Lоuis FENNELL, Plaintiff-Appellant, v. TLB KENT COMPANY and Joseph Pietryka, Defendants-Appellees.
No. 529, Docket 87-7617
United States Court of Appeals, Second Circuit.
Decided Jan. 10, 1989.
865 F.2d 498
Moreover, GM has not withdrawn completely from the heavy-duty truck business. It continues to manufacture the Brigadier, a successful product so far as appears on the state of this record. Indeed, it is more than just a sharе-holder in the joint venture with Volvo. The joint venture‘s name, Volvo GM, guarantees that the GM trademark will remain visible, as Judge Ramsey found in Central GMC, supra. General Motors has retained a percentage of control and has a market for its current production of Brigadiers.
General Motors argues that Glick‘s claim under the New York statute is time-barred because Glick did not bring an action within 120 days after GM first indicated it would terminate the heavy-duty truck franchise. See
If the heavy-duty truck line was indeed a franchise, and if the action under the Act was timely commenced, we conclude that there remain genuine issues of material fact as to whether GM terminated Glick‘s franchise without due cause in violation of
On the breach of contract claim, we agree with Glick that Article 1.5 of the Agreement could be a means of circumventing Article 4‘s termination provisions: If there were a single Addendum attached to the Agreement, discontinuance of the models covered by that Addendum would, effectively, terminate the entire Agreement. This would contradict the plain language of the contrаct and render Article 4 meaningless. (It is significant in this context that roughly one-third of GM heavy-duty truck dealers sell only heavy-duty GM trucks.) Glick has, at the very least, raised a genuine issue of material fact as to whether Article 1.5 of this form document permits discontinuance of individual models but not of entire product lines.
General Motors argues that if Glick‘s reading of the contract were accepted, GM “would be forever frozen in its model choices unable to respond to market conditions and changing consumer demands.” However, General Motors’ obligation is only for five years, GM continues to manufacture its popular Brigadier model, and it appears that General Motors may have appropriated via the joint venture the heavy-duty truck dealers’ rights. This could support a claim for breach of contract without the need for any interpretation of Article 1.5, but we leave the entire matter in thе hands of the district court.
JUDGMENT REVERSED AND CAUSE REMANDED.
Darrin Berger, Huntington, N.Y., for plaintiff-appellant.
Eugene F. Frink, Pawling, N.Y., for defendants-appellees.
Before FEINBERG, MESKILL and MAHONEY, Circuit Judges.
MAHONEY, Circuit Judge:
This is an appeal from a final judgment of the United States District Court for the Southern District of New York, Louis L. Stanton, Judge, entered on June 16, 1987
We reverse and remand.
Plaintiff-appellant Louis Fennell commenced this action in the United States District Court for the Southern District of New York on January 7, 1985 against his employer,2 alleging wrongful discharge because of his race and age in violation of
The case was on Judge Stanton‘s ready calendar on January 6, 1987. On January 16, 1987, however, Brewington and Eugene Frink, dеfendants’ attorney, agreed to settle the case for $10,000 during a telephone conversation. The settlement was reported to the court by both attorneys in a telephone conference call on January 20, 1987. The district court issued an order of dismissal on the same day which provided that either party could apply to the court by letter to restore the case to the court‘s calendar within sixty days of the order. The settlement wаs conditioned upon Fennell signing a general release and a stipulation of discontinuance being filed with the court, which never occurred.
Fennell expressed his dissatisfaction with the settlement in a letter to the district court dated March 28, 1987. Fennell there contended that he had told Brewington on January 16, 1987 that he would not approve a $10,000 settlement, but he was willing to settle the case out of court “with the intentions of getting it out of the way and behind me.” He аlso claimed that he had told Mason on January 20, 1987 that $10,000 was not a satisfactory settlement, and that he had tried several times in early February, 1987 to contact Mason‘s office by telephone about the case, but elicited no response. Fennell further stated that he had gone to Mason‘s office on February 20, 1987, at which time Mason informed him that the case has been settled for $10,000, whereupon Fennell reiterated his dissatisfaction with that settlement.
On Fеbruary 27, 1987, Fennell wrote Mason expressing his dissatisfaction with the settlement agreement and indicating that he had “no further use of [Mason‘s] services.” A copy of this letter was sent to the district court and received there on March 3, 1987. On March 20, 1987, Brewington wrote to the district court requesting that the “matter be restored to the calendar as the settlement which was authorized and accepted by our client is no longer acceptable to him,” and that Masоn and his associates be released by the court as counsel to Fennell.
Following a status conference on June 5, 1987, the district court held a hearing on June 16, 1987 to determine whether Fennell‘s case should be restored to the calendar. At the conclusion of the hearing, the district court dismissed the action and approved the settlement. This ruling was based upon a finding that Fennell‘s attorney had been clothed with “apparent authority” when he settlеd the case, and the court‘s expressed view that “[t]o allow a client to reject a settlement which has been agreed upon by his attorney with apparent authority is to open the door to a mild form of chaos.”
On appeal, Fennell asserts that it was an abuse of discretion for the district court not to have vacated its order of dismissal pursuant to
Discussion
A. The Applicable Law.
In discussing Rule 60(b), Wright and Miller state that “[t]he grounds and the procedure for setting aside a federal judgment
On the other hand, an advisory note to Rule 60(b) states that “Rule 60(b) does not assume to define substantive law as to the grounds for vacating judgments, but merely prescribes the practice in proceedings to obtain relief.”
Be all that as it may, two circuits have ruled that where an аction is based upon federal law, the authority of an attorney to settle that action is a federal question. See Edwards v. Born, Inc., 792 F.2d 387, 389 (3d Cir.1986) (dictum); Mid-South Towing Co. v. Har-Win, Inc., 733 F.2d 386, 386 (5th Cir.1984). There is also analogous support for this view in the Second Circuit. See Brown v. General Motors Corp., 722 F.2d 1009, 1012 n. 1 (2d Cir.1983) (Oakes, J., concurring) (scope of release to be determined by federal law in federal civil rights action); cf. International Telemeter Corp. v. Teleprompter Corp., 592 F.2d 49, 50 (2d Cir.1979) (in suit for patent infringement, New York law governs settlement agreement negotiated, consummated and to be performed in New York, and exprеssly made subject to New York law). In the absence of weighty countervailing considerations, we are inclined to follow our sister circuits in deeming federal law applicable to the question before us. See Keasler v. United States, 766 F.2d 1227, 1233 (8th Cir.1985). In any event, to the extent that deference might be accorded to New York precedents concerning what is at root a fairly general question of agency law, see Greater Kansas City Laborers Pension Fund v. Paramount Indus., 829 F.2d 644, 646 (8th Cir.1987) (rules govеrning attorney‘s authority to settle case “the same as those which govern other principal-agent relationships“), the outcome would in our view be the same, as will hereinafter appear.
B. The Merits.
We turn now to the district court‘s determination that Fennell‘s attorney was clothed with apparent authority to settle the case, resulting in denial of the motion to vacate the prior order of dismissal.
We begin with the undisputed proposition that the deсision to settle is the client‘s to make, not the attorney‘s. United States v. Beebe, 180 U.S. 343, 352 (1901) (“the utter want of power of an attorney, by virtue of his general retainer only, to compromise his client‘s claim, cannot, we think, be successfully disputed.“); Barthelmas v. Fidelity-Phenix Fire Ins. Co., 103 F.2d 329, 331 (2d Cir.1939) (same); see Thomsen v. Terrace Navigation Corp., 490 F.2d 88, 89 (2d Cir.1974) (only “exigent circumstances” might empower an attorney to settle case without client‘s consent); Model Code
The district court made the following findings concerning the issue of apparent authority: 1) that Mason and his associates represented Fennell “in dealing with the other side,” 2) that they were authorized to appear at conferences for him, 3) that Fennell knew that settlement was being discussed, 4) that Fennell did not tell his counsel not to continue discussing settlement, 5) that Fennell would have accepted a higher settlement figure ($50,000-75,000), and 6) that Fennell did not tell defendants’ counsel that the authority of plaintiff‘s counsel was limited in any way. The district court concluded that Fennell‘s counsel “had every appearance of being authorized to make a binding agreement with [defendants’ counsel].” The district court then applied the common law principle that an agent clothed with apparent authority binds the principal as to actions taken within the scope of that authority, together with the principle favoring settlement agreements, to conclude that Fennell was bound by the settlement agreement.
Apparent authority is “the power to affect the legal relations of another person by transactions with third persons, professedly as agent for the other, аrising from and in accordance with the other‘s manifestations to such third persons.” Restatement (Second) of Agency § 8 (1958) (emphasis added). Further, in order to create apparent authority, the principal must manifest to the third party that he “consents to have the act done on his behalf by the person purporting to act for him.” Id. § 27. Second Circuit case law supports the view that apparent authority is created only by the representations of the principal to the third party, and explicitly rejects the notion that an agent can create apparent authority by his own actions or representations. See Trustees of UIU Health & Welfare Fund v. New York Flame Proofing Co., 828 F.2d 79, 84 (2d Cir.1987); Karavos Compania Naviera S.A. v. Atlantica Export Corp., 588 F.2d 1, 10 (2d Cir.1978); see also Edwards v. Born, Inc., 792 F.2d 387, 390-91 (3d Cir.1986) (apparent authority not present where record devoid of direct communication from client to opposing attorney).
In this case, taking the facts as the district court found them, Fennell made no manifestations to defendants’ counsel that Mason and his associates were authorized to settle the case. Fennell‘s attorneys accordingly had no apparent authority to settle the case for $10,000 without Fennell‘s consent. The district court‘s findings that Mason and his associates represented Fennell, and that they were authorized to appear at conferences for him, do not prove otherwise. A client does not create apparent authority for his attorney to settle a case merely by retaining the attorney. See United States v. Beebe, 180 U.S. 343, 352 (1901).
Further, the court‘s findings that Fennell knew settlement was being discussed, did not ask his attorneys not to discuss settlement, would have accepted a higher settlement figure, and did not tell defendant‘s counsel that the authority of plaintiff‘s counsel was limited in any way, do not lead to a different outcome. These findings involve only discussions between Fennell and his attorneys or things that Fennell did not say to opposing counsel. None of these findings relates to positive actions or manifestations by Fennell to defendants’ counsel that would reasonably lead that counsel to believe that Fennell‘s attorneys were clothed with apparent authority to agree to a definitive settlement of the litigation.
Finally, we note that the application of state law would not yield a contrary result. Since all parties are New York residents and the settlement negotiations occurred in New York, New York law would obviously be applicable. Defendants contend that Hallock v. State, 64 N.Y.2d 224 (1984),
Hallock held that a stipulation of settlement made by counsel in open court may bind his clients even where it exceeds his actual authority, provided that there is apparent authority. 64 N.Y.2d at 228, 231. In that case, however, an applicable court rule required that attorneys attending pretrial conferences have authority to еnter into binding court settlements on behalf of their clients, a co-plaintiff attended the conference from which Hallock was absent because of illness, and more than two months passed before plaintiffs made any objection to the settlement. 64 N.Y.2d at 228-29. Hallock explicitly recognized that “without a grant of authority from the client, an attorney cannot compromise or settle a claim,” 64 N.Y.2d at 230, and that:
Essential to the creation of apparent authority are words or conduct of the principal, communicated to a third party, that give rise to the appearance and belief that the agent possesses authority to enter into a transaction. The agent cannot by his own acts imbue himself with apparent authority.
64 N.Y.2d at 231 (emphasis added).
We do not think the rule stated in Hallock would apply here, where a purported settlement agreement was reached in a telephone conference by counsel in which no party participated and Fennell made prompt objection to that agreement upon being advised as to its terms. See Gordon v. Town of Esopus, 107 A.D.2d 114, 116 (3d Dep‘t 1985) (Hallock “can and should be read” as limited to cases involving stipulations in open court), leave to appeal denied, 65 N.Y.2d 609 (1985). The generally applicable New York rule is that “[a] party who relies on the authority of an attorney to compromise an action in his client‘s absence deals with such an attorney at his own peril.” Melstein v. Schmid Laboratories, Inc., 116 A.D.2d 632, 634 (2d Dep‘t 1986) (quoting Slavin v. Polyak, 99 A.D.2d 466, 467 (2d Dep‘t 1984)). See Ford v. Unity Hosp., 32 N.Y.2d 464, 472 (1973) (“[o]ne who deals with an agent does so at his peril, and must make the necessary effort to discоver the actual scope of authority“); Warson Constr. Co. v. Schlussel, 68 A.D.2d 947, 948 (3d Dep‘t 1979) (same) (citing Ford).
We realize that the rule we announce here has the potential to burden, at least occasionally, district courts which must deal with constantly burgeoning calendars. A contrary rule, however, would have even more deleterious consequences. Clients should not be faced with a Hobson‘s choice of denying their counsel all authority to explore settlement or being bound by any settlement to which their counsel might agree, having resort only to an action against their counsel for malpractice. In any event, even if we were to consider such a rule advisable, the applicable precedents and settled principles of agency law would preclude its adoption.
Conclusion
Reversed and remanded for further proceedings not inconsistent herewith.
FEINBERG, Circuit Judge (concurring):
I concur in the result of the majority opinion, but on a different ground.
As the majority points out, in January 1987 the attorneys for the parties negotiated a settlement and reported it to the court by telephone, apparently in a conference call just before the case was to go to trial. The district judge thereafter entered an order which dismissed the action with prejudice, but provided that
It having been reported to this Court that the above entitled action has been settled, it is hereby
ORDERED, that this action be, and the same hereby is, dismissed with preju-
dice but without costs; provided, however, that within sixty days of the date of this order any party may apply by letter for restoration of the action to the calendar of the undersigned.
Such “60-day” orders are obviously common in the district courts and facilitate settlement of civil actions.
The purpose of the 60-day period in which to apply for restoration of the action to the calendar and the conditions to be satisfied in making such application were described by the district judge. On June 16, 1987, when he ruled on appellant‘s request for such restoration, the judge commented on the 60-day order, as follows:
These orders are entered as a matter of routine in appropriate circumstances, and they serve a useful function of allowing parties to agree on the terms of a settlement and to perform the paperwork involved in completing a sеttlement, that is usually the exchange of releases and the exchange of cash, while retaining access to the court in case there should be a difficulty with the consummation of the settlement, and if the settlement should not be approved or be illusory, the immediate access or re-access to the court for purposes of trial. (emphasis added).
Thus, from the judge‘s own words, it is reasonable to assume that if the settlement was “not approved” and turned оut to be “illusory,” there would be immediate “access to the court ... for purposes of trial.” Moreover, absent some limiting language, this construction of the judge‘s January “60-day order” is a reasonable one, even if he had said nothing in explanation of it in June.
What occurred here is precisely the sort of event referred to by the judge. The “settlement” turned out to be illusory because the client, plaintiff-appellant, would not accept it, аnd the attorney reapplied within 60 days for restoration to the calendar. Under the circumstances, the refusal to restore the case to the calendar was an abuse of discretion since the expressed conditions were met.
Of course, the district judge must have had something else in mind when in June 1987 he used the words quoted above in explanation of the 60-day order, because he immediately went on to hold that, in view of the timely application before him, the issue was:
whether a binding agreement was made to settle the case for $10,000, in which event this case should be dismissed and the plaintiff relegated to whatever rights he may have against his former attorney for breach of the instructions in that agency relationship, or whether on the other hand the settlement is not a binding contract, in which event this case should go forward for trial.
But that more limited meaning was certainly not clear from the languagе of the 60-day order itself or from the judge‘s explanation of it. And, absent clearer language in the order, plaintiff is entitled to his day in court rather than being required to accept a settlement to which he never agreed.
Under the circumstances, I do not find it necessary to consider the broader issues of apparent authority discussed in the majority opinion. On this more limited basis, I concur in the majority‘s decision to reverse the judgment of the district cоurt and remand for further proceedings.