Lawyer takes the money and runs
What do you do if you negotiate a personal injury settlement on behalf of a client but the opposing attorney takes the money for himself and disappears?
Cry in your beer, says the Nevada Supreme Court.
The out-of luck client in a case decided late last month was Valley Hospital Medical Center of Las Vegas.
The family of Bobby Garner sued the hospital for wrongful death, alleging that the 69-year-old died in 1998 after hospital staff negligently failed to reconnect cardiac telemetry equipment following an MRI.
The Garner family hired Lawrence Davidson to pursue the case and pursue it he did.
He and the hospital’s lawyers got down to business and negotiated a $160,000 settlement. A stipulated final judgment was entered in Nevada state court, which dismissed the wrongful death suit with prejudice.
All seemed well until everyone was surprised to learn that Davidson had settled the case without the knowledge or approval of the Garners, forged the necessary settlement papers, and disappeared with the money.
Although no one has seen Davidson since the end of 2005, warrants are out for his arrest and the lawyer has been disbarred.
Naturally, the Garners wanted to resurrect their wrongful death suit.
But Valley Hospital felt it was an innocent victim of Davidson’s fraud and that the final judgment in the case should stand.
After all, the Garners hired Davidson in the first place, and they should bear the burden of their lawyer’s misconduct, right?
And the Garners were not exactly models of diligence in seeking to set aside the judgment.
You see, even though they learned of Davidson’s misconduct from the State Bar of Nevada within weeks of the court entering the stipulation and order of dismissal, they waited almost 18 months before filing their motion for relief from judgment under the state’s version of Civil Rule 60(b).
Valley Hospital argued that this fact alone meant that the Garners should be barred from obtaining relief by the six-month limitations period for 60(b) motions.
But the Nevada Supreme Court said that Rule 60(b)(3) “by its terms only applies to fraud ‘of an adverse party.’ The district court found that neither Valley Hospital nor its lawyer had any knowledge of or complicity in Davidson’s fraud. Davidson victimized them, equally with the Garners. [Rule] 60(b)(3) and its six-month limitations period thus do not apply, because the Garners’ motion was not based on ‘fraud (whether . . . intrinsic or extrinsic), misrepresentation or other misconduct of an adverse party.’”
And after finding that the Garners’ motion for relief from judgment was not subject to the Rule’s six-month limit, the court proceeded to find that lawyer fraud in connection with a stipulated final judgment can qualify as a “fraud upon the court” under 60(b)’s savings clause.
“In this case, Davidson obtained Valley Hospital’s lawyer’s signature on the stipulated judgment and presented it to the district judge, who signed and entered it as the final judgment in the case, forever concluding the Garner family’s wrongful death claims,” the court said. “In so doing, Davidson acted as an officer of the court and misrepresented a fraudulent settlement to the district court judge as genuine.”
So the Garners’ motion was timely. But were they entitled to have the settlement with Valley Hospital overturned and proceed with their wrongful death suit?
Yes, the state supreme court said, with the proviso that Valley Hospital will be credited with the $160,000 Davidson stole against any eventual recovery by the Garners.
Valley Hospital vigorously argued that the Garners’ were bound by the settlement because Davidson acted within his authority as their attorney.
But the court found all sorts of flaws with this contention.
“Valley Hospital makes much of the fact that the Garners’ retainer agreement included a paragraph entitled ‘power of attorney’ that gave Davidson the power to sign releases ‘for and on behalf of the client.’ This argument is a nonstarter, however, because Davidson did not use the power of attorney to carry out his fraud. …
“Davidson forged each of the Garner family member’s signatures in original ink on the release, even going so far as to steal a notary stamp from a neighboring office and forging the notary’s signature on the release. Furthermore, the retainer agreement containing the power of attorney provided, ’settlement of the claim will not be made without client’s consent.’ Based on these facts and the testimony it heard from the Garner family members, the district court expressly found that Davidson accomplished his fraud without the express, implied, or apparent authority of his clients,” the court said.
The court concluded that the “district judge’s finding that the court, equally with the Garners, the Hospital, and the Hospital’s lawyer, was defrauded by Davidson, and its conclusion that this fraud was intolerable and justified vacating the stipulated judgment the court had signed, were well within its discretionary authority to decide.” (NC-DSH v. Garner)
— Pat Murphy
patrick.murphy@lawyersusaonline.com
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