Digital Alchemy Llc v. John Hancock Life Insurance Company (usa) ( 2019 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION ONE
DIGITALCHEMY, LLC, ) No. 78731-4-1
a Washington limited liability )
company, )
)
Appellant, )
)
v. )
)
JOHN HANCOCK INSURANCE ) UNPUBLISHED OPINION
COMPANY (USA), an insurer )
admitted to conducted the business ) FILED: November 4, 2019
of insurance in the state of Washington, )
)
Respondent. )
)
VERELLEN, J. — If a life insurance company agrees to backdate a life
insurance policy, then statutory and policy provisions governing death by suicide
within the first two years of the policy may be implicated. Here, John Hancock Life
Insurance Company(USA)terminated the insurance policy and denied coverage
when insured Micah Koffron died by suicide less than two years after the policy's
"Issue Date" but more than two years after the backdated "Policy Date." John
Hancock's denial of coverage was consistent with the phrase "date of issue" in
RCW 48.23.260(1)(b) and with "Issue Date" as defined in the policy.
Digitalchemy's allegations of breach of contract and violation of RCW 48.23.260(1)
were properly dismissed under CR 12(b)(6).
No. 78731-4-1/2
But an insurance policy may be reformed for mutual mistake. Policy
purchaser and beneficiary Digitalchemy, LLC, alleges that the Issue Date on the
face of the insurance policy was contrary to the parties' intention to backdate the
policy's Issue Date, as confirmed by the Issue Date recorded in John Hancock's
internal systems. Digitalchemy's mutual mistake allegations were sufficient to
survive a CR 12(b)(6) motion to dismiss.
Digitalchemy also states valid claims for violations of the Consumer
Protection Act(CPA)1 and the Insurance Fair Conduct Act(IFCA).2 Under the
policy, John Hancock had an unqualified obligation to return all premiums paid
upon termination of the policy due to the insured's suicide. But it conditioned
return of those premiums on Digitalchemy agreeing to a sweeping indemnification
and hold harmless agreement, which either misrepresented the policy or required
a release beyond the subject matter that gave rise to the payment. Because either
can be a per se CPA violation and the violations allegedly precluded Digitalchemy
from taking possession of the premiums paid, Digitalchemy adequately alleged
claims for violation of the CPA and IFCA.
We deny Digitalchemy's request for attorney fees on appeal because it fails
to establish at this early stage of the proceedings that it is a prevailing party for
purposes of RAP 18.1 and Olympic Steamship Co. v. Centennial Insurance Co.3
attorney fees.
1 Ch. 19.86 RCW.
2 RCW 48.30.015.
3 117 Wash. 2d 37, 811 P.2d 673(1991).
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No. 78731-4-1/3
Therefore, we affirm in part, reverse in part, and remand for further
proceedings consistent with this opinion.
FACTS
In October of 2014, the three principals of Digitalchemy decided to
purchase key person life insurance policies for themselves with their company as
the beneficiary. They worked with an insurance agent to buy policies from John
Hancock. Because Koffron, one of the principals, had recently aged a "life
insurance year," his premiums were to be higher than originally estimated. The
agent offered to let Digitalchemy pay a premium to backdate Koffron's policy to
September 1, 2014. On February 3, 2015, Digitalchemy and the insurance agent,
acting on the behalf of John Hancock, agreed to the backdating endorsement.4
The face of the policy identified January 15, 2015 as its Issue Date and
September 1, 2014 as its Policy Date. The insurance policy also contained a
suicide exclusion clause.
Koffron died by suicide on December 18, 2016. Digitalchemy submitted a
claim on Koffron's policy in January of 2017, and on May 18, 2017, John Hancock
4 John Hancock argues the backdating endorsement was a mere notice and
could not have changed the policy "in any respect." Resp't's Br. at 10. And, the
insurer argues, even if it was an endorsement, its insurance agent was not
authorized to agree to endorsements on its behalf. Id. at 11. But when reviewing
a CR 12(b)(6) motion to dismiss, we accept as true Digitalchemy's factual
assertion that an insurance agent acting on John Hancock's behalf signed a policy
endorsement intending to change the policy date in the insurance contract. See
Trujillo v. Nw. Tr. Servs., Inc., 183 Wash. 2d 820, 830, 355 P.3d 1100(2015)(courts
accept as true all facts alleged in a complaint on a motion to dismiss); Swanson v.
Liquid Air Corp., 118 Wash. 2d 512, 524, 826 P.2d 664(1992)(whether parties
intended to modify a contract is a question of fact).
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No. 78731-4-1/4
denied it on the basis of suicide. The same day, John Hancock sent a check for
the amount of premiums paid, a release of all claims, and a letter stating,
"Negotiation of the check will be treated as your acceptance and
acknowledgement of all the terms in the Release."5 The release would obligate
Digitalchemy to "defend, indemnify, and hold harmless John Hancock against any
loss or liability" from any party.6
Digitalchemy sued John Hancock, alleging breach of contract, violation of
RCW 48.23.260, reformation of the insurance contract, violations of the CPA, bad
faith investigation, and a violation of IFCA. The trial court granted John Hancock's
CR 12(b)(6) motion to dismiss all claims with prejudice.
Digitalchemy appeals.
ANALYSIS
We review a CR 12(b)(6) motion de novo.7 Dismissal was proper if the
plaintiff cannot prove any set of facts, even hypothetical facts, justifying recovery.8
We accept as true alleged and hypothetical facts and draw all reasonable
inferences in the plaintiff's favor.9
5 Clerk's Papers(CP)at 282.
6 CP at 283.
7 Tru'illo, 183 Wash. 2d at 830.
8 Id.
9 Id.
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No. 78731-4-1/5
I. Whether John Hancock Breached the Insurance Contract
We construe insurance policies as contracts and give insurance policies ma
fair, reasonable, and sensible construction as would be given to the contract by
the average person purchasing insurance.'"10 We read contract terms with their
ordinary, usual meaning and avoid technical interpretations, except when the
entirety of the contract clearly demonstrates a contrary intent.11 "If terms are
defined in a policy, then the term should be interpreted in accordance with that
policy definition."12
Digitalchemy argues John Hancock breached the insurance contract
because it denied coverage under the policy's suicide exclusion provision. The
suicide exclusion provision states if the insured "commits suicide, while sane or
insane, within [two] years from the Issue Date, the policy will terminate on the date
of such suicide."13 The insurance policy defines "Issue Date" as "the date shown
in the Policy Specifications section of this policy from which the Suicide and
Incontestability provisions are applied."14 "Policy Date" is defined as "the date
10 Kut Suen Lui v. Essex Ins. Co., 185 Wash. 2d 703, 710, 375 P.3d 596
(2016)(internal quotation marks omitted)(quoting Key Tronic Corp. v. Aetna
(CIGNA) Fire Underwriters Ins. Co., 124 Wash. 2d 618, 627, 881 P.2d 201 (1994)).
11 Hearst Commc'ns, Inc. v. Seattle Times Co., 154 Wash. 2d 493, 504, 115
P.3d 262 (2005); Jack v. Paul Revere Life Ins. Co., 97 Wash. App. 314, 318, 982
P.2d 1228 (1999).
12 Bordeaux, Inc. v. Am. Safety Ins. Co., 145 Wash. App. 687, 694, 186 P.3d
1188(2008)(quoting Kitsap County v. Allstate Ins. Co., 136 Wash. 2d 567, 576, 964
P.2d 1173(1998)).
/3 CP at 87.
14 CP at 241.
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No. 78731-4-1/6
from which the first premium is due.. . Policy Years, Policy Months, and Policy
Anniversaries are determined from the Policy Date."15
Because the Issue Date in the policy specifications section is January 15,
2015, and Koffron died less than two years later on December 18, 2016,
Digitalchemy concedes that the face of the policy supports John Hancock's denial
of coverage. It contends, however, that the backdating endorsement amended the
policy by changing both the Issue Date and the Policy Date to September 1, 2014.
The backdating endorsement is titled "Notice — Backdating/Special Dating,"
and states in all capital letters: "BY SIGNING THIS SECTION, I ACKNOWLEDGE
THAT I HAVE READ THE FOLLOWING STATEMENT AND WANT TO ACCEPT
THIS POLICY WITH THE BACKDATED/SPECIAL DATED POLICY DATE OF
9/1/2014."16 The endorsement states its purpose is to "provide a younger issue
age or service specific personal or business need[s]. To receive this benefit, you
must pay the premium from the backdated/special dated policy date to the later
date when coverage under the policy actually begins."17
The insurance contract definitions of "Policy Date" and "Issue Date" control
our understanding of the policy." Read with the policy, the endorsement
purported to modify only the contract's policy date. Because the insurance policy
clearly distinguishes its Policy Date from its Issue Date, John Hancock was not
15 CP at 241.
16 CP at 191 (emphasis added).
17 Id.(emphasis added).
18 Bordeaux, 145 Wash. App. at 694.
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No. 78731-4-1/7
obligated to cover a death resulting from suicide within two years of the stated
Issue Date of January 15, 2015. Koffron died less than two years later. John
Hancock did not breach the contract by denying coverage.
II. Whether The Insurance Contract Violated State Law
Digitalchemy argues that John Hancock violated RCW 48.23.260 by
interpreting the statutory term "date of issue" to mean a later date than a policy's
effective date. RCW 48.23.260(1)(b) states an insurer issuing a life insurance
policy may "limit its liability to a determinable amount not less than the full reserve
of the policy.. . in [the] event only of death occurring: ...[a]s a result of[the]
suicide of the insured, whether sane or insane, within two years from date of issue
of the policy."19 The critical phrases here are "within two years" and "from date of
issue of the policy."
Our goal when interpreting a statute is to "discern and implement the
legislature's intent.'"29 A statute's plain meaning is "an expression of legislative
intent.'"21 "Plain meaning is to be discerned from the ordinary meaning of the
language at issue, the context of the statute in which that provision is found,
19 (Emphasis added.)
29 Saucedov. John Hancock Life & Health Ins. Co., 185 Wash. 2d 171, 182,
369 P.3d 150(2016)(internal quotation marks omitted)(quoting O.S.T. ex rel. G.T.
v. Regence BlueShield, 181 Wash. 2d 691, 696, 335 P.3d 416 (2014)).
21 Seattle Hous. Auth. v. City of Seattle, 3 Wash. App. 2d 532, 538, 416 P.3d
1280(2018)(quoting Citizens All. v. San Juan County, 184 Wash. 2d 428, 435, 359
P.3d 753(2015)).
7
No. 78731-4-1/8
related provisions, and the statutory scheme as a whole.'"22 We may look to a
dictionary to determine the plain meaning of undefined statutory terms.23
The statute does not give any guidance about measuring "two years," nor
does it suggest the two years could be constructive or elapse by agreement. The
ordinary meaning of "within two years" is a period of time less than two actual
calendar years.
Digitalchemy argues the legislature intended "date of issue" to refer to "the
date for which the insured paid premiums to the insurer for that coverage."24 This
equates a policy's effective date with its issue date. But the plain meaning of "date
of issue" does not support this proposed definition. A "date" is "1: a statement or
formula affixed (as to a piece of writing . . .) that specifies the time (as day, month,
and year) and often the date of execution or making."25 "Issue," used here as a
transitive verb, means "1: to cause to come forth. . . 3a: to cause to appear or
become available by officially putting forth or distributing or granting or proclaiming
or promulgating."26 For a life insurance contract, the "date of issue" is the day,
month, and year when the policy was officially granted. Thus, determining
whether a suicide occurred "within two years from the date of issue of the policy"
22 Riddle v. Elofson, 193 Wash. 2d 423, 432, 439 P.3d 647(2019)(internal
quotation marks omitted)(quoting State v. Ermel, 166 Wash. 2d 572, 578, 210 P.2d
1007 (2009)).
23 Seattle Nous. Auth., 3 Wash. App. 2d at 538.
24 Appellant's Br. at 21.
25 WEBSTER'S THIRD NEW INT1 DICTIONARY 576 (2002).
26 Id. at 1201.
8
No. 78731-4-1/9
requires reading the policy itself for the day, month, and year when it was granted
and calculating whether two actual calendar years have elapsed from that date.
John Hancock's understanding of "date of issue" is consistent with this reading.27
This view is also consistent with related statutes in chapter 48.23 RCW.
For example, RCW 48.23.050 requires that life insurance policies contain "a
provision that the policy shall be incontestable after it has been in force during the
lifetime of the insured for a period of two years from its date of issue." Because
the two-year period is measured against the "lifetime of the insured," backdating a
policy could not accelerate passage of the policy's incontestability period. Two
actual years during the insured's lifetime must elapse for the incontestability period
to end. Digitalchemy's definition conflicts with this requirement, effectively reading
"lifetime of the insured" out of the statute.
John Hancock's understanding of "date of issue" also harmonizes with the
purposes of RCW 48.23.260(1)(b). The statute guards against fraudulent
insurance applications by protecting insurers from applicants buying life insurance
with the intent of committing suicide.28 Requiring the passage of two calendar
27 See Resp't's. Br. at 21 ("[T]he Issue Date for the Koffron policy is January
15, 2015, the very date that the policy was issued.").
28 See 16 SAMUEL WILLISTON & RICHARD A. LORD, WILLISTON ON CONTRACTS
§ 49.89 (4th ed. 2000)("[Al suicide exclusion policy that operates for only a short
time following the policy's issuance is designed to prevent the insured from
committing fraud by obtaining the policy and shortly afterward committing
suicide."); 9A LEE R. Russ & THOMAS F. SEGALLA, COUCH ON INSURANCE, § 138.23
(2005)(generally accepted that buying an insurance policy with the intent to
commit suicide is fraud), § 138.27 (suicide exclusion statutes operate "to the
benefit of the insurer"); cf. Hein v. Family Life Ins. Co., 60 Wash. 2d 91, 376 P.2d 152
(1962)(illustrating that incontestability provisions exist to guard against fraudulent
insurance applications by short-lived applicants).
9
No. 78731-4-1/10
years from the date of issue prevents an insured from negotiating a significantly
backdated policy when applying for insurance with the intention of committing
suicide and then letting his beneficiaries receive the benefits of fraudulent conduct.
Both John Hancock and Digitalchemy's understandings of "date of issue" support
the statute's other purpose, protecting insureds and beneficiaries from being
denied coverage after a long-time policyholder commits suicide.29
The purposes of RCW 48.23.260(1)(b) and related statutes are better
supported by reading "within two years from [the] date of issue of the policy" as
requiring the passage of two actual calendar years from the issue date on the
policy memorializing when it was officially granted. Digitalchemy argues several
related statutes support its interpretation, but its arguments are not compelling.39
And its proposed definitions are unsupported by the statute's plain meaning or by
29 See SAMUEL WILLISTON & RICHARD A. LORD, WILLISTON ON CONTRACTS
§ 49.92 (4th ed. 2000)(incontestability statutes were enacted to protect those
insured/beneficiary "victims" who paid premiums for years and were denied
coverage); § 49.90 (noting similarities between time-limited incontestability and
suicide exclusion clauses).
39 Digitalchemy argues we should import a definition for "date of issue" from
RCW 48.76.050, which governs calculation of adjusted premiums. But that statute
expressly restricts its use only "for the purpose of this section."
RCW 48.76.050(1)(d). Digitalchemy also argues RCW 48.23.060 and
RCW 48.18.480 will be violated by adopting John Hancock's understanding of "date
of issue." RCW 48.23.060 allows changes in the premium amounts payable upon
discovery "that the age of the insured . . . has been misstated." But this statute is
inapplicable where, as here, an insured negotiates a specific issue age with the
insurer and there is no showing of fraud, mutual mistake, or something similar.
RCW 48.18.480 prohibits "any unfair discrimination between insureds" with similar
risk factors "in the terms or conditions of any insurance contract." This statute is not
violated because applying John Hancock's understanding requires that all insureds
be unable to receive benefits if death occurs as a result of suicide before the
passage of two calendar years from the policy's issue date, regardless of any
backdating.
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No. 78731-4-1/11
related statutes. John Hancock's understanding and use of "date of issue" aligns
with the plain language of RCW 48.23.260(1)(b). Thus, the trial court did not err
by concluding Digitalchemy failed to state a claim for violation of the statute.
III. Reformation
Contract reformation is "an equitable remedy employed to bring a writing
that is materially at variance with the parties' agreement into conformity with that
agreement."31 Reformation may be appropriate where the parties made a mutual
mistake.32 A mutual mistake occurs when the parties share an identical intent
when forming the contract but fail to express that shared intent in the document.33
Although a party arguing for reformation must show "clear, cogent, and convincing
evidence" to prove the parties' identical intentions,34 on appeal from a CR 12(b)(6)
dismissal, we accept the factual allegations in Digitalchemy's complaint as true.35
Digitalchemy alleges that it and John Hancock, acting through its insurance
agent, agreed to backdate "the policy" to September 1, 2014.36 Digitalchemy also
alleges John Hancock recorded the policy's issue date as September 1, 2014 in its
31 Denaxas v. Sandstone Court of Bellevue, L.L.C., 148 Wash. 2d 654, 669,63
P.3d 125 (2003).
32 Id.
33 Seattle Profl'l Eng'p Employees Ass'n v. Boeing Co., 139 Wash. 2d 824,
832, 991 P.2d 1126 (2000)(quoting Halbert v. Forney, 88 Wash. App. 669, 674, 945
P.2d 1137 (1997)).
34 Denaxas, 148 Wash. 2d at 669.
Trifillo 183 Wash. 2d at 827 n.1.
36 CP at 21.
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No. 78731-4-1/12
internal computer systems "just as was agreed and endorsed on the policy."37 And
it alleges the policy "does not reflect an issue date of September 1, 2014,[and] the
policy fails to accurately reflect the agreement of the parties."38
Taken as true and considered together, Digitalchemy alleged the parties
mutually intended to change both the policy date and issue date to September 1,
2014, and the face of the policy does not reflect the parties' intentions. Because
we must accept Digitalchemy's factual allegations as true,39 Digitalchemy alleged
a viable reformation claim. Thus, the court erred by dismissing this claim under
CR 12(b)(6).
IV. CPA and IFCA Claims
Digitalchemy alleges John Hancock violated the CPA by failing to refund its
premium payments after terminating Koffron's life insurance policy. Digitalchemy
bases its IFCA claim upon that violation.
To prevail on a CPA claim, a party must establish "(1) an unfair or deceptive
act or practice,(2)that act or practice occurs in trade or commerce,(3) a public
interest impact,(4) injury to the plaintiff in his or her business or property, and (5) a
causal link between the unfair or deceptive act and the injury."40 A theory that an
37 CP at 22.
38 CP at 24.
39 See Swanson, 118 Wash. 2d at 524 ("[T]he matter of the parties'
intent. .. is a question of fact which we do not decide."); Trujillo, 183 Wash. 2d at 830
(courts accept as true all facts alleged in complaint on a motion to dismiss).
40 Folweiler Chiropractic, PS v. Am. Family Ins. Co., 5 Wash. App. 2d 829,
836, 429 P.3d 813(2018), review denied sub nom. Folweiler Chiropractic, PS v.
Am. Family Ins., 193 Wash. 2d 1001, 443 P.3d 800 (2019).
12
No. 78731-4-1/13
insured violated insurance regulations may adequately allege the first three
elements of a CPA claim.41
First, Digitalchemy argues John Hancock's conduct violated
RCW 48.30.090 and WAC 284-30-330(1). Both prohibit misrepresentation of
insurance policy provisions. The statute also prohibits "any misrepresentation
of. . . the benefits or advantages promised. . ." in the policy.42
In the suicide exclusion provision of the life insurance policy, John Hancock
states, "[W]e will pay (in place of all other benefits, if any) an amount equal to the
premiums paid" if the policy terminates as a result of the insured's suicide.43 The
policy also states John Hancock "will refund any amount of premium received that
applies beyond the Policy Month in which the policy terminates" if the policy
terminates on a date other than a premium due date."
John Hancock argues it refunded the premiums because it did not dispute
the amount of premiums owed, it sent a check for that amount, and the "check was
negotiable and did not contain any conditions or restrictions."45 Digitalchemy's
allegations contradict this contention. The check accompanied a letter stating that
41 See Panag v. Farmers Ins. Co. of Washington, 166 Wash. 2d 27, 43, 204
P.3d 885(2009)(violating insurance statutes or regulations satisfies the public
interest element of a CPA claim)(citing RCW 48.01.010(1), .030, .040); Hangman
Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wash. 2d 778, 785-86, 719
P.2d 531 (1986)(first two elements of a CPA claim can be established by state
law violations).
42 RCW 48.30.090.
43 CP at 87(emphasis added).
44 CP at 84(emphasis added).
45 Resp't's Br. at 33.
13
No. 78731-4-1/14
negotiating the check meant Digitalchemy agreed to the terms of a release and
indemnification agreement.
John Hancock made an unconditional promise to repay all premiums
following termination of the policy due to suicide. After termination, it conditioned
repayment on Digitalchemy signing a release and indemnification. Because this
conduct misrepresented the terms and benefits of its policy, Digitalchemy
adequately alleged violations of RCW 48.30.090 and WAC 284-30-330(1)for
purposes of CR 12(b)(6).
Second, Digitalchemy also alleges John Hancock violated WAC 284-30-
350(5), which prohibits an insurer from "request[ing] a first party claimant[]sign a
release that extends beyond the subject matter that gave rise to the claim
payment." Koffron's death and Digitalchemy's claim gave rise to the payment.46
John Hancock's letter accompanying the check warned Digitalchemy,
"Should you decline to accept the denial of proceeds on this policy on a voluntary
basis, John Hancock stands ready to pursue any and all of its legal rights."47 The
indemnification agreement releases John Hancock from all of Digitalchemy's
claims and requires that Digitalchemy defend it against any future liability relating
to the policy filed by any party." Digitalchemy did not deposit the check or sign
46 Neither party addresses whether repayment of premiums constitutes a
"claim payment" under this regulation, and we assume, without deciding, it does.
47 CP at 124.
48 CP at 23, 125. The release agreement states that Digitalchemy will
"hereby release and forever discharge John Hancock, and its past, present and
future affiliates, parent, sister, brother or subsidiary corporations, officers,
directors, shareholders, employees, agents, general agents, independent
contractors, representatives, attorneys, administrators, successors and assigns
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No. 78731-4-1/15
the agreement. Four months later, John Hancock sent another letter asking
Digitalchemy to "[k]indly execute the[]release and return by October 30, 2017 to
avoid becoming a defendant in litigation. Please be advised that your failure to
comply with our request will result in [John Hancock] taking legal action."49
John Hancock demanded a release indemnifying it, its employees, its
agents, and many others against any future claim from anyone for any amount of
liability relating to the policy. This sweeping release would, hypothetically, prohibit
Digitalchemy from filing a claim against the insurance agent who sold them
Koffron's policy even if they later discovered improper conduct in the sale of the
policy. These potential claims are beyond the scope of Koffron's death and
Digitalchemy's claim, particularly where both insurer and insured agree about the
amounts owed. Allegations that John Hancock demanded a sweeping release
and indemnification agreement beyond the scope of Koffron's death and
Digitalchemy's claim, such allegations adequately state a claim for a violation of
WAC 284-30-350(5)for purposes of CR 12(b)(6).
John Hancock's alleged violations of RCW 48.30.090, WAC 284-30-330(1),
and WAC 284-30-350(5) adequately state the first three elements of a CPA
from any and all claims, demands, obligations, liabilities, or causes of action
whatsoever, whether known or unknown,foreseen or unforeseen on, account of,
arising out of or relating to Policy Number 81-016-655 and will defend, indemnify,
and hold harmless John Hancock against any loss or liability on account of any
claim, demand, obligation, liability, or cause of action." CP at 125(emphasis
added).
49 CP at 285.
15
No. 78731-4-1/16
claim.50 To state a valid claim here, Digitalchemy must also have alleged facts
showing an injury and a causal link between the per se violations and its injury.
An insured can satisfy the elements of injury and causation by alleging that its
property interests or money have been diminished or delayed as a result of the
insurer's unlawful conduct.51 Digitalchemy had the unqualified contractual right to
repayment of the premiums it paid to John Hancock. Arguably, it has been unable
to take possession of those funds as a direct result of these per se CPA violations.
Digitalchemy alleged facts sufficient to state a valid CPA claim for purposes of CR
12(b)(6).
An insured may have a valid claim under IFCA where it successfully alleges
the insurer "unreasonably denied a claim for. . . payment of benefits."52 Because
Digitalchemy adequately alleged John Hancock misstated or ignored its
contractual obligation to repay all premiums, the court erred by dismissing its IFCA
claims under CR 12(b)(6).53
V. Attorney Fees on Appeal
Digitalchemy requests attorney fees on appeal under RAP 18.1 and argues
they are authorized under Olympic Steamship, the CPA, and IFCA. RAP 18.1
authorizes attorney fees and costs to the prevailing party on appeal if applicable
50 Panag, 166 Wash. 2d at 43; Hangman Ridge, 105 Wash. 2d at 785-86.
51Trujillo, 183 Wash. 2d at 837 (citing Panaq, 166 Wash. 2d at 57); Folweiler, 5
Wash. App. 2d at 839.
52 RCW 48.30.015(1).
53 Digitalchemy alleges three other bases for a CPA claim, but none state a
valid claim.
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No. 78731-4-1/17
law grants a party the right to recover and that party requests fees and costs in its
opening brief.54 "IA] plaintiff "prevails" when actual relief on the merits of his claim
materially alters the legal relationship between the parties by modifying the
defendant's behavior in a way that directly benefits the plaintiff."55 Digitalchemy's
partial success on appeal does not provide "actual relief" because the claims that
survived CR 12(b)(6) are far from resolved. Because Digitalchemy has not yet
prevailed at this stage of the litigation, an award of attorney fees and costs is
premature. If Digitalchemy ultimately prevails on any of its claims on remand and
the trial court concludes fees and costs are appropriate, the trial court may award
fees and costs for this appea1.56
Therefore, we affirm in part, reverse in part, and remand for further
proceedings.
WE CONCUR:
6A/L4A-
54 RAP 18.1(a)-(b).
55 Parmelee v. O'Neel, 168 Wash. 2d 515, 522, 229 P.3d 723(2010)(quoting
Farrar v. Hobby, 506 U.S. 103, 111-12, 113 S. Ct. 566, 121 L. Ed. 2d 494 (1992)).
56 See RAP 18.1(i) (trial courts may be determine amounts of appellate
attorney fees on remand).
17