Be Careful Before Reporting a Case Settled to the Court

Before a case is reported settled to the court, it is important to be sure that both the clients and the attorneys are aware of all terms that will ultimately be a part of the settlement agreement. In Basis Technology Corp. v. Amazon.com, Inc., 71 Mass. App. Ct. 29 (2008), the Appeals Court affirmed the lower court’s decision to enforce a settlement agreement that consisted of an e-mail exchange between counsel on the third day of a trial. Specifically, in Basis Technology Corp., the parties reported the case settled to the court based on an e-mail exchange between counsel that outlined the terms of the settlement, but contemplated drafting an actual settlement agreement. Consequently, the trial court ended the trial and issued a dismissal nisi order. Despite the e-mail and the report of settlement, the parties were unable to agree on a written settlement agreement, and the court ultimately enforced the settlement as initially agreed in the e-mail.

In its decision, the court found that the mere fact that the parties needed to memorialize the settlement terms did not make the settlement incomplete and did not support an argument that the parties had not agreed on the essential business terms of the settlement. Thus, the Basis Technology court stood by a decision it made twenty years earlier when it stated that “if the parties have agreed upon all material terms, it may be inferred that the purpose of a final document which the parties agree to execute is to serve as a polished memorandum of an already binding contract.” Goren v. Royal Invs., Inc., 25 Mass. App. Ct. 137, 140 (1987).

A large factor in the court’s enforcement of the settlement agreement is that the parties had reported the matter settled to the court. As has been noted in several cases, enforcing settlement agreements that have been orally relayed to the court protects the integrity of the judicial process as well as the parties themselves. It allows courts to dismiss juries, clean up their dockets and prepare for the next case. It also allows parties to rely on the results of negotiations that they have had in coming to a settlement conclusion.