United States District Court, S.D. New York
June 9, 2005.
HOSTCENTRIC TECHNOLOGIES, INC., Plaintiff,
REPUBLIC THUNDERBOLT, LLC, Defendant.
The opinion of the court was delivered by: ANDREW PECK, Magistrate Judge
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,
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.
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:
This is to confirm my client's final settlement
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
(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:
My client picked up my voicemail message and called
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.
(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:
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.
(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
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*fn1 (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).
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).*fn2 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,*fn3 whether a contract was
formed, and if so, whether that contract is enforceable.
"`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.
"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
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.);*fn4 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. AT&T 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 . . .").
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
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
Grupo Sistemas Integrales de Telecomunicacion S.A. de C.V v.
AT&T 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. AT&T 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.*fn5
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
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.
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 a
proposed 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.
AT&T 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 misinterpreted
Winston'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)*fn6 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.
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.*fn7
III. HOSTCENTRIC'S APPLICATION FOR ATTORNEYS' FEES SHOULD BE
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
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),