Magallanes, Lydia v. IL Bell Tele Co

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 07-3028
LYDIA G. MAGALLANES,
Plaintiff-Appellant,
v.
ILLINOIS BELL TELEPHONE COMPANY,
WHICH IS A WHOLLY OWNED SUBSIDIARY OF
AT&T TELEHOLDINGS, INC., WHICH IS A WHOLLY
OWNED SUBSIDIARY OF AT&T, INC.,
Defendant-Appellee.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 05 C 4626—William J. Hibbler, Judge.
____________
ARGUED APRIL 2, 2008—DECIDED JULY 23, 2008
____________
Before EASTERBROOK, Chief Judge, and BAUER and EVANS,
Circuit Judges.
BAUER, Circuit Judge. This is the second time we have
encountered this case on the same set of facts albeit in two
separate records, leading us to a feeling, in the words
of Yogi Berra, of “déjà vu all over again.”
Lydia Magallanes has for several years attempted to
bring her case to trial. She was thwarted once by her
2 No. 07-3028
first attorney, who settled her case without her authority.
We reversed the district court judge’s dismissal of the
action and sent it back for trial. She now has been
thwarted by a different district court judge, who also
found that the parties had settled. Because we find that
the second district court also abused its discretion in
doing so, we reverse.
On August 12, 2005, Magallanes filed a lawsuit against
SBC, and on September 26, 2005, she filed an amended
complaint against Illinois Bell Telephone Company
(“Illinois Bell”), seeking relief under Title VII of the
Civil Rights Act, 42 U.S.C. § 2000e, et seq.; the Americans
With Disabilities Act, 42 U.S.C. 12101, et seq.; and the Age
Discrimination in Employment Act, 29 U.S.C. 621, et seq.
Illinois Bell deposed Magallanes on November 4, 2005.
Her attorney, Jonathan Goldman, apparently thought
Magallanes did not fare too well at the deposition, and
three days later, suggested that she consider settling
her case. He noted that the costs of the lawsuit going
forward, which would include further depositions and
pleadings responding to summary judgment motions,
would be substantial and would likely surpass the
$7,500 retainer Magallanes had initially paid him. The
remaining specifics of this conversation on November 7
are in dispute: Goldman testified that Magallanes then
gave him the authority to settle the case for $20,000,
while Magallanes testified that she reaffirmed her desire
for a jury trial and never authorized a settlement.
On November 22, 2005, Goldman called Magallanes
and made another pitch for settlement. Again, the
parties disagree as to what happened: Goldman testified
that Magallanes gave her the authority to settle the case
for $10,000, while Magallanes testified that Goldman did
No. 07-3028 3
not ask for her authority to settle the case for any sum
and she gave no such authority; she wanted to go to trial.
Meanwhile, Goldman was negotiating terms of a set-
tlement with Illinois Bell’s counsel, Kendra Allaband.
After a series of offers and counteroffers in November,
Allaband approved a $10,000 settlement on December 1,
2005. On December 2, 2005, Goldman sent a letter to
Allaband confirming acceptance of the $10,000 settle-
ment, and forwarded the letter to Magallanes. Allaband
drafted a settlement agreement and mutual releases and
sent them to Goldman. Magallanes refused to sign the
release and settlement, and according to her, was furious
that Goldman presumed to settle the case without her
authority. She also refused to pay an additional retainer
of $2,500 that Goldman had demanded following her
deposition.
At a status conference on January 10, 2006, Goldman
presented a motion to withdraw as counsel. Allaband
objected, and moved to enforce a “settlement” between
the parties which she claimed was negotiated on Decem-
ber 1, 2005. The district court denied the motion to with-
draw as moot, and finding that the parties had settled,
dismissed the case. Magallanes appealed, arguing that
the parties had not reached a valid and enforceable settle-
ment agreement. We agreed and reversed, finding that
(1) there was no evidence that Magallanes knowingly
and voluntarily consented to the settlement; (2) there
was no evidence that Magallanes had authorized Gold-
man to settle under any terms; and (3) there was no
evidence as to any of the settlement terms. See Magallanes
v. SBC, 472 F.3d 923, 924 (7th Cir. 2006). We “remanded
for reinstatement and, if necessary, a trial,” applying
Circuit Rule 36 in the process. Id. at 924.
4 No. 07-3028
Apparently our findings and instructions were not
specific enough; on remand, the new district court judge
conducted a hearing on Illinois Bell’s motion to enforce
the settlement supposedly negotiated on December 1,
2005. Finding that the parties had settled the case, the
court dismissed the suit, and this appeal followed.
We review a district court’s determination of whether
parties entered into a valid and enforceable settlement
agreement for abuse of discretion. Dillard v. Starcon Int’l.,
Inc., 483 F.3d 502, 506 (7th Cir. 2007). We analyze not
whether we agree with the district court’s decision, but
whether it was reasonable. Magallanes, 472 F.3d at 924
(citing Hakim v. Payco-General Am. Credits, 272 F.3d 932,
935 (7th Cir. 2001)).
Issues regarding the formation, construction, and en-
forcement of settlement agreements are governed by
state contract law. Sims-Madison v. Inland Paperboard and
Packaging, Inc., 379 F.3d 445, 448 (7th Cir. 2004) (citing
Pohl v. United Airlines, Inc., 213 F.3d 336, 338 (7th Cir.
2000)). Under Illinois law, an attorney has no authority
to settle a claim of the client absent the client’s express
authorization to do so. Webster v. Hartman, 195 Ill.2d 426,
433 n.1, 255 Ill. Dec. 476, 749 N.E.2d 958 (2001) (citing
Danziger v. Pittsfield Shoe Co., 204 Ill. 145, 149, 68 N.E.
534 (1903)); Brewer v. National R .R. Passenger Corp., 165
Ill.2d 100, 105-106, 208 Ill. Dec. 670, 649 N.E.2d 1331. (1995).
An attorney’s authority to agree to an out-of-court settle-
ment will not be presumed, and the burden of proof
rests on the party alleging authority to show that fact.
Higbee v. Sentry Ins. Co., 253 F.3d 994, 1000 (7th Cir. 2001)
(citing Brewer, 165 Ill.2d at 105-06); Webster, 195 Ill.2d
at 433 n.1.
The second district court judge, after holding an eviden-
tiary hearing, found that the parties properly negotiated
No. 07-3028 5
a settlement and had agreed to its terms. The court ac-
cepted Goldman’s version of the facts concerning the
settlement discussions, and found that Magallanes had
authorized Goldman to settle the claims on her behalf.
He observed that Magallanes had not signed the settle-
ment documents because she likely suffered from “cold
feet” and had second thoughts after she gave Goldman
the authority to settle.
Magallanes argues that Illinois Bell did not meet its
burden in showing that she gave Goldman the authority
to settle her case. We agree. Other than Goldman’s state-
ments to the contrary, the record is devoid of an indica-
tion that Magallanes authorized him to settle the case.
Magallanes has consistently stated that she never gave
Goldman the authority to settle the case and never
signed a document stating that she authorized Goldman
to settle or that she agreed to settle. She never acted in a
manner that would suggest that she wanted to settle or
agreed with the terms of any proposed settlement. Nor
does settling the case for $10,000 make much financial
sense: she had already paid Goldman a $7,500 retainer
and had other outstanding fees and costs. She stood to
gain at most $2,500 and, as counsel for Illinois Bell sug-
gested at oral argument, as little as $600. Little in the
record suggests that she would abandon her lawsuit for
such a sum.1
1
Magallanes also suggests that Goldman had a financial
disincentive to prolong the case, as he did not want to risk the
additional fees involved in responding to summary judgment
and proceeding to trial when his client had already declined
to pay the additional $2,500 retainer. Illinois Bell rebuts this
(continued...)
6 No. 07-3028
Against this surfeit of evidence indicating that
Magallanes wanted to proceed to a trial, Illinois Bell
presented the testimony of Goldman. He testified that
he sought and received her authority to settle the case
for $20,000 on November 7, 2005 and for $10,000 on
November 22, 2005; though he was not one hundred
percent sure that Magallanes accepted the settlement
and did not push for a jury trial on November 22. He
also admitted that he attempted to get Magallanes to
sign the settlement and release, but she refused; all of
this was before us in the last appeal and is not enough to
overcome Illinois Bell’s burden of showing that
Magallanes expressly authorized the settlement. It was
unreasonable for the district court to hold that the set-
tlement agreement was valid and enforceable, a posi-
tion we expressly rejected in the first appeal of this case.
Even though we thought we were clear in our original
resolution of the settlement issue, the second district court
judge reopened the issue with an evidentiary hearing.
What we expected—and ruled—was that this case
should proceed to trial or come to some other resolution
at the district court level. So we find—again—that the
court abused its discretion in finding that Magallanes
and Illinois Bell had reached a settlement. We remand
for reinstatement; lest there be any lingering doubt as to
1
(...continued)
accusation by noting that he actually could have continued
to run up Magallanes’s bill by prolonging the case. While this
is true, the potential remained that at some point the well
would run dry and Goldman’s efforts would be unrewarded.
Neither argument is particularly persuasive, so we will set
the issue to the side.
No. 07-3028 7
our intent, this case must proceed to decision on the
merits.2
2
Because we find that Magallanes did not give Goldman the
authority to settle her claim, we need not address her alterna-
tive argument that there was no meeting of the minds as
to the specific terms of the settlement.
USCA-02-C-0072—7-23-08