Over & Under Piping Contractors, Inc. v. Vermont Gas Systems, Inc.
Filing
188
OPINION AND ORDER granting 172 Motion to Enforce the Parties' September 1, 2018 Settlement Agreement; denying 173 Motion to Seal; denying 175 Motion to Seal; denying 178 Motion to Seal. Pltf shall execute a general release that includes the release of dft's employees and agents by 1/11/2019. Ptys shall bear their own fees and costs with respect all efforts to enforce the settlement agreement. Signed by Judge William K. Sessions III on 1/2/2019. (jam)
UNITED STATES DISTRICT COURT
FOR THE
DISTRICT OF VERMONT
OVER & UNDER PIPING
CONTRACTORS, INC.,
Plaintiff,
v.
VERMONT GAS SYSTEMS, INC.,
Defendant.
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Case No. 2:15-cv-169
OPINION AND ORDER
This case centers on a payment dispute between Over & Under
Piping Contractors, Inc. (“Over & Under”) and Vermont Gas
Systems, Inc. (“VGS”) with respect to work performed on a large
natural gas pipeline project.
Before the Court is VGS’s motion
to enforce the parties’ oral settlement agreement.
VGS submits
that counsel for the parties agreed to settle the case, with Over
& Under to receive a payment in exchange for mutual general
releases and the dismissal of all claims.
Over & Under contends
that there was no final agreement because material terms of the
general releases, including whether those releases would cover
VGS’s “agents” and “employees,” remained open for negotiation.
As set forth below, the Court finds that the parties
contemplated general release language that is standard in the
State of Vermont, that such standard language includes the terms
“employees” and “agents,” and that Over & Under’s efforts to
carve out such terms after agreeing to settle the case violated
the oral settlement agreement.
The motion to enforce is granted.
Background
In late August of 2018, with this case approaching trial,
the parties discussed settlement.
Upon a request from VGS’s
counsel for a final settlement offer, Over & Under proposed to
settle the case for a payment from VGS of $4 million.
On
September 1, 2018, counsel for VGS responded that their client
had agreed to such payment in exchange for the dismissal of all
claims and mutual general releases.
During the September 1 conversation with opposing counsel,
Attorney Jeffrey Behm, representing VGS, specified that the
general releases would include broad language that is customary
in State of Vermont.
Attorney Shannon Bertrand, representing
Over & Under, understood that the terms of the settlement would
include such broad language, and that the general releases would
be mutual.
On September 2, 2018, Attorney Bertrand telephoned
counsel for VGS and reported that he and his co-counsel, Roger
Bradley, had spoken with Over & Under owner Joseph Panna, and
that Mr. Panna had agreed to the terms of the settlement.
Counsel for the parties also discussed a separate general release
for Mr. Panna.
While counsel on both sides concurred that any
general release of claims against Over & Under would include Mr.
Panna, VGS agreed to provide him with a separate general release.
The parties further agreed that VGS would release all potential
warranty claims against Over & Under.
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On September 4, 2018, counsel for VGS forwarded proposed
settlement documents to counsel for Over & Under.
The proposed
general release stated that Over & Under
unconditionally remises, releases, discharges and
covenants not to sue VGS and each of its past and
present officers, directors, principals, legal owners,
beneficial owners, shareholders, employees,
predecessors, subsidiaries, parent companies, legal
representatives, insurers, agents, contractors and all
persons acting by, through, under or in concert with
any of them (collectively referred to as the “Released
Parties”), of and from any and all action . . .
relating to O&U’s performance of work on VGS’s Addison
Natural Gas Pipeline . . . .
ECF No. 172-3 at 10.
On September 6, 2018, having received no
word from counsel for Over & Under, Attorney Behm sent an email
asking when VGS could expect to hear about the settlement
documents.
Attorney Bertrand responded that Over & Under would
be in touch “as soon as we are able.”
On September 11, 2018, Attorney Behm emailed opposing
counsel and suggested the parties notify the Court that the case
had been settled.
Attorney Bradley responded via email that Over
& Under could not authorize such a communication with the Court
because the parties were still working out differences in the
settlement agreement and releases.
Attorney Behm replied that he
was not aware what those differences might be, as he not received
any response to the settlement documents sent on September 4.
On September 14, 2018, Attorney Bertrand sent VGS’S
attorneys marked-up versions of the settlement documents.
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The
mark-ups removed several terms from the general release,
including “subsidiaries,” “parent companies,” “insurers,”
“employees,” and “agents.”
Attorney Bertrand also proposed that
the release state: “This release does not release any claims
against any agent of VGS.”
When counsel for VGS asked for an explanation, Attorney
Bertrand replied via email that Over & Under would not agree to a
blanket release of “agents,” but would consider excluding
specific individuals from the releases being given to VGS.
Those
exclusions would include PriceWaterhouseCoopers, Joey Wilson of
Wilson Engineering PLC, and Charlie Pughe of Charlie Pughe
Associates, LLC.
Counsel for VGS responded that the proposed
limitations were inconsistent with the September 1-2, 2018
agreement and would not effectively settle the lawsuit since VGS
agents and employees, if sued by Over & Under, could pursue
indemnification and/or third-party claims against VGS.
VGS
subsequently filed the instant motion to enforce the parties’
initial agreement to exchange general releases.
The Court held an evidentiary hearing on December 19, 2018.
In the course of the hearing, two long-time Vermont attorneys
testified about their understanding of standard general release
language for corporate entities.
Both attorneys testified that,
in their experience, general releases in the State of Vermont
always include the release of employees and agents.
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Discussion
The question before the Court is whether, as a result of the
attorneys’ conversations on September 1 and September 2, 2018,
the parties had a binding and enforceable settlement agreement.
In the course of those discussions, VGS made an offer of payment
and proposed broad general releases and a stipulation of
dismissal.
Attorneys for Over & Under understood those terms,
spoke with their client, and accepted the proposal.
Over & Under
now argues that the settlement, and in particular the material
terms of the general releases, were never finalized.
It is well established that an oral agreement can be
binding.
See Winston v. Mediafare Entm’t Corp., 777 F.2d 78, 80
(2d Cir. 1985).
“This freedom to contract orally remains even if
the parties contemplate a writing to evidence their agreement. In
such a case, the mere intention to commit the agreement to
writing will not prevent contract formation prior to execution.”
Id.
With respect to the terms of an oral settlement agreement,
“[t]he settlement remains binding even if a party has a change of
heart between the time he agreed to the settlement and the time
those terms are reduced to writing.”
Powell v. Omnicom, 497 F.3d
124, 129 (2d Cir. 2007).
Deciding whether the parties intended to be bound in the
absence of a writing requires the Court to consider
(1) whether there has been an express reservation of
the right not to be bound in the absence of a writing;
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(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 is the type of contract that is
usually committed to writing.
Id. (citing Winston, 777 F.2d at 80).
decisive.
No single factor is
Ciaramella v. Reader’s Digest Ass’n, Inc., 131 F.3d
320, 323 (2d Cir. 1997).
Applying those four factors here, the Court finds that the
parties had an enforceable settlement agreement as of September
2, 2018.
First, there was no express reservation of the right
not to be bound.
Counsel for Over & Under informed counsel for
VGS that they had spoken with Mr. Panna, and that he had agreed
to accept the terms of the settlement.
They did not say, as they
expressed only in subsequent weeks, that there were material
terms remaining to be negotiated.
In particular, counsel for
Over & Under did not inform VGS that they intended to carve out
VGS employees, agents, and others from the general release.
Instead, counsel for Over & Under agreed to an exchange of broad
releases which, according to the testimony of highly-experienced
Vermont attorneys, always include a corporation’s agents.
The second factor, partial performance, “appears to have had
the least sway with courts.”
United States v. U.S. Currency in
the Sum of Six Hundred Sixty Thousand, Two Hundred Dollars
($660,200.00), More or Less, 423 F. Supp. 2d 14, 28 (E.D.N.Y.
2006).
Nonetheless, there was partial performance insofar as
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counsel for VGS sent draft settlement documents after receiving
confirmation of the settlement on September 2, 2018.
See id. at
28-29.
The third factor focuses on whether all terms were agreed
upon.
Here, the material terms consisted of the monetary payment
amount, the stipulation of dismissal, and the exchange of broad
general releases.
Over & Under argues that not all terms had
been agreed upon because the general release language had not
been finalized.
To accept Over & Under’s position, the Court
would need to conclude that despite the parties’ agreement to
exchange general releases, with the clear understanding that
those releases would be broad, the inclusion (or exclusion) of
VGS’s agents and employees in those releases remained in question
after September 2, 2018.
Again, VGS has offered convincing
testimony that a general release in the State of Vermont always
includes agents and employees.
Because a corporation is merely a legal entity, any action
it takes must be through its agents.
See, e.g., In re Parmalat
Sec. Litig., 421 F. Supp. 2d 703, 715 (S.D.N.Y. 2006) (“all
corporations act only through their agents”); Brandstein v. White
Lamps, 20 F. Supp. 369, 370 (S.D.N.Y. 1937) (“a corporation is a
legal entity . . . existing only in the contemplation of the law;
it can do no act, except through its agents”).
Consequently, a
refusal to release agents and employees leaves the corporation
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exposed to future third-party claims from all persons who acted
on its behalf.
Such exposure is very broad, as liability may be
imposed on a corporation even if its agents acted contrary to
orders and without authority.
Vogt v. Abish, 663 F. Supp. 321,
327 (S.D.N.Y. 1987); see also In re ICP Strategic Credit Income
Fund Ltd., 568 B.R. 596, 610 (S.D.N.Y. 2017) (“A corporation is
responsible for the acts of its agents, even where those acts
were unauthorized.”), aff’d sub nom. In re ICP Strategic Income
Fund, Ltd., 730 F. App'x 78 (2d Cir. 2018).
It is also “settled
law that a corporation may be held criminally responsible for
[criminal] violations committed by its employees or agents acting
within the scope of their authority.”
United States v. Twentieth
Century Fox Film Corp., 882 F.2d 656, 660 (2d Cir. 1989).
These
well-established tenets of agency law explain why a release of a
corporation is traditionally accompanied by a release of its
agents and employees.
The final factor examines whether the agreement is of the
type that is usually put in writing.
typically finalized in writing.
Settlement agreements are
The question in this case is
whether the parties’ conversations on September 1 and September
2, 2018, prior to any written agreement, were binding.
The
Second Circuit has “found that the complexity of the underlying
agreement is an indication of whether the parties reasonably
could have expected to bind themselves orally.”
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Ciaramella v.
Reader's Digest Ass’n, Inc., 131 F.3d 320, 326 (2d Cir. 1997).
Here, the essential terms of the parties’ agreement were not
complex.
The agreement reached as of September 2, 2018, was that
VGS would make a payment of money to Over & Under in exchange for
the dismissal of all claims and the exchange of mutual releases.
Those releases would be broad and general, in keeping with
Vermont practice.
While minor drafting items may have remained
for discussion, the material terms were set.
Over & Under cites Okemo Mountain, Inc. v. U.S. Sporting
Clays Ass’n, 376 F.3d 102, 103 (2d Cir. 2004) for the proposition
that an ambiguous release must be interpreted by a fact-finder
after a hearing.
At issue in that case was whether, under
Vermont law, a certain release could be construed to bar a future
claim against an agent in his individual capacity.
Id. at 104.
The issue here, in stark contrast, is whether the parties had an
agreement to execute broad general releases.
As the construction
of those general releases is not before the court, Okemo does not
control this case.
Over & Under also urges the Court to hold a hearing to
determine the intent of the parties.
As noted, the Court has now
heard sworn testimony and representations from counsel about the
communications at issue.
As a result of that hearing, as well as
a review of the briefs and attached affidavits, the Court now
finds that counsel for VGS and counsel for Over & Under reached a
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binding settlement agreement on September 2, 2018.
Counsel for
VGS made clear that the agreement would included broad general
releases that are commonplace in Vermont legal practice.
Witnesses for VGS confirmed that such releases include, as
standard language, the employees and agents of a released
corporate entity.
Counsel for Over & Under understood that the
releases would be broad.
Their subsequent efforts to narrow the
scope of the releases to exclude corporate agents were in breach
of their initial agreement.
VGS’s motion to enforce the
settlement agreement is therefore granted, and Over & Under shall
execute a general releases that includes the release of VGS’s
employees and agents.
Such release shall be executed on or
before January 11, 2019.
Conclusion
For the reasons set forth above, VGS’s motion to enforce the
parties’ settlement agreement (ECF No. 172) is granted.
Because
the hearing on the motion to enforce was held in open court, the
pending motions to file briefs, affidavits, and other exhibits
under seal (ECF Nos. 173, 175, 178) are denied.
Finally, the
parties shall bear their own fees and costs with respect all
efforts to enforce the settlement agreement.
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DATED at Burlington, in the District of Vermont, this 2nd
day of January, 2019.
/s/ William K. Sessions III
William K. Sessions III
District Court Judge
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