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Tuesday, April 14, 2015

Settlement Not Approved by City Council is Unenforceable

Plaintiff sued the City after she was injured falling into a sinkhole near her home.  The night before trial, the City Attorney, after conferring with members of the City Council's Code and Regulation Committee, offered to settle the case for $600,000, which plaintiff accepted.  The plaintiff signed the settlement agreement, and two weeks later, the agreement was presented to the City Council for approval.  Two of the council members who previously concurred in the settlement changed their votes and voted to reject the settlement.  As a result, the settlement agreement was not approved.  Meade v. City of Rockford, 2015 IL App (2d) 140645 (April 8, 2015)

The plaintiff sued to enforce the agreement against the City, arguing that the settlement agreement was effective when the City Attorney presented the offer with the concurrence of the Committee members.  

The trial court certified 3 questions to the appellate court, which were answered as follows:

1.  Is the settlement of litigation excluded from the statutory requirement that the city council approve  items that involves the expenditure of money or creation of liability against the City under 65 ILCS 5/3.1-40-40?

The appellate court answered no, finding that a $600,000 payment to the plaintiff in the settlement of her case against the city required city council approval because it involved the expenditure of money and the creation of liability. 

2.  Are City Council members required to vote consistently with their previous authority to the City Attorney to make the settlement offer?

Again, the appellate court said no.  There was no evidence that the Committee members told the plaintiff that no further approval was necessary or that they would not change their votes when the matter came to the City Council for approval.  More importantly, the court would not adopt a position requiring Committee members to vote in accordance with their statements, if such statements had been made. 

The court did, however, find the City's change of course on the settlement very troubling, and suggested that the City's conduct might even be sanctionable, remanding that issue back to the trial court.

3.  Is a settlement agreement reached between the parties during a pretrial settlement conference enforceable against the City notwithstanding the City Council's subsequent vote to not approve it?

Not surprisingly, given the prior discussions, the court answered this in the negative.  Because state statute requires city council approval of a contract involving the expenditure of money, this particular agreement was not enforceable because it was not approved by the council.  

Parties who negotiate settlements with government bodies should be on notice that the settlement is not final until it is approved by the corporate authorities.  There may be various exceptions (i.e., insurance settlements, legislative authority for expenditures of a certain amount), but as a general rule, settlement agreements are subject to the same approval process as other contracts.

Post Authored by Julie Tappendorf


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