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 settlement 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 settlement, 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 December 1, 2005. The district court denied the motion to withdraw 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 settlement 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 Goldman 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 enforcement 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 settlement 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 evidentiary hearing, found that the parties properly negotiated
No. 07-3028 5

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...)

a settlement and had agreed to its terms. The court accepted 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 settlement 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 statements to the contrary, the record is devoid of an indication 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 suggested at oral argument, as little as $600. Little in the

record suggests that she would abandon her lawsuit for

such a sum.1
6 No. 07-3028

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.

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 settlement agreement was valid and enforceable, a position 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
No. 07-3028 7

2 Because we find that Magallanes did not give Goldman the

authority to settle her claim, we need not address her alternative argument that there was no meeting of the minds as

to the specific terms of the settlement.

USCA-02-C-0072—7-23-08

our intent, this case must proceed to decision on the

merits.2