Settlement Term Sheet Enforceable Despite Statement That Formal Papers Would Be Executed

On February 27, 2014, the First Department issued a decision in Trolman v. Trolman, Glaser & Lichtman, P.C., 2014 NY Slip Op. 01396, affirming the enforcement of a settlement term sheet, explaining:

The motion court properly determined that the handwritten memorandum executed following mediation between the parties was a binding and enforceable settlement agreement, and not merely an agreement to agree. The memorandum’s plain language expressed the parties’ intention to be bound, and established a meeting of the minds regarding the material terms pertaining to the settlement of plaintiff’s claim . . . . The agreement was not rendered ineffective simply because certain non-material terms were left for future negotiation, or because it stated that the parties would promptly execute formal settlement papers.

(Internal citations omitted) (emphasis added).

The First Department also affirmed the trial court’s decision to dismiss all claims against the individual defendants, holding that “the record demonstrated that the entirety of the parties’ arbitration proceeding was subject to mediation and is therefore encompassed in the enforceable settlement agreement” and that the plaintiff had failed to make it clear that he intended to “carve out” certain claims against individual defendants from the settlement.

This decision is a reminder that courts treat settlements like any other commercial transaction and, for that reason, they enforce settlement term sheets that meet the criteria discussed above even if a formal settlement agreement was not executed.