Baldino v. Greenburg

NOTICE: NOT FOR PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT
PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
JOSEPH L. BALDINO, et al., Plaintiffs/Appellants,
ROGER ASHKENAZI, et al.,
Plaintiffs/Appellees,
v.
GREENBERG TRAURIG, LLP, a limited liability partnership,
Defendant/Appellee.
No. 1 CA-CV 13-0717
FILED 1-13-2015
Appeal from the Superior Court in Maricopa County
No. CV2010-020851
The Honorable Arthur T. Anderson, Judge
VACATED AND REMANDED
COUNSEL
Wilenchik & Bartness PC, Phoenix
By Dennis I. Wilenchik and Brian Hembd
Counsel for Plaintiffs/Appellants
Evans Scholz Williams & Warncke LLC, Atlanta, GA
By Rickman P. Brown
Sherman & Howard LLC, Phoenix
By David A. Weatherwax and Dewain D. Fox
Ross & Orenstein, LLC, Minneapolis, MN
By Jeff I. Ross
Co-Counsel for Plaintiffs/Appellees
Galbut & Galbut, Phoenix
By Martin R. Galbut and Michaile J. Berg
Williams & Connolly LLP, Washington, DC
By Kenneth C. Smurzynski and Collette T. Connor
Co-Counsel for Defendant/Appellee
MEMORANDUM DECISION
Presiding Judge Andrew W. Gould delivered the decision of the Court, in
which Judge Maurice Portley and Judge Jon W. Thompson joined.
G O U L D, Judge:
¶1 Plaintiffs/Appellants Baldino, et al. (“the Baldino Plaintiffs”)
appeal from the trial court’s entry of judgment pursuant to a settlement
agreement. Plaintiffs/Appellants argue the court incorrectly concluded the
attorneys had apparent authority to settle on behalf of the Baldino Plaintiffs.
Because we find a genuine factual dispute regarding the attorneys’
apparent authority, we vacate the judgment and remand for further
proceedings.
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FACTS AND PROCEDURAL BACKGROUND
¶2 The facts are undisputed. Mortgages Ltd. and/or its affiliates
sold investment securities to a number of individuals before going
bankrupt. As a result, multiple lawsuits were filed against the professional
firms that served as Mortgages Ltd.’s securities counsel and auditors, for
torts allegedly committed by those firms in the course of their
representation of Mortgages Ltd. The plaintiffs in this case (“the Ashkenazi
Plaintiffs”) opted out of a class action lawsuit filed against these
professional firms and brought separate claims against Defendants in July
2010.
¶3 The Ashkenazi Plaintiffs hired attorneys Rickman Brown and
Jeff Ross to represent them. All the Ashkenazi Plaintiffs signed an
engagement agreement outlining the scope and purpose of the
representation. The engagement agreement contained a provision stating
that in the event a lump sum group settlement offer was made, a majority
of the plaintiffs could compel a settlement.
¶4 On June 18, 2012, a global settlement was reached following a
mediation held in New York on April 17-18, 2012, between the Greenberg
Traurig Defendants (“GT Defendants”) and all the plaintiff groups,
including the Ashkenazi Plaintiffs. After the mediation, the Ashkenazi
Plaintiffs were informed via email that a settlement agreement had been
tentatively reached. Brown and Ross then filed a notice of settlement in the
trial court on June 21, 2012.
¶5 About a month later, a group of six plaintiffs from the
Ashkenazi Plaintiffs, composed of Joseph and Helen Baldino, Eva Sperber-
Porter, and the financial entities they controlled (“the Baldino Plaintiffs”),
filed a motion to substitute counsel. The court granted the Baldino
Plaintiffs’ motion to substitute counsel, but the court directed that the
substitution would not negate or affect prior settlements reached.
Thereafter, the GT Defendants and the remaining Ashkenazi Plaintiffs (“the
Non-Baldino Plaintiffs”) jointly moved for entry of judgment in accordance
with the settlement agreement.
¶6 The Baldino Plaintiffs filed a motion opposing entry of
judgment. The motion argued the Baldino Plaintiffs could not be bound by
the settlement agreement because they never agreed to it and Brown and
Ross did not have authority to agree to it on their behalf. After considering
all parties’ motions and the arguments of counsel, the court found attorneys
Brown and Ross had apparent authority to settle the Greenberg claims. The
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court reasoned that the fact that the attorneys represented all the plaintiffs
from inception, during mediation, and at the settlement discussions
justified the GT Defendants’ belief the attorneys had authority to settle.
¶7 The Baldino Plaintiffs filed a Rule 59 motion for new trial
arguing there was no evidence of action by the principal, the Baldino
Plaintiffs, that could lead to a reasonable inference of apparent authority.
The court denied this motion, and the Baldino Plaintiffs timely appealed.
DISCUSSION
I. Supplemental Authority
¶8 Both parties have filed and heavily litigated supplemental
citations of authority. We will only address the motions filed that are
relevant to the outcome of this decision, all other motions we disregard as
moot. Our consideration is guided by the following principles. A party
may supplement the citation of legal authority when “pertinent and
significant authorities come to the attention of a party after the party’s brief
has been filed . . . but before decision.” Arizona Rules of Civil Appellate
Procedure 17. However, “we will not address arguments raised for the first
time under the guise of supplemental authority.” Rowe Int’l, Inc. v. Ariz.
Dep’t of Revenue, 165 Ariz. 122, 128, 796 P.2d 924, 930 (App. 1990).
¶9 We will consider the portion of the Baldino Plaintiffs’
supplemental citation of authority that cites Robertson v. Alling, 235 Ariz.
329, 332 P.3d 76 (App. 2014), to determine the applicable standard of review
and the application of principles of apparent authority. However, the
portions of the supplemental citations raising the argument that under
Arizona Rule of Civil Procedure 80(d) the settlement agreement is invalid,
we disregard. This argument was available to Plaintiffs/Appellants, but it
was not argued in their appellate briefs. Accordingly, we consider it
waived. See Ritchie v. Krasner, 221 Ariz. 288, 305, ¶ 62, 211 P.3d 1272, 1289
(App. 2009) (stating that failure to present arguments in the opening briefs
“can constitute abandonment and waiver”).
II. Standard of Review
¶10 “Generally, whether agency exists is a question of fact, but
when the material facts are not in dispute, the existence of such a
relationship is a question of law for the court to decide.” Goodman v.
Physical Res. Eng’g, Inc., 229 Ariz. 25, 29, ¶ 12, 270 P.3d 852, 856 (App. 2011).
Here, the court based its ruling that the attorneys acted within the scope of
their apparent authority on the arguments of counsel and documentary
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evidence in the record; “[i]n effect, the trial court granted summary
judgment.” Canyon Contracting Co. v. Tohono O’Odham Housing Authority,
172 Ariz. 389, 390, 837 P.2d 750, 751 (App. 1992).
¶11 In reviewing the court’s ruling we “determine de novo
whether the trial court correctly applied the law and whether any genuine
disputes exist as to any material fact.” Robertson, 235 Ariz. at 333, ¶ 7, 332
P.3d at 80. Specifically, we must examine “whether the facts presented are
such that reasonable people could only agree” that the attorneys were
cloaked in apparent authority to enter a settlement on the Baldino Plaintiffs’
behalf. Canyon Contracting, 172 Ariz. at 390, 837 P.2d at 751. We view the
facts “in the light most favorable to the . . . nonmoving party on the motion
to enforce the settlement.” Robertson, 235 Ariz. at 332, ¶ 2, 332 P.3d at 79.
III. Apparent Authority
¶12 “[A]s a general rule, lawyers have no inherent or implied
authority to settle a case.” Robertson, 235 Ariz. at 334, ¶ 16, 332 P.3d at 81.
“However, if the client places the attorney in a position where third persons
of ordinary prudence and discretion would be justified in assuming the
attorney was acting within his authority, then the client is bound by the acts
of the attorney within the scope of his apparent authority.” Arizona Title
Ins. & Trust Co. v. Pace, 8 Ariz. App. 269, 271-72, 445 P.2d 471, 473-74 (1968).
¶13 We focus on whether the principal’s conduct could
reasonably lead a third party to conclude the agent had authority.
Robertson, 235 Ariz. at 335, ¶ 19, 332 P.3d at 82 (“Apparent authority is
established by conduct of the principal.”); Max of Switzerland, Inc. v. Allright
Corp. of Delaware, 187 Ariz. 496, 500, 930 P.2d 1010, 1014 (App. 1997)
(“’[A]pparent authority exists where a third person reasonably believes an
agent has the authority of the principal.’”) (quoting Hartford v. Indust.
Comm’n, 178 Ariz. 106, 110, 870 P.2d 1202, 1206 (App. 1994)). As a result,
“[t]he principal must make some manifestation to the third party which
could reasonably be relied upon to indicate that the agent had the alleged
authority.” Max of Switz., 187 Ariz. at 500, 930 P.2d at 1014 (alteration in
original) (internal quotation marks omitted). Additionally, “[t]he rule is
well established . . . that the declarations of an alleged agent are not
evidence of the fact of agency, nor the extent thereof.” U.S. Smelting, Ref. &
Mining Exploration Co. v. Wallapai Mining & Dev. Co., 27 Ariz. 126, 130, 230
P. 1109, 1110 (1924).
¶14 “[V]iewing the underlying facts in the light most favorable to
the [Baldino Plaintiffs],” as we must, we conclude “that reasonable minds
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could draw different inferences from the undisputed facts.” Robertson, 235
Ariz. at 337, ¶ 27, 332 P.3d at 84. Thus, the court improperly resolved this
issue as a matter of law. Id. at 338, ¶ 30, 332 P.3d at 85.
¶15 We recognize that this is a close case, and that a number of
facts support an inference that Brown and Ross were acting under apparent
authority. It is undisputed that as members of the Ashkenazi Plaintiff
group, the Baldino Plaintiffs signed an engagement letter agreeing to be
bound by any settlement accepted by a majority of the plaintiffs. Both the
Non-Baldino and the Baldino Plaintiffs were represented by Brown and
Ross during the mediation and at all settlement negotiations. At no point
during the settlement negotiations did the Baldino Plaintiffs indicate to the
GT Defendants that Brown and Ross lacked the authority to negotiate a
settlement on their behalf. In addition, the executed settlement agreement
contains an express representation from Brown and Ross that they
possessed authority to settle their clients’ claims against the GT Defendants.
¶16 However, neither the fact that the Baldino Plaintiffs retained
Brown and Ross as their attorneys, nor the statements of Brown and Ross
as to their authority are sufficient, as a matter of law, to establish the fact of
apparent authority. Robertson, 235 Ariz. at 334, ¶ 16, 332 P.3d at 81; U.S.
Smelting, 27 Ariz. at 130, 230 P. at 1110. Rather, we must examine whether
the Baldino Plaintiffs engaged in any conduct that would lead the GT
Defendants to conclude that Brown and Ross had apparent authority to
settle the case. See supra, at ¶ 13.
¶17 The record is sparse regarding the conduct of the Baldino
Plaintiffs on this issue. Some of the facts in this case give rise to equally
viable, conflicting inferences. For example, the GT Defendants contend that
Baldino’s decision not to attend the mediation gives rise to an inference that
he authorized Brown and Ross to negotiate a settlement on his behalf.
However, the fact that he did not attend the mediation can also lead to an
inference that he did not support or approve of their settlement
negotiations.
¶18 Both parties note that Sperber-Porter, the other individual in
the Baldino Plaintiff group, attempted to attend the mediation in New York.
When Sperber-Porter arrived, she was asked to leave by Brown and Ross,
and she complied. The GT Defendants contend that when Sperber-Porter
allowed herself to be excluded by her attorneys, this gave rise to an
inference that her attorneys had authority to settle. In contrast, Sperber-
Porter argues that her exclusion from the mediation by her attorneys would
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indicate to the GT Defendants that Brown and Ross did not have authority
to settle her claims.
¶19 Moreover, there are facts in the record supporting an
inference that Brown and Ross did not have apparent authority. Most
importantly, the GT Defendants requested that each individual plaintiff
sign an acknowledgement of the final settlement agreement. The record
does not show whether the GT Defendants requested the
acknowledgements as a routine matter, or because they doubted the
attorneys’ authority to settle on behalf of the plaintiffs. The record is also
unclear on the question of whether the client acknowledgements were a
condition precedent to finalizing the settlement agreement. However, the
acknowledgement forms could support the inference that Brown and Ross
did not have apparent authority to settle the case, and were required to
obtain each client’s approval of the settlement agreement.
¶20 As in Robertson, “these competing inferences required a
factual resolution and precluded the trial court from deciding the issue as a
matter of law.” Robertson, 235 Ariz. at 338, ¶ 30, 332 P.3d at 85. Accordingly,
we remand this case for further proceedings to resolve these material fact
disputes.
¶21 Appellants request an award of fees and costs. In our
discretion, we decline to award fees. However, upon compliance with
ARCAP 21, Appellants are entitled to their costs.
CONCLUSION
¶22 Because a genuine issue of fact exists as to whether the
attorneys, Brown and Ross, had apparent authority to settle on behalf of the
Baldino Plaintiffs, we vacate the court’s ruling granting the joint motion for
entry of judgment and bar orders. We remand for additional proceedings
to resolve this factual dispute.
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