When an agreement is made to settle a dispute, it can be really advantageous for the background ssection of the signed agreement to document that fact. This advantage is illustrated in Pappas v. Tzolis, 20 N.Y.3d 228 (2012). In that case:
- Tzolis, a businessman, owned part of a limited liability company ("LLC") along with two colleagues, Pappas and Tziolis invested $50,000 in the company, while Ifantopoulos invested $25,000. The LLC acquired a long-term lease on a building in Lower Manhattan.
- About a year later, after repeated disputes had arisen, Tzolis bought out Pappas and Ifantopoulos for 20 times (!) their respective investments.
- A few months later, Tzolis sold the building lease for $17.5 million.
- Pappas and Ifantopoulos sued Tzolis for (among other things) fraud and breach of fiduciary duty, claiming that Tzolis had arranged the sale before he bought them out, without telling them he was doing so.
New York's highest court ruled that Pappas's and Ifantopoulos's complaint should have been summarily dismissed:
Here, plaintiffs were sophisticated businessmen represented by counsel. Moreover, plaintiffs' own allegations make it clear that at the time of the buyout, the relationship between the parties was not one of trust, and reliance on Tzolis's representations as a fiduciary would not have been reasonable.
According to plaintiffs, there had been numerous business disputes, between Tzolis and them, concerning the sublease. Both the complaint and Pappas's affidavit opposing the motion to dismiss portray Tzolis as uncooperative and intransigent in the face of plaintiffs' preferences concerning the sublease. The relationship between plaintiffs and Tzolis had become antagonistic, to the extent that plaintiffs could no longer reasonably regard Tzolis as trustworthy.
Therefore, crediting plaintiffs' allegations, the release contained in the Certificate is valid, and plaintiffs cannot prevail on their cause of action alleging breach of fiduciary duty.
Id. at 233 (emphasis and extra paragraphing added).
In similar fashion, if the Background section of the agreement recites facts about a dispute between the parties, the court likely will accept those facts as true; see the commentary to CD-25.2. Acknowledgement Definition. That can help counter what one commentator says will be the plaintiffs' lawyers' response to the Pappas decision, namely not to stipulate in their complaints that the parties had a dispute. See Peter Mahler, Pappas Saga Ends … (2012).
See also CD-22.18. Release.