Open Court Settlement Stipulation Binds Parties in NY Civil Action

Plaintiffs May Not Back Out Because They Didn’t Account for Workers’ Comp Lien and Medicare Set-Aside

An open-court stipulation of settlement in a New York trial court is an independent contract between the parties and will be enforced to its terms unless there is proof of fraud, duress, overreaching, or unconscionability, held a state appellate court in Lenge v Eklecco Newco, LLC, 2019 N.Y. App. Div. LEXIS 3626 (May 8, 2019). Accordingly, where a New York worker sustained injuries in a work-related accident, filed a civil action against various defendants alleging Labor Law § 241(b) violation and common law negligence, with one of the defendants then commencing a third-party action against the worker’s employer, plaintiff was bound by a stipulation settling the matter for $325,000. He could not later back out because he had not adequately accounted for a workers’ compensation lien and the proper amount for a Medicare Set-Aside.

Background

Plaintiff, an employee of Anzek Construction, allegedly was injured while working on a construction project at the Palisades Mall, in West Nyack, New York, when he tripped and fell over a pallet at or near the service entrance on the second floor. Thereafter, plaintiff and his wife (suing derivatively) filed a civil action against various defendants, including Cahill Construction Company to recover damages for personal injuries. Cahill commenced a third-party action against Anzek.

Settlement at the Eleventh Hour

Prior to jury selection, on the first day of trial, the plaintiffs’ counsel stated on the record in open court that the parties had agreed to completely settle the matter for the sum of $325,000. Defense counsel then indicated on the record that the stipulation of settlement was agreed upon, and stated the sum that each defendant would contribute toward the total settlement amount. Additional terms of the settlement were then placed on the record with all parties and their respective attorneys participating.

Cold Feet

According to the Court, the plaintiffs’ counsel and the plaintiffs all acknowledged on the record the possibility of establishing a Medicare set-aside, and the plaintiffs confirmed that they would “take care of the issues with regard to Medicare should they exist.” The plaintiffs’ counsel also acknowledged on the record the existence of a workers’ compensation lien.

Subsequently, the plaintiffs’ counsel sent a letter to the trial court and all counsel, stating that the stipulation of settlement was “null and void” on the ground that the plaintiffs had “not received an agreed upon workman’s compensation written consent.”

Employer Moves to Enforce Settlement

Anzek, subsequently joined by the defendants, moved, inter alia, to enforce the stipulation of settlement. The plaintiffs cross-moved, inter alia, for an order seeking nunc pro tunc approval of the purported settlement agreement. The trial court denied the motion and the cross motions, concluding that “no binding settlement was ever reached.” Anzek appealed.

Stipulation Was Binding

The appellate court disagreed with the trial court (Supreme Court), holding that an open-court stipulation was an independent contract between the parties. The court added that the fact that the plaintiffs were unsatisfied with the amount they would receive after payment of the workers’ compensation lien and the establishment of a Medicare set-aside did not constitute a sufficient ground to invalidate the settlement.