McGehee et al v. Southwest Electronic Energy Corporation et al
ORDER granting 171 SWE's Motion to Reconsider Order Denying Motion to Enforce Settlement Agreement; vacating 140 Order on Motion to Enforce; granting 116 SWE's Motion to Enforce Settlement Agreement. Signed by Honorable Robin J. Cauthron on 11/30/17. (lg)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
JACOB MCGEHEE and
STEVEN RAY HEATH,
FOREST OIL CORPORATION, and
LANTERN DRILLING COMPANY,
Third Party Plaintiff,
ENGINEERED POWER LP,
Third Party Defendants.
Case No. CIV-15-145-C
MEMORANDUM OPINION AND ORDER
Now before the Court is Defendant/Third Party Plaintiff Southwest Electronic
Energy Corporation’s (“SWE”) Motion to Reconsider Order Denying Motion to Enforce
Settlement Agreement. (Dkt. No. 171.) Plaintiffs Jacob McGehee and Steven Heath
responded and the Motion is now at issue.
SWE urges the Court to reconsider its Memorandum Opinion and Order denying
the Motion to Enforce Settlement Agreement (Dkt. No. 140), stating:
Plaintiffs admit that their counsel had authority to make settlement
offers on their behalf, but maintain that counsel did not have authority to
make the particular offer at issue here. While Plaintiffs may have secretly
limited their counsel’s actual authority in this manner, it does not diminish
their counsel’s apparent authority to SWE because Plaintiffs never
communicated any limitation to SWE.
(Def.’s Mot. to Reconsider, Dkt. No. 171, p. 5) (emphasis omitted). This argument
convinces the Court that in deciding its previous Order it focused too narrowly on the issue
of whether there was authority for Plaintiffs’ attorney to make the specific joint settlement
offer at issue, rather than whether there was apparent authority. It is enough for the
principal to convey apparent authority to the agent once, and then apparent authority will
extend throughout settlement negotiations. See Moore v. Beaufort Cty., N.C., 936 F.2d
159, 163-64 (4th Cir. 1991); Nature’s Sunshine Prods. v. Sunrider Corp., 511 F. App’x
710, 715 (10th Cir. 2013) (unpublished) (“‘[u]nless otherwise agreed, if the agent properly
begins to deal with a third person and the principal has notice of this, the apparent authority
to conduct the transaction is not terminated by the termination of the agent’s authority by
a cause other than the incapacity or impossibility, unless the third person has notice of it’”)
(quoting Restatement (Second) of Agency § 129).
The evidence shows Plaintiffs McGehee and Heath and their counsel attended a
mediation on June 6, 2017, where counsel made one or more settlement offers. (Pls.’ Aff.,
Dkt. Nos. 121-1, 121-2, 121-3.) This created apparent authority for Plaintiffs’ counsel to
act on their behalf in settlement negotiations. The apparent authority continued until
counsel extended a settlement offer on June 26, 2017, to SWE and Engineered Power, LP.
Plaintiffs do not contest whether counsel’s offer was authorized; they instead contest the
terms of the offer. The Court previously determined this offer failed to include an express
condition stating the offer was contingent upon the acceptance of both offerees, thus SWE
accepted the offer. (Dkt. No. 140, p. 3.)
While counsel may not have been privately authorized to accept less than the joint
amount from SWE and Engineered Power, LP, the secret limitation will not be enforced
when counsel was acting with apparent authority and SWE reasonably relied upon the
authority. See Omega Eng’g, Inc. v. Omega, S.A., 432 F.3d 437, 447 (2d Cir. 2005)
(stating “[e]very agent is likely to have secret negotiating limits dictated by the principal,
but other parties may safely assume that any agreement the agent agrees to is within his
authority unless there is reason to believe he is exceeding it”) (citation omitted). To hold
otherwise is unworkable in settlement negotiations because the rules of ethics governing
attorney conduct largely prevent counsel from speaking with represented opposing parties.
See Okla. Rules Prof. Conduct 4.2; Nature’s Sunshine Prods., 511 F. App’x at 716 (finding
counsel had authority to settle even when the actual authority had been privately revoked,
partly for the reason that ethics rules limit an attorney’s ability to communicate directly
with a party who is represented by counsel).
For these reasons, the Court reconsiders its prior Memorandum Opinion and Order
and finds the settlement agreement between SWE and Plaintiffs is valid and shall be
Accordingly, SWE’s Motion to Reconsider Order Denying Motion to Enforce
Settlement Agreement (Dkt. No. 171) is GRANTED; the Order of September 13, 2017
(Dkt. No. 140) is VACATED; and SWE’s Motion to Enforce Settlement Agreement (Dkt.
No. 116) is GRANTED.
IT IS SO ORDERED this 30th day of November, 2017.
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