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Integrated Marketing and Promotional Solutions v. JEC Nutrition LLC

July 28, 2008

INTEGRATED MARKETING AND PROMOTIONAL SOLUTIONS, PLAINTIFF,
v.
JEC NUTRITION LLC AND KELLY LOCKWOOD, DEFENDANTS.



The opinion of the court was delivered by: John F. Keenan, United States District Judge

MEMORANDUM OPINION & ORDER

Before the Court is Plaintiff's motion to enforce a settlement agreement reached by the parties' respective counsel on February 20, 2008. For the reasons discussed below, Plaintiff's motion is granted.

BACKGROUND

On July 26, 2006, Plaintiff Integrated Marketing and Promotional Solutions, Inc. ("IMPS" or "Plaintiff") commenced this action for breach of contract and related claims, invoking the Court's diversity jurisdiction, against Defendants JEC Nutrition, LLC ("JEC") and JEC's CEO and sole principal, Kelly Lockwood ("Lockwood", and collectively "Defendants"). The underlying facts of the lawsuit are set forth in a prior Memorandum Opinion and Order of the Court, see Integrated Marketing and Promotional Solutions, Inc. v. JEC Nutrition, LLC, No. 06 Civ. 5640, 2006 WL 3627753 (S.D.N.Y. Dec. 12, 2006), and familiarity with those facts is assumed. In brief, IMPS, a company that provides advertising and media consulting services, entered into a contract with JEC, a company that distributes nutritional supplements, pursuant to which IMPS agreed to plan JEC's marketing and advertising strategy, create advertising materials, and buy advertising space with media providers on JEC's behalf. JEC allegedly failed to pay IMPS approximately $1.8 million in outstanding invoices. IMPS brought suit against JEC and Lockwood, individually, as the personal guarantor of the agreement.*fn1 Discovery in the case was ongoing when settlement discussions began.

The sole issue raised by the present motion is whether Defendants' counsel, Myron Milch, Esq. ("Milch"), had authority to bind Lockwood to the settlement agreement. The parties' submissions on this motion establish the following relevant facts about the settlement discussions.*fn2 Except where noted, the facts are undisputed.

In the fall of 2007, Lockwood initiated settlement discussions with a former officer of IMPS, but no agreement was reached. In January 2008, a settlement conference was held before the Hon. James C. Francis, IV, U.S.M.J., which was attended by Milch and Plaintiff's initial counsel, Kevin J. Licciardi, Esq., of the law firm McCarter & English. Settlement discussions continued in the form of telephone calls between Milch and Plaintiff's current counsel, Clement Farley, Esq. ("Farley"), also of McCarter & English. During these discussions, Farley told Milch that any settlement would have to (1) include Lockwood individually as a coobligor or guarantor, or (2) include full, or at least a large portion of, payment at one time. Farley again advised Milch of this requirement on February 14, 2008, and Milch conveyed Farley's insistence on such an arrangement to Lockwood via e-mail on February 18, 2008.

On February 14, 2008, Milch and Farley had two telephone discussions during which the attorneys discussed the possibility of settlement. During these discussions, Milch told Farley that he had "full authority to settle on behalf of Defendants" and that he "had 'just spoken to his client,' or words virtually identical to those." Affidavit of Clement J. Farley in Support of Motion to Enforce Settlement ¶¶ 8, 10. However, Milch also said he would have to check with Lockwood before responding to Farley.

After his first discussion with Farley on February 14, 2008, Milch called Lockwood "to find out what he wanted to do about settling the case." Certification of Myron D. Milch, Esq., in Opposition to Plaintiff's Notice of Motion to Enforce a Settlement ("Milch Cert.") ¶ 4. Both Milch and Lockwood concede that, during this conversation, Lockwood authorized Milch to conclude a settlement agreement for any amount up to $180,000. Milch and Lockwood did not discuss any limitation on Lockwood's personal liability in the event that Milch concluded a deal. After speaking with Lockwood, Milch spoke again with Farley. According to Milch, Milch offered to settle the case for $100,000. According to Farley, Milch made an offer of $160,000. In any event, no deal was struck on February 14.

On February 18, 2008, Milch sent Lockwood an e-mail in which Milch recounted for his client the substance of the February 14 settlement discussion with Farley. Milch then decamped for a five-day vacation. On February 19, 2008, Lockwood sent Milch an e-mail in which Lockwood stated that he did not wish to accept any settlement offer that imposed personal liability on him in excess of $75,000.

On February 20, 2008, Milch and Farley held another telephone conversation during which Milch offered $150,000 to settle the case. At the time Milch made this offer, he had not read the e-mail sent by Lockwood on February 19. Farley immediately accepted the offer on behalf of IMPS. The payment terms, discussed over the telephone and subsequently confirmed by an e-mail from Farley to Milch, were as follows: $36,000 was to be paid in seven to ten days, and the balance was to be paid in monthly installments of $9,500 over the next twelve months. Under the agreement, Lockwood was personally liable for the full settlement amount of $150,000. During this discussion, Milch told Farley again that he had full settlement authority. After Farley accepted the $150,000 offer on behalf of Plaintiff, Milch "told Mr. Farley that [they] had settled the case." Milch Cert. ¶ 10.

Several days after the February 20, 2008 conversation, Milch told Farley that, at the time he made the settlement agreement, he was unaware that Lockwood had limited his authority. Milch stated that he had not seen Lockwood's February 19 e-mail and thus did not know that he was authorized only to agree on settlement terms that limited Lockwood's personal liability to $75,000. Accordingly, Lockwood claimed that the settlement was invalid. IMPS' present motion to enforce the terms of the February 20, 2008 settlement followed.

DISCUSSION

It is undisputed that, on February 20, 2008, Milch and Farley reached an agreement to settle the present case on behalf of their respective clients. The sole issue before the Court is whether Milch had authority to conclude the deal.

Under New Jersey law,*fn3 settlement agreements made by attorneys when acting within the scope of their authority are enforceable against their clients. Jennings v. Reed, 885 A.2d 482, 490 (N.J. Super. Ct. App. Div. 2005). Further, an attorney is presumed to possess authority to act on behalf of the client. Id. A party who asserts the lack of authority must sustain "a heavy burden to establish that [the] attorney acted without any kind of authority . . . ." Id. New Jersey law recognizes two types of attorney-possessed authority to settle a lawsuit that bind a client: actual (either express or implied) and apparent. Newark Branch, NAACP v. Twp. of W. Orange, N.J., 786 F. ...


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