Bergassi, LLC v Ikon Solutions, Inc.

[*1] Bergassi, LLC v Ikon Solutions, Inc. 2008 NY Slip Op 52330(U) [21 Misc 3d 1133(A)] Decided on November 18, 2008 New Rochelle City Ct Colangelo, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. As corrected in part through December 2, 2008; it will not be published in the printed Official Reports.

Decided on November 18, 2008
New Rochelle City Ct

Bergassi, LLC, Plaintiff,

against

Ikon Solutions, Inc., Defendant



CV-687-08



JOHN A. SARCONE, III, ESQ.

The Sarcone Law Firm, PLLC

222 Bloomingdale Road

Suite 301

White Plains, NY 10605

Attorney for Plaintiff

ALEXANDER D. PENCU, ESQ.

Financial Centre

695 East Main Street

P.O. Box 10305

Stamford, CT 06904-2305

Attorney for Defendant

John P. Colangelo, J.

In February 2008, Plaintiff Bergassi Group, LLC ("Plaintiff" or "Bergassi") brought suit in the general civil part of this court against Defendant Ikon Solutions, Inc. ("Defendant" or "Ikon") seeking damages for an alleged breach of contract relating to two photocopy machines that Ikon previously sold to Plaintiff. Plaintiff claims that the machines were defective and seeks approximately $4,500.00 in damages. Defendant interposed an answer denying the material allegations of the complaint and raising ten affirmative defenses; no counterclaims have been interposed. On April 22, 2008 Plaintiff filed a Note of Issue and Certificate of Readiness for Trial. Since this action is subject to mandatory arbitration pursuant to § 28.2 of the Rules of the Chief Judge, the Court scheduled a pre-arbitration conference for May 30, 2008.

Counsel for both parties as well as Plaintiff's principal, Edmund Bergassi, appeared for [*2]the May 30 conference and initially met outside the presence of the judge with an eye toward settlement. At some point, according to Defendant and not denied by Plaintiff the Court suggested during an off the record bench conference that the parties consider a settlement figure of $2,500.00. Counsel then engaged in further out of court discussions. Defendant maintains that as a result of those discussions, the parties, again by counsel, arrived at a figure of $2,500.00 to be paid by Defendant to Plaintiff to settle the instant case, subject to the execution and exchange of releases between the parties. The terms of this alleged disposition were not, at the time of the conference or at any subsequent time, reduced to a writing signed by either side; nor were the terms of any settlement proposed or final ever placed on the record in open court. Rather, following the out of court discussions in which the parties, without the judge, participated, counsel returned to open court and Defendant's counsel announced on the record that the parties had reached a "settlement [in] principle" and asked the court for a three week adjournment in order "to close the deal". The court reporter's minutes of May 30, 2008 so reflect.

After the May 30 conference, the parties exchanged correspondence, electronic and otherwise. The correspondence so exchanged reflects the nub of the current dispute: Defendant claimed, and continues to contend by its motion, that on May 30 the parties reached a firm and final agreement to settle the instant case for $2,500.00, and as part and parcel of the settlement, to exchange general releases that would apply to all matters of dispute between them not limited to this case from the beginning of the world to the date of the release. Along, with the letters, Defendant proffered to Plaintiff a general release that so provided and that would apply not only to the parties, but to their subsidiaries and affiliates as well. Plaintiff appears to concur that the parties did agree to settle this case for $2,500.00, but maintains that such settlement was not intended to be a global disposition of all items in dispute or potentially in dispute between the parties. Rather, Plaintiff maintains, the settlement pertained and was limited to the instant case alone. Plaintiff therefore refused to sign the five page "Settlement Agreement and General Release" tendered to it by Defendant for fear that in so doing it might foreclose its ability to pursue Defendant or any of its subsidiaries and affiliates in this or other courts regarding other, potentially more substantial matters.

In July 2008, Defendant interposed the instant motion. By its motion, Defendant seeks to invoke CPLR 2104 to have the Court enforce what Defendant perceives as the agreed upon stipulation of settlement between the parties that is, to compel Plaintiff to not only accept $2,500.00 to settle this case, but to sign a general release encompassing any claims or potential claims that the parties may have against each other or their respective affiliates and subsidiaries, whether such claims are related to this case or not. Apparently, Plaintiff remains willing to accept the $2,500.00 payment, but insists that it will not execute a release that would include within its ambit any claim beyond that contained in its complaint in this particular case. Since Defendant has refused to accept this alternative, Plaintiff has opposed its motion. Plaintiff has also cross-moved pursuant to CPLR 3217 to voluntarily discontinue this action without prejudice. Defendant opposes the cross-motion unless the discontinuance is with prejudice.

For the reasons set forth below, the Court holds that Defendant's motion should be denied, Plaintiff's cross-motion granted, and this case discontinued without prejudice.

Defendant's Motion Pursuant to CPLR 2104 to Enforce the Alleged Settlement Agreement. [*3]

Although stated in the negative, CPLR 2104 clearly provides that the parties to a civil action may stipulate to virtually anything, including the settlement of it, and the courts will enforce their agreement provided that at least one of three indicia of such an agreement is present: the agreement must be "made in open court" by counsel, reflected in a writing signed by the party against whom enforcement of it is sought or his attorney, or entered in the form of written court order. As CPLR 2104 provides, in pertinent part:

"Rule 2104. Stipulations

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 isin a writing subscribed by him or his attorney or reduced to the form of an order andentered."

See Siegel, New York Practice, p. 337 (4th Ed. 2005) ("The parties can stipulate to almost

anything in an action . . . But if they contemplate the need of any judicial aid in carrying out their

stipulation, they must have it in writing . . . unless made in open court.").

In the instant case, by the strict terms of CPLR 2104, none of the criteria for judicial enforcement have been met. The purported stipulation has never been reduced to a writing signed by Plaintiff or entered in court as a written order, nor was it or any of its terms ever placed on the record in open court.

Defendant contends that the alleged oral agreement should nonetheless be enforced according to the terms as understood by Defendant because the conduct of the parties at and after the May 30 conference confirmed the existence and essential terms of such alleged agreement in a manner that effectively satisfies one or more of Rule 2104's criteria. First, Defendant argues that although the details of the alleged agreement were not placed on the court record, a stipulation of settlement was, in effect, "made between counsel in open court" through counsels' alleged agreement made during off the record discussions together with the on the record statement by Defendant's counsel that the parties had reached a "settlement [in] principle".

In addition, Defendant adduces certain post-conference correspondence between counsel which purportedly refer to a settlement agreement and to "general releases" to be signed pursuant to it (see Exhibits to Affidavit of Defendant's counsel, Alexander D. Pencu). Defendant maintains that such correspondence, together with the statements of counsel during the May 30 conference, provide sufficient confirmation of the alleged settlement agreement to constitute compliance with the rule and thus compel its enforcement. In support of its argument, Defendant relies on certain cases in which, Defendant contends, the courts enforced settlement stipulations despite the absence of the parties' strict compliance with CPLR 2104's terms. See, e.g. Neiman v. Springer, 89 AD2d 922 (2d Dept. 1982); Deal v. Meenan Oil Co., 153 AD2d 665 (2d Dept. 1989); Popovic v. New York City Health and Hospitals Corp. , 180 AD2d 493 (1st Dept. 1992), all cited by Defendant. Plaintiff takes issue with Ikon's characterization of the correspondence between counsel as confirmatory of the alleged agreement according to the terms propounded by Defendant, and points to statements by both counsel in such correspondence that described the [*4]purported agreement as a "proposed" rather than a final settlement.

However the correspondence is characterized or the May 30 conference is described, the fact remains that the plain terms of CPLR 2104 have not been met, and the purpose behind the rule would be subverted by forging an exception to them under the circumstances that obtain in the instant case. The rationale behind the restrictions that CPLR 2104 imposes on settlement stipulation enforcement is clear: While a longstanding policy of the courts is to encourage discussions and agreements between the parties themselves, courts are justifiably reluctant to intervene and potentially deprive a party of important rights unless a demonstrable agreement has clearly been reached. This judicial reticence is particularly acute in the case of a stipulation in the form of a settlement agreement that disposes with finality a party's claim, since so doing may well deprive that party of the essence of the action the very claim on which it sued.

For this reason, the courts have proven loathe to liberally construe CPLR 2104's requirements in such cases, and have carved out few exceptions to the rule's prescriptions. Indeed, consistent with the evident purpose of CPLR 2104, each of these judicially engrafted exceptions which the courts characterize as effective rule compliance requires concrete indicia of a settlement with all relevant terms specified. For example, courts have enforced oral settlement agreements made in the presence of the judge in court but without a stenographic transcript, but only if the terms of settlement are clear and recorded in the court's minute book or otherwise "entered into during formal court proceedings." Neiman v. Springer, 89 AD2d 922 (2d Dept. 1982). The very cases relied upon by Defendant so indicate. See, e.g., Deal v. Meenan Oil Co., 153 AD2d 665 (2d Dept. 1989) (Recording of the fact of the agreement and its terms in the court minute book rather than in open court deemed acceptable); Popovic v. New York City Health and Hospitals Corp., 180 AD2d 493 (1st Dept. 1992) (The judge's recording of the fact that the "parties agreed in the presence of the court to settle this personal injury case for $30,000.00" deemed equivalent to entry of the settlement in the minute book when it was also entered on the court's calendar and in the court's computer system); Neiman v. Springer, 89 AD2d 922 (2d Dept. 1982) (Arbitration award resulting from a stipulation made before the arbitrator enforced when terms were adduced before and recorded by the arbitrator and parties had previously agreed to dispense with stenographic transcript). See also Golden Arrow Films, Inc., 38 AD2d 813 (1st Dept. 1972) (Judge's personal notes made in chambers reflecting detailed settlement terms of which the parties had advised him deemed sufficient when court stenographer was unavailable).

Consistent with these cases, courts have likewise refused to enforce settlement agreements when the terms are not reflected in a written document signed by the party against whom the enforcement is sought or reflected in an official or quasi official court record, but instead remain in the ethereal realm of an alleged oral agreement. For example, in the leading Court of Appeals case of Bonnette v. Long Island College Hospital, 3 NY3d 281 (2004), the Court refused to enforce an alleged out of court oral agreement between counsel to settle the case for $3 million subject to the infant plaintiff's mother completing paperwork, including the execution of a stipulation of discontinuance and releases. The Court held that particularly in cases involving stipulations of settlement, and the strong policy in favor of rigorous enforcement of them, the protective strictures of CPLR 2104 must be adhered to so that the terms of any such stipulation are certain and clear to all. Only by so doing will the dual policies in favor of [*5]negotiated settlements and judicial economy be advanced by affording the parties both the "flexibility to conduct settlement negotiations without fear of being bound by preliminary offers" and, of equal importance, eliminating the need to involve the court in divining what the parties may have intended during settlement discussions. As the Court articulated,

"The plain language of the statute directs that the agreement itself must be in writing,signed by the party (or attorney) to be bound (CPLR 2104). As we remarked over a centuryago,

"[t]his rule is of somewhat ancient origin. It grew out of the frequent conflictbetween attorneys as to agreements made with reference to proceedings inactions, and was intended to relieve the courts from the constant determinationof controverted questions of fact with reference to such proceedings"

(Mutual Life Ins. Co. of NY v. O'Donnell, 146 NY 275, 279 [1895]).

To allow the enforcement of unrecorded oral settlements would invite an endless streamof collateral litigation over the settlement terms. This would run counter not only to thestatute, which on its face admits of no exceptions, but also to the policy concerns ofcertainty, judicial economy, flexibility to conduct settlement negotiations without fear ofbeing bound by preliminary offers and the prevention of fraud.

Furthermore, our State's strong policy promoting settlement (see Hallock v. Stateof New York, 64 NY2d 224, 230 [1984]), repeatedly advanced by Bonnette as a reasonto enforce the settlement here, actually convinces us that we cannot enforce thehospital's unwritten agreement with Bonnette. If settlements, once entered, are to beenforced with rigor and without a searching examination into their substance, it becomesall the more important that they be clear, final and the product of mutual accord. Theseconcerns obviously lie at the heart of CPLR 2104, a neutral statute enacted to promotecertainty in settlements, which benefits all litigants." Id. at 286.

Other courts including the Second Department have similarly so held when, as in Bonnette, an objectively verifiable court record of the material terms of the settlement stipulation is lacking. See, e.g., Kalomiris v. County of Nassau, 121 AD2d 367, 368 (2d Dept. 1986) ("[T]he agreement reached in open court must have definite terms, and, at the very least, must be entered in the minute books of such proceeding . . . [T]he mere entry on the clerk's docket card indicating that the case has been settled, in and of itself, is insufficient to satisfy CPLR 2104."); Phillips v. Pamper Decorating Service, 228 AD2d 425 (2d Dept. 1996) (Notation of a settlement in judge's personal file held "insufficient to satisfy the open court requirement of CPLR 2104" especially when "the parties were in dispute as to whether the settlement offer of the appellant's counsel was conditioned upon his client's approval."); Mutual Life Ins. Co. v. O'Donnell, 146 NY 275 (1895).

Moreover, in refusing to enforce the alleged oral settlement agreement, the Court in Bonnette rejected arguments similar to those interposed by Defendant herein, including its contention that the draft settlement documents sent to plaintiff reflected the alleged oral [*6]agreement and amounted to substantial compliance with CPLR 2104. Bonnette, 3 NY3d at 285.

Consistent with the Court's reasoning in Bonnette, the central unifying feature of the case law that permits a deviation from Rule 2104's prescription that an oral settlement agreement be announced in open court is that in each such exceptional case, the terms of the agreement were spelled out and recorded for all to see in an official or quasi official judicial document albeit not in an open court stenographic transcript. The reason behind this judicial policy is evident: Only in that manner may the court be assured that the parties are aware of the rights that they are giving up, and the court clear as to what the parties intended.

Put simply, as in the instant case, a mere statement in court by counsel for either or both sides that the parties have reached a "settlement [in] principle" is, without more, plainly insufficient. Particularly where the result of enforcing such an "agreement" would be to terminate for all time a party's rights to its claim, both CPLR 2104 by its terms and the courts interpreting it demand more; as the case law reflects, the courts insist upon an objective, verifiable means of confirming that there has been a settlement in fact together with its material terms. To require less would as the Court in Bonnette recognized enmesh the court in a litigation within a litigation with the focus on determining whether the parties settled and for what, rather than resolving the dispute that precipitated the action in the first place.

In any event, the extraordinary circumstances present in the case law relied upon by Defendant clearly do not obtain here. As Defendant must concede, no statement of the alleged agreement enunciating the terms claimed by Defendant was made in open court, and unlike the situation in Deal or Popovic, the alleged agreement is not reflected in any court minute book or computer system. The court's off the record comment that the parties consider a $2,500 settlement figure hardly qualifies as an "open court" recitation of settlement terms, as Defendant suggests. Neither the parties nor counsel ever confirmed before the court on or off the record that such a settlement amount was acceptable to either of them, nor were any other purported settlement terms revealed or presented to the court. The fact remains that the lone statement recorded in open court regarding a possible agreement the statement by Defendant's counsel that the parties had arrived at a "settlement [in] principle" and that they needed three weeks "to close the deal" contains no reference to any "settlement" amount or to the exchange of releases, general or otherwise, and thus belies Defendant's contention that the parties had arrived at a firm, final settlement. Indeed, such statement reflects, at best, a tentative settlement subject to final agreement on open, unspecified issues.

Thus, in the instant case, the "settlement" proffered by Defendant does not amount to a concrete, verifiable resolution of Plaintiff's claim as reflected in the settlement agreements reached in Deal and Popovic, and more closely resembles the rejected oral agreements purportedly reached by counsel in Bonnette, Kalomiris and Phillips alleged agreements that the courts in those cases declined to enforce. Indeed, in the instant case, the facts relied upon by Defendant prove even less confirmatory of the existence of a firm, final settlement agreement than the situations present in Kalomiris and Phillips. Whereas in those cases, some notation, albeit informal, of the purported settlements terms was made by the court or its staff, Defendant here relies solely on the naked statement by its own counsel that a settlement had been reached, a statement devoid of any substantive content as to what such a settlement entailed. At most, defense counsel's statement here amounts to nothing more than a nebulous agreement to agree to [*7]some unspecified terms in the future plainly not the "clear, final product of mutual accord" contemplated by CPLR 2104 and the cases applying it. Bonnette, 3 NY3d at 286.

In addition, the correspondence relied upon by Defendant is ambiguous at best, and does not reflect any agreement to the overarching general release sought by Defendant other than Defendant's transmission of such a release only to have it rejected by Plaintiff. For in the instant case, Defendant is seeking to go well beyond an attempt to enforce a rudimentary stipulation discontinuing Plaintiff's claim, albeit with prejudice. Rather, Defendant is seeking to enforce an alleged agreement that would release Defendant, as well as its subsidies and affiliates, from any liability to Plaintiff for any claim or potential claim whatsoever that arose from the beginning of time to date and this in a court of limited civil jurisdiction. Under such circumstances, Defendant should bear an even heavier burden of proving the existence of a definite agreement and adduce a compelling reason why the strictures of Rule 2104 should be relaxed. This, Defendant has failed to do.

Accordingly, since the requirements of CPLR 2104 have not been met, Defendant's effort to enforce the alleged settlement agreement proves unavailing and its motion is denied.

Plaintiff's Cross-Motion to Discontinue this Action without Prejudice:

Plaintiff has cross-moved pursuant to CPLR 3217 to voluntarily discontinue this action without prejudice. In so doing, Plaintiff has also indicated its continued willingness to settle the case for the admittedly agreed upon amount of $2,500.00, as long as the settlement is limited to this suit. Defendant, however, refuses to take yes for an answer, and asserts that the action should not be discontinued unless its perceived agreement that the parties execute broad general releases is enforced. Since the Court has already determined that it will not do so, the only extant issue is whether the instant case should be discontinued without Ikon's consent and, if so, whether it should be discontinued with or without prejudice.

CPLR 3217 permits a plaintiff to voluntarily discontinue its action without a court order until issue is joined and after that, only with the court's permission. The commentaries explaining and the case law applying CPLR 3217 indicate that such judicial approval will, in the main, be liberally granted and that such dismissals are typically without prejudice so that the plaintiff, subject to the applicable statute of limitations, may bring suit upon its claim at a later time. Siegel, New York Practice, pp. 483-484 (4th Ed. 2005); Louis R. Shapiro, Inc. V. Milspemes Corp., 20 AD2d 857 (1st Dept. 1964).

In general, courts demand that a voluntary discontinuance be with prejudice only in situations where the failure to do so would prejudice the opposing party's rights by allowing a plaintiff to profit from what the court perceives as gamesmanship. For example, a court will not allow a dismissal without prejudice on the eve of trial when it appears to the court that plaintiff is seeking a non-merits dismissal only because it realizes that a loss at trial is imminent and its attempt to withdraw its case is "merely an effort to make another try." Siegel, New York Practice, p. 484 (4th Ed. 2005); Getz v. Silverstein, 205 Misc. 431 (NY City Ct. 1954). Accordingly, unless "substantial rights have accrued and [the] adversary's rights would be prejudiced thereby", courts generally hold that a plaintiff's application for dismissal without prejudice should be freely granted. Siegel, New York Practice, p. 484 (4th Ed. 2005).

In the instant case, Defendant has failed to demonstrate that any "substantial right" of it would be prejudiced by dismissing this action without prejudice rather than with it. This [*8]particular case in which Plaintiff seeks damages in an amount less that $6,500.00 and is therefore subject to mandatory arbitration has not been the subject of much, if any, discovery and the mandatory arbitration which would permit a trial de novo in any event has yet to be scheduled, much less held. See § 28.2, Rules of the Chief Judge. Also, this case is of relatively recent vintage; less than eight months have elapsed since its inception, three of which have been consumed in motion practice initiated by Defendant.

Moreover, in light of Plaintiff's statements that it may have other claims against Ikon or its subsidiaries, granting its motion to dismiss without prejudice may well serve the interests of judicial economy by permitting the consolidation of such claims in another court with broader subject matter jurisdiction than this City Court. However, at this time, the Court is aware of no other action in any other court between Bergassi and Ikon. Thus the Court cannot transfer this action to another court, as Plaintiff suggests. Plaintiff is free, however, to attempt the assert the claim discontinued here in another forum at a later time, subject to the applicable statute of limitations.

Accordingly, Plaintiff's cross motion is granted and this action is discontinued without prejudice pursuant to CPLR 3217.

The foregoing constitutes the Decision and Order of this Court.

DATED: New Rochelle, New York

November 18, 2008

___________________________________

John P. Colangelo

City Judge