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February 08, 2022 Top Story

No Takebacks! Playground Rules Apply to Email Settlement

A six-word email, accompanied by counsel’s signature block, sufficient to bind client to unfavorable settlement agreement

By Grant H. Hackley

While email allows for faster and less formal communication, it also presents risks for rushed attorneys. A state appellate court recently held that a lawyer’s email typed and sent in haste bound the client to an unfavorable settlement. ABA Litigation Section leaders counsel attorneys to slow down and exercise caution before sending off quick emails that might prejudice clients.

A standard signature block at the bottom of an email is sufficient for subscription

A standard signature block at the bottom of an email is sufficient for subscription

MARHARYTA MARKO | iStockphoto by Getty Images

An Unread Email and a Premature Email

In Philadelphia Ins. Indemnity Co. v. Kendall, the plaintiff insurer sued to enforce the defendant’s agreement to settle her underinsured motorist claim for $400,000. The defendant suffered injuries in a motor vehicle accident while operating her employer’s vehicle. The other driver had inadequate insurance coverage and settled the defendant’s claims for policy limits of $25,000. The defendant then brought a separate claim in arbitration under her employer’s underinsured motorist policy for recovery of supplemental benefits.

The defendant and the insurer attempted to negotiate a settlement but were unable to do so prior to arbitration. Arbitration went forward on August 15, 2019. A month later, on September 16, 2019, the arbitrator issued a decision awarding $975,000 to the defendant, representing the employer’s policy limits less the amount recovered from the other driver. The arbitrator emailed the notice of award to the defendant’s counsel and faxed it to the insurer’s counsel that day.

However, neither attorney reviewed the notice of award. Instead, on September 19, 2019, counsel exchanged emails settling the defendant’s underinsured motorist claim for $400,000. Specifically, defendant’s counsel said in his email, “Confirmed—we are settled for 400K.” Later, after reviewing the arbitrator’s email, the defendant’s attorney retracted the agreement to settle and demanded payment of the full $975,000 award.

The insurer brought suit to enforce the settlement and vacate the arbitration award. The trial court found in favor of the defendant, finding that the defendant’s attorney had not “subscribed” his settlement email, as required by New York law regarding attorney agreements, by retyping his name into the email before sending it.

The appellate court reversed, holding that the attorney’s standard signature block on his email was sufficient to bind his client. The court held that the “distinction between prepopulated and retyped signatures in emails reflects a needless formality that does not reflect how law is commonly practiced today.” The email—not the nature of the signoff within it—reflected the parties’ intentions, the court held.

The Times Are Changing

“This decision takes into account the less formal ways in which parties and their counsel may communicate—without needing a revision to the statute,” notes Betsy A. Hellmann, New York, NY, cochair of the Section’s International Litigation & Dispute Resolution Committee. “Indeed,” she adds, “the court’s decision on how to interpret the statute’s requirement that a writing be ‘subscribed’ takes into account that ‘electronic storage of records has become the norm, email has become ubiquitous, and statutes allowing for electronic signatures have become widespread.’”

This less formal email practice comes with risks. “The automatic inclusion of a signature block in an email does not reflect the same deliberate intent to subscribe a document as a wet signature,” states Blanca F. Young, San Francisco, CA, cochair of the Litigation Section’s Expert Witnesses Committee. “I think many attorneys would be surprised to learn that a court might treat their email signature block as an electronic signature,” she adds, noting that attorneys should “take care to engage in email communications with that in mind.”

What Is the Worst that Can Happen?

Leaders note that the impact of the court’s holding is limited. “Not every attorney email will be treated as evidence of a binding settlement,” suggests Hellmann, pointing to the court’s language that “an email settlement must, like all enforceable settlements, set forth all material terms.” Here, Hellman explains, “there was only a single issue to decide, the amount of the settlement. That won’t be true for many complex commercial matters.” Nevertheless, Hellman advises that email disclaimers should be utilized to avoid risk. “When in the midst of settlement negotiations, counsel can consider including language in every email” that makes a binding settlement conditioned upon “a separate writing signed by the client,” she says.

Consenting to settlement is not the only potential hazard, advises Young. While the decision to settle belongs solely to the client, “consent is not always required for other agreements, such as those relating to litigation strategy or logistics—e.g., a briefing schedule. There may therefore be a risk that attorneys will bind their client to an agreement before they have had an opportunity to confirm the agreement with the client,” she cautions. Asked whether the court here reached the “right” result, Young concludes: “Attorneys should be aware that courts have adopted this rule and take care to engage in email communications with that in mind.”

Hashtags: #settlement, #ethics, #emailetiquette


Grant H. Hackley


Grant H. Hackley is an associate editor for Litigation News.

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