733 F.2d 386 (5th Cir. 1984), 82-3680, Mid-South Towing Co. v. Har-Win, Inc.

Docket Nº:82-3680.
Citation:733 F.2d 386
Party Name:MID-SOUTH TOWING COMPANY, Plaintiff-Appellee, v. HAR-WIN, INC., et al., Defendants-Appellees, v. OKC CORPORATION LIQUIDATING TRUST, Defendant-Appellant.
Case Date:June 04, 1984
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 386

733 F.2d 386 (5th Cir. 1984)

MID-SOUTH TOWING COMPANY, Plaintiff-Appellee,

v.

HAR-WIN, INC., et al., Defendants-Appellees,

v.

OKC CORPORATION LIQUIDATING TRUST, Defendant-Appellant.

No. 82-3680.

United States Court of Appeals, Fifth Circuit

June 4, 1984

Page 387

Charles L. Stern, Jr., Phillip A. Wittmann, New Orleans, La., for defendant-appellant.

Robert I. Siegel, Donald A. Hoffman, James R. Holmes, New Orleans, La., for Har-Win, Inc.

J. Kelly Duncan, New Orleans, La., for Mid-South Tow.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before BROWN, THORNBERRY and TATE, Circuit Judges.

JOHN R. BROWN, Circuit Judge:

This is an appeal from the District Court's enforcement by summary judgment of an agreement to settle a case pending before the Court. The defendant OKC contends that the agreement was invalid for two reasons: (1) OKC's attorney, although believing he had authority to settle the case, actually did not have authority, and (2) even if counsel had authority, the settlement was based on a mistake by OKC regarding the existence of certain evidence. As to the second issue, we hold that if there was a mistake, it was at most a unilateral mistake of fact, which standing alone does not vitiate the settlement. However, because there remained an issue of material fact regarding whether OKC's attorney actually had authority to settle, summary disposition was inappropriate, and we remand for an evidentiary hearing on that issue.

Facts

In June, 1979, Mid-South Towing Corporation (Mid-South) chartered ten of its barges to Har-Win, Inc. (Har-Win), who in turn subchartered them to OKC. 1 Surveys of the barges were performed by various surveyors both at the beginning and end of the charter. When the barges were returned by Har-Win to Mid-South at the end of the charter period, Mid-South claimed that they had been damaged since delivery to Har-Win and that under the terms of the charter Har-Win was responsible for the expenses of repairs. Mid-South had the repairs made at a cost of about $230,000.

The Gathering Storm

Mid-South filed a complaint against Har-Win in the Eastern District of Louisiana,

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seeking to recover the repair costs, lost charter hire, and survey costs, interest and costs. Har-Win denied liability and filed an admiralty third-party claim under F.R.Civ.P. 14(c) against OKC, who denied any liability to either Mid-South or Har-Win. American Employers' Insurance Company (American Employers'), from whom OKC and Har-Win had obtained a hull policy covering the barges, agreed to defend Har-Win and OKC to the extent of the hull policy's coverage. Har-Win later dismissed the third-party claim against OKC, without prejudice to Mid-South's claim against OKC.

In late August, 1982, Jerry Sawyer, a Dallas, Texas attorney who had been retained by OKC one month earlier to oversee some of its ongoing litigation, learned that potential conflicts existed between OKC and American Employers' with regard to the extent of insurance coverage and the scope of the hull policy deductible. Following a review of OKC's file in the matter, Sawyer forwarded a copy of that file to the New Orleans law firm of Stone, Pigman, Walther, Wittmann & Hutchinson and requested that the firm take the necessary steps to protect OKC's interests. OKC still looked to American Employers' to defend against the merits of the main claim by Mid-South. OKC's New Orleans counsel's duties were limited to monitoring the litigation and representing OKC's interest in any disputes that might arise with American Employers.

Their Finest Hour

Beginning on August 26, 1983, Mid-South, American Employers' and New Orleans counsel for OKC engaged in negotiations for a full and final settlement. Much of this negotiation was between OKC and American Employers' concerning their respective contributions to a settlement with Mid-South. During these negotiations, Sawyer believed that he had authority to settle on behalf of OKC, and Sawyer was informed of and formally approved all actions by the New Orleans counsel whom he had employed. Moreover, Mid-South, American Employers', and OKC's New Orleans counsel were led to believe that Sawyer had authority to settle for OKC. 2

On September 20, 1982, American Employers' and OKC's New Orleans counsel offered Mid-South $150,000, with $100,000 to be funded by OKC 3 and $50,000 by American Employers'. Mid-South accepted this offer by phone the next day. The District Court was immediately notified and in response cancelled the trial scheduled for October 4, 1982. For one pristine moment everyone was happy.

An Attorney's Nightmare

An ominous rumble descended from the lofty heights of the OKC corporate hierarchy. When Sawyer presented the settlement to OKC management, he was informed that he was mistaken in believing that he had authority to make a settlement of this magnitude. Such settlement had to be approved, he was told, by Charles Redwine, Trustee, and his advisors. Sawyer passed this message on to his dismayed local counsel in New Orleans. On September 28, 1982, the District Court was informed of this unsettling news. The storm had...

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