Apparent Authority Of Attorney Makes Settlement Agreement Enforceable

A recent decision of the Arizona Supreme Court

Agreements between parties or attorneys in civil lawsuits are not binding if disputed unless they are evidenced by a writing or made orally in court. Ariz. R. Civ. P. 80(d). We here consider whether Rule 80(d) makes a written settlement agreement unenforceable because it lacked the written assent of clients who dispute their attorney’s authority to make the agreement. Holding that no such written assent is required and that the agreement here satisfied Rule 80(d), we also conclude that it is enforceable because the attorney acted within the apparent authority given by his clients.

The facts

Petitioners (“the Robertson Group”) sued neighboring property owners (“the Alling Group”) concerning a water line. On January 29, 2013, the parties and their attorneys attended a mediation but did not reach an agreement. At the end of the mediation, the Alling Group, represented by attorney Mark Sifferman, made a settlement offer requiring acceptance within forty-eight hours.Hours before the offer expired, Robert Grasso, the Robertson Group’s attorney, told Sifferman that the Robertson Group needed more time to respond to the offer because one group member had a family emergency. Grasso proposed that the attorneys discuss the offer the next week. Sifferman did not extend the January 31 deadline, and the offer expired.

Sifferman advised his clients of Grasso’s request and recommended they “leave the door open” for settlement. Two of the Alling Group members emailed Sifferman on February 4 stating that they and others favored “removing the settlement offer proposed in the mediation.” But Sifferman did not read the email and mistakenly thought all his clients were willing to settle on the terms previously conveyed to the Robertson Group.

On February 6, after talking with another attorney at Grasso’s law firm, Sifferman sent that attorney an email extending a new settlement offer with terms that mirrored the prior offer but would expire at 5:00 p.m. on February 8. Grasso timely accepted the offer via email. Later, after Grasso’s law firm had informed the trial court of the settlement (the “February 8 settlement”) and circulated draft settlement documents, Sifferman discovered he had lacked authority to extend the settlement offer. After conferring with his clients, Sifferman made a new settlement offer, which materially varied from the February 8 settlement.

The Robertson Group moved to enforce the February 8 settlement. Without an evidentiary hearing, the trial court granted the motion, ruling that Sifferman had actual and apparent authority to extend the settlement offer and, alternatively, that the Alling Group was equitably estopped from disputing that authority. The court also ruled that Arizona Rule of Civil Procedure 80(d) did not apply but, if it did, the emails exchanged between counsel satisfied the rule.

The court here reversed the Court of Appeals, which had found that the settlement was not enforceable.

…we hold that the Alling Group’s actions allowed the Robertson Group to reasonably assume that Sifferman had authority to keep a settlement offer on the table or reoffer the same settlement terms days after the agreement’s expiration, and the Robertson Group reasonably relied on the attorney’s apparent authority…

Rule 80(d) applies only if a party disputes the existence or terms of an agreement. If such a dispute exists, the rule can be satisfied by writings exchanged by counsel. Rule 80(d) does not also require the written assent of a client who disputes that it is bound by the agreement. Because the parties here do not dispute the existence or terms of the February 8 settlement, Rule 80(d) does not apply. Finally, because the evidence shows that Sifferman was cloaked with apparent authority to bind the Alling Group to the February 8 settlement, the trial court correctly enforced the agreement. We vacate the court of appeals’ opinion, affirm the trial court’s judgment, and award the Robertson Group its reasonable attorney fees on appeal.

 (Mike Frisch)