Amazon's E-mail Agreement Same As
Paper: Judge
By Elizabeth Landau
Law360, New York (January 16, 2008, 12:00 AM ET) -- Reinforcing the power of e-mail as a medium for
an enforceable settlement, a Massachusetts appeals court ruled in favor of Basis Technology Corp. in its
case against Amazon.com Inc. regarding nonpayment for work done on the online retailer's Japanese Web
site.
Associate Justice Mitchell J. Sikora Jr. last week upheld a ruling that an e-mail exchange between Basis
counsel and Amazon counsel constituted a binding settlement agreement.
The lower court correctly ruled that Basis' e-mail, sent March 23, 2005, “constituted 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,” Sikora wrote.
“If anyone had any doubts prior to this decision, this decision certainly seems to confirm that an e-mail can
have the same force and effect as a traditional paper contract in terms of being enforceable,” said Thomas
Gallitano, attorney at Boston's Conn Kavanaugh Rosenthal Peisch & Ford, who represented Basis in the
matter.
Basis, which makes software for multilingual Web sites, sued Amazon to recover compensation for its
services in Amazon's Japanese venture.
The companies had agreed in 1999 that Basis would provide services such as researching and composing a
business plan, creating a Japanese verification database and establishing Japan-based headquarters and
distribution and customer centers, according to the suit.
Basis initiated its action against Amazon in May 2003, alleging breach of fiduciary duty and violations for
nonpayment for "out of scope" work and invoking quantum meruit, according to Sikora's decision. The
parties began a jury-waived trial in March 2005.
After the third day of the trial, Basis counsel e-mailed Amazon counsel with the terms of the settlement,
which included Amazon's paying Basis $275,000 and removing Basis from 'do not use' or 'blacklists,'
according to the recent decision.
The e-mail also stated that Basis could again use the Amazon name and logo on its Web site and in printed
marketing material.
The e-mailed settlement further required Amazon to give up its seat on the board of directors at Basis as
well as its preferred shareholder rights, privileges the online retailer had attained through a stock purchase
agreement with Basis.
Amazon counsel replied the following morning with the single word, “Correct.” The judge ended the case
when both counselors reported the result of a settlement in open court.
A week later, Amazon wanted to nix the part of the e-mail settlement stating that it would convert its
preferred stock shares to common stock. The companies were also deadlocked over Basis' request to
Amazon involving stock issuance to a company called In-Q-Tel.
When Basis filed a motion to enforce the settlement agreement in April 2005, Amazon resisted. But a judge
said the e-mail exchange constituted "an agreement on all material terms" and that "there [was] nothing
ambiguous about this agreement."
Amazon then appealed, arguing that the e-mail was not a complete and unambiguous exchange as the judge
had ruled.
The company also said that “the judge, as a matter of fact-finding, incorrectly determined that Amazon had
intended to be bound by the e-mail terms at the time of their exchange,” according to Sikora's decision.
The decision of the Massachusetts appeals court is consistent with “a long history of judicial and legislative
trends toward treating electronic communications as equivalent to paper communications with appropriate
controls for authenticity,” said Aaron Fellmeth, associate professor at Arizona State University College of
Law. “If oral contracts are binding, e-mail contracts should a fortiori be binding.”
The statute of frauds, which motivates limitations on recognizing and enforcing oral contracts, does not
apply in cases of e-mail contracts, assuming they can be reliably authenticated, he said. “After all, an e-mail
contract is its own evidence; there is no more doubt about the scope of the agreement and intent of the
parties than in a paper agreement,” Fellmeth said.
Tom Bell, professor at Chapman University School of Law, agreed that it is no surprise that enforceable
settlement agreements could be formed through e-mail.
Some caveats do apply, such as local court requirements that such agreements be written and signed, but
“even then, though, e-mail ought to suffice,” he said.
As a practical matter, trial lawyers often have to settle cases outside the office, such as late at night or in a
courthouse, Gallitano said. Sometimes they will sketch an agreement on a piece of lined paper or in an email.
“If you're hoping to capture all of the important terms, the ones that matter, in an e-mail or something that's
written up in the corridor of a courthouse, it would be good practice to recite that what you're putting down
on paper is, in fact, {the settlement], Gallitano said.
Patty Smith, director of corporate communications at Amazon, declined to comment on the case.
Basis is represented in the matter by Conn Kavanaugh Rosenthal Peisch & Ford.
Amazon is represented in the case by Goodwin Procter LLP.
The case is Basis Technology Corporation v. Amazon.com Inc., case number 06-P-1048, in the Appeals
Court of the Commonwealth of Massachusetts.