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Royal Indian Raj International Corporation v. Domains By Proxy

July 20, 2011

ROYAL INDIAN RAJ INTERNATIONAL CORPORATION, PLAINTIFF,
v.
DOMAINS BY PROXY, INC., ET AL.,
DEFENDANT.



The opinion of the court was delivered by: John G. Koeltl, District Judge:

MEMORANDUM OPINION AND ORDER

The defendant has filed a motion to enforce a settlement agreement and a motion for attorneys' fees or other sanctions. The plaintiff's time to respond has passed, and the plaintiff has not filed a response. The Court therefore decides the motions based on the papers submitted to the Court to date.

I.

On April 8, 2008, the plaintiff, Royal Indian Raj International Corporation, filed this action against the defendants Domains by Proxy, Inc., WestHost, Inc., William Zack, Ann Zack, Direct Information PVT Ltd., Piradius Net, and John Does 1-7, alleging injurious falsehood and tortious interference with prospective contractual relations based on actions allegedly arising from defendant William Zack's creation of a website and former employment with the plaintiff corporation. On April 24, 2008, the plaintiff voluntarily dismissed Domains by Proxy, Inc., and WestHost, Inc. as defendants and submitted an amended complaint on July 9, 2008, adding new claims of defamation by implication, theft of confidential information, breach of duty of good faith and loyalty towards employer and violations of 18 U.S.C. § 1030. On September 5, 2008, the defendant, William Zack, counterclaimed against the plaintiff for violation of the Securities and Exchange Act of 1934, breach of contract, and quantam meruit/ unjust enrichment.

On October 13, 2009, Einbinder and Dunn, LLP moved to withdraw as attorney for the plaintiff. The Court granted the motion on December 4, 2009 and gave the plaintiff thirty days to appear by new counsel.

By March 1, 2010, the plaintiff had not appeared by new counsel and on March 16, 2010, the defendant, William Zack, filed an order to show cause for a default judgment on the defendant's counterclaims. On April 28, 2010, represented by new counsel, Diane McFadin, the plaintiff submitted filings in opposition to the motion for default judgment. The Court thereafter vacated the default against the plaintiff, denied the order to show cause for a default judgment and referred the case to Magistrate Judge John C. Francis IV. Royal Indian Raj Int., Corp. v. Domains by Proxy, Inc., No. 08 Civ. 3445 (S.D.N.Y. June 11, 2010)(Order of Reference to a Magistrate Judge).

On September 13, 2010, a settlement conference was held before Magistrate Judge Francis. The terms of the settlement were agreed to in open court by both parties. See Settlement Conference Tr. Sept. 13, 2010 ("Settlement Tr.")at 3:18-3:24. The conference was attended by the principal of the plaintiff, the individual defendant William Zack, and the lawyers for both parties. The oral agreement in court was to be followed by a written settlement agreement by the parties. Id. at 2:12-2:13.

Following the settlement conference, on September 15, 2010, the defendant drafted a written settlement agreement based on the terms set out in court and sent it to the plaintiff for review. (Def. Motion Ex. A.) On September 17, 2010, counsel for the plaintiff sent the defendant an e-mail stating that her client had not yet reviewed the settlement agreement. (Def. Motion Ex. B.) On September 22, 2010, the plaintiff's attorney indicated that the plaintiff wanted to make changes to the letters to be attached to the agreement. (Def. Motion Ex. C.) The plaintiff's attorney also requested additional acknowledgements from the defendant and expressed the need to talk to her client more about other aspects of the agreement. Id. All of the changes were either additional or different from the terms agreed to in open court and the attorney for the defendant warned the plaintiff's attorney of her duty to proceed in good faith and his obligation to file pleadings to enforce the agreement or for sanctions. Cf. (Def. Motion Ex. C), (Settlement Tr. at 2-3.) Between September 24, 2010 and September 29, 2010, the parties' attorneys exchanged more emails regarding which terms were agreed to in court and decided to obtain a transcript because the plaintiff had become unclear about the obligations to which the defendant had consented. (Def. Motion Ex. D.) On Wednesday, October 13, 2010, when the settlement still had not been finalized, the attorney for the defendant indicated his intent to file pleadings by that Friday if the settlement papers had not yet been signed. (Def. Motion Ex. E.) Later that day, counsel for the plaintiff sent an edited copy of the settlement agreement to the defendant for review. (Def. Motion Ex. F.) The defendant's attorney replied that the changes were acceptable, that he and his client would sign the agreement, and that the principal of the plaintiff and his attorney should do the same. (Def. Motion Ex. G.) Counsel for the plaintiff, however, then indicated that there were more edits to propose to one of the letters. (Def. Motion Ex. H.)

On October 21, 2010, the plaintiff's counsel proposed an additional edit, to which the defendant's attorney agreed. (Def. Motion Ex. I.) The defendant now argues that the parties agreed to the terms of the settlement in open court and then agreed to the actual written document. The plaintiff has not submitted papers in response.

On November 25, 2010, Diane McFadin submitted a motion to withdraw as attorney for the plaintiff. The Court granted this motion on May 11, 2011, ordered the plaintiff to appear by new counsel by June 3, 2011, and directed the defendant to file any motions by June 10, 2011. The plaintiff has not appeared by new counsel.

By motion dated June 23, 2011, the defendant advised the Court that the plaintiff has not responded to the pending motion to enforce the settlement agreement and asked that the Court decide this motion based on the papers submitted.

II.

The defendant requests that the Court enforce the Settlement Agreement, signed by the defendant and his attorney, and annexed to the motion as exhibit J. The Settlement Agreement is materially similar to the terms laid out by Judge Francis. Cf. (Def. Motion Ex. J); (Settlement Tr. at 2-3.) In essence, the settlement provided that the plaintiff would pay the defendant William Zack $120,000 in four separate installments ending on June 1, 2011. There was to be a mutual non-disparagement agreement and the defendant was to provide two letters explaining the resolution of the dispute. There was a notice and cure provision if any payment was late. The proposed judgment was to settle the entire lawsuit. The Settlement Agreement also reflects all of the changes proposed by the plaintiff to which the defendant agreed. See (Def. Motion Exs. F, G, I, J.)

The plaintiff's counsel had the authority to agree to the Settlement Agreement. The relationship between a lawyer and client is one of agent and principal. United States v. International Bhd. of Teamsters, 986 F.2d 15, 20 (2d Cir. 1993). The decision to settle a case rests with the client, and a client does not automatically bestow the authority to settle a case on retained counsel. Fennell v. TLB Kent Co., 865 F.2d 498, 501-02 (2d Cir. 1989). Nonetheless, an attorney's actual authority "may be inferred from words or conduct which the principal has reason to know indicates to the agent that he is to do the act." International Bhd., 986 F.2d at 20; see also Figueroa v. City of New York, No. 05 Civ. 9594, 2011 WL 309061 at *4(S.D.N.Y. Feb. 1, 2011). Here, the plaintiff explicitly agreed to the terms of the settlement in open court, and the Court indicated that, following the conference, the parties would memorialize those terms in writing. See Settlement Tr. at 3:12, 3:24. The ...


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