E-mail and Paper: Equated in Law

A recent Massachusetts Appeals Court ruling enforcing an e-mail settlement agreement of a contractual dispute is a reminder to lawyers that e-mail settlements carry the same weight as deals on paper.

The court ruled on Jan. 7 that a midtrial, e-mail settlement between Basis Technology Corp., a Cambridge, Mass.-based company that makes software for multilingual Web sites, and e-commerce giant Amazon.com Inc. was binding.

Associate Justice Mitchell J. Sikora Jr. wrote that the trial judge correctly ruled that a March 23, 2005, e-mail from Basis to Amazon.com was a "sufficiently complete and unambiguous statement as a matter of law, and that both parties intended to be bound by that communication of settlement terms." Basis Technology Corp. v. Amazon.com Inc., No. 06-P-1048 (Mass. App. Ct.).

Thomas J. Gallitano, a lawyer for Basis, said a statement in the e-mail exchange confirming that six different points in the e-mails contained the essential business terms of the settlement agreement was pivotal to the court's decision.

The Power of Paper

Amazon.com spokeswoman Patty Smith said the company wouldn't comment on the case. Basis sued Amazon in May 2003, for alleged breach of fiduciary duty, and violations of the state's consumer protection laws for not paying for work that fell outside the scope of a contract between the two companies. At the time, Amazon was creating an e-commerce system to sell products in Japan. It hired Basis for technical services.

The two companies were also linked through a stock purchase agreement that involved Amazon.com's purchase of Basis preferred stock and a seat on the private company's board of directors. The settlement required Amazon to give up its board seat and relinquish its rights as preferred shareholder. Basis Technology Corp. v. Amazon.com Inc, No. SUCV2003-02246 (Suffolk Co., Mass., Super Ct.).

After the settlement, Amazon tried to rescind a provision that called for it to convert preferred stock to common stock. Amazon.com also objected to a separate Basis request that Amazon retroactively approve Basis' preferred stock issuance to a separate company and approve a new sale of stock to the same company.

Amazon opposed the sales and filed a separate lawsuit in the Delaware Court of Chancery, because it claimed the other stock sales would reduce its ownership stake in Basis. Amazon appealed the Massachusetts case on the grounds that the judge incorrectly ruled that the e-mail exchange "created a complete and unambiguous agreement" and that Amazon had intended to be bound by the terms of the e-mail.