Who Has Authority to Settle a Claim Against the State?

Procedural posture and result

Appeal from a trial court order enforcing a mediated settlement against the State of Indiana. The settlement required approval by both the Indiana Attorney General and Governor, but the Governor did not approve it. The Indiana Court of Appeals reversed the enforcement order and remanded the case.

What happened and what the authority decided

Scott Sparks asserted a negligence claim against the State arising from a motor-vehicle accident involving an allegedly unrepaired downed stop sign. Following mediation, Sparks and the State entered into a settlement under which Indiana would pay $25,000. The agreement expressly provided that payment was subject to approval by the Indiana Attorney General and Governor.

The Governor did not approve the settlement. Sparks nevertheless moved to enforce it, and the trial court granted the motion and ordered the State to pay $25,000.

The Indiana Court of Appeals reversed. It concluded that the approval requirement was an express condition precedent and that Indiana law gives the Governor ultimate authority to compromise or settle tort claims against the State. Because the required gubernatorial approval was not obtained, the settlement never became a binding contract.

The court also rejected the argument that the State acted in bad faith merely because the deputy attorney general attending mediation lacked advance authority to bind the State. The court explained that settlements may legitimately be conditioned on approval by a higher governmental authority. It also rejected equitable estoppel on the record presented.

What this tells the mediator

A government representative participating in mediation may have authority to negotiate without having final legal authority to bind the governmental party. Mediators should identify any statutory or organizational approval requirements before settlement discussions conclude and clearly distinguish between a proposed settlement, a conditionally approved agreement, and a final binding settlement.

Practical guidance

• Identify statutes and regulations governing settlement authority before mediation.
• Confirm the representative’s actual authority and any monetary limits.
• Name every required approving official or public body in the term sheet.
• State whether approval is a condition to formation or to performance.
• Set an approval deadline and specify what happens if approval is denied.