This was originally published on the SGR Blog.
Email is now a primary and ubiquitous means of business and legal communications. And electronic signatures are recognized as valid and binding by statute in New York and many other jurisdictions. But was a signature binding where the signature block of an attorney was mechanically propagated in an email but the lawyer did not retype his name in the signature block? Or did the mere sending of the email by counsel suffice?
On June 6, 2014, Erika Kendall was driving her employer’s car when a motor vehicle owned and operated by Khaliah T. Martin hit her vehicle. Martin carried automobile liability insurance with policy limits in a lesser amount than those maintained by Kendall’s employer, which was insured by Philadelphia Insurance Indemnity Company (Philadelphia).
Kendall settled her personal injury claim against Martin, receiving the full policy amount of $25,000. Kendall then made a claim under the Supplementary Underinsured Motorist (SUM) benefit provision in the employer’s automobile policy with Philadelphia. Kendall and Philadelphia proceeded to arbitration before the American Arbitration Association on Kendall’s claim for SUM benefits. The arbitration hearing was held on August 15, 2019. Before, during, and after the arbitration hearing, the parties sought to settle Kendall’s claim.
The arbitrator rendered her decision on September 16, 2019, awarding Kendall $975,000. The same day, the decision was emailed to Kendall’s counsel and faxed to Philadelphia’s counsel. However, neither counsel received the decision and they continued to negotiate.
On September 19, 2019, the parties reached an agreement to settle the dispute for $400,000. On that day, Kendall’s counsel emailed Philadelphia’s counsel: “Confirmed -we are settled for 400K.” Below that appeared “Sincerely,” followed by the counsel’s name and contact information. Shortly thereafter, Philadelphia’s counsel emailed in reply, attaching a general release, styled a “Release and Trust Agreement,” and saying, “Get it signed quickly before any decision comes in, wouldn’t want your client reneging.” Kendall’s counsel answered, “Thank you. Will try to get her in asap.” That email concluded with the same valediction, name, and contact information as had counsel’s earlier email.
After Kendall’s counsel received the arbitrator’s decision and before she signed the Release and Trust Agreement, counsel indicated that he would not proceed with the $400,000 settlement and demanded payment of the $975,000 awarded by the arbitrator. Philadelphia thereupon brought this special proceeding to enforce the settlement agreement and to vacate the arbitral award.
Supreme Court denied relief, finding that it did not appear that Kendall’s attorney had subscribed his email for purposes of CPLR 2104 by retyping his name in addition to his prepopulated contact information block. Her counsel did not actually represent to the court that the contact information block was prepopulated, but the court implicitly placed the burden on Philadelphia to prove that counsel retyped his name. The court also found that Kendall’s failure to sign the release was a necessary occurrence to finalize the settlement and that this fact was recognized by Philadelphia’s counsel’s email in which she urged that Kendall’s counsel get her to sign the release quickly, lest she “reneg[e].”
CPLR 2104, entitled “Stipulations,” reads in pertinent part: “An agreement between parties or their attorneys relating to any matter in an action . . . is not binding upon a party unless it is in a writing subscribed by him or his attorney . . . .” The Court of Appeals has said that “[t]he plain language of the statute directs that the agreement itself must be in writing, signed by the party (or attorney) to be bound”.
The Court of Appeals had not opined on whether email can satisfy CPLR 2104. In 1996, the Court of Appeals found that a preprogrammed name on a fax transmission did not fulfill the subscription requirement. However, the Court of Appeals wrote in a different era, when paper records were still an important modality, maybe the most important modality, of recording information in law and business. Since that time, the electronic storage of records has become the norm, email has become ubiquitous, and statutes allowing for electronic signatures have become widespread. For those and other reasons, the Court found the 1996 Court of Appeals Decision not controlling.
Holding instead that the distinction between prepopulated and retyped signatures in email reflected a needless formality that did not reflect how law was commonly practiced today. It was not the signoff that indicated whether the parties intended to reach a settlement by email, but rather the fact that the email was sent.
Since 1999, New York State has joined other states in allowing, in most contexts, parties to accept electronic signatures in place of “wet ink” signatures. Section 304(2) of New York’s Electronic Signatures and Records Act provides: “unless specifically provided otherwise by law, an electronic signature may be used by a person in lieu of a signature affixed by hand. The use of an electronic signature shall have the same validity and effect as the use of a signature affixed by hand.” Moreover, the statutory definition of what constitutes an “electronic signature” is extremely broad under the ESRA. And includes any “electronic sound, symbol, or process, attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the record”.
The Court found that if an attorney hits “send” with the intent of relaying a settlement offer or acceptance, and their email account is identified in some way as their own, then it was unnecessary for them to type their own signature. That rule avoided unnecessary delay caused by burden-shifting swearing contests over whether an individual typed their name or it was generated automatically by their email account.
Jettisoning the requirement that a party or a lawyer retype their name in an email to show subscription did not mean that every email purporting to settle a dispute will be unassailable evidence of a binding settlement.
First, there may be issues of authentication. Email accounts can be hacked. An email from an attorney’s account is presumed to be authentic, but that is a rebuttable presumption. Just as a party may attack a hardcopy settlement offer or acceptance as a forgery, a party that claims an email was the product of a hacker (or of artificial intelligence, or of some other source) may rebut its authenticity.
Second, an email settlement must, like all enforceable settlements, set forth all material terms. That condition was satisfied in this case where the sole issue was how much Kendall would accept in settlement of her SUM claim. Kendall argued that the settlement was conditioned on her signing the release. The Court disagreed. The Release and Trust Agreement was to be further documentation of the binding agreement constituted by the parties’ counsel’s email agreeing to settle Kendall’s claim for $400,000. The material term of the parties’ agreement to settle Kendall’s claim was the sum of money Philadelphia would pay her. Kendall’s execution of a general release was essentially a ministerial condition precedent to payment.
Kendall’s reliance on Philadelphia’s counsel’s email urging speed in executing the release to avoid her “reneging” was misplaced. The email exchange exhibited offer and acceptance. And an expression of concern that a party might renege presupposed the existence of an agreement. Additionally, the doctrine of mutual mistake was not applicable where the existence of an arbitral award was easily ascertainable before entering into the settlement.
The judgment of the Supreme Court was reversed. Kendall was bound by the $400,000 settlement, the $975,000 arbitration award to the contrary notwithstanding.