Arizona Lawyer's Authority to Bind a Client to a Settlement Agreement

In Arizona, an attorney's authority to bind a client to a settlement agreement has two governing principles. First, as a general rule, lawyers have no inherent or implied authority to settle a case. United Liquor Co. v. Stephenson, 84 Ariz. 1, 3, 322 P.2d 886, 887 (1958); Restatement (Third) of the Law Governing Lawyers 22 (2000) (hereinafter "Lawyers"). Thus, ordinarily the attorney may not settle or compromise a claim "without the client's express, actual authorization." Garn v. Garn, 155 Ariz. 156, 160-61, 745 P.2d 604, 608-09 (App. 1987). Clients remain free to revoke their attorney's settlement authority at any time. Lawyers 22(3) & cmt. c. Clients are bound, however, "by a settlement reached by their attorney before revocation." Lawyers 22 cmt. c. Second, despite the general rule, principles of agency law also govern the attorney-client relationship, and the actions of the client may alter the general rule. See Panzino v. City of Phoenix, 196 Ariz. 442,17, 999 P.2d 198, 203 (2000). Thus, "if the client places the attorney in a position where third persons of ordinary prudence and discretion would be justified in assuming the attorney was acting within his authority, then the client is bound by the acts of the attorney within the scope of his apparent authority." Ariz. Title Ins. & Trust Co. v. Pace, 8 Ariz. App. 269, 271-72, 445 P.2d 471, 473-74 (1968).