Makins v. District of Columbia

838 A.2d 300, 2003 D.C. App. LEXIS 709, 2003 WL 22965253

• Court: District of Columbia Court of Appeals
• Decided: December 18, 2003
• Docket: 02-SP-241
• Status: Published

Opinions

NEBEKER, Senior Judge:

Pursuant to D.C.Code § 11-723 (1995), the United States Court of Appeals for the District of Columbia Circuit (“Circuit”) has certified the following question to this court:

Under District of Columbia law, is a client bound by a settlement agreement negotiated by her attorney when the client has not given the attorney actual authority to settle the case on those terms but has authorized the attorney to attend a settlement conference before a magistrate judge and to negotiate on her behalf and when the attorney leads the opposing party to believe that the client has agreed to those terms.[¹]

For reasons set forth below, we hold that a client is not bound by a settlement agreement negotiated by her attorney at an in-court proceeding when the client was not present absent actual authority granted to the attorney to reach the settlement.

I.

We will paraphrase the Circuit’s concise statement of the facts. In November 1998, Brenda Makins brought an action against the District of Columbia claiming sex discrimination and retaliatory firing, in violation of Title VII (42 U.S.C. §§ 2000e et seq.). Makins had been employed in the District’s Department of Corrections from 1995 until her discharge in 1997. Her complaint sought reinstatement, compensatory damages, and attorney’s fees.

Makins’ attorney, John Harrison, began representing her in 1996, after she received notice of termination from the Department. Harrison and Makins did not have a written retainer agreement. In the summer of 2000, at a pre-trial conference, the district judge referred Makins’ case to a magistrate judge “for settlement purposes only” and ordered the District to “have present at all settlement meetings ... an individual with full settlement authority.” A similar admonition was absent as to Ms. Makins. The judge set the ease for trial in December 2000. A few days later, the magistrate ordered the “lead attorney(s) for the parties” to appear before him for a settlement conference; the order required that the “parties shall either attend the settlement conference or be available by telephone for the duration of the settlement conference.”

The conference took place on September 12, 2000. Makins was not present. After two and half hours of negotiations, Harrison and the attorneys for the District reached an agreement. Makins would receive $99,000 and have her personnel records amended from “discharged” to “resigned” (to preserve her retirement benefits if she were able to attain other creditable employment). In return, Makins would dismiss her claims against the District. The attorneys “shook hands” on the deal and later reduced it to writing. A few days later, when Harrison presented Makins with a copy for her signature, she refused to sign it. The District then filed a Motion to Enforce Settlement. Makins retained another attorney, and the court held an evi-dentiary hearing in which Harrison, Ma-kins, and the lead attorney for the District testified.

The testimony of Makins and Harrison was at odds. According to Makins, she never agreed to settle her case under the terms Harrison and the District negotiated because “getting [her] job back had to be part of any agreement.” She admitted to wanting to settle the case and knowing that the correctional facility in which she had worked was closing. She claimed that Harrison waited until the night before the conference to alert her to it and specifically told her not to attend. She talked to Harrison several times during the settlement negotiations on September 12. But she insisted that she never agreed to the negotiated terms because, as she expressed to Harrison in one of their cell phone conversations that day, getting her job back was a condition to settling the case. Although Makins swore in an affidavit, filed before the hearing, that Harrison alerted her during the negotiations that he was discussing the $99,000 figure, she testified that she did not recall such a conversation.

Harrison disputed much of Makins’ testimony. He said they had extensively discussed the possibility of settlement the day before the conference and that he thought it made sense strategically for his client to remain at home so that “the Judge couldn’t put pressure on her to settle.” Harrison also testified that he discouraged Makins .from insisting on getting her job back. According to Harrison, Makins gave him a number where he could reach her on September 12, and told him to do “what you think is right, I trust you.”

At the conference, each side presented its case separately to the magistrate. The attorneys and the magistrate then sat at a table and negotiations began. On several occasions, the magistrate sent one of the attorneys out of the room and talked to the other about what he saw as strengths and weaknesses in the case. By cell phone, Harrison called Makins when he was out of the room. He contends that she agreed to settle for $99,000. Harrison testified that when the District agreed to this figure, he called Makins immediately and “told her the 99 was done,” to which she replied “good.” Harrison also stated that Makins did not express any dissatisfaction with the settlement until several days later when she refused to sign the papers in Harrison’s office.

The District’s attorney generally confirmed Harrison’s account of the conference (although he did not know what Harrison and his client had discussed by cell phone, or even if they had discussion). In response to the District’s offer of approximately $80,000, Harrison said his client was still at $120,000, or thereabouts. The District’s attorney replied that he would not settle the ease for more than $100,000. Harrison left the room, cell phone in hand, and came back a few minutes later. He said $99,000 would be fine but his client wanted her records changed to show that she had resigned. The District reluctantly-agreed. Neither the attorney for the District nor the magistrate spoke to Makins to confirm her assent to the terms of the agreement.

The District Court, observing the “sharp conflict” in testimony between Makins and Harrison, declined to resolve it. Instead, the court assumed arguendo that Harrison did not have actual authority to settle the case. The court granted the District’s motion to enforce the settlement on the alternative ground that Harrison had apparent authority to bind Makins to the agreement. The court saw “no justification for the District of Columbia not to reasonably believe that Mr. Harrison had the full confidence and authority of his client.”

II.

There is some confusion as to both the degree of authority required of an attorney in settlement negotiations.² Indeed, a review of relevant case law and principles enunciated by the American Bar Association and the American Law Institute demonstrate widespread dissonance not only over the degree of authority, but also the appropriate definitions of authority. We hold that, while attorneys must have some inherent procedural and tactical authority on behalf of clients, for in-court settlement proceedings that attorneys for the parties are ordered to attend, the client must give actual authority to settle the case in the client’s absence.³

We deem the situation at hand sufficiently analogous to our decision in Bronson v. Borst⁴ and distinguishable from our holdings in other cases as discussed below. Actual authority, which may also be referred to as delegated or specific authority, focuses on the client/lawyer relationship. In Bronson, an attorney sued his former client for declaratory judgment to enforce a settlement agreement that the attorney had accepted and entered into on his client’s behalf. We held that “absent specific authority, an attorney cannot accept a settlement offer on behalf of a client.” Bronson, supra note 4, 404 A.2d at 963.⁵ We reached that holding through an analysis of “actions which counsel was neither duty bound nor authorized to perform.” Id. at 962. To be sure, Bronson differs from the case at hand on this point since Bronson did not involve a settlement conference and Harrison was duty bound, by order of the magistrate judge, to attend the settlement conference and participate in negotiations on Makins’ behalf. Moreover, this is an action by the other party to the settlement rather than the attorney or the client. Nonetheless, Bronson addresses the principle that a client’s approval is required “regardless of the merits of the ... case or the attractiveness of the settlement offer.” Id. at 962. Contrary to the District’s argument before this court, the Bronson holding is consonant with the decision in Ashley v. Atlas Mfg. Co., 7 F.R.D. 77 (D.D.C.1946), aff'd, 82 U.S.App.D.C. 399, 166 F.2d 209 (1947). In Ashley, the court found specific authority arising from an in-court proceeding based in part on the fact that, unlike here, the client’s attorney announced the settlement agreement in the client’s presence. The Ashley court recognized the general rule that an attorney shall not enter settlement without actual authority.⁶ Id.

We distinguish our holding here from the line of cases finding apparent authority based on contract theory.⁷ The Restatement (Seoond) of Agency § 8 (1958) defines apparent authority as “the power to affect the legal relations of another person by transactions with third persons, professedly as an agent for the other, arising from and in accordance with the other’s manifestations to such third persons.” Thus, unlike actual authority, apparent authority does not depend upon any manifestation from the principal to her agent, but rather from the principal to the third party. Restatement (Seoond) of AgeNCY § 27, cmt. a. This court has stated that apparent authority arises when a principal placed an agent “in a position which causes a third person to reasonably believe the principal had consented to the exercise of authority the agent purports to hold. This falls short of an overt, affirmative representation by a principal .... ” Feltman v. Sarbov, 366 A.2d 137, 139 (D.C.1976) (citing Drazin v. Jack Pry, Inc., 154 A.2d 553, 554 (D.C.1959)). In such circumstances, an agent’s representations need not expressly be authorized by his principal. The apparent authority of an agent arises when the principal places the agent in such a position as to mislead third persons into believing that the agent is clothed with the authority which in fact he does not possess. Id. at 140. Apparent authority depends upon “the third-party’s perception of the agent’s authority.” Sigal Construction Corp. v. Stanbury, 586 A.2d 1204, 1219 (D.C.1991) (citing Restatement (Seoond) of Agenoy § 27) (other citation omitted). The third party’s perception may be based upon “written or spoken words or any other conduct of the principal which, reasonably interpreted, causes the third person to believe that the principal consents to have the act done on [her] behalf by the person purporting to act for [her].” Restatement (Seoond) of Agency § 27.

The cases cited by the District in support of apparent authority are distinguishable on the facts. Although the courts in Ashley and Navajo Tribe found the attorneys had apparent authority to settle, the clients in those cases were present in the courtroom.⁸ There is an important difference between a settlement reached where the client is present, and therefore has an opportunity to be heard on the matter by all parties, and the case at hand. The settlement proceedings in Fennell; Hayes and Capital Dredge did not take place in court.⁹ We express no judgment here as to whether, for out-of-court settlements, apparent authority is sufficient to uphold the validity of a settlement. Sigal Con-stmction, supra, involved the question of whether an employee had apparent authority such that the employer was bound by his statements. Feltman, supra, similarly involved the apparent authority of a lawyer/employee to bind his client in a lease negotiation. Management Partnership, Inc. v. Crumlin, 423 A.2d 939 (D.C.1980), involved a determination of apparent authority of an employee with respect to a lease agreement. None of these cases addressed the special circumstances of a settlement conference and of the appropriate distinctions, if any, between manifestations of authority in employer-employee relationships and the conveyance of authority in the lawyer-client relationship (which, as noted, necessitates our consideration of ethical conduct and professional responsibility guidelines in addition to contract and agency principles).

The District argues, and the District Court appears to agree, that Makins authorized her attorney to attend the court-ordered settlement conference and to negotiate on her behalf. The District further argues, since Makins held out her attorney as the person with whom the District should deal at the settlement conference, Makins’ attorney possessed apparent authority to settle her claim. Because Harrison was ordered to attend the conference by the magistrate, however, we find such an “authorization” of limited value in evaluating a conveyance of authority. As the Circuit Court majority observed, a “client’s manifestations [of a conveyance of authority] to the third party must be with respect to settlement, not the general conduct of the litigation.” Makins, 349 U.S.App.D.C. at 310, 277 F.3d at 551 (citing Auvil v. Grafton Homes, Inc., 92 F.3d 226, 230 (4th Cir.1996)). Indeed, the majority notes that if it followed the rule espoused by the District and the apparent authority line of cases, “an attorney would nearly always have apparent authority to end the case despite the wishes of his client.” Id.10

The District also presents several policy arguments supporting enforcement of settlement agreements on apparent authority grounds, none of which we find compelling. First, it argues the settlement process would be undermined because the third party would never know if the principal’s attorney was actually empowered to reach a settlement, and that the third party would either have to require the principal’s verification of authority or risk subsequent rescission or denial of the agreement. This argument fails because if a principal forbade settlement then her attorney must disclose this ab initio. By extension, if the principal’s attorney in fact actively enters settlement negotiations, then the third party is assured that there are terms to which the principal would agree. Finally, requiring actual authority disposes of the risk of rescission or denial because the third party and presiding official would in fact receive confirmation, by telephone, from the principal that she agreed to the terms of the settlement. Such a requirement poses only a minimal burden on the settlement proceeding. We note that if the principal attends a settlement conference in person, the dangers arising from apparent authority are simply not present.

We are unwilling to extend the power of settlement by way of apparent authority to attorneys who attend settlement negotiations under order of the court when their client is not present to validate the agreement. Accordingly, our answer to the certified question is in the negative.

1 . Makins v. District of Columbia, 349 U.S.App.D.C. 303, 312, 277 F.3d 544, 553 (2002). Earlier in its decision, the Circuit Court phrases the question somewhat differently: "may an attorney negotiating in the client’s absence bind the client to a settlement agreement if the attorney has led opposing counsel to believe he had actual authority from the client to settle the case?" Id. at 308, 277 F.3d at 549. Our answer is the same either way.

2 . See generally Jeffrey A. Pamess & Austin W. Bartlett, Unsettling Questions Regarding Lawyer Civil Claim Settlement Authority, 78 Or. L. Rev. 1061 (1999); Grace M. Giesel, Enforcement of Settlement Contracts: The Problem of the Attorney Agent, 12 Geo. J. Legal Ethics 543 (1999).

3 . Thus, we find settlement proceedings are akin to certain criminal proceedings, such as a guilty plea proceeding (Super.Ct.Crim. R. 11) and waiver of jury trials (Super.Ct.Crim. R. 23).

4 . Bronson v. Borst, 404 A.2d 960 (D.C.1979).

5 . With due respect to the Circuit Court’s dissenting opinion, we hold that, while there is no meaningful difference between the “specific authority” referred to in Bronson and the term “actual authority” as we use it here, "apparent authority” can and should be understood as wholly different in meaning from specific or actual authority.

6 .This holding is echoed in the District of Columbia Code of Professional Responsibility Ethical Consideration 7-7 (EC 7-7), which provides that it is the exclusive authority of “the client to decide whether he will accept a settlement offer ...." Similarly, District of Columbia Rule of Professional Conduct 1.2(a) (2001) provides that a "lawyer shall abide by a client’s decision whether to accept an offer of settlement of a matter.”

7 . As a general rule, "it is well established that settlement agreements are entitled to enforcement under general principles of contract law ..." Goozh v. Capitol Souvenir Co., 462 A.2d 1140, 1142 (D.C.1983) (quoting Brown v. Brown, 343 A.2d 59, 61 (D.C.1975)).

8 . Ashley, supra; Navajo Tribe of Indians v. Hanosh Chevrolet-Buick, Inc., 106 N.M. 705, 749 P.2d 90 (1988).

9 . Fennell v. TLB Kent Co., 865 F.2d 498 (2d Cir.1989); Hayes v. National Serv. Indus., 196 F.3d 1252 (11th Cir.1999); Capital Dredge & Dock Corp. v. Detroit, 800 F.2d 525 (6th Cir.1986).

10 . In such a scenario, the client’s only remedy against a settlement reached without her consent would be to sue her attorney. By clearly delineating the authority required, our holding in this case obviates that highly lamentable outcome as well.