Trial Lawyer Has Apparent Authority to Settle Discrimination Case

A recent decision by New Jersey’s Appellate Division recognizes that, under the doctrine of apparent authority, a company’s attorney can bind it to a settlement whether or not the employer actually authorized him to settle the case.

Employment Lawsuit Settles in CourtJesus Gonzalez filed an employment discrimination lawsuit against his former employer, Electronic Integration Services, LLC, also known as Panurgy OEM.  More specifically, he claimed Panurgy fired him in violation of the New Jersey Law Against Discrimination (“LAD”), the Family & Medical Leave Act (“FLMA”) and the New Jersey Family Leave Act (“NJFLA”).

Shortly before a trial, Panurgy’s lawyer conveyed an offer to settle the case for $175,000.  Mr. Gonzalez accepted the offer, and the judge placed the terms of the settlement on the record.

Later the same day, Panurgy indicated that it did not want to honor the settlement and claimed it had not given its lawyer the authority to settle the case on its behalf.

After Mr. Gonzalez learned that Panurgy was unwilling to abide by the settlement agreement, he filed a motion to enforce the settlement.  In response, the lawyer who attended the settlement conference on behalf of Panurgy submitted a sworn statement in which he indicated that the company’s Chief Executive Officer had given him authority to settle the case.  In contrast, Panurgy claimed it did not give its lawyer any settlement authority, but rather the lawyer “went rogue.”

The trial court granted Mr. Gonzalez’s motion to enforce the settlement, finding that whether or not Panurgy’s lawyer had actual authority to settle the case, he had the apparent authority to do so.  The trial judge indicated that the lawyer had been the company’s only attorney in the case for approximately three years, had handled motions, mediation and settlement negotiations during the lawsuit, and was the company’s Designated Trial Attorney.

Panurgy appealed.  It claimed the trial court should have held a hearing to determine whether its lawyer had apparent authority to enter into the settlement agreement.

In a May 30, 2019 opinion, Gonzalez v. Electronic Integration Services, LLC, the Appellate Division affirmed the trial court’s ruling.  It explained that since New Jersey’s public policy gives a high importance to settling lawsuits, “settlement agreements will be honored ‘absent a demonstration of fraud or other compelling circumstances.’”

The appellate court further explained that when there is a dispute about a material fact on a motion to enforce a settlement, the trial court must conduct a hearing.  It also recognized that there was a factual dispute about whether Panurgy’s lawyer had actual authority to enter into the settlement on the company’s behalf.  However, it found there was no dispute that Panurgy’s lawyer had apparent authority to enter into the settlement agreement on its behalf.

The Appellate Division explained that apparent authority exists when a “client’s voluntary act has placed the attorney in a situation wherein a person of ordinary prudence would be justified in presuming that the attorney had authority to enter into a settlement, not just negotiations, on behalf of [a] client.” Accordingly, “sending an attorney to a settlement conference presumptively establishes that the attorney has authority to settle.”  Thus, the appellate court ruled that Panurgy’s lawyer had apparent authority to settle the lawsuit, and upheld the trial court’s ruling enforcing the settlement.