1999 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

5-18-1999

Farris v. JC Penney Co Inc

Precedential or Non-Precedential:

Docket 98-1419

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Recommended Citation

"Farris v. JC Penney Co Inc" (1999). 1999 Decisions. Paper 132.

http://digitalcommons.law.villanova.edu/thirdcircuit_1999/132
Filed May 17, 1999 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 98-1419 

MARGARET FARRIS; CHARLES FARRIS, H/W, 

 Appellants 

v. 

JC PENNEY COMPANY, INC. 

Appeal from the United States District Court 

for the Eastern District of Pennsylvania 

(D.C. Civ. No. 95-cv-07432) 

District Judge: Honorable Anita B. Brody 

Argued 

March 9, 1999 

Before: MANSMANN, SCIRICA and NYGAARD, 

Circuit Judges. 

(Filed May 17, 1999) 

 Richard P. Abraham, Esquire 

 (ARGUED) 

 Abraham, Bauer & Spalding 

 1600 Market Street 

 32nd Floor 

 Philadelphia, PA 19103 

 COUNSEL FOR APPELLANT 
 William C. Foster, Esquire 

 (ARGUED) 

 Kelly, McLaughlin & Foster 

 260 South Broad Street 

 1700 Atlantic Building 

 Philadelphia, PA 19102 

 COUNSEL FOR APPELLEE 

OPINION OF THE COURT 

MANSMANN, Circuit Judge. 

Margaret and Charles Farris appeal from an order of the 

District Court denying their motion, made pursuant to Fed. 

R. Civ. P. 60(b), to set aside a settlement reached in and 

the resulting dismissal of a diversity action filed in the U.S. 

District Court for the Eastern District of Pennsylvania. 

This appeal requires us to predict whether, in the 

particular circumstances presented here, the Pennsylvania 

Supreme Court would invoke the doctrine of apparent

authority to enforce a settlement entered into by an 

attorney lacking actual authority to settle the case. We 

addressed a similar, although not identical, issue in 

Tiernan v. Devoe, 923 F.2d 1024 (3d Cir. 1991). We revisit 

this area of the law in order to clarify our view of the 

doctrine of apparent authority with respect to matters of 

settlement in Pennsylvania. Because we predict that the 

Pennsylvania Supreme Court would not apply the doctrine 

to enforce the settlement in this case, we will reverse the 

order of the District Court and remand this matter for 

further proceedings. 

I. 

The facts underlying this appeal are straightforward and 

uncontested. We recount these facts in detail because the 

events leading up to the contested settlement and those 

immediately following the court's "acceptance" of the 

settlement are crucial to the legal issues involved. 

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On April 15, 1995, Margaret Farris was injured in a fall 

at the J.C. Penney store in downtown Philadelphia. She 

alleges that her injuries were sustained when she was 

restrained by Penney's employees and falsely accused of 

shoplifting. Farris and her husband Charles hired attorney 

Timothy Booker to represent them in connection with the 

incident, agreeing to pay him a 40% contingent fee. Booker 

filed suit on behalf of the Farrises on November 28, 1995, 

in federal court. 

A trial, bifurcated with respect to liability and damages, 

began before the judge and jury on September 24, 1996. At 

about noon on the second day of trial, settlement 

discussions began.1 Booker and the Farrises met with the 

trial judge alone. The judge then met with attorney Renee 

Berger, counsel for J.C. Penney. Later that day, in a 

meeting with both Booker and Berger, the judge asked 

Berger if J.C. Penney would authorize her to settle the case 

for $20,000. After receiving assurance from the judge that 

$20,000 would indeed settle the matter, Berger secured the 

necessary authority and communicated that fact to Booker. 

Ms. Berger then saw Booker enter a witness room with Mrs. 

Farris where the two remained for about five minutes. At 

some later point Booker informed Berger that the $20,000 

settlement offer had been accepted. In fact, neither of the 

Farrises authorized Booker to accept the offer. To the 

contrary, Margaret Farris had told Booker that she did not 

want the case to be settled until her medical treatment was 

complete. 

Nonetheless, the $20,000 settlement figure was 

communicated to the judge. When court reconvened in the 

afternoon of September 25, the record establishes the 

following exchange: 

 The Court: Good afternoon. What can I do for you? 

 Ms. Berger: Your Honor, we have resolved this 

 matter for $20,000. 

_________________________________________________________________ 

1. The District Court found that as of the time of these discussions, 

Booker had not taken steps to secure expert testimony bearing on 

damages. 

 3 
 The Court: Do you want to get anything on the 

 record? 

 Ms. Berger: Yes. I would like to just get it on the 

 record that we have agreed to settle this 

 matter for $20,000. 

 The Court Defendant will pay $20,000? 

 Ms. Berger: Will pay $20,000 to Plaintiff. The 

 Plaintiffs will be responsible for all 

 medical bills and Plaintiffs' costs and 

 Defendant will be -- 

 The Court: Total settlement of $20,000? 

 Ms. Berger: That is correct. 

 The Court: Is that correct Mr. Booker? 

 Mr. Booker: Yes. 

 The Court: I notice the plaintiffs are present in 

 court. 

The jury was summoned, received the thanks of the court, 

and was discharged. The entire in-court proceeding with 

respect to the settlement lasted approximately three 

minutes and the District Court later found that Mrs. Farris 

either did not hear or did not understand what was 

happening until after the jury had been dismissed. 

Following discharge of the jury, the Farrises left the 

courtroom with Booker. Crying, Margaret Farris asked 

Booker, "Why did you do this to me?" Mrs. Farris testified 

that Booker's response was, "One day you'll thank me." 

Within minutes of this exchange, Margaret Farris reentered the courtroom where Ms. Berger stood conferring 

with a number of the jurors. Mrs. Farris told Ms. Berger 

that she had never authorized Booker to settle the case. 

Berger confirmed Margaret Farris's account. 

On September 26, 1996, the trial judge entered an order 

dismissing the case pursuant to Fed. R. Civ. P. 41.1(b). 

Berger prepared a general release setting forth the terms of 

the settlement and transmitted it to Booker. Because the 

Farrises declined to sign the release, the settlement check 

was never issued. Booker sought to have the settlement 

 4 
proceeds disbursed without a signed release but Berger 

refused. On October 7, 1996, Booker filed a motion to 

enforce the settlement. In November of 1996, Booker was 

discharged as attorney for the Farrises. 

Richard P. Abraham, Esq., replaced Booker as counsel 

for the Farrises. On January 13, 1997, a hearing was held 

on the motion to enforce the settlement. The trial judge 

recused himself and the matter was reassigned. On 

January 24, 1997, while the motion to enforce settlement 

was pending, Abraham filed a motion pursuant to Rule 

60(b) for relief from dismissal. At an evidentiary hearing on 

February 5, 1998, the District Court heard testimony from 

Booker, Berger and the Farrises. On April 15, 1998, the 

Court issued a Memorandum and Order denying the 

Farrises' Rule 60(b) motion and upholding the settlement. 

The District Court based its decision on the doctrine of 

apparent authority, holding that Pennsylvania law 

recognized the doctrine and that the Pennsylvania Supreme 

Court would find that the circumstances of this case 

warranted its application. This timely appeal followed. 

II. 

The Pennsylvania Supreme Court has never invoked the 

doctrine of apparent authority to enforce a settlement 

entered into by an attorney who lacks actual authority to 

settle a matter. At best, the court has left the applicability 

of the doctrine open, seeming to suggest in Rothman v. 

Fillette, 469 A.2d 543 (Pa. 1983), that apparent authority 

might be used to enforce a settlement given the right set of 

facts. In Rothman, the plaintiffs filed suit to recover 

damages for injuries sustained in an automobile accident. 

Following negotiations with the Rothmans' insurer, the 

Rothmans' attorney received a check for $7,000. The facts 

showed that the Rothmans' attorney, acting without his 

clients' knowledge or consent, forged the Rothman 

signature on the settlement agreement and the check and 

misappropriated the settlement proceeds. On instructions 

of the Rothmans' attorney, the pending personal injury 

action was marked settled and discontinued. 

Some five years later, the Rothmans filed a petition to 

remove the order discontinuing the case. The trial court 

 5 
granted the petition and reinstated the action. Reversing, 

the Pennsylvania Supreme Court wrote: 

 At the outset it must be understood that under the 

 facts of this case there is no question of an implied or 

 an apparent agency. The law in this jurisdiction is 

 quite clear that an attorney must have express 

 authority to settle a cause of action of the client.2 

469 A.2d 545. 

The only direct endorsement of apparent authority in 

Pennsylvania is set forth in an intermediate appellate court 

decision, Sustrik v. Jones & Laughlin Steel Corp., 149 A.2d 

498 (Pa. Super. 1959). There, the Sustriks' attorney 

negotiated a settlement agreement with the defendants, 

accepted a check in full settlement, and dismissed the 

Sustriks' claim. When the settlement check and 

accompanying release were delivered to the Sustriks, 

however, they refused to accept either, alleging that their 

attorney lacked authority to settle the matter. The Sustriks' 

request to reopen and to vacate the settlement was denied. 

Affirming the denial, the Superior Court stated the general 

rule that: 

 [T]he act of an agent or attorney affecting the relation 

 of his principal or client, with a third person, done in 

 accordance with his principal's manifestations of 

 consent although without special authority, may bind 

 his principal or client. 

149 A.2d at 499. The court found that the Sustriks had 

manifested their consent to the settlement: 

 The lower court was justified in concluding that the 

 plaintiffs' conduct in connection with settlement and 

 discontinuance clearly clothed their counsel with 

_________________________________________________________________ 

2. Other Pennsylvania Supreme Court cases reiterate the need for 

express authority. See Starling v. West Erie Ave. Bldg. & Loan Assn., 3 

A.2d 387 (Pa. 1939) (noting that Pennsylvania has never utilized 

"apparent authority" as grounds to enforce settlement entered into by 

attorney without express authority); Yarnall v. Yorkshire Worsted Mills, 

87 A.2d 192 (Pa. 1952); and Senyshyn v. Karlak, 299 A.2d 294 (Pa. 

1973) (stating that attorney cannot settle litigation without express 

authority). 

 6 
 authority to settle the case upon principles of apparent 

 authority. . . . 

Id. at 500. 

III. 

We considered the Rothman and Sustrik decisions in our 

opinion interpreting the doctrine of apparent authority 

under Pennsylvania law in Tiernan v. Devoe, 923 F.2d at 

1024. Tiernan involved a challenge to an order of the 

District Court granting summary enforcement of several 

settlement agreements. Our decision turned on "the nature 

and extent of the authority that plaintiffs gave their 

attorney and on his conduct towards the district court and 

other parties to the litigation." Id. at 1028. We proceeded on 

the assumption that the plaintiffs' attorney lacked actual 

authority to enter into a settlement agreement on behalf of 

his clients. We explored, therefore, whether Pennsylvania 

law recognized an alternative source of authority upon 

which the defendants could rely to enforce the settlement. 

Looking first to the Pennsylvania Supreme Court's 

statements in Rothman, we concluded that the Court's 

reasoning "suggest[ed] that [it] was reluctant to rule out 

completely the availability of [implied or apparent] authority 

in Pennsylvania." 923 F.3d at 1034. The apparent 

reservation of the doctrine in Rothman combined with the 

endorsement of the doctrine by the intermediate appellate 

court in Sustrick, convinced us to write in the Tiernan 

opinion: "[W] e believe that the Pennsylvania Supreme 

Court might allow implied actual or apparent authority to 

suffice in an appropriate case.". 923 F.3d at 1035.3 

In the matter now before us, the District Court, in the 

context of the Farrises' motion, concluded that this is the 

appropriate case: 

_________________________________________________________________ 

3. We balanced this conclusion with an acknowledgment that: 

 [T]his area is clouded somewhat by the fact that the Pennsylvania 

 Supreme Court has on occasion stated without qualification that 

 "[a]n attorney cannot, absent express authority, settle 

litigation." 

Id. at 1034. 

 7 
 I read [Tiernan] to permit enforcement of a settlement 

 where apparent authority is present. [J.C. Penney] 

 reasonably interpreted the Farrises' actions on 

 September 21, 1996 -- specifically, seeing the Farrises 

 and Booker enter Judge Fullam's chambers, seeing 

 Booker enter the witness room with his clients after the 

 $20,000 offer was communicated, and seeing the 

 Farrises at the counsel table as the settlement was 

 read into the record, to mean that they [the Farrises] 

 had given authorization to Booker to settle their case 

 for $20,000. These manifestations by the Farrises to 

 defendant's counsel cloaked Booker with apparent 

 authority sufficient to uphold the settlement. Whether 

 or not Booker exceeded his authority as the Farrises 

 attorney (and the credible evidence makes plain that he 

 did), the record contains both words and actions by 

 both Booker and the Farrises sufficient to support 

 defendant's reasonable conclusion that a settlement 

 had been reached. 

2 F. Supp.2d at 700. According to the District Court, J.C. 

Penney is "entitled to finality with regard to an agreement 

it reasonably entered into over eighteen months ago; the 

Farrises may pursue their dissatisfaction with their 

attorney in another forum." Id. 

We are convinced that the District Court's reliance on 

Tiernan in predicting that the Supreme Court of 

Pennsylvania would here recognize an exception to the 

general rule requiring that an attorney have actual

authority to settle was misplaced. Ultimately, our 

discussion in Tiernan of Pennsylvania law with respect to 

apparent authority was in dicta: 

 [W]e believe that the Pennsylvania Supreme Court 

 might allow . . . apparent authority to suffice. We do 

 not believe, however, that [this] ground is so clearly 

 available in this case to justify summary enforcement 

 of the settlement agreements. Furthermore, we 

 emphasize the general rule that an attorney cannot 

 settle his client's case without express actual authority. 

Id. at 1035. 

 8 
The District Court extrapolated from the dicta in Tiernan 

and predicted that the Pennsylvania Supreme Court would 

invoke the doctrine of apparent authority to enforce the 

settlement at issue in this case. While we reiterate our 

conclusion in Tiernan that the Supreme Court of 

Pennsylvania may recognize apparent authority in some 

case, it has yet to do so and we are not convinced that the 

Supreme Court would invoke the doctrine on the facts of 

this case. 

IV. 

Our discussions of apparent authority in the context of 

Pennsylvania law and the law generally have emphasized 

that whether the doctrine applies depends upon the client's 

conduct. In Tiernan, we explained that: 

 Apparent authority . . . has as its source the client's 

 conduct toward another party in the litigation. It arises 

 from a principal's manifestations to a third party that 

 any agent has authority to act on the principal's 

 behalf. See Restatement (Second) of Agency S 8 (1958). 

923 F.2d at 1034. 

We again stressed the fact-dependent nature of the 

doctrine of apparent authority in Edwards v. Born, Inc., 792 

F.2d 387 (3d Cir. 1986). In Edwards, the plaintiffs appealed 

a District Court order enforcing a settlement agreement 

entered into by the Edwardses' attorney. The Edwardses 

contended that their attorney lacked actual authority to 

settle the case. Because Virgin Islands law was devoid of 

statute or precedent governing the issue of an attorney's 

authority to settle a client's action, we looked to principles 

of agency law and "common law rules `as generally 

understood and applied in the United States' " in 

accordance with V.I. Code Ann. Tit. 1, S 4. Id. at 389-90. 

Applying those principles in evaluating the Edwardses' 

claims, we noted first that: 

 A strong public policy exists in favor of settlements. 

 Such a settlement, once entered, may be set aside only 

 if the client produces "proof that the attorney had no 

 right to consent to its entry." 

 9 
Id. at 389 (quoting Surety Insurance Co. of California v. 

Williams, 729 F.2d 581, 582-83 (8th Cir. 1984). We then 

considered the applicability of apparent authority, writing 

that "there is no consensus" on the doctrine but finding 

that its applicability represents "the better rule": 

 [E]nforcing settlement agreements on the basis of 

 apparent authority is consistent with the principles of 

 agency law, the policies favoring settlements generally, 

 and the notions of fairness to the parties in the 

 adjudicatory process. 

Id. at 390. In finding that apparent authority could be 

invoked to validate a settlement we emphasized that the 

"crucial question in ascertaining whether apparent 

authority has been created is whether the principal has 

made representations concerning the agent's authority to 

the third party." Id. Evaluating the facts in Edwards, we 

concluded that 

 Apparent authority is an equitable doctrine that places 

 the loss on one whose manifestations to another have 

 misled the latter. We agree with the [Edwardses] that 

 the record is devoid of communications directly from 

 the [Edwardses] to defense counsel, much less 

 representations that might have led defense counsel to 

 believe that Groner had the Edwardses' permission to 

 settle. 

Id. at 391. 

In Edwards, we thus declined to rely on apparent 

authority even though: 1) the attorney in question had been 

the Edwardses' attorney since the beginning of the case and 

had transmitted all communications from the defendants to 

the Edwardses; (2) pretrial conference orders required the 

attorneys to appear with authority to settle; and (3) the 

attorney had been authorized to select medical experts to 

prepare for the trial. 

The Tiernan and Edwards decisions, taken together, 

establish that in order for the doctrine of apparent 

authority to apply, the facts must show that the plaintiffs 

(principals) communicated directly with defense counsel, 

making representations that would lead defense counsel to 

 10 
believe that the plaintiffs' attorney had authority to settle 

the case. The District Court in the matter now before us 

grounded its invocation of apparent authority on two 

findings: (1) the Farrises were seen conferring with their 

attorney during the course of settlement negations; and (2) 

the Farrises were silent during the in-court announcement 

of the settlement and dismissal of their cases. 

The Farrises in-court conduct is the linchpin of this case. 

Normally in-court silence during the reading or entry of a 

settlement would be a powerful indicator that the particular 

settlement terms were authorized. The unique facts of this 

case, however, negate the evidentiary force of the Farrises' 

silence. 

The District Court, making findings of fact, noted that the 

entire in-court proceeding from discussion of the settlement 

through dismissal of the jury lasted less than three 

minutes. The Court also found that Mrs. Farris either did 

not understand or did not hear what was happening during 

those three minutes. Moreover, had J.C. Penney construed 

Farrises' silence as a manifestation of authority, it was 

immediately disabused of that notion. As soon as the 

proceedings were concluded, Mrs. Farris expressed her 

surprise with and opposition to the settlement both to her 

own attorney and to counsel for J.C. Penney.4 J.C. Penney 

was on notice immediately that the settlement was not 

authorized and has never paid any amount to anyone as a 

result of the settlement.5 

Where, as here, the District Court found that Booker was 

never authorized to settle on behalf of his client, there is a 

credible explanation for the client's silence, and the client 

_________________________________________________________________ 

4. Had there been any manifestation of authority sufficient to support 

the doctrine of apparent authority, that manifestation was promptly 

repudiated. The general rule is that a principal may promptly repudiate 

an agent's acts, apparent authority notwithstanding. See Tiernan, 923 

F.2d at 1037; Sustrik, 149 A.2d at 501. 

5. While we recognize that J.C. Penney suffered at least some degree of 

prejudice as a result of events surrounding the purported settlement, we 

note that counsel, at oral argument, conceded that he is not aware of 

any impediment which would prevent his client from proceeding to trial 

in this matter. 

 11 
made all parties aware of the lack of authority immediately 

upon learning what had happened, we are convinced that 

these equities lie with the Farrises and that the Supreme 

Court of Pennsylvania would not rely on the doctrine of 

apparent authority to enforce the settlement. This 

conclusion is consistent with our own caselaw and the law 

of Pennsylvania. 

The particular facts supporting our conclusion are 

unlikely to arise often. This is not the "typical" case where 

a client has acted to create an ambiguity with respect to the 

attorney's authority, where she has delayed in asserting the 

lack of authority, or where it is clear that the real motive for 

challenging a settlement involves a change of heart

regarding the substance of the settlement.6 

V. 

In predicting how a matter would be decided under state 

law we take into consideration the District Court's analysis 

and also examine: 

 (1) what the Pennsylvania Supreme Court has said in 

 related areas; (2) the decisional law of the Pennsylvania 

 intermediate courts; (3) federal appeals and district 

 court cases interpreting the state law; (4) decisions 

 from other jurisdictions that have discussed the issues 

 we face here. 

_________________________________________________________________ 

6. For decisions resting on these more "typical" grounds, see Jones v. 

Stedman, 595 So.2d 1355 (Ala. 1992) (ordering enforcement of 

settlement where challenger sat silently while settlement was read into 

the record and later argued that by her silence she conveyed 

disagreement with the settlement); Moreland v. Suttmiller, 397 S.E.2d 

910 (W. Va. 1990)(ordering settlement enforced where record showed 

that petitioners vacillated between granting and revoking attorney's 

authority to settle and real reservations seemed to relate to belief that 

they had settled for inadequate amount); Sunn v. Mercury Marine, 305 

S.E.2d 6 (Ga. 1983)(enforcing settlement where client was silent when 

settlement was read and failed to object to settlement or to attorney's 

continued appearance on his behalf); Szymkowski v. Szymkowski, 432 

N.E.2d 1209 (Ill. App. 1982)(enforcing settlement where petitioners were 

present and failed to object in a meeting where their counsel informed 

opposing counsel that the terms of settlement were accepted). 

 12 
Wiley v. State Farm Fire & Casualty Co., 995 F.2d 457, 459 

(3d Cir. 1993). 

Taking all of these authorities into account, we predict 

that while the Pennsylvania Supreme Court might, in some 

as yet undefined case, apply the doctrine of apparent 

authority to uphold a disputed settlement, it would not do 

so here. Accordingly, we will reverse the order of the 

District Court denying the motion to set aside the 

settlement entered and will remand this matter for further 

proceedings. 

 13 
NYGAARD, J., Concurring. 

I concur in the judgment. I believe, however, that it is 

neither necessary nor desirable that we predict whether the 

Pennsylvania Supreme Court would recognize apparent

authority in this odd situation, because as the majority 

opinion makes clear, Farris learned of the settlement 

agreement within minutes and immediately repudiated it. 

Under these facts, I view this as a contemporaneous

repudiation of whatever agreement her attorney reached 

with counsel for the defendant. 

Alternatively, I would suggest that we certify the apparent 

authority issue to the Pennsylvania Supreme Court for it to 

decide. In Hakimoglu v. Trump Taj Mahal Assoc., 70 F.3d 

291, 304 (3rd Cir. 1995), we said that an issue should be 

certified to the state court "when: (1) the issue is one of 

importance; (2) it may be determinative of the litigation; 

and, (3) state law does not provide controlling precedent 

through which the federal court could resolve the issue." I 

think this case qualifies. In any event, I would avoid 

making the prediction. 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

 14