by David Cosgrove
If parties to a lawsuit dispute whether a valid settlement agreement was entered into, the party purporting that an agreement was made may file a motion to enforce the agreement with the court. Vulgamott v. Perm, 154 S.W.3d 382, 387 (Mo. App. W.D. 2004). The trial court may take one of three possible avenues to decide a motion to enforce settlement: (1) the trial court may hold an evidentiary hearing on the motion to determine the disputed facts and then enter judgment after taking evidence to prove the agreement and any defenses the non-moving party may proffer; (2) the court may dispose of the motion on the pleadings pursuant to Rule 55.27; or (3) the trial court may treat the motion akin to that for summary judgment pursuant to Rule 74.04. Eaton v. Malinkrodt, lnc., 224 S.W.3d 596, 599 (Mo. banc 2007). Where the Court determines that a valid settlement agreement exists and the parties have agreed to release their claims, the proper course is for the Court to dismiss those claims and order the parties to execute a release. Kenney v. Vansittert, 277 S.W.3d 713, 722-23 (Mo. App. 2008).
Generally, these disputes arise when one party believes his attorney was not authorized to enter into or accept the purported settlement. “The rules of law applicable to principal and agent control the relation between an attorney and his clients.” State ex rel. A. M. T. v. Weinstein, 411 S.W.2d 267, 272 (Mo. App. 1967). The authority given to the attorney by the client may come in various forms.
“Actual authority is the power of the agent to affect the legal relations of the principal by acts done in accordance with the principal’s manifestations of consent to him.” Hardcore Concrete. LLC v. Former Ins. Services. Inc., 220 S.W.3d 350, 355 (Mo. App. SD. 2007) (quoting Restatement (Second) of Agency § 1 (1958)). Actual authority may be express or implied. Id.; (citing Nichols v. Prudential Ins. Co. of America, 851 S.W.2d 657, 661 (Mo. App. ED. 1993)). “‘Express authority is created when the principal explicitly tells the agent what to do’ and ‘[i]mplied authority consists of those powers incidental and necessary to carry out the express authority.”’ Id.; (citing Nichols, 851 S.W.2d at 661).
The type of authority that usually governs an attorney’s dealings with third parties or their counsel during settlement discussions is apparent authority. Apparent authority is not “incident to” the attorney client relationship, nor does apparent authority arise by reason of the representation. Rather, apparent authority is created by the conduct of the principal (client) which causes a third person reasonably to believe that the agent (attorney) has the authority to act for the principal. The Bar Plan v. Cooper, 290 S.W.3d 788, 792 (Mo. App. E.D. 2009). To determine the existence and scope of apparent authority, the focus is on the third party. Id. In determining whether apparent authority exists, the only consideration is the reasonableness of the belief of the third party that the attorney was in fact authorized to act. See Barton v. Snellson, 735 S.W.2d 160, 162 (Mo. App. 1987); Cooper, 290 S.W.2d at 792. By its very nature, apparent authority binds a client even where the attorney lacks actual authority.
In Missouri, a party contending that his attorney lacked authority to bind him to a settlement agreement carries a heavy burden. Bishop v. Heartland Chevrolet, 152 SW2d 893, 896 (Mo. App. W.D. 2005). Missouri Courts will only permit a party to avoid a settlement concluded by that party’s attorney where the evidence has failed to raise the presumption of authority to settle or where the fact-finder is truly convinced authority is lacking. Bolander v. City of Green City, 35 S.W.3d 432, 440 (Mo. App. W.D. 2000).
“The compromise of a pending suit by an attorney having apparent authority will be binding upon his client, unless it is so unfair as to put the other party upon inquiry as to the authority, or imply fraud.” Wenneker v. Frager, 448 S.W.2d 932, 937 (Mo. App. l969) (citing Black v. Rogers, 75 M0. 441, 1882 WL 9621 at *4 (Mo. 1882)). In other words, courts will only find a settlement negotiated by an attorney with only apparent authority to bind his client if it was not unfair and if there was no fraud in its procurement. See Stearns Bank NA. v. Palmer, 182 S.W.3d 624, 626 (Mo. App. ED. 2005) (finding settlement binding because “only allegations of unfairness in the agreement to dismiss or fraud in its procurement would undermine the attorney’s apparent authority” and party attacking the agreement made no allegations that it was unfair or procured by fraud);
Where a party’s attorney of record represents that he has authority to settle the client’s claim, and the attorney reaches an agreement with the opposing party to settle that claim, there is prima facie evidence of the authority to settle, and the authority to settle is presumed. Leffler v. Bi-State Development Aqenov, 612 SW2d 835, 837 (Mo. App. E.D. 1981) (citing Southwestern Bell Tele. Co. v. Roussin, 534 S.W.2d 273, 276 (Mo. App. 1976)). The conduct of the claimant’s attorney in negotiating a settlement can imply the authority to settle, shifting the burden to the party challenging the settlement to rebut the presumption of authority. McDowell, 758 S.W.2d at 482-83; Barton v. Snellson, 735 S.W.2d 160, 162-63 (Mo. App. 1987); and Leffler, 612 S.W.2d at 837-38.
Once apparent authority to settle has been established, the burden is thrust upon the party challenging settlement to prove that his attorney did not have the express authority which he claimed to have. Leffler, 612 S.W.2d at 837, n.4, (citing Roussin, 534 S.W.2d at 276).
Indeed, in cases where an attorney represents that he or she has authority from the client to accept a settlement offer, and did reach an agreement with the other party’s counsel to settle, Missouri Courts have placed a substantial burden on the client to disprove his attorney’s authority if the client wishes to avoid the settlement. Southwestern Bell Yellow Pages v. Dye, 875 S.W.2d 557, 561 (Mo. App. E.D. 1994). Finally, where the presumption of authority is raised, the settlement may only be avoided where the trier of fact is convinced that authority to settle was truly lacking. Bolander, 35 S.W.3d at 440 (emphasis added).
For instance, the rule stated in Leffler, 612 S.W.2d at 837 was:
Where it is shown that a party’s attorney of record “represented that he had [settlement] authority (from the client) and did reach an agreement with (the other party’s) counsel to settle ….”, then “it was incumbent upon (the party) to prove to the trial court that (his) attorney lacked authority to settle the case, since his act of settling…is presumed prima facie to be authorized.”
Id. (quoting Roussin, 534 S.W.2d at 276). The court went on to state that the “presumption of express authority from the client to settle” which arises when an attorney of record asserts such authority may be overcome by the party disputing the attorney’s authority. Id. “An ‘attorney of record’ means an attorney who has filed an appearance or pleading in the cause and is therefore presumed to have authority to bind his client.” Colla v. Colla, 614 S.W.2d 9, 11 (Mo. App. ED. 1981).
Missouri decisions subsequent to Leffler have criticized Leffler for espousing a “mutation of the general principles of agency” by “resort[ing] to a new species of authority, ‘presumptive’ or ‘presumed’ authority, rather than the equally serviceable concept of apparent authority.’ Rosenblum v. Jacks or Better of America West. Inc, 745 S.W.2d 754, 760-62 (Mo. App. E.D. 1988). Whether the application of the rule (i.e.: “presumptive authority”) or application of the doctrine of apparent authority applies, the conclusion is the same, as explained below.
In Barton, the Court addressed the enforceability of a settlement agreement reached pre-suit arising from a motor vehicle accident. 735 S.W.2d at 161-62. In that case, the claimant hired counsel to resolve her claim against the defendant driver. Id. at 161. Claimant’s counsel later retained co-counsel and together, they negotiated with an insurance adjuster employed by the defendant’s insurance company. Id. at 161. According to the insurance adjuster, after engaging in settlement negotiations with the plaintiff’s counsel over the course of five years, the case was settled between himself and the plaintiff’s counsel prior to suit being filed. Id. The plaintiff denied that she authorized her counsel to settle her claim, and thus filed suit. Id. The defendant immediately filed a motion to dismiss and to enforce the settlement. Id.
The trial court, applying the Leffler rule, found that the conduct of the plaintiff’s counsel in engaging in settlement negotiations “created the presumption that they had express authority to bind [the plaintiffs] to the settlement agreement.” Id. at 163. This was true even though the defendant’s insurance adjuster never asked the plaintiff’s counsel whether they had authority to settle the plaintiff’s claim, and the plaintiff’s counsel never expressly stated that the plaintiffs had accepted the defendant’s offer. The court commented that “the difference between an attorney expressly stating he has authority to settle a claim and his negotiating as if he did, without saying so, is miniscule at best.” More importantly, the reasonable impressions created by the attorney’s conduct in each instance do not differ. Id.
The Barton Court failed to find that the Leffler rule was inapplicable because no lawsuit had been filed by the plaintiffs at the time the case was settled. Rather, the Barton court found that authority to settle was presumed from the conduct of the plaintiff’s attorneys and the reasonable impressions created in the minds of third parties based on that conduct. This finding suggests that, at the heart of the Leffler rule lies a focus on the reasonable impressions created by conduct of counsel, and this focus is not removed by the manner in which counsel announces its representation to third parties.
However, consider the following situation. What if an attorney enters into a settlement agreement after learning of his client’s death and fails to reveal the client’s death to the adverse party? The death of a client during the course of representation begs the question of whether the attorney’s authority has terminated. Can apparent authority exist from the perspective of the adverse or third party who entered into a settlement even though the client had died?
In Missouri, it is clear that upon the death of a principal, an agent no longer has actual authority. Wood v. Hudson, 823 S.W.2d l58, l60 (Mo. App. ED. 1992) (finding that deceased defendant could not be liable for injuries resulting from accident with truck driven by decedent’s agent because the principal—agent relationship is terminated by death); see also Ridenaur v. Duncan, 291 S.W.2d 900, 905-06 (Mo. 1956) (finding that agent did not have authority to execute deed pursuant to principal’s explicit instructions because any authority conferred by a principal upon any agent to act terminated with the principal’s death).
This was solidified by the Missouri court of appeals in State ex rel. White v. Terte:
The general rule is that the relationship between an attorney and client in a lawsuit is one of agency, and that upon the death of the client, that relationship terminates, with all authority incidental thereto, and the attorneys have noauthority to take any further steps whatsoever in behalf of the deceased party unless and until authorized by the personal representatives of the deceased, duly qualified.
293 S.W.2d 6, 10 (Mo. App. 1956); see also Glaser v. Hornbeck. 477 S.W.2d 432, 433 (Mo. App. 1972) (finding that attorney’s attempt to file notice of appeal after his clients’ deaths was ineffective because his employment as attorney and authority to act as an agent ceased immediately upon their deaths). Thus, when the White court states that death terminates the attorney client relationship and all authority incident thereto, it is, in effect, stating that death terminates the attorney’s actual/express authority and implied authority (i.e.: the authority incidental to the attorney-client relationship).
Moreover, a cause of action for personal injuries, other than those resulting in death, shall not abate by reason of the injured person’s death, nor by reason of the death of the person against whom such cause of action shall have accrued; “but in case of the death of either or both such parties, such cause of action shall survive to the personal representative of such injured party.” Mo. Rev. Stat. § 5370201 (2009) (emphasis added). Further, Mo. Rev. Stat. 537.021.1 (2009) provides that:
The existence of a cause of action for an injury to property, for a personal injury not resulting in death, or for wrongful death, which action survives the death of the wrongdoer or the person injured, or both, shall authorize and require the appointment by a probate division of the circuit court of: (l) A personal representative of the estate of a person whose property is injured, or a person injured…
Therefore, it is clear that once a client dies during the course of representation, that any actual (express or incidental) authority terminates because the agency relationship ceases to exist. However, once a personal representative of the estate is appointed, the personal representative steps into the shoes of the deceased client and can create an attorney-client relationship.
What remains unclear is whether a third person can reasonably rely on apparent authority to enforce a settlement entered into after the client’s death. As stated above, in Missouri, the compromise of a pending suit by an attorney having apparent authority will be binding upon his client only if it is not so unfair as to put the other party upon inquiry as to the authority, or does not imply fraud. Therefore, for example, if the Court determines that a client’s death did not terminate the attorney’s apparent authority, in order for the settlement to be binding the Court must find that: (l) the terms of the settlement were not unfair; and (2) the attorney did not commit fraud in procuring the settlement.
The Restatement (Third) of Agency and Restatement (Third) of The Law Governing Lawyers, both conclude that death does not automatically terminate an attorney’s apparent authority to bind his client. Rather, such apparent authority is terminated only when the third party can no longer reasonably believe the attorney has the authority he claims to have. An excerpt from comment (b) to Restatement (Third) of Agency §3.11 is particularly apt:
An agent may act with apparent authority following the principal’s death or loss of capacity because the basis of apparent authority is a principal’s manifestation to third parties, coupled with a third party’s reasonable belief that the agent acts with actual authority. . . . Neither element requires that the principal consent or manifest assent at the time the agent takes action. When third parties do not have notice that the principal has died or lost capacity, they may reasonably believe the agent to be authorized.
Courts in other jurisdictions have also found that death of the principal does not terminate the apparent authority of his/her agent. In Schock v. US, the court commented as follows:
The doctrine of apparent authority exists in order to allow third parties to depend on agents without investigating their agency before every single transaction. if a third party had to confirm the agency relationship repeatedly, then it might as well deal directly with the principal. [The plaintiff] seeks to place the risk that a principal has died onto third parties, rather than on the principal. That is absurd.
56 F. Supp.2d 185, 187 (D.R.I. 1999).
Once again, absent the grant of express authority to settle a lawsuit, an attorney’s authority to do so should be analyzed in terms of apparent authority. Rosendblum v. Jacks or Better of America West, Inc., 745 S.W.2d 754, 760 (Mo. App. E.D. 1988). In Rosenbloom, 745 S.W.2d at 760, the court noted that, “regrettably, the cases in Missouri arising out of settlements gone awry have entailed a mutation of the general principles of agency.” The court observed that and its progeny, by focusing on the acts or representations of the attorney (agent), instead of the client (principal), in effect resorted to a new species of authority, “presumptive” or “presumed” authority, rather than the equally serviceable concept of apparent authority. Id. at 761-62. However, the court noted that the Leffler presumption is not wholly irreconcilable with the concept of apparent authority. Id. at 762. In this connection, the court pointed to the Restatement (Second) of Agency, § 49, comment c:
Inferences from agent’s position. Acts are interpreted in the light of ordinary human experience. If a principal puts an agent into, or knowingly permits him to occupy, a position in which according to the ordinary habits of persons in the locality, trade or profession, it is usual for such an agent to have a particular kind of authority, anyone dealing with him is justified in inferring that he has such authority, in the absence of reason to know otherwise. The content of such apparent authority is a matter to be determined from the facts.
The court then applied the general principles of agency to the case before it, and found that the trial court could have found that apparent authority existed based on the facts of the case. Specifically, the trial court could have found that the client knew that settlement negotiations were taking place and that the other party’s attorney was never on notice that there was a limitation put on the attorney’s authority. Id. at 762. Moreover, the attorney was knowingly permitted by the client to occupy the position of exclusive negotiator, and to make and reject offers. Id.
The analysis performed by the Rosenbloom court perhaps demonstrates why a party seeking to enforce a settlement might rely upon Leffler and its “presumptive” express authority. This author, however, believes that death terminates apparent authority. The Restatement (Second) of Agency, § 120 (1958) states that:
(1) The death of the principal terminates the authority of the agent without notice to him, except as stated in subsections (2) and (3) and in the caveat.
(2) Until notice of a depositor’s death, a bank has authority to pay checks drawn by him or by agents authorized by him before death.
(3) Until notice of the death of the holder of a check deposited for collection, the bank in which it is deposited and those to which the check is sent for collection have authority to go forward with the process of collection.
Caveat: No inference is to be drawn from the rule stated in this Section that an agent does not have power to bind the estate of a deceased principal in transactions dependent upon a special relation between the agent and the principal, such as trustee and beneficiary, or in transactions in which spacial rules are applicable, as in dealings with negotiable instruments.
Restatement (Second) of Agency § 120 Comment c. Apparent authority, which addresses the precise issue presented in this case, states:
Like authority, apparent authority terminates with the death of the principal. Third persons who, in ignorance of the death, deal with the former agent (who also may be ignorant of the death) have no rights upon tho contract against the estate of the deceased, unless the situation is one within the rules stated in Subsections (2) or (3) or the Caveat, except as they may be subrogated to any right which the agent may have because of a special contract with the principal.
An example of the application of this rule can be found in In re Estate of Kelly, 547 A.2d 284, 286 (NH. 1988), where the petitioners were not aware of the client’s death at the time they arrived at the settlement with the attorney. The petitioners brought an action to set aside a settlement arrived at after the death of the client. The petitioners alleged that actual, as well as apparent authority terminated with the death of the principal. Id. at 287. The court, looking to Restatement (Second) of Agency § 120 (1958), concluded that none of the exceptions to 120 applied, and that consequently the apparent authority of the attorney terminated with the death of his client. Id. at 288~89. Therefore, the settlement would not be enforced. Id. at 289.
Missouri courts have not adopted or cited to Restatement (Second) of Agency § 120. However, since its publication in 1958, Missouri courts have cited to and relied upon other sections of the Restatement (Second) of Agency.
On the other hand, the Restatement (Third) of Agency § 3.11 (2006) states as follows:
(1) The termination of actual authority does not by itself end any apparent authority held by an agent.
(2) Apparent authority ends when it is no longer reasonable for the third party with whom an agent deals to believe that the agent continues to act with actual authority.
Restatement (Third) of Agency § 3.11 Comment b. Principal death or loss of capacity, which addresses the precise issue presented in this case, states:
A principal’s death or loss of capacity does not by itself or automatically end the agent’s apparent authority. This is contrary to the position taken in Restatement Second, Agency § 120, Comment c. Change is warranted for several reasons, including the nature of apparent authority and various indications of policy contrary to the position taken in § 120.
An agent may act with apparent authority following the principal’s death or loss of capacity because the basis of apparent authority is a principal’s manifestation to third parties, coupled with a third party’s reasonable belief that the agent acts with actual authority. See §§ 2.03 and 3.03. Neither element requires that the principal consent or manifest assent at the time the agent takes action. When third parties do not have notice that the principal has died or lost capacity, they may reasonably believe the agent to be authorized.
Restatement (Third) of the Law Governing Lawyers § 31(3) (2000) also addresses the issue presented here:
A lawyer’s apparent authority to act for a client with respect to another person ends when the other person knows or should know of facts from which it can be reasonably inferred that the lawyer lacks actual authority, including knowledge of any event described in Subsection (2).
Subsection (2) lists circumstances under which a lawyer’s actual authority to represent a client ends, which includes when the client dies. Restatement (Third) of the Law Governing Lawyers § 31(2)(b).
Prior to the publication of either Restatement (Third) of Agency or Restatement (Third) of the Law Governing Lawyers, courts outside of Missouri found that death does not terminate apparent authority. For example, in Schock v. U.S., 56 F. Supp.2d 185, 187 (D.R.I. 1999), an attorney withdrew all the funds from the account of the decedent. The decedent’s only heir brought an action against the bank from which the funds were withdrawn. Id. In addressing the issue of whether a principal’s death terminated the apparent authority of the attorney to withdraw the funds, the court looked to Restatement (Second) of Agency § l20 cmt. c (1958), which states that apparent authority terminates with the death of the client. Id. at l 93. The court noted that this statement of the law was “illogical.” Id. The court found that:
The public policy for which the state  created apparent agency would be eviscerated by adopting the rule that [plaintiff] promotes. The doctrine of apparent agency exists in order to allow third parties to depend on agents without investigating their agency before every single transaction. If a third party had to confirm the agency relationship repeatedly, then it might as well deal directly with the principal. [Plaintiff] seeks to place the risk that a principal has died onto third panics, rather than on the principal. That is absurd.
Other cases since the publication of Restatement (Third) of Agency have also found that the death of a principal does not terminate the apparent authority of an agent. See Grizzle v. US. Bank, 892 N.E.2d 983, 986 (Ohio Ct. App. 2008) (finding that summary judgment was inappropriate Where genuine issue of material fact existed as to whether defendant was acting under apparent authority to withdraw funds after principal’s death).
Missouri courts have not adopted or cited to either Restatement (Third) of Agency § 3.11 or Restatement (Third) of the Law Governing Lawyers § 31(3). It should be noted, however, that both were only recently published, giving Missouri courts somewhat limited opportunity to rely on their provisions. At least one Missouri court has relied upon other sections of the Restatement (Third) of Agency. See Milligan v. Chesterfield Village GP. LLC, 239 S.W.3d 613, 622 (Mo. App. SD. 2007) (citing to Restatement (Third) of Agency § 6.01 (2005)).
A question that has not been analyzed by Missouri courts is whether the deceased client’s attorney’s failure to inform the adverse party of the client’s death before procuring a settlement constitutes the type of fraud that would void the settlement. See Promotional Consultants. Inc. v. Logsdon, 25 S.W.3d 501, 505 (Mo. App. ED. 2000) (finding settlement binding because “there was nothing in the record or arguments of counsel that the settlement agreement, or any of the provisions contained within, was unfair or otherwise fraudulently obtained”). Based on the foregoing principals, this author believes it does. Ultimately, regardless of whether the third party’s basis for believing the existence of apparent authority was reasonable, the procurement of a settlement was fraudulently obtained by the deliberate failure of an attorney to advise the opposing party of the client’s demise.