Luethke v. Suhr8/9/2002
2d 858 (2002).
ANALYSIS
This appeal requires us to consider when, and under what circumstances, a lawyer may bind his or her client to a settlement agreement entered into without express authority from the client. In order to answer this question, we must review a few well-settled principles unique to the practice of law and derived from the nature of the attorney-client relationship.
Nebraska law is clear that the decision to settle a lawsuit belongs to the client; because the client bears the risk when settling or refusing to settle a dispute, it is the client, not the lawyer, who should assess whether the risk is acceptable. Wood v. McGrath, North, 256 Neb. 109, 589 N.W.2d 103 (1999). Additionally, the Code of Professional Responsibility, Canon 7, EC 7-7, dictates the boundaries of an attorney's authority to settle claims without the client's express authority as follows:
In certain areas of legal representation not affecting the merits of the cause or substantially prejudicing the rights of a client, a lawyer is entitled to make decisions on his or her own. But otherwise the authority to make decisions is exclusively that of the client and, if made within the framework of the law, such decisions are binding on the lawyer. As typical examples in civil cases, it is for the client to decide whether to accept a settlement offer . . . .
We observed and noted these ethical considerations in Smith v. Ganz, 219 Neb. 432, 363 N.W.2d 526 (1985).
[3,4] Thus, as a general rule, in this state and in a vast majority of other jurisdictions, lawyers may enter settlement agreements only when the client expressly authorizes the lawyer to do so. The ordinary employment or retainer of a lawyer to represent a client with respect to litigation does not of itself give the lawyer the implied or apparent authority to bind the client by a settlement or compromise of the claim; and, in the absence of express authority, knowledge, or consent, the lawyer cannot do so. A lawyer's execution of a settlement agreement without a client's knowledge or consent constitutes a breach of duty to the client; and it may constitute a fraud upon the court. See 7A C.J.S. Attorney & Client ยง 214 a. (1980). See, also, e.g., Malave v. Carney Hosp., 170 F.3d 217 (1st Cir. 1999) (construing federal law); Garabedian v. Allstates Engineering Co., 811 F.2d 802 (3d Cir. 1987) (apparently construing Pennsylvania law); Blanton v. Womancare Inc., 38 Cal. 3d 396, 696 P.2d 645, 212 Cal. Rptr. 151 (1985); Cross v. Dist. Court In & For 1st Jud. Dist., 643 P.2d 39 (Colo. 1982); Dillon v. City of Davenport, 366 N.W.2d 918 (Iowa 1985); Clark v. Burden, 917 S.W.2d 574 (Ky. 1996); Hallock v. State, 64 N.Y.2d 224, 474 N.E.2d 1178, 485 N.Y.S.2d 510 (1984); Midwest Federal v. Dickinson Econo-Storage, 450 N.W.2d 418 (N.D. 1990); NEET v. Silver Street Partnership, 148 Vt. 99, 528 A.2d 1117 (1987); Hays v. Fischer, 161 Ariz. 159, 777 P.2d 222 (Ariz. App. 1989); Kazale v. Kar-Lee Flowers, 185 Ill. App. 3d 224, 541 N.E.2d 219, 133 Ill. Dec. 382 (1989); Townsend v. Square, 643 So. 2d 787 (La. App. 1994); Gojcaj v Moser, 140 Mich. App. 828, 366 N.W.2d 54 (1985); Schumann v. Northtown Ins. Agency, Inc., 452 N.W.2d 482 (Minn. App. 1990); Southwestern Bell Yellow Pages v. Dye, 875 S.W.2d 557 (Mo. App. 1994); Amatuzzo v. Kozmiuk, 305 N.J. Super. 469, 703 A.2d 9 (1997); Royal v. Hartle, 145 N.C. App. 181, 551 S.E.2d 168 (2001); Annot., 90 A.L.R.4th 326 (1991).
The appellants argue, however, that under Nebraska agency law, Wickenkamp can bind Luethke to a settlement because she acted with apparent authority in her correspondence with Plessman. The appellants cite Nebraska cases where a lawyer a
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