Edwards v. Born, Inc.

• Decision Date: 13 May 1985
• Docket Number: Civ. No. 1982/283.
• Parties: Keithley EDWARDS and Edith Edwards, Plaintiffs, v. BORN, INC., et al, Defendants.
• Court: U.S. District Court — Virgin Islands

608 F. Supp. 580

Keithley EDWARDS and Edith Edwards, Plaintiffs, v. BORN, INC., et al, Defendants.

Civ. No. 1982/283.

District Court, Virgin Islands, D. St. Croix.

May 13, 1985.

Mark L. Milligan, Darryl Donohue, Christiansted, St. Croix, V.I., for plaintiffs.

R. Eric Moore, Christiansted, St. Croix, V.I., for defendant Born, Inc.

Britain H. Bryant, Christiansted, St. Croix, V.I., for defendant St. Croix Petrochemical, Inc.

James L. Hymes, III, St. Thomas, V.I., for defendant Fluor Engineers & Constructors, Inc.

MEMORANDUM OPINION

DAVID V. O'BRIEN, District Judge.

On behalf of their respective clients, the attorneys in this personal injury case reached a settlement during a pre-trial conference on December 12, 1984. The plaintiffs' attorney accepted an offer made jointly by the defendants' counsel of $150,000 in full settlement of all plaintiffs' claims. Each attorney stated that he had the authority to act on behalf of his client.

Shortly thereafter, plaintiffs repudiated the settlement and asserted that their attorney had no authority to enter into it. All three defendants moved to enforce the settlement. The plaintiffs' attorney moved to withdraw due to irreconcilable differences; the motion was granted. On February 27, 1985, the motion to enforce the settlement was heard. Plaintiffs' new legal representative, listed above, attended and evidence was taken on the issue of the express authority or apparent authority of plaintiffs' original attorney to settle the case.

The issue now before the Court is whether the original attorney possessed the express authority to settle his clients' case for $150,000. If he did not, we must decide whether the attorney had apparent authority to commit his clients to such a settlement and if so, whether it is sufficient to bind the plaintiffs.

I. FACTS

Keithley Edwards was employed at Hess Virgin Islands Corporation on September 24, 1982 when he was injured while working on a boiler supplied by Born, Inc., installed by Fluor Engineers & Constructors, Inc., and owned by St. Croix Petrochemical Corporation. He filed this action against all three companies, and later his wife was added as party plaintiff with a loss of consortium claim. Both were represented by the same attorney.

Full discovery took place among the parties. Mr. Edwards' essential claim of injuries concerned his back, a partial loss of the sense of taste and complete loss of the sense of smell. Since he did not lose a great deal of time from work, the issue of lost wages past, or future earning capacity, was not a major consideration in the monetary calculation of his claim.

A trial date was set for the period commencing January 8, 1985, and several weeks prior to that time, the Court scheduled an informal pre-trial conference among the attorneys to inquire into the possibility of settlement. This was in addition to the formal pre-trial conference conducted by the magistrate.

The Court followed its standard procedure in the settlement conference. The attorneys met together with the Court to discuss the claims and defenses. The plaintiffs themselves were not present. The Court met separately with plaintiffs' counsel, and then with defendants' counsel. The purpose was to seek a narrowing of the differences to a point where a settlement offer could be made which would be mutually acceptable.

In the instant situation, the narrowing of positions resulted in an offer by defendants' counsel to plaintiffs' counsel within the range of what the latter had informed the Court was necessary to settle all of plaintiffs' claims. After the offer was made and accepted in chambers, a court reporter was called in and the offer and acceptance was repeated. The transcript was made a part of this record.

One of the defendants' counsel, speaking for all three of them, when asked by the Court whether he had an offer of settlement, responded:

"The offer is $150,000 in full settlement of all claims."

To which the Court inquired:

"And that is all claims of all plaintiffs? Plaintiff will pay his own compensation claim out of the proceeds; is that correct?

The attorney responded:

"That is correct."

All defendants' counsel placed on the record their authority to make this combined offer. The Court then turned to plaintiffs' counsel who stated:

"I accept that offer. I am authorized to accept it on behalf of the plaintiffs."

Defense counsel then ordered settlement drafts totaling $150,000 which were delivered to plaintiffs' attorney. At that point, the plaintiffs rejected the checks, claiming that they had not given their attorney authority to settle their claims for $150,000. The attorney moved to withdraw and plaintiffs retained their present counsel.

At the hearing, plaintiffs' original attorney testified under oath that plaintiffs told him they would rely on his good judgment and experience as to the amount of the settlement. No figures were discussed. The plaintiffs filed affidavits indicating that at no time, orally or in writing, did they authorize the attorney to settle their claims and that the question of a settlement demand was never discussed. Both plaintiffs indicated that they had no idea a settlement conference was to take place. Mr. Edwards asserted that he was in Antigua at the time it was scheduled. The plaintiffs further swore that the first they learned of any settlement was after the conference when they were notified by the attorney.

II. DISCUSSION

A. Public Policy Behind Settlements

The Third Circuit Court of Appeals has consistently held that "an agreement to settle a law suit is binding upon the parties, whether or not made in the presence of the court, and even in the absence of a writing." Green v. John H. Lewis & Co., 436 F.2d 389, 390 (3d Cir.1970). Accord Good v. Pa.R.R.Co., 384 F.2d 989 (3d Cir.1967); Kelly v. Greer, 365 F.2d 669 (3d Cir.1966); Main Line Theatres, Inc. v. Paramount Film Distribution Corp., 298 F.2d 801 (3d Cir.1962). Other courts have ruled that voluntary settlements are highly favored and, when reached validly, cannot be repudiated. See, e.g. Aro Corp. v. Allied Witan Co., 531 F.2d 1368 (6th Cir.1976); D.H. Overmyer Co. v. Loflin, 440 F.2d 1213 (5th Cir.1971); Bergstrom v. Sears, Roebuck & Co., 532 F.Supp. 923 (D.Minn.1982).

Underlying the judicial preference to enforce settlements are public policy considerations. Most commonly cited is the avoidance of costly and time-consuming litigation. But, in the case of settlements in which the court is actively involved, such as the one at issue, the integrity of the court and the management of its calendar are important factors.

B. Express Authority to Settle

It is a well accepted principle that an attorney has no power to settle his client's case nor to consent to a dismissal upon the merits without express authority. United States v. Beebe, 180 U.S. 343, 21 S.Ct. 371, 45 L.Ed. 563 (1901); Bradford Exchange v. The Treins Exchange, 600 F.2d 99 (7th Cir.1979); Associates Discount Co. v. Goldman, 524 F.2d 1051 (3d Cir.1975); Thomas v. Colorado Trust Deed Funds, Inc., 366 F.2d 136 (10th Cir.1966); In re Gsand, 153 F.2d 1001 (3d Cir.1946); Griego v. Kokkeler, 543 P.2d 729 (Colo.Ct. App.1975). Express authority is the authority that the principal, the client, expressly or explicitly gives to the agent, the attorney. United States v. Martinez, 613 F.2d 473, 481 (3d Cir.1980); Downing v. Fortuna Bay Estates, Inc., 17 V.I. 20,26 (D.V.I.1980); see also Restatement (Second) of Agency § 7 comment c (1958).

It is clear from the plaintiffs' affidavits as well as the testimony of their original attorney that by no acts of theirs was express authority conferred on the attorney to settle plaintiffs' claims. When an attorney is told by his or her client that the client relies on the attorney's judgment and experience in these matters, the attorney is not relieved from further consultation with the client when settlement negotiations reach specific dollar amounts.

According to the ABA Code of Professional Responsibility a lawyer is entitled to make decisions of his or her own only in those areas "not affecting the merits of the cause or substantially prejudicing the rights of a client." It is for the client to decide whether or not to accept a settlement offer. Model Code of Professional Responsibility EC 7-7 (1983).

C. Apparent Authority

Notwithstanding the lack of express settlement authority, we must discern whether plaintiffs' attorney had apparent authority to settle the action. In order to determine whether the settlement should be set aside, we must also decide whether apparent authority is sufficient to bind the client.

Under the law of agency, apparent authority is defined as "the power to affect the legal relations of another person by transactions with third persons, professedly as agent for the other, arising from and in accordance with the other's manifestations to such third persons." Restatement (Second) of Agency § 8 (1958) (applicable to the Virgin Islands by virtue of 1 V.I.C. § 4 (1967)).

Certain courts hold that apparent authority is sufficient to bind a client to a settlement entered into by his or her attorney. In Glazer v. J.C. Bradford & Co., 616 F.2d 167 (5th Cir.1980), the court found that "a client is bound by his attorney's agreement to settle a lawsuit, even though the attorney may not have had express authority to settle, if the opposing party was unaware of any limitation on the attorney's apparent authority." Id. at 168 (Georgia law).

Similarly, in International Telemeter Corp. v. Teleprompter Corp., 592 F.2d 49, 55 (2d Cir.1979), the court held that as long as there was no reason to believe the attorney was exceeding the scope of his apparent authority in settlement negotiations, the opposing party was entitled to rely on it.

The reasoning behind these rulings was stated in Bergstrom v. Sears, Roebuck & Co., 532 F.Supp. 923 (D.Minn.1982). The court found that "where one of two innocent parties...