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)

Whether this case is right or wrong, it’s a good little practice pointer/reminder.

A creditor contacted an estate to make a claim. She gave it her address, phone number, and email address. It replied to her by email.  Later, the estate denied the claim. It notified her only by certified mail, return receipt requested. The letter was returned unclaimed. (If you don’t see where this is going then you do need to read the rest of it.)

When she learned of the disallowance she filed a petition. She argued that because she wasn’t given notice of disallowance, her claim – per the normal statutory procedure – was allowed. The estate pointed out that the statute (14-3806) says to give notice of disallowance by “mail.” The trial court dismissed the petition.

Of course the Court of Appeals was going to find a reason to reverse. Whenever courts have to wonder whether you were really trying to give notice, or not really trying to give notice, or really trying not to give notice, you’re likely to lose. The court finds a U.S. Supreme Court case (Jones 2006) to the effect that notice by certified mail isn’t due process if its returned unclaimed. Since the estate had reason to know that the creditor hadn’t received notice, it should have done something else.

The estate did not contend that the creditor deliberately did not pick up the certified letter, perhaps because it couldn’t prove it. That’s the problem with certified/return-receipt mail: you never can. The letter is a two-edged sword; its purpose is to prove that a letter was received but it can also prove that it wasn’t. We all know that some people never pick up certified mail, so as to avoid the bad news it often brings; but the same people who boast of that when it makes them seem clever will deny it when it doesn’t.

The court rules, however, that the failure to give actual notice does not result in allowance of the claim. It holds instead that the time for responding to the disallowance runs from the date the creditor had actual knowledge of it. Dismissal of the petition is therefore reversed and the parties will litigate whether the claim should be allowed.

(link to opinion)

This special action involves claims of privilege by a non-but-closely-associated-party.

A social worker counseled Bruno and his domestic partner, Abeyta, jointly – i.e., she saw them together and kept a single chart. The partner ended up suing her and the psychiatric hospital she sent him to. He named Abeyta as a witness. The social worker disclosed her records and noticed Abeyta’s deposition. Abeyta claimed the privilege and moved for protective order. The trial court denied it; the Court of Appeals accepted his special action and grants relief.

Abeyta had never expressly waived the privilege; that the partner had is irrelevant. The court reviews HIPAA and State behavioral health regulations, concluding that they do not authorize or permit the release of Abeyta’s records. The defense relied on a case (Hahmann 1981) in which a couple’s communications with a psychologist were not privileged against each other in their divorce/custody battle. But Abeyta and his partner weren’t suing each other.

(Some of those regulations involve “family” counseling. Normally this sort of thing would trigger at least a footnote but the court doesn’t mention it. One wonders which the court was more afraid of – complaints that it would even quibble about whether same-sex couples are families or complaints about an official pronouncement that they are.)

The defense also relied on high dudgeon, as litigants tend to do when an opponent’s witness will claim a privilege at cross-examination time. But the court says that questions about matters at issue could be asked “outside the context” of the counseling and points out that Abeyta might still do something to waive the privilege.

Unfortunately for the opinion, which is otherwise fairly unremarkable, the court messed up the Hahmann case. It indicates – three times, so its not just a typo – that Hahmann involved attorney-client privilege. While that opinion analogized to attorney-client privilege, it was a psychologist–patient case. The court may be right that it wasn’t a spotted-horse case –  but not to know what sort of animal it was about is an embarrassment.

(link to opinion)