United States District Court, E.D. New York
SPRINT COMMUNICATIONS COMPANY L.P., SPRINT NEXTEL CORPORATION, BOOST WORLDWIDE, INC. and VIRGIN MOBILE USA, Plaintiffs,
JASCO TRADING, INC., YRB TRADING CORP., ALAN SAVDIE and YEHUDAH BODEK, Defendants
For Sprint Communications Company L.P., Sprint Nextel Corporation, Boost Worldwide, Inc., Virgin Mobile USA, L.P., Plaintiffs: Brian Rosner, LEAD ATTORNEY, Natalie Napierala, Carlton Fields, P.A., New York, NY; Gail Podolsky, Carlton Fields, Atlanta, GA; James B. Baldinger, Stacey K. Sutton, PRO HAC VICE, Carlton Fields, P.A., West Palm Beach, FL.
For Jasco Trading, Inc., a New York corporation, Alan Savdie, Individually, Defendants: Ezra Sutton, LEAD ATTORNEY, EZRA SUTTON P.A., Woodbridge, NJ; Gerald D. Grunsfeld, LEAD ATTORNEY, Lazar Grunsfeld Elnadev LLP, Brooklyn, NY.
For Y R B Trading Corp., a New York corporation, Yehudah Bodek, Individually, Defendants: Solomon J. Jaskiel, LEAD ATTORNEY, Law Offices of Solomon J. Jaskiel, New York, NY.
MEMORANDUM & ORDER
MARGO K. BRODIE, United States District Judge.
On October 9, 2012, Plaintiffs Sprint Communications Company L.P., Sprint Nextel Corporation, Boost Worldwide, Inc. and Virgin Mobile USA, L.P. (collectively " Sprint" or " Plaintiffs" ) brought the above-captioned action against Defendants Jasco Trading, Inc. and Alan Savdie (" the Jasco Defendants" ), and YRB Trading
Corp. and Yehudah Bodek (" the YRB Defendants" ) (collectively " Defendants" ) alleging breach of contract, unfair competition, tortious interference with business relationships, civil conspiracy, unjust enrichment, conspiracy to induce breach of contract, fraud, trafficking in computer passwords, unauthorized access, unauthorized access with intent to defraud, federal trademark infringement, false advertising, contributory trademark infringement, deceptive acts and practices, and conversion claims. Plaintiffs now move to enforce a settlement agreement (" Settlement Agreement" ) that Plaintiffs assert was reached between Sprint and the YRB Defendants since the commencement of this action. (Docket Entry No. 44.) The YRB Defendants moved to stay the case pending arbitration. (Docket Entry No. 48.) For the reasons set forth below, the Court denies Plaintiffs' motion to enforce the Settlement Agreement, and denies the YRB Defendants' motion to stay the case pending arbitration, without prejudice to renew.
Plaintiffs are mobile telephone communications companies. Plaintiffs bring this action against Defendants, two corporations and their respective presidents. (Compl. ¶ ¶ 16-19.) Plaintiffs allege that Defendants engaged in a " Bulk Handset Trafficking Scheme" in which they made unauthorized and deceptive bulk purchases of Sprint mobile telephones, which they resold outside the United States without authorization.
Sprint alleges in part that, by purchasing Sprint telephones, the YRB Defendants agreed to the terms and conditions (" Terms and Conditions" ) that were included with each Sprint telephone, and that the Terms and Conditions comprise a valid and binding contract between Sprint and the YRB Defendants, which contract was breached by the YRB Defendants. (Compl. ¶ ¶ 60-65; Compl. Ex. B " Terms and Conditions." ) The YRB Defendants, represented by counsel Arnold Davis, and Plaintiffs, represented in part by Stacey Sutton and Natalie Napierela, began to negotiate the Settlement Agreement through their respective attorneys after the YRB Defendants filed their answer to the complaint. (Pl. Mem 3; Def. Opp'n 3).
On December 18, 2012, the day before the parties were scheduled to appear before Magistrate Judge Ramon E. Reyes for an initial conference, Sutton sent Davis a copy of the Settlement Agreement, which incorporated revisions suggested by Davis. (Pl. Ex. A, Declaration of Stacey Sutton dated May 3, 2013 (" Sutton May 2013 Decl." )¶ 8; Def. Opp'n Mem. 4.) The attorney for the YRB Defendants, Davis, met with his client, individual Defendant Bodek, who declined to sign the Settlement Agreement at that time. (Def. Mem. 4.) Davis subsequently sent an email to Sutton, counsel for Plaintiffs, which stated:
I have spent the better part of today convincing my client to sign the settlement agreement. He wants to consult with another attorney within his Hasidic sect and has asked for a bit more time to come to a conclusion. It is my feeling that he will sign. The matter is on before the Magistrate at 11 AM tomorrow. Is it OK to report that settlement papers have been distributed and a short adjournment is needed to complete the matter?
(Def. Opp'n Ex A (" Email from Arnold Davis dated Dec. 18, 2012 4:14 pm" ).) Sutton replied with an email that stated, in pertinent part, " I don't have an issue with you conveying to the Court that the parties believe settlement is imminent. . . . If you want to send the Court a letter that you believe that YRB and Sprint are close to settlement and as such you do not want
to attend, we won't oppose." ( Id. (" Email from Stacey Sutton dated Dec. 18, 2012 at 4:17 pm" ).) After Davis responded by email indicating that he thought it best to appear and report to the Court in person, Sutton replied: " Since you will be attending the conference and we were not able to get this totally settled before the conference, please find attached the propose[d] case management plan that we drafted." ( Id. (" Email from Stacey Sutton dated Dec. 18, 2012 at 4:57 pm" ).) According to Plaintiffs, at an unspecified time on that same day, Davis called Sutton's office to explain that his client " needed to get approval to sign the agreement from his community leaders," but that this was " normal and a formality and that he expected to have the signed agreement within a short period of time." (Sutton May 2013 Decl.¶ 8.)
On December 19, 2012, at a conference before Judge Reyes, Davis reported that the matter as to the YRB Defendants was " pending the signing of the settlement agreement," and requested that the conference be adjourned until " after the first week of January, and it should be signed before then." (Pl. Ex. B, Transcript of Conference (" Tr" ), 3:10-11.) Plaintiffs' counsel, Napierela, stated: " We expect that that agreement will be signed either by week's end or early next week. And the terms have all been negotiated and we're just waiting for the execution of the document." (Tr. 5:25-6:3.) Later at that same conference Davis informed the court about " one of the sticking points" with his clients regarding the Settlement Agreement. (Tr. 16:17-17:7.) When the court inquired if counsel wanted to discuss the issue at that time, counsel for Plaintiffs responded that it was her understanding that they were going to execute the Settlement Agreement with Davis's clients that week, and suggested that they discuss the matter with Davis over the telephone. (Tr. 17:8-18.)
Following the December 19, 2012 conference, Plaintiffs' counsel did not speak directly to Davis until sometime in January 2013, when Davis informed Plaintiffs that his clients were refusing to sign the Settlement Agreement and he was no longer representing the YRB Defendants. (Pl. Mem. 4; Sutton May 2013 Decl.¶ 11.) The YRB Defendants subsequently filed a motion to substitute counsel, terminating Davis' representation, (Docket Entry No. 30), and Plaintiffs filed a motion to enforce the Settlement Agreement, (Docket Entry No. 44). The YRB Defendants moved to stay the case pending arbitration pursuant to 9 U.S.C. § 3, citing the mandatory arbitration clause in the Terms and Conditions. (Docket Entry No. 48.)
II. Plaintiffs' Motion to Enforce the Settlement Agreement
a. Standard of Review
Settlement agreements are governed by the principles of contract law. Powell v. Omnicom, 497 F.3d 124, 128 (2d Cir. 2007) (" A settlement agreement is a contract that is interpreted according to general principles of contract law." (citing Omega Eng'g, Inc. v. Omega, S.A., 432 F.3d 437, 443 (2d Cir. 2005))). In the absence of a written document, the Second Circuit has identified several factors to be considered in determining whether a settlement agreement is binding. Winston v. Mediafare Entm't Corp., 777 F.2d 78, 80 (2d Cir. 1985). These factors include: " (1) whether there has been an express 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." Winston, 777 F.2d at 80 (citing, inter alia, Restatement (Second) of Contracts); see also Powell, 497 F.3d at 129 (stating Winston factors); Kaczmarcysk v. Dutton, 414 F.Appx. 354, 355 (2d Cir. 2011) (same); Sawabeh Info. Servs. Co. v. Brody, 832 F.Supp.2d 280, 301 (S.D.N.Y. 2011) (same). While " [n]o single factor is decisive," Ciaramella v. Reader's Digest Ass'n, Inc., 131 F.3d 320, 323 (2d Cir. 1997), if " there is a writing between the parties showing that [a party] did not intend to be bound," then " a court need look no further than the first factor." RKG Holdings, Inc. v. Simon, 182 F.3d 901 (2d Cir. 1999) (alteration and internal quotation marks omitted) (citing Arcadian Phosphates, Inc. v. Arcadian Corp., 884 F.2d 69, 72 (2d Cir. 1989) and R.G. Grp., Inc. v. Horn & Hardart Co., 751 F.2d 69, 75 (2d Cir. 1984)). " A district court has the power to enforce summarily, on motion, a settlement agreement reached in a case that was pending before it." BCM Dev., LLC v. Oprandy, 490 F.Appx. 409 (2d Cir. 2013) (quoting Meetings & Expositions Inc. v. Tandy Corp., 490 F.2d 714, 717 (2d Cir. 1974)).
b. Choice of Law
Although not raised by the parties, the Court considers the appropriate law to be applied. Whether New York state law or federal common law applies when evaluating the enforceability of oral settlement agreements has not been decided by the Second Circuit, although the Second Circuit and most district courts have found no meaningful difference between the two. See, e.g., Ciaramella, 131 F.3d at 322 (finding " no material difference between the applicable state law or federal common law standard" to determine whether parties reached a settlement of claims, and declining to decide the question); Figueroa v. New York City Dep't of Sanitation, 475 F.Appx. 365, 366 (2d Cir. 2012) (" [W]e note that the question of whether federal or state law controls the enforceability of a settlement agreement in this context is an open one." ); Powell, 497 F.3d at 129 n.1 (" It is unclear whether the settlement of federal claims is governed by New York law or federal common law." ). The Second Circuit has stated that it need not answer the question, as " New York law and federal common law [are] materially indistinguishable." Powell, 497 F.3d at 129 n.1; Ciaramella, 131 F.3d at 322 (" Because we find that there is no material difference between the applicable state law or federal common law standard, we need not decide this question here" ). As a result, " Courts apply New York and federal common law interchangeably." Clarke v. Peake, No. 06-CV-4358, 2009 WL 862237, at *4 n.4 (E.D.N.Y. Mar. 31, 2009) (citing Powell, 497 F.3d at 129); see also Massie v. Metro. Museum of Art, 651 F.Supp.2d 88, 93 (S.D.N.Y. 2009) (" [F]ederal courts in the Second Circuit regularly apply New York law, observing that there is no meaningful substantive difference between federal and New York law with regard to enforceability." ).
Although the parties did not raise the issue of which law the Court should apply, they rely primarily on federal common law in presenting their arguments. ( See Pl. Mem. 6 (citing, inter alia, Winston, 777 F.2d at 80-83); Def. Opp'n 9 (same).) Accordingly, the Court applies common law as interpreted by federal courts. The Court notes that application of New York law would lead to the same outcome in this case. See Ciaramella,
131 F.3d at 320 (" New York relies on settled common law contract principles to determine when parties to a litigation intended to form a binding agreement." (citing Winston, 777 F.2d at 80-81)); Monaghan v. SZS 33 Assocs., L.P., 73 F.3d 1276, 1283 (2d Cir. 1996) (" the federal rule regarding oral stipulations does not differ significantly from the New York rule" ).
c. There is No Binding Settlement Agreement
Plaintiffs argue that the YRB Defendants entered into a binding Settlement Agreement with Plaintiffs, notwithstanding the absence of a signed and executed written document. (Pl. Mem. 5.) According to Plaintiffs, the YRB Defendants entered into a binding agreement when counsel for the YRB Defendants: (1) represented to Judge Reyes on December 19, 2012, that the parties had reached an agreement that was merely awaiting the addition of signatures, (Pl. Mem. 3; Pl. Reply 7); (2) represented to Plaintiffs' counsel on December 18, 2012, that his clients had accepted the Settlement Agreement, (Pl. Mem. 8; Declaration of Stacey Sutton dated Aug. 1, 2013 (" Sutton August 2013 Decl." ) annexed to Pl. Suppl. Brief, ¶ ¶ 4-5); and (3) sent to Plaintiffs' counsel a " counteroffer" to the initial offer of settlement, which counsel for Plaintiffs then " accepted" by sending a final revised settlement to counsel for the YRB Defendants, (Pl. Suppl. Reply 1-2). Plaintiffs argue that the oral agreement can be enforced by the Court under settled case law. (Pl. Mem. 6 (citing Winston, 777 F.2d at 80-83).) The YRB ...