The opinion of the court was delivered by: David E. Peebles U.S. Magistrate Judge
The parties to this action, which is otherwise trial ready and before me on consent of the parties pursuant to 28 U.S.C. § 636(c), have entered into an oral agreement to settle the case based upon payment by the defendant of a specific monetary amount. Negotiations conducted by the parties' representatives in an effort to draft and execute an acceptable written document embodying the terms of a fully integrated settlement agreement, however, have proven unsuccessful.
Believing that the parties have entered into a binding settlement, defendant now seeks an order enforcing the agreement. Plaintiff opposes that application, arguing that because the parties did not intend to be bound by the settlement terms until reduced to a writing accepted and executed by the parties, and no such agreement has been signed, defendant is not entitled to the relief requested.
Because I find, based upon consideration of the facts surrounding the parties' settlement discussions, that while having tentatively agreed to settle the action neither party intended to be bound by the terms of the settlement until it was reduced to writing and executed by the parties, and no written agreement in resolution of the case was ever accepted and signed by both parties, I will deny defendant's motion.
A. Circumstances Surrounding The Action
Plaintiff AmeriCU Credit Union ("AmeriCU") commenced this action in New York State Supreme Court on or about September 29, 2006. The genesis of the suit was a loss suffered by AmeriCU as a result of the acts of one of its employees and the alleged failure of defendant Cumis Insurance Society, Inc. ("Cumis") to properly indemnify AmeriCU for the shortfall in accordance with existing insurance policies under which Cumis provided coverage to the plaintiff. Cumis subsequently removed the action to this court on November 6, 2006, urging diversity of citizenship as a basis for the court's jurisdiction in the matter, pursuant to 28 U.S.C. § 1332.
Following the denial on April 25, 2008 of a summary judgment motion filed by Cumis, the action was deemed trial ready and the parties were directed to report to the court by June 30, 2008 with proposed trial dates. Notwithstanding that trial ready status, Cumis requested and was granted leave to file a motion to amend and/or correct its answer to add a counterclaim. That motion was subsequently filed on May 20, 2008, and made returnable on July 9, 2008.
B. The Parties' Settlement
On or about June 26, 2008, attorneys for the respective parties orally agreed to settle the action based upon payment by Cumis of $50,000 in settlement of all the claims in the case. Upon achieving the settlement Jennifer E. Lattimore, Esq., an attorney for Cumis, drafted and e-mailed to plaintiff's counsel, John A. Nasto, Esq. a proposed written settlement agreement on the afternoon of that same date. During an ensuing telephone conference, held on June 30, 2008, Attorney Nasto requested that Attorney Lattimore revise two provisions, including the "Whereas" clause on the first page and the "release of claims" language on the second, in order to reflect that the agreement was limited only to the facts involved in this case.
After making the requested changes, Attorney Lattimore forwarded a revised draft of the agreement to AmeriCU's counsel on June 30, 2008. On the following day, Attorney Nasto telephoned requesting further revision of the same two clauses, proposing language which was subsequently incorporated by Cumis into yet another iteration of the agreement. The second revised agreement was e-mailed to Attorney Nasto on July 1, 2008, with an indication that Cumis had authorized acceptance of the document, as redrafted. Contemporaneously with that action, and with assent from AmeriCU's counsel, Cumis wrote to the court on July 1, 2008 requesting permission to withdraw its pending motion to amend. That request was granted, and the motion was removed from the court's calendar.
On July 8, 2008, not having heard further from AmeriCU regarding the settlement, Attorney Lattimore e-mailed Attorney Nasto to inquire concerning the status of the matter. In response, Attorney Nasto telephoned defendant's counsel to advise that his client would not agree to a settlement which did not include a waiver of subrogation provision similar to a clause included in prior agreements between the parties, but which was not included in the existing draft settlement agreement. During the course of that conversation, Attorney Nealon admitted that he had overlooked the omission of such a provision and had accordingly failed to raise it in prior discussions regarding the settlement agreement drafting process.
With permission from the court, Cumis moved on July 25, 2008 for an order enforcing the settlement agreement between the parties. Dkt. No. 54. In papers filed on August 8, 2008, AmeriCU has both opposed defendant's motion and cross-moved seeking a declaration from the court that in the event the case is deemed to have been settled, the merger provision of the parties' agreement overrides any subrogation obligation arising out of the relevant insurance policies. Dkt. No. 55. In its opposition to defendant's motion, AmeriCU asserts that while there was a tentative settlement reached, through their actions the parties manifested an intention not to be bound by its terms until it was reduced to writing and executed by the parties, additionally arguing that because the subrogation rights ...