Hello and welcome to this JACPA Ethics Alert which will discuss recent Nebraska Supreme Court opinion which held that a lawyer who signs a settlement agreement under the legend, “Agreed to in Form & Substance,” was not liable for breach of the payment terms because the language and circumstances surrounding the agreement did not indicate that the lawyer intended to be bound to the agreement. The case is RSUI Indemnity Company v. Bacon, ___N.W.2d___, 2011 WL 4502296 (Neb. 2011). A PDF version of the opinion is attached.
In RSUI Indemnity Company, Bacon was injured on a construction site. He sued, inter alia, his employer’s insurance company. Bacon and the insurance company settled the claim and he and his lawyer signed the settlement agreement under language stating “Agreed to in Form & Substance”. A dispute then arose regarding payment terms under the agreement, and the insurer sued Bacon and the lawyer for breach of contract. Surprisingly, the trial court held that both the Bacon and the lawyer were potentially liable for any alleged breach.
The lawyer appealed, arguing that he could not be held liable as a matter of law for a potential breach. The Nebraska Supreme Court reversed the trial court and held that the lawyer was not bound by the agreement and could not be found liable for a claim for an alleged breach of the payment terms. The opinion looked at the language of the settlement agreement, which referred to both the lawyer who signed the agreement and another lawyer from the same firm who had not signed the agreement.
Since the insurance company conceded that the lawyer who did not sign the agreement was not bound by the agreement, the opinion then analyzed the question of whether the other attorney’s signature below the language stating “Agreed to in Form & Substance” (and there was also additional language stating that the two named lawyers would pay a “sum of money” if the agreement was breached) showed any intent to be bound.
The opinion held that the circumstances surrounding the signature did not indicate any intent by the lawyer to incur personal liability and noted that the insurer’s lawyer also had signed the agreement and nothing in the contractual language could be construed to impose liability on that lawyer. The opinion also noted that the language was not clear regarding any intent of the lawyer to be bound by its terms.
Bottom line: The lawyer in this case was found potentially liable by a trial court for an alleged breach of the settlement agreement between his client and the defendant. Although the finding of potential liability was reversed on appeal to the Nebraska Supreme Court, the lawyer most likely incurred fees and expenses pursuing the appeal.
This opinion might provide some assurance to lawyers who approve and execute settlement agreements with “Agreed to in Form & Substance” language or the equivalent; however, it also shows the risk that lawyers may incur by executing settlement agreements with this type of language (and also language that may be construed to state that the lawyer agrees to pay if the agreement is breached).
…and be careful out there!
As always, if you have any questions about this Ethics Alert or need assistance, analysis, and guidance regarding these or any other ethics, risk management, or other issues, please do not hesitate to contact me.
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