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State of the Law in Georgia on Attorneys Binding Their Clients

by merlin on December 16th, 2014
  • Sumo

This issue has cropped up on a Discovery-related matter in a child custody case, where certain records were denied by the attorney but, after he withdrew, were acknowledged by the client.  They are the kind of thing that could be, under certain circumstances, dispositive of the person’s case.  However, just because an action is legally permissible doesn’t make it the moral thing to do, so I felt a need to look into this issue further.  It turns out that, contrary to what I had previously believed, the law on the authority of an attorney to act on behalf of their client in Georgia remains very, very confusing.  In fact, I cannot say what the attorney’s authority definitely is, one way or the other.  Here is the prevailing statutory and case law on this issue:

Section 15-19-5 of the Official Code of Georgia states that “[a]ttorneys have authority to bind their clients in any action or proceeding by any agreement in relation to the cause, made in writing, and by signing judgments, entering appeals, and entering such matters, when permissible, on the dockets of the court. Attorneys who are otherwise authorized by law to take affidavits and administer oaths shall not be disqualified to take affidavits required of their clients in any matter or proceeding of any nature whatsoever.”

 

Note that this Code Section does not refer to the unauthorized acts of an attorney; rather, this draws a page from the law of agency, because someone authorized to act on behalf of another is absolutely so authorized.  The attorney even has authority to take affidavits and administer oaths for their clients (something I was not aware of until recently, which is why I had previously permitted my notary’s license to expire).

There are two cases on this issue that govern, and they need to be read carefully to understand the way that they frame the point and do not contradict each other.  The prevailing case on the issue for a very long time was Vandiver v. McFarland, 179  Ga.App. 411 (Ga. Ct. App. 1986).  That case involved an attorney who entered into a settlement of claims on behalf of his client, but he did not have the actual authority to make that settlement.  However, the Court held him bound to his attorney’s actions because the attorney had apparent authority to bind him.  The opinions says that “[t]he plaintiffs in this case gave express instructions in writing to their attorneys that no settlement of their claims could be made without their consent.”  That case is below (and it is still good law):

Darryl R. Vandeford, Lawrenceville, for appellants.

E. Wycliffe Orr, Gainesville, Ellis Ray Brown, John S. D’Orazio, Atlanta, for appellee.

BIRDSONG, Presiding Judge.

The defendant McFarland in this personal injury case filed a “Motion to Enforce Settlement Agreement and for Order of Judgment Thereon.” Plaintiffs’ attorneys filed a cross-motion in support of McFarland’s motion, with affidavits averring that a binding settlement agreement was entered into. Plaintiffs hired a new attorney. The trial court granted McFarland’s motion. On appeal, the plaintiffs contend the trial court erred in denying their objections and motions to strike the attorneys’ affidavits for insufficiency, and erred in enforcing the settlement.

The plaintiffs’ erstwhile attorney, Brown, swears by affidavit that he entered into the agreement with McFarland’s attorney, and that he had “express authorization from the plaintiff, Alan Dean Vandiver,” to settle as he did. Brown’s partner, D’Orazio, swore by affidavit that “[o]ur firm had and I exercised express authority … to enter into the settlement agreement.”

In response, Alan Vandiver asserts by affidavit that he discussed a settlement but he did not authorize his attorneys to settle all claims; and that he “never [agreed] to settle [his] claim,” and informed his attorneys he would not settle, on the terms proposed. Elaine Vandiver averred she had no knowledge of the purported settlement, as not asked for and gave no consent and did not authorize the attorneys to settle her claims.

The attorney fee agreement provided: “[N]o settlement … may be made without the consent of the undersigned [plaintiffs].” (Emphasis supplied.)

The trial court found “that a [definite and certain] verbal settlement agreement was reached between counsel for the defendant and the [plaintiff’s attorneys]”; and further “that the [attorneys] had apparent authority by law to enter on behalf of the plaintiffs such settlement agreement….” Held:

The Supreme Court held in Brumbelow v. Northern Propane Gas Co., 251 Ga. 674, 675, 308 S.E.2d 544: “Under Georgia law an attorney of record has apparent authority to enter into an agreement on behalf of his client and the agreement is enforceable against the client by other settling parties. [Cits.] This authority is determined by the contract between the attorney and the client and by instructions given the attorney by the client, and in the absence of express restrictions the authority may be considered plenary by the court and opposing parties. [Cits.] The authority may be considered plenary unless it is limited by the client and that limitation is communicated to opposing parties. [Cits.] Therefore, from the perspective of the opposing party, in the absence of knowledge of express restrictions on an attorney’s authority, the opposing party may deal with the attorney as if with the client, and the client will be bound by the acts of his attorney within the scope of his apparent authority….”

Accordingly, we must hold the trial court correctly granted judgment enforcing this settlement. Further, since under Brumbelow it is immaterial whether the attorney had authority to settle, any insufficiencies in the affidavits as to authority, are immaterial.

Brumbelow holds an attorney has plenary authority in fact to dispose of his client’s claim or defense without authority. The Supreme Court explains that the client’s remedy for unauthorized settlement is not to forbid such settlement in the first place, but to force the client to sue his own lawyer after the fact, under DR 7-102(A)(9) of the Rules and Regulations of the State Bar of Georgia: “In his representation of a client, a lawyer shall not … institute, cause to be instituted or settle a legal proceeding or claim without obtaining proper authorization from his client.” But it seems to us this State Bar Rule means attorneys have no such apparent authority and have no right to presume others do.

The remedy proposed by the Supreme Court is an empty one: if after much trouble, litigation and expense the client succeeds in convincing a court or jury, over the attorney’s word, that the settlement was unauthorized and that the claim or defense thus disposed of was valuable, what if the attorney cannot pay?

In our experience, attorneys expect that an agreement by counsel to settle depends on the client’s approval, and offers and acceptances are generally made on that basis. By holding otherwise, the Brumbelow rule propagates litigation. It puts the burden on clients to prove that their attorney breached his trust; and not least, it sacrifices the delicate relation of trust between client and lawyer–all merely to give the opponent a bonus in the form of settlement he had no right to expect in the first place.

Considering what is lost here, what is the monumental burden in simply requiring attorneys to obtain special authority before settling a case?

The main cases relied upon by Brumbelow for its rule of “apparent authority,” actually involved the special equity of detrimental reliance by the other party. General Communications Svc. v. Ga. Public Svc. Comm., 244 Ga. 855, 262 S.E.2d 96; Stone Mountain, etc., Assn. v. Smith, 170 Ga. 515, 153 S.E. 209. Other cited authorities were Glazer v. J.C. Bradford & Co., 616 F.2d 167, where the party asked his lawyer to settle and placed no limitations on his authority, and Davis v. Davis, 245 Ga. 233, 264 S.E.2d 177. In Glazer, the federal court also relied upon Davis v. Davis, supra, which relied upon Shepherd v. Carlton’s Nice Cars, 149 Ga.App. 749, 256 S.E.2d 113. Shepherd based its broad “apparent authority” statement upon Dean v. Jackson, 219 Ga. 552, 134 S.E.2d 601, which really involved only a stipulation as to the “management and direction of the client’s case” authorized by OCGA § 15-19-5. (See Davis v. First Nat. Bank, 139 Ga. 702, 706, 710, 78 S.E. 190: The statute concerning attorney’s authority to bind client, OCGA § 15-19-5, historically refers to the “conduct and management of the case” and does not imply authority to dispose of a claim or defense in spite of client’s instructions.) Further, the cases cited for Brumbelow ‘s holding that the attorney’s authority is plenary unless any restrictions are communicated to the opposing party, involved agreements that had gone to judgment which could be set aside only for fraud of the opponent. Reece v. McCormack, 188 Ga. 665, 4 S.E.2d 575; Elliott v. Elliott, 184 Ga. 417, 191 S.E. 465. But see Davis v. First Nat. Bank, supra, 139 Ga. pp. 710-711, 78 S.E. 190; 7A C.J.S. 214, p. 370; 7 AmJur2d § 158.

It may be true that an agent can bind his principal if a third party is unaware of limitations on his authority, but only if some fact appears which would justify the third party in assuming the agent had such authority in the first place. See Shivers v. Barton & Ludwig, 164 Ga.App. 490, 491, 296 S.E.2d 749; Commercial Auto Loan Corp. v. Baker, 73 Ga.App. 534, 535, 37 S.E.2d 636; 1 EGL 469, 519, Agency, §§ 33, 119 § 119, § 33 (1977 rev.) The mere act of hiring an attorney does not imply to anyone that the attorney has authority to dispose of his client’s claim or defense. If the public were told that it did and that the attorney they hire can therefore dispose of their claims and defenses at will, they would recoil in horror and deny it. Brumbelow further holds that even if the client expressly tells the attorney not to settle without authority, he can do it because the opposing party thinks he can.

“The … almost universal [rule is] that an attorney who is clothed with no other authority than that arising from his employment in that capacity has no implied power by virtue of his general retainer to compromise and settle his client’s claim or cause of action.” 30 A.L.R.2d 944, 945. In 7 AmJur2d, § 156, it is said: “An attorney,[179 Ga.App. 414] merely by virtue of his general retainer, has no implied power to compromise and settle his client’s claim…. [S]pecial authorization or subsequent ratification by the client is essential before a compromise or settlement by the attorney will be binding on the client.”

In 7A C.J.S. § 214, it is said: “[T]he general rule [is] that an attorney cannot bind his client by contract or a compromise or settlement without express authority…. Where … there has been nothing beyond a mere employment or retainer of the attorney to represent the client in a cause and the attorney has thereby acquired no apparent authority to make a compromise or settlement … it is incumbent upon the opposing party to ascertain at his peril whether actual authority to take such action has been conferred upon the attorney. Accordingly, if the client has not held his attorney out to the opposing party as having any other or greater power than an attorney … commonly has, such other party is charged with knowledge that agreements of compromise or settlement do not come within the implied authority of the attorney….”

The plaintiffs in this case gave express instructions in writing to their attorneys that no settlement of their claims could be made without their consent. We are, however, required by Brumbelow to affirm the grant of summary judgment to the defendant based on plaintiffs’ own attorneys’ sworn affidavit that they disposed of their clients’ claims.

Judgment affirmed.

BANKE, C.J., and SOGNIER, J., concur.

ON MOTION FOR REHEARING.

Appellants propose a difference in fact between this case and Brumbelow, supra, to wit: in Brumbelow the plaintiff apparently placed no express restrictions upon his attorney’s authority to settle. But the holding in Brumbelow, though it exceeds its facts, clearly states that a settlement by an attorney is enforceable, and his authority is plenary, “unless it is limited by the client and that limitation is communicated to opposing parties…. Therefore … in the absence of knowledge [by opposing party] of express restrictions … the client will be bound by the acts of his attorney within the scope of his apparent authority….”

We note further that none of the authorities we cited, nor any we found, allowed that if there were no express restrictions the attorney had authority to settle. To the contrary, they all show it is unnecessary and redundant to require a client to place express restrictions on the attorney’s authority because mere retention of an attorney does not give him authority to compromise and that is why he does not have “apparent” authority. As we indicated in our opinion, as a matter of fact the public would “recoil in horror and deny it” if they were told their attorney could dispose of their case because they never told him not to.

Motion for rehearing denied.

 

Now, this case should be compared with the more recent case on the issue, Lord v. Money Masters, 210 Ga.App. 21, decided by the Court of Appeals in 1993.  That case goes with the idea that the attorney must have actual authority to settle the case for less than the total, known by the other side, for the settlement to be enforceable.  I think the difference between the two is that the other attorneys actually knew that the attorney acting improperly was not authorized to make that decision for the person, and that is the difference.

Laura J. Burton, Atlanta, for appellant.

Campbell & Dreger, Richard J. Dreger, Roswell, for appellee.

BIRDSONG, Presiding Judge.

Plaintiff Richard S. Lord filed a defamation suit alleging that agents of Money Masters, Inc. intentionally made false statements to others that Lord embezzled money, and caused Lord to be arrested for theft. According to Money Masters, Lord embezzled $125,000 in money orders after Lord bought appellee Money Masters’ check-cashing business. The money was to be refunded by appellee to third parties who had issued the money orders. According to appellee, when Lord refused to return the money, appellee had Lord arrested for theft.

Appellee moved for summary judgment based on Lord’s attorney’s agreement to a settlement by which Lord would release all claims against appellee and repay the money, and appellee would drop the criminal charges. However, the day after this settlement was allegedly agreed to, Lord’s attorney told appellee’s attorney that she had made a mistake and that Lord would not release all his claims. Lord did not execute the general release. He executed a release only of his claims arising out of the arrest. Lord’s attorney sent this release and the money to appellee’s attorney and asked appellee to forward the money to the issuers of the money orders. Appellee did so, which relieved its own liability, and asked the district attorney to drop the criminal prosecutions.

The trial court granted summary judgment to appellee, finding that while there was a dispute whether the attorneys ever agreed to the specific terms of appellee’s general release, it is undisputed that on appellee’s receipt of the limited release executed by Lord and the money, “and in reliance thereon,” appellee undertook all actions which it had agreed to undertake. The trial court granted summary judgment to Money Masters as to all claims. Lord appeals. Held:

Money Masters contends Lord’s attorney’s initial agreement to its settlement is binding on Lord under Brumbelow v. Northern Propane Gas Co., 251 Ga. 674, 308 S.E.2d 544 (1983). However, Brumbelow is to be narrowly construed and we are not authorized to extend its holding out of context of its facts. Addley v. Beizer, 205 Ga.App. 714, 720, 423 S.E.2d 398 (1992)(cert. denied). See, e.g., Bridges v. Bridges, 256 Ga. 348, 350, 349 S.E.2d 172 (1986).

Although Brumbelow at 675, 308 S.E.2d 544, held the attorney’s authority “may be considered” plenary, it did not say an attorney has absolute authority in fact, for he does not have such authority. Lewis v. Uselton, 202 Ga.App. 875, 879, 416 S.E.2d 94 (cert. denied). The law is: “Without special authority, attorneys cannot receive anything in discharge of a client’s claim but the full amount in cash.” OCGA § 15-19-6. State Bar DR 7-102(A)(9) provides: “[A] lawyer shall not … settle a legal proceeding or claim without obtaining proper authorization from his client.” “Special authority” means something more specific than the general authority which attorneys have. Vandiver v. McFarland, 179 Ga.App. 411, 413-414, 346 S.E.2d 854, cert. denied. An attorney can generally “obtain” “special authority” only when a specific settlement is proposed (Lewis at 880, 416 S.E.2d 94), or where he had prior authority to settle within certain limits.

Attorneys cannot legally or ethically compromise his client’s claims or rights without “obtaining” (DR 7-102(A)(9)) “special authority” (§ 15-19-6) for the settlement proposed. An attorney may not assume opposing counsel has a right which he knows he himself does not have. See Lewis at 878, 416 S.E.2d 94. Brumbelow is strictly construed because enforcement of unauthorized settlements significantly alters the legal and property rights of clients, promotes uncertainty in legal dealings, propagates litigation, and removes even the illusion of fidelity which is the bar’s stock in trade. Id. at 879, 416 S.E.2d 94. It puts the burden on the client to prove his attorney breached his trust and sacrifices the delicate relation of trust between client and lawyer, merely to give the opponent a bonus in the form of a settlement he had no right to expect in the first place. Vandiver at 412, 346 S.E.2d 854.

When a client employs an attorney, he does not lose his power to [210 Ga.App. 23] say whether he will compromise, and the attorney does not become owner of the litigation so as to be able to sell or give away his client’s rights. Evans v. Brooke, 182 Ga. 197, 207, 184 S.E. 800 (1936); Addley at 719-720, 423 S.E.2d 398. If unauthorized settlements are routinely enforced, “occasions might arise where a client’s entire property … might be agreed away, in spite of his protest, and he might be remitted to a suit [against his own attorney] by which nothing could be realized.” Davis v. First Nat. Bank of Blakely, 139 Ga. 702, 713, 78 S.E. 190 (1913). An assumption that unauthorized settlements can be enforced is an assumption that unauthorized settlements may be made. The only safeguard to an unauthorized disposition of a client’s claim or defense is to make it generally unenforceable, for if it cannot be enforced there is no point in making an unauthorized settlement or in relying on one. Lewis at 877, 416 S.E.2d 94. There is nothing onerous in making a settlement subject to the client’s approval, or in ascertaining the party’s actual agreement to a specific compromise before relying on it. See Addley at 722, 423 S.E.2d 398. Attorneys should expect that an agreement to settle depends on the client’s approval, and offers and acceptances are generally made on that basis. See Vandiver at 412, 346 S.E.2d 854. This is nothing new.

Under OCGA § 15-19-6 and DR 7-102(A)(9), Lord’s attorney had no right to compromise his claims without obtaining special authority. Appellee’s attorney should have known this for he had no such right himself. Unless an innocent party suffers actual detriment in justifiable reliance on a settlement, there is no reason to give him a bonus to the detriment of another innocent party. Lewis at 877, 416 S.E.2d 94; see Gen. Communications Svc. v. Ga. Pub. Svc. Commn., 244 Ga. 855, 856, 262 S.E.2d 96 (1979). See Hynko v. Hilton, 198 Ga.App. 308, 310, 401 S.E.2d 324 (1991).

Lord’s attorney advised appellee’s attorney as soon as she learned she had made a mistake. She forwarded the full disputed moneys to appellee’s attorney, with the release actually executed by Lord. A jury might find appellee’s attorney’s acceptance of the money and his action to drop criminal charges were done in reliance on the limited release which Lord executed; this alone prevents summary judgment. Moreover, although appellee contends it did these acts in reliance on the original settlement, such reliance was not innocent or justified, for it was made after appellee’s attorney knew that agreement was unauthorized and unapproved, so he did not deal with Lord’s agent on the assumption that it was authorized. Addley at 720, 423 S.E.2d 398. Nor did appellee’s attorney ascertain Lord’s attorney’s authority by asking Lord to execute the settlement. Id.

The judgment of the trial court is reversed.

Judgment reversed.

POPE, C.J., and ANDREWS, J., concur.

 

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