SCHAUFFERT v. LLOYD'S
| Decision Date | 28 March 2011 |
| Docket Number | No. 3-09-0510,3-09-0510 |
| Parties | ALEX SCHAUFFERT, Plaintiff/Counter-Defendant v. CERTAIN UNDERWRITERS AT LLOYD'S, LONDON; GAB ROBINS NORTH AMERICA, INC., Defendants and BRAUN CONSTRUCTION SERVICES, INC., Defendant/Counter-Plaintiff1 |
| Court | U.S. District Court — Middle District of Tennessee |
OPINION TEXT STARTS HERE
By order entered September 3, 2010 (Docket Entry No. 82), the motion filed by defendant/counter-plaintiffBraun Construction Services, Inc. ("Braun") and defendant GAB Robins North America, Inc. ("GAB") to require the plaintiff to show cause why settlement agreement reached among the plaintiff and these defendants should not be enforced (Docket Entry No. 68) was referred to the Magistrate Judge with instructions to hold an evidentiary hearing and provide a Report and Recommendation. Pursuant to the order entered September 3, 2010 (Docket Entry No. 83), an evidentiary hearing was held on September 22, 2010, at which time the plaintiff and current counsel for the plaintiff appeared, along with counsel for Braun and GAB. Prior to the hearing, the plaintiff filed a response to the motion and an affidavit (Docket Entry Nos. 79-80), and subsequent to the hearing, the plaintiff filed another affidavit and supplemental response (Docket Entry Nos. 90 and 92).
Although the motion seeking to require the plaintiff to show cause why the settlement agreement should not be enforced was effectively granted by the order scheduling the evidentiary hearing, the issue in dispute remains whether the parties entered into an enforceable settlement agreement, which shall be addressed herein.
The plaintiff originally brought this action in state court and it was removed to this Court by the defendants. The plaintiff seeks damages for the cost of repair and rebuilding of a roof on an apartment building owned by the plaintiff that was damaged by water intrusion caused by rain and ice. The plaintiff sued its insurance carrier, defendant Certain Underwriters at Lloyd's London ("Lloyd's"), GAB, the local adjustor, and Braun, which had done emergency repairs to the building. Braun filed a counterclaim against the plaintiff for enforcement of its materialman's lien and damages for breach of contract and unjust enrichment (Docket Entry No. 11). Braun also filed crossclaims against Lloyd's and GAB for negligent misrepresentation, breach of implied contract, and promissory estoppel. Id. By order entered December 23, 2009 (Docket Entry No. 48), the motions of defendants Lloyd's and Braun to dismiss Braun's crossclaims were granted on Braun's claims for breach of contract and promissory estoppel, but denied on Braun's claims for negligent misrepresentation. Upon Braun's motion, the remaining crossclaims filed by Braun against Lloyd's and GAB were dismissed by order entered May 10, 2010 (Docket Entry No. 58).
According to counsel for Braun and GAB, on July 27, 2010, the plaintiff, plaintiff's former counsel, Michael Mills, and counsel for Braun and GAB participated in settlement discussions. Docket Entry Nos. 70-72. Counsel for Braun and GAB attest in their affidavits that terms of a settlement were discussed at that meeting and thereafter they requested and received approval of the settlement agreement from their clients and communicated with plaintiffs former counsel that Braun and GAB had agreed. Id. Braun and GAB contend that a settlement agreement was reached when counsel for the plaintiff called counsel for GAB and confirmed the settlement by letter faxed to counsel for GAB on August 2, 2010, and corresponded with counsel for Braun on August 2, 2010, and August 3, 2010, confirming the settlement. Specifically, in pertinent part, plaintiff's counsel wrote to counsel for Braun and GAB on August 2, 2010, as follows:
This will confirm the settlement of the claims among my client, GAB, and Braun Construction. Generally, GAB will pay fifty thousand dollars (,000.00) in full and final settlement of all claims by Schauffert against GAB. Braun, through their carrier, represented by John McReynolds, will pay twenty-five thousand dollars (,000.00) in settlement of Schauffert's claims against Braun. In addition, Schauffert and Braun agree to the "sliding scale" recovery discussed last week, on Braun's claim against Schauffert, based on the amount of [sic] Schauffert is able to make against Lloyd's. I will forward payment information to you under separate communication and will, of course, have Mr. Schauffert execute whatever Releases or Agreements are necessary to consummate this arrangement.
Defendants' Exhibit 1. That letter was sent to John Ray Clemmons, representing defendant Braun on the plaintiff's complaint, by facsimile, to John A. McReynolds, Jr., representing Braun on its counterclaim against the plaintiff, by email, William E. Godbold, III, representing GAB, by facsimile, and the plaintiff by facsimile.
On August 3, 2010, Mr. Clemmons wrote to Mr. Mills, Mr. McReynolds and Mr. Godbold, attaching the sliding scale language to which Mr. Mills referred in his August 2, 2010, letter that was presented at the meeting on July 27, 2010. Defendants' Exhibit 2. However, on August 12, 2010, counsel for the plaintiff filed a motion to withdraw (Docket Entry No. 67), and wrote to counsel for Braun and GAB by letter dated August 12, 2010, as follows:
I am left in a position where I am not clear on Mr. Schauffert's position as to the settlement with your clients. The last position I got from him was that he was not in agreement about being in any contract to settle with you. My efforts to clarify that have been completely unsuccessful. He picked up his file, and efforts to communicate by several means have also been totally unsuccessful. I have no choice but to ask the Court to allow me to withdraw.
The motion of plaintiffs counsel to withdraw was granted by order entered August 17, 2010 (Docket Entry No. 73), and new counsel entered an appearance on behalf of the plaintiff on August 19, 2010 (Docket Entry No. 76).
Prior to the September 22, 2010, evidentiary hearing, the plaintiff filed an affidavit, outlining his verbal and email communications with his former counsel in which he represented that he had relayed to his counsel that he did not intend to be bound by any settlement until he received a settlement agreement in writing and had agreed to all "important and material terms" and that his counsel did not otherwise have authority to bind him to a settlement. Docket Entry No. 79, at 5, § 14. In his affidavit, the plaintiff attested that he had "no idea on what terms these proposed settlements are supposedly based upon other than some gross numbers . . . ." to which the plaintiff did not agree. Id., at § 15.
Therefore, in his response (Docket Entry No. 80) to the defendants' motion, the plaintiff argues that his former counsel did not have actual authority to enter into a settlement, that he did not have apparent authority because there were "numerous material terms" not included in the August 2, 2010, letter, including "issues of confidentiality, penalties for breach of confidentiality, availability of witnesses under the defendant's control, ongoing cooperation of defendants [and] disclosure of other agreements between the parties," and that the lack of such material terms renders any settlement agreement unenforceable since agreements involving certain sums of money and affecting real property, i.e., Braun's materialman's lien,, must be in writing in accord with the Tennessee Statute of Frauds. Id. at 4.
In reply (Docket Entry No. 84), defendants Braun and GAB contend that, even if the plaintiffs former attorney did not have actual authority, he had apparent authority, and that they may rely upon the apparent authority of the plaintiff's attorney, as his agent, unless they had reason to believe that he had no such authority.
At the evidentiary hearing, counsel for Braun chronicled the relevant recent history of settlement negotiations, beginning when counsel for Braun proposed a sliding scale so that Braun would receive a portion of any recovery that the plaintiff received from defendant Lloyd's, depending on the amount that the plaintiff recovered from Lloyd's, for Braun's counterclaim against the plaintiff. Counsel for Braun represented that the agreement was reduced to writing and discussed at the office of Braun's counsel in the plaintiff's presence and a copy of the proposal was provided to plaintiff's attorney. Specifically, the proposal was for Braun to pay $25,000.00 and GAB to pay $50,000, and for the plaintiff to pay certain amounts to Braun depending upon the recovery received by the plaintiff from Lloyd's.
After the evidentiary hearing the plaintiff filed an affidavit, detailing the lack of "numerous important and material" aspects of the settlement agreement (Docket Entry No. 90), and the plaintiff filed a supplemental response (Docket Entry No. 92). Neither Braun nor GAB made any filing after the hearing.
Defendants called Mr. Mills to testify and through him four exhibits were introduced on behalf of the defendants and two exhibits were introduced on behalf of the plaintiff. No other witnesses testified on behalf of the defendants. The plaintiff did not testify nor did the plaintiff call any witnesses to testify on his behalf.
Mr. Mills testified that he had authority from the plaintiff to accept the offers of settlement based on his verbal conversation with the plaintiff on the telephone. Docket Entry No. 116, at 2526. As a result, he wrote a letter dated August 2, 2010, to defendants' counsel, confirming the settlement of the claims among the plaintiff, GAB, and Braun, which he copied to the plaintiff. Defendants' Exhibit 1.
Mr. Mills attested to the accuracy of the affidavits filed by counsel for Braun and GAB (Docket Entry Nos. 70, 71, and 72), except that in his...
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