Stacey Defoor v. Rafel Law Group Pllc ( 2013 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
RAFEL LAW GROUP PLLC, ;
DIVISION ONE
Respondent, ]
r-.r'
No. 68339-0-1
v. ]
PUBLISHED IN
STACEY DEFOOR, )
] PART OPINION
157 Wn. App. 1033 (2010). We
reversed in part, holding that the trial courtcounted twice the proceeds from the sale of the
Defoors' Costa Rica condominium. We also remanded for further inquiry into whether the trial
court allocated to Terry a line of credit debt as part of its fair and equitable property distribution.
Following proceedings on remand, Terry, GWC, and Merrilee A. MacLean, the chapter 7
bankruptcy trustee for Terry's estate, appealed. The unpublished consolidated decision on
appeal is Defoor v. Defoor. Nos. 67457-9-I, 67458-7-I, 2013 WL 1164772 (Wash. Ct. App. March
18,2013).
Atthe time of this appeal, Defoor had not recovered any cash as the result of the
award against Terry.
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the subject Agreement was negotiated and signed. Thus, RPC 1.8 does not
apply as a matter of law."
The trial court additionally granted RLG's motion for partial summary
judgment on attorney fees and costs, awarding RLG $497,117.50 for attorney
fees for Matter 1 and $405,860.42 for attorney fees for Matter 2, totaling
$902,977.92.14 In that same order, the trial court awarded RLG judgment for
costs RLG incurred and paid on behalf of Defoor in the amount of $383,184.29.
The trial court thereafter awarded RLG prejudgment interest in the amount of
$490,563.81.
Defoor appeals.15
II
Defoor's principal contention is that the Agreement and Note are void as a
matter of law because RLG failed to comply with RPC 1.8(a). This argument is
premised on the assertion that RPC 1.8(a) applies to the Agreement and Note.
This is so, Defoor avers, because (1) RPC 1.8 governs transactions entered into
concurrently with the attorney's engagement, during the formation of the
attorney-client relationship, and (2) the Agreement and Note involved a "business
transaction" and a "security interest" that implicate RPC 1.8(a). We disagree.
14 The trial court made an arithmetic error and entered judgment in the amount of
$902,978.22.
15 RLG submitted a motion requesting that this court, pursuant to RAP 10.3(c) and RAP
10.7, strike Defoor's reply brief, or, in the alternative, permit RLG to file a response to the reply
brief pursuant to RAP 10.1(h). RLG argues that Defoor's reply briefcontains "new arguments,
authorities and evidence." Defoor's reply briefsubstantially comports with RAP 10.3(c) insofar as
it responds to issues raised in RLG's respondent's brief. Accordingly, we deny RLG's motion to
strike Defoor's reply brief.
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This court's review of orders granting or denying summary judgment is de
novo, and we engage in the same inquiry as the trial court. Aba Sheikh v. Choe,
156 Wn.2d 441, 447, 128 P.3d 574 (2006). Summary judgment is proper when
there is no genuine issue of material fact and the moving party is entitled to
judgment as a matter of law. CR 56(c). A "material fact" is one upon which the
outcome of the litigation depends. Cotton v. Kronenberg, 111 Wn. App. 258,
264, 44 P.3d 878 (2002) (citing Greater Harbor 2000 v. City of Seattle, 132
Wn.2d 267, 279, 937 P.2d 1082 (1997)). All facts and reasonable inferences
must be considered in the light most favorable to the nonmoving party. Mountain
Park Homeowners Ass'n v. Tvdings. 125 Wn.2d 337, 341, 883 P.2d 1383 (1994).
Whether an attorney's conduct violated the RPC is a question of law.
Eriks v. Denver, 118 Wn.2d 451, 457-58, 824 P.2d 1207(1992). Business
transactions within the scope of RPC 1.8(a) are considered prima facie
fraudulent. In re Disciplinary Proceeding Against Holcomb, 162 Wn.2d 563, 580,
173 P.3d 898 (2007); In re Disciplinary Proceeding Against Johnson, 118 Wn.2d
693, 704, 826 P.2d 186 (1992) (citing In re Disciplinary Proceeding Against
McGlothlen, 99 Wn.2d 515, 525, 663 P.2d 1330 (1983)). Attorney fee
agreements that violate the Rules of Professional Conduct are against public
policy and are therefore unenforceable. Simburg, Ketter. Sheppard & Purdv,
LLP, v. Olshan, 109 Wn. App. 436, 445, 988 P.2d 467, 33 P.3d 742 (1999).
RPC 1.8(a) governs business transactions between lawyers and clients. It
prohibits an attorney from participating in business transactions with a client
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unless the attorney satisfies certain disclosure requirements designed to protect
the client's interests. In pertinent part, RPC 1.8 provides:
CONFLICT OF INTEREST: CURRENT CLIENTS: SPECIFIC RULES
(a) A lawyer shall not enter into a business transaction
with a client or knowingly acquire an ownership, possessory,
security or other pecuniary interest adverse to a client unless:
(1) the transaction and terms on which the lawyer
acquires the interest are fair and reasonable to the client and are
fully disclosed and transmitted in writing in a manner that can be
reasonably understood by the client.'161
Defoor asserts that RPC 1.8(a) applies to the Agreement and Note
because they were entered into concurrently with the new attorney-client
engagement. Defoor's contention is mistaken. RPC 1.8(a) governs transactions
entered into during the course of the attorney-client relationship. The rule does
not apply to transactions entered into prior to the creation of the attorney-client
relationship or those agreed upon during the relationship's formation.17 Such
application is made clear by the plain language of RPC 1.8, which expressly
prohibits an attorney from entering into "a business transaction with a client."
The language of the rule makes no reference to transactions with prospective
clients or transactions entered into in anticipation of representation. The rule
itself is thus limited to conflicts of interests with current clients. Given that this
rule was enacted by our Supreme Court, which is charged with rule oversight of
16 Defoor does not challenge RLG's compliance with RPC 1.8(a)(2) and (a)(3). RPC
1.8(a)(2) prescribes that the client be advised "in writing of the desirability of seeking and is given
a reasonable opportunity to seek the advice of independent legal counsel on the transaction."
RPC 1.8(a)(3) requires that the clientgive "informed consent, in a writing signed by the client, to
the essential terms of the transaction and the lawyer's role in the transaction, including whether
the lawyer is representing the client in the transaction."
17 The sole exception to this general rule is discussed infra.
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attorney discipline and regulatory matters, In re Disciplinary Proceeding Against
Greenlee, 158 Wn.2d 259, 266-67, 143 P.3d 807 (2006), it would be improper for
us to import language into the rule to create a broader application than that
warranted by the text of the rule.
Moreover, the structure and organization of the rules provide further
indication that RPC 1.8 does not apply to transactions with prospective clients or
those entered into in anticipation of formation of an attorney-client relationship.
The rules are organized and categorized, in part, according to an attorney's
duties to prospective, current, and former clients. In particular, the heading of
RPC 1.7 is entitled, "Conflict of Interest: Current Clients," and thus concerns a
lawyer's duties to current clients. RPC 1.8 sets forth the obligations owing to
current clients, as demonstrated by its heading, "Conflict of Interest: Current
Clients: Specific Rules." Further, RPC 1.9 sets forth "Duties to Former Clients,"
while RPC 1.18 specifies "Duties to Prospective Client[s]." Thus, the structure of
the rules is consistent with the conclusion that RPC 1.8(a) does not apply to
transactions entered into with prospective clients.
In addition, the principle underlying RPC 1.8(a) is consistent with our
determination. The Official Comments to the Rules are instructive in this regard.
Comment 1 explains that "[a] lawyer's legal skill and training, together with the
relationship of trust and confidence between lawyer and client, create the
possibility of overreaching when the lawyer participates in a business, property or
financial transaction with a client." RPC 1.8 cmt. 1. RPC 1.8(a) is therefore
designed to prevent an attorney, who likely benefits from a considerable
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advantage when dealing with a client, from exploiting the attorney-client
relationship, given that the client should be free to repose a great deal of trust
and confidence in the attorney. Conversely, when an attorney negotiates with a
prospective client the terms of the initial fee agreement, the attorney-client
relationship has not yet been established. Thus, the attorney does not owe the
same duty that he or she owes to a current client. If the prospective client is
dissatisfied with the terms of the proposed engagement agreement, the
prospective client is free to decline representation or seek representation
elsewhere.
Here, it is undisputed that at the time Defoor and RLG reached agreement
on the Agreement and Note, an attorney-client relationship had not yet
commenced. To the contrary, their previous relationship had been terminated,
as evident by the trial court's order granting RLG's leave to withdraw. At the time
the Agreement and Note were negotiated, Defoor was not a "current client" of
RLG for purposes of RPC 1.8(a).
Notwithstanding that Defoor was not a current client of RLG at the time the
Agreement and Note were negotiated, Defoor insists that RPC 1.8(a) applies
because the Agreement grants a lien to RLG against "any assets of Defoor"
securing payments due for work on Matters 1 and 2. This grant of a security
interest, Defoor asserts, brings the Agreement within the scope of RPC 1.8(a).
This is so, Defoor contends, because an official comment to RPC 1.8(a) states
that the rule "does not apply to ordinary fee arrangements between client and
lawyer, which are governed by Rule 1.5, although its requirements must be met
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when the lawyer accepts an interest in the client's business or other
nonmonetary property as payment of all or part of a fee." RPC 1.8 cmt. 1
(emphasis added). Defoor maintains that the security interest granted in the
Agreement constitutes "payment," within the meaning of the comment. Thus,
Defoor asserts, RPC 1.8(a) applies to the Agreement. We disagree.
First, the Note securing payment for $775,000—as settlement for Defoor's
obligation to RLG for its services and costs for Matter 1—constitutes nothing
other than an accord, the satisfaction of which has not been performed by Defoor
because she has not paid the amount owed.18 Because of this and the absence
of an attorney-client relationship at the time the Agreement and Note were
negotiated, RPC 1.8 is inapplicable to the grant ofa lien securing payment of
fees for work done on Matter 1.
Second, contrary to Defoor's contention, the cited lien provision does not
constitute payment for RLG's legal services. Comment 1 pertains to
circumstances in which an attorney acquires an interest in the property of a client
as payment offees, such as a total or partial ownership in a client's business. It
does not pertain to a security interest designed to protect the attorney against
nonpayment.
A case relied upon by Defoor is actually consonant with this view. See
Holmes v. Loveless, 122 Wn. App. 470, 94 P.3d 338 (2004). Attorney Holmes
18 Black's Law Dictionary defines an accord as "[a]n offerto give or to accept a stipulated
performance in the future tosatisfy an obligor's existing duty, together with an acceptance ofthat
offer. The performance becomes what is known as a satisfaction." Black's Law Dictionary 18
(9th ed. 2009). See Dep't of Fisheries v. J-Z Sales Corp.. 25 Wn. App. 671, 676, 610 P.2d 390(1980).
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and his law firm began performing legal services for Loveless in 1970. Two
years later, Loveless and his business partner, Tollefson, launched a joint
venture. In 1972, Holmes and his law firm entered into a fee agreement with the
joint venture in which the law firm, in exchange for charging a reduced hourly fee
for work performed, would receive five percent of the joint venture's cash
distributions.19 Holmes, 122 Wn. App. at 473. The court concluded that RPC
1.8(a) and RPC 1.5(a) governed the 1972 agreement because the law firm's
"compensation was directly linked to the joint venture's profits." Holmes, 122
Wn. App. at 475-76.
In contrast to Holmes, here, RLG obtained no direct interest in Defoor's
property as payment for the work it performed. Instead, the Agreement
stipulated that payment would be calculated on an hourly basis for services
performed after RLG's re-engagement. RLG billed Defoor monthly for services
rendered on Matter 2; all amounts unpaid were added to the sum due on the
promissory note. The value of the compensation earned by RLG was measured
by its rates and the hours itworked. It was neither increased nor decreased by
the value of the property to which a lien attached, securing unpaid amounts due.
The grant of an interest to secure payment is not the same as payment.
Similarly unavailing is Defoor's reliance on Cotton v. Kronenberg, 111 Wn.
App. 258, for what she claims reflects longstanding Washington precedent that
19 Although the facts ofthe case clearly indicate that Loveless was represented by
Holmes and his law firm two years priorto the joint venture's fee agreement with the firm, the
court did not expressly address whether Loveless, Tollefson, or the joint venture, were "current
clients" at the time the joint venture agreement or the fee agreement were signed.
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RPC 1.8(a) applies to business transactions that are included as part of the
terms of the lawyer's engagement. In fact, Cotton set forth no such rule.
Courts have applied RPC 1.8(a) to modifications or renegotiations of fee
arrangements made during the representation. "[A]ny modification of a fee
arrangement after an attorney-client relationship has been established is subject
to 'particular attention and scrutiny.'" Cotton, 111 Wn. App. at 272 n.34 (internal
quotation marks omitted) (quoting Perez v. Pappas, 98 Wn.2d 835, 841, 659
P.2d 475 (1983)). "[I]f the renegotiation results in greater compensation than
counsel was entitled to under the original agreement, courts may refuse to
enforce the renegotiation unless it is supported by new consideration." Perez, 98
Wn.2dat841.
Cotton involved the modification of a fee agreement with an existing client.
In that case, we determined that the second fee agreement, requiring the
exchange of real property for legal services, violated RPC 1.8(a). 111 Wn. App.
at 262. The second fee agreement, signed a few days after the first, transferred
Cotton's real property and mobile home to his attorney, Kronenberg, in full
satisfaction of Kronenberg's fees earned in the case. The second fee agreement
was entered into after Kronenberg and Cotton's attorney-client relationship had
commenced. The challenged fee agreement superseded the initial fee
agreement.
Nothing like that happened here. The Agreement and Note were
negotiated before RLG and Defoor re-established an attorney-client relationship.
The court had explicitly permitted and supervised the severing of the first
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attorney-client relationship. Because an attorney-client relationship was
nonexistent at the time the Agreement and Note were negotiated and entered
into, Defoor's reliance on Cotton is misplaced.
Defoor's next contention involves a theory that she first presented at oral
argument in this court; a theory that was neither previously addressed in her
briefing on appeal nor in her pleadings in the trial court. She asserts that even
after RLG's withdrawal and before its re-engagement, an attorney-client
relationship continued to exist, thereby subjecting the Agreement and Note to
RPC 1.8(a). The existence of this relationship, Defoor argues, is reflected in
RLG's billing records, which indicate that RLG performed legal services on behalf
of Defoor in preparation for their re-engagement.20 Further, following appellate
oral argument, Defoor submitted a statement of additional authorities, in which
she argues that "Rafel Law Group's provision of legal services between January
11 and February 14, 2008 creates at least an issue of fact regarding the
existence of an attorney-client relationship."
We decline to evaluate the merits of this tardily-raised argument. In
reviewing an order granting or denying a motion for summary judgment, we "will
consider only evidence and issues called to the attention of the trial court." RAP
9.12. Defoor's contention was not raised in her pleadings to the trial court, thus
denying RLG the opportunity to offer evidence or argument designed to rebut the
20 Such services included drafting the Agreement and Note, communicating with Defoor
regarding the possibility of re-engagement, and serving and filing an updated attorney's lien
claim. As discussed infra, Rafel later removed some of these billing entries, excluding the work
performed from the list ofwork from which RLG calculated its damages stemming from Defoor's
breach of the Agreement.
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contention. Nor did Defoor address this theory in her briefing on appeal, similarly
denying RLG the opportunity to respond. Finally, Defoor sought to argue her
case in its statement of additional authorities, in contravention of RAP 10.8.
Defoor's contention, raised for the first time on appeal, is not properly before this
court. It will not be further addressed.21
The terms of the Agreement and Note do not fall within the scope of RPC
1.8(a). Defoor was not a current client at the time Defoor and RLG contracted for
the Agreement and Note. In addition, the lien securing an interest in Defoor's
assets does not fall within Official Comment 1's exception to the general rule.
The trial court did not err in giving effect to the Agreement and Note.22
The remainder of this opinion has no precedential value. It will, therefore,
be filed for public record in accordance with the rules governing unpublished
opinions.
21 RLG filed a motion to strike Defoor's statement of additional authorities, noting that the
statement violates RAP 10.8. The rule provides that a statement of additional authorities "should
not contain argument, butshould identify the issue for which each authority is offered." RAP
10.8. RLG is correct that Defoor improperly presented argument in its statement of additional
authorities. However, because we decline to consider Defoor's new argument for the reasons set
forth above, we need not rule on RLG's motion to strike.
22 RLG contends that Defoor should be estopped from asserting her claims because she
fraudulently induced RLG to enter into the Agreement. In support of this argument, RLG points to
Defoor's deposition, in which she testified that when she signed the Agreement, she did not, in
fact, agree to its terms and that her acknowledgement of some of its terms was "totally false."
Defoor also testified that at the time she signed the Agreement, she had plans to later bring suit
against Rafel, contesting her duty to pay legal fees. Although she discussed this intention with
her former attorney and Terry's counsel, she did not make Rafel aware of her plan because she
believed he would not have accepted representation. It appears, therefore, that Defoor had no
intention to honor the Agreement and Note at the time she signed them. However, because the
Agreement is valid and enforceable, we need not address this claim.
Similarly, the trial court did not adjudicate RLG's amended claims for common law fraud
and fraudulent inducement. After the trial court granted RLG's motion for summary judgment re:
re-engagement agreement and RLG's motion for summaryjudgmentdismissing negligence,
breach of fiduciary duty and other damages claims, RLG sought leave to amend its complaint to
withdraw its claims for common law fraud and fraudulent inducement. The trial court granted
RLG's motion to dismiss the fraud claims without prejudice.
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Defoor next contends that the trial court erred by dismissing her legal
malpractice claim, asserting that disputed factual issues preclude summary
judgment. We conclude that no genuine issues of material fact were established
to preclude summary judgment and that the trial court did not err by summarily
adjudicating Defoor's malpractice claim.23
Defoor first argues that a question of fact exists as to whether RLG
breached the applicable standard of care because RLG failed to track Terry's
postseparation disposition of community assets. In support of this argument,
Defoor points to the expert testimony of attorney Ted Billbe, in which he opined:
[D]uring the time that Mr. Rafel represented Ms. Defoor, he did not
do a proper job of tracking the assets that were quasi-community
and that resulted in him not being able to put on a proper case to
present to the judge all of the assets . . . that constituted the quasi-
marital property to be divided.[24]
To establish a legal professional negligence claim, Defoor must prove: (1)
the existence of an attorney-client relationship giving rise to a duty of care on the
part of the attorney to the client; (2) an act or omission by the attorney in breach
of the duty of care; (3) damage to the client; and (4) proximate causation
between the attorney's breach of the duty and the damage incurred. Hizev v.
Carpenter, 119 Wn.2d 251, 260-61, 830 P.2d 646 (1992). Expert testimony is
23 In discussing this claim on appeal, Defoor relies in her briefing on portions ofthe
supplemental declaration that were stricken pursuant to the trial court's order. As earlier stated,
we affirm this order.
24 Defoor also refers to statements made by Rafel that purportedly reveal his
acknowledgement of the duty to track assets. However, such evidence has no relevance to the
question of whether Rafel in fact breached the duty.
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often required to determine whether an attorney's duty of care was breached in a
legal professional negligence action. Geer v. Tonnon, 137 Wn. App. 838, 851,
155P.3d 163(2007).
Defoor fails to raise a material question of fact as to whether RLG
breached its duty of care. The record reveals that, in the underlying litigation,
RLG did, in fact, present to the trial court evidence of Terry's postseparation
disposition of assets. RLG's expert provided the court a balance sheet and
schedule showing Terry's assets and liabilities that existed when Terry and
Defoor separated. Further, although RLG did not prove to the trial court that
Terry transferred $950,000 of the $1,050,000 Camwest assignment fee to a new
UBS account, it did present evidence to the trial court of GWC's receipt of the
$1,050,000 assignment fee.
Nor does Defoor demonstrate that RLG's alleged failure to track
postseparation disposition of community assets proximately harmed Defoor. To
prove proximate cause, the complainant must prove both cause in fact and legal
causation. Lavigne v. Chase. Haskell. Haves & Kalamon. P.S., 112 Wn. App.
677, 682-83, 50 P.3d 306 (2002). "Cause in fact refers to the 'but for'
consequences of an act," City of Seattle v. Blume. 134 Wn.2d 243, 251, 947 P.2d
223 (1997), which requires the complainant to show that he or she would have
prevailed or achieved a better result but for the attorney's negligence. Halvorsen
v. Ferguson. 46 Wn. App. 708, 719, 735 P.2d 675 (1986).
Here, Defoor puts forward no evidence indicating that the trial court would
have awarded her a larger judgment had RLG differently accounted for the
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disposition of assets. Instead, Defoor maintains that she was injured by RLG's
alleged failure to track the disposition of assets because it led to the trial judge's
refusal to allocate to her value from such assets. However, Defoor was awarded
50 percent of any undisclosed assets. Thus, even if it were true that RLG failed
to identify concealed assets, Defoor would nonetheless be entitled to recover half
of them upon their disclosure.
Moreover, when asked the extent to which Defoor had been damaged by
RLG's failure to track assets, Defoor's expert could not provide an answer. Thus,
Defoor's assertions are merely speculative; she provided no evidence—through
expert testimony or otherwise—to establish that but for RLG's asserted
negligence, she would have been awarded a greater judgment or have been able
to collect on it.25 Absent such evidence, Defoor's claim for legal malpractice is
insufficient to withstand RLG's motion for summary judgment.
Accordingly, even viewing the evidence in the light most favorable to
Defoor, no material factual disputes precluded summary judgment on her legal
malpractice claim.
25 RLG asserts that Defoor's claim fails as a matter of law because Defoor cannot prove
that she would be able to collect on the judgment even had she been awarded a larger judgment.
"[Cjollectibility of the underlying judgment is a component of damages in a legal malpractice
action." Matson v. Weidenkopf. 101 Wn. App. 472, 484, 3 P.3d 805 (2000). Here, Defoor faced
and faces considerable impediments to full collection on the judgment in the underlying litigation
because Terry and his two companies declared bankruptcy.
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VI
Defoor next contends that the trial court erred by dismissing her breach of
fiduciary duty claim. We disagree. The evidence she proffers does not
demonstrate such a breach on the part of RLG.
Violation of the Rules of Professional Conduct may not be used as
evidence of legal malpractice. Hizev. 119 Wn.2d at 265-66. Atrial court can,
however, consider the RPCs when determining whether an attorney breached his
or her fiduciary duty to a client. See Cotton, 111 Wn. App. at 266. A claim for
breach of fiduciary duty requires the claimant to prove: (1) the existence of a duty
owed; (2) breach of that duty; (3) resulting injury; and (4) that the claimed breach
caused the injury. Micro Enhancement Int'l. Inc. v. Coopers & Lvbrand. LLP. 110
Wn. App. 412, 433-34, 40 P.3d 1206 (2002).
First, Defoor's argument to the trial court in opposition to RLG's motion for
summary judgment was identical to that asserted on behalf of her legal
malpractice claim. Because there are no genuine issues of material fact
precluding her legal malpractice claim, her fiduciary duty claim likewise fails.
Defoor nonetheless asserts that because the trial court erred by
determining that no breach of RPC 1.8(a) had occurred, the trial court also erred
by dismissing Defoor's breach of fiduciary duty claim as it related to the
Agreement. This claim fails for the reasons previously given.
Defoor next maintains that RLG breached its fiduciary duty because it filed
excessive and unreasonable attorney's liens before, during, and after its
engagement and falsely informed Defoor that she owed an "obligation" to pay
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such fees. This claim is not well taken. Defoor offered no evidence establishing
that RLG breached its duty in such a manner. Expert witness Billbe's opinion
that RLG breached its duty by failing to track community assets does not
substantiate a claim for breach of fiduciary duty based on the filing of allegedly
excessive liens or the asserted charging of unreasonable fees. Conversely,
RLG's expert, Jeffrey Tilden, opined that the Matter 1 and Matter 2 fees
($505,000 and $425,500, respectively)—upon which the lien amounts were
based—were reasonable. Such expert testimony was unrebutted by Defoor.
Defoor also argues that RLG's assertion of an attorney's lien for costs that
had not actually been paid by RLG at the time of filing the lien was unlawful. The
trial judge granted summaryjudgment in favor of RLG for the total costs RLG
paid on Defoor's behalf, amounting to $274,250.28. In addition, the trial court
awarded RLG $108,934.01 in costs RLG incurred, which remained outstanding
at the time. However, the $274,250.28 in costs paid on behalf of Defoor is more
than the $270,000 claimed in the attorney's lien. Further, both the initial
contingency fee agreement and the Agreement require Defoor to pay RLG for all
costs advanced on her behalf. Thus, Defoor fails to raise questions of material
fact as to whether RLG breached its fiduciary duty by asserting an attorney's lien
for costs incurred and paid.
Defoor contends that the filing of purportedly excessive liens caused her
injury because they compromised her ability to find other counsel shortly before
trial, thus resulting in economic harm. However, because Defoorfails to raise a
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material question of fact as to whether RLG breached its fiduciary duty, this
contention as to resulting injury is immaterial.
Finally, Defoor argues that she suffered emotional distress as a result of
the lien claims, insisting that she is entitled to compensation for serious
emotional distress flowing from RLG's breach of fiduciary duty. Even if emotional
distress damages were available for a breach of fiduciary duty claim,26 we need
not address this claim because Defoor is unable to show disputed factual issues
regarding the existence of such a breach.
No genuine issue of material fact was shown to exist on this claim. The
trial court properly granted summaryjudgment dismissing Defoor's breach of
fiduciary duty claim.
V
Defoor next asserts that material factual disputes exist regarding the
reasonableness of RLG's billing rates and the hours expended on the underlying
litigation, thus precluding summary judgment. Again, we disagree.
In its motion for partial summary judgment on attorney fees and costs,
RLG argued that if the trial court found enforceable the Agreement and Note,
then RLG would be entitled to an award of attorney fees for Matters 1 and 2.
RLG alternatively argued that if the court did not find them enforceable, then it
should utilize the lodestar method to determine the amount of a quantum meruit
recovery. Notably, in its order granting plaintiff's motion for partial summary
26 Defoor asserts that Nord v. Shoreline Sav. Ass'n, 116 Wn.2d 477, 805 P.2d 800(1991), provides for such damages. This is not at all clear, and need not be decided by us in
order to resolve this dispute.
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judgment on attorney fees and costs, the trial court stated: "The Court finds that
the same reasonable fee amounts are properly payable whether the basis for
recovery is the Re-Engagement Agreement and Promissory Note between
Plaintiff and Defendant or quantum meruit."
Defoor challenges RLG's application of the lodestar methodology in
computing its award. Particularly, Defoor argues that there are material factual
disputes involving the rates, hours, and reasonableness of RLG's fee request
that should preclude summary judgment.
The lodestar methodology requires that attorney fees be calculated based
on the total number of hours reasonably expended, multiplied by a reasonable
hourly rate of compensation. Morgan v. Kingen, 166 Wn.2d 526, 539, 210 P.3d
995 (2009) (emphasis added). After determining the lodestar, the trial court may
then adjust the award to reflect factors not already taken into consideration.
Bowers v. Transamerica Title Ins. Co., 100 Wn.2d 581, 598, 675 P.2d 193(1983). Such factors include the time expended on the case, the difficulty ofthe
questions involved, the skill required, the customary rates of other attorneys, the
amount involved, the benefit resulting to the client, the contingency or certainty in
collecting the fee, and the character ofthe employment. Scott Fetzer Co. v.
Weeks, 122Wn.2d 141, 150, 859 P.2d 1210(1993). The trial court should also
"discount hours spent on unsuccessful claims, duplicated or wasted effort, or
otherwise unproductive time." Chuong Van Pham v. Seattle City Light, 159
Wn.2d 527, 538, 151 P.3d 976 (2007) (citing Bowers, 100 Wn.2d at 597, 600).
24
No. 68339-0-1/25
To support its motion for partial summary judgment on attorney fees and
costs, RLG offered expert witness Tilden's deposition testimony as well as his
written declaration. Attorney Tilden opined as to the reasonableness of the
attorney fees and costs sought by RLG.27
Tilden provided the following opinions: the end result in the case was
excellent; RLG's time keeping was more than adequate; the legal services
described in the hourly time records and monthly invoices were necessary and
appropriate; Rafel's hourly rate of $450 was reasonable, and in fact low, and that
Tilden "would never have taken this case on these terms for a number
approaching $450/hour";28 the rates charged by RLG's attorneys and staff were
reasonable; and, the total fees sought for legal services in both matters were
reasonable given the risks involved in accepting representation in a hotly
contested case. Tilden also disagreed with Defoor's contention that RLG's fees
were unreasonable and excessive in light of the 2008 recession and economic
downturn. He stated that the impact of the recession "cannot be laid at the feet
of the lawyers."
27 In particular, Tilden was asked to opine on the reasonableness of the hourly rates
charged to Defoor by RLG, whether the work performed in light ofthe amount at stake and the
end result was necessary and appropriate, whether the time entries ofthe billings of RLG and
other time records were sufficiently detailed to judge the reasonableness of the attorneyfees
charged, and whether the total hourly fees charged were reasonable under the circumstances.
Tilden was also asked to opine as to whether the costs incurred were reasonable. All of his
testimony was favorable to RLG.
Tilden evaluated the reasonableness of Rafel's hourly rate based on several factors,
stating that, "[Rafel] took over a case in which: (a) the client had fired her prior lawyer; (b) he
would have to conclude the case to get paid; (c) he would have to win to get paid; (d) he would
have to prevail on appeal to get paid; (e) he would have to enforce the judgment to get paid; (f)
his client would then have to pay him; and (g) he would have to pay or forestall payment of
hundreds of thousands of dollars in costs—that he might never recover
-25-
No. 68339-0-1/26
Although Defoor offered the testimony of experts Billbe and Mark Fucile
regarding Rafel's alleged breach of fiduciary duty and the standard of care,
Defoor offered no such expert testimony to refute Tilden's statements regarding
the reasonableness of the fees and costs. Defoor instead asserts that Rafel
never charged or collected on its "premium contingent fee" rates other than in
Defoor's case. However, we are not persuaded that this contention is material to
the reasonableness of the fee.
In addition, Defoor's trial court pleadings maintained that there were flaws
in Tilden's testimony that established the existence of disputed factual issues.
She asserted, for example, that Tilden's testimony indicated that he had not
reviewed each time entry to determine whether it involved wasteful, duplicative,
or unsuccessful efforts. However, Tilden's testimony and declaration indicate
that he was adequately prepared to offer an opinion concerning the
reasonableness of the fees sought by RLG. Defoor also argued that Tilden failed
to consider each RPC 1.5 factor in evaluating the reasonableness of the fee.
Contrary to this assertion, however, the factors enumerated in RPC 1.5 "are not
exclusive. Nor will each factor be relevant in each instance." RPC 1.5, cmt. 1.
Further, Tilden's opinion was, in fact, based on an application of a majority of
these factors. Tilden's testimony contained no inconsistencies or defects
establishing a genuine issue of material fact.
In its motion for partial summary judgment on attorney fees, RLG argued
that it was entitled to a determination under CR 56(d) that all of the services
26
No. 68339-0-1/27
identified on its hourly billings for both matters were actually performed.29 In
support of this claim, Rafel's declaration presented testimony that he performed
all of the services charged in the billing records for both matters. However, he
stated that there were some time entries for which he determined "Defoor should
not have been billed." As a result, Rafel deducted several time entries from
RLG's total amount claimed in attorney fees.30 For example, he removed a
billing entry charging Defoor for work done researching and drafting a notice of
attorney's lien performed in connection with RLG's motion for leave to withdraw.
Rafel also removed an entry charging Defoor for time spent communicating with
her regarding RLG's re-engagement.
In her briefing on appeal, Defoor contends that excessive time was
claimed even after Rafel removed billing entries. As an example, on appeal
Defoor points out that RLG charged her $1,000 for drafting the Agreement and
Note at a time when RLG no longer represented her. However, although this
29 CR 56(d) provides:
Case Not Fully Adjudicated on Motion. If on motion under the rule judgment is
not rendered upon the whole case or for all the relief asked and a trial is
necessary,.the court at the hearing ofthe motion, by examining the pleadings
and the evidence before itand by interrogating counsel, shall ifpracticable
ascertain what material facts exist without substantial controversy and what
material facts are actually and in good faith controverted. It shall thereupon make
an order specifying the facts that appear without substantial controversy,
including the extent to which the amount ofdamages or other relief is not in
controversy, and directing such further proceedings in the action as are just.
Upon the trial ofthe action, the facts so specified shall be deemed established,
and the trial shall be conducted accordingly.
This claim was asserted in the alternative—in the event that full recovery was not granted
on summary judgment.
30 After removal of several time entries, the total amount of RLG's claim, excluding
interest, was $1,286,162.21, which included $497,117.50 for fees in Matter 1 and $405,860.42 for
fees in Matter 2. Notably, Defoor testified at deposition thatshe did not know if the services
recorded in the time records were performed or not.
-27-
No. 68339-0-1/28
particular entry was included in the exhibits submitted to the trial court, Defoor's
trial court pleadings did not specifically identify any such excessive time entries.
Rather, her trial court's pleadings merely alluded to general exhibits containing
numerous pages of billing records.31
Moreover, Defoor's contention that she gained no benefit from RLG's
representation is unavailing. Defoor unquestionably gained value from RLG's
representation in the underlying litigation. Defoor's judgment against Terry—
which included interests in real property valued at over $2 million, a cash sum in
the amount of $2,223,368.60, substantial interest in contract rights to property,
and half of any undisclosed assets—is largely indicative of such benefit.
Defoor did not proffer sufficient evidence in the trial court to substantiate
the existence of any dispute of material fact regarding the reasonableness of
RLG's attorney fees. Therefore, the trial court did not err in granting RLG's
motion for partial summary judgment.
VI
Defoor next contends that the trial court erred in awarding over $490,000
in prejudgment interest on RLG's collection claims against Defoor. She asserts
that courts may only award prejudgment interest when a claim is liquidated.
31 In addition, Defoor's briefing on appeal cites to the record for additional examples of
what she assumes to be excessive charges. However, her citation is to a supporting document
and its attached exhibits that were submitted to the trial court in connection with a later motion,
after the trial court entered partial summary judgment on attorney fees and costs. Therefore, in
accordance with RAP 9.12, we decline to consider such evidence, as it was not called to the
attention of the trial court prior to its summary judgment ruling.
-28-
No. 68339-0-1/29
Because the claim was unliquidated, Defoor argues, the court erred in awarding
prejudgment interest. We disagree.
A prevailing party is generally entitled to prejudgment interest. Lakes v.
von der Mehden, 117 Wn. App. 212, 217, 70 P.3d 154 (2003). Prejudgment
interest is awardable "(1) when an amount claimed is 'liquidated' or (2) when the
amount of an 'unliquidated' claim is for an amount due upon a specific contract
for the payment of money and the amount due is determinable by computation
with reference to a fixed standard contained in the contract, without reliance on
opinion or discretion." Prierv. Refrigeration Eng'g Co., 74 Wn.2d 25, 32, 442
P.2d 621 (1968). A liquidated claim is "one where the evidence furnishes data
which, if believed, makes it possible to compute the amount with exactness,
without reliance on opinion or discretion." Prier. 74 Wn.2d at 32.
Here, the trial court awarded attorney fees to RLG in the amount of
$497,117.50 for Matter 1 and $405,860.42 for Matter 2, and determined that
"[s]aid sums are liquidated." These sums were determined "with exactness,
without reliance on opinion or discretion." Prier. 74 Wn.2d at 32. Thus, the trial
court properly awarded RLG prejudgment interest as based on liquidated sums.
VII
Defoor next contends that because the trial court erred in granting
summary judgment in favor of RLG regarding the Agreement and Note, this court
should reverse the order awarding RLG attorney fees and instead grant Defoor
an award of such fees. Here, the Note contains a provision that requires Defoor
to pay for all legal fees and costs incurred in collecting or enforcing the Note,
-29-
No. 68339-0-1/30
including on appeal. The trial court did not err in granting summary judgment in
favor of RLG; thus, the trial court did not err in awarding RLG fees and costs
pursuant to the fee shifting provision set forth in the Note.
VIII
Defoor requests an award of attorney fees on appeal. Rule of Appellate
Procedure 18.1(a) permits us to award attorney fees and costs on appeal "[i]f
applicable law grants to a party the right to recover reasonable attorneyfees or
expenses." Because we conclude that RLG prevails on appeal and because the
Note specifies an award of attorney fees on appeal, RLG is entitled to an award
of attorney fees and costs. Upon proper submission, a commissioner of our
court will enter an appropriate order.
Affirmed.
We concur:
30
No. 68339-0-1/31
Schindler, J. (concurring) — Because the limited case law interpreting RPC
1.8(a) only addresses application of the rule to current clients, I agree with the
conclusion that RPC 1.8(a) does not apply. But I write separately to urge the Supreme
Court to address whether RPC 1.8(a) should apply to a security interest acquired during
the negotiation of the initial fee agreement. While the Court has not addressed the
application of RPC 1.8(a) to the acquisition of a security interest during negotiation of a
fee agreement, recent Washington State Bar Association (WSBA) Advisory Opinion
2209, "Lawyer Taking Security Interest in Client Property" (2012), states that best
practice would include compliance with the requirements of RPC 1.8(a) in those
circumstances.
In WSBA Advisory Opinion 2209, the WSBA Rules of Professional Conduct
Committee (Committee) recognizes RPC 1.8(a) only applies to current clients, but notes
that the Supreme Court has not squarely addressed whether RPC 1.8(a) applies to the
negotiation ofa security interest as part ofthe initial fee agreement. Based on authority
from other jurisdictions and American BarAssociation (ABA) Formal Opinion 02-427,
"Contractual Security Interest Obtained by a Lawyer to Secure Payment of a Fee"
(2002), the Committee states that best practice would include compliance with the
requirements of RPC 1.8(a) when acquiring a security interest, such as a lien, during
the negotiation of the initial fee agreement. WSBA Advisory Op. 2209.
WSBA Advisory Opinion 2209 states, in pertinent part:
The negotiation of the terms of the initial fee agreement is not
generally considered a "business transaction" with a client. This is
because at the time of the negotiation of the initial fee agreement, the
attorney-client relationship is not yet formed. Thus the attorney does not
owe the same duty to a prospective client as she would to an existing
client. Additionally, the prospective client can walk away from the
31
No. 68339-0-1/32
transaction. On the other hand, any subsequent modification of the fee
agreement is generally considered a business transaction. See Comment
[1] to RPC 1.8 ("[RPC 1.8] does not apply to ordinary fee arrangements
between client and lawyer, which are governed by Rule 1.5, although its
requirements must be met when the lawyer accepts an interest in the
client's business or other nonmonetary property as payment of all or part
of a fee.").
However, there is some authority from other jurisdictions that RPC
1.8(a) applies even to security interests acquired during the negotiation of
the initial fee agreement. See ABA Formal Opinion 02-427. Thus, it is the
Committee's opinion that the best practice would include compliance with
RPC 1.8(a).
Under RPC 1.8(i), an attorney may accept a contractual security
interest in a client's real property. Washington courts have not squarely
addressed the application of RPC 1.8(a) to the acceptance of a security
interest during the initial negotiation of the fee agreement, but the careful
attorney would comply with its provisions. If the security interest is
created pursuant to a modified fee agreement, the attorney must comply
with RPC 1.8(a).m
ABA Formal Opinion 02-427 states that "[a] lawyer who acquires a contractual
security interest in a client's property to secure payment of fees earned or to be earned
must comply with [ABA] Model Rule 1.8(a)."2 ABA Formal Opinion 02-427 also states
that transactions to secure a fee are "regarded in most state and local bar opinions and
court decisions as . .. business transaction^]" subject to the disclosure requirements of
1See also WSBA Advisory Opinion 2178, "Client signing judgment for estimated attorney's fees
in dissolution case" (2008) (A lawyer violates RPC 1.8(a) by obtaining a stipulated judgment to secure
anticipated fees in advance of undertaking representation. The Committee "questioned] whether it would
be proper under any circumstances to obtain a negotiable promissory note for a sum certain from a
prospective client prior to work being performed or fees being earned."); WSBA Advisory Opinion 1044,
"Conflict of interest; receipt of deed of trust to secure future fees" (1986) (Where a law firm "received a
deed of trust and promissory note to secure legal fees for future representation," the law firm was
required to comply with RPC 1.8(a) "if[the deed and note] were a security interest." (Emphasis added.)).
2(Emphasis added.)
32
No. 68339-0-1/33
ABA Model Rule 1.8(a).3
Here, the Agreement provides, in pertinent part:
5. Lien. Defoor hereby grants RLG a lien for the total amount of
the past fees and costs for which she is obligated ($775,000), plus the
amount of additional fees and costs incurred by or on behalf of Defoor
pursuant to this Agreement. This lien shall apply and be enforceable
against any recovery by Defoor in the Litigation and any assets of Defoor,
whether awarded in the Litigation, obtained in settlement, or otherwise.
Any payment and/or transfer of property to Defoor or for Defoor's benefit
in the Litigation shall be paid or given, as the case may be, to RLG in trust
for Defoor, and RLG may use said funds or property to discharge, in whole
or in part, any amounts due to RLG under this Agreement or the
Promissory Note.[4]
RPC 1.8(i) prohibits a lawyer from acquiring a lien "to secure the lawyer's fee or
expenses." RPC 1.8(i)(1).5 Comment 16 to RPC 1.8 states that where "a lawyer
acquires by contract a security interest in property other than that recovered through the
lawyer's efforts in the litigation, such an acquisition is a business or financial transaction
with a client and is governed by the requirements of paragraph (a)." RPC 1.8(a)
requires a lawyer to meet strict requirements before entering into a business transaction
with a client or acquiring "an ownership, possessory, security or other pecuniary interest
adverse to a client."
3ABA Formal Opinion 02-427 states, in pertinent part:
Considerations in Securing a Fee Obligation
Most state and local bar opinions and court decisions have looked to [ABA]
Model Rule 1.8(a) when considering this issue. That rule applies to business
transactions with clients. Although a fee agreement with a client is not generally
considered to constitute a business transaction, the transaction with a client to secure a
fee is itself regarded in most state and local bar opinions and court decisions as a
business transaction. The [ABA] Committee [on Ethics and Professional Responsibility]
agrees.
(Footnotes omitted.)
4(Second emphasis added.)
5 RPC 1.8(i) states:
A lawyer shall not acquire a proprietary interest in the cause of action or subject matter of
litigation the lawyer is conducting for a client, except that the lawyer may:
(1) acquire a lien authorized by lawto secure the lawyer's fee or expenses; and
(2) contract with a client for a reasonable contingent fee in a civil case.
33
No. 68339-0-1/34
If RPC 1.8(a) applied to the Agreement, there is no question that the disclosure
requirements were not met.6 Afee agreement that violates RPC 1.8(a) is against public
policy and unenforceable. Vallev/50th Ave.. LLC v. Stewart. 159 Wn.2d 736, 743, 153
P.3d 186(2007).
'* A^ U ,
6 RLG did not establish:
(1) there was no undue influence; (2) he or she gave the client exactly the same
information or advice as would have been given by a disinterested attorney; and (3) the
client would have received no greater benefit had he or she dealt with a stranger.
In re Disciplinary Proceeding Against McGlothlen, 99 Wn.2d 515, 525, 663 P.2d 1330 (1983).
34