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April 19, 2014

Delaware Chancery Court Finds Settlement Agreement Enforceable Despite Lacking Signature

The Delaware Court of Chancery recently ruled that a settlement agreement does not have to be fully executed by all parties to be enforceable. 

The court found in favor of plaintiff Frank Whittington and entered judgment for him in an underlying lawsuit in the amount of approximately $630,000. The defendants appealed to the Delaware Supreme Court. While the appeal was pending, the parties reached a settlement which was formalized in a signed writing executed by plaintiff and all of the defendants (the Agreement). Several days before the parties finalized the terms of the Agreement, Whittington’s attorneys, Cross & Simon, LLC (C&S) stopped representing him. C&S asserted an attorneys’ lien (Lien) of approximately $65,000 against any amount paid to Whittington by the defendants. C&S was reluctant to sign the Agreement and instead provided plaintiff with written assurances that payment under the Agreement would satisfy C&S’s claims for attorneys’ fees. 

Defendants paid the agreed-upon settlement figure of $396,000 and voluntarily dismissed their appeal, but plaintiff refused to execute a general release of claims and satisfaction of judgment as required under the Agreement. The defendants moved for enforcement of the Agreement and an award of their attorneys’ fees pursuant to a provision of the Agreement. Whittington responded by disputing the validity of the Agreement, seeking a declaration that the Agreement is not enforceable, an order enforcing the original judgment amount and an award of $1.1 million in attorneys’ fees. Whittington argued that the Agreement was unenforceable because C&S did not sign it. 

Despite lacking C&S’s signature, the court held that the Agreement was enforceable because there was no evidence that the parties “positively agreed” that the Agreement would not be enforceable until C&S formally executed it. C&S’s signature was only required to ensure that C&S discharged the Lien. While C&S did not sign the Agreement, the court found that Whittington accepted C&S’s written assurances that payment under the Agreement would satisfy C&S’s claims. The court also found that because the Agreement was binding and enforceable, the defendants were entitled to recover their reasonable attorneys’ fees and costs as the “prevailing party” pursuant to the Agreement.

Whittington v. Dragon Group LLC, No. 2291-VCP (Del. Ch. May 1, 2013).

©2014 Katten Muchin Rosenman LLP

About the Author

William M. Regan, Katten Muchin Law Firm, Litigation Attorney
Partner

William M. Regan represents banks, issuers and senior executives in securities class actions, stockholder derivative cases, complex financial product litigation and enforcement actions. Bill has been involved in litigating some of the largest and most complex matters in the securities litigation field, including Thornburg Mortgage, Inc., Madoff/Fairfield Greenwich, Global Crossing, Enron, WorldCom and the Oracle special litigation committee insider trading investigation.

212.940.6541

About the Author

Jason F. Clouser, Litigation Attorney, Katten Muchin Law Firm
Associate

Jason F. Clouser concentrates his practice in litigation and dispute resolution matters. 

212-940-6309

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