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P.I. claim can be reopened

Now-disbarred lawyer lacked ‘authority’ for settlement

Peter Vieth//April 28, 2010

P.I. claim can be reopened

Now-disbarred lawyer lacked ‘authority’ for settlement

Peter Vieth//April 28, 2010//

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In a split with earlier decisions, a Prince William County judge will allow a plaintiff to re-open a personal injury claim settled by a crooked lawyer who apparently pocketed the recovery.

The decision by Circuit Judge William D. Hamblen turns aside defenses by two insurance companies that paid a total of $80,000 in the case to now-disbarred lawyer Stephen T. Conrad.

In 2008, a series of decisions by judges in Prince William and Fairfax Counties held that the insurance companies were entitled to the benefit of their settlement deals with Conrad because he had “apparent authority” to negotiate for his clients. In fact, Conrad consistently failed to consult with clients on his negotiations and failed to make payments to the clients.

In the case of Andrews v. Andrews (VLW 010-8-076), however, Hamblen rejected the apparent authority defense because the client never took any action, other than Conrad’s initial engagement, to convey settlement authority to Conrad. “Manifestation by the principal is the sine qua non to any creation of apparent authority,” Hamblen wrote.

The decision clears the way for a trial on the merits on May 25 for Nicole Andrews. The young woman, now 22, suffered facial fractures in a 2003 auto accident on Interstate 95 in Prince William County. She endured surgery and was left with resulting scars, according to her current lawyer, Edward L. Allen of Fredericksburg.

After Andrews’ accident, her parents hired Conrad to represent her. Conrad settled one UM claim for $50,000, half of the available coverage. Another insurance carrier paid all of its $30,000 UM coverage. Conrad never advised his client of the settlements.

Conrad was disbarred in 2007 and pleaded guilty to fraud in 2008 after stealing close to $4 million in similar “settlements” from more than 250 clients. His Woodbridge practice was placed in receivership. Many of his client victims received about 28 cents on the dollar for their losses from the Virginia State Bar Clients’ Protection Fund and from the receivership. Conrad is serving an 11-year sentence at a federal prison in Morgantown, W.Va.

Conrad’s actions fueled a demand for “payee notice” legislation to require insurers to notify personal injury claimants when sending payment to the claimants’ lawyers. Bar groups did not press the measure during the 2010 General Assembly session at the request of Chief Justice Leroy Rountree Hassell Sr.

In a string of court rulings, judges rejected plaintiffs’ efforts to re-open their claims. Following a May 2008 opinion by Fairfax County Circuit Judge Jane Marum Roush, several courts held that insurance companies reasonably relied on Conrad’s apparent authority to negotiate claims on behalf of his clients. Roush reasoned in part that the client, rather than the insurance company, should bear the loss because it was the client who “accredited” Conrad by hiring him in the first place.

Allen said he sought to distinguish the previous Conrad cases by arguing that his client, as a minor, never actually hired Conrad or ratified his engagement by her parents. Hamblen, however, made no reference to those facts in his opinion. Instead, the judge applied reasoning with a broader sweep.

Citing a 1926 decision of the Supreme Court of Virginia, Hamblen held that reliance on a lawyer’s apparent authority must be based on some action by the client. “The apparent authority must be the product of a belief that is ‘traceable to the principal’s manifestations,’” Hamblen said.

“The evidence … fails to show any act of the plaintiff, save for the initial engagement of Conrad to represent her, on which any grant of authority to settle could be based,” Hamblen wrote. “I find that she is not bound by the acts of her lawyer and the pleas in bar must be denied.”

Allen hailed Hamblen’s opinion as adhering to traditional contract and agency law. “I believe it preserves the important role of the client in the attorney/client relationship by preserving a fundamental right of the client to determine the scope of the attorney’s authority,” he said.

“It’s a great opinion. It’s about time,” said Thomas J. Curcio. Curcio had made many of the same arguments in 2008 on behalf of a former Conrad client. His arguments were rejected in Roush’s opinion in Johnson v. Lovos (VLW 009-8-018).

Curcio said he now will file a motion to set aside a Conrad “settlement” in a Loudoun County case.

“We now have the benefit of these conflicting opinions,” he said. “It’s very good news.”

Christopher D. Williams of Fairfax represented an insurance company seeking to uphold the validity of its settlements with Conrad in both the Andrews case and in the 2008 Johnson decision by Roush.

He said an appeal is possible. “We are certainly considering it,” he said, noting the Hamblen decision creates a split in authority in Prince William County.

Williams was aware of Curcio’s pending Loudoun county case, but does not expect many other such claims to be litigated at this point. “I can’t imagine there’s that many still out there,” he said.

VLW 010-8-076

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