Can a Lawyer With Apparent Authority Bind His Client to a Settlement ?
In Reutzel v. Douglas, 582 Pa. 149, 158, 870 A.2d 787, 792 (2005), the Supreme Court explained that "Rothman was a particularly egregious case of attorney fraud and therefore warranted somewhat unusual treatment."
The Court contrasted the facts in Reutzel, where the issue was whether an attorney could bind his client to a settlement, where the attorney had apparent, but not express, authority.
The Supreme Court explained as follows:
In contrast, in the instant case, while Appellees contend that Danielsen misled them as to his authority, they do not go so far as to characterize his conduct as fraud and indeed, it seems clear that Danielsen's representations to Appellees regarding settlement simply did not rise to that level.
In any event, unlike the attorney in Rothman, Danielsen certainly did not defraud his own client, much less enter into a settlement by forging his client's signature and then pocketing the proceeds for his own use.
As such, unlike the situation in Rothman, we are not faced with two defrauded parties, between whom we must apportion a loss. Rothman, 469 A.2d at 545 ("[W]here one of two innocent persons must suffer because of the fraud of a third, the one who has accredited him must bear the loss.").
In addition, the fact that the Reutzels were not defrauded is significant in the balancing of the equities here, because defrauded clients like those in Rothman can oftentimes recover their losses from the Client Security Fund . . . while the Reutzels, whose attorney did not defraud them, would not be entitled to such recovery. . . .
Accordingly, although this Court determined in Rothman that agency and equitable principles required Mr. Rothman to bear the losses sustained by his attorney's misconduct, we conclude that these principles do not require a similar result here. Id. at 158-159, 870 A.2d at 792-793.