Spheyr, Inc. v. Brooklyn Minds Psychiatry P.C.

Background

Spheyr, Inc. brought the action against Brooklyn Minds Psychiatry P.C. to recover amounts allegedly due under a promissory note. The note was executed on September 28, 2021, and stated that Spheyr had loaned Brooklyn $451,000. After a change in Brooklyn’s ownership, Spheyr treated the note as in default and demanded $461,756.96. Brooklyn did not pay. Spheyr later moved for summary judgment, and the court deferred that motion until discovery was completed.

The parties then discussed settlement. On October 19, 2023, Brooklyn’s counsel emailed Spheyr’s counsel: “Client can do $150k paid within 10 days. I would jump on this before he changes his mind.” The next morning, Spheyr’s counsel responded that Spheyr accepted the offer and asked for proposed settlement papers. Brooklyn’s counsel replied that he would pass the acceptance along but might have difficulty reaching the client because of the client’s father’s death.

Later that day, Brooklyn’s counsel described a proposed transaction in which an unidentified third party would purchase Spheyr’s rights and pay $150,000 in 30 days. Brooklyn’s corporate counsel then stated that the arrangement was not a settlement with Brooklyn, that Brooklyn would not pay anything, and that Brooklyn’s counsel had not been authorized to offer Brooklyn’s payment of $150,000. Spheyr objected that these communications attempted to change the settlement terms. Negotiations concerning the possible third-party transaction continued for several months but ultimately did not produce a completed sale. Spheyr moved to enforce the alleged $150,000 settlement based on the October 19–20 emails.

Legal standard

The court explained that it may enforce a settlement reached in a case pending before it. Settlement agreements are contracts, and the party seeking enforcement must prove that a binding agreement exists. The court applied the four-factor test used to determine whether parties intended to be bound by an unsigned or informal settlement agreement: whether either side expressly reserved the right not to be bound without a signed writing; whether there was partial performance; whether all material terms had been agreed upon; and whether the agreement was the type normally put in writing.

The court focused on the parties’ objective intent rather than their undisclosed subjective intentions. It also explained that a later formal document does not necessarily prevent an earlier agreement from being binding.

Court’s analysis

The first factor favored enforcement. The court found no express reservation that the parties would not be bound until they signed formal settlement papers. Spheyr’s request for proposed papers did not impose that condition. The court also viewed Brooklyn’s counsel’s instruction to Spheyr to “jump on” the offer before the client changed his mind as evidence against finding such a reservation by Brooklyn.

The second factor weighed against enforcement because Spheyr conceded that neither side had partially performed the settlement. The court gave this factor limited weight.

The third factor favored enforcement. The court found that the October 19–20 emails established the material terms: payment of $150,000 within 10 days. It concluded that identifying a third-party purchaser was not a material open term because Brooklyn’s October 19 offer did not mention a third-party transaction. The court determined that the most reasonable reading of the offer was that it came from Brooklyn’s client, rather than from an unidentified third party.

The fourth factor also favored enforcement. The court found the agreement straightforward and not complex enough to require a more formal document. It further noted that the agreement was memorialized in emails, rather than being only an oral agreement.

Ruling and disposition

After weighing all four factors, the court held that the parties intended to be bound by the October 19–20 email exchange and had entered an enforceable settlement agreement. Judge Edgardo Ramos granted Spheyr’s motion to enforce the settlement. The court directed the Clerk of Court to terminate the motion, enter judgment in favor of Spheyr for $150,000, and close the case.