Authority to Settle

KBL Mediation Authority to Settle

Authority to Settle

Authority to settle means legal authority to settle. It does not refer to corporate or personal authority. Authority to settle is of course a requirement of party representatives to a mediation. It seems the authority to settle rule is always strictly adhered to. Yet, some professionals have mistakenly believed otherwise. That is a problem for reasons which can be found in my article Neutral Does Not Mean Passive. It discusses another rule with a parallel misunderstanding.

Rule 1.720(c) of the FRCP defines authority to settle.

FRCP 1.720 (c) Party Representative Having Full Authority to Settle. A “party representative having full

authority to settle” shall mean the final decision maker with respect to all issues presented by the case who has the legal capacity to execute a binding settlement agreement on behalf of the party. Nothing herein shall be deemed to require any party or party representative who appears at a mediation conference in compliance with this rule to enter into a settlement agreement.

1.720 (c) requires that a party representative be able to make the final decision. The final decision is the decision as to whether to settle. Prior to such a decision many other decisions may be made, none of of which are the final decision. The requisite legal capacity can be presumed if an employment or representation agreement exists. It is not destroyed by corporate or client guidelines, instructions, or restrictions. In other words, an attorney can have full legal authority or capacity to settle but have restrictions placed on him or her by the insurance company, corporation, or client and still be in compliance with the rule to appear with full authority to settle.

Legal authority exists because a settlement agreement reached in mediation is enforceable. It can withstand a defense that the amount exceeds personal instructions. The confusion with some is in not understanding that legal authority exists regardless other restrictions.

The 2011 Amendment in the Committee clarifies.

2011 Amendment. Mediated settlement conferences pursuant to this rule are meant to be conducted when the participants actually engaged in the settlement negotiations have full authority to settle the case without further consultation. New language in subdivision (c) now defines “a party representative with full authority to settle” in two parts. First, the party representative must be the final decision maker with respect to all issues presented by the case in question. Second, the party representative must have the legal capacity to execute a binding agreement on behalf of the settling party…

Again, the rule refers to legal authority by defining authority to settle in two parts: the ability to make a final decision, and; the capacity to bind. The issue is whether the party representative’s agreement is binding. And, goals and limits on dollar amounts will affect that.

In summary, by the rule’s definitions, party representatives have authority to settle notwithstanding restrictions place on them. Interestingly, if one did not, the mediator is to report to the court as a non appearance if it is discovered in a joint session but maintain confidentiality if it is discovered in caucus. See MEAC, MQAP 99-002.

 


 

Email: Keith@KeithBradyLaw.com

 

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