In Dweck v. Nassar, 2008 WL 2602169 (Del. Ch., July 2, 2008), read opinion here, the Chancery Court addressed the authority, pursuant to agency law, of an attorney for a party who agreed to the terms of a settlement of litigation on behalf of a party–but where that attorney was not "counsel of record" in the case that was settled.
Two prior decisions by the Chancery Court in this case are summarized briefly on this blog here.
In sum, despite that understanding of everyone involved that the long-time attorney and close friend of the party had authority to agree to the terms of the settlement, the party refused to sign. In this motion to enforce the terms of a settlement, the court recited in great detail the factual background relevant to this dispute and the law of agency that controlled the outcome.
Here is the money quote:
“[A]n attorney of record in a pending action who agrees to the settlement of [a] case is presumed to have lawful authority to make such an agreement.” FN53
While it is possible that [the attorney-of-record’s] words and actions amounted to a binding expression of acceptance, the court finds it unnecessary to consider that issue since both Shiboleth’s [the other attorney who agreed to the settlement] authority to settle and his manifestation of acceptance are so clear.
FN53. Aiken v. Nat’l Fire Safety Counsellors, 127 A.2d 473, 475 (Del. Ch.1956).
Regardless of Shiboleth’s close relationship with Nasser [the party who refused to sign the settlement agreement], this court cannot presume that Shiboleth had lawful authority to enter into the settlement agreement because he was not the attorney of record. Instead, the court must look to agency law to determine whether Shiboleth had the authority to bind the defendants to the agreement. Since Shiboleth testified that he agreed to the settlement, FN55, Shiboleth’s authority is the only issue for this court to decide.
It is well settled that questions of agency are not subject to absolute rules but, rather, turn on the facts of the individual case.” FN57
In the normal course of business dealing, there are three separate sources of an agency relationship.FN58. First, actual authority is expressly granted authority either orally or in writing .FN59. Second, implied authority is a derivation of actual authority and often means “actual authority either (1) to do what is necessary, usual, and proper to accomplish or perform an agent’s express responsibilities or (2) to act in a manner in which an agent believes the principal wishes the agent to act based on the agent’s reasonable interpretation of the principal’s manifestation in light of the principal’s objectives and other facts known to the agent.”FN60. Third, apparent authority “is such power as a principal holds his [a]gent out as possessing or permits him to exercise under such circumstances as to preclude a denial of its existence.”FN61. The plaintiffs claim that there is sufficient evidence to support a finding that Shiboleth was vested with all three sources of authority to enter into the settlement. (emphasis added).