Xie v. Caruso, Spillane, Leighton, Constrastano, Savino & Mollar, P.C.

Background

Agnes Xie brought state-law claims for legal malpractice, breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, and fraud against Caruso, Spillane, Leighton, Contrastano, Savino & Mollar, P.C., Daniel J. Savino, Jr., Esq., and Valerie Marie De-Peppo-Malloy, Esq. The claims concerned the defendants’ representation of Xie before the New York State Workers’ Compensation Board. Xie initially proceeded without a lawyer, but Andrew Lavoott Bluestone later appeared as her attorney.

In January 2021, Xie emailed Bluestone that she agreed to accept $47,500 net to settle the case. Bluestone told defense counsel that Xie would settle for $55,000, accounting for his $7,500 fee. Defense counsel replied that the defendants consented to a $55,000 settlement. The parties then told the court that they had reached a resolution, and the court dismissed the case based on a settlement in principle, subject to reopening within 30 days.

The parties continued exchanging drafts of a formal settlement agreement. Negotiations ultimately broke down over provisions concerning whether the defendants would breach the agreement by issuing Xie an Internal Revenue Service Form 1099, whether the settlement would count as Xie’s gross income, whether the defendants’ insurance company would accept her insurance claims, and attorney’s fees in later litigation over the settlement. No formal settlement agreement was signed. Xie terminated Bluestone, and the court later reopened the case.

The Motion and Legal Standard

The defendants moved to enforce the alleged $55,000 settlement. Under the test used by the United States Court of Appeals for the Second Circuit, a court examines four factors to determine whether parties intended to be bound by an oral or unsigned settlement: (1) whether either side reserved the right not to be bound without a writing; (2) whether the parties partially performed; (3) whether they agreed on all terms; and (4) whether the type of agreement is usually put in writing. Under New York law, the party seeking enforcement must prove the existence of a binding contract by a preponderance of the evidence, meaning that it is more likely than not that the contract existed.

Court’s Analysis

For the first factor, the court found that the draft agreements showed a reservation of the right not to be bound until a final written agreement was signed. The drafts stated that payment would occur only after the defendants received a fully executed settlement agreement and other documents. They also contained a merger clause stating that the written agreement would contain the parties’ entire understanding and supersede earlier agreements. This factor weighed against enforcement.

For the second factor, the defendants had not paid Xie any part of the alleged settlement. The parties had, however, stopped discovery and trial preparation because they believed the matter was effectively settled. The court found this factor neutral.

For the third factor, the court concluded that important terms remained unresolved. The court treated Xie’s proposed provisions concerning the tax treatment of the settlement, the exception-and-reservation clause, and the defendants’ insurance company as material terms forming part of the consideration for her agreement to give up the claims. The court stated that the issue was not whether Xie’s demands were reasonable, but whether she intended to be bound without those provisions being resolved. This factor weighed against enforcement.

For the fourth factor, the court found that settlements are generally put in writing or made on the record in open court. Because the proposed settlement involved one payment resolving all of Xie’s claims, the court said this factor favored enforcement, although it had limited relevance in the circumstances.

Disposition

The court concluded that the defendants had not proved the existence of a binding settlement agreement. Although the second factor was neutral and the fourth favored the defendants, the first and third factors showed that Xie did not intend to be bound merely by the $55,000 figure. Judge Oetken therefore denied the defendants’ motion to enforce the settlement. The clerk was directed to close the motion, and the court deferred consideration of Bluestone’s request for a charging lien until the case was resolved on its merits or settled. The opinion also states that the court did not find credible Xie’s separate allegation that Bluestone coerced her into accepting the settlement; that issue did not affect the ruling.