865 F.2d 498 (2nd Cir. 1989), 529, Fennell v. TLB Kent Co.

Docket Nº:529, Docket 87-7617.
Citation:865 F.2d 498
Party Name:12 Fed.R.Serv.3d 1387 Louis FENNELL, Plaintiff-Appellant, v. TLB KENT COMPANY and Joseph Pietryka, Defendants-Appellees.
Case Date:January 10, 1989
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

Page 498

865 F.2d 498 (2nd Cir. 1989)

12 Fed.R.Serv.3d 1387

Louis FENNELL, Plaintiff-Appellant,


TLB KENT COMPANY and Joseph Pietryka, Defendants-Appellees.

No. 529, Docket 87-7617.

United States Court of Appeals, Second Circuit

January 10, 1989

Submitted Jan. 26, 1988.

Page 499

Darrin Berger, Huntington, N.Y., for plaintiff-appellant.

Eugene F. Frink, Pawling, N.Y., for defendants-appellees.

Before FEINBERG, MESKILL and MAHONEY, Circuit Judges.

MAHONEY, Circuit Judge:

This is an appeal from a final judgment of the United States District Court for the Southern District of New York, Louis L. Stanton, Judge, entered on June 16, 1987 which dismissed plaintiff's action and approved a $10,000 settlement agreement. 1 The attorneys for the parties negotiated a settlement and reported it to the court by telephone. Based on this conference call, the district court entered an order on January 20, 1987 which dismissed the action with prejudice, but provided that "within sixty days of the date of this order any party may apply by letter for restoration of the action to the calendar of the undersigned." Plaintiff's counsel requested that the action be restored to the calendar on March 20, 1987. After a hearing on June 16, 1987, the district court dismissed the action and approved the settlement, finding that plaintiff's attorney had had apparent authority to settle the case and plaintiff was accordingly bound by the settlement agreement.

We reverse and remand.

Page 500


Plaintiff-appellant Louis Fennell commenced this action in the United States District Court for the Southern District of New York on January 7, 1985 against his employer, 2 alleging wrongful discharge because of his race and age in violation of 42 U.S.C. Sec. 1981 (1982). Fennell was represented by C. Vernon Mason and several of his associates, including Fred K. Brewington.

The case was on Judge Stanton's ready calendar on January 6, 1987. On January 16, 1987, however, Brewington and Eugene Frink, defendants' attorney, agreed to settle the case for $10,000 during a telephone conversation. The settlement was reported to the court by both attorneys in a telephone conference call on January 20, 1987. The district court issued an order of dismissal on the same day which provided that either party could apply to the court by letter to restore the case to the court's calendar within sixty days of the order. The settlement was conditioned upon Fennell signing a general release and a stipulation of discontinuance being filed with the court, which never occurred.

Fennell expressed his dissatisfaction with the settlement in a letter to the district court dated March 28, 1987. Fennell there contended that he had told Brewington on January 16, 1987 that he would not approve a $10,000 settlement, but he was willing to settle the case out of court "with the intentions of getting it out of the way and behind me." He also claimed that he had told Mason on January 20, 1987 that $10,000 was not a satisfactory settlement, and that he had tried several times in early February, 1987 to contact Mason's office by telephone about the case, but elicited no response. Fennell further stated that he had gone to Mason's office on February 20, 1987, at which time Mason informed him that the case has been settled for $10,000, whereupon Fennell reiterated his dissatisfaction with that settlement.

On February 27, 1987, Fennell wrote Mason expressing his dissatisfaction with the settlement agreement and indicating that he had "no further use of [Mason's] services." A copy of this letter was sent to the district court and received there on March 3, 1987. On March 20, 1987, Brewington wrote to the district court requesting that the "matter be restored to the calendar as the settlement which was authorized and accepted by our client is no longer acceptable to him," and that Mason and his associates be released by the court as counsel to Fennell.

Following a status conference on June 5, 1987, the district court held a hearing on June 16, 1987 to determine whether Fennell's case should be restored to the calendar. At the conclusion of the hearing, the district court dismissed the action and approved the settlement. This ruling was based upon a finding that Fennell's attorney had been clothed with "apparent authority" when he settled the case, and the court's expressed view that "[t]o allow a client to reject a settlement which has been agreed upon by his attorney with apparent authority is to open the door to a mild form of chaos."

On appeal, Fennell asserts that it was an abuse of discretion for the district court not to have vacated its order of dismissal pursuant to Fed.R.Civ.P. 60(b)(1). Appellees contend that since Fennell's attorney was clothed with apparent authority to settle the case, Fennell is bound by that settlement.


  1. The Applicable Law.

    In discussing Rule 60(b), Wright and Miller state that "[t]he grounds and the procedure for setting aside a federal judgment

    Page 501

    are entirely a matter of federal law, on which state law may be disregarded." 11 C. Wright & A. Miller, Federal Practice and Procedure Sec. 2853, at 147-48 (1973) (citations omitted); see Vassos v. Societa Trans-Oceanica Canopus, S.A., 272 F.2d 182, 183 (2d Cir.1959) (any attempt to reopen a federal district court judgment completely controlled by Fed.R.Civ.P. 60), cert. denied, 362 U.S. 935, 80 S.Ct. 756, 4 L.Ed.2d 747 (1960).

    On the other hand, an advisory note to Rule 60(b) states that "Rule 60(b) does not assume to define substantive law as to the grounds for vacating judgments, but merely prescribes the practice in proceedings to obtain relief." Fed.R.Civ.P. 60(b) advisory committee's note to 1946 amendment. 3 Further, it is not at all clear that the ruling on appeal here is the determination of a Rule 60(b) motion. That rule only applies to the reconsideration of a "final judgment, order or proceeding." Id. (emphasis added). Here, by contrast, the district court's original order provided "that within sixty days of the date of this order any party may apply by letter for restoration of the action to the calendar of the undersigned," and therefore appears provisional rather than final by its very terms. Cf. Audiovisual Publishers, Inc. v. Cenco, Inc., 580 F.2d 50, 51 (2d Cir.1978) (motion for reconsideration of prior order denying vacation of stipulation of settlement deemed a motion to vacate judgment and grant a new trial pursuant to Rule 60(b)).

    Be all that as it may, two circuits have ruled that where an action is based upon federal law, the authority of an attorney to settle that action is a federal question. See Edwards v. Born, Inc., 792 F.2d 387, 389 (3d Cir.1986) (dictum); Mid-South Towing Co. v. Har-Win, Inc., 733 F.2d 386, 386 (5th Cir.1984). There is also analogous support for this view in the Second Circuit. See Brown v. General Motors Corp., 722 F.2d 1009, 1012 n. 1 (2d Cir.1983) (Oakes, J., concurring) (scope of release to be determined by federal law in federal civil rights action); cf. International Telemeter Corp. v. Teleprompter Corp., 592 F.2d 49, 50 (2d Cir.1979) (in suit for patent infringement, New York law governs settlement agreement negotiated, consummated and to be performed in New York, and expressly made subject to New York law). In the absence of weighty countervailing considerations, we are inclined to follow our sister circuits in deeming federal law applicable to the question before us. See Keasler v. United States, 766 F.2d 1227, 1233 (8th Cir.1985). In any event, to the extent that deference might be accorded to New York precedents concerning what is at root a fairly general question of agency law, see Greater Kansas City Laborers Pension Fund v. Paramount Indus., 829 F.2d 644, 646 (8th Cir.1987) (rules governing attorney's authority to settle case "the same as those which govern other principal-agent relationships"), the outcome would in our view be the same, as will hereinafter appear.

  2. The Merits.

    We turn now to the district court's determination that Fennell's attorney was clothed with apparent authority to settle the case, resulting in denial of the motion to vacate the prior order of dismissal.

    We begin with the undisputed proposition that the decision to settle is the client's to make, not the attorney's. United States v. Beebe, 180 U.S. 343, 352, 21 S.Ct. 371, 374, 45 L.Ed. 563 (1901) ("the utter want of power of an attorney, by virtue of his general retainer only, to compromise his client's claim, cannot, we think, be successfully disputed."); Barthelmas v. Fidelity-Phenix Fire Ins. Co., 103 F.2d 329, 331 (2d Cir.1939) (same); see Thomsen v. Terrace Navigation Corp., 490 F.2d 88, 89 (2d Cir.1974) (only "exigent circumstances" might empower an attorney to settle case without...

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