# Opposition Brief — Mallott v. Stadtmiller

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1997
- **Citation:** 520 U.S. 1239

## Text

Supreme Court, U.S.
Sc me Bae
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APR 24 199/ .
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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

v.

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)

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,
i ae I OO ain i ncenccenciivieniadeevescimavedbacteynaes 7 2
ee Me, EE TOE TEP ss Linc akscsensedastcceunupuasccubcdseeiecbecne 1]
Se rs, AEE EE SU IRD bees nestinnstéessangvisvieduesnsen 6

(Ii)

IV

Statutes and rule-—Continued: Page
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33 U.S.C. 933(¢) (§ 33(c)) «0... eee 4, 5, 7, 8, 10, 12, 13
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BE TET. edcisianpitiriitinniisipeininasaptinsbnahianesiamee 2
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,

10, 11, 12, 14

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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

v.

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

ee

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).

6

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

7

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

8

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.

9

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.

10

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.

11

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).

12

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.

14

(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 |

15

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

16

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

17

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
ALLEN H. FELDMAN

Associate Solicitor
NATHANIEL I. SPILLER

Deputy Associate Solicitor
EDWARD D. SIEGER

Attorney

Department of Labor

APRIL 1997

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386013_0142%3A3. Public record. Not legal advice.