In a recent posting, Christensen & Jensen (“C&J”) wrote about a Utah District Court decision that recognized an attorney’s authority to enforce a finalized, yet unsigned, settlement agreement. In another recent case regarding an accepted settlement agreement, a Utah District Court was saddled with determining whether to grant or deny Defendants’ request to enforce a settlement agreement and Defendants’ request for attorney’s fees.
In Hunt v. Schauerhamer, the district court granted Defendants’ motion to enforce the settlement agreement, holding that one of the Plaintiffs had accepted the settlement offer through her attorney and that she was therefore bound by its terms. However, the court was unwilling to grant Defendants’ request for attorney’s fees as it related to their efforts to enforce the settlement.
Plaintiff Retains Counsel and Files Civil Rights Lawsuit
On September 10, 2013, Plaintiffs’ son was pursued by several Utah police officers, shot, and killed. The decedent’s mother hired a local Utah law firm that specializes in civil rights, who filed a civil rights claim on the mother’s behalf. C&J was retained as counsel for the decedent’s father.
After the complaint was filed, the parties entered into settlement negotiations. During the summer of 2015, the parties drafted a settlement agreement in which Defendants agreed to pay the Plaintiffs approximately $900,000 in exchange for a full release of liability (accompanied by a press release) and a non-disparagement clause.
However, the decedent’s mother contended that she never agreed to the terms of the settlement agreement. In fact, on September 10, 2015, she repudiated the settlement agreement in statements to the media.
In the time after the complaint was filed, the parties attempted to mediate their dispute, but a resolution was never reached. However, even though the mediation was unsuccessful, the parties agreed to keep settlement negotiations open.
The Parties Agree to Settle
On July 8, 2015, the Plaintiff emailed to her attorney that she was willing to reluctantly accept $850,000 to $900,000 in order to settle the case, but that she wanted her attorney to push for $1 million. Five days later, her counsel emailed Defendants’ counsel stating that he and the decedent’s father’s counsel would like to take another go at getting the case resolved.
After some negotiations by the parties, the parties ultimately agreed to a $900,000 settlement in early August 2015. The settlement agreement was mailed to Plaintiff’s counsel at that same time. Additionally, the parties began working on respective press releases to publicize the settlement upon entry of an order of dismissal given the overwhelming media attention the case had garnered.
Five days after the settlement agreement was mailed to Plaintiff’s counsel, Plaintiff’s counsel had a telephone conversation with Plaintiff, which Plaintiff’s counsel recorded and later had transcribed. In the phone call, the two discussed the amount of the settlement and the non-disparagement clause, with the Plaintiff ultimately agreeing to the settlement.
A few days after getting authority to accept the settlement from his client, Plaintiff’s counsel emailed opposing counsel asking where they were on the final settlement documents. The next day, Defendants’ counsel responded stating that they were working through the last details of the settlement documents and accompanying press release. Defendants’ counsel also asked Plaintiff’s counsel, and counsel for the decedent’s father, to send them their firm’s Tax ID numbers and who the settlement checks should be made out to. Plaintiff’s counsel sent the requested information, and confirmed the payment instructions twice more in subsequent emails.
Plaintiff Tells Her Attorney She Will Not Accept Settlement, and Subsequently Fires Him
After ironing out a few more details regarding the press releases, the two sides agreed to a final settlement. Subsequent to agreeing on the settlement, Plaintiff and her counsel had series of private communications, in which the Plaintiff said she would not sign the settlement agreement.
Over the next few days, Defendants’ counsel contacted Plaintiff’s counsel to tell him that they had the settlement checks ready, but they heard nothing back. During that same time, Plaintiff’s counsel responded to his client, telling her that she had accepted the settlement and agreed to sign the release. Three days later Plaintiff fired her counsel through an email.
Defendants Move to Enforce Settlement Agreement
In early September 2015, Defendants’ counsel, not knowing that Plaintiff had fired her counsel, reached out again to Plaintiff’s now-former counsel regarding the settlement, but there was no response. Then on September 10th, the Plaintiff appeared on the news and repudiated the settlement agreement. As a result, Defendants filed a motion to enforce the settlement agreement.
The Plaintiff contended that her counsel did not have the actual or apparent authority to bind her to any settlement. Plaintiff further contended that even if her counsel had authority, no contract was formed because there was no meeting of the minds on material terms of the agreement, namely the non-disparagement clause and the release (with the accompanying press release).
Court Says Plaintiff’s Counsel Had Authority to Bind Her to Settlement Agreement
The court determined that Plaintiff’s counsel did have the requisite authority to bind her to the settlement agreement. There, the court said:
[Plaintiff’s counsel] had actual authority to enter into the Agreement on [Plaintiff’s] behalf. She hired him to file the complaint on her behalf, and she did not fire him until August 28, 2015, ten days after [Plaintiff’s counsel] and the other attorneys agreed to the settlement terms on behalf of their clients. During the time that [Plaintiff’s counsel] represented [Plaintiff], they had numerous discussions about pursuing settlement, settlement terms, and acceptance of those settlement terms.
The court then stated that, even if Plaintiff’s counsel did not have actual authority to bind Plaintiff to a settlement, he had apparent authority to bind her to the negotiated terms of the settlement, stating:
[Plaintiff] argues that the Defendants could not have reasonably relied on [Plaintiff’s counsel’s] actions and statements. The court disagrees. Assuming [Plaintiff] had placed limitations on [her counsel’s] authority, she did not disclose any such limitations to the Defendants. This lack of notice to the Defendants means that she is bound by [her counsel’s] actions. Moreover, nothing in the evidence indicates that the Defendants had any reason to doubt [Plaintiff’s counsel’s] authority. It was reasonable for Defendants to participate in negotiations with the understanding that [Plaintiff’s counsel] could agree to terms that would bind [Plaintiff].
Next, the court determined that the agreement was binding and enforceable because the parties agreed to and finalized the material terms of the settlement. The court also held that the settlement agreement was valid even though it was not signed by the Plaintiff on account of the email exchanges where Plaintiff agreed to accept the settlement agreement. As a result, the settlement the court granted Defendants’ motion to enforce the settlement agreement.
Court Denies Defendants’ Request for Attorney’s Fees
After granting the motion to enforce the settlement, the court turned to Defendants’ request for attorney’s fees as it related to their efforts in seeking to enforce the settlement agreement. In response to Defendants’ request, the court said:
The Defendants do not point to any agreement or case law entitling them to attorney’s fees. Instead, the Defendants rely on the court’s inherent authority as a basis for sanctions. The court declines to exercise that authority because such an award is not equitable in this case.
Finally, the court addressed Plaintiff’s counsel’s Notice of Attorney’s Lien that he filed in September 2015. There, the court ordered Defendants to place $900,000 into the Registry of the court, and said the court would hold a conference with the parties to decided how to distribute the settlement funds in light of the attorney’s lien.
The Importance of Written Communications With Your Client
This case illustrates how important it is for an attorney to obtain explicit authority from his or her client to settle on their behalf, and how all material terms of a settlement must be worked through with a client before any settlement is accepted. Furthermore, this case underscores the importance of putting communications with a client in writing, because without such written communications, Plaintiff’s counsel in this case may have been hung clean out to dry.