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Civil Procedure: Enforceability of Settlement Agreement Based Upon Attorney’s Apparent Authority

Posted by Ted A. Schmidt | Jul 06, 2015 | 0 Comments

Robertson v. Alling, 715 Ariz. Adv. Rep. 23 (June 24, 2015) (J. Timmer)

ATTORNEY HAS APPARENT AUTHORITY TO ENTER SETTLEMENT AGREEMENT WHERE BASED UPON CLIENTS' ACTIONS THERE EXISTS A REASONABLE BELIEF THE ATTORNEY HAS SUCH AUTHORITY/RULE 80(d) ONLY APPLIES WHERE THE EXISTENCE OR TERMS OF AGREEMENT ARE CHALLENGED, DOES NOT REQUIRE CLIENT'S WRITTEN ASSENT BUT DOES REQUIRE WRITTEN DOCUMENTATION OF THE TERMS—E-MAIL SATISFIES THE WRITTEN DOCUMENTATION REQUIREMENT

Plaintiffs sued their neighbor defendant Alling Group over a water line. After a failed mediation the defendant made a settlement offer via e-mail with a deadline.  Plaintiff asked for an extension of the deadline. Defendant did not expressly grant the extension but its attorney recommended to his clients that they “leave the door open” for settlement on the offered terms. Two members of the defendant Group rejected this advice via e-mail but defense counsel didn't read the e-mails until after reoffering the settlement proposal to the plaintiff and receiving an acceptance of the settlement offer from the plaintiffs' attorney all via e-mail. When defense counsel discovered the e-mails rejecting his advice he made a new settlement offer at his clients'' behest with materially different terms. The plaintiff then moved to enforce the original settlement agreement and the trial court ruled the defendant was equitably estopped to reject the original settlement and that its attorney had apparent if not actual authority to make the offer and execute the agreement.  The Arizona Court of Appeals reversed but the Arizona Supreme Court vacated the court of appeals decision and affirmed the trial court.

Rule 80(d) provides that "[n]o agreement or consent between parties or attorneys in any matter is binding if disputed, unless it is in writing, or made orally in open court, and entered in the minutes." Since the parties here do not dispute the existence or terms of the settlement agreement this rule does not resolve the issue of whether or not the defense attorney had authority to enter into the agreement.  Rule 80(d) only applies where the terms or existence of the settlement agreement is challenged. In any case, rule 80(d)'s requirement a settlement agreement be in writing would be satisfied by the e-mail exchanges between the parties here. Rule 80(d) does not require written assent to the agreement by a client challenging the agreement based upon a claim its attorney lacked authority to settle on the terms offered.

An attorney without actual authority to settle a dispute can nevertheless do so if the other party to the agreement "reasonably assumes that the lawyer is authorized to do the act on the basis of the client's (and not the lawyer's) manifestation of such authorization." Here based upon the actions of the clients during the mediation there existed a reasonable basis for the plaintiffs to believe the defense attorney had authority to essentially extend the settlement deadline. This was particularly true based upon the fact that placing a deadline on the original offer was the plaintiffs' attorney's idea and was not material to the defendant.

About the Author

Ted A. Schmidt

Ted's early career as a trial attorney began on the other side of the fence, in the offices of a major insurance defense firm. It was there that Ted acquired the experience, the skills and the special insight into defense strategy that have served him so well in the field of personal injury law. Notable among his successful verdicts was the landmark Sparks vs. Republic National Life Insurance Company case, a $4.5 million award to Ted's client. To this day, it is the defining case for insurance bad faith, and yet it is only one of several other multi-million dollar jury judgments won by Ted during his career. He is certified by the State Bar of Arizona as a specialist in "wrongful death and bodily injury litigation".

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