Newsletter – September 2021

The California Court of Appeals established that an attorney cannot settle a case if his or her client objects to the settlement. (Amjadi v. Brown, No. G059069 (Ct. App. Aug. 30, 2021).) Moreover, any provision in a retainer agreement purporting to give the attorney settlement authority is void and violates the California Rules of Professional Conduct.

Facts of the Case

Plaintiff Sayedeh Sahba Amjadi sued defendant Jerrod West Brown and two others for damages due to injuries she suffered in a car accident. The week before trial, Amjadi fired her attorneys and hired new ones (Kevin Jolly & Leah Berry of Jolly Berry Law and Joseph Nazarian from Accident Lawyers Firm). The trial was moved to a date a few months later. Amjadi signed a contingent fee agreement with Jolly Berry Law, which stated:

“CLIENT agrees that if a settlement offer is tendered in the case by any defendants and the ATTORNEY believes in good faith that the settlement offer is reasonable, and that acceptance of the offer is in the CLIENT’s best interest, and should be accepted, CLIENT authorizes ATTORNEY to accept said offer on CLIENT’s behalf, at ATTORNEY’s sole discretion.”

In other words, Jolly Berry Law could accept an offer to settle Amjadi’s case on her behalf without her consent.

Shortly before the rescheduled trial, Amjadi’s relationship with her new attorneys deteriorated. On the morning of trial, the attorneys sought to be relieved as counsel due to a conflict of interest. The court denied the request. Attorney Kevin Jolly then approached defendant’s attorney about a settlement of $150,000. Amjadi previously had rejected a settlement of this amount. Defendant’s attorney made the offer of $150,000, and Jolly accepted it.

Over Amjadi’s objection, Jolly announced the settlement to the court. During the lunch break, Amjadi emailed her attorneys objecting to their actions regarding settlement and asking for a signed substitution of attorney form. Jolly signed the settlement agreement on her behalf and the court accepted it as binding Amjadi.

The court then set a hearing on dismissal of the case due to the settlement. Amjadi filed a declaration before the hearing, explaining her objection to the settlement and dismissal. The trial court decided to dismiss the case, ruling that Amjadi had not filed a motion to set aside the settlement.

Amjadi hired new attorneys to file a motion to vacate the dismissal. Jolly Berry Law opposed the motion. In opposition, they included declarations that disclosed attorney-client communications and the retainer agreement. The trial court denied the motion.

Plaintiff appealed both the dismissal and the order denying the motion to vacate the dismissal.

Was the Settlement Effective, Even Though Amjadi Objected to It?

On appeal, the California Court of Appeals first established that Amjadi properly opposed the dismissal of the case. The court’s order to show cause regarding dismissal was the equivalent of a motion, and Amjadi’s declaration was a sufficient response. The court should have considered her declaration.

Next, the Court of Appeals considered whether an attorney can settle a case over his client’s objection (regardless of “advance consent” language in the retainer agreement). The California Rules of Professional Conduct governing lawyers state in part: “A lawyer shall abide by a client’s decision whether to settle a matter.” (Rules Prof. Conduct 1.2(a).) Amjadi also cited a case with very similar facts where the State Bar court found that the attorney’s behavior “involve[d] overreaching and constitute[d] moral turpitude.” (In the Matter of Guzman (Review Dept. 2014) 5 Cal. State Bar Ct. Rptr. 308, 314.) The State Bar court had found that the retainer provision permitting the attorney to settle a case for a client was invalid.

Here, the Court found the Guzman case persuasive. The opinion notes other reasons, beyond those stated in Guzman, that a retainer provision like the one at issue might be problematic. For example, if the attorney and client disagree about settlement, this disagreement creates a direct conflict of interest. Also, disclosing the retainer agreement to opposing counsel in order to allow the attorney to settle on the client’s behalf would violate the attorney’s duty of confidentiality.

The Court also rejected the defendant’s arguments, noting that Amjadi continually objected to the settlement despite Jolly’s representation that he had authority to settle. Amjadi had rejected the previous $150,000 settlement offer by defendant. As a result, the Court held that Jolly could not settle the case over Amjadi’s objection, and the retainer provision purportedly giving the lawyer to bind the client to a settlement is void. The Court also found that such a provision in the retainer agreement violates the Rules of Professional Conduct. Because of the Rules violation, the Court referred attorneys Kevin Jolly, Leah Berry, and Joseph Nazarian to the State Bar for potential discipline.

The Takeaway

The client is in control of the objectives of the legal matter. The Court of Appeals’ opinion makes it clear that attorneys cannot settle their clients’ cases if the clients object. An attorney cannot evade this well established principle concerning settlement authority by inserting a provision in a retainer agreement that gives an attorney authority to settle a case without client approval. Attempting to enforce this settlement led to a referral by the court to the State Bar.