Agreement on Dollar Amount Alone Not Enough for Binding Malpractice Settlement

Lawrence v. Hutchinson, ___ P.3d ___, 2009 WL 260621 (Idaho App. 2009)

Brief Summary
A legal malpractice settlement agreement was not enforceable because the parties only agreed to one material term, the dollar amount, and did not exhibit sufficient intent to be bound by this agreement.

Complete Summary
Plaintiff Frederick Lawrence sued his former attorney Keith Hutchinson for breach of a settlement agreement. The issue was whether the parties had actually reached an agreement to settle Lawrence’s legal malpractice claim against Hutchinson. The trial court granted Hutchinson summary judgment because the agreement lacked material terms, such as confidentiality and indemnity provisions, and was therefore unenforceable. Nonetheless, the trial court denied Hutchinson’s motion for attorney fees.

The court of appeals affirmed. In drawing the line between what is and is not enforceable, the court focused on party intent and agreement on material terms. While the Idaho Supreme Court has enforced oral settlements before, the appellate court noted such settlements have involved parties’ agreement to, and intent to be bound by, all essential material terms. In the present case, however, only one term was agreed to, dollar amount, and the parties’ intent was unclear. Thus, it was unclear to the court whether the agreement was final because an affidavit submitted by Hutchinson to the malpractice court stated the parties had merely reached an agreement “in principle.”  Id. at *7.

Further, Lawrence had implicitly recognized the materiality of the indemnity and confidentiality clauses to Hutchinson because Lawrence had negotiated these issues. Such conduct was further evidence, the court noted, that the parties did not intend the agreement on the dollar amount to be a final, binding agreement.

On appeal, Lawrence argued the doctrine of judicial estoppel barred Hutchinson from denying the existence of an enforceable agreement. In this case, Hutchinson had informed the malpractice court that the parties had reached a settlement in principle. Although this statement was inconsistent with Hutchinson’s subsequent position in the breach of contract matter, the court declined to apply judicial estoppel because Hutchinson’s earlier statement had benefitted both parties.

Finally, the court affirmed the denial of Hutchinson’s motion for attorney fees. Under Idaho Rule of Civil Procedure 54(d), reasonable attorney fees are to be paid to the prevailing party in actions where the amount pleaded is less than or equal to $25,000. Because the pleadings did not pray for a specific amount, and because this rule is literally construed by Idaho courts, the court held against Hutchinson.

Significance of Opinion
This opinion ties together the elements of intent and materiality. The court’s reasoning suggests that if a term is subjectively material to a party, that party cannot have intended to be bound until there is agreement on that term.