Enforcing Settlement Agreements in New Hampshire Medical Negligence and Personal Injury Cases

Enforcing Settlement Agreements in New Hampshire Medical Negligence and Personal Injury Cases

By

Mark Abramson and Jared Green

 

I.          INTRODUCTION:

            We recently encountered a situation where we accepted a settlement offer on the eve of trial in a medical negligence case only to have the defendant doctor attempt to back out a couple of days later.  The defense attorney made the offer after the trial management conference.  It was the first offer after more than three years of litigation.  Four days after we accepted the offer, defense counsel informed us that his client was revoking her authorization for settlement.  In subsequent pleadings, the doctor did not deny that she had authorized her attorney to make a settlement offer; however, she alleged that she  was under extreme stress at the time due to undefined health, work, and family issues.  She sought to revoke the settlement agreement on the grounds that she did not have legal capacity to enter into a binding contract and/or she was under duress.Our motion requesting court enforcement of settlement was granted and Judge McHugh ordered the defendant to pay our attorneys’ fees incurred “as a result of the defendant’s attempt to negate her settlement agreement.”[1]

II.        DISCUSSION:

A.        Settlement Agreements:

            An attorney’s ability to bind his client to a settlement agreement is unquestioned.  In fact, New Hampshire’s rule regarding the power of an attorney to bind his client by settlement “is, perhaps, the most liberal in the country.”[2]  “The reason for this liberal rule is clear.  ‘The authority of attorneys to make settlement agreements is in practice never questioned.  It is essential to the orderly and convenient dispatch of business, and necessary for the protection of the rights of the parties.’”[3]

            In Poland v. Twomey[4], our Supreme Court unanimously upheld the trial court’s order enforcing a settlement agreement reached by the parties’ attorneys in a legal malpractice case.  In that case, plaintiffs’ counsel emailed defense counsel to accept a settlement offer.  Despite the email acceptance, the plaintiffs subsequently refused to sign the release tendered by defense counsel.  The trial judge held a hearing and found that the plaintiffs had authorized their attorney to settle the case.  He thus concluded that the settlement agreement was enforceable.  The Supreme Court unanimously affirmed finding sufficient evidence to establish the contractual requisites of offer, acceptance, consideration and a meeting of the minds.[5]

            Once entered into, a settlement agreement “will not be overturned merely because it was improvident, not the most advantageous to the dissatisfied party, or because a party had a change of heart.”[6]  A party seeking to back out of a settlement faces the significant burden of establishing a valid, legal basis for doing so since “New Hampshire jurisprudence strongly favors enforcement of settlement agreements made by authorized attorneys acting on behalf of their clients.”[7]


B.        Mental Incapacity:

            Mental incapacity as a defense to an action to enforce a contract stems from “the common-law rule requiring that competent minds must agree in the formation of a valid contract.”[8]  More than a century ago, our Supreme Court described the level of mental incapacity sufficient to revoke a contract as encompassing “persons bereft of reason.”[9]  The court expounded on this in Upton v. Conway Lumber Co., where it set forth the following test for contractual incapacity:

 

                                    The inquiry in all cases where incapacity to contract, from defect of mind, is alleged,

                                    is not whether a person's mind is impaired, nor if he is afflicted by any form of insanity,

                                    but whether the powers of his mind have been so far affected by his disease as to render

                                    him incapable of transacting business like that in question.[10]

 

            The first question that arises under Upton is whether the party seeking to revoke the agreement had a disease or defect of mind.  New York’s highest court has emphasized that, in this context, "nothing less serious than medically classified psychosis should suffice or else few contracts would be invulnerable to some kind of psychological attack."[11]  However, even if the revoking party can plausibly assert the existence of a disease or defect of the mind, he or she still must allege facts sufficient to support a finding that the disease or defect rendered him or her incapable of transacting business.[12]  

            If a party’s assertion of “extreme stress” were enough to constitute incapacity to contract, no one would be able to rely on any contract.  Settlement agreements, in particular, would be routinely challenged by litigants who merely have a change of heart but need a legal basis for seeking rescission.  As one court explained in rejecting a claim of incapacity, "An outcome which will, in all likelihood, encourage people to challenge otherwise valid agreements on the ground that they were depressed when they entered into them should not be condoned.”[13]   Not surprisingly, many cases flatly reject the argument that emotional distress constitutes incapacity sufficient to revoke a settlement agreement.[14]  

           

C.        Duress:

            Our Supreme Court has described the requirements for establishing legal duress as a basis for rescinding a contract as follows:

                       

                                    To establish duress, a party must show that it involuntarily accepted the other party's

                                    terms, that the coercive circumstances were the result of the other party's acts, that

                                    the other party exerted pressure wrongfully, and that under the circumstances the party

                                    had no alternative but to accept the terms set out by the other party.[15]

 

            The key component of legal duress is wrongful, coercive conduct by the opposing party.  Thus, “[a] contract signed because a party is bargaining under adverse conditions . . . is not unenforceable on account of duress if the other party is not responsible for those circumstances . . .”[16]  Accordingly, our Supreme Court held that inHealey v. Richman that duress is not a basis for revoking a settlement agreement where there is no coercive conduct on the part of the opposing party.[17]

            In Healey, the defendant entered into a settlement agreement in a child support case and moved to rescind the agreement two weeks later.  He claimed he agreed to the settlement under duress because his attorney intended to withdraw on the day of the hearing and he was afraid he would have to proceed without counsel.  The trial court denied his motion and the Supreme Court unanimously affirmed because the alleged duress was not the fault of the opposing party.  In support of its holding, the court stated, “It is well settled that the fact one party to a settlement is negotiating under adverse conditions does not constitute duress.”[18]

            Based on the foregoing, emotional stress cannot be a basis for revoking a settlement agreement unless it was caused by the other party’s wrongful coercive conduct.  Thus, emotional stress from outside sources cannot constitute legal duress.

 

D.        Ruling:

            In his order enforcing the settlement, Judge McHugh emphasized the fact that the defendant authorized her attorney to settle the case.  He explained that “[o]ur entire judicial system is dependent upon the word of attorneys regarding settlement.”[19]  He added that “[t]here is both an emotional and financial component to the settlement process which demands finality.”[20]  Judge McHugh strongly rejected the defendant’s assertion that she had been ambushed by the judicial process since the trial date had been in place for at least six months before she authorized the settlement.[21]  He also noted that she was familiar with litigation and settlement since she had been sued at least two other times in the same Court.[22]  Based on these considerations, Judge McHugh found no legal or equitable basis for the settlement to be voided.  He granted the plaintiffs’ motion to enforce the settlement and granted our request for attorneys’ fees as a sanction.[23]

 

III.       CONCLUSION:

            Buyer’s remorse is not a valid basis for backing out of a settlement agreement.  A party who regrets settling his or her case cannot have the court turn back the clock by asserting that he or she was under extreme stress when the agreement was made.  Much more is needed to avoid judicial enforcement of the agreement.  Unsupported attempts to undue a settlement are likely to be met with an award of sanctions.

           

 

                                                                   ENDNOTES

 


[1]Rallis v. Gerety, Docket No. 2009-CV-598, Rockingham County Superior Court, Order on Plaintiffs’ Motion to Enforce Settlement at 2-3 (September 20, 2012).

[2].  Halstead v. Murray, 130 N.H. 560, 565 (1988) (quoting Ducey v. Corey, 116 N.H. 163, 164 (1976)).

[3]Id. (quoting Beliveau v. Amoskeag Co., 68 N.H. 225, 226 (1894)).

[4].  156 N.H. 412 (2007).

[5].  Id., 156 N.H. at 414-15.

[6]Warren v. Rabinowitz, 644 N.Y.S.2d 315, 316 (N.Y.App. 1996).

[7]Poland, infra Note 3, 156 N.H. at 416.

[8].  Oullette v. Ledoux, 92 N.H. 302, 304 (1943).

[9].  Clark v. Pease, 41 N.H. 414, 420 (1860).

[10].  81 N.H. 489, 490 (1925)(quotations omitted).

[11]Ortelere v. Teachers' Ret. Bd. of City of New York, 250 N.E.2d 460, 466 (N.Y. 1969).

[12].  Note 10, infra, 81 N.H. at 490.

[13].  Blatt v. Manhattan Med. Group, 519 N.Y.S.2d 973, 976 (N.Y.App. 1987).

[14].  See e.g. Palumbo v. Norstar Bank Upstate New York, 622 N.Y.S.2d 263, 264 (1995) (elderly litigant who was "confronting personal problems that caused him great stress" did not lack capacity to enter into binding settlement agreement); Sparrow v. Demonico, 960 N.E.2d 296, 306 (Mass. 2012) (transient mental defect or "breakdown" insufficient to rescind settlement on grounds of incapacity); Del Bosque v. AT&T Advertising, LP, 441 Fed.Appx. 258, 261-62 (5th Cir. 2011) (plaintiff who agreed to settlement had legal capacity despite the fact that she was “distraught” during mediation and, according to a letter from a nurse, she “may not have been in the best medical condition to enter into a legal agreement.”).

[15].  In re Yannolfo, 147 N.H. 597, 599 (2002) (quoting Goodwin Railroad, Inc. v. State, 128 N.H. 595, 605(1986)).

[16].  Cheshire Oil Co., Inc. v. Springfield Realty Corp., 118 N.H. 232, 237 (1978).

[17].  109 N.H. 439 (1969).

[18]Id., 109 N.H. at 440.

[19].  Note 1, infra, Order on Plaintiffs’ Motion to Enforce Settlement at 2.

[20].  Id.

[21]Id.

[22]Id.

[23]Id., Order on Plaintiffs’ Motion to Enforce Settlement at 2-3.