Negotiation News: Volume 4, Issue 3

Picture this:  You are in the middle of putting the final terms of a negotiation together, and the emails are flying back and forth between you and your opposing counsel. You get to a point where all the terms can be set forth in a single email, and you send it to the other side for agreement. Your opponent sends you an email saying that his client agrees, above an email from the client to the lawyer with the client’s name. All that’s left is to put together the formal agreement and release and the settlement is done, right? The opposing party signed off, so it’s enforceable under 664.6, right? Time to meet up with your client to toast the conclusion of a wonderful negotiation and celebrate your great success.

But as you slowly make your way into the office the following morning, you see that there’s a message from your opponent saying, “my client had a chance to think about this, and he changed his mind.”  Fearing that you must have drunk bad champagne the night before, you quickly return the call, only to have this awful news confirmed.

What happened, and what do you do next?  Do you file a CCP 664.6 motion?

If You Like It, Then You Better Get A Sig(Nature) On It

This question was recently considered by the California Court of Appeal in J.B.B. Investment Partners, Ltd. v. Fair, A140232, A141228 December 5, 2014, not certified for publication, certified for publication December 30, 2014).  In J.B.B., after negotiations regarding a real estate investment, Plaintiff J.B.B sent an email to Defendant Fair setting forth the terms of the agreement, including the staying of litigation pending settlement. The email stated that Fair was required to state that he accepted the terms of the settlement, and to let Plaintiff know when he did. The following morning, Fair sent an email to Plaintiff’s counsel disagreeing with his recitation of facts in the proposed agreement, but concluding with a statement “So I agree. Tom Fair.”

Nevertheless, Plaintiff believed that this statement was ambiguous, so filed its complaint. After receiving notice that the complaint was filed, Fair then contacted Plaintiff’s counsel reiterating his agreement in three separate emails. Plaintiff’s counsel then went to work on a final settlement agreement which was sent to Fair for signature. Fair then refused to sign off on that document after consultation with his accountant, stating further that (a) after Plaintiff filed its complaint, he changed his mind about the settlement and (b) his emails indicated a showing of good faith to end the dispute, not a final agreement.  Upon motion under CCP section 664.6, the trial court found in favor of the Plaintiff and held that Fair’s signature was an electronic signature under Civil Code 1633.1 et. seq. The court further found that Fair’s follow-up emails reiterating his agreement, when taken together, constituted an acceptance of Plaintiff’s offer.

The Court of Appeal reversed, in pertinent part stating as follows:
1. Civil Code section 1633.1 et. seq. (the “Uniform Electronic Transactions Act” or “UETA”) provides that a signature may not be denied legal effect solely because it is in electronic form (1633.7(a); a contract may not be denied legal effect solely because it is in electronic form (1633.7(b); and if the law requires a signature, an electronic signature satisfies the law (1633.7(c).

2. Fair contended that the emails were not final electronic signatures because Plaintiff contemplated Fair signing off on a formal settlement agreement. There was no signature block for Fair to sign in any of the emails to which he said “I agree with this,” but also contemplated the finalizing of deal terms. The court held that under Civil Code 1633.2(h), “an electronic signature means an electronic sound, symbol or process attached to, or logically associated with, an electronic record and executed or adopted by a person with the intent to sign the electronic record.”  Further, the parties must consent to conduct the transaction by electronic means (1633.5(b), and because no such consent was memorialized, this was not a valid electronic signature. Importantly, since Fair only initially offered his printed name after voicing factual disagreements, his initial email was not a valid electronic signature for the purposes of enforcing the agreement.

3. In further emails Fair had stated that he “agreed” indicated that the parties would continue to work on a final agreement. Thus, these emails were not valid electronic signatured either.
The takeaway:  The Court of Appeal is strongly indicating that the provisions of the UETA must be strictly complied with, even if there is general assent to a settlement and even if it means denying a CCP 664.6 motion to enforce.  The court is stating clearly that any transactions conducted by electronic means must first have an enforceable stipulation to conduct transactions in that manner under 1633,5(b).  If a Memorandum of Settlement is used prior to the execution of a formal agreement, the parties should clearly state that notwithstanding the execution of a formal agreement, they agree to be bound by the material terms set forth in the MOS. Finally, it is crucial to assure that any electronic signature is clearly made part of the offer, ideally by specifically stating that acceptance is incorporated into the terms of the offer, and that such acceptance is enforceable.

Make sure you dot your “i’s” and cross your “t’s” if you are proceeding with something other than a pen-to-paper agreement. In light of J.B.B., the courts are looking at electronic signatures carefully, and putting the burden on the party seeking to enforce them, regardless of the general intent of the parties to settle a case.

• Charity

It’s springtime, and those of us in Southern California probably wondered whether winter actually existed. As always, when booking your mediation, please direct me to the website of your charity and I will donate part of the fees in your name.

• In Closing . . .

I look forward to working with you in mediation soon!

Sean E. Judge is a mediator with offices in Woodland Hills, CA. In his 21 years as a litigator, he has represented corporate and institutional clients, and individual litigants and small businesses, both as Plaintiffs and Defendants. He can be reached via telephone at 818-616-8500, at www.judgemediation.com or via email at [email protected].