.D.2d 483 (2nd Dept. 1987), the Second Department held:

The court did not err in granting the plaintiffs’ motion to strike the defendant’s second affirmative defense, asserting the Statute of Limitations, based upon the parties’ written stipulation which extended the defendant’s time to answer the complaint on the condition that all affirmative defenses were waived. Although the stipulation was not actually signed by the defendant (see, CPLR 2104), it was prepared by the defendant’s attorney and proffered to the plaintiffs’ attorney. The plaintiffs’ attorney executed the stipulation without modification and returned it to the defendant’s attorney. Under these circumstances, we conclude that the terms of the stipulation are binding upon the defendant despite the absence of the defendant’s signature or that of his attorney.

While it may be unlikely that a stipulation you draft on behalf of your client will be detrimental to your client, Stefaniw is yet another reason to take great care even when you are the stipulation’s scrivener.

Conclusion

Mercifully, this concludes our treatment of stipulations (for now). CPLR 2104 is a potent litigation tool, but one that requires caution and care. Use it wisely.

[i] Russian for “trust but verify.” See, also, https://www.youtube.com/watch?v=qwh2w7osIp4.

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