In the

United States Court of Appeals

For the Seventh Circuit

Nos. 00-1101 & 00-1505

ROSEMARY HIGBEE,

Plaintiff-Appellant,

v.

SENTRY INSURANCE COMPANY,

Defendant-Appellee.

Appeals from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 97 C 1349--James B. Zagel, Judge.

Argued March 30, 2001--Decided June 14, 2001

 Before FLAUM, Chief Judge, and POSNER and

EVANS, Circuit Judges.

 EVANS, Circuit Judge. The district

courts in this circuit have crowded

dockets, and the judges presiding over

those courts work very hard to keep their

heads above water. To that end, district

judges are wise to encourage settlements

and to poke and prod reluctant parties to

compromise, especially when their

differences are not great and/or their

claims or defenses are not airtight. See

Pierce v. Atchison, Topeka and Santa Fe

Ry., 65 F.3d 562, 572 (7th Cir. 1995)

(encouragement of voluntary settlements

is an important federal policy). By the

same token, judges must resist the

temptation to dismiss a case prematurely

before a settlement has truly been

finalized. The question presented in this

case is whether the stellar district

judge, a pillar of the bench of the

Northern District of Illinois, yielded to

that temptation.

 Rosemary Higbee filed the complaint

that began this litigation in February

1997, accusing her former employer,

Sentry Insurance Company, of sexual

harassment, age discrimination, and

retaliatory discharge. Higbee’s first two

attorneys withdrew without completing

much discovery, and, as a discovery cutoff approached, her third lawyer, William
Barasha, still had not taken even a

single deposition of a Sentry witness. On

the last day of discovery, Barasha filed

a motion to vacate the discovery cut-off

and, more importantly, to withdraw his

appearance on behalf of Higbee due to

what he said were irreconcilable

differences with her. Barasha’s motion

was noticed for a hearing on April 2,

1998.

 Higbee claims to have been shocked by

Barasha’s motion and to have become

extremely distressed at the prospect of

losing her attorney at such a late stage

in the litigation. To ease her nerves,

Higbee asked her friend Jeff Braiman, an

attorney, to accompany her to the April 2

hearing on Barasha’s motion. On that

date, however, the district judge did not

immediately address the noticed motion,

but instead suggested that the parties

retire to his chambers for an impromptu

settlement conference. They were

separated into two rooms, and the judge

assumed the role of mediator, talking

with each side privately. Eventually,

Sentry’s counsel, Janet Hedrick, obtained

the approval she needed to offer $20,000

to Higbee. The judge presented this offer

to Barasha, Braiman, and Higbee, but

Higbee informed the judge that she had

not calculated her damages and was not in

a position to evaluate the offer.

Nevertheless, at some point during the

negotiation, the parties were all brought

together to discuss other details of the

proposed settlement. They were able to

agree in principle that the settlement

would include a general release of all

claims by Higbee, a waiver by Higbee of

any right to future employment with

Sentry, a confidentiality and

nondisparagement clause, and a provision

that the parties would use their best

efforts to effectuate the settlement. In

addition, they drafted a letter of

reference for Higbee from Sentry. At the

conclusion of negotiations, the judge

denied Barasha’s motion to vacate the

discovery cut-off and withdraw, and

dismissed the case with prejudice. As the

parties were leaving, Higbee asked the

judge what would happen if the parties

could not agree, and he stated, according

to her, something to the effect of "If

you cannot get it together, come back,

and I will, of course, reinstate."/1

 Higbee quickly came to the conclusion
that she wanted to press on with her case

and claims to have informed Barasha of

this decision a day or two after the

conference./2 Barasha did not

immediately share this information with

Sentry, however, and on April 9, a week

after the court appearance, Hedrick

forwarded to him a draft settlement

agreement incorporating the terms, as she

understood them, agreed upon in the

judge’s chambers. Shortly thereafter,

Barasha realized that Higbee had a

worker’s compensation claim that had not

been discussed at the settlement

conference and that she wished to have

excluded from the release. Sentry agreed

to this request, and on April 21 Barasha

sent back a "counter-proposed release"

reflecting this change. Sentry’s in-house

counsel, Brad Corbett, made minor

revisions, then signed the agreement and

sent it back to Barasha. According to

Barasha, he thereafter spoke with Higbee,

who proposed several further changes to

the agreement, including adding names of

specific Sentry employees to be bound by

the nondisparagement clause and requiring

Sentry to turn over a psychological

report on Higbee prepared by its expert.

Corbett orally assented to these

modifications and then signed a revised

draft of the agreement which Barasha

forwarded for his approval on July 10.

According to Higbee, Barasha had not yet

consulted her about the language of the

agreement, and when he finally faxed it

to her on July 27 she found it

unacceptable. Higbee instructed Barasha

to demand the original psychological

report (as opposed to the copy offered by

Corbett), as well as additional sums for

accrued vacation and work-related

expenses, which she believed were not

covered by the $20,000 payment. Sentry

refused to make further concessions, Hig

bee refused to execute the draft

agreement, and Barasha resigned as

Higbee’s counsel.

 On March 29, 1999, Higbee’s new counsel

filed a motion under Federal Rule of

Civil Procedure 60(b) to vacate the

district court’s order of dismissal and

reinstate the case. The judge denied the

motion and ordered that the agreement be

enforced as memorialized in the July 10

draft. Higbee’s motion to reconsider was

denied. In a second motion to reconsider,

Higbee asked that the case be transferred

to another judge for a hearing on whether
a settlement agreement had been reached.

The judge refused to transfer the case

but held a hearing on November 9 and 10,

1999, during which he heard testimony

from those present at the April 2

conference. After the hearing, the judge

made oral findings of fact, followed by

written conclusions of law. Although

several minor issues were still

unresolved at the conclusion of the April

2 settlement conference (such as the

status of the worker’s compensation claim

and the language of the confidentiality

clause), the judge held that they were

immaterial because they were easily

resolved during the negotiations that

followed. As to the status of the

psychological report, the court held that

it was immaterial because it was not

mentioned at the settlement conference

and its disposition would be governed by

state law. Accordingly, the judge

reaffirmed his decision that the parties

had entered a binding settlement

agreement on April 2.

 Contract law, which governs this case,

requires a meeting of the minds on all

material terms. Abbott Lab. v. Alpha

Therapeutic Corp., 164 F.3d 385, 387 (7th

Cir. 1999). The parties agree that some

issues were resolved at the April 2

meeting, that some issues were left

unresolved, and that Higbee subjectively

believed that no binding agreement had

been reached. A layman might think that

these latter two facts preclude the

possibility of a meeting of the minds,

but any lawyer could tell you that a lack

of agreement on minor, immaterial terms,

and a party’s subjective and

unarticulated belief that she would not

be bound by an oral agreement, do not

preclude a finding that a contract has

been formed. See Wilson v. Wilson, 46

F.3d 660, 666-67 (7th Cir. 1995)

(unresolved immaterial terms do not

prevent meeting of the minds); Abbott

Lab., 164 F.3d at 387 ("’meeting of the

minds’ is determined not by [parties’]

actual subjective intent, but by what

they expressed to each other"). Thus, our

inquiry must focus on whether Sentry and

Higbee reached an agreement on all

material terms of a settlement and

whether Higbee’s objective words and

actions--quite apart from her subjective

beliefs--indicated her assent to be

bound.
 The judge eventually found that three

issues were left unresolved at the

conclusion of the April 2 conference: 

(1) the status of Higbee’s worker’s

compensation claim, (2) the language of

the confidentiality and nondisparagement

clause, and (3) the disposition of the

psychological report on Higbee created by

Sentry’s expert. Although we don’t

presume to speak for Sentry, we think

many defendants would agree that the most

material term in any settlement agreement

is the release, see Abbott Laboratories,

164 F.3d at 388, and, in a case involving

multiple claims, which of those claims

are covered by the release. Here,

although the release discussed at the

conference purported to waive all of

Higbee’s claims, the parties had not even

discussed the worker’s compensation

claim. Indeed, Higbee’s own attorney had

"forgot[ten] all about that" until a day

or two after the conference. Higbee

obviously wished to preserve this

claim,/3 but Sentry, at least at the

conference, sought nothing less than a

full waiver of all claims. Although

Sentry subsequently agreed to exclude the

worker’s compensation claim from the

release, this belated concession has no

bearing on whether an oral settlement was

reached on April 2./4

 Similarly, the wording of the

confidentiality and nondisparagement

clause was a material term, at least as

far as Higbee was concerned. During the

negotiations, Higbee made it clear that

she would not settle the case without

such a clause, and it is undisputed that

the conference adjourned without hashing

out its details. Although a contract can

be formed even though the precise

language is not worked out and put into

writing until sometime later, see, e.g.,

Wilson, 46 F.3d at 667, there must at

least be some agreement as to what it

will say. Here, the parties agreed on

little more than the fact that the

settlement agreement would contain a

confidentiality and nondisparagement

clause, and further negotiation was

necessary to come to a specific

agreement. Again, the fact that the

parties eventually agreed, months later,

on mutually satisfactory language is

irrelevant.

 Finally, getting her hands on the

original psychological report was
material to Higbee and, judging from its

post-conference stance on the issue, to

Sentry as well. Clearly there was no

agreement on the disposition of the

report at the settlement conference, and

the parties were not even able

subsequently to come to a compromise.

Sentry argues that Higbee’s right to the

report is governed by law independent of

any settlement agreement, and thus

failure to resolve the issue is not

material. But the fact that Higbee might

later be able to compel Sentry to release

the report via judicial intervention does

not diminish the value of obtaining it

cost-free as part of a global settlement

of all disputes between the parties. And

even if some unidentified state law

governs the disposition of the report,

that law certainly would not prevent

Sentry from voluntarily relinquishing it

as part of a settlement. Alone, the

parties’ failure to dispense with the

psychological report would not prevent a

binding settlement, but combined with the

lack of agreement on the worker’s

compensation claim and the

confidentiality and nondisparagement

clause, we think too much was left

unresolved at the April 2 conference for

the judge to find that a binding oral

settlement agreement was reached. That

finding, we reluctantly conclude, was

clearly erroneous.

 We note for completeness that even if

Sentry had made a clear settlement offer

filling all the holes we discussed, we

are not certain that Higbee’s words and

actions sufficiently manifested her

acceptance. In particular, we are

concerned with her question to the judge

and his response that "If you cannot get

it together, come back, and I will, of

course, reinstate." The judge explained

after the evidentiary hearing that he was

offering to reinstate the case only if

the parties mutually agreed to rescind

the settlement agreement. Although he is

in the best position to know the meaning

of his own statement, Higbee’s question

should have raised a red flag regarding

her commitment to the settlement. And the

judge’s response only fueled her

subjective belief-- objectively revealed

by her question--that she had not yet

entered a binding agreement.

 Perhaps anticipating our ruling today,

Sentry argues that even if no oral
contract was formed at the conference,

the parties subsequently agreed to a

written settlement via the exchange of

draft agreements between Barasha and Cor

bett. There is no question that Barasha

sent Corbett a revised draft of the

settlement agreement on July 10 and that

Corbett orally accepted this offer and

later did so in writing. The parties

dispute vigorously, however, whether

Barasha had authority to make this offer,

and settle the case, on behalf of Higbee.

An attorney’s authority to settle a

lawsuit is entirely separate from his

authority to represent a client in

litigation and will not be presumed.

Brewer v. National R.R. Passenger Corp.,

649 N.E.2d 1331, 1333-34 (Ill. 1995).

Sentry bears the burden of proof on this

issue. Id. at 1334.

 Sentry first asserts that Higbee

expressly conferred authority on Barasha

to settle the case, pointing to the

judge’s finding that Barasha discussed

with Higbee the terms of the July 10

draft agreement before sending it to

Corbett. But Higbee denies that Barasha

consulted her, and this version of events

is supported by the only available

physical evidence--a July 27 fax from

Barasha to Higbee of the July 10 draft

agreement. Notably, Barasha did not send

this draft to Higbee until 17 days after

it had been accepted by Corbett and, upon

receiving it, Higbee found it

unacceptable and proposed extensive

revisions. Barasha could come up with no

other written correspondence between

himself and Higbee during the postsettlement conference negotiations

referencing the enclosure of any draft

agreement or discussing any proposed

terms./5 On these facts, we find it

difficult to understand how the judge

found that Higbee expressly authorized

Barasha to settle.

 Sentry also has a fallback position:

even if Barasha lacked actual authority

to settle the case on Higbee’s behalf, he

had apparent authority to do so. Sentry

points out that Higbee permitted Barasha

to negotiate for her at the conference,

and even nodded as he agreed to certain

terms. In addition, she sat silently as

the attorneys agreed to later work out

the details of the language of the

agreement. Based on these facts, Sentry

argues that Barasha’s authority to settle
may be presumed and that it was

reasonable for Sentry to indulge that

presumption. See Szymkowski v.

Szymkowski, 432 N.E.2d 1209, 1211 (Ill.

App. Ct. 1982) ("the existence of the

attorney of record’s authority to settle

in open court is presumed unless rebutted

by affirmative evidence that authority is

lacking").

 The problem with Sentry’s argument is

that Szymkowski addresses an attorney’s

authority to settle in open court, in his

client’s presence. In that context, it is

easy to presume that an attorney speaks

for the client because the client is

there and free to object if she disagrees

with what is said. Id. A very different

situation is presented here, where the

alleged (written) settlement occurred

outside of court, in the client’s

absence. Under these circumstances, we

think it wise to revert to the general

rule that an attorney’s authority to

settle will not be presumed. Brewer, 649

N.E.2d at 1333-34./6 Nothing in the

record--other than Barasha’s self-serving

testimony--indicates that Higbee was ever

prospectively aware of the terms of any

offer made to Sentry or that she

authorized Barasha to make any such

offer. Accordingly, we decline Sentry’s

invitation to affirm on the alternative

ground that the exchange of drafts

between the attorneys formed a written

contract.

 We conclude by noting the obvious: Ms.

Higbee seems to be a bit of a difficult

plaintiff. Just the number of attorneys

she has had in this case is vivid

testimony to that fact. And we can

certainly understand the desire that any

judge would have to move a case like this

off his docket. Nevertheless, for the

reasons noted, we think Ms. Higbee did

not agree to settle her case and so it

should not have been dismissed.

Accordingly, the judgment of the district

court is REVERSED and the case is REMANDED

for further proceedings. Circuit Rule 36

shall apply on remand.

FOOTNOTES

/1 Sentry’s counsel represented at oral argument

that this exchange took place at some point

earlier in the negotiations, but the court’s

memorandum opinion and order states that it

occurred at the conclusion of the settlement
conference. The proceedings in the judge’s

chambers were not transcribed, so we can only

guess at the sequence of the conversation, but,

given the context, we think it more likely that

the judge made this statement at the conclusion

of the negotiations.

/2 Barasha admits that he spoke to Higbee around

this time but claims that she merely expressed

her belief that she could withdraw from the

settlement, not that she wished to do so.

/3 In addition, Higbee claims certain work-related

expenses were not covered by the $20,000 offer.

Although the judge specifically found that they

were included in Higbee’s "laundry list" of

damages covered by the lump sum payment, Higbee’s

confusion on this point further illustrates that

no meeting of the minds occurred.

/4 It is true, as Sentry argues, that the Illinois

Workers’ Compensation Act provides that a worker’s compensation claim cannot be settled without

the prior approval of the Illinois Industrial

Commission. 820 ILCS 305/23. All the same, the

Act would not have precluded an agreement between

the parties that would have become effective only

upon the approval of the Commission. Instead of

trying to design such a settlement, the parties

neglected to address the worker’s compensation

claim at all.

/5 Sentry points out that Barasha was no longer

Higbee’s counsel on the dates of the evidentiary

hearing, so he no longer had access to the case

file and therefore could not be expected to

produce such correspondence. We consider it

unlikely, however, that an attorney would fail to

keep a separate file, independent of any case

file, containing at least his outgoing correspondence.

/6 To the extent our conclusion conflicts with In re

Marriage of Clarke, 550 N.E.2d 1220 (Ill. App.

Ct. 1990), we reject that decision as inconsistent with the Illinois Supreme Court’s subsequent

decision in Brewer.