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Edwards v. Born Inc.

June 11, 1986

KEITHLEY EDWARDS
v.
BORN, INC., KEITHLEY EDWARDS AND EDITH EDWARDS, APPELLANTS



On Appeal from the District Court of the Virgin Islands District of St. Croix D.C. Civil No. 82-0283

Author: Hunter

Before: HUNTER, WEIS, and MANSMANN, Circuit Judges.

Opinion OF THE COURT

JAMES HUNTER, III, Circuit Judge:

Keithley Edwards and Edith Edwards appeal the district court's order enforcing a settlement agreement entered into by their attorney. Subject matter jurisdiction obtained by virtue of V.I. Code Ann. tit. 4, § 32 (Supp. 1985). We have appellate jurisdiction under 28 U.S.C. § 1291 (1982). This case presents the question whether the Edwardses' attorney had the authority to compromise their suit. Because we conclude that the district court did not correctly apply the proper legal standards, we vacate and remand.

I.

The facts in this appeal are reported in Edwards v. Born, Inc., 608 F. Supp. 580 (D.V.I. 1985). Keithley Edwards, an employee of Hess Oil Virgin Islands, was injured on September 24, 1982 when an access door to a refinery boiler fell on him. The boiler, which was owned by the St. Croix Petroleum Corporation, had been supplied by Born, Inc. and installed by Fluor Engineers & Constructors, Inc. Keithley filed suit against all three firms, alleging that the boiler had been supplied and installed with a defective access door and that the accident resulted in permanent injuries to his back, deprived him of his sense of taste and smell, and caused the loss of income. Keithley sought $1,000,000 in compensation for these injuries. Edith Edwards joined in the complaint, requesting $100,000 for loss of consortium. Gerald T. Groner, the Edwardses' attorney, filed the action on December 10, 1982.

In preparation for a January trial date, the magistrate scheduled a pretrial conference for December 11, 1984. The magistrate's pretrial order required the attorneys to bring to the conference, inter alia, either written settlement authority from their clients or the client or a representative authorized to settle the action. The Edwardses did not attend this conference.

On December 12, the parties attended a pretrial settlement conference in the district judge's chambers. The record does not reveal an order scheduling the conference; indeed, the court referred to it as "informal" as opposed to the formal pretrial conference before the magistrate. Edwards, 608 F. Supp. at 582. The court followed what it describes as its standard settlement conference procedure, meeting first with both sides and then with each side separately to facilitate a settlement. The Edwardses were not present. This procedure succeeded in eliciting an offer from the defendants of $150,000 in settlement of all plaintiffs' claims, a figure that Groner had indicated would be acceptable. After Groner orally accepted the offer, the judge called the court reporter into chambers, and the parties reiterated the offer and acceptance for the record. Mr. Groner specifically said, "I accept the offer. I am authorized to accept it on behalf of the plaintiffs." Id. The court then entered a sixty-day order conditionally dismissing the suit.

When the defendants tendered the checks for the settlement amount to Groner, however, the Edwardses rejected the drafts and asserted that Groner did not have the authority to settle their claims. This development prompted an ex parte conference with Groner and Keithley Edwards where the court apparently attempted to assure Edwards of the propriety and adequacy of the settlement agreement. Mr. Edwards did not change his mind. The district court subsequently granted Groner's motion to withdraw, and scheduled an evidentiary hearing for February 27, 1985 on the defendants' motion to enforce the agreement.

At the hearing, the Edwardses rested on their statements in their affidavits that they had never authorized Groner to settle or to make a demand for a settlement. For his part, Groner testified that he had informed Keithley about the upcoming settlement conferences and had inquired as to the amount the Edwardses would consider in settlement of their claims. Keithley had responded that he did not have a specific figure in mind because it was Groner's job, as their attorney, to determine the proper amount. Groner told the court that he believed he had the express actual authority to settle the suit on the basis of this conversation.

The court returned an opinion and order in which it held that Groner did not have the express actual authority to settle, but that it would enforce the agreement on the basis of Groner's apparent authority. The Edwardses timely filed this appeal.

II.

Before we examine the district court's conclusions, we must determine the source and contours of the applicable law. It is clear to us that territorial law provides the rule of decision on the question of an attorney's authority to settle his client's action when the action does not implicate rights and duties derived from federal law. This is precisely the case here. Compare Mid-South Towing Co. v. Har-Win, Inc., 733 F.2d 386, 389 (5th Cir. 1984) (attorney's authority to settle a matter of federal law in a maritime suit) with Glazer v. J.C. Bradford & Co., 616 F.2d 167, 169 (5th Cir. 1980) (state law defines attorney's authority in a diversity case). See also ...


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