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PARTY WHO BALKED AT SETTLING NOT ON THE HOOK FOR FEES by Guy Loranger, Staff Writer

An Alamance County court had no basis to award attorney fees to the defendants in a nursing-home negligence case in which the plaintiff changed her mind and refused to sign a settlement contract after an agreement had been reached, the Court of Appeals has ruled in an unpublished opinion.

Judge Abraham Jones awarded the $1,678.50 in costs and attorney fees in December 2008 after granting the defendants’ motion to enforce the settlement agreement.

That motion had been filed after the plaintiff backed down from a settlement agreement that had been announced in open court a month earlier.

According to the appeals panel, the plaintiff had not filed any pleading in response to the motion to enforce that would have justified an attorney fees award on statutory grounds.

Also, there was no indication that the trial court had intended to sanction the plaintiff for violating a court order, which would have triggered the court’s inherent power to impose fees, the opinion said.

“Although there is some indication that the trial court intended to file an order approving the settlement agreement, no such order appears in the record,” Judge James A. Wynn Jr. wrote for the appeals panel.

“Moreover, there is no indication that the trial court ever considered holding plaintiff in contempt, and there is no language in the court’s order awarding attorney’s fees and costs to support such an interpretation.”

The attorneys for both sides said the ruling in the case, Hardin v. Liberty Commons Nursing & Rehabilitation Center of Alamance County, LLC (North Carolina Lawyers Weekly No. 10-16-0175, 9 pages) is significant enough to merit being published, which would give it precedential authority.

However, they disagreed on why it should be published.

Raleigh lawyer Stephen J. Gugenheim, representing the plaintiff, said the ruling would “provide guidance to trial courts around the state” in an area where “there’s not really a whole lot of guidance.”

That is important, he said, considering that more cases today are being resolved in mediation. In turn, there’s likely been an increase in motions to enforce settlement agreements, he said.

“I think this opinion addresses that there are very limited circumstances in which a trial court can award attorney fees and costs, and if those circumstances don’t exist, then the trial court has no authority to do that,” Gugenheim said.

“Otherwise, people would be asking for attorney fees and costs every time they file a motion and win, even if it’s not opposed.”

The defendants’ attorney, Michael C. Hurley of Raleigh, said the ruling should be published because it contains two rulings of first impression: That a party is not exposed to sanctions unless a pleading has been filed, and that no costs and attorney fees can be imposed for disobeying court orders that are not reduced to writing.

Hurley contended that the trial court had issued an order from the bench approving the settlement agreement. He argued that the court had the power to sanction the plaintiff for disobeying that order.

“The Court of Appeals said that because Judge Jones didn’t take that, write it down and sign it, it wasn’t an order,” Hurley said. “But I’m not aware of any court that doesn’t consider an order from the bench to be an order.”

Change of mind

According to the opinion, the parties announced in open court in November 2008 that they had resolved their claims.

The parties then went to the judge’s chambers to recite the agreement’s confidential terms. At the end of that discussion, the plaintiff’s attorney asked for the court to approve the settlement.

“I will, and we’ll, based on this, I think that what I’ll do is to do an order of that, noting that this has been, that plaintiff’s taking a voluntary dismissal without prejudice until such time as final documents exchanged hands and the funds are distributed, and the court retains jurisdiction until that time, and that will do it,” Judge Jones said.

After the plaintiff refused to sign the papers, the defendants filed the motion to enforce the settlement agreement and sought costs and attorney fees incurred as a result of the motion.

The plaintiff’s counsel did not dispute the motion at a hearing at which the trial court granted the motion, costs and fees.

Later on, the plaintiff signed off on the settlement.

Statutory basis

On appeal, the defendants argued that they were entitled to the award under G.S. Sect. 6-21.5, which authorizes attorney fees if there has been a complete absence of a justiciable issue “raised by the losing party in any pleading.”

The defendants contended that under Sunamerica Financial Corp. v. Bonham, 328 N.C. 254 (1991), the statutory award was not triggered by the filing of pleadings but “the frivolous prosecution of litigation.”

“We argued that once the plaintiff went to the judge and said we have settled the case, and I want you to approve it, the litigation was barred by accord and satisfaction at that point,” said Hurley, the defendants’ attorney. “There was no justiciable issue.”

Hurley said that Sunamerica approved sanctions whenever there was any persistence in litigation regardless of whether pleadings are filed.

The Court of Appeals disagreed and focused on the fact that the plaintiff had filed no responsive pleading to the defendants’ motion to enforce the settlement agreement.

“Plaintiff therefore filed no pleading which could activate [G.S.] Sect. 6-21.5,” Wynn wrote.

Inherent powers

The Court of Appeals also rejected the defendants’ claim that the plaintiff’s refusal to sign the agreement was in disobedience to an order of the court, and that the award of attorney fees was in the nature of a contempt order.

Gugenheim, the plaintiff’s attorney, said the Court of Appeals simply found there had been no order approving the settlement. That was in contrast to the defendants’ argument.

“What the Court of Appeals did recognize was that, if there had been an order, the plaintiff’s refusal to abide by the court’s order would have been contempt, and the court would have had the power to sanction the plaintiff for contempt,” he said.

“But because there was no order, the court had no ability to hold the plaintiff in contempt.”

OPINION BRIEF

Case name: Hardin v. Liberty Commons Nursing & Rehabilitation Center of Alamance County, LLC

Court: N.C. Court of Appeals (unpublished)

Judge: James A. Wynn Jr. (author); Judges Ann Marie Calabria and Cheri L. Beasley (concurring)

Date: Feb. 16, 2010

Plaintiff-appellant’s attorney: Stephen J. Gugenheim of Gugenheim Law Offices (Raleigh)

Defendant-appellee’s attorney: Michael C. Hurley (Raleigh)

Issue: Did the trial court have a proper basis to award the defendants attorney fees where the plaintiff changed her mind and refused to sign a settlement contract after the agreement had been reached?

Holding: No. The award was not authorized by statute and cannot be sustained as an exercise of the trial court’s inherent authority to sanction a party for disobedience.

Noteworthy: The decision indicates that there must be a pleading to trigger a court’s statutory authority to award attorney fees under G.S. Sect. 6-21.5.

© 2010 Lawyers Weekly Inc., All Rights Reserved.

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