Ackerman v. Sobol Family Partnership

Connecticut Supreme Court · Corporations

CorporationsAgencySettlement agreementsAttorney authorityJury trialapparent authorityattorney-clientsettlement enforcement

Facts

The plaintiffs' lead attorney, Glenn Coe, represented all plaintiffs in mediation and later in extended settlement negotiations with the Sobol defendants and Bank of America. Coe previously had actual authority to reject a defense proposal and to send a June 16 settlement offer on behalf of all plaintiffs, and during late-June negotiations he repeatedly told defense counsel that he was authorized to make a global settlement offer that would resolve the litigation in all respects. The defendants accepted the Sobol portion on June 30 and the Bank of America portion on July 1, while several plaintiffs, including Rena Ackerman, were present with Coe and did not notify anyone that his authority had been limited, withdrawn, or terminated. The trial court found Rena Ackerman's contrary testimony not credible and found the settlement terms clear and unambiguous.

Issue

Whether the trial court clearly erred in finding that the plaintiffs' attorney had apparent authority to make and conclude a global settlement binding the plaintiffs. Whether the plaintiffs had a constitutional right to a jury trial on factual disputes raised by the defendants' motions to enforce the settlement agreement.

Rule

An attorney may bind a client to a settlement if the attorney has apparent authority. Under Tomlinson, apparent authority exists when: (1) the principal, by conduct, holds the agent out as possessing sufficient authority to embrace the act in question or knowingly permits the agent to act as having such authority; and (2) the party dealing with the agent, acting in good faith, reasonably believes under all the circumstances that the agent has authority. Mere retention of an attorney is insufficient, but a course of dealing, the client's observable conduct, silence where a reasonable person would speak, and the absence of notice terminating authority can create apparent authority. A motion to enforce a settlement agreement seeks specific performance of an accord and is essentially equitable, so there is no constitutional right to a jury trial on that enforcement proceeding.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In a derivative suit involving Cedar Harbor Manufacturing, Inc. in Hartford, Maya Ortiz attended a court-ordered mediation with the corporation's outside counsel, Daniel Price, and two board members. After mediation failed, Price rejected a defense proposal and, with the board's knowledge, sent a detailed settlement offer that would have resolved all claims. Over the next week, while Ortiz and one board member were present at depositions, Price continued negotiations and repeatedly told opposing counsel he was fully authorized; no one from the corporation said otherwise before the defendants accepted his oral proposal.

If Cedar Harbor later refuses to perform, is a court most likely to enforce the settlement against the corporation?

Explanation. The settlement is likely enforceable. Under the majority's rule, an attorney may bind a client to a settlement through apparent authority when the principal's conduct holds the attorney out as authorized or knowingly permits him to act that way, and the opposing party reasonably and in good faith relies on that appearance. Mere retention is insufficient, but an extended course of dealing, prior authorized offers, the client's presence during negotiations, and failure to notify the other side of any limitation support apparent authority. A writing is not required if the terms are clear and unambiguous. (Derived from Ackerman v. Sobol Family Partnership (n.d.).)