F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
JUN 30 2000
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
ANTHONY HEUSER AND NONA
HEUSER,
Plaintiffs-Appellants,
v.
FRANK KEPHART; FARMINGTON
UTILITY SYSTEM; JACK No. 98-2233
MCQUITTY, Code Compliance
Officer; STEPHEN HRZICH, City
Electrical Inspector, City of
Farmington; JAMES CHEVERIE,
ROGER LASATER, SAN JUAN
COUNTY BOARD OF COUNTY
COMMISSIONERS,
Defendants-Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO
(D.C. No CIV-95-257-MV/LCS)
Debra D. Poulin, Santa Fe, New Mexico, (Richard Rosenstock, Santa Fe, New
Mexico and Jeffrey J. Buckels, Albuquerque, New Mexico on the briefs) for the
plaintiffs-appellants.
David G. Reynolds (Wayne E. Bingham with him on the brief), Crider, Bingham &
Hurst, P.C., Albuquerque, New Mexico, for the defendants-appellees Hrzich,
McQuitty and City of Farmington Utility System.
Robert C. Armijo (Gregory W. MacKenzie with him on the brief), Civerolo,
Gralow & Hill, Albuquerque, New Mexico, for defendants-appellees Kephart,
Cheverie, Lasater and San Juan County Board of County Commissioners.
_______________________________
Before EBEL, HOLLOWAY and KELLY, Circuit Judges.
HOLLOWAY, Circuit Judge.
_____________________________
Plaintiffs/appellants Anthony and Nona Heuser (plaintiffs) bring this timely
appeal from a judgment of the district court dismissing, pursuant to a putative
settlement agreement, a suit they brought under 42 U.S.C. § 1983. The Section 1983
action alleged constitutional violations by state, county and city officials in denying
electrical services to plaintiffs, inter alia. Contending that no enforceable settlement
agreement had been reached, the plaintiffs opposed the dismissal below and now ask
this court to reverse the judgment of dismissal.
I
A
Because the issues in this appeal are limited to those involving the
enforceability of the putative settlement agreement of April 15, 1998, the “Outline of
Agreement,” we need only provide a brief general sketch of the underlying dispute.
Except for findings of the district court noted below, we summarize only the
plaintiffs’ allegations.
Plaintiffs apparently live near to but not within the city limits of Farmington,
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New Mexico and before the present controversy, received their electrical service from
the Farmington Utility System. Defendant Kephart, a building inspector for the
county, allegedly entered plaintiffs’ property without a warrant in 1991. As a result
of what he saw then, he brought a criminal charge of constructing a building without
a permit. Eventually plaintiffs were acquitted of that charge. While that criminal
case was pending, however, a search warrant was obtained for some of the
outbuildings on plaintiffs’ property, and the warrant was executed on March 11, 1992.
The actions of some of the defendants in obtaining and executing this search warrant
are central events alleged by plaintiffs in the instant case.
The district judge found that the following facts were undisputed. 1 Kephart
was not properly certified as a building inspector. None of the officers who assisted
Kephart in presentation of the search warrant application demonstrated their
credentials to conduct an administrative inspection. The allegations in the search
warrant application were limited to violations of county ordinances regarding proper
set back and/or fire separations, failure to obtain building permits, and the existence
1
These findings occurred in a rather unusual procedure. Some or all of the
defendants had filed a motion for summary judgment raising the defense of
qualified immunity. When that motion was denied, the defendants commenced an
interlocutory appeal. Plaintiffs then moved the district court to certify that the
appeal was frivolous, arguing that the appellate court did not have jurisdiction of
the appeal under the doctrine of Johnson v. Jones , 515 U.S. 304 (1995). The
district court granted the plaintiffs’ motion, thus determining that proceedings
could continue in the district court during the pendency of the interlocutory
appeal. See Stewart v. Donges , 915 F.2d 572, 574-79 (10th Cir. 1990).
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of five or more structures “that appear to be fire hazards to adjacent buildings and
property lines.” Aplt. App. 63, 65-66.
The district judge further found that no allegations of electrical or plumbing
code violations were made in the affidavit and Kephart was neither qualified nor
authorized to conduct electrical or plumbing inspections. Kephart asked defendant
Hrzich to investigate the electrical wiring of the plaintiffs’ buildings in spite of the
lack of allegations of violations of electrical codes in the search warrant affidavit.
No allegations of criminal activity were made in the search warrant affidavit. The
district judge found that in the affidavit defendant Deputy Sheriff Cheverie “falsely
accused Plaintiffs of committing crimes in violation of a county ordinance and
misinformed the magistrate who issued the criminal search warrant that Plaintiffs’
refusal to allow Kephart right of entry on their property without a warrant in itself
violated the building code.” The search warrant authorized a search only by Kephart,
but other inspectors or law enforcement officers (ten of them according to plaintiffs’
allegations) joined him in executing the warrant. While executing the warrant, two
of the defendants entered the plaintiffs’ residence, which was expressly excluded
from the search warrant. Id.
About two months after execution of the search warrant, plaintiffs filed a tort
claim with the county. On June 10, 1992, within a week of plaintiffs’ filing of the
claim, two of the defendants cut off plaintiffs’ electrical service. Service was
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restored on April 2, 1993, but on May 26, 1993, it was again terminated by some of
the defendants. Service was then not restored for about five years, under
circumstances discussed below. Altogether, the plaintiffs were without electric
service from the City for almost six years, relying on electricity from their own
generator during that time.
B
About three years after the March 1992 execution of the search warrant,
plaintiffs commenced the present Section 1983 action. Plaintiffs, who originally were
proceeding pro se, sued the Governor and the Attorney General of New Mexico; the
City Council of Farmington and the Farmington Utility System (the City); the Board
of Commissioners of the County of San Juan (the County); and various county and
city officials. Plaintiffs invoked 42 U.S.C. § 1983, inter alia, alleging that the
defendants had violated plaintiffs’ constitutional rights. The district court thus had
jurisdiction under 28 U.S.C. §§ 1331 and 1343. The state officials were dismissed
during the progress of the case and are not parties to this appeal.
C
On April 15, 1998, about three years after the action had been commenced, a
settlement conference was conducted with a court-appointed mediator. At the
conference there was agreement on the basic contours of a settlement, which the
mediator summarized in a hand written document styled “Outline of Agreement” and
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which was signed by plaintiffs, their attorney, and attorneys for the City, Defendants
and for San Juan County. Aplt. App. 106-109. (The attorney for the City also was
representing the city employees and officials; similarly the attorneys for the County
were also representing the county employees and officials.)
We quote the most pertinent provisions of the Outline: 2
1. Counsel for the County and City Defendants agree that they
will recommend to their respective clients that said clients jointly pay
the total sum of $237,500 in full and complete settlement of all claims
in this above-referenced action filed or that could have been filed
including attorneys fees and costs.
2. Plaintiffs agree that if said sum of $237,500 is jointly offered
as indicated above by the County & City Defendants that they will
accept said offer, if it also includes the terms set out below.
3. Farmington Utility System agrees that if a full and complete
settlement is reached, they will promptly restore electrical service to the
Heuser’s [sic] property . . . and the Heusers will be reinstated as regular
customers without need of an inspection, subject to the Heusers[]
signing a Hold Harmless Agreement.
4. The Heusers agree to sign a full and complete standard release
in a form satisfactory to Defendants which Release shall contain
language that Defendants do not admit liability.
Aplt. App. 107-108.
As made clear in an affidavit of counsel later submitted to the district court, the
attorney representing the City at the mediation session did not have authority to
2
We have a typed “transcript” of the Outline provided by plaintiffs and
appended to their brief. Defendants have not contested the accuracy of plaintiffs’
typed version of the original hand-written document.
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commit the City to any settlement, which required the approval of the City Council. 3
Before that body could meet and approve the proposal, plaintiffs communicated their
dissatisfaction with it and indicated that they would not accept the payment called for
therein. Upon receiving notice that the settlement was being rejected by the
plaintiffs, the district judge sua sponte scheduled a hearing to determine whether
plaintiffs’ electricity could be safely restored immediately. Aplt. App. 70-71. Before
the day of the scheduled hearing, the service was restored.
The defendants moved for enforcement of the purported settlement agreement,
which the district court granted over plaintiffs’ objection. The court entered judgment
based on that order, dismissing plaintiffs’ action as settled. Plaintiffs then filed a
motion under Fed. R. Civ. P. 59(e) asking the court to vacate the order enforcing the
settlement. The judge denied that motion, again holding that the Outline constituted
an enforceable agreement, and plaintiffs commenced this appeal.
II
In the first of the two orders upholding the settlement agreement, the district
judge ruled that the language of the Outline was unambiguous so that there was no
3
The New Mexico Supreme Court has noted that it “‘is fundamental that an
attorney does not by reason of his employment have authority to compromise his
client’s cause of action absent an emergency requiring prompt action.’” See
Augustus v. John Williams & Assoc., Inc. , 589 P.2d 1028, 1030 (N.M. 1979)
(quoting Hayes v. Eagle-Picher Industries, Inc ., 513 F.2d 892, 893 (10th Cir.
1975)).
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need for extrinsic evidence as to the meaning of its terms. The judge found no merit
in plaintiffs’ contention that the terms of the Outline were not sufficiently definite for
creation of a binding contract, and she found that the parties intended to form a final
enforceable agreement, as opposed to merely documenting the progress of their
negotiations. Her findings stated:
Since the City Defendants are self insured, the City Council had to give
final formal approval of the settlement amounts. Affidavit of Robin D.
Strother. Accordingly, the parties agreed that “Counsel for the County
and City Defendants will recommend to their respective clients that said
clients jointly pay the total sum of $237,500 in full and complete
settlement of all claims in the action filed or that could have been filed
including attorneys fees and costs.”
Aplt. App. at 76.
The condition of approval of the settlement amount by the City Council was a
condition precedent to enforcement of the contract, the district court ruled, but not a
condition to formation of the contract. Accordingly, the City had a reasonable time
to perform the condition. The judge also rejected the plaintiffs’ allegation that they
had signed the Outline under duress. The judge opined that the real reason for the
plaintiffs’ resistance was the belated belief that they were not receiving enough
money for their claims and that the court could not relieve the parties of their
commitments.
On plaintiffs’ motion to amend the judgment, which argued that there was no
consideration for their promise to accept the deal if offered, the district judge
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specifically held that the consideration was sufficient:
There was a bilateral contract here: in return for Defendants’ agents’
promise to recommend that the City pay the negotiated amount,
Plaintiffs promised not to back out on the deal that Defendants’
attorneys had negotiated (at great expense to the Defendants) before
Defendants could act on that recommendation. New Mexico follows
Section 71 of the Restatement (Second) of Contracts (1979). Under that
Section, “[t]o constitute consideration, a performance or a return
promise must be bargained for.” . . . . The Court finds that the parties
bargained for the exchange of promises and that the cessation of
litigation was the goal of the bargaining process. . . . . Defendants,
through their agents, provided adequate consideration for Plaintiffs’
promise to accept the monetary settlement if it was offered. Settlement
negotiations between individuals and public entities would be
meaningless if Courts allowed individuals to undo days of negotiation
(with their underlying expense) by simply changing their minds before
the entity can take formal action to complete the bargain.
Aplt. App. 92-93 (emphasis added).
III
We review a district judge’s approval of a settlement agreement for an abuse of
discretion. See United States v. Hardage , 982 F.2d 1491, 1495 (10th Cir. 1993). We
have held that the enforcement and interpretation of settlement agreements in Title VII
cases are governed by federal common law because such settlements are “inextricably
linked” to the underlying law of Title VII. Snider v. Circle K Corp. , 923 F.2d 1404,
1407 (10th Cir. 1991) (“Federal common law governs the enforcement and
interpretation of such agreements because ‘the right of the litigants and the operative
legal policies derive from a federal source.’ Fulgence v. J. Ray McDermott & Co. , 662
F.2d 1207, 1209 (5th Cir. 1981).”). Our later opinion in Morris v. City of Hobart , 39
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F. 3d 1105, 1112 (10th Cir. 1994), addressed the issue whether federal or state law
governs the interpretation of such settlement agreements in the context of subject
matter jurisdiction and said that the “cause of action [for breach of contract arising out
of private settlement of a Title VII claim] is a subject traditionally relegated to state
law.” 4 Here the district judge said that “‘Construction of a settlement agreement
generally is governed by state law.’” Memorandum Opinion and Order, Appellants’
App. at 78 (quoting Brockman v. Sweetwater County School Dist. No. 1 , 25 F.3d 1055,
1994 WL 170795 (10th Cir.), cert. denied , 513 U.S. 951 (1994)).
In the instant appeal, the parties do not present a controversy over which law
governs. In fact the briefs for all the parties say that state law governs interpretation
of the settlement contract. Appellants’ Brief at 20 n. 6; Response Brief of Appellees
Frank Kephart et al. at 21; Response Brief of Appellees McQuitty et al. at 18.
Moreover we feel that the applicable principles of contract law are not different in
federal and New Mexico law. Accordingly, we turn to the parties’ arguments which we
will consider under basic contract rules.
Plaintiffs first argue that the defendants’ alleged promise was illusory and thus
legally insufficient as consideration for plaintiffs’ promises. Therefore, plaintiffs
4
The divergence of views of other courts on the applicability of federal or
state law is noted in 19 Charles A. Wright, Arthur R. Miller & Edward H. Cooper,
Federal Practice & Procedure: Jurisdiction 2d § 4541 at p. 394 n. 132 (2d ed.
1996) (collecting cases).
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contend, the district court erred in holding that the Outline constituted a legally
enforceable contract. We agree. It was apparent from paragraphs 1 and 3 of the
Outline’s numbered provisions that the $237,500 settlement had to be submitted to, and
be given approval by, the City and County authorities. Aplt. App. at 108.
Thus, there was no legally sufficient consideration for the plaintiffs’ promise to
accept the contemplated settlement offer. The district judge found that the
consideration, which she also found had been specifically bargained for, was the
attorneys’ promise to recommend the terms of the proposed settlement to their clients.
The court’s ruling notes that the attorneys were acting as agents. Section 147 of the
Restatement (Second) of Agency provides: “Unless otherwise agreed, a disclosed or
partially disclosed principal is a party to a contract, if not negotiable or sealed, made
by his agent within his authority.” See also id. § 292 & comment a. Here, the language
of the Outline makes it clear that the parties “otherwise agreed” that the defendants as
principals were not parties to the “agreement” but were to be given a recommendation
to offer a specific amount of money, plus other consideration, to the plaintiffs if they
chose to do so.
Under the terms of the Outline, the defendants were not obligated to extend the
offer to plaintiffs, and the Outline noted the operative procedure “if said sum of
$237,500 is jointly offered . . . by the County and City Defendants . . .” Outline of
Agreement, paragraph 2, Aplt. App. at 107. The defendants were completely free to
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choose between two alternatives – they could accept the attorneys’ recommendation
and extend the offer, or they could reject the recommendation. Obviously, if the
defendants were to choose the second alternative, plaintiffs would have received
nothing in exchange for their agreement. It is well settled that a promise by a party in
the alternative is not consideration except under limited circumstances:
A promise or apparent promise is not consideration if by its terms
the promisor or purported promisor reserves a choice of alternative
performances unless
(a) each of the alternative performances would have been
consideration if it alone had been bargained for; or
(b) one of the alternative performances would have been
consideration and there is or appears to the parties to be a substantial
possibility that before the promisor exercises his choice events may
eliminate the alternatives which would not have been consideration.
Restatement (Second) of Contracts § 77 (1981).
Where, as here, a party “has an unfettered choice of alternatives, and one
alternative would not have been consideration if separately bargained for, the promise
in the alternative is not consideration.” Id., comment b. In circumstances very similar
to those presented here, it has been held that an apparent promise subject to the
“unfettered discretion” of a municipality’s governing body to accept or reject is “a
classic example of an illusory promise.” Mastaw v. Naiukow , 306 N.W. 2d 378, 380
(Mich. Ct. App. 1981) (“Since the Detroit Common Council had unfettered discretion
to accept or reject the settlement, its options were in no way limited by the supposed
settlement.”). Similarly in the instant case the defendants made no binding promise but
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had the unfettered discretion to accept or reject the proposed terms. Hence this is a
clear example of an illusory promise.
New Mexico cases have applied this principle, holding that where the purported
promise to perform actually leaves it to the discretion of the promisor, the alleged
promise is illusory and not consideration as a matter of law. See Board of Education
v. Hamilton Construction Co. , 891 P.2d 556, 561 (N.M. Ct. App. 1994), cert. denied ,
890 P.2d 1807 (N.M. 1995); Acme Cigarette Services, Inc. v. Gallegos , 577 P.2d 885,
889 (N.M. Ct. App. 1978). As the court explained in Hamilton Construction : “A valid
contract must possess mutuality of obligation. Mutuality means both sides must
provide consideration. It is also elementary that a contract, which leaves it entirely
optional with one of the parties to perform, is not founded on mutual promises.” 891
P.2d at 561 (internal citations and quotation marks omitted).
The purported contract in Hamilton Construction was for the purchase of real
property, but the written agreement provided forty days for the buyer to complete its
due diligence work “and to review and approve or reject all matters pertaining to this
transaction.” Id. at 558. The escrow arrangements provided that buyer “may” deposit
funds with the escrow agent. The New Mexico court held that there was no contract:
“[B]ecause Buyer’s promise to perform under the Agreement and [escrow] Instructions
was entirely at its discretion, any consideration contained in such a promise would be
illusory.” Id. at 561. Because the purported contract in the instant case likewise left
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it entirely to the discretion of the defendants whether to accept or reject the proposed
terms, we hold that the district court erred in concluding that the parties had entered
into a binding contract.
In Joseph E. Montoya and Associates v. State of New Mexico , 704 P.2d 1100
(N.M. 1985), another ruling similar to that of the Michigan Court in Mastaw , 306 N.W.
2d at 380, was made. The New Mexico Supreme Court there held:
Even without consideration of New Mexico law requiring DFA approval
of state agency contracts, a contract never came into being under
traditional contract principles. Part of the bargain between HSD and
Montoya was that the proposed contract would not become effective
unless and until DFA approval was obtained . . . Because this condition
precedent was not satisfied, no contract came into being.
704 P.2d at 1102.
Defendants contend that there was consideration for the plaintiffs’ promise to
accept the designated sum because the attorneys were bound by their promise to
recommend the settlement. Defendants correctly point out that the district judge ruled
that this was the promise for which the plaintiffs had specifically bargained, as our
quotation supra from her order shows. We conclude nevertheless that the Outline is
unenforceable, even if we assume that the district judge was correct in her ruling that
the plaintiffs specifically bargained for only the attorneys’ promise to recommend the
settlement to their clients (as opposed to bargaining for the anticipated offer of money
and restoration of electrical services from the defendants under the terms of the
Outline). The attorneys’ promise is not consideration because the attorneys promised
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only to do that which they were as counsel separately entitled to do – make a
recommendation to the City and County. We assume that the attorneys promised to
recommend the settlement to their clients because, in the exercise of their independent
judgment and adhering to their ethical obligation of loyalty to their clients, the
attorneys had concluded that it was in their clients’ best interests to approve the
settlement.
The dissent argues that the recommendation from the attorneys, contemplated in
the Outline of Agreement, serves as consideration flowing from a third party supporting
the settlement agreement as performance given “by some other person.” See
Restatement (Second) Contracts § 71(4). This contention is premised on a
misconception of the City and County counsel as a third party. The misconception runs
counter to the parties’ and the attorneys’ treatment of such counsel not as third parties,
but as agents of the City and County. The district judge found that “Defendants,
through their agents, provided adequate consideration. . .”. Aplt. App. at 93. In their
brief before us, the County defendants recognize that their counsel were acting as their
agents . Response Brief of Appellees Kephart, et al. at 27 (“Plaintiffs bargained for the
Defendants’ agents[’] promise that they would recommend the settlement to their
clients”). The Response Brief of Appellees McQuitty, et al. at 24 and 25, implicitly
recognizes their counsel as their agents (the offer had been “accepted by the Appellees,
through counsel. . .”). Thus the recommendations of counsel to accept the settlement
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must be treated as coming from the City’s and County’s agents, and cannot serve as
third party performance given “by some other person.” Restatement (Second) Contracts
§ 71 (4). 5
In sum, the attorneys’ promise is not sufficient as a matter of law to serve as
consideration from the defendants to support this purported contract because the
defendants simply made no enforceable promise. Because we have determined that
there was no consideration given to the plaintiffs to make their promise enforceable at
law, we need not reach other issues raised by the plaintiffs.
IV
The judgment of the district court is reversed and the case is remanded for
further proceedings.
5
Moreover the wording of the Outline of Agreement refutes the dissent’s
suggestion that the agreement contained “no such language” as that in Montoya v.
State of New Mexico , 704 P.2d at 1101, showing that the agreement in Montoya
was not to be effective until a given date or approval by a state Department. To
the contrary, the Outline of Agreement in the instant case clearly conditioned the
duty of the plaintiffs to accept the settlement, saying “ if said sum of $237,500 is
jointly offered as indicated above . . . they [plaintiffs] will accept said offer.”
Aplt. App. at 108.
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Heuser v. Kephart , Case No. 98-2233
EBEL, Circuit Judge, dissenting
I disagree with the majority’s conclusion that the settlement outline fails for
lack of consideration. In my view, the promise of the City and County attorneys to
recommend ratification of the settlement constitutes sufficient third-party
consideration to support an agreement. I therefore respectfully dissent.
The cases relied upon by the majority are not persuasive under the facts
presented by this case. First, the majority notes that the New Mexico Supreme
Court has held that, absent emergency circumstances or preauthorization, an
attorney may not “‘compromise his client’s cause of action.’” Augustus v. John
Williams & Assocs., Inc. , 589 P.2d 1028, 1030 (N.M. 1979) (quoting Hayes v.
Eagle-Picher Indus., Inc. , 513 F.2d 892, 893 (10th Cir. 1975); see Majority Opinion
at n.3. The Augustus case, however, does not describe the situation we are
presently addressing. In the case at bar, the lawyers merely supplied valid third-
party consideration in the form of a promise to recommend the settlement to their
clients. 1 They did not, as the Augustus case prohibits, affirmatively bind the City
The majority opinion dismisses the possibility that the attorneys supplied
1
third-party consideration because, the opinion states, the parties have chosen to
characterize the attorneys as agents of the City and County. However, even
assuming that the attorneys did not act both as agents for the City and County and
as third parties, the majority’s point is misguided. If acting as agents, then the
attorneys’ promise affirmatively to recommend the settlement is direct
consideration flowing from the promisee. The fact remains that the Heusers
bargained for this affirmative act by the attorneys, and it was a meaningful
(continued...)
or County or otherwise compromise their interests. Rather, they made a promise
that induced the Heusers to agree to the settlement.
The majority also cites cases for the proposition that “where the purported
promise to perform actually leaves it to the discretion of the promisor, the alleged
promise is illusory and not consideration as a matter of law.” Majority Opinion at
13 (citing Board of Educ. v. Hamilton Constr. Co. , 891 P.2d 556, 561 (N.M. Ct.
App. 1994); Acme Cigarette Servs., Inc. v. Gallegos , 577 P.2d 885, 889 (N.M. Ct.
App. 1978)). 2
This discussion likewise overlooks the presence of third-party
consideration in the present case. Although the City retained the option of either
approving or rejecting the proposed settlement, the attorneys obligation to
recommend the settlement was firm and definite.
I would conclude that the attorneys promise to recommend the settlement was
sufficient consideration supporting the settlement agreement. It is well-settled that
1
(...continued)
restraint on the attorneys’ freedom which constitutes adequate consideration,
regardless of whether it is viewed as third-party consideration or party
consideration.
I also note that the majority’s reliance on
2
Joseph E. Montoya & Assocs.
v. State of New Mexico , 704 P.2d 1100 (N.M. 1985) is misplaced because that
case is plainly distinguishable from the present facts. The alleged agreement in
Montoya contained a explicit provision stating that the agreement was not to
become effective until “January 1, 1983, or upon approval by the Department of
Finance and Administration, whichever is later.” Id. at 1102. The outline at
issue in the case at bar contains no such language, and that case did not involve
third-party consideration as is the case here.
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consideration may flow from a third-party. See Restatement (Second) of Contracts
§ 71(4) (“The performance or return promise may be given to the promisor or to
some other person. It may be given by the promisee or by some other person .”)
(emphasis added); 2 Corbin on Contracts § 5.11 (1995 Rev. Ed.) (“[I]n this country
it is indisputable that the consideration need not move from the promisee.”).
The majority seeks to dismiss the value of the attorneys’ promise as
consideration “because the attorneys promised to do that which they were as
counsel separately entitled to do – make a recommendation to the City and County.”
Majority Opinion at 15. The majority then explicitly “assume[s] that the attorneys
promised to recommend the settlement to their clients because, in the exercise of
their independent judgment and adhering to their ethical obligation of loyalty to
their clients, the attorneys had concluded that it was in their clients’ best interests to
approve the settlement.” Id. This reasoning is misguided. The attorneys had an
ethical and professional obligation to present the settlement to their clients, but they
were under no duty to affirmatively recommend it. Furthermore, the assumption
that the attorneys must have concluded that it was in their clients’ best interest to
accept the settlement is unfounded. The attorneys may very well have concluded
that this was the best settlement offer that they could negotiate with the Heusers,
but that it was perhaps still too generous. Whatever tension might exist between
the lawyers’ promise to recommend the settlement and their professional obligation
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not to advise a client to accept an undesirable settlement does not alter the fact that
the attorneys are not obligated to affirmatively recommend every settlement offer
presented to their clients.
Here the Heusers obtained a clear commitment from the City’s and County’s
attorneys to recommend the settlement for adoption. That commitment was an
obvious benefit to the Heusers, as it would greatly facilitate the likelihood that the
City and County would approve the settlement. It was similarly a detriment to the
attorneys, who thereby diminished their own options. Whatever implication this
may have had as between the City and County and its attorneys is of no
consequence to the Heusers. From the Heusers’ perspective, the commitment by the
City’s and County’s attorneys was clear and valuable consideration, and in my
opinion, it supports the settlement agreement.
Thus, I would find that the attorneys’ promise represented valid third-party
consideration supporting the agreement. I respectfully dissent.
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Heuser v. Kephart
Court: Court of Appeals for the Tenth Circuit
Date filed: 2000-06-30
Citations: 215 F.3d 1186
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