Opposition Brief — Mallott v. Stadtmiller

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No. 96-1163 CLERK i

Jn the Supreme Court of the Giuted States

OCTOBER TERM, 1996

MALLOTT & PETERSON AND INDUSTRIAI

INDEMNITY COMPANY, PETITIONERS

BEATRICE STADTMILLER, ETAL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BRIEF FOR THE FEDERAL RESPONDENT

IN OPPOSITION

WALTER DELLINGER

Acting Solicitor General

Department of Justice

J. DAVITT MC ATEER Washington, D.C. 20530-0001

Acting Solicitor of Labor (202) 514-2217

ALLEN H. FELDMAN

Associate Solicitor

NATHANIEL I. SPILLER

Deputy Associate Solicitor

EDWARD D. SIEGER

Attorney

Department of Labor

Washington, D.C. 20210

QUESTIONS PRESENTED

Section 33(g) of the Longshore and Harbor

Workers’ Compensation Act (LHWCA), 33 U.S.C.

933(g), requires the prior written approval of an

employer and its insurer when a “person entitled

to compensation (or the person’s representative)”

settles an action against a third party who may be

liable for a work-related injury, if the settlement is

“for an amount less than the compensation to which

the person (or the person’s representative) would

be entitled” under the LHWCA. The questions pre-

sented are:

1. Whether, as used in Section 33(g), the term

“representative” includes an attorney who is not

entitled to LHWCA compensation but serves as legal

counsel for a surviving spouse in a lawsuit against a

third party.

2. Whether respondent entered into a third-party

settlement through her attorney when the attorney

lacked actual or apparent authority to enter into such

a settlement on her behalf and she neither ratified,

nor obtained any proceeds from, the purported

settlement.

(I)

PARTIES TO THE PROCEEDINGS

In addition to the parties listed in the petition (Pet.

ii), the Director, Office of Workers’ Compensation

Programs, was a respondent in the court of appeals.

TABLE OF CONTENTS

Page

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TABLE OF AUTHORITIES

Cases:

Aetna Life Ins. Co. v. Moses, 287 U.S. 530

STII diksudihacacenckeskeekheeaséuanbeaenbdhhchasaaeeriikedksdnsecsies 8, 12-13

Atherton v. FDIC, 1175S. Ct. 666 (1997) ................. 15

Blanton v. Womancare, Inc., 696 P.2d 645

I nia ciuenbives 16

Frisby v. Schultz, 487 U.S. 474 (1988) .................... 16

Gagnon Co. v. Nevada Desert Inn, Inc., 289 P.2d

a BIER a tick Aina ch hain dscnnnd kponeieaiasineae ek veshatatiin 16

Ingalls Shipbuilding, Inc. v. Director, OWCP,

Rarer Ws Es® EEC RUIPED: ccbicccsubuesaceetibebswdndbeneceoestbapencnse’ 1]

Irwin v. Department of Veterans Affairs, 498

eke Se FERS MS REE ETO os mo ea UE AN ey pe 15-16

Link v. Wabash R.R., 370 U.S. 626 (1962) .............. 15-16

Martin v. OSHRC, 499 U.S. 144 (1991) ............... 8, 14

Mullins Coal Co. v. Director, OWCP, 484 U.S. 135

a a a anduboabinbbhconisnnbes 14

O’Melveny & Meyers v. FDIC, 512 U.S. 79 (1994) .... 15

Texas Indus., Inc., v. Radcliff Materials, Inc.,

ee a aucdabichpeansaestaneae 10, 14-15

United States v. Beebe, 180 U.S. 343 (1901) ............ 16

Statutes and rule:

Longshore and Harbor Workers’ Compensation Act,

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33 U.S.C. 933(¢) (§ 33(c)) «0... eee 4, 5, 7, 8, 10, 12, 13

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33 U.S.C. 933(g) (§ 33(g)) .... 3, 4, 5, 6, 7, 8, 9, 10, 13, 14

33 U.S.C. 983(2)(1) (§ SBC~)(1)) 2.0... ..ccrecscreccvence 2, 7, 8,

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Miscellaneous:

Black’s Law Dictionary (5th ed. 1979) ...............ce ee 5, 11

Jn the Supreme Court of the Anited States

OCTOBER TERM, 1996

No. 96-1163

MALLOTT & PETERSON AND INDUSTRIAL

INDEMNITY COMPANY, PETITIONERS

BEATRICE STADTMILLER, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BRIEF FOR THE FEDERAL RESPONDENT

IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1-11)

is reported at 98 F.3d 1170. The decision of the

Benefits Review Board (Pet. App. 12-31) is reported at

28 Ben. Rev. Bd. Serv. (MB) 304, and the decision of

the administrative law judge (Pet. App. 32-52) is not

yet reported.

JURISDICTION

The court of appeals entered its judgment on Octo-

ber 24, 1996. The petition for a writ of certiorari was

filed on January 22, 1997. The jurisdiction of this

Court is invoked under 28 U.S.C. 1254(1).

STATEMENT

1. The Longshore and Harbor Workers’ Compensa-

tion Act (LHWCA), 33 U.S.C. 901 et seq., requires

maritime employers to pay compensation for work-

related injuries that result in a disability to, or the

death of, a covered employee, without regard to fault

as a cause of the injury. See 33 U.S.C. 904, 908, 909. A

person entitled to compensation under the LHWCA

may also sue a third party who may be liable for the

injury or death, without forgoing his or her right

to compensation under the LHWCA, although the

employer is entitled to offset such a third-party re-

covery in certain circumstances. See 33 U.S.C. 933(a)

and (f).

Section 33(g)(1) of the LHWCA requires the prior

written approval of an employer and its insurer when

a “person entitled to compensation (or the person’s

representative) enters into a settlement with a third

person” who may be liable for a work-related injury or

death, if the third-party settlement is “for an amount

less than the compensation to which the person (or

the person’s representative) would be entitled under

[the LHWCA).” 33 U.S.C. 933(g)(1). A failure to

obtain such prior written approval from the employer

and insurer results in the termination of all rights

to compensation and medical benefits under the

LHWCA. 33 U.S.C. 933(g)(1) and (2).

2. Petitioner Mallott & Peterson is an employer

subject to the LHWCA, and petitioner Industrial

Indemnity Company is its insurer. Between 1940 and

1946, Delbert Stadtmiller (respondent’s new-deceased

husband) was exposed to asbestos while working for

Mallott & Peterson. In June 1990, he filed a claim

for LHWCA disability benefits for asbestos-related

cancer. Pet. App. 18-14. He died from that work-

related condition in December 1990. In December

1991, his widow, respondent Beatrice Stadtmiller,

filed a LHWCA claim for her husband’s disability

benefits as well as a LHWCA claim for death benefits

on her own behalf. Pet. App. 14.

3. a. In February 1993, the parties submitted to

the administrative law judge (ALJ) proposed stipula-

tions settling all the issues regarding respondent

Stadtmiller’s claims under the LHWCA. Pet. App.

14. Pursuant to the parties’ joint request and in light

of the stipulations, the ALJ remanded the matter to

the district director on February 26, 1993. Pet. App.

33.

On March 5, 1993, petitioners moved to rescind

the stipulations and for entry of summary judgment

denying respondent Stadtmiller’s claim in its en-

tirety, on the ground that respondent, through her

attorney, had settled a civil lawsuit against a third

party for the wrongful death of her husband, without

obtaining petitioners’ prior written approval of the

settlement. Pet. App. 14, 33. Petitioners contended

that, under Section 33(g), the purported settlement

precluded respondent Stadtmiller from any entitle-

ment to benefits under the LHWCA. Respondent

Stadtmiller opposed petitioners’ motion, contending

that no settlement had occurred, and submitted sup-

porting affidavits from respondent and her attorney in

the civil suit. Pet. App. 35. Respondent Stadtmiller

also contended that she had not authorized her

attorney to settle her civil lawsuit against the third

party, had not signed any settlement papers regard-

ing that suit, and had not received any settlement

money connected to that suit. Jd. at 14-15, 34. She

explained that the third-party defendant apparently

had provided her attorney in that lawsuit with funds

that were offered in return for the settlement of a

group of lawsuits, including respondent’s, but that

respondent had not been informed of the offer and had

not accepted or rejected that proposed settlement. /d.

at 34, 36-37.

b. The ALJ vacated the remand order, Pet. App. 33,

and considered the merits of petitioners’ motion. The

ALJ denied petitioners’ request for summary

judgment because of the existence of a genuine issue

of material fact. Jd. at 35.

After a hearing, the ALJ denied petitioners’ motion

for rescission of the stipulations. Pet. App. 32-52.

The ALJ found that it was clear that respondent

Stadtmiller did not enter into a direct settlement

with the third-party defendant in her civil suit. Jd. at

44. The ALJ also found that no “representative,”

within the meaning of Section 33(g), had entered into

a third-party settlement on respondent Stadtmiller’s

behalf. Pet. App. 44. The ALJ reasoned that, as

used in Section 33(g), “representative” means “legal

representative” as defined in Section 33(c) of the

LHWCA, 33 U.S.C. 933(c). Pet. App. 44 n.2.' The

| Section 33(c) governs cases in which a payment of

LHWCA compensation is made into a special statutory fund

under Section 44 of the LHWCA (33 U.S.C. 944), rather than to

a person entitled to compensation. A payment of an award is

made by an employer to the Section 44 fund when the Secre-

tary determines that there is no person entitled under the

LHWCA to compensation for the death of an employec that

would otherwise be compensable under the LHWCA, i.e. where

the compensable injury caused death and the decedent has no

eligible survivors. In such a case, the employer must pay

$5,000 to the Section 44 fund. 33 U.S.C. 944(c)(1). As a result

of such a payment, the employer obtains the right, by virtue of

eT eT TE |

ALJ then concluded that the term “legal

representative” means “a person who oversees the

legal affairs of another,” such as an executor of an

estate or a court-appointed guardian, but does not

include an attorney at law except when acting as an

executor, guardian, or in a similar capacity. Jbid.

(quoting in part Black’s Law Dictionary 807 (5th ed.

1979)).

The ALJ also rejected petitioners’ argument that

respondent Stadtmiller was vicariously bound by the

actions of her attorney. Pet. App. 44-45. The ALJ

recognized that, to achieve the purpose of Section

33(g) to protect employers and their insurers from

third-party settlements that would adversely affect

their interests, a claimant should not be permitted

to avoid the requirements of Section 33(g) by author-

izing an attorney to enter into a third-party settle-

ment for the claimant. To determine whether a claim-

ant is bound by her attorney’s third-party settlement

in a particular case, the ALJ invoked the standard

that would be applied by the court having jurisdiction

over the civil action against the third-party defen-

dant. Pet. App. 45. Applying the California law that

would govern respondent Stadtmiller’s third-party

lawsuit, the ALJ concluded that respondent Stadt-

Section 33(c), to seek damages from a third party. Section

33(c) provides:

The payment of such compensation into the fund estab-

lished in section 944 of this title shall operate as an

assignment to the employer of all right of the legal

representative of the deceased (hereinafter referred to as

“representative”) to recover damages against such third

person.

33 U.S.C. 933(c).

miller is not bound by any settlement-related actions

of her attorney because her attorney was not acting

within the scope of his express or implied actual

authority, her attorney was not acting with apparent

authority, and respondent Stadtmiller had not sub-

sequently ratified any purported settlement. Jd. at

45-50."

ec. The ALJ denied petitioners’ motion for recon-

sideration. 96-1163 Resp. Stadtmiller Br. in Opp. App.

1-9. The ALJ reaffirmed that, because the ordinary

meaning of “legal representative” does not include an

attorney, Congress did not intend to include

attorneys within that statutory term. The ALJ also

explained that the second reference to the term

“representative” in Section 33(g) makes clear that

the term was not intended to including attorneys.

That reference is to settlements for less than “the

compensation to which the person (or the person’s

representative) would be entitled” under the

LHWCA. Although attorneys are entitled to recover

attorney’s fees under the LHWCA, they are not

entitled, as attorneys, to “compensation” under the

LHWCA. “Compensation” is defined in Section 2(12)

of the LHWCA (33 U.S.C. 902(12)) to mean “the

money allowance payable to an employee or to his

dependents.” 96-1163 Resp. Stadtmiller Br. in Opp.

App. 4. Therefore, the ALJ concluded, to construe the

term “representative” to include attorneys in Section

2 Because of its conclusion that respondent Stadtmiller was

not bound by any settlement actions of her attorney and was

not barred by Section 33(g) from receiving compensation under

the LHWCA, the ALJ did not find it necessary to decide

whether the attorney’s actions, in fact, constituted the execu-

tion of a settlement agreement. Pet. App. 50-51.

ee ee ee en RENN

33(g) “would make no sense.” Jd. at 3-4. The ALJ also

rejected petitioners’ contention that respondent

Stadtmiller was aware that her attorney settled her

lawsuit. Jd. at 4-6.

4. The Benefits Review Board (Board) affirmed.

Pet. App. 12-31. It concluded that the ALJ’s con-

struction of Section 33(g) is consistent with the plain

language of the Act. The Board agreed with the ALJ

that the term “representative” in Section 33(g) means

“legal representative” of a decedent as set forth in

Section 33(c), a phrase that does not ordinarily in-

clude an attorney. Pet. App. 19, 21-22. The Board also

agreed that this interpretation of “representative”

allows for a reasonable reading of the provision in

Section 33(g)(1) that refers to entering into a settle-

ment with a third party for less than the amount to

which the “person (or the person’s representative)”

would be entitled under the LHWCA. Pet. App. 22.

The Board reasoned that it would make no sense to

interpret that provision as referring to attorneys, as

petitioners urged, because “[wJhile a legal repre-

sentative of the decedent may receive compensation”

under the LHWCA, “his attorney cannot.” Jbid.

Like the ALJ, the Board also concluded that re-

spondent Stadtmiller was not bound by her attorney’s

actions under agency principles. Pet. App. 24-27.

Specifically, the Board rejected petitioners’ argument

that respondent Stadtmiller had ratified the

settlement. Applying the state law that would govern

the third-party lawsuit, the Board ruled that the

ALJ’s finding that respondent Stadtmiller had not

ratified any settlement was rational, supported by the

record, and in accordance with law. Jd. at 26-27."

5. The court of appeals denied petitioners’ request

to set aside the Board’s order. Pet. App. 1-11. The

court noted, as a threshold matter, that “considerable

weight” is due the statutory construction of the

LHWCA urged by the Director, Office of Workers’

Compensation Programs (OWCP). /d. at 6. Thus, the

court explained, if the Director’s interpretation is

reasonable, the court should defer to it. Jbid. (citing

Martin v. OSHRC, 499 U.S. 144, 158 (1991)). The

court concluded that, for the reasons stated by the

Board, the Direcior’s interpretation of “representa-

tive” in Section 933(g) should be upheld. Pet. App. 6-7.

The court emphasized that Section 33(c) of the

LHWCA specifically defines “representative,” for

purposes of Section 33 (including Section 33(g)), to

mean the “legal representative of the deceased.” Pet.

App. 7 (citing also Aetna Life Ins. Co. v. Moses, 287

U.S. 530, 539 (1932)). The court further explained

that only the Director’s interpretation of “repre-

sentative” can be reconciled with the text of Section

33(¢)(1), which refers to entering into settlements

“for an amount less than the compensation to which

the person (or the person’s representative) would be

entitled” under the LHWCA. Pet. App. 7 (quoting 33

U.S.C. 933(g)(1)). Although the legal representative

of a deceased claimant can be entitled to compensation

3 The Board concluded that the ALJ properly determined

that it was unnecessary to reach the question whether the

execution of a settlement had, in fact, occurred, in light of its

other rulings, although the Board noted that it appeared that

there was no settlement on the facts presented. Pet. App. 28-

31.

under the LHWCA, a decedent’s attorney cannot be.

Pet. App. 7. The court rejected petitioners’ argument

that the Director’s interpretation frustrates the

purpose of Section 33(g) to protect employers from

inordinately low settlements. The court noted that

an attorney cannot settle a case without some action

by the client, 7.e., the claimant or his or her legal rep-

resentative. Pet. App. 7.

The court of appeals also rejected petitioners’

alternative argument that, assuming respondent

Stadtmiller’s attorney is not a “representative” for

purposes of Section 33(g), respondent is nonetheless

subject to the Section 33(g) bar because she ratified

the settlement negotiated by her attorney. Pet.

App. 8-10. The court ruled that petitioners did not

meet their burden of proving that respondent Stadt-

miller ratified the attorney’s efforts. It agreed with

the Board that the ALJ’s finding that respondent

Stadtmiller had not ratified any settlement agree-

ment regarding the civil lawsuit was supported by

substantial evidence, including the testimony of the

attorney and of the third-party defendant. Jd. at 9-10.

The court of appeals specifically rejected peti-

tioners’ argument that the question of ratification

should be governed by federal law and that, under

federal law, a client is bound by an attorney’s un-

authorized settlement. Pet. App. 8-9 n.2.4 The court

noted that “(t]he instances in which the courts are

authorized to fashion federal common law are re-

stricted to ‘those in which a federal rule of decision is

“necessary to protect uniquely federal interests,”

* Petitioners had not argued before the Board that federal

law should apply, but the court of appeals nevertheless ad-

dressed the issue.

and those in which Congress has given the courts

the power to develop substantive law.’” Ibid.

(quoting Texas Indus., Inc. v. Radcliff Materials,

Inc., 451 U.S. 630, 640 (1981) (citations omitted)). In

the court’s view, this case did not fall into either

category. It further ruled that, in any event, federal

law establishes only a presumption that a settlement

entered into by an attorney was authorized by the

client, and rebuttal of the presumption renders any

alleged settlement ineffective. Pet. App. 9 n.2.°

ARGUMENT

1. Petitioners contend (Pet. 13-18) that the attor-

ney representing respondent Stadtmiller in her civil

lawsuit against a third party was her “representa-

tive” as that term is used in Section 33(g)(1) of the

Longshore and Harbor Workers’ Compensation Act

(LHWCA), 33 U.S.C. 933(g)(1).

The plain language of Section 33 of the LHWCA

refutes petitioners’ interpretation. As the court

of appeals correctly noted, Congress specified, in Sec-

tion 33(c), that “legal representative of the deceased”

is “hereinafter referred to as ‘representative.’” 33

U.S.C. 933(c). The natural reading of that provision

is that subsequent references in Section 33 to

“representative”’—including in Section 33(g)(1)—

mean “legal representative of the deceased” and not

some broader category, as petitioners urge. “Legal

representative” commonly refers not to an attorney

acting as legal counsel for an individual, but rather

to a person who oversees the legal affairs of an

5 In light of its rejection of petitioners’ ratification argu-

ment, the court of appeals did not reach the question whether

respondent Stadtmiller’s attorney, in fact, reached a settlement

with the third-party defendant. Pet. App. 10 n.3.

individual, such as the executor or administrator of

an estate or the court-appointed guardian of another.

See Black’s Law Dictionary 807 (5th ed. 1979).

In addition, limiting “representative” to “legal rep-

resentative of the deceased” for purposes of Section

33(g)(1) is the only sensible construction of that term

when read in the context of Section 33(g)(1) as a

whole, which uses the term “representative” three

times. As the court of appeals explained, one of those

other uses is in referring to settlements for less than

the compensation to which a “person (or the person’s

representative) would be entitled” under the LHWCA.

33 U.S.C. 933(g)(1). The term “representative” in

that context cannot include an attorney serving as

legal counsel for a claimant, because attorneys are

not entitled to “compensation” under the LHWCA.

Section 2 of the LHWCA, 33 U.S.C. 902, which fur-

nishes the statutory definitions that govern through-

out the LHWCA, provides that “‘[clompensation’

means the money allowance payable to an employee or

to his dependents as provided for in this chapter, and

includes funeral benefits provided therein.” 33 U.S.C.

902(12). Attorneys are not entitled to any monies that

are payable to an employee or his dependents under

the LHWCA. Rather, the LHWCA specifies the

instances in which attorneys, as legal counsel for

others, are entitled to monies, and it makes clear that

any such payments are in the form of reasonable

attorney’s fees. See 33 U.S.C. 928, 933(e)(1)(A); ef.

Ingalls Shipbuilding, Inc. v. Director, OWCP, 117 S.

Ct. 796, 801-803 (1997) (in order to be “entitled to

compensation” within the meaning of Section 33(g)(1),

a person must be entitled to LHWCA compensation at

the time of the settlement).

Congress used the term “representative” in a simi-

lar context in Section 33(e), a neighboring statutory

provision to which the Section 33(c) definition of

“legal representative” also applies. Section 33(e)

governs the distribution of any recovery that an

employer obtains by virtue of pursuing a third-party

suit through an action assigned to it from a person

entitled to compensation or from a legal representa-

tive of the deceased. Section 33(e) requires that the

employer retain for itself an amount to cover its

litigation expenses (“including a reasonable attor-

ney’s fee”) and to cover the costs of all LHWCA bene-

fits and compensation (both actually paid and payable

in the future). 33 U.S.C. 933(e) If any monies remain

in excess of that amount, the employer must pay that

“excess to the person entitled to compensation or to

the representative.” 33 U.S.C. 933(e)(2). Also, if the

amount set aside to cover future LHWCA payments is

not exhausted at the conclusion of payments, the em-

ployer must pay the “excess thereof to the person

entitled to compensation or to the representative.” 33

U.S.C. 933(e)(1)(D). In light of the express provision

in Section 33(e)(1)(A) for payment of attorney’s fees,

there can be no doubt that the term “representative”

in Section 33(e) does not include an attorney acting

as legal counsel. Section 33(e) thus confirms that

attorneys are paid through reasonable attorney’s fees

authorized by the LHWCA, not through statutory

“compensation,” and that attorneys have no right to

the residual of a third-party recovery. The Court fol-

lowed that natural reading when it construed an

earlier (although substantively similar) version of

Section 33(e) in Aetna Life Ins. Co. v. Moses, 287 U.S.

530, 539 (1933) (describing Section 33(e), in a case

where the person entitled to compensation was de-

“13

ceased, as providing for payment of the excess of a

third-party recovery to “to the representative of the

deceased”).®

There is no merit to petitioners’ argument (Pet. 15)

that interpreting “representative” in Section 33(g:) to

be limited to a representative of a decedent, as set

forth in Section 33(c), will mean that minors and

incompetents, who cannot settle except through a

guardian or other representative, can never settle

with a third party and obtain employer approval. See

33 U.S.C. 911 (deputy commissioner may require

court appointment of a guardian or other representa-

tive to receive compensation payable to a person who

is mentally incompetent or a minor). As used in Sec-

tion 33(g), “person entitled to compensation” includes

minors and incompetents who are entitled to

compensation, and such persons may act through

guardians or other representatives. Indeed, there is

no dispute that even a person entitled to compensa-

tion, such as respondent Stadtmiller, who is not a

minor or incompetent, may authorize another, in-

cluding an attorney, to act on his or her behalf for

purposes of Section 33(g), and that such a person

would be bound by the actions of that attorney. That

would be so, however, not because the attorney is a

“representative” under Section 33(g)(1), but rather

because the attorney’s actions were authorized by the

person entitled to compensation. See Pet. App. 45

® Because Congress expressly defined “representative” for

purposes of Section 33, and because that meaning is reinforced

by the context in which that term is used in Section 33(e) and

Section 33(g), it is irrelevant that, as petitioners note (Pet. 14-

17), the term has different meanings in other sections of the

LHWCA or in other statutes.

(ALJ opinion) (claimant cannot avoid Section 33

requirements by authorizing an attorney to enter

into settlement on his or her behalf). Thus, Section

33(g)(1) provides for settlements by all persons

entitled to compensation, including through author-

ized actions of their attorneys or guardians, as well

as for settlements by legal representatives of de-

cedents entitled to compensation.’

2. Petitioners contend (Pet. 19-21) that, even if

respondent Stadtmiller’s attorney was not her re-

presentative within the meaning of Section 33(g), the

bar against recovery in Section 33(g) should nonethe-

less apply because the attorney settled respondent’s

case when he was acting as her agent and she should

be bound by those acts under principles of agency law.

Petitioners rely on federal law to support that pro-

position and contend that the court of appeals erred by

applying state law. They also argue (Pet. 20) that,

even if state law governed, the court of appeals erred

in its interpretation of that law.

a. The court of appeals correctly rejected peti-

tioners’ contention that federal law should govern the

question whether respondent Stadtmiller was bound

by unauthorized settlement actions by her attorney

in the civil lawsuit pending in state court. Pet. App.

EE EEE

7 Petitioners concede that the interpretation adopted by the

court of appeals is a possible interpretation of the Act. See Pet.

13. Accordingly, the court of appeals correctly affirmed the

Board and deferred to the interpretation urged by the Director

of the Office of Workers’ Compensation Programs. The

Director is the policy-making authority whose views on

questions of statutory and regulatory interpretation under the

LHWCA should be given deference. Cf. Mullins Coal Co. v.

Director, OWCP, 484 U.S. 135, 159-160 (1987); Martin v.

OSHRC, 499 U.S. at 153.

a OTT |

8-9 n.2 (citing Texas Indus., Inc. v. Radcliff Materi-

als, Inc., 451 U.S. 630, 640 (1981)); see also Atherton v.

FDIC, 117 S. Ct. 666, 670 (1997) (“[njormally, when

courts decide to fashion rules of federal common law,”

the existence of “a significant conflict between some

federal policy or interest and the use of state law” is a

precondition) (citing O’Melveny & Myers v. FDIC,

512 U.S. 79, 87 (1994)). In determining whether a

person is bound by an attorney’s settlement of a third-

party civil tort action, the court of appeals (and the

Director) reasonably looked to the law that would be

applied by the court having jurisdiction over the

third-party action, because the rights that are the

subject of the settlement arose under that law.

Petitioners have not identified any reason to fashion a

different standard as a matter of federal common law.

In any event, petitioners err in suggesting (Pet. 19)

that, under federal law, a client is bound by the

actions of her attorney, regardless of whether the

actions were authorized. The general retainer of an

attorney does not give that attorney the power to

compromise the client’s claim. United States v.

Beebe, 180 U.S. 348, 352 (1901). Although a judgment

based on a compromise made by an attorney is

presumed valid, that judgment will be set aside if it

is proven that the attorney did not have special

authority to make such a compromise. Jbid.

Petitioners ignore Beebe and erroneously argue

that the decision below conflicts with decisions of this

Court holding that a client is bound by an attorney’s

lack of due diligence in pursuing an appeal, Jrwin v.

Department of Veterans Affairs, 498 U.S. 89, 92-93

(1990), or in prosecuting an action, Link v. Wabash

R.R., 370 U.S. 626, 633 (1962). The basis for Irwin

and Link, however, is the principle, now codified in

Fed. R. Civ. P. 5(b), that notice to an attorney is

notice to the client. See Jrwin, 498 U.S. at 92-93;

Link, 370 U.S. at 634. Neither case purported to rule

that a client is bound by an attorney’s unauthorized

settlement.

o. Petitioners’ contention that the court of appeals

misinterpreted state law also does not merit review.

This Court rarely reviews a construction of state law

by a lower court. See, e.g., Frisby v. Schultz, 487 U.S.

474, 482 (1988). There is no reason to depart from that

practice here. The court of appeals’ interpretation is |

consistent with the well-settled law in California |

“that an attorney must be specifically authorized |

to settle and compromise a claim.” Blanton v. |

Womancare, Inc., 696 P.2d 645, 650 (Cal. 1985). |

Petitioners erroneously argue (Pet. 20) that Blanton

is an exception to a more general rule, announced in

Gagnon Co. v. Nevada Desert Inn, Inc., 289 P.2d 466

(Cal. 1955), that a client is bound by an attorney’s

actions. In fact, Gagnon is the exception. See

Blanton, 696 P.2d at 651 n.8 (noting that Gagnon had

grappled with the “presumption” that an attorney has

authority to settle in a case involving a collateral

attack on another State’s judgment and was “in-

apposite” in a case involving no collateral attack).

Petitioners maintain (Pet. 20-21) that respondent

Stadtmiller ratified her attorney’s unauthorized

settlement actions by failing to take steps that the

client in Blanton took. Petitioners, however, do not

dispute that the court of appeals properly understood

ratification to be a factual question requiring a

showing “that the principal, knowing the facts,

accepts the benefits of the agent’s actions.” Pet. App.

10. Here, the ALJ found that the principal, re-

spondent Stadtmiller, never accepted the benefits of

the purported settlement. That finding was properly

upheld by the Board and the court of appeals as

supported by substantial evidence.

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.

WALTER DELLINGER

Acting Solicitor General

J. DAVITT MCATEER

Acting Solicitor of Labor