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Massachusetts Federal Court Finds Exchange of Emails An Enforceable Settlement Agreement

The Massachusetts federal district court has held under Massachusetts law that an exchange of emails between the parties' counsel can constitute an enforceable settlement agreement.  In doing so, the court contrasted Massachusetts law with that of Rhode Island which requires that a settlement agreement be in writing or presented to the court on the record.

Plaintiff attempted to purchase the defendant business.  He signed a purchase and sale agreement that included a financing contingency and a $250,000 refundable deposit.  Plaintiff paid the deposit but was unable to get financing.  Defendant refused to return the deposit and plaintiff filed suit. 

The parties' counsel entered into settlement negotiations via email.  Plaintiff's counsel sent an email setting forth specific terms of a settlement and said he would send a draft agreement.  Defendant's counsel responded:  "Glad we were able to get it done.  Thanks."  Counsel subsequently agreed on the form of the written agreement.  The next day, defendant was placed into involuntary receivership by a Rhode Island Superior Court judge. 

Plaintiff filed a motion to enforce the settlement agreement to which the receiver objected on the grounds that the receivership order stayed all actions against the receivership estate.  The receiver also filed a motion in the receivership proceeding to reject the settlement which the Superior Court granted. 

The district court said it first had to decide whether Massachusetts or Rhode Island law applied because Rhode Island law required a settlement agreement to be in writing or presented on the record to the court (which had not occurred).  The court said it applies the choice-of-law framework of the forum state and Massachusetts applies the law of the jurisdiction with the most significant relationship to the case.  The court found that to be Massachusetts because the lawsuit was pending in Massachusetts, the funds were held in escrow in Massachusetts, and the P&S and the draft settlement agreement both included Massachusetts choice of law provisions. 

With respect to the enforceability of counsels' exchange of emails, the court said under Massachusetts law an enforceable settlement agreement arises when the parties to be bound mutually assent to all material terms even if those terms are not memorialized in a final writing.  The court said it was manifest that they had agreed on all the material terms.  The draft settlement agreement only memorialized the terms, it did not create them. 

Hansen v. Rhode Island's Only 24 Hour Truck & Auto Plaza, Inc., 2012 WL 2491054 (D.Mass. June 7, 2013). 

http://www.sfandllaw.com/Practice-Areas/Business-Commercial-Litigation.shtml

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