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Litigation: Stipulators Beware: The Perils of CPLR 2104

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December 22, 2006

By Richard L. Weber, NYSBA, Perspective, Fall/Winter 2006

To a young lawyer, the process of settling a lawsuit or entering a stipulation with an opponent looks simple enough: just reach an agreement. However, any lawyer entering a stipulation or agreement must take care to comply with the requirements of CPLR 2104.

As a matter of public policy, courts seek to encourage stipulations as a way to provide litigants with predictability and to promote judicial economy.1 To facilitate that goal, CPLR 2104 sets forth three alternate options for memorializing agreements between parties (or their attorneys) in an action: (a) the agreement must be made between counsel "in open court", or (b) the agreement must be set forth in a writing subscribed by the party against whom enforcement is sought, or (c) the agreement must be reduced to the form of an order and entered. 2 Failure to satisfy one of the three acceptable options will render the stipulation unenforceable. 3

Of the three alternatives, the third option -- reducing the agreement to an order entered with the Court -- presents the least difficulty from an enforcement standpoint. After all, under this option, the express terms of the stipulation are documented in a writing, signed by a judge, and filed with the court. As a matter of course, state courts frequently utilize scheduling orders and other stipulations to control timing of discovery and motion practice. 4

Option number one -- agreement between counsel "in open court" -- hinges on the definition of "open court", a term of art not to be taken lightly. In re Dolgen Eldrich Corp. sets forth the traditional description of the "open court" requirement:

    The term "open court" . . . is a technical term in the law. It refers to a judicial proceeding in a court, whether held in public or private, and whether held in the courthouse, a courtroom, or any place else, so long as it is, in an institutional sense, a court convened, with or without a jury, to do judicial business. Typically, in a court of record, an open court has in attendance a clerk who makes entries of judicial events in a docket, register, or minute book, and in modern times there is a court reporter, who makes record of all the proceedings. An open court is not a "judge in chambers", in the technical sense of that phrase, and it is neither a judge nor a clerk acting in its proper person anywhere, whether in the courtroom or elsewhere. 5

With that in mind, it should come as no surprise that a telephone call between counsel -- without participation by the Court -- fails to meet the "open court" requirement.6 Similarly, documentation of the agreement in a stenographic record created at a deposition is insufficient.7 In fact, a stenographic record made in chambers and in front of a judge's law clerk will not suffice unless the judge is also present.8 On the other hand, an agreement made during a pre-trial conference may fail to satisfy the "open court" requirement if the material terms of the agreement are not properly documented in a stenographic record.9 For example, one recent case noted that a mere notation on the trial judge's case calendar, marking the case "settled", was not sufficient documentation of the agreement.10 In short, the "open court" requirement demands both the presence of a judge and a full stenographic record of the terms of the stipulation.11

Option number two -- a "signed writing" -- presents other traps for the unwary. In Bonnette v. Long Island College Hospital,12 the parties entered into an out-of-court oral settlement of a medical malpractice action. To finalize the settlement, the defendant hospital required the plaintiff to complete settlement paperwork. The hospital provided the forms to the plaintiff parent, who delayed returning the necessary forms while she sought an appropriate annuity plan from the hospital's chosen annuity company. The infant plaintiff died prior to execution of the settlement paperwork; the hospital responded by informing plaintiff parent that no enforceable settlement existed, as no signed writing complying with CPLR 2104 was ever delivered. Plaintiff moved to enforce the settlement. Ultimately, the Appellate Division determined that plaintiff's failure to obtain any writing with the complete settlement terms, or any recitation in open court of the settlement terms (i.e. CPLR 2104 option number one), precluded enforcement of the settlement agreement. The Court of Appeals affirmed. 13

Bonnette is emblematic of the traps associated with the second CPLR 2104 option: there is no enforceable agreement until all material terms of the agreement are in a writing, signed by the parties. Simply drafting and circulating a stipulation or release is not enough; the documents must be executed to be enforceable.14 Mere enclosure letters -- even those acknowledging the existence of an agreement -- will not suffice unless they incorporate all material terms of the settlement.15 Stipulations that are contingent on a subsequent event or agreement will not be enforceable in the absence of the contingency.16 Also, reliance on arguments of "substantial compliance" or partial performance will be unlikely to save a stipulation not properly committed to writing.17 In sum, the "signed writing" option requires both an express record of all material terms and the signature of the opponent.18

CPLR 2104 leaves little room for challenges by the parties. The strongest argument available to a party seeking to enforce a non-compliant stipulation is that the party seeking enforcement was misled by the stipulation and detrimentally relied upon its terms, thereby warranting estoppel upon the breaching party.19 Where there is no dispute between the parties to the terms of a settlement agreement made during pending litigation, courts will refuse to allow CPLR 2104 to be used against a party who has been misled or deceived.20 On the other hand, a party attempting to set aside a compliant stipulation has the tall order of demonstrating fraud, collusion, mistake, accident or duress in order to be relieved from the consequences of the stipulation.21

In sum, CPLR 2104 demands the prompt and proper documentation of the material terms of any stipulation or settlement between the parties. Failure to heed its requirements may render any agreement a nullity.

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1 McCoy v. Feinman, 99 NY2d 295, 302 [2002].

2 CPLR 2104. Note that stipulations of settlement of an action carry an additional requirement -- the "filing" of the terms of settlement, by the defendant, with the county clerk. Id.

3 See In re Hicks v. Schoetz, 261 AD2d 944 [4th Dept 1999].

4 See generally Uniform Civil Rules for the Supreme Court and County Courts, Rule 202.12; see also Chadbourne & Parke v. Warshaw, 287 AD2d 119, 122 [1st Dept 2001] [noting "courts have long favored and encouraged the fashioning of stipulations as a means of expediting and simplifying the resolution of disputes"].

5 In re Dolgen Eldrich Corp., 31 NY2d 1, 4-5 [1972].

6 Tocker v. City of New York, 22 AD3d 311 [1st Dept 2005].

7 Marpe v. Dolmetsch, 256 AD2d 914 [3d Dept 1998].

8 Conlon v. Concorde Pools Ltd., 170 AD2d 754 [3d Dept. 1991].

9 See generally Uniform Civil Rules for the Supreme Court and County Courts, Rule 202.26(f) [requiring "complete minutes" of any stipulation of settlement made at a pretrial conference]; see also Zenteno v. Geils, 17 AD3d 457 [2d Dept. 2005]; Gustaf v. Fink, 285 AD2d 625 [2d Dept 2001].

10 Andre-Long v. Verizon Corp. , 2006 NY Slip Op 5300 [2d Dept July 5, 2006]; see also Gustaf, 285 AD2d at 626.

11 Shenoy v. Buffalo Medical Group, 213 AD2d 1012 [4th Dept 1995] [no settlement entered in "open court" where no court minutes document the fact of the stipulation or its terms].

12 3 NY3d 281 [2004].

13 Id. at 285.

14 Klein v. Mount Sinai Hospital, 61 NY2d 865 [1984]; Defeo v. Civitano, 304 AD2d 520 [2d Dept 2003].

15 Bonnette, 3 NY3d at 286 [citing Matter of Galasso, 35 NY2d at 321].

16 Luisi v. Luisi, 244 AD2d 464 [2d Dept 1997] [where written stipulation was made "subject to" agreement of the parties, stipulation not enforceable unless and until parties executed a further stipulation].

17 Bonnette, 3 NY3d at 286.

18 Id.; Shenoy, 213 AD2d at ___.

19 See generally, Twumasi v. TJMT Transportation Services, Inc., 267 AD2d 153 [1st Dept 1999]; Marpe, 256 AD2d 914; Bedrosian v. McCollum, 209 AD2d 778 [3d Dept 1994].

20 Id.; Conlon, 170 AD2d 754.

21 French v. Quinn, 243 AD2d 792 [3d Dept 1997].