Real Market Data, Llc, V. Bluestone Entertainment, Llc ( 2022 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
REAL MARKET DATA, LLC, a No. 83346-4-I
Washington State Limited Liability
Company, DIVISION ONE
Appellant,
v. UNPUBLISHED OPINION
BLUE STONE ENTERTAINMENT, LLC,
a Washington State Limited Liability
Company, and ROY J. JOHNSON and
MARY E. JOHNSON, husband and
wife,
Respondents.
CHUN, J. — Real Market Data, LLC sued Blue Stone Entertainment, LLC
for breach of contract. Following a bench trial, the trial court accepted the
interpretation of the contract advanced by Blue Stone and awarded Real Market
Data only a fraction of the damages and attorney fees it sought. Real Market
Data appeals. For the reasons below, we affirm.
I. BACKGROUND
Roy Johnson and Mary Johnson1 owned a controlling share of Diamond
Game Enterprises Inc. Diamond Game leased “Promotional Sweepstakes”
game stations to two “entertainment centers” owned and operated by Ysleta del
Sur Pueblo (Tribe) in Texas. To use the game stations, patrons make “charitable
1
For clarity, in certain instances, we refer to Roy Johnson, Mark Witschger, and
Bridget Witschger by their first names. We intend no disrespect.
Citations and pin cites are based on the Westlaw online version of the cited material.
No. 83346-4-I/2
donations,” which help fund tribal programs like “health care, public safety,
veterans’ services, education, elder care, day care and after school programs.”
For each “donation,” a patron can win “the Sweepstakes.”
From 2011 to 2013, the Johnsons were in the process of selling Diamond
Game to a larger gaming company, Amaya Americas. But a suit brought by the
Texas Attorney General was pending against the Tribe and Diamond Game.
Amaya refused to purchase Diamond Game unless it was protected from liability,
which required Diamond Game to give up its Texas division.
On January 2, 2014, the Johnsons formed Blue Stone Entertainment, LLC
to act as a “pass-through” or “intermediary between Diamond Game and the
[T]ribe.” Blue Stone would lease the game stations from Diamond Game and
assume liability in the Texas litigation, and then Blue Stone would operate and
maintain the game stations for the Tribe. Once Blue Stone was substituted for
Diamond Game in the litigation, Amaya bought Diamond Game.
While working on the sale of Diamond Game to Amaya, Roy approached
his neighbor and friend, Mark Witschger. Mark and his wife, Bridget Witschger,
operated Real Market Data, LLC, a real estate data business. Roy asked Mark if
Real Market Data could assist Blue Stone, and Mark agreed.2
2
The parties dispute the type of assistance Mark rendered to Blue Stone. Blue
Stone says it hired Mark to do part-time bookkeeping. Real Market Data says Mark did
more than bookkeeping, and that he managed Blue Stone. Roy testified that he hired
Mark to do “bookkeeping.” Real Market Data’s employee, Carol McCann, also testified
that Mark did Blue Stone’s bookkeeping. Bridget testified that Mark did “more than just
bookkeeping.” She said he did “[w]hatever Roy needed assistance with.” And Mark
testified that he had many responsibilities besides bookkeeping, such as running the
business and dealing with attorneys.
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The next day, Blue Stone and Real Market Data entered an “Independent
Contractor Agreement.” Section 3 of the agreement states, “In consideration of
the Services provided during the Term, Blue Stone Entertainment LLC shall pay
Contractor at a rate of 20% of net revenue collected under the promotional
sweepstakes agreement (Exhibit A), paid on a bi-weekly basis commencing as of
the Effective Date.” (Emphasis added.)
On January 16, Blue Stone concurrently entered an “Equipment Lease
Agreement” with Diamond Game and a “Promotional Sweepstakes Agreement”
with the Tribe. Under the Equipment Lease Agreement, Blue Stone leased the
stations from Diamond Game. Under the Promotional Sweepstakes Agreement,
Blue Stone operated and maintained the stations for the Tribe.
The Equipment Lease Agreement provides that Diamond Game is the
“Service Provider,” and Blue Stone would pay Diamond Game “[a] service fee
equal to five percent (5%) of Net Donations payable to Service Provider pursuant
to the Service Agreement.” Also, the agreement defines “Net Donations” as “the
sum of all Sweepstakes donations made via the Donation Stations less
sweepstake prize payouts paid in connection with the Donation Stations during
the applicable period.”
The Promotional Sweepstakes Agreement provides that Blue Stone was
the “Operator.” That agreement says, “(a) Tribe shall collect the total Net
Donations made via the Donation Stations. As a ‘Fee’ for operating the
promotional Sweepstakes and providing the related Equipment, Tribe shall pay to
Operator an amount calculated as set forth in Exhibit A-1.” Exhibit A-1 provides
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that net donations are “[t]he sum of all Sweepstakes donations made via the
Donation Stations less Sweepstakes prize payouts paid for each Donation
Station during the applicable period.” It also provides that the operator fee is
“30% of Net Donations (fee for Operator’s administration of the Sweepstakes and
provision of Equipment)” and that “5% of Net Donations shall be payable by
Operator from its Fee to Service Provider pursuant to the Service Agreement
between Operator and Service Provider.”
Blue Stone operated for about 22 months from 2014 to 2016.
Real Market Data sued Blue Stone for breach of contract. It alleged Blue
Stone failed to pay it “20% of the net revenue” of the earnings from January 2014
to February 2017. Real Market Data alleged Blue Stone’s net revenue was
$5,282,122.08, but that Blue Stone paid Real Market Data only $127,233.57,
about 2.4 percent. Real Market Data claimed it was entitled to the difference
between 20 percent of what Blue Stone received ($5,282,122.08 x .20 =
$1,056,424.42) and what it received ($127,233.57), which it calculated to be
$929,190.84.3
The trial court interpreted “20% of net revenue” to mean “what money
[Blue Stone] took in (which was 30% of the net donations) minus 5% payable to
the service provider as well as the cost of leasing the machines.” It also found
that Roy received $586,541 from Blue Stone. Because Mark received
$127,233.57, the court found that he received less than 20 percent of the “net
profit” ($586,541 + $127,233.57 = $713,774.57; $127,233.57 / $713,774.57 =
3
We calculate $1,056,424.42 minus $127,233.57 to be $929,190.85.
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No. 83346-4-I/5
0.178 or 17.8 percent). To make up the difference between what he received
and what Blue Stone owed, the court awarded Mark $15,520.34. Blue Stone no
longer exists and has no assets; the trial court determined the Johnsons were
liable for that amount.
The court determined that because the court awarded Real Market Data
$15,520.34 when it sought $929,190.84, it received .0167 of the amount it
pursued. The court determined Real Market Data was entitled to the proportional
amount of attorney fees requested; because Real Market Data requested
$95,525, the court awarded it $1,595.27.
Real Market Data moved for, and the trial court denied, reconsideration.
Real Market Data appeals.
II. ANALYSIS
A. Independent Contractor Agreement – “Net Revenue”
We “follow the objective manifestation theory of contracts. Under this
approach, we attempt to determine the parties’ intent by focusing on the objective
manifestations of the agreement, rather than on the unexpressed subjective
intent of the parties.” Hearst Commc’ns, Inc. v. Seattle Times, 154 Wn.2d 493,
503, 115 P.3d 262 (2005). “We generally give words in a contract their ordinary,
usual, and popular meaning unless the entirety of the agreement clearly
demonstrates a contrary intent.” Id. at 504.
As for extrinsic evidence, our use of it is not limited to interpreting
contracts with an ambiguous term. Berg v. Hudesman, 115 Wn.2d 657, 668–69,
802 P.2d 222 (1990). We may look to the “surrounding circumstances and other
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No. 83346-4-I/6
extrinsic evidence . . . ‘to determine the meaning of specific words and terms
used’ and not to ‘show an intention independent of the instrument’ or to ‘vary,
contradict or modify the written word.’” Hearst Commc’ns, 154 Wn.2d at 503(emphasis omitted) (quoting Hollis v. Garwall, Inc., 137 Wn.2d 683, 695–96, 974
P.2d 836 (1999)). Extrinsic evidence is not admissible as “‘evidence of a party’s
unilateral or subjective intent as to the meaning of a contract word or term.’”
Go2Net, Inc. v. C I Host, Inc., 115 Wn. App. 73, 84, 60 P.3d 1245 (2003) (quoting
Bort v. Parker, 110 Wn. App. 561, 574, 42 P.3d 980 (2002)).
“We review a trial court’s decision following a bench trial by asking
whether substantial evidence supports the trial court’s findings of fact and
whether those findings support the trial court’s conclusions of law.” Viking Bank
v. Firgrove Commons 3, LLC, 183 Wn. App. 706, 712, 334 P.3d 116 (2014). We
review de novo the trial court’s conclusions of law. Id.
1. Ordinary Meaning
“A contract term is ambiguous only when, viewed in context, two or more
meanings are reasonable. When multiple meanings are reasonable, which
meaning reflects the parties’ intent is a question of fact.” Healy v. Seattle Rugby,
LLC, 15 Wn. App. 2d 539, 545, 476 P.3d 583 (2020) (citing GMAC v. Everett
Chevrolet, Inc., 179 Wn. App. 126, 135, 317 P.3d 1074 (2014)). When a contract
term is undefined, we often turn to dictionary definitions to determine its ordinary
meaning. Seattle Tunnel Partners v. Great Lakes Reinsurance (UK) PLC, 18
Wn. App. 600, 611, 492 P.3d 843 (2021), pet. for review granted, No. 100168-1
(Wash. Jan. 5, 2022). Typically, we use “standard English language
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dictionaries.” Boeing Co. v. Aetna Cas. & Sur. Co., 113 Wn.2d 869, 877, 784
P.2d 507 (1990).
Real Market Data assigns error to finding of fact 13, which states, “The
term ‘net revenue’ from the Independent Contractor Agreement is not the ‘net
donations’ as defined under the Promotional Sweepstakes Agreement and is
more akin to 20% of the net profit of [Blue Stone] during the term of its operation
of these ‘donation stations.’”
Real Market Data and Blue Stone assert that the Independent Contractor
Agreement’s use of the “net revenue” is unambiguous but they interpret it
differently. Real Market Data contends that “20% of net revenue” unambiguously
is “20 percent of the money collected by Blue Stone from the Tribe under the
promotional sweepstakes agreement,” which means 20 percent of
$5,282,122.08. Blue Stone contends it means that Real Market Data was only
entitled to “20% of Blue Stone’s profit—the operator fee minus expenses—and
not 20% of the total operator fee” under the Promotional Sweepstakes
Agreement. We conclude that the ordinary meaning supports the trial court’s
interpretation that net revenue is 20 percent of Blue Stone’s revenue after
deductions for expenses.
The Independent Contractor Agreement does not define “net revenue.” It
says Blue Stone will pay Real Market Data “20% of net revenue collected under
the promotional sweepstakes agreement.” “Net” is the amount of money
“remaining after the deduction of all charges, outlay, or loss.” W EBSTER’S THIRD
NEW INTERNATIONAL DICTIONARY 1519 (1993). “Revenue” is “the total income
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No. 83346-4-I/8
produced by a given source.” W EBSTER’S at 1942. Thus, “net revenue” is the
total income from a given source remaining after deducting all charges. That
definition matches the trial court’s interpretation and conclusion that “net
revenue” is “akin to 20% of the net profit of [Blue Stone] during the term of its
operation of these ‘donation stations,’” and that Real Market Data was entitled
20 percent of the total income from the Promotional Sweepstakes Agreement
after any deductions for expenses.4
Given the foregoing, from an ordinary meaning perspective, Blue Stone
advances a reasonable interpretation of “net revenue.” And our analysis of the
extrinsic evidence, set forth below through the lens of substantial evidence
review, confirms that it advances the only reasonable interpretation.5
4
Blue Stone uses Black’s Law Dictionary’s definitions of “net,” “revenue,” and
“profit.” “Net” is “[t]he final amount remaining after all other amounts have been taken
away; esp., an amount of money remaining after a sale, minus any deductions for
expenses, commissions, and taxes.” BLACK’S LAW DICTIONARY 1250 (11th ed. 2019).
“Revenue” is “[i]ncome from any and all sources; gross income or gross receipts.”
BLACK’S at 1577. Combining those definitions, “net revenue” is the amount of income
remaining after deductions for expenses. Also, Black’s Law Dictionary lists the term “net
revenue” as an example under its definition of the term “net profit,” which it defines as
the “[t]otal sales revenue less the cost of the goods sold and all additional expenses.” It
defines profit, by itself, as “[t]he excess of revenues over expenditures in a business
transaction.” BLACK’S at 1463. These definitions support the trial court’s interpretation of
the contract.
Real Market Data says that Blue Stone mistakenly interprets “net” and “revenue”
separately because the term “net revenue” has its own definition. Real Market Data
relies on QuickBooks’ definitions of “net revenue” and “net profit.” QuickBooks says that
“Net revenue (or net sales) refers to money earned by your company during the course
of doing business. . . . after subtracting things like sales discounts, returns, etc.”
Katheryn Pomroy, What is net income and how does it affect your bottom line, Intuit
QuickBooks: Resource Center (June 18, 2019) (emphasis added)
https://quickbooks.intuit.com/r/revenue/understanding-top-bottom-line-difference-net-
revenue-net-income/. But this definition, by using terms such as “like” and “etc.,” is
hardly definite. Nor does Real Market Data cite law supporting the use of QuickBooks to
interpret this agreement.
5
Real Market Data also cites F.T.C. v. Commerce Planet, Inc., 815 F.3d 593,
603 (9th Cir. 2016), which defines “net revenues” as “typically the amount consumers
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2. Extrinsic Evidence
As discussed above, courts may look to the “surrounding circumstances
and other extrinsic evidence . . . ‘to determine the meaning of specific words and
terms used’ and not to ‘show an intention independent of the instrument’ or to
‘vary, contradict or modify the written word.’” Hearst Commc’ns, 154 Wn.2d at
503 (emphasis omitted) (quoting Hollis, 137 Wn.2d at 695–96). It is not
admissible as evidence of one party’s unilateral or subjective intent of the
meaning of a contract term. Go2Net, 115 Wn. App. at 84. Extrinsic evidence
may include:
(1) the subject matter and objective of the contract, (2) the
circumstances surrounding the making of the contract, (3) the
subsequent conduct of the parties to the contract, (4) the
reasonableness of the parties’ respective interpretations,
(5) statements made by the parties in preliminary negotiations,
(6) usages of trade, and (7) the course of dealing between the
parties.
Spectrum Glass Co., Inc. v. Pub. Util. Dist. No. 1 of Snohomish County, 129 Wn.
App. 303, 311, 119 P.3d 854 (2005). Here, extrinsic evidence concerning the
subsequent conduct of the parties and the reasonableness of their interpretations
supports the trial court’s interpretation of the agreement.
“When interpretation depends on factual determinations such as the
credibility of extrinsic evidence or a choice among reasonable inferences to be
drawn from extrinsic evidence, we review the fact finder’s determinations of such
matters for substantial evidence.” Dave Johnson Ins., Inc. v. Wright, 167 Wn.
paid for the product or service minus refunds and chargebacks.” But that case does not
apply as it concerns the calculation of “unjust gains” in the context of determining a
restitution award for a violation of the Federal Trade Commission Act (FTCA), 15
U.S.C.A. § 45, and has nothing to do with contract interpretation.
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App. 758, 769, 275 P.3d 339 (2012) (citing Berg, 115 Wn2d at 668). “Substantial
evidence is evidence sufficient to persuade a fair-minded, rational person of the
truth of the finding. On appeal, we view the evidence in the light most favorable
to the prevailing party.” Weyerhaeuser v. Tacoma-Pierce County Health Dep’t,
123 Wn. App. 59, 65, 96 P.3d 460 (2004) (citation omitted) (citing Pilcher v. State
Dep’t of Revenue, 112 Wn. App. 428, 435, 49 P.3d 947 (2002)). We also defer
to the trier of fact on witness credibility or conflicting testimony. Id.i. Subsequent Conduct of Parties
Real Market Data assigns error to finding of fact 10, which states,
The accounting and payments out of [Blue Stone] to
Mr. Johnson and Mr. Witschger are much more consistent with the
intent to split net profits 80% to Mr. Johnson and 20% to
Mr. Witschger. Also, the conduct in payout during the term of the
22 months of operation of this arrangement once again favors the
defendant [Blue Stone]’s interpretation of net revenue.
Substantial evidence supports this finding, which supports the trial court’s
interpretation of the agreement.
Roy testified that he and Mark agreed to “split the net profits 80/20 and
that’s how it was done over the course of the 22 months.” Roy also testified that
during that period Mark paid himself 20 percent of Blue Stone’s income after Blue
Stone paid the operating costs without complaint. Real Market Data presented
conflicting evidence at trial, but the standard of review here is substantial
evidence, and we cannot reweigh the evidence considered by the trial court. See
Bale v. Allison, 173 Wn. App. 435, 458, 294 P.3d 789 (2013) (“We do not
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No. 83346-4-I/11
reweigh or rebalance competing testimony and inferences even if we may have
resolved the factual dispute differently.”).
ii. Reasonableness of Interpretations
Next, substantial evidence supports the trial court’s finding essentially that
Blue Stone advanced the only reasonable interpretation of the agreement.
Blue Stone received $5,282,122.08 in apparently gross revenue (i.e.,
before deductions for expenses). The trial court calculated the “net revenue” to
be the total of payments to Roy and Mark. Roy received $586,541 and Mark
received $127,233.57. Together, Roy and Mark received $713,774.57.6
At trial, Real Market Data claimed that the $5,282,092.08 figure was Blue
Stone’s net revenue and that it was entitled to 20 percent of it, or about
$1 million. Under such an interpretation of the agreement, Blue Stone would
operate at a loss and Roy would receive nothing.
And indeed, Roy testified that under Mark’s interpretation of the
Independent Contractor Agreement, Blue Stone would have operated at a loss —
an agreement he said he would not have entered “unless my mental faculty was
damaged.”7 Roy testified that he hired Mark to do “bookkeeping.” And Real
Market Data’s employee, Carol McCann, testified that Mark did Blue Stone’s
6
Blue Stone asserts that its total profit from the 22 months it operated was
$601,323.48.
7
Contract interpretation should not produce an absurd result. Eurick v. Pemco
Ins. Co., 108 Wn.2d 338, 341, 738 P.2d 251 (1987) (“The contract must be read as the
average person would read it; it should be given a ‘practical and reasonable rather than
a literal interpretation’, and not a ‘strained or forced construction’ leading to absurd
results.” (quoting E-Z Loader boat Trailers, Inc. v. Travelers Indem. Co., 106 Wn.2d 901,
907, 726 P.2d 439 (1986))).
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No. 83346-4-I/12
bookkeeping. Real Market Data points to evidence that Mark did more than
bookkeeping for Blue Stone; but again, we do not reweigh the evidence
presented to the trial court. Given the foregoing, substantial evidence supports
the trial court’s finding on the reasonableness of Blue Stone’s interpretation.
As substantial evidence supports the trial court’s findings on the parties’
subsequent conduct and the reasonableness of Blue Stone’s interpretation of the
agreement, and those findings support the trial court’s conclusions, the court did
not err.8
B. Attorney Fees
1. Trial Court Fee Award
Real Market Data contends the trial court abused its discretion by
misapplying the proportionality method instead of the lodestar method to
8
Real Market Data claims that the trial court misused extrinsic evidence; for
example, by using it to determine subjective intent. But we may affirm on any ground
supported by the record. Deep Water Brewing, LLC v. Fairway Res., Ltd., 170 Wn. App.
1, 11, 282 P.3d 146 (2012).
Also, Real Market Data assigns error to finding of fact 3. It says the finding
contains typographical errors and thus does not accurately quote the provision at issue
in the Independent Contractor Agreement. The finding states,
On January 3, 2014, Defendant BLUESTONE ENTERTAINMENT,
LLC, and Plaintiff entered into an independent contractor agreement
wherein the Parties expressly agreed that for the consideration “at the rate
of twenty percent (20%) of the net revenue collected, under the promotional
sweepstakes agreement paid on a bi-weekly basis commencing as of the
effective date.”
(Emphasis added.) The Independent Contractor Agreement states,
Blue Stone Entertainment LLC shall pay Contractor at a rate of 20% of net
revenue collected under the promotional sweepstakes agreement (Exhibit
A), paid on a bi-weekly basis commencing as of the Effective Date.
(Emphasis added.) The variances between the quoted text in the finding and the
Independent Contractor Agreement are slight and do not call into question the trial
court’s reasoning. Nor do they do not affect our interpretation of the Independent
Contractor Agreement, which is based on the contract language itself.
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No. 83346-4-I/13
calculate attorney fees. We disagree.
“An attorney fee award made pursuant to a contract may be reversed only
if the trial court manifestly abused its discretion.” Cornish College of the Arts v.
1000 Virginia Ltd. Partnership, 158 Wn. App. 203, 231, 242 P.3d 1 (2010). A trial
court abuses its discretion when the court exercises it on untenable grounds or
for untenable reasons. Berryman v. Metcalf, 177 Wn. App. 644, 657, 312 P.3d
745 (2013). “A discretionary decision rests on ‘untenable grounds’ or is based on
‘untenable reasons’ if the trial court relies on unsupported facts or applies the
wrong legal standard.” Mayer v. Sto Indus., Inc., 156 Wn.2d 677, 684, 132 P.3d
115 (2006).
“A determination of reasonable attorney fees begins with a calculation of
the ‘lodestar,’ which is the number of hours reasonably expended on the litigation
multiplied by a reasonable hourly rate.” Berryman, 177 Wn. App. at 660. But
“[t]he ‘lodestar’ is only the starting point, and the fee thus calculated is not
necessarily a ‘reasonable’ fee. In assessing the reasonableness of a fee
request, a ‘vital’ consideration is ‘the size of the amount in dispute in relation to
the fees requested.’” Id. (citation omitted) (quoting Scott Fetzer Co. v. Weeks,
122 Wn.2d 141, 150–51, 859 P.2d 1210 (1993)). “A lodestar calculation that
grossly exceeds the amount in controversy should suggest a downward
adjustment.” ADA Motors, Inc. v. Butler, 7 Wn. App. 2d 53, 68, 432 P.3d 445(2018). “For purposes of proportionality analysis, the amount in controversy
necessarily requires consideration of the actual amount recovered on a claim.”
Id.13
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Section 26 of the Independent Contractor Agreement provides a basis for
awarding attorney fees:
If any legal action, or other proceeding is brought for the enforcement
of this Agreement, or because of an alleged dispute, breach, default
or misrepresentation in connection with this Agreement, the
successful or prevailing party shall be entitled to recover reasonable
attorney’s fees and other costs incurred in that action or proceeding,
in addition to any other relief to which the prevailing party may be
entitled.
Generally, “a prevailing party is one who receives an affirmative judgment in its
favor.” Cornish College, 158 Wn. App. at 231.
Real Market Data contends the trial court committed an error of law, and
therefore abused its discretion, by applying the proportionality approach instead
of the lodestar method. But the lodestar method is just the starting point and
may be adjusted to award a reasonable fee. Berryman, 177 Wn. App. at 660.
The trial court determined that Blue Stone prevailed on the contract
interpretation issue, but Real Market Data still obtained a judgment of
$15,520.34. The trial court considered that it awarded Real Market Data .0167
(or 1.67 percent) of the amount the company pursued. Using the “spirit of a
proportionality approach,” the court determined that Real Market Data was
entitled to the proportional amount of attorney fees requested; because it
requested $95,525, the court awarded it $1,595.27.
While the lodestar method is generally the starting point for an award of
attorney fees, trial courts have discretion to deviate from it and apply the
proportionality method. Thus, the trial court did not abuse its discretion in
applying the proportionality method.
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2. Appellate Fees
Real Market Data and Blue Stone request attorney fees on appeal under
the Independent Contractor Agreement and RAP 18.1. RAP 18.1(a) provides, “If
applicable law grants to a party the right to recover reasonable attorney fees or
expenses on review before either the Court of Appeals or Supreme Court, the
party must request the fees or expenses as provided in this rule.” Blue Stone is
the prevailing party on appeal, and is entitled to attorney fees under the
Independent Contractor Agreement, subject to its compliance with RAP 18.1.
We affirm.
WE CONCUR:
15