Buyer's Remorse Can Become a Settlement Nightmare
- posted: Feb. 07, 2014
(AUTHORITY TO REPRESENT VS. AUTHORITY TO SETTLE OR COMPROMISE)
In the past few years, our firm has defended several judgments obtained on behalf of creditors that were attacked on grounds that the debtor’s attorneys did not adequately inform the debtor or lacked settlement authority. I some cases, the courts have based their rulings upon technical failures in pleading and untimely actions on the part of the complaining party. See Alvarez v. De Lage Landen Financial Services, Inc., 93 So. 3d 415 (Fla. 4 DCA 2012), affirmed due to failure to properly preserve for appellate review thereby upholding the settlement and the subsequent judgment; Mayur Mehta, M.D., P.A., v. De Lage Landen Financial Services, Inc., 126 So.2d 1062 (Fla. 2 DCA 2013), Per Curium Affirmed. However, many cases reveal that the settlement process is fraught with risks that should not be ignored by counsel, to wit: that a client will develop the equivalent of buyer’s remorse once the dust settles. A change of heart is further exacerbated because a case can be resolved and dismissed with prejudice, while the payment and other obligations of the agreement are yet to be performed (with the court retaining jurisdiction to enforce the settlement), thereby resulting in a challenge (following non-performance) which is made too late for timely review.
In Florida, authority to represent is not the same as authority to settle on behalf of an individual or entity. Moreover, attorneys should be mindful of the pitfalls of representing multiple clients (including the potential for conflict) and must ensure that all clients remain informed throughout the litigation process. These duties are imposed by the Florida Rules of Professional Conduct and are paramount to providing adequate and effective representation. (See Rules 4-1.7 and 4-1.4). All settlement offers must be relayed to all clients for consideration, and settlement or compromise should only be made with the express authority provided by informed clients. Cross-Aero Corp. V. Cross-Aero Service Corp., 326 So.2d 249, 250 (Fla. 3 rd DCA 1976). The only exception to this requirement exists when the attorney must act without delay and there is no time to consult with the client. This is a very narrow exception and should not be relied upon as basis for one’s authority to compromise a claim on behalf of a client unless a clear emergency exists. Brumberg v Chunghai Chan, 25 Misc., 2d 312, 204 N.Y.S.2d 315 (1959) cited with approval in Bursten v Green, 172 So.2d 472 (Fla. 2d DCA 1963). With today’s ease of communication, it seems unlikely that an emergency would prevent counsel from communicating with a client in a timely manner.
Although the case law indicates that settlement agreements are highly favored and should be enforced whenever possible, Robbie v. City of Miami, 469 So. 2d 1384, 1385 (Fla. 1985), there must be clear and unequivocal authority to settle at the time the settlement was reached Sharick v. Southeastern University of Health Services, Inc., 891 So. 2d 562, 565 (Fla. 3 rd DCA 2004). Given the age of emails, this means: get your authority in writing and preferably have your client sign the settlement agreement.
As discussed in Murchison v. Grand Cypress Hotel Corporation, 13 F.3rd 1483 (11th Cir. 1994), the courts are mindful of the potential for a change of heart that occurs once a settlement agreement has been executed and have repeatedly held that litigants should not be permitted to attack the integrity of the settlement process because he or she is unhappy with the settlement. The Murchison Court discussed several factors for determining whether an attorney has actual settlement authority, including: (i) whether the client knew his lawyer was in the process of negotiating a settlement; (ii) whether and how many times the client met or spoke with the attorney while settlement negotiations were ongoing; (iii) whether the client was present in the courtroom when the settlement was announced in open court; (iv) whether the client immediately objected to the settlement; and (v) whether the client was an educated person who could understand the terms of the settlement agreement. See Murchison, at 1485-86.
The lesson to be learned: keep all settlement discussions with opposing counsel and your clients in writing and keep your clients apprised of all developments. Just as in mediation, the client should make the ultimate decision which serves as your authority to settle or compromise on their behalf.