The opinion of the court was delivered by: Trager, J
Pursuant to the instructions of the court, defendants Fyn Paint & Lacquer Co., Inc. ("Fyn Paint"), William Feinstein ("Feinstein") and Kent River Corp. ("Kent River") (collectively "defendants") submitted a proposed judgment on October 18, 2007 to implement the settlement agreement defendants reached with plaintiff Consolidated Edison Company of New York, Inc. ("plaintiff" or "Con Edison") at the parties' May 7, 2003 settlement conference. In response to the proposed judgment, Con Edison filed an opposition brief on November 2, 2007 claiming (1) that the settlement agreement included certain conditions precedent that had not been satisfied, (2) that defendants had breached the settlement agreement rendering it unenforceable against Con Edison, and (3) that Con Edison had not assented to the proposed form of judgment.
For the reasons explained below, the May 7, 2003 settlement agreement (the "agreement") remains enforceable. The proposed judgment will be entered as a settlement judgment, with some minor modifications to ensure that the judgment appropriately implements the agreement reached between the parties.
This case involves a long-standing dispute over the environmental cleanup of two adjacent properties in Brooklyn. Con Edison filed a complaint against defendants Fyn Paint and Feinstein on June 26, 2000, alleging that contaminants released from the Fyn Paint manufacturing facility at 230 Kent Avenue, Brooklyn New York (the "Fyn Paint site") had contaminated the neighboring property owned by Con Edison at 214 Kent Avenue, Brooklyn, New York (the "Con Edison site").*fn1
The parties have been engaged in settlement discussions since the initiation of this lawsuit. Initial settlement conferences, as well as pre-trial discovery, were overseen by Magistrate Judge Go. On February 12, 2002, the parties informed Judge Go that they had reached a settlement and were drafting a stipulated agreement for her approval. Letter from Lawrence Menkes to Magistrate Judge Go (Feb. 12, 2002). This purported settlement, however, shortly fell apart because no real meeting of the minds occurred. The parties instead prepared a Pre-Trial Order and took steps to place this matter on the calendar for trial.
After some pre-trial preparations, the parties resumed settlement discussions in coordination with the court. On October 3, 2002, defendants submitted a confidential letter to Con Edison and the court outlining a proposed settlement that the parties had discussed at an October 2, 2002 status conference. Letter from Nicholas Ward-Willis to Judge Trager (Oct. 3, 2002). Defendants proposed to pay an initial $225,000 toward the cost of remediation. The proposal anticipated that Con Edison would also pay up to $225,000 of remediation costs, with Con Edison's share decreasing if the cleanup cost less than $800,000. Defendants also asked Con Edison to file an Amended Complaint naming Kent River as a defendant, in order to reach Kent River insurance policies that could help pay for remediation costs. Finally, defendants offered Con Edison the option of accepting any proceeds recovered through defendants' insurance actions, or instead taking ownership of the Fyn Paint property in lieu of additional remediation payments.
Con Edison quickly rejected defendants' offer as "grossly inadequate." Letter from Lawrence Menkes to Judge Trager (Oct. 4, 2002) at 3. In particular, Con Edison rejected defendants' offer of "either highly speculative insurance proceeds or title to a badly contaminated piece of property" as partial payment for defendants' share of the expected cleanup. Con Edison, however, did file the requested Second Amended Complaint on October 17, 2002 to add Kent River as a defendant, so that defendants could reach the Kent River insurance policies.
The parties continued to negotiate toward a settlement. These talks culminated in a May 7, 2003 status conference (the "May 2003 conference") in which the parties committed, on the record and before the court, to a settlement agreement. Under the agreement, defendants would contribute up to $792,000, representing 72% of the cost for investigation and remediation of the Fyn Paint and Con Edison properties up to a limit of $1.1 million. Con Edison would contribute up to 28% of the cost of remediating these two properties until the costs reached $1.1 million (for a share of $308,000), and would pay for 100% of any additional remediation costs up to $4 million. The parties agreed that Con Edison would retain the right to petition the court for relief and to reopen the settlement if the remediation costs unexpectedly exceeded $4 million. May 7, 2003 Tr. at 3:4-6; 4:24-5:2. The parties also stated that Con Edison would control the actual cleanup process, in accordance with the Voluntary Cleanup Agreement ("VCA") reached between defendants and the New York State Department of Environmental Conservation ("DEC"). Id. at 23:8-12.
At the May 2003 conference, the parties decided to defer the signing of a final agreement for about 120 days, to allow defendants' expert to conduct some supplemental investigation of the contaminated sites, and to allow the parties to iron out some issues about the implementation of the agreement. See id. at 27:18-28:12, 31:11-17. This delay was requested by defendants, who wanted to be sure that DEC would not order Con Edison to demolish or excavate through the floor slab of the existing Fyn Paint factory building in the course of the site cleanup. Id. at 9:9-15, 11:5-19. The delay in finalizing settlement terms was agreed to by the parties, despite the stated objections of Con Edison's Vice President for Regulatory Affairs Chanoch Lubling, who stated that Con Edison would prefer to finalize the settlement immediately rather than create an unnecessary "two-step process." Id. at 20:14-25; 21:14-20.
Despite the agreed-upon delay, the parties confirmed the court's assessment that they had committed to a comprehensive settlement. See id. at 24:11-14.*fn2 The court explained that the parties were permitted to negotiate the final terms of the agreement, but only "on the condition" that such discussions would not "upset this settlement." Id. at 31:11-32:11. The court made clear that if the parties failed to reach agreement on additional terms, then the settlement would consist of the terms already agreed to on the record, plus any terms added by the court to implement the existing agreement. See id. at 33:3-4 ("[T]he settlement is what I put on the record and any omitted terms, I fill in.").
The subsequent investigation and discussions took longer than the expected 120 days. Dan Buzea ("Buzea"), who serves as Fyn Paint's environmental consultant, attests that the Supplemental Remedial Investigation ("SRI") report was submitted to DEC and Con Edison approximately three weeks late on October 1, 2003. Decl. of Dan Buzea, dated Dec. 12, 2007 ("Buzea Decl.") at ¶ 33. The parties held a scheduled status conference on December 8, 2003, but agreed to hold off the final signing of the settlement agreement until after DEC had formally responded to the parties' submissions. See Minute Entry for Settlement Conference Held Before Judge David G. Trager on 12/8/2003. The DEC did not respond to the SRI report until February 17, 2004, when the DEC declared that the report was "approvable" upon the condition that Fyn Paint agreed to additional investigation and reporting requirements. See Letter from DEC to Dan Buzea (Feb. 17, 2004), attached as Buzea Decl. Ex. F .
In the meantime, however, the parties began almost immediately to disagree over the implementation of the settlement agreement. For example, on February 4, 2004, while the DEC's formal written response was pending, Con Edison sent a letter to the court complaining that defendants were failing to comply with DEC's interim requirements, and maintaining that defendants' "VCA with [DEC] is at risk of being terminated for their continuing noncompliance." Letter from Lawrence Menkes to Judge Trager (Feb. 4, 2004) at 2. Con Edison expressed its concern that defendants' noncompliance with DEC would "jeopardize the settlement." Id.
On March 23, 2004, defendants responded to Con Edison's concerns by announcing that "based upon the results of the prior investigation, sufficient data now exists to permit the parties to finalize the settlement." See Letter from Nicholas Ward-Willis to Judge Trager (March 23, 2004) at 2. Defendants stated that, based on the supplemental investigation, they did not believe that the remediation costs would exceed the figures discussed at the May 2003 conference. Id. Defendants also stated that they had incurred expenses in excess of $125,000.00 to perform the investigation and remediation work to date, but that additional work would be difficult to fund prior to finalizing the settlement due to defendants' limited resources.
Id. Defendants asked to schedule an initial conference to resolve pending third-party insurance actions, and then to schedule a conference between Con Edison and defendants to finalize the settlement agreement. Id.
Defendants' primary focus in the subsequent months was on their third-party insurance actions, which they had brought so they could use the money from the insurance actions to fund the required remediation. Then, on September 3, 2004, defendants sent a letter to DEC asking for an adjournment of the dates in its VCA, claiming that it could not afford to comply with its obligations under the VCA while also litigating with Con Edison and its insurance carriers.*fn3 Con Edison responded by complaining to the court about defendants' delays and asking for a conference for the "purpose of bringing long overdue closure to this matter." Letter from Chanoch Lubling to Judge Trager (Oct. 4, 2004) at 3. Defendants, however, continued to insist that the finalization of the settlement with Con Edison should await the resolution of the insurance actions. Letter from Nicholas Ward-Willis to Judge Trager (Oct. 15, 2004) at 2.
The record shows a pattern of continued attacks between the parties over the subsequent two years. Con Edison complained repeatedly about defendants' failure to comply with remediation requirements under the VCA. Defendants, meanwhile, insisted that they were cooperating with DEC, indicated that insurance settlements had lifted the remaining barrier to compliance with the agreement, and blamed Con Edison for "placing obstacles [and] adding needless work and costs to the project." Letter from Nicholas Ward-Willis to Judge Trager (Aug. 24, 2005) at 1.*fn4
On February 14, 2006, Con Edison submitted a pre-motion conference letter, pursuant to individual chamber rules, stating that it was prepared to file a motion to ask "that the tentative settlement be declared at an end and that the matter be scheduled for trial." Letter from Lawrence Menkes to Judge Trager (Feb. 14, 2006) at 3. Con Edison claimed that defendants had repeatedly failed to conduct required remediation work, and that "[d]efendants' chronic refusal to perform has . . . deprived Con Edison of the benefits of the settlement." Id. at 2. Con Edison stated that it had complied with its obligations under the settlement by paying $33,235.25 in remediation costs to DEC, although Con Edison now characterized this payment as money "advanced on defendants' behalf." Id. at 1.
Rather than vacate the settlement, however, defendants were instructed by the court to provide a series of periodic status reports to ensure that the required remediation work was proceeding at a pace acceptable to DEC. The next correspondence from Con Edison, sent to the court on May 8, 2006, indicated that -- although Con Edison continued to dispute whether defendants were in full compliance with the VCA -- the parties all believed they remained bound by the May 2003 settlement agreement. See Letter from Lawrence Menkes to Judge Trager (May 8, 2006) at 2 ("Con Edison respectfully requests that the court once again emphasize to defendants the need for compliance and the benefits to be achieved for all under the settlement." (emphasis added)).
The next status conference between the parties was held on December 13, 2006 with the additional participation of DEC. The DEC representative confirmed that the state agency had considered "pull[ing] the plug" on the VCA due to defendants' failure to move remediation forward in a timely manner, but added that the agreement would remain in place due to "some forward progress." Dec. 13, 2006 Tr. at 2:22-3:1. Defendants agreed to comply with additional deadlines set by DEC to ensure timely compliance with the VCA. Critically, however, despite their ongoing disputes over compliance and implementation, the parties remained committed to the May 2003 settlement agreement. At the conclusion of this conference, defendants requested a final order to memorialize the agreement, so that the parties would no longer need to rely on the May 2003 conference transcript. Con Edison indicated its assent to that request. Id. at 14:2-10. The parties were instructed to prepare an order for submission.
After the December 13, 2006 conference, the parties appear to have negotiated the terms of a final stipulated judgment in earnest. However, in three subsequent status conferences -- held on April 24, 2007, July 17, 2007 and October 9, 2007 -- the parties noted their continued disagreement over a limited number of specific and discreet issues, and their resulting inability to agree on a final stipulation. At the October 9, 2007 conference, the parties indicated that they could not agree on a final stipulation, due to disagreements over Con Edison's demand that a party be named as a successor or guarantor to ensure future compliance with the settlement agreement after Fyn Paint and Feinstein had completed their remediation payments. Accordingly, defendants were instructed to submit the agreed-upon terms to be entered as a judgment to implement the May 2003 settlement agreement. Defendants submitted their proposed judgment on October 18, 2007. Defendants submitted an amended proposed judgment on March 26, 2008 to include subsequent remediation payments made by defendants while this decision was pending.
Con Edison responded to defendants' proposed judgment by filing a memorandum of law on November 2, 2007 claiming (1) that the May 2003 settlement was unenforceable due to the failure of defendants to meet four purported "conditions precedent" to the agreement; (2) that the settlement was unenforceable due to defendants' breach of the agreement; and (3) that the proposed judgment failed to represent the terms agreed upon by the parties. The proposed judgment submitted by defendants, together with Con Edison's objections and defendants' responses, are now before the court.
A settlement agreement is a binding and enforceable contract between the parties, which is subject to general principles of contract law. Delyanis v. Dyna-Empire, Inc., 465 F. Supp. 2d 170, 173 (E.D.N.Y. 2006) (applying New York contract law to enforce settlement agreement between parties in federal court). Under New York law, an agreement is enforceable if it is endorsed by the parties to a lawsuit or their counsel in open court. N.Y. C.P.L.R. § 2104. Once parties agree on the record to a settlement, they may not set that agreement aside without a valid basis. Downes v. O'Connell, 103 F. Supp. 2d 579, 582 (E.D.N.Y. 2000) ("The court will set aside or modify the terms of a settlement reached in open court only upon a showing of good cause, such as fraud, collusion, mistake, accident, or lack of authority."). The New York Court of Appeals has explained:
Stipulations of settlement are favored by the courts and not lightly cast aside. This is all the more so in the case of "open court" stipulations within CPLR 2104, where strict enforcement not only serves the interest of efficient dispute resolution but also is essential to the management of court calendars and integrity of the litigation process. Only where there is cause sufficient to invalidate a contract, such as fraud, collusion, mistake or accident, will a party be relieved from the consequences of a stipulation made during litigation.
Hallock v. State of New York, 64 N.Y.2d 224, 230, 474 N.E.2d 1178, 485 N.Y.S.2d 510 (1984).
Where parties agree to a settlement on the record, but are unable to agree upon the final terms to implement their agreement, a district court has the authority to issue a "settlement judgment" to effectuate the settlement agreement. Manning v. New York Univ., 299 F.3d 156, 163 (2d Cir. 2002); Janus Films, Inc. v. Miller, 801 F.2d 578, 582 (2d Cir. 1986). A settlement judgment is issued when the parties agree through settlement negotiations "on the components of a judgment, including the basic aspects of relief, but not on all the details or the wording of the judgment. Although the components of the agreement are usually reported to the court on the record, a district court nonetheless is obliged to determine the detailed terms of the relief and the wording of the judgment." Manning, 299 F.3d at 163 (internal punctuation and citations omitted). "A court's authority to enforce a settlement by entry of judgment in the underlying action is especially clear where the settlement is reported to the court during the course of . . . courtroom proceedings." Janus Films, 801 F.2d at 582. Such a settlement agreement, made by the parties on the record, empowers a court "to enter a settlement judgment, implementing but not expanding upon the parties' settlement agreement." Id.; see also Manning, 299 F.3d at 163. As with any contractual agreement, a "'plaintiff's change of mind does not excuse her [or him] from performance of her [or his] obligations under the settlement agreement,'" even in a case where a district court must use its authority to direct the final terms of that agreement. Manning v. New York Univ., 299 F.3d at 164 (2d Cir. 2002) (quoting Evans v. Waldorf-Astoria Corp., 827 F. Supp. 911, 914 (E.D.N.Y. 1993)); see also Janus Films, 801 F.2d at 583 (2d Cir. 1986) (explaining that a party may not "walk away from the settlement simply because he changed his mind").
(1) None of Con Edison's Purported "Conditions Precedent" Provide a Basis for Setting Aside the Settlement Agreement
Con Edison now claims that the May 2003 agreement was merely a "settlement in principle" that was unenforceable until certain conditions precedent were met.*fn5 Cf. Office of Comptroller General of Republic of Bolivia v. International Promotions & Ventures, Ltd., 618 F. Supp. 202, 207 (S.D.N.Y. 1985) (explaining that failure to satisfy a contractual condition precedent can relieve a party from an obligation to perform under the contract). Con Edison claims that defendants' failure to satisfy those conditions renders the agreement unenforceable. But none of the four issues raised by Con Edison was actually a "condition precedent" to the agreement reached by the parties on May 7, 2003. Moreover, none of these issues would create a valid basis for rescinding the settlement agreement under any other theory of contract law. Therefore, this settlement agreement remains enforceable, and a settlement judgment will be entered in order to implement the parties' agreement.
a. Defendants' Failure to Submit Supplemental Remedial Investigation Report Within 120 Days
Con Edison's first claim is that defendants failed to submit their Supplemental Remedial Investigation ("SRI") report to DEC within 120 days, pursuant to the parties' agreement at the May 7, 2003 conference. Con Edison claims that the supplemental remedial investigation remains incomplete, so that the parties do not have the information needed to "enable them to determine whether the settlement in principle should be consummated."
Pl.'s Mem. in Opp. to Defs.' Proposed Order of Settlement and Dismissal ("Pl.'s Mem.") at 7. Con Edison argues that this required investigation is an unfulfilled condition precedent that nullifies the settlement agreement.
Con Edison, however, mischaracterizes the parties' discussion of the SRI report at the May 2003 conference. Con Edison is correct that the parties agreed to postpone the final signing of a consent agreement until after defendants' consultants filed an SRI report, which defendants estimated would take 120 days. However, this postponement (which was requested by defendants and which, interestingly, Con Edison insisted was unnecessary) was not to uncover information that would allow the parties to decide whether to enter a proposed agreement. Rather, it was to confirm the ...