Wednesday, April 22nd, 2015

Informal Approval of Settlement Agreement by City Council Is Unenforceable

An appellate court, in Meade v. City of Rockford, recently held that a settlement agreement, informally approved by a city council, was unenforceable despite a court having dismissed the case pursuant to the settlement. In coming to this resolution, the court answered three questions on appeal: Are litigation settlements excluded from the statutory (65 ILCS 5/3.1-40-40)requirement that city councils approve the passage of any resolution creating a liability against a city for the expenditure of money?; Are members of city councils required to vote consistently with their past approval of authority for the city attorney to make a settlement offer?; Is the parties settlement agreement enforceable against the municipality notwithstanding the city council’s subsequent vote to not approve the settlement? The court answered all three questions in the negative.

In Meade, a settlement was reached between the municipality and injured plaintiff the day before trial. During negotiations, five members of the city council gave their approval to the city attorney to settle the issue for $600,000. Subsequently, when the settlement was to be approved by the city council, two of the city council members who had previously approved the agreement changed their vote resulting in the settlement not being approved. Thereafter, the plaintiff brought suit to enforce the agreement.

Not surprisingly, the court held that litigation settlements are an expenditure of money that statutorily requires an approval of the city council. Further, the court held that they would not adopt a rule requiring city council members to vote consistently with their previous statements (however, the court did leave the trial court to determine whether the city council’s conduct was sanctionable). Finally, the court held that the previous settlement agreement was unenforceable because of the statutory requirement for city council approval.

As a result of this case, city council members should be advised that any settlement agreements that occur without the approval of the council may be unenforceable and could result in sanctions.


David W. McArdle

Authors: David McArdle, Jacob Caudill