Nelson v. Consumers Power Co.
497 N.W.2d 205 · Michigan Court of Appeals · 1993
Facts
America E. Nelson, M.D., filed suit against Consumers Power Company to recover damages for injuries she allegedly sustained in a motor vehicle accident. Her attorney, J. Martin Bartnick, negotiated a $20,000 settlement with defendant's counsel after mediation. A dispute arose between Nelson and Bartnick, with Bartnick claiming Nelson authorized the settlement and Nelson claiming her acceptance was conditional on an MRI report. The trial court did not resolve this factual dispute but ruled that defense counsel could rely on Bartnick's representations. The settlement was confirmed in a letter signed by Bartnick.
Procedural history
Plaintiff Nelson filed suit against defendant Consumers Power Company in the circuit court. Defendant moved to enforce a settlement agreement. The circuit court ruled that defense counsel was entitled to rely on the plaintiff's attorney's representations and enforced the $20,000 settlement, entering judgment against the defendant for that amount. Plaintiff appealed this decision, and the case reached the Court of Appeals.
Issue
Does an attorney, acting solely in the client's interest, have the apparent authority to settle a lawsuit on behalf of the client, even if the client disputes actual authorization? Is such a settlement enforceable against the client?
Holding
Yes, attorneys possess apparent authority to settle a lawsuit on behalf of their client, making the settlement enforceable. The circuit court's judgment enforcing the $20,000 settlement was affirmed.
Rule
When a client hires an attorney and holds them out as counsel, the attorney is clothed with apparent authority to settle claims connected with the matter. A third party may enforce a settlement agreement reached with the attorney, even if the attorney acted contrary to the client's express instructions, unless the third party had reason to believe the attorney lacked authority. The client's remedy in such a situation is to sue their attorney for professional malpractice. This rule is subject to MCR 2.507(H), which requires settlement agreements to be made in open court or in writing subscribed by the party or their attorney. The court adopted this rule to prevent an unworkable situation where litigants could not rely on opposing counsel's representations.
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