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Steinfeld v. IMS Health Incorporated

United States District Court, S.D. New York

April 21, 2014




Before the Court is Magistrate Judge Lisa Margaret Smith's Report and Recommendation ("R&R"), dated February 14, 2014 (Doc. #119), on defendant's motion to enforce a purported settlement agreement between the parties. (Doc. #101). Judge Smith recommended that the motion be denied because, despite the existence of an otherwise binding preliminary agreement, the parties entered into the agreement under a mutual mistake as to a material fact, such that the agreement is voidable and must be rescinded.

For the following reasons, the Court adopts the R&R and DENIES the motion to enforce.

I. Standard of Review

A district court reviewing a magistrate judge's report and recommendation on a dispositive motion, such as a motion to enforce a settlement agreement, "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. ยง 636(b)(1). Objections to the recommended ruling are reviewed de novo. Id .; Fed.R.Civ.P. 72(b)(3). Unobjected to portions of the recommended ruling are reviewed for clear error. See Wilds v UPS, Inc. , 262 F.Supp.2d 163, 169 (S.D.N.Y. 2003).

II. Plaintiff's Objections

Plaintiff objects to the magistrate judge's finding that, in an exchange of emails on August 23, 2013;, the parties entered into a preliminary settlement agreement to which both parties intended to be bound. Specifically, plaintiff claims Judge Smith incorrectly found that two of the four Winston factors[1] - whether either party expressly reserved its right not to be bound, and whether all essential terms of the alleged contract were agreed upon - weighed in favor of finding the parties had entered into a binding agreement.

Judge Smith found that the language of the preliminary agreement[2] - in which plaintiff's counsel, in response to defendant's counsel's summary of the terms of the settlement, stated, "I confirm my agreement on Mr. Steinfeld's behalf to these terms, " and in which neither party expressly reserved its right not to be bound absent the execution of a formal agreement - coupled with counsel's joint communication shortly thereafter to Judge Seibel's chambers that they had settled the matter, was strong evidence the parties did indeed intend to be bound. (R&R, at 13-17).[3]

The magistrate judge further found the preliminary settlement agreement was facially complete, contained "all of its essential terms, " and indicated "no future substantial negotiations." (R&R, at 25). In doing so, Judge Smith rejected plaintiff's argument that the preliminary agreement was incomplete because (i) language in the preliminary agreement required the parties to execute mutual general releases, (ii) the parties subsequently expressed divergent views on what they intended would be released, (iii) the preliminary agreement called for a formal written agreement with "typical boilerplate' provisions, " and (iv) defendant later proposed terms that were arguably not boilerplate provisions.

Judge Smith concluded the promise to exchange mutual general releases was facially complete because lawyers know the nature and intended effect of a standard form mutual general release, notwithstanding the obvious fact that parties can, if they so desire, agree to alter the terms of such a release. Thus, according to Judge Smith, what controls is not the parties' subjective intent, but rather the parties' intent as reflected in the unambiguous language of the release clause in the preliminary agreement. Judge Smith also concluded the reference in the preliminary agreement to typical boilerplate provisions plainly meant such provisions would have no material effect on the agreement; thus, that reference did not change the fact that the preliminary agreement was facially complete as to its essential terms. And, finally, Judge Smith found the arguably non-boilerplate terms later proposed by defendant were of no consequence because no writings contemporaneous with or prior to the preliminary agreement indicated any anticipated future negotiation of such terms. (R&R, at 17-25).

As to the two remaining Winston factors - whether there has been partial performance, and whether the agreement at issue is the type of contract that is usually committed to writing - the magistrate judge found they weighed against finding the parties intended to be bound. Judge Smith observed there was no partial performance and that, although there was a writing in the form of an exchange of emails, given the amount of money involved, and the lengthy time necessary for full performance, an agreement of this type would typically be reflected in a more formal written document. (R&R, at 25-27).

Judge Smith correctly observed that the intent of the parties here is a "close question." (R&R, 13, 28). But because the express language of the agreement (the most important of the four factors) so clearly indicates the parties intended to be bound, combined with the fact the agreement had no open essential terms, Judge Smith ultimately concluded the parties intended the preliminary agreement to be binding. (R&R, at 28).

In conducting a de novo review of the R&R, this Court has independently and thoroughly reviewed the record and the relevant case law. Having done so, the Court finds no merit in any of plaintiffs' objections, and further finds that Judge Smith correctly concluded the parties intended to be bound by the preliminary settlement ...

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