Court Enforces Settlement Agreement Where Defendants Accepted the Benefits Despite Parties’ Non-Compliance With a Contract Provision

On April 6, 2017, Justice Kornreich of the New York County Commercial Division issued a decision in GEM Holdco, LLC v. RDX Technologies Corp., 2017 NY Slip Op. 30668(U), holding that the defendants ratified their settlement agreement with plaintiffs by accepting the benefits of the agreement, notwithstanding non-compliance with one of the agreement’s terms.

In GEM Holdco, the plaintiff sued the defendants for breaching a settlement agreement by failing to make required payments. The defendants argued that the agreement could not be enforced because the parties had not satisfied a provision which stated that the agreement would be “null and void” if the Toronto Venture Exchange had not given a formal approval within three business days of its execution. The court rejected this argument and found that the defendants had ratified the settlement agreement by accepting the benefits, explaining:

[U]nder these circumstances, no reasonable finder of fact could conclude that the RDX Parties did not ratify the Settlement Agreement despite non-compliance with section 1(b)(iii). For more than two years, the RDX Parties accepted the benefits of GEM ceasing its litigation of the claims it asserted in the Prior Action. After accepting the benefits of the Settlement Agreement for that long, the RDX Parties have no right to now repudiate it. As a matter of law, the RDX Parties "implicitly ratified" the Settlement Agreement by accepting it benefits for more than two years.

(Citations omitted).

Note: Schlam Stone & Dolan LLP represents the plaintiffs in this action.