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In New York, a settlement agreement is enforceable only if it is reduced to writing, or made between the parties in open court.
Homecast Co., Ltd. and Microgem Corp., Inc. initially entered into a Sales Agreement on July 27, 2007, pursuant to which Microgem would act as a sales agent and market digital converter boxes produced under Homecast's brand name to distributors in the United States. Through a series of meetings and email correspondence, the parties amended their agreement, whereby Microgem, instead of acting as a sales agent, would now purchase the digital converter boxes manufactured by Homecast. Microgem submitted three purchase orders to Homecast; however, it did not pay the total outstanding balance due on the same, asserting that its obligation to pay was excused because the digital converter boxes delivered to it were defective. In 2009, after Microgem filed a lawsuit, the parties met to discuss the problems Microgem was having with the digital converter boxes. Homecast agreed to pay Microgem; Homecast asserted that the payment was in exchange for a full settlement of the claims alleged in the lawsuit. Trial commenced in 2012, and the jury returned a verdict in favor of Homecast. In this current petition, Microgem argued that it was entitled to summary judgment on Homecast’s counterclaims for breach of a settlement agreement because any agreement that the parties may have reached was not a valid settlement agreement under New York law.
Was Microgem entitled to summary judgment on Homecast’s counterclaims for breach of a settlement agreement?
The Court noted that generally, New York would permit parties to enter binding agreements without memorializing the terms of the agreement in a writing. In the absence of a written agreement, courts consider the following four factors to determine if parties intended to be bound by an oral agreement: "(1) whether there has been an express reservation of the right not to be bound in the absence of a writing; (2) whether there has been partial performance of the contract; (3) whether all of the terms of the alleged contract have been agreed upon; and (4) whether the agreement at issue was the type of contract that is usually committed to writing." However, the Court averred that despite the general principle, in New York, a settlement agreement was enforceable only if it was reduced to writing, or made between the parties in open court. N.Y. C.P.L.R. § 2104. In this case, the parties did not comply with the requirements of § 2104 because they did not reach the settlement agreement in open court or reduce the agreement to writing. Therefore, because any agreement that the parties reached was not a valid settlement agreement under New York law, Microgem was entitled to summary judgment on this claim.