Blessedly, this is not a frequent event. And as law has migrated from handwritten to typewritten to telecopied and emailed agreements one might think this kind of dispute would be headed to the dungeons of history. But yesterday brought King v. Driscoll a precedential three judge ruling from the Superior Court, citable as 2023 Pa.Super. 95.
This is a commercial case involving a dispute over a restaurant sale. But, Pennsylvania law is clear (except when it isn’t)* that the law of contracts applies even to domestic relations agreements. In the King case, the parties owned equal shares of a restaurant. A conflict emerged and King proposed to buy-out Driscoll’s 50% share. In May 2021 the lawyers for the respective parties began to send term sheets summarizing the elements upon which a buy out would be agreeable. This culminated in King’s attorney sending the seller’s lawyer an email where he wrote that his “Client [King] has approved your redline” [prepared by Driscoll’s lawyer]. King’s lawyer asked for a clean copy (adopting the “redlined” changes) with Driscoll’s signature. When that signed document was not forthcoming, King’s attorney started to “ding” his adversary for the agreement. Then came the letter from Driscoll’s attorney: there never was a settlement, just discussions.
Three weeks after the negotiations seemed completed without signed documents forthcoming, King’s attorney filed a petition to enforce a settlement. Many laypersons, and sadly, more than a few lawyers, think an agreement like this cannot exist until it is reduced to a written form that has been signed by the parties. This is not true. Pennsylvania adopted Britain’s Statute of Frauds in 1772 and it’s around today in various current statutes including 33 P.S. Section 1; 13 P.S. 2201(a) and 68 P.S. 250.202. These laws require a ”signed” writing for a contract to be enforceable but they don’t apply to most agreements divorce lawyers prepare except where real estate is involved. Thus, the question in King v. Driscoll revolved around whether the parties had come to “terms of agreement.” If they had, there would be an enforceable agreement even if no one had signed anything. That why King’s lawyer filed to enforce an agreement that was actually little more than an unsigned term sheet.
Driscoll’s attorney was negotiating on behalf of his client, but he professed that he did not have authority to conclude an agreement. Driscoll claimed he wanted to see documents King had filed with the Small Business Administration before he would conclude the deal even though the terms of the agreement otherwise don’t appear to be disputed. On a petition to enforce an agreement, a court must conduct a hearing to assess whether these was a “meeting of the minds”, a corny phrase that contracts professors first teach and then condemn since we all agree that human brains never attain what geometry teachers call “congruence.” See Brannum v. Reedy, 906 A.2d 635, 639) (requiring evidentiary hearing required to assess existence/enforceability of contracts).
An Allegheny County court held the hearing and ruled that an enforceable agreement did exist. Thus, it granted the petition to enforce but it did not address whether Driscoll’s attorney had “authority” to conclude the agreement even though he had sent a redlined term sheet which King’s attorney said his client had approved.
Driscoll’s attorney filed post trial motions to the ruling. This prompted a procedural question of intense interest to attorneys. On a petition to enforce a settlement are post trial motions under Pa.R.C.P. 227.1 allowed or required? King tried to quash the appeal based on the contention that this was not a case requiring post trial motions and that because no appeal was taken within 30 days of the order to enforce, the appeal was untimely. The Superior Court upheld the appeal noting that this was a petition to enforce a settlement, which is a different judicial animal than a petition to enforce a judgment. The latter is a direct appeal for which no post trial motion is valid. A petition to enforce a settlement does proceed through post trial motions. This may seem of little moment to divorce practitioners because Pa. Rules of Civil Procedure 1920.52 and 1920.55-3 seem emphatic that “No Motions for Post Trial Relief may be filed to [divorce] actions or claims.” We have a dichotomy here in that one kind of agreement requires post trial motions while a “marital agreement” forbids such a filing.
On the substantive point, the Superior Court remanded the case because the trial court did not adequately address the scope of the attorney’s authority. It would seem from his communications that Driscoll’s lack of communication in response to King’s direction to “Write it up” based on the redline version communicated by Driscoll’s attorney implied that the lawyer had authority. But Driscoll’s attorney never said he had his client’s authority and there is no indication that the client was involved in a way that would suggest authority was granted to his attorney.
This is a challenging subject which is why we write about it. Lots of folks both inside and outside the legal community seem to assume that when an attorney speaks or writes something, he does so with that client’s authority. The truth is that the law is quite cautious about this. In a 2020 case the Commonwealth Court held that engagement of an attorney, even in the context of litigation, does not confer “implied or apparent authority to bind the client to a settlement.” The attorney must have express authority to bind his client to a contract. Baribault v. Zoning Hearing Board of Haverford Twp., 236 A.3d 112, 122. The Supreme Court has held that grants of settlement authority must be specific. Reutzel v. Douglas, 870 A.2d 787, 791 (Pa. 2005). See Restatement (2d) of Agency. Sec. 7 comment c (1958). It seems the party asserting that agency was conferred has the duty to show it. That’s not an easy thing to accomplish in a world such as this, where Driscoll’s attorney says nothing at first but then writes he never had authority to settle on the terms of the redlined document he sent to King’s counsel. The opinion quotes directly from the testimony in the enforcement action. This reader has the impression that Driscoll’s lawyer thought it best to nail down terms and then assert that the deal was conditioned upon making certain the Small Business Administration documents were produced. King’s attorney indicates that this condition was not revealed and, not relevant to the transaction.
One could look at this and conclude that Driscoll’s lawyer was acting in bad faith. That may be a hasty conclusion. Buying and selling a business, much like a divorce transaction, is a complex affair and most clients eschew piecemeal negotiations. And unlike buying a car or hiring an employee, business sales and divorce transactions tend to become imbued with emotions that can be irrational. Before I joined this firm, I had a case with my now longtime partner David Rasner involving a young couple who had the good fortune to make a lot of money during a relatively short marriage. The discussions between the clients were emotional in our first in-person meeting but we were headed toward a comprehensive agreement. Then, we started down the rocky road of dividing their personal property and when possession of a portable vacuum cleaner came into focus, both clients lost all of theirs. The case settled a few weeks later, but the takeaway from that day was that the parties weren’t ready to finish their deal.
This writer suspects that a similar reluctance to “let go” of half of the restaurant may have caused the King/Driscoll deal to collapse.
No client can or should authorize his attorney to conclude an agreement without a complete understanding of the terms. But King v. Driscoll illustrates something we wrote about in our last blog; the importance of attorney-client communications. Do you or should you be party to all communications between attorneys in your case? That’s overkill. But if terms of settlement are in the air, especially when the lawyers are editing settlement proposals, you need to be in the room, at least electronically. And, if you should decide to “pull the plug” by imposing new settlement terms or reneging on past writings, realize that you submerge not only your credibility but that of your attorney. Mistakes can happen, but there’s usually a price. By affirming that there is no presumed principal-agent relationship the King case offers clients protections from lawyers who communicate poorly or overreach their authority. Mr. Driscoll returns to the trial court without a contract (for now), but either, he, his counsel or both will return as marked men because when King’s attorneys said “Done. Write it up” they chose to stop the process cold, with no reason offered why the agreement was not concluded.
*See our post on 3/23/23 in the Lewis case. https://pafamilylaw.foxrothschild.com/2023/03/articles/general-pennsylvania-family-law-news-updates/prenuptial-agreement-law-continues-to-head-in-new-directions/