Yale University v. Out of the Box, LLC
118 Conn. App. 800, 990 A.2d 869, 2010 Conn. App. LEXIS 596 (2010)
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Rule of Law:
An attorney has apparent authority to bind a client to a settlement agreement when the client's conduct, including acts, omissions, and the entire course of dealing, causes a third party to reasonably believe that the attorney possesses such authority.
Facts:
- In November 2001, Out of the Box, LLC, entered into a lease for property at 266 College Street in New Haven.
- In January 2005, Yale University acquired an abutting parcel of land, which included a shed and walkway that Out of the Box had been using.
- Yale offered a license agreement to Out of the Box for the use of the shed and walkway.
- Out of the Box refused to sign the license agreement, believing it had potential claims of adverse possession and prescriptive easement to the property.
- During the dispute, Suzette Franco-Camacho, a member of Out of the Box, emailed Bruce Alexander, a high-level Yale vice president, to resolve the matter, characterizing the issue as likely "below [his] concern."
- Alexander responded to the email but did not correct Franco-Camacho's characterization or state that his personal approval was required for any settlement.
- Yale's attorney, Thomas Sansone, and its director of university properties, David Newton, engaged in lengthy negotiations with Out of the Box and its attorney over several years.
- During the final settlement negotiations at the courthouse, Newton was present and agreed to each term of the settlement that Sansone signed on Yale's behalf.
Procedural Posture:
- Yale University filed a summary process action against Out of the Box, LLC, in the trial court.
- During a court-scheduled hearing, the parties' attorneys and representatives negotiated and signed a settlement agreement.
- The trial court accepted the settlement and entered it as a stipulated judgment.
- Yale University filed a motion to open and set aside the judgment, arguing its attorney exceeded his authority.
- The trial court conducted an evidentiary hearing and denied Yale's motion, finding the attorney possessed apparent authority to settle the case.
- Yale University, as the appellant, appealed the trial court's denial of its motion to the intermediate appellate court.
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Issue:
Does an attorney possess apparent authority to bind a client to a settlement agreement when the client's actions and omissions cause the opposing party to reasonably believe the attorney has settlement authority, even if the attorney lacks actual authority?
Opinions:
Majority - DiPentima, J.
Yes. An attorney possesses apparent authority to bind a client to a settlement when the principal's conduct, through its own acts or inadvertences, causes a third party to reasonably believe the attorney has such authority. The court's reasoning was that apparent authority is determined not by the agent's acts, but by the principal's. Here, the totality of Yale's conduct created this authority. This conduct included the long course of dealing where attorney Sansone and director Newton were the 'face' of Yale; the failure of Yale VP Alexander to correct the opposing party's assumption that the matter was below his level of concern, which constituted an omission that fostered the belief of delegated authority; and the presence and approval of Newton, a high-level employee, at the final settlement negotiations. This was not a case of authority arising merely from the retention of counsel, but from a specific course of conduct by the principal, Yale University.
Dissenting - Borden, J.
No. An attorney does not possess apparent authority to settle a case simply because the principal authorized them to negotiate, and the principal's actions in this case did not clothe the attorney with such authority. The dissent argued that the majority's conclusion improperly turns the law on its head. The authority to negotiate is distinct from the authority to settle, a right which rests with the client. The burden is on the third party to establish that the principal (Alexander) clothed the agent (Sansone) with apparent authority, not on the principal to proactively deny it. Alexander's email response showed he was concerned with the matter, and his only action was to permit negotiations, which cannot, by itself, create apparent authority to settle. Newton's presence was irrelevant as he was a subordinate who also lacked actual settlement authority.
Analysis:
This decision emphasizes that the creation of an attorney's apparent authority is a fact-intensive inquiry based on the totality of the principal's conduct. It serves as a significant caution to sophisticated corporate and institutional clients, highlighting that their omissions and the overall pattern of negotiations can be just as important as express grants of authority. The case implies that principals must be explicit about the limits of their agents' authority to avoid being bound by unauthorized settlements, especially when high-level executives are aware of the dispute but delegate negotiations to subordinates and attorneys.
