Lawyers Journal

Using and abusing a general power of attorney

You represent a plaintiff in a personal injury case where there is weak liability but substantial damages. If the case goes to trial, it is your professional opinion that a defense verdict is more likely than not. Shortly before trial, the defendant's insurer makes a settlement offer that you consider reasonable. You convey that offer to your client, but despite your best efforts to counsel the client on the reasonableness of the offer and the risks of trial, your client refuses to accept it. Can you, under these circumstances, accept the settlement offer on your client's behalf? The simple answer is no.

The power that an attorney has merely as a result of being retained do not vest the attorney with the authority to settle a case, compromise a client's claims, substantially modify the terms of existing contracts or make other substantive decisions regarding the representation. Mass. R. Prof. C. 1.2(a); see Interstate Commerce Commission v. Holmes, et al., 983 F.2d 1122, 1129 (1st Cir. 1993); Hubbard v. C.A. Peairs, 24 Mass. App. Ct. 372, 377-378 (1987). To undertake these acts on behalf of a client, there must be express authority. Further, although there may be recognized exceptions in specific areas of law such as tax representation, the act of having the client execute a broad, general power of attorney at the outset of the case does not convey such authority. Mass. R. Prof. C. 1.2(a), comment 5; see Hubbard, supra at 377-378.

A client cannot grant an attorney authority to settle or compromise claims or make other critical decisions in the case unless the client has made an educated decision to do so in each instance. Rule 1.4(b) of the Massachusetts Rules of Professional Conduct provides that "[a] lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation." Thus, only after discussing the particulars of a specific settlement offer can the attorney obtain express authorization to settle. Statements by the client during representation such as, "I am not a lawyer ... You are the lawyer go ahead and do everything," do not convey authority to compromise claims. DeSantis v. Mass. Bonding Ins. Co., 289 Mass. 315, 321-22 (1935). Similarly, a general power of attorney, whether contained in a fee agreement or executed separately at the inception of representation, does not discharge the attorney's obligations under Rule 1.4 to obtain a client's informed consent. See Matter of Killilea, 3 Mass. Att'y Disc. R. 127 (1982) (attorney disbarred for, among other misconduct, using a purported general power of attorney to settle a case without the client's knowledge).

Rule 1.2 provides that "[a] lawyer shall abide by a client's decision whether to accept an offer of settlement of a matter." The ultimate decision on whether to settle or compromise a claim is accordingly a matter within the exclusive authority of the client. See, e.g. Evans et al. v. Jeff et al., 475 U.S. 717, 728 n.14 (1986); Matter of Bretz, 168 Mont. 23, 58 (1975); Carter v. City of Philadelphia, 1989 WL 121919 (E.D. Pa). This is true even where the client's decision is contrary to the advice of counsel. A client has a right to be "pigheaded" and "to tilt at windmills."McKnight v. Dean, 270 F.3d 513, 519 (7th Cir. 2001). In such a situation, the attorney's recourse is to move to withdraw as counsel if withdrawal is permitted by Mass. R. Prof. C. 1.16 and, if applicable, permitted by the court.

The requirements of Rules 1.15(b) and 1.5(c) raise additional concerns as to the use of general powers of attorney. These rules require an attorney to notify a client upon receipt of settlement funds in any type of case and, in a contingent fee case, to provide a written settlement statement. At least one court has commented that prohibiting the use of general powers of attorney is the only way to ensure that an attorney consults a client concerning settlement of a contingent fee case and promptly distributes settlement funds. See In re: Walner, 119 Ill.2d 511, 520 (1988). A general power of attorney also does not supersede the attorney's obligation under Rule 1.5(c) to provide the client with a settlement statement accounting for monies received pursuant to a contingent fee agreement and the fees and costs deducted. See also Matter of Kerlinsky, 406 Mass. 67, 75 (1989), cert. denied, 498 U.S. 1027 (1991); Matter of Killilea, 3 Mass. Att'y Disc. R. 127 (1982).

Consider a situation where the client disappears and there is a reasonable settlement offer. Unless the attorney had discussed with the client in detail the precise settlement offer and terms, the attorney cannot use a general power of attorney to settle the case. Here, the attorney has an obligation to undertake all reasonable efforts to locate the client, including in certain circumstances retaining a private investigator. See Linda Bauer, Missing in Action: What to Do When You Can't Find Your Client, (May 2000). The attorney may discover that the client's disappearance is due to death or disability, both of which would revoke the general power of attorney in Massachusetts. M.G.L. c.201B, section 4. See also In re: Walner, 119 Ill.2d 511, 520 (1988). If a reasonable investigation fails to locate the client, the attorney may seek the appointment of a receiver to stand in the shoes of the client. See Nolan and Sartorio, 31 M. P. S., Equit. Rem. ßß187 -193 (2d ed. 1993). A sufficiently broad appointment will allow the receiver to authorize the settlement and approve the attorney's fees, costs and expenses.

Except in areas of law where there are recognized exceptions, lawyers are well advised to use powers of attorney limited to a specific purpose that has been explicitly identified and fully explained to the client.

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