Opinion
No. 96 Civ. 9608 (JFK).
March 27, 2001.
For Plaintiff: GAIL I. AUSTER ASSOCIATES, P.C. Of Counsel: Gail I. Auster, Esq.
For Defendants: SATTERLEE STEPHENS BURKE BURKE LLP Of Counsel: James J. Coster, Esq., Anne B. Carroll, Esq.
OPINION and ORDER
Before the Court is the Plaintiff's motion to enforce the settlement agreement (the "Agreement") in this case, as well as the Defendant Judith Harrison-Bode's ("Harrison-Bode") cross-motion to reform that Agreement. For the reasons that follow in this Opinion and Order, the Court grants the Plaintiff's motion to enforce the Agreement against Harrison-Bode and denies Harrison-Bode's cross-motion to reform that Agreement. The Court also denies the Plaintiff's request for sanctions pursuant to Fed.R.Civ.P. 11.
The Agreement contains an arbitration clause, which requires arbitration for "[e]very claim, dispute, or difference arising out of, dealing with, relating to, or affecting the interpretation or application of this Agreement, or the violation or breach, or the threatened violation or breach thereof." (See Auster Decl. Ex. A at ¶ 11). Neither party has asserted any rights under this clause.
BACKGROUND
This action between the Plaintiff and the Defendants Monet Group, Inc., Monet Group Holdings, Inc. (together, the "Monet Group"), and Harrison-Bode involved the alleged breach of an employment agreement between the Plaintiff and the Defendants. The Plaintiff filed the action before this Court in 1996, asserting claims of breach of contract, breach of the implied covenant of good faith and fair dealing, intentional infliction of emotional distress, negligent infliction of emotional distress, and breach of fiduciary duty on a constructive trust.
On August 27, 1998, the parties agreed to settle this case for $650,000, payable in installments. One year later, the parties executed the Agreement, drafted by the Defendants, under which "Monet" would pay $650,000 to the Plaintiff in thirteen installments over a twelve-month period. (See Auster Decl. Ex. A at ¶ 1). The Agreement defined "Monet" as, collectively, "The Monet Group, Inc., its parent, subsidiaries, affiliates, successors and assigns, members officers, employees, representatives, insurance carriers and agents, [and] Judith Harrison-Bode." See id. at preamble) (emphasis added).
The Plaintiff's signature on the Agreement is dated August 20, 1999, the Monet Group's authorized signature is dated August 25, 1999, and Judith Harrison-Bode's signature is dated September 3, 1999. (See Auster Decl. Ex. A at 10-10) (the Agreement contains two separate, consecutive signature pages labeled "10").
The Monet Group, Inc. paid four installments to the Plaintiff between September 1, 1999 and March 2000, totaling $256,250. The Defendants have made no further payments since March 2000, and remain in arrears under the Agreement for a total of $393,750.
The Monet Group, Inc. and Monet Group Holdings, Inc. both filed for bankruptcy under Chapter Eleven ( 11 U.S.C. § 1101 et. seq.) before the United States Bankruptcy Court for the District of Delaware on May 11, 2000. The Plaintiff filed the instant motion to enforce the Agreement against Harrison-Bode on September 20, 2000.
DISCUSSION
Under the Agreement, "Monet" agreed to make payments to the Plaintiff totaling $650,000 pursuant to the terms set forth in that Agreement. (See Auster Decl. Ex. A at ¶ 1). The Agreement defined "Monet" as including Harrison-Bode. (See id. at preamble). Harrison-Bode signed the Agreement. Therefore, the Plaintiff seeks the remainder of the payments, $393,750, from Harrison-Bode.
Harrison-Bode argues that the parties never intended to obligate her for any payments to the Plaintiff, and that any interpretation of the contract to that effect is the result of "a scrivener's error." (See Def.'s Opp. Mem. at 1). According to Harrison-Bode, extrinsic evidence demonstrates that the Monet Group was solely responsible for making payments under the Agreement. See id. at 10-15). She further argues that this Court should reform the Agreement to reflect that intent, based upon the parties' mutual mistake. (See id. at 16-18).
I Ambiguity
A court may not consider extrinsic evidence of intent "when the intent of the parties can be fairly gleaned from the face of the instrument."Terwilliger v. Terwilliger, 206 F.3d 240, 245 (2d Cir. 2000); see Seiden Assocs., Inc. v. ANC Holdings Inc., 959 F.2d 425, 428 (2d Cir. 1992). A court may not rewrite a term in the contract that is clear and unambiguous either "under the guise of interpretation or "to accord with its instinct for the dispensation of equity upon the facts of a given case." Terwilliger, 206 F.3d at 245.
This Court must therefore examine whether the agreement to pay the settlement sum to the Plaintiff is ambiguous, i.e. whether it is, on its face, "reasonably susceptible of more than one interpretation." See Chimart Assocs. v. Paul, 66 N.Y.2d 570, 573 (1986). The Court finds that it is not.
As the Court has already noted, the Agreement, which Harrison-Bode signed, defined the term "Monet" as including Harrison-Bode. (See Auster Decl. Ex. A at preamble). Nevertheless, certain uses of the term "Monet" in the Agreement could not include Harrison-Bode. For example, the Agreement refers to "Monet Common Stock," "Monet Preferred Stock," "Monet's Junior Subordinated Note," and "the Chief Administrative Officer of Monet" in the same section as the reference to payment. (See Auster Decl. Ex. A at 2-3).
In addition, the Agreement provides that "[i]f Monet fails to make a payment . . . Monet will issue to Collins a Standby Letter of Credit in the form and substantially identical to Exhibit A of this Agreement." (See Auster Decl. Ex. A at 2). The attached form letter of credit, however, expressly draws on the account of "The Monet Group, Inc." (See Coster Aff. Ex. D at 12). Moreover, that form letter requires, as a condition of its issue, that either "James Collins (or Gail I. Auster[, Esq.])" swear under oath that "I have not received payment from The Monet Group Inc. See id.
Notwithstanding those examples, the preamble's inclusion of Harrison-Bode in the meaning of "Monet" is corroborated, with respect to the payment obligation, by the general release that the parties executed and incorporated into the Agreement as Exhibit D. (See Coster Aff. Ex. D). That release specifies that the Defendants are released from liability in consideration of $650,000 "received from Monet Group, Inc., The Monet Group Holdings, Inc. and Judith Harrison-Bode." (See Coster Aff. Ex. D).
The Court finds the general release, taken together with the preamble's definition of "Monet," show that all Defendants, including Harrison-Bode, were to be held liable for payment of the settlement sum. The Court finds that in contrast, the form standby letter of credit's reference to payment from "The Monet Group, Inc." does not establish that the Monet Group would alone be liable for all payments. The Court therefore concludes that the use of "Monet" with respect to the payment obligation is not ambiguous, and does not require extrinsic evidence of the parties' intent.
II Mutual Mistake
Harrison-Bode argues in the alternative that the Agreement is the result of a mutual mistake between the parties. Accordingly, she asks that this Court reform the Agreement so that it reflects the true agreement reached between the parties.
The Plaintiff opposes this request. His attorney, Ms. Gail I. Auster, Esq., has stated under oath that the Agreement does indeed reflect her intent, upon executing that Agreement, to hold Harrison-Bode liable under the settlement.
The New York Court of Appeals has stated that "there is a heavy presumption that a deliberately prepared and executed written instrument manifests the true intention of the parties." See Chimart 66 N.Y.2d at 574 (internal quotation marks omitted). As that Court has noted, the "freedom to contract would not long survive courts' ready remaking of contracts that parties have agreed upon." Id. (quoting George Backer Mgmt. Corp. v. Acme Quilting Co., 46 N.Y.2d 211, 219 (1978).
As a result, the required burden of proof that a proponent of reformation must shoulder has been variously described as "clear, positive and convincing evidence" of the "certainty" of an error rather than a mere "probability," "evidence of the clearest and most satisfactory character," and evidence of "the most substantial and convincing character." See Backer, 46 N.Y.2d at 219-20 (quoting Amend v. Hurley, 293 N.Y. 587, 595 (1944), Porter v. Commercial Cas. Ins. Co., 292 N.Y. 176, 181 (1944), and Christopher Tenth St. R.R. Co. v. Twenty-Third St. Ry. Co., 149 N.Y. 51, 58 (1896))). The Court finds that the evidence proffered by Harrison-Bode does not meet those standards.
Harrison-Bode has referenced a series of documents that show, she argues, that she was not to be held liable for any payments under the Agreement. These include the following: (1) a typed term sheet, which predates the parties' August 27, 1998 decision to settle the case, (see Coster Aff. Ex. C); (2) a transcript of settlement terms as stated at a deposition on August 27, 1998, (see id. Ex. B); and (3) an affirmation by the Plaintiff's attorney to this Court, dated October 19, 1998, stating that "The Monet Group is the defendant who will be making all payments to the plaintiff," (see id. Ex. F at n. 2).
The Court note that another "scrivener's error" occurred in the drafting of Harrison-Bode's opposition brief. In that brief, she refers to the Auster Affirmation of October 19, 1998, as well as to a September 18, 1998 letter from Mr. Collins to Ms. Auster, as examples of "ongoing conduct" that demonstrated the parties' intent even "[a]fter the Settlement Agreement was executed." (See Def.'s Opp. Mem. at 5-6).
In fact, both documents predate the Agreement's execution by several months. Although Harrison-Bode did misdate the Auster Affirmation in her brief as "October 19, 1999" rather than October 19, 1998, the Court knows not the reason for her confusion regarding the Collins letter. (See Coster Aff. Exs. E, F).
The Plaintiff, on the other hand, argues that the inclusion of Harrison-Bode in the definition of "Monet" was not a "scrivener's error," rather, it was a negotiated revision. The Agreement's first draft did not include Harrison-Bode in the definition of "Monet." (see Auster Reply Decl. Ex. 1 at 1). However, the parties did include Harrison-Bode in that definition in the second draft. (See id. Ex. 2 at 1). That inclusive definition survived at least two more successive drafts before appearing in the final executed Agreement. (See id. Ex. 3 at 1, Ex. 4 at 1; Auster Decl. Ex. A at 1).
In addition, the Plaintiff convincingly argues that the evolution of the general release further demonstrates that Harrison-Bode was to be equally liable for payment of the $650,000. Earlier drafts of the main Agreement released all Defendants immediately upon execution of the Agreement. (See Auster Reply Decl. Ex. 1 at 3). The final version, however, provided that the attached and executed general release of all Defendants, including Harrison-Bode, would be held in escrow until payment was rendered in full. (See Auster Decl. Ex. A at 4). Were Harrison-Bode not liable under the settlement, she would have been removed from the case at the signing of the release.
The Court finds that Harrison-Bode's evidence of the parties' allegedly true intent is not of "the most substantial and convincing character." The Court notes that Harrison-Bode's evidence predates, the execution of the final Agreement by at least ten months. Over the course of a full year, counsel for the parties negotiated and revised at least four successive drafts of the Agreement before executing it in final form. Harrison-Bode signed that final Agreement. This Court declines to rewrite that final version, as approved by able counsel, on the basis of evidence that predates the bulk of that revision process.
CONCLUSION
The Plaintiff's motion to enforce the settlement agreement, with interest, against Judith Harrison-Bode is granted. The Defendant Judith Harrison-Bode's cross-motion to reform that agreement is denied. The Court further denies the Plaintiff's request to impose sanctions in this case pursuant to Fed.R.Civ.P. 11.
SO ORDERED.