It is not too difficult to Imagine the following scenario. There is
bitter litigation between 2 or more parties that has dragged on for
several years. Each side is represented by legal counsel, and each has
spent thousands of dollars in legal fees trying to posture the case in
their favor. A trial is approaching shortly. The parties are each
growing weary of the case; it has become too time consuming and
expensive, and the law of diminishing returns has set in for all
involved. This is why the overwhelming majority of civil disputes ultimately settle before trial. Lawyers know it, and so to the clients and judges.
In fact, our court system is designed to encourage and foster settlements
In the Superior Court of New Jersey, Law Division,, all contract and
business law disputes are generally subject to mandatory mediation with a
court-appointed mediator who agrees to volunteer up to 2 hours of
his/her time trying to foster settlement of the cases they are assigned
to. The mediation is usually scheduled at the initial stages of the
case, and the litigants' attendance is required. While the mediator has
no power to force the parties to settle, an early intervention with all
parties present face-to-face can sometimes lead to a settlement before
the parties engage in substantial pretrial discovery proceedings.
In Chancery Court matters, the judge will usually schedule a status conference at the early stage of the case at which time the
judge may ask the lawyers to explore various settlement options.
At some point during the case, assume the various parties reach a
settlement while appearing either at a court hearing, mediation hearing
or status conference. The lawyers take a few moments to jot down the
key or principal terms of the settlement, and ask to see the judge so
that they can place the settlement terms on the record in open court
thus creating a binding contract or agreement to settle the case. Each litigant assures their lawyer that they are on board with the settlement terms, but because a few of
them have other commitments they tell their lawyer to proceed without
them and to fill them in on the details afterwards. The judge then
comes out, the lawyers enter their respective appearances for their
clients, and usually one of the lawyers
lay out the specific terms of the settlement in the presence of a court reporter
or while the proceeding is being taped in the courtroom. The judge
asks each lawyer to confirm his or her understanding of the settlement,
to confirm that each client is on board, etc. The judge then thanks
everyone for working together to reach a consensual resolution, tells
the lawyers that they can memorialize the settlement terms in a
stipulation to be filed later on, and leaves the bench.
In the next
week or two a draft of a stipulation of settlement is prepared and
circulated to everyone by email. Suddenly, one of the litigant's
objects to the settlement claiming he/she never agreed to that term and
refuses to allow his/her lawyer to sign the stipulation.
Unfortunately, this happens quite frequently in litigation with one of
the parties either suffering from buyer's remorse, realizing they made a
mistake, or simply misunderstanding a key component of the
IS THE CASE SETTLED OR NOT? WHEN DO THE ACTIONS OF AN ATTORNEY ENGAGED IN HIS OR HER CAPACITY BIND THE CLIENT TO THE SETTLEMENT?
It is fundamental principle that the settlement of litigation ranks high in the public policy of New Jersey. Ziegelheim v. Apollo, 128 N.J. 250, 263 (1992); Nolan v. Lee Ho, 120 N.J. 465, 472 (1990); Judson v. Peoples Bank & Trust Co., 25 N.J. 17, 35 (1957). As such, settlements should be encouraged. Ziegelheim v. Apollo, 128 N.J. at 263.
The relationship between an attorney and client is that of principal
and agent. An agency relationship is created “when one person (a
principal) manifests assent to another person (an agent) that the agent
shall act on the principal’s behalf and subject to the principal’s
control, and the agent manifests assent or otherwise consents so to
act.” Lawyers' Fund for Client Prot. v. Stewart Title Guar. Co., 203 N.J. 208, 220 (2010).
Generally, an agent may only bind his principal for such acts that “are within his actual or apparent authority.” Carlson v. Hannah, 6 N.J. 202, 212 (1951). Actual authority is the authority that a principal expressly or implicitly gives an agent. United States v. Martinez, 613 F.2d 473, 481 (3d Cir. 1980); Reynolds Offset Co. v. Summer, 58 N.J. Super. 542 (App. Div. 1959). Actual authority may be either express or implied. Id. at 557.
The focus on an analysis of whether the attorney had actual authority
is on the client’s manifestations to the attorney regarding settlement
and the attorney’s reasonable interpretation of those manifestations. Newark Branch, N.A.A.C.P. v. Township of West Orange, 786 F.Supp.
408, 424 (D.N.J. 1992)(New Jersey law). The general rule is that
unless an attorney is specifically authorized by the client to settle a
case, the consent of the client is necessary. City of Jersey City v. Roosevelt Stadium Marina, Inc., 210 N.J. Super.
315, 327 (App. Div. 1986). “Negotiations of an attorney are not
binding on the client unless the client has expressly authorized the
settlement or the client's
voluntary act has placed the attorney in a situation wherein a person of
ordinary prudence would be justified in presuming that the attorney had
authority to enter into a settlement, not just negotiations, on behalf
of the client.” Amatuzzo v. Kozmiuk, 305 N.J. Super. 469, 475
(App Div. 1997)(citing United States Plywood Corp. v. Neidlinger,41 N.J.
66, 74 (1963)(emphasis added)(other internal citation omitted).
“Thus, in private litigation, where the client by words or conduct
communicated to the adverse attorney, engenders a reasonable belief that
the attorney possesses authority to conclude a settlement, the
settlement may be enforced.
However, the attorney's words or acts alone are insufficient to cloak the attorney with apparent authority.” Amatuzzo v. Kozmiuk, 305 N.J. Super.
at 475-476. "It is well settled that 'stipulations . . . made by
attorneys when acting within the scope of their authority are
enforceable against their clients.'" Jennings v. Reed, 381 N.J. Super. 217, 230 (App. Div. 2005)(quoting Carlsen v. Carlsen, 49 N.J.
130, 137, (App. Div. 1958). "Consequently, an attorney is presumed to
possess authority to act on behalf of the client, and the party
asserting the lack of authority must sustain 'a heavy burden to
establish that [her] attorney acted without any kind of authority in
agreeing to the entry of judgment in the trial court.'" Jennings v. Reed, 381 N.J. Super. at 231.
In the particular scenario that I've outlined here, the objecting
party who allowed his/her attorney to confirm/accept the settlement
terms as recounted in the presence of the Court and all other attorneys
bears a 'heavy burden' to persuade the judge that his/her attorney was
not cloaked with actual authority to settle the case on those terms, or
that there was not a meeting of the minds as to the principal terms.
Labels: Enforcing settlements in New Jersey, settlement of litigation NJ