Smith v. Home Depot U.S.A., Inc.

Opinion

25-1141-cv Smith v. Home Depot U.S.A., Inc.

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 4th day of September, two thousand twenty-six.

PRESENT: RAYMOND J. LOHIER, JR., Chief Judge,

DENNY CHIN,

WILLIAM J. NARDINI,

Circuit Judges.

------------------------------------------------------------------

DUANE SMITH, INDIVIDUALLY AND AS ADMINISTRATOR OF THE ESTATE OF BARBARA SHELTON, DECEASED,

Plaintiff-Appellant,

v. No. 25-1141-cv HOME DEPOT U.S.A., INC., Defendant-Third-Party-Plaintiff-Appellee,

ROOF DIAGNOSTICS SOLAR & ELECTRIC LLC, NRG HOME SERVICES, LLC,

Third-Party-Defendants-Appellees.

------------------------------------------------------------------

FOR PLAINTIFF-APPELLANT: Duane Smith, pro se, Hempstead, NY

FOR DEFENDANT-THIRD-PARTY- Anthony R. Minchella, Minchella PLAINTIFF-APPELLEE: & Associates, LLC, Middlebury, CT

FOR THIRD-PARTY- Jonathan B. Isaacson, Gino A.

DEFENDANTS-APPELLEES: Zonghetti, Christopher I.

Mdeway, Kaufman Dolowich, LLP, Hackensack, NJ

Appeal from a judgment of the United States District Court for the Eastern District of New York (Joan M. Azrack, Judge).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the judgment of the District Court is AFFIRMED.

Duane Smith, representing himself, appeals from both the judgment of the United States District Court for the Eastern District of New York (Azrack, J.), approving a settlement agreement among Smith, Defendant Home Depot U.S.A., Inc., and third-party Defendants Roof Diagnostics Solar & Electric LLC and NRG

3

Home Services, LLC (collectively, “NRG”), 1 and the March 19, 2024 order enforcing that settlement agreement. On appeal, Smith principally argues that the District Court erred in enforcing the settlement agreement. We assume the parties’ familiarity with the underlying facts and the record of prior proceedings, to which we refer only as necessary to explain our decision to affirm. 2 BACKGROUND

Smith, through his then-counsel Paul Youkilis, sued Home Depot, asserting state-law contract and tort claims related to a construction project. Home Depot in turn sued NRG for indemnification and removed this action to federal court. At the settlement conference before Magistrate Judge Dunst of the Eastern District of New York, the Magistrate Judge stated on the record that there was an oral settlement agreement, which Youkilis, and counsel for Home Depot and NRG each confirmed. Shortly thereafter, Smith emailed Youkilis stating that he was “[l]ooking to settle the matter for a much higher amount.” App’x 146

1The District Court did not enter final judgment in a separate document as required by Rule 58 of the Federal Rules of Civil Procedure. See Fed. R. Civ. P. 58(a). But “failure to set forth a judgment or order on a separate document when required by [Rule] 58(a) does not affect the validity of an appeal from that judgment or order.” Fed. R. App. P. 4(a)(7)(B). Under Rule 58(c)(2)(B), the judgment became final on August 29, 2025, 150 days after the order was entered on the docket. See Fed. R. Civ. P. 58(c)(2)(B).

2 Smith also moves for reconsideration of our denial of his motion to strike Appellees’ brief. That motion is denied as moot.

4

(citation modified). Acknowledging that the parties had already settled and that he could not in good faith represent otherwise, Youkilis withdrew as Smith’s counsel, and Smith, now pro se, disputed that a settlement agreement ever existed. Defendants moved to enforce the settlement agreement. Following a fact-finding hearing during which it heard testimony, the District Court granted the Defendants’ motion, finding that Smith entered into an oral agreement to release all claims in exchange for $65,000.

DISCUSSION

In reviewing a district court’s decision whether to enforce a settlement agreement, we review conclusions of law de novo and findings of fact, including whether a settlement agreement existed and the parties assented to it, for clear error. Omega Eng’g, Inc. v. Omega, S.A., 432 F.3d 437, 443 (2d Cir. 2005).

I. Assent to Oral Settlement Agreement Smith first argues that he is not bound by the settlement agreement because his attorney lacked actual or apparent authority. We are unpersuaded.

To start, we note that under either federal common law or New York law, a settlement agreement is binding on the client if the attorney had either actual or apparent authority to enter into the agreement. United States v. Int’l Bhd. of

5

Teamsters, 986 F.2d 15, 19–20 (2d Cir. 1993). 3 We “presume that an attorney-of- record who enters into a settlement agreement, purportedly on behalf of a client, had authority to do so.” In re Artha Mgmt., Inc., 91 F.3d 326, 329 (2d Cir. 1996). Smith, as the party challenging his attorney’s authority to settle the case thus bore “the burden of proving by affirmative evidence that the attorney lacked authority.” Id. As for the merits, we have explained that a “voluntary, clear, explicit, and unqualified stipulation of dismissal entered into by the parties in court and on the record is enforceable even if the agreement is never reduced to writing, signed, or filed.” Powell v. Omnicom, 497 F.3d 124, 129 (2d Cir. 2007) (citation modified). Indeed, “[t]he settlement remains binding even if a party has a change of heart between the time he agreed to the settlement and the time those terms are reduced to writing.” Id.; see also United States v. Bank of N.Y., 14 F.3d 756, 759 (2d Cir. 1994).

In circumstances where, as here, “a former attorney and his client dispute the giving of authority, courts generally require the holding of an evidentiary hearing on the question of authorization.” Gomez v. City of New York, 805 F.3d

3Where, as here, the parties have not disputed whether New York law or federal common law applies to the settlement of federal claims, we need not decide that question, since they are “materially indistinguishable” for the purposes of resolving this appeal. Powell v. Omnicon, 497 F.3d 124, 129 n.1 (2d Cir. 2007).

6

419, 424 (2d Cir. 2015) (citation modified).

The District Court conducted such a hearing and found that Smith agreed to the settlement at issue. Based on our review of the record, we find no clear error in that finding. Although Smith’s correspondence with Youkilis in the days following the settlement conference shows he hoped to settle for more money, the District Court did not clearly err in concluding that Smith simply had a change of heart. Further, the District Court’s finding that Youkilis had actual authority to agree to settle for $65,000 is sufficiently supported by the record.

First, it is undisputed that Smith was present throughout the conference, leaving only after the settlement amount had been agreed to, but prior to the final on-the-record discussion. Second, Smith himself made an initial, lower settlement offer to the Defendants, “insist[ing] on an immediate settlement . . . for 60K.” App’x 145. Both Magistrate Judge Dunst and Youkilis told Smith that the Defendants were willing to settle for a higher amount. The Magistrate Judge then presented Smith with the Defendants’ counteroffer of $65,000—$5,000 more than Smith had opened with. When the parties went back on the record at the close of the settlement conference, Youkilis did not explicitly state that he had authority to settle the action on Smith’s behalf but confirmed that Smith had

7

agreed to a confidential settlement amount. Youkilis repeated in testimony during the evidentiary hearing that Smith had agreed to accept $65,000 in settlement. Cf. Int’l Bhd. of Teamsters, 986 F.2d at 20 (finding actual authority where counsel “stated in open court that his clients had given him the authority to agree to the proposed Settlement”). Third, Smith waited the better part of a year after the evidentiary hearing before asserting that the settlement agreement was invalid owing to a lack of authority on Youkilis’s part. Fourth, Smith agreed to have Youkilis go back on the record at the close of negotiations to confirm in open court that the parties had agreed on an undisclosed settlement sum. Although he now asserts that he did not understand the significance of this formality, when, as here, “a party makes a deliberate, strategic choice to settle, []he cannot be relieved of such a choice merely because h[is] assessment of the consequences was incorrect.” Bank of N.Y., 14 F.3d at 759 (citation modified).

Given the record evidence described above, the District Court was not required to credit Smith’s testimony that he had rejected the Defendants’ offer to settle for $65,000. Accordingly, we conclude that the court did not clearly err in finding that Youkilis had actual authority to settle the action on Smith’s behalf.

8

As we affirm on the basis of actual authority, we decline to address the District Court’s alternative finding that Youkilis had apparent authority.

II. Enforceability of the Settlement Agreement Smith also argues that the oral settlement agreement between the parties was not enforceable. Again, we disagree. To decide whether parties intended to be bound in the absence of a signed writing, we consider the four so-called Winston factors: “(1) whether there has been an express reservation of the right not to be bound in the absence of a writing; (2) whether there has been partial performance of the contract; (3) whether all the terms of the alleged contract have been agreed upon; and (4) whether the agreement at issue is the type of contract that is usually committed to writing.” Powell, 497 F.3d at 129 (citing Winston v. Mediafare Ent. Corp., 777 F.2d 78, 80 (2d Cir. 1985)). Although “[n]o single factor is decisive,” Ciaramella v. Reader’s Digest Ass’n, Inc., 131 F.3d 320, 323 (2d Cir. 1997), the express reservation of rights is “frequently the most important.” Brown v. Cara, 420 F.3d 148, 154 (2d Cir. 2005).

As to the first factor, the District Court correctly concluded that the parties did not make any express reservation to be bound only by a writing. Although the oral settlement agreement did not contain all the terms that would be

9

incorporated in the final version, “preliminary agreements can” nevertheless “create binding obligations.” Adjustrite Sys., Inc. v. GAB Bus. Servs., Inc., 145 F.3d 543, 548 (2d Cir. 1998). The District Court’s factual findings demonstrate that the parties’ settlement agreement was enforceable. To expressly reserve his right not to be bound absent a writing, Smith needed to convey “forthright, reasonable signals that [he] mean[t] to be bound only by a written agreement.” R.G. Grp., Inc. v. Horn & Hardart Co., 751 F.2d 69, 75 (2d Cir. 1984); see Winston, 777 F.2d at 81. Here, the record does not reflect that Smith conveyed such signals; the parties’ actions in negotiating the settlement and instructing the Magistrate Judge on the record that an agreement had been reached evinced the parties’ understanding that “the settlement’s reduction to writing was only a formality.” Powell, 497 F.3d at 130.

The parties’ post-settlement conference email exchanges and conversations confirm that the only terms that remained open were the confidentiality and non- disparagement provisions. Although the parties agreed on the record that the agreement was “tentative” and would require the completion of necessary documents, App’x 49–50, there was no suggestion that they understood this as anything more than a ministerial final step.

10

The third Winston factor—whether the oral agreement included all material terms—also favors enforcement. “[P]arties can choose to be bound despite the presence of open terms,” as long as those terms are not material. Murphy v. Inst. of Int’l Educ., 32 F.4th 146, 152 (2d Cir. 2022) (citation modified). A material term is understood as one that “seriously affects the rights and obligations of the parties,” Ginsberg Mach. Co. v. J. & H. Label Processing Corp., 341 F.2d 825, 828 (2d Cir. 1965), and is case specific. See Shann v. Dunk, 84 F.3d 73, 79 (2d Cir. 1996). We see no reason to disturb the District Court’s finding that no material terms were left open.

Although the confidentiality and disparagement provisions remained unsettled after the settlement conference, there is no evidence that they were a topic of negotiation during the conference or that the Defendants contested Smith’s preferences regarding either. See Tractebel Energy Mktg., Inc. v. AEP Power Mktg., Inc., 487 F.3d 89, 95 (2d Cir. 2007) (“[N]ot all terms of a contract need be fixed with absolute certainty. A contract is not necessarily lacking in all effect merely because it expresses the idea that something is left to future agreement. At some point virtually every agreement can be said to have a degree of indefiniteness, but parties should be held to their promises.”) (citation

11

modified). There is no indication that any items “remain[ed] to be negotiated” through the process of drafting a written instrument, such that the parties did not intend “to be bound until they synthesized a writing satisfactory to both sides in every respect.” Powell, 497 F.3d at 130 (citation modified).

The fourth Winston factor considers whether the agreement is of the type that is “generally required to be in writing or, at a minimum, made on the record in open court.” Ciaramella, 131 F.3d at 326. Here, the District Court’s decision to “announc[e] the terms of [the] agreement on the record in open court . . . ensure[d] that there [were] at least some formal entries to memorialize the critical litigation events.” Powell, 497 F.3d at 131 (citation modified). The announcement here functioned as the equivalent of a memorialized writing, even if a more formal writing was to follow. Accordingly, this factor weighs in favor of enforcement.

In summary, at least three of the four Winston factors favor enforcement.

We accordingly find no error in the District Court’s enforcement of the parties’ oral settlement agreement.

12

CONCLUSION

We have considered Smith’s remaining arguments and conclude that they are without merit. For the foregoing reasons, the judgment of the District Court is AFFIRMED.

FOR THE COURT:

Catherine O’Hagan Wolfe, Clerk of Court