Covington v. Continental General Tire

Mary Lou Covington and others (the clients) (plaintiffs) were injured in a car accident. The accident was allegedly caused by a defective tire manufactured by Continental General Tire, Inc. (Continental) (defendant). The clients hired attorney Carl Schiffman to represent them in a lawsuit against Continental and a second defendant, Sears and Roebuck. The clients signed an agreement with Schiffman regarding his representation. The agreement stated that Schiffman would not settle the clients’ claims without their consent. During discovery, Schiffman discovered that the expert witness he had hired was not going to testify in a way that would help the clients’ case. Concerned that this issue significantly weakened the clients’ chance of success, Schiffman entered negotiation discussions with Continental’s attorney. Ultimately, Continental’s attorney and Schiffman agreed that the clients would dismiss their claims against Continental in exchange for being able to hire Continental’s expert witness to pursue their remaining claims against Sears and Roebuck. But when Schiffman told the clients about the deal, the clients did not want to settle on those terms and refused to sign the proposed settlement agreement. Continental then filed a motion to enforce the settlement promised by Schiffman. Continental argued that Schiffman, as the clients’ agent, had apparent authority to bind the clients to the agreement’s terms. Continental further claimed that because Continental had relied on that appearance of authority, the settlement was enforceable against the clients. The trial court granted the motion and dismissed the clients’ claims against Continental. The clients appealed.