FOR PUBLICATION
ATTORNEYS FOR APPELLANT: ATTORNEYS FOR APPELLEES:
ATLEY C. PRICE MARK A. LIENHOOP
Braje & Nelson Newby, Lewis, Kaminski & Jones
Michigan City, Indiana LaPorte, Indiana
LEE DABAGIA
Sweeney, Dabagia, Donoghue, Thorne,
Janes & Pagos
Michigan City, Indiana
RED ARROW VENTURES, LTD., THOMAS )
W. HAYES, CLAUDIA LANGMAN, and )
CAROL P. EASTIN, )
)
Appellants-Defendants, )
)
vs. ) No. 46A05-9701-CV-9
)
JUANITA ELLEN MILLER f/k/a )
JUANITA ELLEN GRADOWSKI, )
)
Appellee-Plaintiff. )
APPEAL FROM THE LAPORTE SUPERIOR COURT
BARTEAU, Judge
2. Whether the trial court properly awarded the plaintiff attorney fees.
3. Whether the trial court erred when, during the Motion to Enforce
Settlement Agreement hearing, it refused to disqualify plaintiff's counsel from
representing the plaintiff.
Affirmed in part and reversed in part.
trial lasted three days and occurred in May of 1996. At the end of the trial, the judge
informed the parties that, although he would be ruling against the defendants, he had not yet
determined what amount of damages would be awarded to Miller.
About an hour after the trial had concluded, the defendants' attorney, Steven Ruffalo,
met with Miller's attorney, Lee Dabagia, at the latter's office. The two attorneys discussed
whether a settlement might be reached between the parties. Suggesting an amount of money
that the plaintiff might be willing to accept from the defendants in settlement, Dabagia
"tendered a figure" to Ruffalo. R. 1641. In response, Ruffalo suggested that he might be
able to convince the defendants to settle for the tendered amount.
Later that day, Ruffalo discussed Dabagia's tendered amount with the defendants.
Ruffalo then informed Dabagia, by telephone, that the tendered amount was not satisfactory
to Defendant Langman.
Two days later, the attorneys again spoke with each other by telephone. During their
conversation, Dabagia told Ruffalo that Miller would accept $21,000 in settlement. Ruffalo
responded that the defendants were satisfied with the $21,000 amount. Ruffalo then faxed
Dabagia a letter, dated May 17, 1996, which stated, in relevant part:
Dear Lee:
As we discussed today, the parties have agreed to settle their dispute for
a lump sum payment of $21,000 from Claudia Langman and Tom Hayes to
Juanita Gradowski/Miller.
Tom and Claudia will be talking with a banker on Monday, in
connection with obtaining a loan to make the payment. I will call you Monday
to give you a status report on the loan. Since the money will be by means of
the bank financing, my clients anticipate that it will take thirty (30) to sixty
(60) days for the loan to be processed and funded.
R. 1742. In reply, Dabagia, on May 20, 1996, faxed and mailed to Ruffalo a letter which
stated, in relevant part:
Dear Steve:
I acknowledge receipt of your letter facsimile transmission dated May
17, 1996, confirming that the parties . . . have agreed to settle all disputes for
a lump sum payment of $21,000.00 from Claudia Langman and Tom Hayes
to Juanita Gradowski-Miller.
As further agreed, payment of the agreed settlement by your clients will
be made no later than July 17, 1996.
R. 1744. After this letter was sent, Ruffalo asked Dabagia to tell the trial judge that a
settlement had been reached and that judgment should not be entered. Then, on June 4, 1996,
Ruffalo sent Dabagia a letter which stated, in relevant part:
Dear Lee:
Please let this letter confirm that the terms of the parties' agreement are
accurately set forth in your letter of May 20, 1996. I trust that you have
contacted [the trial judge] to advise him of our accord so as to insure that no
judgment is entered in connection with this matter.
. . . .
[P]lease forward to me the appropriate Stipulation to Dismiss so that I can
obtain my client's signature and forward the Stipulation together with payment
on to you in due course.
R. 1746. Dabagia subsequently prepared a stipulation to dismiss and sent six copies of it,
along with a letter dated June 5, 1996, to Ruffalo.
Between July 16 and July 18 of 1996, Dabagia telephoned Ruffalo, inquiring into the
status of the settlement. Ruffalo said that he was preparing a mutual release agreement, and
he faxed it to Dabagia soon after their telephone conversation. Dabagia then faxed Ruffalo
a letter which expressed Dabagia's satisfaction with the mutual release agreement and
requested that Ruffalo send Dabagia "the settlement check together with [the defendants']
signatures on the Release and Stipulations of Dismissal . . . ." R. 1759.
After this, Dabagia attempted, without success, to contact Ruffalo during the next few
days. Dabagia finally spoke with Ruffalo around July 30, 1996. At that time, Ruffalo told
Dabagia that the defendants "didn't want to pay the settlement[.]" R. 1644. Dabagia then
filed, on Miller's behalf, a Motion to Enforce Settlement Agreement. A hearing on this
motion was held on August 30, 1996, and September 16, 1996. At the end of the hearing,
the trial court granted the Motion to Enforce Settlement Agreement and issued a written
judgment which stated, in relevant part:
Having heard testimony of the witnesses, examined all admitted
exhibits and after consideration of oral argument made by counsel, the Court
now finds that the Plaintiff's Motion to Enforce Settlement Agreement should
be granted and that Plaintiff should further be awarded attorney fees in the sum
of ONE THOUSAND DOLLARS . . . .
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED, that
the Motion to Enforce Settlement Agreement filed by Plaintiff . . . is hereby
granted and judgment is now entered against the Defendants . . . in the sum of
TWENTY-ONE THOUSAND DOLLARS . . . together with interest from this
date forward . . . .
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that all
other claims, counter-claims and cross-claims made and pending in this action
are hereby dismissed, said judgment enforcing the Settlement Agreement and
awarding attorney fees representing a final judgment among the parties on all
issues herein.
R. 249.
Indiana law views an attorney as a powerful agent. An attorney has apparent
authority to dismiss a case, to allow judgment against the client, and to do all
things ordinarily done with respect to the litigation for which the attorney was
hired.
At least until September 1996, the law of Indiana with respect to the
authority a party grants its attorney through the retention agreement remained
as set forth years ago; with the probable exception of the need to modify
pronouns to reflect today's profession, that statement of Indiana law remained
unchanged by later decisions:
The attorney for the plaintiff was in court, objecting to the
proposed dismissal. His authority is not only presumed, but
conclusively established by written contracts of employment. . . .
"In the general management of a suit the attorney has a very
extensive authority. * * * The conduct of a suit except in a
matter arising in the argument or hearing before the court is
exclusively under the control of the attorney of record in it."
The authority which an attorney exercises under a general
retainer is not the subject of uncertainty. "He is more than the
mere agent as to the business committed to his care. He is the
sole manager."
Miedreich v. Rank, 40 Ind. App. 393, [396-97,] 82 N.E. 117, 118 (1907)
(citations omitted); accord, Thompson v. Pershing, 86 Ind. 303[, 310] (1882)
("The allegation in the complaint, that the attorney of the appellant had [no]
authority to make the agreement upon which the judgment was rendered in the
original action, must be understood to mean that the appellants had not, in fact,
authorized him to make the agreement. But, by employing him to appear for
them in the action as their attorney, they did impliedly authorize him to make
such agreement. An attorney may, without express authority, bind his client
by agreement that judgment may be taken against him, and that, too, though
the attorney know that his client has a good defence to [said] action. If he acts
contrary to the express directions of his client, or to his injury, the client must
look to the attorney for redress."). At least until September 1996, these
principles continued to control Indiana cases. See, e.g., Mirka v. Fairfield of
America, Inc., 627 N.E.2d 449, 450 n.1 (Ind. Ct. App. 1994) ("In the absence
of fraud by the attorney, the client is bound by the actions of his attorney . . .
even though the attorney is guilty of gross negligence."); Farm Credit Services
v. Estate of Decker, 624 N.E.2d 491, 495 (Ind. Ct. App. 1993) ("[T]he general
and long standing rule in this jurisdiction is that absent fraud or collusion
between the attorney and the opposing side, acts or omissions of the attorney
are attributable to the client.").
Several Indiana cases have held that an attorney has the apparent authority to settle a claim without the client's consent. Ferrara v. Genduso, 214 Ind. 99, [100-02,] 14 N.E.2d 580, 581[-82] (1938) ([appellants] retained counsel to defend them in foreclosure suit, but did not expressly authorize attorneys to settle case; attorneys nonetheless agreed with opposing counsel to entry of agreed judgment, and did not appear for trial; [appellants'] efforts to set aside judgment rejected); Guydon v. Taylor, 115 Ind. App. 685, [690,] 60 N.E.2d 750, 751 (1945) ("This attorney was clothed, under the law, with ample authority to bind appellant by agreeing to the rendition of the judgment set forth in the transcript filed by the Justice of the Peace."); Evansville Improvement Co. of Vanderburgh County v. Gardner, 75 Ind. App. 401, [408- 09,] 128 N.E. 471[, 473] (1920) ("In this case appellant had joined in the execution of the mortgage for the payment of which the real estate was [sold by the trustee], under the order of the court. When the assignment was made she employed an attorney who represented her throughout the assignment proceedings, being present and joining in or acquiescing in each step taken, pertaining to the sale of the real estate involved. That she was bound by his acts has been repeatedly decided."); accord, International Vacuum, Inc. v. Owens, 439 N.E.2d 188, 190 ([Ind. Ct. App.] 1982) (no abuse of discretion in refusing to vacate default judgment when court's notices to defendant's attorney were returned undeliverable, and attorney failed to keep himself apprised of court proceedings); see also Devenbaugh v. Nifer, 3 Ind. App. 379, [380-82,] 29 N.E. 923, [923-24] (1892) (defendant awaited word from attorney as to when trial was to be held; a week before trial, according to client and attorney, attorney dispatched deputy sheriff to client's house with blank subpoenas for client's witnesses, with instructions to complete forms for deputy to deliver, but deputy was too drunk to reach client's house, so client remained ignorant of trial date; client failed to appear for trial, and attorney assumed client was abandoning defense of case, and consented to entry of judgment in full amount of claim; appellate court upheld refusal to set judgment aside: "His employment in the cause generally gives such attorney the power to agree to an entry of judgment, and, if he violates his instructions, the client must look for redress to the attorney."); Biddle v. Pierce, 13 Ind. App. 239, [246-47,] 41 N.E. 475, 477 (1895). The attorney also has the right to dismiss the claim on which the attorney was retained, without the client's consent. Cory v. Howard, 88 Ind. App. 503, [505,] 164 N.E. 639, [639-40] (1929) ("As the dismissal of a suit does not bar the bringing of another for the same cause of action, the attorney of record has the implied authority to discontinue the action if he sees fit. . . . As the attorney had the authority to make the agreement to dismiss the action, it follows that appellant was bound thereby the same as if he had made the agreement himself.").
In light of this apparent authority granted by law, a party seeking to
resolve litigation was free to discuss settlement with the attorney as if
discussion were with the client. Black v. Krauss, 119 Ind. App. 529, [539,] 85
N.E.2d 647, 651 (1949) ("Luhring's dealings with Bippus and Walker in the
Walker office at the time of [the] delivery of the deed, which dealings were at
the instance and request of Mrs. Black's attorneys and in response to their letter
to Luhring requesting settlement in the manner which was finally carried out,
was clearly equivalent to such dealing directly with Mrs. Black. . . .").
One recent appellate decision contained language that appears to signal
a retreat from the historic breadth of an attorney's agency. In Klebes v. Forest
Lake Corp., 607 N.E.2d 978 (Ind. Ct. App. 1993), the clients had authorized
their attorney to attempt to settle a case. The attorney did so, but the clients
disliked the settlement's terms and refused to sign the dismissal papers. The
trial court reduced the settlement to judgment over the clients' objection, and
the clients appealed. In affirming, the court of appeals wrote, "Although a
client has full authority over the decision whether to settle the case or proceed
to trial, Ind. Professional Conduct Rule 1.2, attorneys act as agents of their
clients and may enter enforceable settlement agreements on their behalf if they
first secure their client's consent to do so. Mid-States Aircraft Engines v. Mize
Co.[, 467 N.E.2d 1242, 1248 (Ind. Ct. App. 1984)]; Miedreich v. Rank[, 40
Ind. App. 393, 82 N.E. 117 (1907)]." [Klebes, 607 N.E.2d at 982.] Whether
the clients consented to settlement negotiations was not an issue in the case,
so the suggested limitation on the attorney's authority to settle a claim can only
be considered dicta.
. . . .
[Then,] [i]n September 1996, the Indiana Court of Appeals decided a
case at odds with the cases discussed above. In Gravens v. Auto-Owners Ins.
Co., 666 N.E.2d 964 (Ind. Ct. App. 1996), Gravens retained an attorney to sue
his insurer. Gravens did not authorize his attorney to settle the claim, but the
attorney did so anyway, before filing suit. Gravens hired another attorney,
who filed suit, and the insurer defended on the basis of accord and satisfaction.
The trial court granted summary judgment to the insurer, but the court of
appeals reversed. The appellate court's brief opinion explained, first its belief
that it was writing on a clean slate, and then its reasoning:
Indiana law is well-settled that an attorney has, by virtue
of his employment, the general implied authority to do on behalf
of the client all acts in or out of court necessary or incidental to
the prosecution or management of the suit or the
accomplishment of the purpose for which he was retained.
United Farm Bureau [Mutual] Insurance Company v. Groen,
486 N.E.2d 571, 573 (Ind. Ct. App. 1985). However, neither
party has cited, nor are we aware of any Indiana authority which
disposes of the precise question presented in this case, that is,
whether an attorney has the implied authority to settle a case
without the authorization or consent of the client.
979 F. Supp. 1222, 1227-31 (N.D. Ind. 1997) (footnotes omitted).See footnote
2
See also Natare Corp.
v. Aquatic Renovation Sys. Inc., No. IP 95-C-0145 B/S, 1997 WL 763480, at *3 (S.D. Ind.
Dec. 4, 1997), in which Chief Judge Sarah Evans Barker noted that "the Indiana Court of
Appeals in Gravens . . . cast doubt on Indiana's long-standing doctrine that an attorney has
authority to bind the client to a settlement without the client's consent . . .
."
evidence." Union Fed. Sav. Bank v. INB Banking Co. S.W., 582 N.E.2d 426, 428 (Ind. Ct.
App. 1991). "We must affirm the trial court's judgment if it can be sustained on any legal
theory supported by the evidence[,]" id., and "we consider only the evidence most favorable
to the judgment together with all reasonable inferences drawn therefrom." Id.
Ruffalo's letter to Dabagia of May 17 states that "the parties have agreed to settle their
dispute for a lump sum payment of $21,000 . . . ." R. 1742. Dabagia's May 20 letter to
Ruffalo confirms that "the parties . . . have agreed to settle all disputes for a lump sum
payment of $21,000.00 . . . ." R. 1744. Ruffalo's June 4 letter informs Dabagia that "the
terms of the parties' agreement are accurately set forth in [Dabagia's] letter of May 20 . . . ."
R. 1746. This correspondence is compelling evidence which could warrant a finding that the
parties' attorneys reached a settlement agreement disposing of all claims between Plaintiff
Miller and the defendants. Because such a settlement agreement can be enforced against the
defendants even if they did not consent to be bound by it, sufficient evidence supports the
trial court's judgment.
Id. Attorney fee awards are authorized by Indiana Code Section 34-1-32-1, which provides
that:
(b) In any civil action, the court may award attorney's fees as part of the cost
to the prevailing party, if it finds that either party:
(1) brought the action or defense on a claim or defense that is
frivolous, unreasonable, or groundless;
(2) continued to litigate the action or defense after the party's
claim or defense clearly became frivolous, unreasonable, or
groundless; or
(3) litigated the action in bad faith.
A defense is frivolous "(a) if it is taken primarily for the purpose of harassing or maliciously injuring a person, or (b) if the lawyer is unable to make a good faith and rational argument on the merits of the action, or (c) if the lawyer is unable to support the action taken by a good faith and rational argument for an extension, modification, or reversal of existing law." Kahn v. Cundiff, 533 N.E.2d 164, 170 (Ind. Ct. App. 1989). A defense is unreasonable "if, based on a totality of the circumstances, including the law and facts known at the time of the filing, no reasonable attorney would consider that the . . . defense was worthy of litigation or justified." Id. at 170-71. A defense is groundless "if no facts exist which support the legal claim relied on and presented by the losing party." Id. at 171. In litigation, bad faith "implies the conscious doing of a wrong because of dishonest purpose or moral obliquity." Figg v. Bryan Rental Inc., 646 N.E.2d 69, 76 (Ind. Ct. App. 1995) (quoting Watson v. Thibodeau, 559 N.E.2d 1205, 1211 (Ind. Ct. App. 1990) (quoting Young v. Williamson, 497 N.E.2d 612, 617 (Ind. Ct. App. 1986))). "The trial court's decision to grant or to deny
attorneys' fees will not be disturbed absent an abuse of discretion." Kovenock v. Mallus, 660
N.E.2d 638, 643 (Ind. Ct. App. 1996), trans. denied.
In defending against Miller's motion, the defendants argued that a settlement
agreement could not be enforced against them in the absence of their consent to be bound by
it. They cited Klebes and Gravens in support of their argument, and they put forth evidence
which, they claimed, suggested that their consent to be bound was lacking. Although we
may disapprove of the legal authority upon which the defendants based their argument, we
cannot say that the defense they constructed was illegitimate or without merit. There is no
evidence in the record to support a finding that the defendants' litigation of their defense was
at any time frivolous, unreasonable, groundless, or conducted in bad faith. The trial court's
award of attorney fees is therefore unauthorized by statute, and the trial court abused its
discretion by making such an award.
Indiana Professional Conduct Rule 1.12,See footnote
3
argue that the trial court erred when it refused to
disqualify Attorney Lienhoop.
Because the defendants have failed to allege that Lienhoop's participation in the
proceedings prejudiced them, we conclude that the defendants have presented no issue of
error here.See footnote
4
Affirmed in part and reversed in part.
HOFFMAN, J., concurs.
SHARPNACK, C.J., concurs in result.
Converted from WP6.1 by the Access Indiana Information Network