The court holds that settlement agreements are worthless.

This was a prescriptive-easement case with several plaintiffs and 27 defendants. There was a settlement conference; all defendants, or their authorized proxies, attended. They made an offer that wasn’t accepted. Their lawyer then emailed them recommending that they keep the  offer open. Five defendants emailed him that they didn’t agree to that; he didn’t read the email. A number of emails between counsel then set forth and confirmed the settlement. When the plaintiffs learned that some defendants were making problems they moved to enforce the settlement agreement. The trial court granted the motion, ruling that the defendants’ lawyer had actual and apparent authority.

The Court of Appeals reverses.

The court first decides that it treats motions to enforce settlement as motions for summary judgment.

The court finds that the lawyer had no actual authority; the Robertson’s argument that he did because he didn’t read the email has “no merit.”

The court finds that a question of fact exists as to actual authority. Why? That isn’t as clear. The court cites the traditional rule that “if the client places the attorney in a position where third persons of ordinary prudence and discretion would be justified in assuming the attorney was acting within his authority, then the client is bound by the acts of the attorney within the scope of his apparent authority.” That used to mean what it says. But the court cites a 1992 case called Canyon Contracting, which apparently implied that the principal’s manifestations must include not just placing the attorney in a position but somehow sending signals directly to the other party. What signals (you’re asking) is a good question and the court does nothing to clarify it much by suggesting that the defendants’ presence at the settlement conference might mean not that they were on board with the lawyer but, on the contrary, that he didn’t have authority to settle the case if they weren’t present. It is evidently up to “persons of ordinary prudence and discretion” to assume that things either are as appearances naturally suggest or that they are the complete and counterintuitive (to anyone who has ever actually attended settlement conferences) opposite. Perhaps having 27 clients makes a difference; perhaps that ordinary person should understand that getting 27 fractious ducks in a row can be tricky and temporary. The court does mention that the plaintiffs insisted that they all be at the settlement conference. But nothing in the court’s analysis suggests that there is a difference between one client and one thousand.

So what is the resolution? The court says that under the summary-judgment standard it would normally remand for hearing or trial on the disputed issue. (And that’s certainly a possibility, though its odd to say that that’s something that “normally” happens.) But here it simply sets the settlement agreement aside. Why? Rule 80 (agreements must be in writing or made in open court). The court apparently accepts that the emails were “in writing.” What wasn’t in writing was the clients’ assent to the settlement. Since when does that have to be in writing? The court cites Canyon Contracting for the proposition.

The court isn’t entirely comfortable with this, though, since it finds the need to justify itself in a footnote. Rule 80 does not contain this requirement but Canyon Contracting, the court says, read it into the rule. The plaintiffs did not argue that the court should change Canyon Contracting (presumably because they argued an entirely different set of issues and so had no reason to). Moreover, Canyon Contracting is “long standing precedent.”  The court does not suggest that any other case has followed Canyon Contracting on this point (we haven’t Shepardized it). We used to question a former Supreme Court Justice’s practice of finding a lone case that was wrongly-decided years ago and announcing that it had “established” the law of Arizona. Apparently he has followers after all.

So remember that your settlement agreement signed by counsel is as good as gold – until the other lawyer calls to tell you that his client never really did agree and even if he did it wasn’t in writing so you can’t enforce anything.

(link to opinion)