Underlying Matter: WV – Employment Law; settlement
Facts: The plaintiff/appellants were doctors, together the Huntington Anesthesia Group, Inc., who had been sued for disability discrimination. They were represented by the defendants/appellees, Mark Dellinger and the law firm of Bowles Rice McDavid Graff & Love LLP. In the underlying disability discrimination action, the appellees had prematurely settled on behalf of the doctors, even though the doctors had made it clear they had not all agreed to a settlement. The issue of whether the doctors had to pay on a settlement they had not actually agreed to went on appeal to the Supreme Court of Appeals. In a case called Messer II by the Supreme Court it held that the doctors were bound by the settlement agreement reached by their lawyer, even though the case went on to be dismissed — on the theory that the lawyer had acted with apparent authority since he had appeared in court on behalf of the doctors. The doctors had to pay up on the settlement terms. The doctors then sued their lawyers for legal malpractice among other things. The lawyer/defendant filed a motion to dismiss on the basis of collateral estoppel, arguing that since the court had previously decided they had a right to act on behalf of the doctors — where they had apparent authority, the issue could not be re-litigated. The Circuit Court agreed, and granted the motion to dismiss. The doctors appealed.
Issue: Was the lower court’s ruling on the motion to dismiss correct in determining that the subsequent legal malpractice action was barred by the collateral estoppel rule, under the theory that the court had previously decided the issue of the attorney’s apparent authority to act on behalf of its clients and therefore the issue of actual authority could not be re-litigated among the same parties?
Ruling: No, the doctrine of collateral estoppel does not apply in this case because the issue of actual authority was not previously litigated and the plaintiff’s appellees’ claims could not be dismissed for failure to state a claim using a collateral estoppel theory regarding actual authority.
Lesson: While a lawyer has apparent authority to settle on behalf of his client, the issue of apparent authority does not affect the client’s cause of action in legal malpractice based on the lawyer’s actions absent actual authority.
Posted in: West Virginia