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North Brunswick Residents Against High Density Housing v. Township Council of North Brunswick

A-4465-05T3 (N.J. Super. App. Div. 2007) (Unpublished)

SETTLEMENTS — Sending an attorney to a judicial settlement conference raises the presumption that the attorney has the authority to settle the matter.

A corporation opposed the rezoning of a property located in a certain municipality. The property had originally been zoned for low-density residential use, and had been re-zoned for the construction of a planned adult community. The corporation hired an attorney and filed a complaint against the municipality challenging the validity of the zoning change. The contract purchaser of the property, who planned to develop the adult community, intervened.

The corporation’s attorney and its trustees discussed settlement of the case. The trustees informed the attorney that they would only authorize settlement negotiations on certain terms. The attorney informed the developer’s attorney that any settlement would have to be approved by a vote of the trustees. After some time, the trustees agreed to proceed with the process of obtaining a formal settlement. They cautioned the corporation’s attorney that the decision to pursue a settlement agreement did not constitute acceptance of a settlement, since the parties had not yet agreed upon any details. The attorney then instructed her secretary to contact the court and adjourn an upcoming case management conference, which seemed unnecessary due to the decision to attempt settlement. She then instructed her secretary to send a letter to the court stating that “the case is being settled.” The secretary sent a letter that, in fact, stated that the matter “had been settled.” Based on the letter, the court cancelled the case management conference, and dismissed the lawsuit. As a settlement had not yet been reached, the corporation moved for reinstatement of the complaint.

The settlement discussions continued for several months, and the corporation’s attorney assured the opposing counsel that she had the authority from the corporation to proceed with discussions. After negotiating an agreement which the trustees voted to approve, the attorney alerted the court that the case was settled and could be dismissed. Weeks later, according to the opposing counsel, the attorney advised opposing counsel that although the trustees had approved the settlement, the members of the corporation wanted to repudiate the settlement and demanded additional terms and an increase in the monetary award. The attorney claimed that while she had prepared a stipulation of settlement, she had also informed opposing counsel that the corporation would likely have additional requirements to be included in the agreement. The lower court dismissed the complaint and deemed the settlement agreement binding.

The corporation appealed, and the Appellate Division reversed and remanded the case for further proceedings to determine if the parties reached a settlement. The Court explained that lawsuit settlements are contracts, and in the absence of fraud or other compelling circumstances, courts should enforce settlements just like any other contracts. If parties agree on the essential terms and show the intent to be bound by those terms, they have created an enforceable contract. A conditional acceptance containing terms not found in the original proposal does not constitute an acceptance and is not binding. The Court further explained that settlements do not have to be placed on the record or gain court approval in order to be valid. However, it also noted that the record must contain a sufficient factual basis for judicial enforcement of the settlement agreement.

Additionally, the Court explained that for a settlement to have been reached, the corporation’s attorney must have had the authority from the corporation to settle. Sending an attorney to a settlement conference raises the presumption that the attorney has the authority to settle. The Court stated that apparent authority can also be found where the client denies granting authority to settle, but places the attorney in a position where people would presume that she has the authority to settle.

The Court concluded that the record was not sufficient to demonstrate that the case was settled. It found that there were factual disputes over the terms of a settlement, as well as whether the corporation’s attorney had the authority to settle. Because the record was insufficient to enforce the agreement, the Court reversed the lower court’s dismissal of the complaint, and remanded the case to determine if the parties had reached a settlement.

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