Legal Ethics Corner

Ethics Corner is designed to present ethical issues that practitioners might well face on a daily basis. It is a service of the Legal Ethics Committee of the San Diego County Bar Association for SDCBA members.

Duly-Appointed Agents, Including Attorneys, May Bind Principal for Settlement Purposes

Plaintiff sued for whistleblower retaliation and related causes of action, naming the Regents of the University of California and two individuals as defendants in Provost v. Regents of University of Cal., (Cal.App. 4 Dist., Dec. 14, 2011) 2011 WL 6188735; ____ Cal.App.4th ____; ____ Cal.Rptr.3d ____.  Regents cross-complained.

Following multiple mediation sessions, the parties reached an agreement in April of 2008 that in resulted in a stipulated settlement signed by the plaintiff, one of his lawyers, counsel for the individual defendants and an in-house attorney for Regents (Yee) who had been appointed as a party representative. Yee was authorized to sign on behalf of Regents and had attended all mediation sessions as a party representative.  The settlement stipulation provided that it was “subject to approval of Regents.”

By October, defense counsel had prepared a final settlement agreement and Regents had approved the settlement.  However, plaintiff advised at a voluntary settlement conference that he would not sign the final settlement agreement because of alleged “irregularities” that occurred at the mediation and before. 

Regents moved to enforce the stipulated settlement under Code of Civil Procedure section 664.6.  The trial court denied the motion on the ground that only counsel, not a party, had signed the settlement stipulation on behalf of Regents.  Following a writ of mandate in which Regents argued that Yee signed as a duly authorized representative, and an alternative writ by the Fourth District Court of Appeal, the trial court granted Regents’ motion and plaintiff appealed.

On appeal, the Fourth District Court of Appeal found that Yee’s designation and action on behalf of Regents fully satisfied the rationale announced in Levy v. Superior Court (1995) 10 Cal.4th 578, 586, which requires that a settlement writing be signed by the parties to be enforceable under section 664.6.  The parties’ assent is required because settling a case is not incidental to the management of a lawsuit and thus “requires the client’s knowledge and express consent.”

At the time of settlement negotiations, Yee was employed by Regents in the Office of General Counsel and was designated a party representative by Regents’ General Counsel and Vice President of Legal Affairs.  As an employee, Yee could be designated to execute the settlement on Regents’ behalf.

The Court of Appeal noted that not every corporate employee will qualify to act in every circumstance, but held it impracticable to require an officer to attend and participate in all settlements for them to be enforceable under section 664.6, in particular when a large corporation may be involved in frequent litigation.  Unlike in Levy, Yee signed the settlement stipulation as a designated employee, not just as an attorney-agent.

As a corollary, the court observed the individual defendants also benefitted from Yee’s status and signature upon the stipulation.  While the individual defendants did not sign the stipulated settlement themselves, the court found they satisfied the criteria of third-party beneficiaries.  As Yee’s signature was sufficient for Regents to enforce the settlement, which resolved all claims and compelled dismissal of the entire action, plaintiff could not continue against the individual defendants, either.

Eric R. Deitz

**No portion of this summary is intended to constitute legal advice. Be sure to perform independent research and analysis. Any views expressed are those of the author only and not of the SDCBA or its Legal Ethics Committee.**