Opinion
CIVIL ACTION NO. 00-11801-GAO.
February 12, 2002
MEMORANDUM AND ORDER
The plaintiffs, Olin Aegis, a partnership, and Olin Corporation (collectively "Olin"), move to enforce a settlement Olin claims was reached with the defendants, Ixion LLC ("Ixion") and William Finnegan. Ixion acknowledges that it negotiated with Olin, but denies that there was ever sufficient agreement on the material terms for there to be a binding contract between Olin and Ixion. Finnegan, on the other hand, cross-moves to enforce the settlement agreement, but only as between Olin and himself. For the reasons to be discussed below, Olin's motion to enforce settlement as to Ixion is DENIED, and Finnegan's motion to enforce settlement as to himself is GRANTED.
A. Summary of Facts
Olin brought suit against Finnegan and Ixion in August 2000 for various claims arising out of Finnegan's departure from Olin to go to work for Ixion. Olin alleges that immediately prior to leaving Olin, Finnegan sent six e-mails containing over 200 files from his computer at Olin to his personal e-mail accounts. These e-mails allegedly contained information which is proprietary to Olin and to some of its customers. Olin is also suing Ixion because Ixion may have benefitted from the information Finnegan e-mailed to himself and because Olin believes that Ixion engaged in a pattern of raiding Olin for employees as a means to gain trade secret information.
On September 26, 2000, Daniel Jaffe, counsel for Olin, called Thomas J. Gallitano, counsel for Ixion, and asked whether Ixion and Finnegan would consider settling this litigation. Gallitano Aff. ¶ 3 at 1-2. The parties's version of events on how the negotiations started after this initial phone call are somewhat conflicting. However, over the course of a few days it appears that Ixion and Olin agreed on the main topics a settlement would have to address. Chief among these was Olin's request for a hiring moratorium under which neither company would be able to hire an employee who had worked for the other company within the previous twelve months. The five other issues to be resolved concerned the payment of legal fees, termination of Finnegan's employment at Ixion, provision for a reference for Finnegan from Olin, dismissal of this litigation, and a release from the claims asserted in the litigation. Olin Ex. 1, Jaffe Decl. ¶¶ 3, 4 at 2, 3. Negotiations began auspiciously, and on October 5, Gallitano e-mailed Jaffe saying that he hoped that the parties would be able to have an agreement by the end of the following day. Olin Ex. C.
Between September 26, 2000 and October 26, 2000, Olin and Ixion exchanged several draft settlement agreements which tried to shape the six issues in a way that was satisfactory to both parties. None of the drafts achieved this goal. In particular, the parties disagreed about how the hiring moratorium would have to be drafted in order to avoid violating antitrust laws. On October 6, Jaffe sent Gallitano a list of cases which he felt demonstrated that a liquidated damages clause had to be added to the moratorium. Olin Ex. E. Gallitano alleges that after reading the case law, he discussed the matter with his client and they concluded that the proposed settlement agreement created a substantial risk that Ixion would be exposed to antitrust liability. Gallitano Aff. 6 12 at 6. The parties also wrangled over whether their litigation should be dismissed with or without prejudice. Gallitano Aff. ¶ 13 at 6-7. By the end of October, Ixion decided that it was unhappy with the settlement that was emerging from the negotiations, and on October 26, 2000, it broke off discussions. Gallitano Aff. ¶ 14 at 7; Ex. 10.
Finnegan was not heavily involved in the settlement discussions. As the exhibits submitted by Olin and Ixion reflect, the settlement drafts were chiefly exchanged and revised by Olin and Ixion. On September 27, 2000, Finnegan's attorney, Joseph Hardcastle, called Jaffe and informed him that Finnegan would accept Olin's offer to drop its claims against Finnegan in return for Finnegan leaving Ixion's employ. Hardcastle Aff. 6 4 at 2-3. Two weeks later, Finnegan left Ixion. On October 23, 2000, Finnegan began working for another company. Finnegan Aff. ¶ 4 at 2.
B. Enforcement of a Settlement Agreement Between Ixion and Olin
Under Massachusetts law, when parties have agreed to execute a final written agreement, there is a "strong inference" that the transaction is still open and that the parties are not bound until such a written agreement is produced. See Goren v. Royal Invs. Inc, 516 N.E.2d 173, 175 (Mass.App.Ct. 1987). "If, however, 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." Id. Factors bearing on whether a contract has been formed even though the final agreement was not yet memorialized include:
the extent to which express agreement has been reached on all the terms to be included, whether the contract is of a type usually put in writing, whether it needs a formal writing for its full expression, whether it has few or many details, whether the amount involved is large or small, whether it is a common or unusual contract, whether a standard form of contract is widely used in similar transactions, and whether either party takes any action in preparation for performance during the negotiations.
Restatement (Second) of Contracts § 27, cmt. c (1979). An unwritten binding contract may exist when there is enough evidence of an oral agreement to infer that a contract existed, and that a final written document was largely an outstanding formality. See also, Salem Laundry Co. v. New England Teamsters and Trucking Indus. Pension Fund, 829 F.2d 278, 281 (1st Cir. 1987) (determining that the parties's conduct during the negotiation of a complex deal did not support an inference that the parties intended to be bound until a formal document was executed).
Olin and Ixion's negotiations never fully resolved the issues their agreement was intended to encompass. Olin's attempt to compare its negotiations with those of the parties in Correia v. DeSimone, 614 N.E.2d 1014 (Mass.App.Ct. 1993), is unpersuasive. In Correia, the parties had agreed to a cash payment by the defendant in return for the plaintiff's agreement to drop its tort suit against the defendant. Id. The only matter left unresolved was a "choice between two structured payment schedules" of equal economic value. Id. at 1015. The attorneys for both sides reported to the court that the case was settled. Id. When the defendants came back a day later and stated that they had "changed their mind," the court held them to their agreement from the day before. Id. The terms of Ixion and Olin's agreement were never so finalized that it was simply a matter of one party making a choice between two alternate, but equivalent, terms. The parties also never jointly reported to this court that their dispute had been settled.
Ixion and Olin's settlement discussions did not advance beyond the stage of "imperfect negotiation." Situation Mgmt. Sys., Inc. v. Malouf, Inc., 724 N.E.2d 699, 703 (Mass. 2000). The circumstances of Ixion's and Olin's negotiations are similar to those in Rosenfield v. United States Trust Co., 195 N.E. 323 (Mass. 1935). In Rosenfield, the parties were negotiating the terms of a lease for a storefront. In their initial discussions, they had set out a few basic terms that the lease would have to include. Id. at 324. Negotiations had progressed far enough that the parties set these basic terms out on a piece of paper which was passed on to the lessor's attorney as a basis for a lease. Id. After the first draft of the lease was drawn up, the parties met several more times to discuss numerous other terms that would also be included in the lease.Id. at 325. Then the lessor withdrew from the negotiations and leased the building to some one else. Id. The court in Rosenfield held that the continuing negotiations showed that "all material matters had not been agreed upon" and that "no completed contract enforceable at law or in equity" existed. Id. at 326.
Similarly, Ixion and Olin had agreed on the basic scope of their agreement, but important material terms were never resolved. In particular, the draft agreements show that the terms of the hiring moratorium provision, which was a principal feature of the settlement, were never agreed on. In the September 29 draft, the moratorium terms were simply that each party would agree for three years not to hire any employee from the other company within twelve months of the employee's departure from the other company. Olin Ex. B, Settlement Agreement ¶¶ 1, 2 at 3. The October 5 draft then made an exemption for temporary employees. Olin Ex. C, Settlement Agreement ¶ 2 at 3-4. In the next round, Olin proposed a $300,000 liquidated damages clause for failure to comply with the moratorium. Olin Ex. D, Settlement Agreement ¶ 1 at 3. Ixion did not want a liquidated damages clause, so the October 16 draft eliminated this provision. Olin Ex. F, Settlement Agreement ¶ 1 at 2-3. The parties also did not agree as to when Olin would dismiss its action against Ixion or whether that dismissal would be with or without prejudice. Because the requisite "meeting of the minds" never occurred on several essential terms, no enforceable settlement agreement was formed.
C. Enforcement of a Settlement Between Olin and Finnegan
The degree of contract formation between Olin and Finnegan is on a different footing because Finnegan relied on Olin's promise to drop its suit against him by giving up his employment at Ixion. The doctrine of promissory estoppel holds that a promise "becomes enforceable because of the promisee's reasonable and detrimental reliance" on that promise. Rooney v. Paul D. Osborne Desk Co., 645 N.E.2d 50, 51 (Mass.App.Ct. 1995); see also, Loranger Constr. Corp. v. E.F. Hauserman Co., 384 N.E.2d 176, 179 (Mass. 1978) ("When a promise is enforceable in whole or in part by virtue of reliance, it is a `contract,' and it is enforceable."). Finnegan's departure from Ixion qualifies as detrimental reliance, and Finnegan has satisfied the first requirement of promissory estoppel.
Finnegan also has satisfied the second requirement of promissory estoppel because his reliance was reasonable. See Sands v. Ridefilm Corp., 212 F.3d 657, 664 (1st Cir. 2000). Finnegan's attorney, Joseph F. Hardcastle, states in his affidavit that on September 26, Jaffe and Gallitano called him and told him "that they had been discussing settlement of the case." Hardcastle Aff. ¶ 2 at 1. They also told him that one of the settlement terms they discussed was that Finnegan would not work for Ixion for a period of one year. Id. ¶ 2(3) at 2. Hardcastle then consulted with Finnegan, and on September 27, 2000, he called Jaffe, Olin's counsel, and told him that Finnegan accepted the settlement proposal made by Olin. Id. ¶ 4 at 2. Jaffe told Hardcastle that an agreement had been reached amongst all the parties and that he would begin circulating drafts of the settlement document. Id. Hardcastle then told Jaffe that Finnegan would begin his job search immediately, and requested that Olin grant Finnegan access to his computer to print his resume. Id. ¶ 4 at 3. Olin agreed to let Finnegan print out his resume. Shortly thereafter, Finnegan applied for a job with another company and began working there on October 23, 2000. There was nothing else required of Finnegan for him to earn mutual performance by Olin. If his change of employment status was to await some future crystallization of the deal between Olin and Ixion, Olin should have made that clear. In these circumstances, it is appropriate to enforce the settlement between Finnegan and Olin and to dismiss the action with prejudice. Olin suggests that whether the dismissal was to be with or without prejudice was not resolved, but that is a fatuous suggestion. It is not imaginable that Finnegan would have agreed to leave his desired employment in exchange for only a dismissal without prejudice.
D. Conclusion
For the foregoing reasons Olin's motion to enforce settlement as to Ixion is DENIED. Finnegan's motion to enforce settlement as to himself is GRANTED. Olin's claims against Finnegan are dismissed with prejudice.