Velasquez v St. Barnabas Hosp.

[*1] Velasquez v St. Barnabas Hosp. 2007 NY Slip Op 52641(U) [25 Misc 3d 1206(A)] Decided on July 17, 2007 Supreme Court, Bronx County Roman, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on July 17, 2007
Supreme Court, Bronx County

Ana Velasquez, Plaintiff/Cross-Petitioner

against

St. Barnabas Hospital, Defendant/Petitioner



16282-03

Nelson Roman, J.

Defendant/Petitioner, ST. BARNABAS HOSPITAL (St. Barnabas), moves for an order pursuant to CPLR §2104 to compel the Court to enforce an in-court settlement entered into with plaintiff, ANA VELASQUEZ. Defendant claims that the Settlement Agreement includes execution of a Stipulation of Discontinuance with Prejudice, a General Release and a Confidentiality Agreement. Plaintiff contends that while an agreement was reached to sign the General Release and Stipulation of Discontinuance, the Confidentiality Agreement was not a part of the agreement. The same alleges that the Confidentiality Agreement is an illegal provision which she cannot sign and defendant is withholding settlement payments subject to signing this illegal provision. Accordingly, plaintiff cross-moves to have the Court enforce the settlement with interest, award attorney's fees, and award any other, further and different relief the Court deems just and proper (pursuant to NY CPLR §§ 2215, 5003-a(c) and 5001 and NYCRR §130-1.1).

For the reasons mentioned hereinafter, defendant's motion is granted in its entirety and plaintiff's cross-motion is hereby denied.

Settlement Agreements, Generally

Generally, an executory agreement is enforceable as long as "the promise of the party against whom it is sought to enforce the accord is in writing and signed by such party." Denburg v. Chapin, 82 NY2d 375, 375 (1993)(citing General Obligations Law §15-501 [2]). Additionally, it is well-settled that oral agreements reached in open court are likewise binding on litigants, even if not reduced to writing. According to CLPR §2104:

An agreement between parties or their attorneys relating to any matter in an action, other than one made between counsel in open court, is not binding upon a party unless it is in writing subscribed by him or his attorney or reduced to the form of an order and entered. With respect to stipulations of settlement and notwithstanding the form of the stipulation of settlement, the terms of such stipulation shall be filed the defendant with the county clerk.

There is a wealth of case law in this State citing CPLR's statutory requirement that [*2]settlements be made orally in open court or in a signed, complete writing. See e.g. Bonnette v. Long Island Hosp., 3 NY2d 281 (2004); McCoy v. Fienman, 99 NY2d 295 (2002); Deitsch Textiles, Inc. v. NY Prop. Ins. Underwriting Assc., 62 NY2d 999 (1984).Strong public policy arguments underlie these decisions: judiciary preference for strict enforcement of settlement agreements reached in open court, "not only serves the interest of efficient dispute resolution but also is essential to the management of court calendars and integrity of the litigation process" Will of Kanter, 209 AD2d 365, 365 (1994)(quoting Hallock v. State of New York, 64 NY2d 224, 230). As the Court in Denburg v. Chapin (82 NY2d 375, 383 (1993)) recognized:

"a negotiated compromise of a dispute avoids potentially costly, time-consuming litigation and preserves scarce judicial resources There is a societal benefit in recognizing the autonomy of parties to shape their own solution to a controversy rather than having one judicially imposed. Additionally, a settlement produces finality and repose upon which people can order their affairs These interests are advanced only if settlements are routinely enforced rather than becoming gateways to litigation."

Consequently, executed settlement agreements "may not be lightly set aside .particularly in an open court' stipulation pursuant to CPLR 2104." Will of Kanter, 209 AD2d 365, 365 (1994)(citing Daniel v. Long Is. Univ., 184 AD2d 350, 352). In the absence of fraud, collusion, mistake or other factors that would compel a Court to invalidate a contract, stipulations of settlement to end litigation will rarely be vacated. Heimuller v. Amoco Oil Company, 92 AD2d 882, 884 (1983)(enforceable stipulation was read into the record in open court and party seeking to vacate it was represented by counsel and acknowledged to the court that he had a full understanding of, and voluntarily agreed to the terms).

However, an agreement to settle an action does not necessarily terminate the action "unless there has been an express stipulation of discontinuance or actual entry of judgment in accordance with the terms of the settlement." Teitelbaum Holdings, Ltd. v. Gold, 48 NY2d 51, 53 (1979). In the absence of such termination, "the court retains its supervisory power over the action." Id. at 53. Only "upon a showing that parties have executed an express, unconditional stipulation of discontinuance, or have entered judgment in accordance with the terms of the settlement" will the action be terminated in the eyes of the Court. Id at 56.

Once a stipulation of settlement has been reached and filed with the Court, though, a settling defendant is required to comply with clearly stated obligations set out in CPLR §5003-a (c):

When an action to recover damages has been settled and the settling defendant is a public benefit corporation entitled to indemnified by the state, payment of all sums due to any settling plaintiff shall be made within ninety days of the comptroller's determination that all papers required to effectuate the settlement have been received by him.

Generally, an obligee "does not intend to discharge the existing claim merely upon the making of [an] accord; what is bargained for is the performance, or satisfaction." (Denberg at 383 (citing Plant City Steel Corp. v. National Mach. Exch., 23 NY2d 472 and General Obligations Law §15-501[3])). It is axiomatic, therefore, that a Settlement Agreement contains both accord and satisfaction (underlined for emphasis). As stated by the Denberg Court, "If the satisfaction is not tendered, the obligee may sue under the original claim or for breach of the accord." Id at 383.

The present dispute has arisen because one of the parties purportedly breached the [*3]settlement agreement. The question is whether defendant's failure to pay the settlement amount or plaintiff's failure to sign and return the Confidentiality Agreement constitutes a breach. Plaintiff alleges that defendant inserted the Confidentially Agreement after the final settlement agreement was reached in open court. Defendant argues that terms of confidentiality were part of the Settlement Agreement reached in open court and a signed Confidentiality Agreement was merely a formality.

As a general rule, a settlement agreement will be construed by the Court "to give effect to all its provisions and to render them consistent with each other." Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 63 (1995). Further, "Courts are bound to interpret contracts in accordance with the expressed intentions of the parties." Id at 57. The Courts also hold a clear position regarding common-law rules of interpretation of ambiguous contractual language. As Justice Stevens wrote in Mastrobuono v. Shearson Lehman Hutton, Inc., "the court should construe ambiguous language against the interest of the party that drafted it because [they] drafted an ambiguous document, and cannot now claim the benefit of the doubt." 514 U.S. 52, 62-63 (1995). The public policy supporting this is codified in the Restatement (Second) of Contracts §206, Comment a (1079):

Where one party chooses the terms of a contract, he is likely to provide more carefully for the protection of his own interests than for those of the other party. He is also more likely than the other party to have reason to know of uncertainties of meaning. Indeed, he may leave meaning deliberately obscure, intending to decide at a later date what meaning to assert. In cases of doubt, therefore, so long as other factors are not decisive, there is a substantial reason for preferring the meaning of the other party.

Terms of the Final Agreement

The primary inquiry here is whether the terms of the final in-court settlement, express or implied, included the proposed Confidentiality Agreement. Furthermore, if the agreement was ambiguous as to the terms, the Court will construe the agreement in favor of or against the party that drafted it the agreement. In the instant case, St. Barnabas drafted the agreement.

In interpreting contractual language, express or implied, generally "it would be sufficient to find that plaintiff intended to conclude the matter and that he did not specifically reserve a challenge to the clause's validity." Denberg at 383 (see Matter of Olympic Tower Assocs. V. City of New York, 81 NY2d 963). Accordingly, an agreement is valid and enforceable as long as, "a party [has] a good-faith belief in the merit of its position. That the party's view of the law might ultimately prove meritless does not undermine the validity of the agreement." Denberg at 383 (citing to R2d Contracts §74, comment b.).

In the instant case, counsel for plaintiff, Abdool Hassad, clearly entered into the settlement agreement in order to conclude the action. St. Barnabas points out that plaintiff never indicated an objection to the validity of the Confidentiality Agreement, nor gave notice of intention not to sign. In his own cross-motion, Mr. Hassad states that the alleged illegality of the Confidentiality Agreement became apparent to him after researching the issue. This occurred after settling the matter in open court. That Mr. Hassad's understanding of the law changed does not necessarily invalidate the Settlement Agreement.

Further, if the terms of the stipulation between St. Barnabas and Velasquez "specifically contemplated the possibility" that a Confidentiality Agreement would be a condition of the settlement, the agreement should be enforced. See Heimuller at 884 (plaintiff's contention that [*4]stipulation was tainted by economic duress and fraud was found to be without merit because stipulation was read in open court, and the party who later sought to vacate agreement was represented by counsel and acknowledged to the court that he had a full understanding of, and voluntarily agreed to, the terms). The record indicates that Mr. Hassad agreed to terms of confidentiality when the settlement was reached in court. Mr. Hassad, therefore, must have "specifically contemplated the possibility" that a Confidentiality Agreement would be included with the finalized documents and that signing it would be a condition of the settlement.

Alleged Illegality of the Confidentiality Agreement

Plaintiff argues that even if the Confidentiality Agreement was found to be part of the final Settlement Agreement, it is an illegal provision. The Court has inherent discretionary power to "vacate an award enforcing an illegal agreement or one volitive of public policy." Garity v. Lyle Stuart, Inc., 40 NY2d 354, 357 (1976)(citing Matter of Associated Teachers of Huntington v. Board of Educ., 33 NY2d 229, 235-236). plaintiff's illegality argument is two-pronged: 1) CPLR §2104 prohibits confidentiality in settlement agreements, and 2) the Confidentiality Agreement is, in application, an anti-competition clause which illegally restricts the right of Mr. Hassad from practicing law.

To support the first prong, plaintiff asserts statutory requirements prohibiting confidential settlement agreements. Until CPLR §2104 was amended in 1997, it was possible in many case for litigants to keep the terms of their settlement agreements private. The amended CPLR 2104 diminishes this option by turning all settlement stipulations into publicly-filed documents. It is generally difficult for parties to achieve confidentiality by sealing records; sealing court records is prohibited unless the court makes written findings of "good cause." Matter of Estate of R.R. Jr., 153 Misc 2d 747 (1992). Upon a showing of good cause, however, parties desirous of confidentiality might be able to obtain a court order sealing the terms of their filed stipulations. See §216.1, Part 216, Uniform Rules for the New York State Trial Courts.

To support the second-prong of illegality, plaintiff cites to Denberg v. Chapin, which highlights the fact that generally, "a lawyer may not participate in a partnership or employment agreement with another lawyer that restricts the right of a lawyer to practice law after the termination of a relationship created by the agreement.'" 82 NY2d 375, 380 (1993)(citing to DR 2-108 (A) of the Code of Professional Responsibility)(anti-competition clause in effect improperly deterred competition and impinged upon clients' choice of counsel). This principle reflects public policy, "rendering certain anti-competition clauses void and unenforceable." Id. at 391 (citing Cohen v. Lord, Day & Lord, 75 NY2d 95, 98). In Cohen, the same Denberg Court voided a provision that required withdrawing law firm partners going into private practice or taking positions as in-house counsel in any State where the firm had an office to relinquish their share of revenues earned but uncollected by the firm. The Court reasoned that:

"restrictions on the practice of law, which include financial disincentives' against competition as well as outright prohibitions, are objectionable primarily because they interfere with the client's choice of counsel: a clause that penalizes a competing attorney by requiring forfeiture of income could functionally and realistically discourage' a withdrawing partner from serving clients who might wish to be represented by that lawyer." Id at 380 (citing Cohen at 95).

However, the Court in both Cohen and Denberg explicitlycautioned against a "categorical interpretation or application" of their decision, writing that "While some bargains are so offensive to society that courts will not entertain the action—essentially leaving the [*5]parties where they are—in other cases an illegal agreement is not so repugnant and may be enforced It is all a matter of degree." Id at 381-383 (citing Cohen at 345).

Citing to the Cohen/Denberg rule here, plaintiff attempts just such a "categorical interpretation or application." Unlike the Confidentiality Agreement in Denberg, for instance, St. Barnabas's Confidentiality Agreement merely prohibits plaintiff from making disclosures about the contents of the Settlement Agreement, the discussions and circumstances preceding the Agreement, or the settlement amount. It allows disclosures "as may be necessary to enforce the Agreement or to the extent as required by income tax laws" (underlined for emphasis). Mr. Hassad also points out that the settlement amount is available to view for anyone in the world on the New York Unified Court System's website (nycourts.gov). The Confidentiality Agreement states nothing about the Court. Therefore, it is neither volitive of CPLR §2104 nor any other statute or common law as to make it illegal, nor is it so "repugnant" or "offensive to society" as to warrant invalidation by the Court. Accordingly, the Confidentiality Agreement should be enforced but may only prohibit disclosures except to the extent required by income tax laws or pursuant to CPLR §2104.

Defendant has demonstrated entitlement to have the Settlement Agreement enforced along with the Confidentiality Agreement. Because plaintiff's allegations of illegality and frivolity are without merit, plaintiff's cross-motion for interest on the settlement amount, attorney's fees, and further punitive awards is accordingly denied. It is hereby

ORDERED that plaintiff is directed to execute the Stipulation of Discontinuance with Prejudice, General Release and Confidentiality Agreement and forward the same to defendant within forty-five (45) days hereof . It is further

ORDERED that, upon receipt of the fully executed documents noted above, defendant pay the settlement amount of three thousand, five hundred dollars ($3500) to plaintiff within forty-five (45) days thereof. It is further

ORDERED that defendant serve a copy of this decision and order, with notice of entry, upon all parties within twenty-one (21) days hereof.

This constitutes the Court's decision and order.

Dated:July 17, 2007

Bronx, New York

______________________________

Nelson S. Roman, J.S.C