Client authority sustains lawyers. With client authority, a lawyer becomes an advocate, a deal maker, and the legal proxy for the client. Without client authority, a lawyer remains a potted plant, unable to make an agreement or advocate a substantive position that is binding on the client or the client's case.
What happens when a lawyer acts beyond the express authority given by a client? This can happen where a lawyer knowingly ignores client instructions. But more often, it can happen where a lawyer is unclear on a client's instructions, or a client misapprehends a lawyer's advice and later withdraws authority.
Maryland's Court of Special Appeals gave practical advice to lawyers and clients on this subject in 4900 Park Heights Avenue LLC v. Cromwell Retail, LLC. The court was asked whether a settlement reached in the trial court could be enforced against a party claiming a lack of express authority between client and lawyer.
The case involved a commercial landlord and its tenant, and a dispute over the tenant's right to build a tall sign outside the leased building. The landlord had warned the tenant that recorded declarations restricted the tenant's rights to erect the sign, and that the tenant risked a lawsuit by the landlord for violation of the restrictions. The tenant filed a lawsuit seeking a preemptive decision by the court that the intended sign was, indeed, permitted by the recorded declarations.
The case was hotly contested for over a year. One day before the scheduled trial the parties notified the court of a settlement. This meant the trial would not occur. The lawyers then arrived in court to announce the settlement "on the record." That means one or more lawyers for the parties describe the material terms of a settlement agreement so that the court's recording system preserves the agreement. In this case, the settlement was described by the landlord's lawyer, with the tenant's lawyer announcing his client's agreement to the settlement. Because the settlement included modifications to the declarations recorded in the land records, the parties advised the court that a more formal written document was to be drafted and signed by all parties. The court then issued a standard settlement order and sent the parties back to their offices to work out the agreement.
The negotiations over precise language of the settlement took several months, and the parties never did reach full agreement. This caused the landlord's attorney to bring the case back to court, seeking an order to enforce the settlement as it had been described and recorded in the record many months before.
In court, again, the tenant's lawyer advised that his client had not fully understood the broad reach of one particular concession in the settlement that had been put on the record. Through months of negotiation the lawyer had tried to further revise the term more to his client's liking- unsuccessfully.
The sticking point for the court was that the tenant's lawyer knew of his client's misapprehension on the same day as the settlement was put on the record. Instead of immediately notifying the court and all parties, counsel worked to massage the term into something less oppressive to his client.
The trial court made an order enforcing the agreement as it had been specifically stated on the record. The case wound up before the appellate court,which mostly affirmed the decision. On the issue of whether a confused client can authorize attorney action to make a binding settlement, the appellate court said "yes." Where the lawyer unequivocally represented that he had client authority, the client did not show up in court to state differently, and where the misapprehension was not brought out for several months, all others were entitled to rely on the apparent authority of the tenant's counsel. The misunderstood settlement terms was thus enforced against the tenant.
In our own practice, we work hard to assure that clients understand the costs and consequences of substantive decisions. The lesson of this case is that where a misunderstanding arises, it is important to bring it to the attention of the court and all parties, thus permitting all to revisit the misunderstood item and to avoid the prejudicial passage of time.
