Email and the Threat of Inadvertent Compromise or Settlement

By Mark Macmurdo, Senior Associate

March 15, 2016

As any practitioner knows, negotiations for compromise—or “settlement”—do not just take place in an office setting. Increasingly, deals are ironed out from laptops, tablets, and cellphones. Practitioners would do well to remember that, in the eyes of the law, these informal forms of communication could have the same consequences as a formal letter. In particular, the risk of an inadvertent agreement to settle looms over any such correspondence.

I. Email May Meet the Form Requirements of a Signed Writing, Even if the Agreement is Pieced Together from Multiple Messages

An email may qualify as a signed writing, creating an enforceable agreement. A writing meets the form requirement for a valid compromise.[1] Implicit in the writing requirement set forth in Civil Code article 3072 is a requirement that both parties sign the agreement.[2] Louisiana Revised Statutes section 9:2707 states that, where the law requires a writing or a signature, an electronic record or electronic signature satisfies those requirements. Thus, an email with a corresponding electronic signature is sufficient to meet the form requirements for a compromise.[3]

Louisiana law defines an “electronic signature” as “an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.”[4] A court may require that any compromise established through email include such an electronic signature.[5] In determining whether an email has satisfied the implied requirement that a compromise agreement be signed, a court has found that an ordinary closing with the sender’s name at the end of an email message is insufficient to indicate intent to create an electronic signature for the purposes of a compromise or contract.[6]

Although a single communication by one party stating its understanding of an agreement is insufficient to establish a compromise because both parties must sign an agreement,[7] the agreement need not be written in a single document.[8] Where two instruments may be read together to outline the obligations and agreement of the parties, there is a valid compromise.[9] A court could find that a compromise has been reached through an exchange of writings, even though there is a lack of clarity as to incidental matters.[10]

II. Email May Evidence Intent to Compromise, Even when a Subsequent, More Formal Document is Contemplated

There are no magic words that conclusively determine whether a party intended to make an offer for compromise. A court may find that the specificity of terms contained in a writing indicates the party’s intent to compromise.[11] Even where a more formal future agreement is contemplated, a preliminary agreement that meets the form requirements and indicates consent as to particular terms may be upheld as a valid compromise.[12] By contrast, when the terms of an offer are confusing or contradictory, a court may find that no offer to establish a valid compromise has been made.[13] In addition, where an exchange indicates further negotiation or discussion regarding the terms of a compromise is contemplated, no compromise is established.[14]

III. Informal Electronic Communication in Holt v. Ace American Insurance Co.

Holt v. Ace American Insurance Co.[15] serves as an example of a court finding that an exchange of a long series of emails establishes a valid compromise. Because the emails established the compromise, the time for payment of the compromise was based on the date of the emails, even where a more formal settlement and release document was clearly contemplated and subsequently executed.[16]

In that case, the plaintiff’s attorney received a message from the mediator indicating that the defendant would be willing to settle at a particular price.[17] The plaintiff’s attorney replied to the mediator with a message stating that he had advised his clients “of the following facts,” apparently stating the parties’ obligations under the proposed compromise.[18] The plaintiff’s attorney asked the mediator to have the “[the defendant], through their counsel, confirm the terms of the compromise settlement to insure [sic] that it is an enforceable compromise agreement.”[19] The mediator forwarded the message to defendant’s counsel, asking the attorney to “please confirm asap.”[20] The attorney replied stating that his message “will confirm [that the defendant] agrees to the settlement per the e-mail string below” and that he would send a “draft Settlement and Release Agreement” to the plaintiff’s attorney.[21] The court found that the trial court did not manifestly err in finding that a valid compromise had been established.[22]

IV. Disclaimers May Be Effective in Preventing an Inadvertent Compromise

Practitioners should not let the informal nature of email fool them; electronic messages exchanged by attorneys could become enforceable if they meet the form requirements and evidence intent to compromise. This rule not only applies to emails sent from the office but extends to messages sent from any portable device. Regardless of whether the attorneys in an email exchange actually intended to reach a compromise, a court may nonetheless find a valid compromise based on the circumstances. To avoid inadvertent agreements to compromise, or any other agreement that requires a signature, a disclaimer located in all electronic correspondence might be an effective method of precluding a finding that the message contains an electronic signature. Because intent is a requirement for a valid electronic signature, such a disclaimer could state “nothing in this message may be construed as evidencing intent to provide an electronic signature for the purposes of Louisiana Revised Statutes section 9:2602.” Such a disclaimer, however, might be overly inclusive and be used as a way to invalidate other agreements. Alternatively, a disclaimer stating that “nothing in this message may be construed as evidencing intent to compromise” may be more effective for these purposes.

[1] La. Civ. Code art. 3072 (2016).

[2] Felder v. Ga. Pac. Corp., 405 So. 2d 521, 523 (La. 1981) (“Obviously, to serve as written proof of the agreement and obligations of both parties, and their acquiescence therein, the written agreement must be signed by both parties, obligating both to do what they have agreed on.”).

[3] La. Civ. Code art. 3072 cmt. d; Regions Bank v. Cabinet Works, L.L.C., 92 So. 3d 945, 956 (La. Ct. App. 2012).

[4] La. Rev. Stat. Ann. § 9:2602 (Supp. 2015).

[5] Regions Bank v. Cabinet Works, L.L.C., 92 So. 3d 945, 956 (La. Ct. App. 2012) (citing La. Rev. Stat. Ann. § 9:2602) (dictum). But see Holt v. Ace Am. Ins. Co., 149 So. 3d 886, 889–91 (La. Ct. App. 2014) (where attorney stated that his message “will confirm [that his client] agrees to the settlement” in the email string, the electronic signature was apparently valid).

[6] Regions Bank, 92 So. 3d at 956.

[7] Id.; Scott v. Green, 621 So. 2d 1, 2 (La. Ct. App. 1993); Barnes v. West, 159 So. 3d 1075, 1078 (La. Ct. App. 2015).

[8] Felder v. Ga. Pac. Corp., 405 So. 2d 521, 523 (La. 1981); Jacobson v. Harris, 503 So. 2d 540, 542 (La. Ct. App. 1987).

[9] Felder, 405 So. 2d at 524; Elder v. Elder & Elder Enters., Ltd., 948 So. 2d 348, 351 (La. Ct. App. 2007) (“In deciphering when separate instruments satisfy the writing requirement of [Louisiana Civil Code article] 3071, the Supreme Court has reasoned that where two instruments, when read together, outline the obligations each party has to the other and evidence each party’s acquiescence in the agreement, a written compromise agreement . . . has been perfected.”).

[10] See, e.g., Klebanoff v. Haberle, 978 So. 2d 598, 604 (La. Ct. App. 2008) (where parties had not agreed upon indemnification language to accompany the settlement, and the party demanding such language was assured that the opposing party would sign any such language, it was an “incidental matter” to the settlement of the lawsuit). But see Collins v. Mike’s Trucking Co., 934 So. 2d 827, 833 (La. Ct. App. 2006) (where a party wrote “this is not true!” in response to proposed indemnification language, it was fatal to the agreement because there was no “meeting of the minds”).

[11] First Nat’l Bank of Jefferson Parish v. Manor Heights Co., 576 So. 2d 61, 64 (La. Ct. App. 1991) (where an attorney-agent stated that his client “would like to explore . . . the possibility of settling” a dispute, detailed a list of terms it would be willing to accept, and asked for “thoughtful consideration of the foregoing settlement proposal,” the court found that a compromise had been reached).

[12] LeBlanc v. State Farm Ins. Co., 878 So. 2d 715, 720 (La. Ct. App. 2004).

[13] Soileau v. Allstate Ins. Co., 857 So. 2d 1264 (La. Ct. App. 2003).

[14] Regions Bank v. Cabinet Works, L.L.C., 92 So. 3d 945, 956 (La. Ct. App. 2012).

[15] 149 So. 3d 886 (La. Ct. App. 2014).

[16] Id. at 889–90.

[17] Id. at 888.

[18] Id. at 888–89.

[19] Id. at 888.

[20] Id. at 889.

[21] Id.

[22] Id. at 890. The court did not address the lack of signatures by the parties or the sufficiency of the language to indicate consent.