## Facts

- Louis Fennell, an African-American employee, sued TLB Kent Company and a supervisor under 42 U.S.C. § 1981, alleging wrongful discharge based on race and age.
- During litigation, Fennell was represented by counsel who engaged in settlement discussions with defense counsel.
- On January 16, 1987, counsel for both sides agreed by telephone to settle the action for $10,000.
- The attorneys reported the agreement to the district court by conference call, and on January 20, 1987 the court dismissed the case with prejudice, allowing either party to request restoration within 60 days by letter.
- The proposed settlement contemplated that Fennell would sign a general release and a stipulation of discontinuance; he never signed either.
- Within the restoration period, Fennell sought to restore the case and informed the court that he had told his attorney he would not approve a $10,000 settlement.
- After a hearing, the district court approved the $10,000 settlement and refused to reinstate the case, reasoning that Fennell’s attorney had apparent authority to settle.

## Issues

1. Whether, under New York law, Fennell’s attorney had apparent authority to bind him to a $10,000 settlement reached in attorney-to-attorney communications and reported to the court without Fennell’s participation.
2. Whether the district court abused its discretion by enforcing the settlement and denying relief from the dismissal when Fennell promptly objected and did not execute settlement documents.

## Decision

- The Second Circuit reversed the order enforcing the settlement and remanded.
- The court held the record did not support a finding that Fennell made manifestations to the defendants or their counsel sufficient to create apparent authority in his attorney to settle for $10,000.
- Because the settlement enforcement rested on an incorrect application of New York apparent-authority doctrine, the district court abused its discretion in treating the settlement as binding and refusing to reinstate the action.

## Legal Principles

- The choice to settle belongs to the client; an attorney ordinarily cannot compromise a claim without actual authority.
- Under New York law, apparent authority arises only from the principal’s manifestations to the third party; it cannot be created by the attorney’s own statements or conduct.
- The party seeking to enforce a settlement bears the burden of proving the attorney had actual or apparent authority to enter it.
- A client’s silence or mere use of counsel to negotiate, without affirmative manifestations to the adversary, is insufficient to establish apparent authority.
- A settlement reported to the court without the client’s participation, and without an in-court stipulation, provides limited support for binding a client absent proof of client manifestations of authority.

## Conclusion

The Second Circuit declined to enforce a $10,000 settlement because the defendants did not prove that the plaintiff, through words or conduct directed to them, gave his attorney apparent authority to settle; the case was remanded for further proceedings on the merits.


Fennell v. TLB Kent Co., 865 F.2d 498 (2d Cir. 1989)