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applying Winston factors to determine “whether the parties intended to be bound in the absence of a fully executed formal written agreement,” where parties exchanged emails containing a formal counter-offer and an acceptance
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04 Civ. 1621 (KMW) (AJP).
June 9, 2005
REPORT AND RECOMMENDATION
To the Honorable Kimba M. Wood, United States District Judge:
Presently before this Court is the motion by plaintiff Hostcentric Technologies, Inc. ("Hostcentric") to enforce a settlement agreement documented in an email offer and acceptance, and for attorneys' fees against defendant Republic Thunderbolt, LLC ("Republic").
For the reasons set forth below, Hostcentric's motion (Dkt. No. 21) to enforce the settlement should be GRANTED, but its request for attorneys' fees should be DENIED.
FACTS
The relevant facts are undisputed.
Hostcentric, as tenant, and Republic (at that time known as Warthog, Inc.), as landlord, entered into a ten year commercial lease agreement in January 2001. (Dkt. No. 23: Hostcentric Br. at 2; Dkt. No. 26: Republic Br. at 2; Dkt. No. 1: Compl. Ex. A: Lease.) On December 12, 2003, Hostcentric purported to terminate the lease agreement and it has not paid rent pursuant to the lease since December 1, 2003. (Hostcentric Br. at 2; Republic Br. at 2.)
Hostcentric filed suit in this Court against Republic seeking a declaratory judgement that Republic had acquiesced in the lease termination by accepting Hostcentric's surrender of the premises. (Compl.; see Hostcentric Br. at 2; Republic Br. at 2.) Republic counterclaimed for rent due to it from Hostcentric under the lease, and both parties engaged in discovery including depositions. (Dkt. No. 5: Answer Counterclaim; see Hostcentric Br. at 2; Republic Br. at 3.)
In August 2004, the parties engaged in settlement negotiations. (Hostcentric Br. at 2; Republic Br. at 3.) According to Hostcentric, on September 15, 2004, the parties reached an oral settlement agreement in which Hostcentric agreed to pay $785,000 to Republic, less a credit to Hostcentric of $59,793 for the rent deposit held by Republic, and both parties would dismiss their respective claims with prejudice and execute full and mutual releases. (Hostcentric Br. at 2; see Dkt. No. 22: French Aff. ¶ 3.) According to Hostcentric, Republic reneged on the oral settlement, claiming that the settlement required Hostcentric to pay $785,000 while allowing Republic to retain the $59,793 deposit. (Hostcentric Br. at 3; French Aff. ¶ 4.)
The September 21, 2004 Settlement Emails
On September 21, 2004, Hostcentric requested a conference with Judge Wood to discuss enforcement of the oral agreement. (Dkt. No. 23: Hostcentric Br. at 3.) Later that day, Republic's counsel Anton Borovina called Hostcentric's counsel Michael French to propose new settlement terms. (Hostcentric Br. at 3; Dkt. No. 22: French Aff. ¶ 6-7.) French replied that Hostcentric would not respond to any further settlement offers from Republic "unless they were binding offers made in writing." (Hostcentric Br. at 3; French Aff. ¶ 7.) That evening at approximately 6:07 p.m., Borovina (Republic) sent French (Hostcentric) the following email:
Michael,
This is to confirm my client's final settlement counter-proposal:
Fairchild will accept payment from your client in the amount of $755,000.00 with my client retaining the security deposit. The pending action would be dismissed with prejudice and all parties would exchange mutual general releases. The payment is due my client within 10 days from today's date.
I must have your answer before the deposition of Robert Sanchez takes place tomorrow. This counter-proposal expires by 9:30 AM tomorrow unless accepted by you before that time.
Your client will be required to remove its property from the premises within 21 days and at its own expense.
Anton
(French Aff. Ex. A, emphasis added; see French Aff. ¶ 8; Hostcentric Br. at 3; Dkt. No. 26: Republic Br. at 3.) At 9:41 p.m., French (Hostcentric) emailed Borovina (Republic) to accept the offer, as follows:
Anton,
My client picked up my voicemail message and called me back.
I am writing to formally accept your settlement offer as set forth by you in your message from earlier this evening below.
This matter is now conclusively settled. Please let me know how you would like to communicate this fact to the Court.
MSF
(French Aff. Ex. B, emphasis added; see French Aff. ¶ 11; Hostcentric Br. at 4; Republic Br. at 3-4.) At 10:02 p.m., French (Hostcentric) sent Borovina (Republic) a follow-up email:
Anton,
Now that the parties have agreed on a settlement, please let me know if you still want to draft the necessary papers. If so, please send us a draft as soon as possible. We need to finalize these docs, including the dismissal papers and release, prior to the agreed date of payment.
MSF
(Dkt. No. 28: Borovina Aff. Ex. A.)
The next morning, September 22, 2004, French (Hostcentric) sent Borovina (Republic) a letter by fax, attaching the above emails and again formally accepting Republic's offer, stating that "[t]his matter is now settled and concluded." (French Aff. Ex. C;see also French Aff. ¶ 11; Hostcentric Br. at 4.)
On September 23, 2004, Borovina (Republic) sent a letter to Judge Wood stating:
Counsel for all parties in the above referenced matter are pleased to advise the court that this action has been settled. The parties are preparing the appropriate paperwork which will include a stipulation of discontinuance with prejudice.
(French Aff. Ex. D; accord, Borovina Aff. Ex. B; see French Aff. ¶ 12; Hostcentric Br. at 4-5; Republic Br. at 4.) Judge Wood dismissed the action but provided that the case could be reinstated to the docket within a specified time "if the settlement is not consummated." (Dkt. No. 16: 9/28/04 Order of Dismissal; see also Republic Br. at 5.)
The Settlement Falls Apart
On September 27, 2004, Republic's counsel emailed to French (Hostcentric) a draft stipulation of settlement, containing the following provision:
9. Plaintiff hereby agrees to indemnify, defend and hold defendant harmless from and against all loss, costs or expense (including, without limitation, reasonable attorney's fees) arising from any claim for leasing commissions or finder's fees that may be asserted by A.J. Finkelstein Realty or any other broker relating to the sums stipulated herein and/or the re-letting or sub-leasing of the premises in question arising from any agreement between or understanding or claimed agreement or understanding between the plaintiff and such broker.
(Dkt. No. 22: French Aff. Ex. E; accord, Dkt. No. 28: Borovina Aff. Ex. C; see also French Aff. ¶¶ 13-14; Dkt. No. 23: Hostcentric Br. at 5; Dkt. No. 26: Republic Br. at 4-5.) This provision was never discussed by counsel for the parties nor was it part of the September 21 emails; Hostcentric advised Republic to remove the indemnification clause. (Hostcentric Br. at 5; French Aff. ¶¶ 14-17 Ex. F.) Republic responded that it would not execute the stipulation without the indemnification clause or a release from the real estate broker. (Hostcentric Br. at 5; French Aff. ¶ 18 Ex. G.) Hostcentric considered this a breach of the September 21 email agreement and informed Republic that it would seek to enforce that agreement and seek attorneys' fees and costs. (Hostcentric Br. at 5-6; French Aff. ¶ 19 Ex. G.)
On October 7, 2004, Republic informed Judge Wood that "the contemplated settlement could not be consummated" and requested that the matter be restored to the Court's calendar. (Borovina Aff. Ex. E; Republic Br. at 5.) On January 6, 2005, Judge Wood "memo endorsed" Republic's letter as "granted." (Dkt. No. 18: 1/6/05 Memo Endorsed Order; see Borovina Aff. ¶ 10 Ex. J; Republic Br. at 6.) Hostcentric's formal motion to enforce the settlement followed.
The Motion Before the Court
Hostcentric's current motion asserts that the emailed offer and acceptance formed a valid and final settlement agreement. Hostcentric argues that: (1) the words and deeds of both parties show that they entered into a full and binding settlement (Dkt. No. 23: Hostcentric Br. at 6-7); (2) the agreement is enforceable without the indemnification clause that Republic attempted to add (Hostcentric Br. at 9-10); and (3) Hostcentric is entitled to attorneys' fees (Hostcentric Br. at 11). In opposition, Republic asserts that Hostcentric's motion should be rejected because its arguments in support of the motion "were previously raised and then rejected by this court when it granted [Republic's] application" to restore the action to the Court's calendar. (Dkt. No. 25: Republic Br. at 6.) Republic further submits that it had no intention to be bound by an agreement "in the absence of a fully executed, written agreement" and that the "e-mails between counsel concerned the monetary accord and did not finally resolve the scope of the release and other issues." (Republic Br. at 7; see also Dkt. No. 27: Miller Aff. ¶ 6-9.) Republic argues that both sides impliedly reserved the right not to be bound by the emails because: (1) the September 23, 2004 letter to Judge Wood and the September 21, 2004, 10:02 p.m. email from French to Borovina demonstrate that both parties were seeking to draft a written settlement finalizing all the terms of the contemplated settlement (Republic Br. at 7); (2) neither party attempted to perform any of the obligations under the purported settlement that could have evidenced an intention to be bound, including Hostcenetric's duty to pay Republic the $755,000 and remove its property from the leased premises (Republic Br. at 7); and (3) settlement agreements between landlords and tenants are a type of agreement that is usually put in writing (Republic Br. at 8).
Hostcentric points to several factors in this determination: (1) Republic sent Hostcentric a written settlement offer confirming Republic's "final settlement counter-proposal" (Hostcentric Br. at 6; see also page 3 above); (2) Republic's offer set out material terms of settlement including payment of funds, retention of the security deposit, dismissal of the action with prejudice, and an exchange of releases (Hostcentric Br. at 6; see also page 3 above); (3) Republic's offer included an acceptance deadline to which Hostcentric adhered both via e-mail and facsimile (Hostcentric Br. at 6; see also pages 3-4 above); and (4) Republic's counsel notified Judge Wood in writing that the action had been settled (Hostcentric Br. at 7; see also page 4 above).
ANALYSIS
I. THE PURPORTED SETTLEMENT AGREEMENT MUST BE INTERPRETED UNDER PRINCIPLES OF CONTRACT LAW
It is black letter law in the Second Circuit that "[s]ettlement agreements are contracts and must therefore be construed according to general principles of contract law." Red Ball Interior Demolition Corp. v. Palmadessa, 173 F.3d 481, 484 (2d Cir. 1999); accord, e.g., Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., No. 04-3528, 2005 WL 1076552 at *1 (2d Cir. May 6, 2005); Collins v. Harrison-Bode, 303 F.3d 429, 433 (2d Cir. 2002); Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 525 (2d Cir. 1994).
See, e.g., Spanierman Gallery v. Merritt, 00 Civ. 5712, 2004 WL 1781006 at *10 (S.D.N.Y. Aug. 10, 2004); Rella v.North Atl. Marine, Ltd., 02 Civ. 8573, 2004 WL 1418021 at *3 (S.D.N.Y. June 23, 2004) ("Under New York law, a settlement agreement is a contract subject to the ordinary rules of contract interpretation and enforcement."); Dahingo v. Royal Caribbean Cruises, Ltd., 312 F.Supp.2d 440, 445 (S.D.N.Y. 2004); Manning v. Utilities Mut. Ins. Co., 98 Civ. 4790, 2004 WL 235256 at *7 (S.D.N.Y. Feb. 9, 2004); Universal Outdoor, Inc. v. New Rochelle, 286 F.Supp.2d 268, 274 (S.D.N.Y. 2003); Marisol A. v. Giuliani, 157 F.Supp.2d 303, 306 (S.D.N.Y. 2001); Torres v. Costich, 935 F.Supp. 232, 234 (W.D.N.Y. 1996).
In this case, the parties disagree as to whether a binding contract was formed by the September 21, 2004 emails between counsel for Hostcentric and Republic. This Court therefore must determine, under New York law, whether a contract was formed, and if so, whether that contract is enforceable.
This Court has subject matter jurisdiction based on diversity of citizenship between the parties. (Dkt. No. 1: Compl. ¶ 3.) "'It is black letter law that in a diversity action such as this, state substantive law applies.'" Chevron TCI, Inc. v.Tallyrand Assoc., LLC, 03 Civ. 4043, 2003 WL 22977498 at *4 (S.D.N.Y. Dec. 19, 2003) (Peck, M.J.) (quoting Conti v. Yellow Freight Sys., Inc., 92 Civ. 2603, 1996 WL 87237 at *2 (S.D.N.Y. Feb. 29, 1996) (Peck, M.J.) (citing Erie R.R. v. Tompkins, 309 U.S. 64, 78, 58 S.Ct. 817, 822 (1938))). Here, the original lease provided that it was governed by New York law. (Dkt. No. 1: Compl. Ex. A: Lease § 10.4(A)). The parties' briefs cite federal cases from this Circuit and New York state cases. As the Second Circuit has stated, "the parties agree that New York substantive law governs . . . and 'where the parties have agreed to the application of the forum law, their consent concludes the choice of law inquiry.'" Texaco A/S (Denmark) v. Commercial Ins. Co., 160 F.3d 124, 128 (2d Cir. 1998) (quoting American Fuel Corp. v. Utah Energy Dev. Co., 122 F.3d 130, 134 (2d Cir. 1997)); accord, e.g., Chevron TCI, Inc. v. Tallyrand Assoc., LLC, 2003 WL 22977498 at *4 n. 4 (citing cases);Bellis v. Tokio Marine Fire Ins. Co., 93 Civ. 6549, 2002 WL 193149 at *13 n. 20 (S.D.N.Y. Feb. 7, 2002).
"'To form a valid contract under New York law, there must be an offer, acceptance, consideration, mutual assent and intent to be bound.'" Register.Com, Inc. v. Verio, Inc., 356 F.3d 393, 427 (2d Cir. 2004); see, e.g., Wells Fargo Bank Minnesota v.Brooksamerica Mortgage Corp., 02 Civ. 4467, 2004 WL 2072358 at *6 (S.D.N.Y. Sep. 14, 2004);Facella v. Federation of Jewish Philanthropies of New York, Inc., 98 Civ. 3146, 2004 WL 1700616 at *6 (S.D.N.Y. July 30, 2004); Aderman v. Niagara Wheatfield, No. 01-CV-0801, 2003 WL 21382894 at *2 (W.D.N.Y. May 27, 2003); Centre-Point Merch. Bank Ltd. v. American Express Bank Ltd., 95 Civ. 5000, 2000 WL 1772874 at *3 (S.D.N.Y. Nov. 30, 2000); Ostman v. St. John's Episcopal Hosp., 918 F.Supp. 635, 643 (E.D.N.Y. 1996) (Because a "settlement agreement is a contract that is subject to the ordinary rules of contract construction and interpretation. . . . it requires an offer, an acceptance, and consideration to be enforceable, and will be construed in accordance with the intent of the parties.").
"[O]nce reached, a settlement agreement constitutes a contract that is binding and conclusive and the parties are bound to the terms of the contract even if a party has a change of heart between the time of the agreement to the terms of the settlement and the time it is reduced to writing." Macdonald v. Dragone Classic Motor Cars, 95 Civ. 499, 2003 WL 22056626 at *6 (D. Conn. Apr. 29, 2003); accord, e.g., Omega Eng'g, Inc. v.Omega, SA, No. 98CV2464, 2004 WL 2191588 at *8 (D. Conn. Aug. 12, 2004).
"Moreover, '[a] district court has the power to enforce summarily, on motion, a settlement agreement reached in a case pending before it.'" Macdonald v. Dragone Classic Motor Cars, 2003 WL 22056626 at *6 (quoting Meetings Expositions, Inc. v.Tandy Corp., 490 F.2d 714, 717 (2d Cir. 1974)); accord, e.g., Omega Eng'g, Inc. v. Omega, SA, 2004 WL 2191588 at *8. II. THE EMAILED OFFER AND ACCEPTANCE BETWEEN HOSTCENTRIC AND REPUBLIC FORMED A VALID AND BINDING CONTRACT
As discussed above, the formation of a contract requires, offer, acceptance, consideration, mutual assent and intent to be bound. (See page 8 above.) The September 21, 2004 emails met all of these factors. Republic, in its own words, sent to Hostcentric a "final settlement counter-proposal" with an expiration date to accept the offer, and listed all of the essential terms of the settlement: the settlement amount, removal of property from the premises, mutual general releases and dismissal of the lawsuit. (See page 3 above.) Hostcentric accepted the offer within that time frame, emailing back to Republic to "formally accept your settlement offer," and stating that the matter was "now conclusively settled." (See pages 3-4 above.) Republic then reported to Judge Wood that the matter was settled (see page 4 above), further evidence of Republic's intent to be bound. See, e.g., Citizens Bank Trust Co. v.Se-Fish Assoc., No. 99-CV-0417, 2003 WL 22383564 at *1, 4-5 (W.D.N.Y. Sept. 30, 2003) (Settlement enforced by the court where "the parties advised the Court that they had reached a settlement."); Krauth v. Executive Telecard, Ltd., 890 F. Supp. 269, 294 (S.D.N.Y. 1995) (Parties' joint submission to the court that settlement was reached "is strong indication of their innt to be bound.").
Republic, however, argues that it did not intend to be bound by the emails. (See, e.g., Dkt. No. 27: Miller Aff. ¶¶ 6-9; Dkt. No. 26: Republic Br. at 7.) The law is clear, however, that it is not a parties' subjective intent that controls, but rather what the parties said (and/or did). See, e.g, Klos v. Polskie Linie Lotnicze, 133 F.3d 164, 168 (2d Cir. 1997) ("When interpreting the meaning of a contract, it is the objective intent of the parties that controls. The secret or subjective intent of the parties is irrelevant.") (citation omitted); Brodeur v.City of New York, No. 04-CV-1859, 2005 WL 1139908 at *3 (E.D.N.Y. May 13, 2005) ("Settlement agreements and general releases are contracts construed according to general principles of contract law. . . . [W]here a contract is unambiguous, a party's subjective intent is irrelevant."); Cusano v. Horipro Entm't Group, 301 F. Supp. 2d 272, 277 (S.D.N.Y. 2004) ("When the terms of a contract are clear, '[t]he secret or subjective intent of the parties is irrelevant.'") (quoting Klos v.Lotnicze, 133 F.3d at 168), aff'd, No. 04-0575, 126 Fed. Appx. 521, 2005 WL 927425 (2d Cir. Apr. 22, 2005).
Here, Republic's counsel made a final offer in writing to Hostcentric that stated (or at least objectively appeared to state) all material terms, and Hostcentric accepted the offer. (See pages 3-4 above.) Republic's (alleged) undisclosed intent is irrelevant.
Without citing to any case law, Republic further argues that the fact that both parties wanted a formal executed stipulation of settlement implies that they did not intend to be bound by the emailed agreement. (Dkt. No. 26: Republic Br. at 7.) The Court disagrees. "'It is well established that parties are bound to the terms of a contract even though it is not signed [or even written].'" Omega Eng'g, Inc. v. Omega, S.A., 98 Civ. 2464, 2004 WL 2191588 at *7 (D. Conn. Aug. 12, 2004) (bracketed material in original). Republic argues that "it did not intend to be bound by any agreement in the absence of a fully executed, written agreement," but that this "reservation" was not "explicit," but should be "implied" from the fact that the parties intended to draft formal settlement papers. (Republic Br. at 7.) The problem with Republic's argument is its failure to distinguish between a preliminary agreement contingent on and not intended to be binding absent formal documentation, and a binding agreement that is nevertheless to be further documented. The emails demonstrate the latter type agreement, which is binding.
As then-District (now Circuit) Judge Leval stated almost twenty years ago (and the Second Circuit later adopted), a "preliminary" agreement is binding, despite the desire for a later formal document, "when the parties have reached complete agreement (including the agreement to be bound) on all the issues perceived to require negotiation. Such an agreement is preliminary only in form — only in the sense that the parties desire a more elaborate formalization of the agreement. The second stage is not necessary; it is merely considered desirable." Teachers Ins. Annuity Assoc. v. Tribune Co., 670 F.Supp. 491, 498 (S.D.N.Y. 1987) (Leval, D.J.); accord, e.g.. Krauth v.Executive Telecard, Ltd., 890 F.Supp. 269, 293 (S.D.N.Y. 1995) (quoting Judge Leval's Teachers decision); Weinreich v.Sandhaus, 850 F.Supp. 1169, 1176-77 (S.D.N.Y. 1994) (same). As the Second Circuit explained over thirty-five years ago: "Two rules on this subject are well established: First, if the parties intend not to be bound until they have executed a formal document embodying their agreement, they will not be bound until then; and second, the mere fact that the parties contemplate memorializing their agreement in a formal document does not prevent their informal agreement from taking effect prior to that event."V'Soske v. Barwick, 404 F.2d 495, 499 (2d Cir. 1968), cert. denied, 394 U.S. 921, 89 S. Ct. 1197 (1969); see also, e.g., Francis v. Home Box Office, 04 Civ. 7430, 2005 WL 1020863 at *4 (S.D.N.Y. Apr. 28, 2005) ("The intent to reduce a valid oral settlement agreement to writing, however, does not prevent that oral agreement from being enforced."); Grupo Sistemas Integrales de Telecomunicacion S.A. de C.V v. ATT Communications, Inc., 92 Civ. 7862, 1994 WL 463014 at *3 (S.D.N.Y. Aug. 24, 1994) (Wood, D.J.) ("Under New York law, 'parties are free to enter into a binding contract without memorializing their agreement in a fully executed document.' . . . Parties who intend to be bound by informal agreement are so bound even if they contemplate later memorializing their agreement in writing.") (quoting Winston v.Mediafare Entm't Corp., 777 F.2d 78, 80 (2d Cir. 1986));Villeroy Boch S.A.R.L. v. THC Sys., Inc., 84 Civ. 8073, 1991 WL 102520 at *4 (S.D.N.Y. June 3, 1991) ("[A]n informal agreement may be binding despite the parties' contemplation to memorialize the contract into a written document. It requires proof that the parties did not intend to form an agreement whereby the validity thereof depended on formal execution of a written document . . .").
The Second Circuit adopted Judge Leval's framework inArcadian Phosphates, Inc. v. Arcadian Corp., 884 F.2d 69, 71-72 (2d Cir. 1989); accord, e.g., Adjustrite Sys., Inc. v. GAB Bus. Servs., Inc., 145 F.3d 543, 547-48 (2d Cir. 1998) ("A framework under New York law for analyzing the issue of whether a preliminary agreement is a binding contract or an unenforceable agreement to agree was articulated by Judge Leval in Teachers . . . and applied by this Court inArcadian. . . .") (fn. omitted).
Republic's argument that it is implicit that both parties intended not to be bound until the formal settlement agreement was signed is based solely on the fact that formal documentation was contemplated. (Republic Br. at 7.) The Second Circuit has held, however, that more is needed:
To overcome the reasonable inference we draw from the language of the correspondence that the parties did indeed intend thereby to create a binding contract, appellees must do more than merely point to the circumstance that a formal document was contemplated: they must show either that both parties understood that their correspondence was to be of no legal effect or that [appellant] had reason to know that [appellee] contemplated that no obligations should arise until a formal contract was executed. But appellees have referred to no evidence substantiating either of these possibilities, and we do not find them supported by our independent review of the evidence.V'Soske v. Barwick, 404 F.2d at 499.
The test is not Republic's after-the-fact professed intent, but the parties' intent as expressed in their words and deeds at the time. As Judge Wood has explained:
In determining the parties' intent, a court must look, not to their "after-the-fact professed subjective intent, but their objective intent as manifested by their expressed words and deeds at the time."Grupo Sistemas Integrales de Telecomunicacion S.A. de C.V v.ATT Communications, Inc., 1994 WL 463014 at *3; accord, e.g., Adjustrite Sys., Inc. v. GAB Bus. Servs., Inc., 145 F.3d at 549 ("Subjective evidence of intent . . . is generally not considered."); see also cases cited at page 12 above.
To determine whether the parties intended to be bound in the absence of a fully executed formal written agreement, Republic cites to the four factors test articulated by the Second Circuit in Winston v. Mediafare Entm't Corp., 777 F.2d at 80. (Republic Br. at 6.) As Judge Wood restated the Winston factors: "The Second Circuit Court of Appeals has articulated four factors to be considered in discerning whether the parties intended to be bound [by a settlement agreement] in the absence of a fully executed, written document: (1) whether there has been an express or implied reservation of the right not to be bound in the absence of a writing; (2) whether there has been partial performance of the contract; (3) whether all of the terms of the alleged contract have been agreed upon; and (4) whether the agreement at issue is the type of contract that is usually committed to writing." Grupo Sistemas Integrales de Telecomunicacion S.A. de C.V v. ATT Communications, Inc., 1994 WL 463014 at *3 (citing Winston v. Mediafare Entm't Corp., 777 F.2d at 80); accord, e.g., RKG Holdings, Inc. v. Simon, No. 98-9433, 182 F.3d 901 (table), 1999 WL 464979 at *1 (2d Cir. June 23, 1999); Adjustrite Sys., Inc. v. GAB Bus. Servs., Inc., 145 F.3d at 549; Arcadian Phosphates, Inc. v. Arcadian Corp., 884 F.2d at 72; Melwani v. Jain, 02 Civ. 1224, 2004 WL 936814 at *4 (S.D.N.Y. Apr. 29, 2004); Conway v. Brooklyn Union Gas Co., 236 F.Supp. 2d 241, 248 (E.D.N.Y. 2002); Krauth v. Executive Telecard, Ltd., 890 F.Supp. at 293.
The first factor, the parties' objectively-expressed intent, is the most important:
The Second Circuit has at various times stated that '[n]o single factor is decisive, but each provides significant guidance.' But the Second Circuit has also stated, in the context of a binding preliminary commitment, that the first factor is the most important. Similarly, in cases involving binding preliminary agreements, the same importance should be placed on what the specific writing in question provides.Krauth v. Executive Telecard, Ltd., 890 F. Supp. at 293 (citations omitted); accord, e.g., Adjustrite Sys., Inc. v.GAB Bus. Servs., Inc., 145 F.3d at 549 ("The first factor, the language of the agreement, is 'the most important.'"); Arcadian Phosphates, Inc. v. Arcadian Corp., 884 F.2d at 72 ("The first factor, the language of the agreement, is the most important.");RKG Holdings, Inc. v. Simon, 1999 WL 464979 at *1 ("'[T]o determine if an oral agreement becomes legally binding, the intent of the parties is of central importance.'"); Horphag Research Ltd. v.Henkel Corp., 115 F.Supp.2d 455, 457 (S.D.N.Y. 2000);Weinreich v. Sandhaus, 850 F.Supp. 1169, 1177 (S.D.N.Y. 1994).
Hostcentric argues that the Winston analysis is inappropriate in this case because the settlement agreement in question was, in fact, a written document (two emails), while "[i]n Winston, the court established a test to determine whether an oral contract is binding without memorializing the agreement in a fully-executed document. . . . Winston and its progeny do not apply here because Republic and Hostcentric entered into a written settlement agreement." (Dkt. No. 25: Hostcentric Reply Br. at 3.) However, the Winston analysis has been utilized in this Circuit when an agreement is written but not executed into a formal document by both parties. See, e.g., Ciaramella v. Reader's Digest Ass'n, 131 F.3d 320, 323 (2d Cir. 1997) (Using Winston factors to determine that "district court erred in concluding that the parties intended that the unexecuted draft settlement constitute a binding agreement"); Winn v. Seaport Manor Corp., 01 Civ. 5349, 2002 WL 31133388 at *2 (S.D.N.Y. Aug. 22, 2002) (using Winston factors to determine that unsigned draft of a stipulation of settlement constituted a binding agreement).
The first — and most important — Winston factor clearly favors Hostcentric. The two emails constitute a classic offer and acceptance, contain all the terms of the agreement, and evidence the intent that the "matter [was] now conclusively settled." (See page 4 above.) Indeed, after Hostcentric's acceptance email that stated the matter was "conclusively settled," Hostcentric sent a follow-up email, confirming the finality of the settlement and asking whether Republic still wanted to draft formal papers: "Now that the parties have agreed on a settlement, please let me know if you still want to draft the necessary papers." (Dkt. No. 28: Borovina Aff. Ex. A, quoted at page 4 above.) Republic did not respond directly to Hostcentric, but wrote to Judge Wood that the parties "are pleased to advise the court that this action has been settled," although also noting that the parties were preparing paperwork. (Borovina Aff. Ex. B, quoted at page 4 above.) Thus, both parties referred to there being a conclusive settlement. Compare, e.g., Winston v.Mediafare Entm't Corp., 777 F.2d at 81 (party's letters to opposing counsel and court referred to the "proposed agreement" and "proposed settlement"); Rella v. North Atl. Marine, Ltd., 2004 WL 1418021 at *3 (party's letter that it was "enclosing aproposed stipulation of settlement for [opposing parties'] review and approval" showed intent not to be bound absent signed agreement) (emphasis in original); Cedric Kushner Promotions, Ltd. v. King, 98 Civ. 6859, 1999 WL 13732 at *2 (S.D.N.Y. Jan 11, 1999) ("[E]ach draft of the proposed stipulation contained a provision imposing a duty on DKP to pay $100,000 'upon execution of this Stipulation by the undersigned counsel.' . . . In addition, the cover sheet accompanying the December 4, 1998 instrument at issue refers to that instrument as the 'revised draft stipulation.' This Court interprets the use of the terms 'execution' and 'draft' as evidence that the parties did not intend to be bound in the absence of a signed writing.");and Clorox Intern'l Co. v. International Trade Expo, Inc., 94 Civ. 0938, 1995 WL 106104 at *6 (S.D.N.Y. Mar. 9, 1995) ("[C]orrespondence by [plaintiff's counsel] to the court referred to a 'potential' or 'proposed' settlement . . .; counsel for the ITE defendants did not, at the time, object to this characterization of the settlement. Had the parties intended to be bound by the terms of an agreement reached on August 23, none of these subsequent actions could be explained."); with, e.g., Omega Eng'g, Inc. v. Omega, SA, No. 98CV2464, 2004 WL 2191588 at *1, 11 (D. Conn. Aug. 12, 2004) (Settlement agreement enforced where, inter alia, "the parties reported to the court that [the] matter had been settled."); Melwani v. Jain, 2004 WL 936814 at *5 ("[N]o party to the settlement expressed any reservation on the record of a right not to be bound absent an executed agreement. . . ."); Krauth v. Executive Telecard, Ltd., 890 F.Supp. at 294 (first factor favors finding agreement binding where "in the press releases, the Form 10-Q filed by the Company with the SEC, and the joint motion to this Court, EXTL represented that it had entered into a settlement agreement with the plaintiffs. . . . [I]n this case, the actions of the parties, particularly in their joint submission to this Court, is strong indication of their intent to be bound. . . . The first factor favors plaintiff in this case."); and Vari-O-Matic Mach. Corp. v. New York Sewing Mach. Attachment Corp., 629 F. Supp. 257, 258-59 (S.D.N.Y. 1986) ("In this case the court issued two orders . . . upon the representation of the parties that settlement had been reached and that a stipulation of settlement would be filed forthwith. Failure to complete the formal stipulation papers does not mean that a settlement was not in fact reached. . . . [I]n this case since both parties made representations to the court that agreement had been reached, there can be no factual dispute that a settlement had been consummated.").
The second Winston factor, partial performance, is essentially neutral. Since Republic repudiated the agreement before the time for Hostcentric's payment or removal of its property from the premises, it is not surprising that Hostcentric did not thereafter perform.
The third Winston factor, whether all of the terms had been agreed on, favors Hostcentric. The email exchange agreed on payment amount and timing, removal of Hostcentric's property from the premises and a time for that performance, mutual general releases and dismissal of the lawsuit with prejudice. (See pages 3-4 above.)
Republic asserts that while the "emails between counsel concerned the monetary accord," the "did not finally resolve the scope of the release and other issues." (Republic Br. at 7.) To the contrary, the emails referred to "mutual general releases," a concept well known to lawyers and usually contained in a standard Blumberg form. Cf., Okemo Mountain, Inc. v. U.S. Sporting Clays Ass'n, 376 F.3d 102, 109 (2d Cir. 1994) ("[J]udges and lawyers know the customs and practices of the profession and need consult no expert to know the nature and intended effect of a standard form so common as a general release."); Melwani v.Jain, 2004 WL 936814 at *5 ("[E]ven if Melwani planned to execute a written general release subsequent to stating his agreement on the record, that would not satisfy the express reservation of rights requirement."). Indeed, Republic's proposed formal "Stipulation of Settlement" states that the parties "shall exchange mutual general releases," the same language as in the emails. (See Dkt. No. 22: French Aff. Ex. E: Republic "Stipulation of Settlement" ¶ 8.) Republic does not state what "other issues" remained. Indeed, the only "other issue" reflected in Republic's draft "Stipulation of Settlement" was the indemnification for lease commissions paragraph (¶ 9, quoted at page 5 above). Had Republic wished such indemnification, it should have included that term in its "final settlement counter-proposal" email, but it did not. The addition of this new term does not tip the third factor to Republic. Rather, the third factor would favor the party who claims not to be bound when (1) key terms, such as price, have not been agreed upon, or (2) both parties make changes during the drafting process. Compare, e.g., Winston v. Mediafare Entm't Corp., 777 F.2d at 82-83 ("Where, as here, counsel insist on continually redrafting specific terms of a proposed agreement, the changes made must be deemed important enough to the parties to have delayed final execution and consummation of the agreement.");Grupo Sistemas Integrales de Telecomunicacion S.A. de C.V v.ATT Communications, Inc., 1994 WL 463014 at *4 (same); with, e.g., Conway v. Brooklyn Union Gas Co., 236 F.Supp.2d at 251 (when parties had agreed on these terms, but remained apart only on amount to be paid in settlement, and subsequently agreed to Court's recommendation as to that amount, no additional terms remained to be negotiated, and third factor favored enforcement of agreement; "[o]nce a party agrees to the settlement terms, either orally or in writing, that party's later change of heart will not frustrate the agreement's enforceability."); see also, e.g., Brown v. Nationscredit Commercial, No. 99-CV-592, 2000 WL 888507 at *2 (D. Conn. June 23, 2000) (A "settlement is still binding even if a party has a change of heart between the time of the agreement to the terms of the settlement and the time those terms are reduced to writing."); Foster v. City of New York, 96 Civ. 9271, 2000 WL 145927 at *4 (S.D.N.Y. Feb. 7, 2000) ("This Court must enforce a binding oral agreement, notwithstanding that plaintiff may have had a change of heart."); Willgerodt ex rel. Majority Peoples' Fund for the 21st Century, Inc. v. Hohri, 953 F.Supp. 557, 560 (S.D.N.Y. 1997) ("Afterthought or change of mind are not sufficient to justify rejecting a settlement."), aff'd, 159 F.3d 1347 (2d Cir. 1998).
Finally, the fourth Winston factor is whether the agreement is the type of contract that is usually committed to writing. (See page 14 above.) Republic argues that this agreement is one usually committed to writing because "[t]he court in Winston held that even a simple settlement agreement is one that is usually put in writing." (Republic Br. at 8.) In fact, the Second Circuit in Winston was referring to a settlement agreement that called for "payment . . . over several years based on a percentage of earnings." Winston v. Mediafare Entm't Corp., 777 F.2d at 83. Since the Winston test is designed to determine if a settlement agreement is binding absent a formally executed agreement, it would be a strange test if the fourth factor always favored finding no agreement on the ground that settlement agreements usually are written. Republic has misinterpretedWinston's decision as to the fourth factor.
Rather, the correct question is whether the settlement agreement terms are sufficiently complex or involve long time periods, such that there should be a formal writing. See, e.g., Adjustrite Sys., Inc. v. GAB Bus. Servs., Inc., 145 F.3d at 551 ("In view of the size of the transaction, the nature of the assets being purchased, and the length of the contemplated employment contracts, the Agreement clearly was of the type that ordinarily would be committed not only to a writing but to a formal contract complete with representations and warranties and the other standard provisions usually found in sophisticated, formal contracts."); Ciaramella v. Reader's Digest Ass'n, Inc., 131 F.3d at 326 ("We have also found that the complexity of the underlying agreement is an indication of whether the parties reasonably could have expected to bind themselves orally."); Conway v. Brooklyn Union Gas Co., 236 F.Supp.2d at 251 ("The court in Winston also assessed the complexity of the underlying agreement — i.e., whether it is the type of agreement that generally requires a written contract — by examining the following factors: (1) the amount of money at issue, (2) whether the terms of agreement will carry into perpetuity, and (3) the length and complexity of the agreement itself."); Cedric Kushner Promotions, Ltd. v. King, 1999 WL 13732 at *2 ("The final factor is whether the agreement at issue is the type of instrument that is usually committed to a writing. For these purposes, courts have considered both the amount of money at stake as well as the magnitude and complexity of the deal.").
Moreover, in this case there was a writing — Republic's email (and Hostcentric's email accepting Republic's proposal without change). (See page 4 above.) Those emails memorialized all the terms — payment amount and schedule, removal of property and deadline, mutual general releases, and dismissal of the lawsuit. (See page 4 above.) Republic's proposed formal "Stipulation of Settlement" is only three pages long (one page of which contains only the caption and some "Whereas" clauses), and the eight agreed-upon substantive paragraphs on pages 2 and 3 are short, simple and no different than the email terms. (Compare French Aff. Ex. A email with French Aff. Ex. E "Stipulation of Settlement.") While the Court can take judicial notice that a commercial lease usually is a lengthy document (see, e.g., Dkt. No. 1: Compl. Ex. A: Lease), Republic presents no evidence that a simple lease termination is complex or the type of agreement that usually is set forth in a formal written agreement. On termination of a lease, the terms that need to be addressed are the tenant's time to depart the premises and/or remove property, what must be paid to the landlord, and condition of the premises. All of those terms were covered in the emails. The emails also covered the items typical of a settlement — the type of release (mutual and general) and dismissal of the action (with prejudice). Finally, the agreement would last only the short time necessary for payment and removal of property, not for a lengthy time into the future.
Republic again argues that the release was not agreed upon (Republic Br. at 8, citing Miller Aff.), but as discussed above, the email referred to "mutual general releases," a clearly understood reference among lawyers, and even Republic's draft formal agreement referred to mutual general releases. (See page 18 above.)
Finally, the Court notes that even if one were to find that this type of agreement should be in writing, it was — the parties were not dealing with an oral agreement but one written in an email from Republic and accepted by an email from Hostcentric.See, e.g., Conway v. Brooklyn Union Gas Co., 236 F.Supp.2d at 251-52 ("Here, even if the agreement is the type that is typically reduced to writing, the written draft of the settlement had essentially been finalized. . . . The terms, with the exception of the final dollar amounts, were 'substantially complete' and 'largely reduced to writing.' Moreover, the parties had confirmed to the court, as part of the process of negotiating the monetary amount, that their agreement on a sum would settle the case.") (citations omitted); Krauth v. Executive Telecard, Ltd., 890 F.Supp. at 295 ("The fourth factor is not particularly meaningful in this context, the agreements are in writing.").
In short, based on review of all of the Winston factors, the Court finds that the parties intended for the two emails to constitute a binding contract, and that the settlement agreement therefore should be enforced by the Court. III. HOSTCENTRIC'S APPLICATION FOR ATTORNEYS' FEES SHOULD BE DENIED
Republic's argument that "the law of the case" warrants denial of Hostcentric's motion is entirely misplaced. (Republic Br. at 6.) Republic appears to claim that Judge Wood's restoration of this action to the docket means that Hostcentric's arguments in support of its motion to enforce were rejected by the Court. "Under the 'law of the case' doctrine, 'a court should not reopen issues decided in earlier stages of the same litigation.'" National Enter. Inc. v. State of New York Tax Com'n, No. 99-7841, 208 F.3d 203 (table), 2000 WL 305510 at *1 (2d Cir. Mar. 22, 2000) (quoting Agostini v. Felton, 521 U.S. 203, 236, 117 S.Ct. 1997, 2017 (1997)). Judge Wood did not decide whether the parties had or had not reached a binding settlement. Republic asked that the case be returned to the docket, and Judge Wood endorsed that request as "granted." (See page 6 above.) The case needed to be returned to the Court's docket in either case — either to continue the litigation if Republic was correct or to allow Hostcentric to move to enforce the settlement that Republic repudiated. The order restoring the case to the docket did not decide that question — if it had, there would have been no need for Judge Wood to refer Hostcentric's motion to enforce the settlement to me for a Report and Recommendation, when she could have endorsed it as "denied under the law of the case." Republic's law of the case argument is frivolous.
Hostcentric seeks an award of its "attorneys' fees and other costs incurred as a result of Republic's breach of the Written Settlement Agreement." (Dkt. N. 23: Hostcentric Br. at 11.) Hostcentric neither states the amount in issue, nor cites to any case law awarding attorneys' fees in such a case. (Id.) In fact, most of the cases in this Circuit have declined to award attorneys' fees in this situation. See e.g., Francis v.Home Box Office, 04 Civ. 7430, 2005 WL 1020863 at *4 (S.D.N.Y. Apr. 28, 2005); Omega Eng'g, Inc. v. Omega, S.A., 98 Civ. 2464, 2004 WL 2191588 at *11 (D. Conn. Aug. 12, 2004); Edelman v. Smith Barney, Inc., 98 Civ. 691, 2000 WL 10209 at *6 (S.D.N.Y. Jan. 6, 2000); Torres v. Costich, 935 F.Supp. 232, 236 (W.D.N.Y. 1996) ("There is no general rule that attorney's fees should be awarded on a successful motion to enforce a settlement agreement, but a court may award fees in such circumstances under the court's inherent power to award attorney's fees to a successful litigant when the opposing party has acted 'in bad faith, vexatiously, wantonly, or for oppressive reasons.' In the absence of such behavior, fees are generally not awarded unless the settlement agreement expressly provides for a fee award.") (citations omitted); Apple Corps Ltd. v. Sony Music Entm't, Inc., 91 Civ. 7465, 1993 WL 267362 at *9-10 (S.D.N.Y. July 14, 1993). While the Court is sympathetic to Hostcentric, there is no basis to award it attorneys' fees. Accordingly, the Court should deny Hostcentric's request for attorneys' fees.
CONCLUSION
For the reasons set forth above, Hostcentric's motion (Dkt. N. 21) to enforce the settlement should be GRANTED, but its application for attorneys' fees should be DENIED.
FILING OF OBJECTIONS TO THIS REPORT AND RECOMMENDATION
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties shall have ten (10) days from service of this Report to file written objections. See also Fed.R.Civ.P. 6. Such objections (and any responses to objections) shall be filed with the Clerk of the Court, with courtesy copies delivered to the chambers of the Honorable Kimba M. Wood, 500 Pearl Street, Room 1610, and to my chambers, 500 Pearl Street, Room 1370. Any requests for an extension of time for filing objections must be directed to Judge Wood. Failure to file objections will result in a waiver of those objections for purposes of appeal. Thomas v. Arn, 474 U.S. 140, 106 S.Ct. 466 (1985); IUE AFL-CIO Pension Fund v.Herrmann, 9 F.3d 1049, 1054 (2d Cir. 1993), cert. denied, 513 U.S. 822, 115 S.Ct. 86 (1994); Roldan v. Racette, 984 F.2d 85, 89 (2d Cir. 1993); Frank v. Johnson, 968 F.2d 298, 300 (2d Cir.), cert. denied, 506 U.S. 1038, 113 S.Ct. 825 (1992);Small v. Secretary of Health Human Servs., 892 F.2d 15, 16 (2d Cir. 1989); Wesolek v. Canadair Ltd., 838 F.2d 55, 57-59 (2d Cir. 1988); McCarthy v. Manson, 714 F.2d 234, 237-38 (2d Cir. 1983); 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72, 6(a), 6(e).