Steven Bagot, Respondent/cr-appellant V. Smrb, Llc, Appellant/cr-respondents ( 2024 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
STEVEN BAGOT,
No. 84440-7-I (consolidated with
Respondent, No. 84905-1-I)
v. DIVISION ONE
SMRB, LLC, a Washington Limited UNPUBLISHED OPINION
Liability Company d.b.a. GREEN
ACRE PHARMS; and ROBERT
RUSSELL,
Petitioners,
RENEWABLE TECHNOLOGIES
SOLUTION, INC., a Nevada
Corporation; GREEN ACRES
PHARMS, LLC, a Washington Limited
Liability Company; and GUY
GRIFFITHE,
Defendants.
CHUNG, J. — Steven Bagot sued Roger Russell and others in Skagit
County, alleging breach of contract, fraud, misrepresentation, civil conspiracy,
and other claims related to several payments he made to invest in a cannabis
operation. The parties settled and stipulated to dismissal with prejudice. Bagot
then filed another lawsuit, this time in King County, against the same parties
alleging the same causes of action and an additional claim under the Washington
Securities Act. Except for the Securities Act violation, the trial court granted
summary judgment dismissing all claims on the grounds of claim preclusion.
No. 84440-7-I/2 (consol. with No. 84905-1-I)
Bagot and Russell each filed motions for discretionary review of the
court’s summary judgment rulings based on the claim preclusion doctrine. A
commissioner of this court granted review only as to Russell’s motion, which
sought review of the trial court’s denial of summary judgment dismissal of the
Securities Act claim. We conclude the trial court erred by denying summary
judgment on the Securities Act claim and reverse.
FACTS
Robert Russell and his wife formed SMRB, LLC in 2013 and were its sole
members. In 2015, SMRB 1 received a Washington state license to produce and
process cannabis at a facility in Anacortes, Washington. After SMRB began
operating, Russell determined the company needed a larger space and began
exploring sources of funding. Guy Griffithe and his company Renewable
Technologies Solutions, Inc. (RTSI) expressed interest in investing. 2 Russell and
Griffithe entered an agreement in which RTSI paid $1.5 million to purchase 49
percent of the net profits distributed to Russell by SMRB. The agreement
expressly provided that RTSI did not acquire an ownership interest and would not
be a shareholder in SMRB. The agreement acknowledged that RTSI intended to
1 SMRB also has a registered d.b.a. of “Green Acre Pharms.”
2 According to Griffithe, in late 2016 or early 2017, he converted the membership
interests in RTSI’s profit rights into membership interests in a Nevada LLC called Green Acres
Pharms, with the sole function of serving “as a vehicle for the sale of profit rights and the
distribution of profits to the holders of those rights.” The record is inconsistent as to whether
Griffithe’s entity is Green Acres Pharms or Green Acre Pharms. Griffithe’s Green Acres Pharms
LLC is a separate entity from SMRB’s Green Acre Pharms. Russell was never a member of
Griffithe’s LLC and has never acted on its behalf.
2
No. 84440-7-I/3 (consol. with No. 84905-1-I)
sell portions of this “dividend interest” in order to fund the purchase. Russell and
SMRB would have no role in these sales.
In March 2017, Steven Bagot, a California resident, entered into a
“subscription agreement” with RTSI to purchase four percent of the company for
$450,000. Under the subscription agreement, Bagot would receive four percent
of the net dividend interest paid to RTSI by SMRB. On October 10, 2017, Bagot
signed a promissory note agreeing to provide Green Acres Pharms, 3 Griffithe,
and Russell with $100,000, and they agreed to repay the principal within 90
days. 4 The note further provides that interest is payable “on the unpaid principal
at the rate of 10% for 90 calendar days, calculated monthly not in advance,” and
“for every month thereafter there will be a $4,500.00 a month penalty or $150.00
per day.” The promissory note included personal guarantees by Griffithe and
Russell. However, only Bagot and Griffithe, for himself and on behalf of Green
Acres Pharms, signed the note.
Bagot followed this promissory note with a letter of understanding (LOU)
signed by Griffithe on November 26, 2017. The LOU confirmed that Bagot
intended to purchase an additional two percent interest in RTSI for $200,000,
increasing his total ownership to six percent “representing 6% of the net income
or sale of the business of Green Acres Pharm and SMRB, to be paid quarterly.”
The LOU further provided that a portion of the investment 5 was to be used only
3 The promissory note does not specify whether the Green Acres Pharms named is the
d.b.a. of SMRB or Griffithe’s LLC. While SMRB’s entity is named Green Acre Pharms, the record
confusingly refers to it as Green Acres Pharms.
4 In one place, the note misstates the principal amount as “$100,000,00.00 USD.”
5 Paragraph 2 of the LOU states that “the $200,000 being invested will be used only for the
completion of the cryogenic oil processing machine purchase,” while paragraph 3 states “[t]he
overall intent is for $100,000 of the $200,000 investment be used toward the cryogenic oil machine
3
No. 84440-7-I/4 (consol. with No. 84905-1-I)
for the completion of a cryogenic oil processing machine purchase, and if
sufficient funds were not raised to complete the purchase within two weeks “that
deal will be considered ‘dead’ and all monies returned.” Additionally, after
purchase of the equipment, Bagot was to be repaid under the terms of the
promissory note: “The overall intent is for $100,000 of the $200,000 investment
be used toward the cryogenic oil machine purchase, and the other $100,000 be
used to repay the October 10, 2017 promissory note.” Within days of the LOU,
Bagot and Griffithe entered into a second subscription agreement for purchase of
the additional six percent for $200,000.
Bagot did not receive repayment for the money loaned under the terms of
the promissory note when it became due on January 8. RTSI also failed to make
regular disbursements or provide accounting related to Bagot’s six percent
interest. Bagot retained counsel, who sent a notice of default with a demand for
payment on the promissory note in January 2018. In April 2018, after having
received no response to his demand, Bagot filed suit against SMRB d.b.a. Green
Acres Pharms, Russell, Griffithe, RTSI, and Green Acres Pharms in Skagit
County Superior Court. Bagot raised ten claims: breach of contract, unjust
enrichment, fraud, negligent misrepresentation, conversion, promissory estoppel,
civil conspiracy, breach of fiduciary duty, breach of good faith and fair dealing,
and violation of Washington’s Limited Liability Company (LLC) Act records
disclosure requirements.
purchase . . . .” Reading the LOU as a whole, paragraph 2 appears to contain a scrivener’s error
and should state that $100,000 is for the machine purchase.
4
No. 84440-7-I/5 (consol. with No. 84905-1-I)
The parties entered into a settlement agreement on July 23, 2018.
Russell, Griffithe, and the defendant companies agreed to pay $139,887.50 to
Bagot. In turn, Bagot agreed to dismiss the claims with prejudice. Specifically, the
settlement agreement provided that Bagot
releases, acquits and discharges Defendants from all claims and
causes of action, whether based on contract, tort, statutory or other
legal or equitable theory of recovery, arising out of Defendant’s
obligation to pay Plaintiff pursuant to the terms of the Note signed
on or about October 10, 2017. This release shall not release any
obligation or right created by this Agreement.
Additionally, the settlement agreement specified, “This release shall not release
nor affect any other obligation or right existing between Plaintiff and Defendants,
including but not limited to the Letter of Understanding signed by and between
Plaintiffs and Defendants on or about November 24, 2017.”
On August 24, 2018, Bagot’s counsel sent a letter to the attorney
representing SMRB, RTSI, and both Green Acres Pharms entities “in an effort to
find an equitable solution to these ongoing issues between our clients and to
avoid litigation.” The letter detailed the companies’ failure to use the investment
for the cryogenic oil processing equipment as promised, violations of the
Washington Securities Act, as well as the lack of quarterly disbursements since
December 2017 and accounting of the business since September 2017. Bagot’s
counsel expressed that he was willing to forego a lawsuit if they agreed to repay
the $650,000 investment, including an immediate repayment of the $200,000 that
was not properly used under the terms of the LOU. Counsel concluded with a
warning that failure to provide a response within 72 hours would result in service
of a summons and complaint no later than September 21, 2018.
5
No. 84440-7-I/6 (consol. with No. 84905-1-I)
On September 7, 2018, in accordance with the settlement agreement, 6 the
parties entered a stipulation for dismissal with the Skagit County Superior Court.
The agreed stipulation stated that the action “is voluntarily dismissed with
prejudice and without costs, this matter having been fully settled and
compromised between Plaintiff and Defendant[s], pursuant to CR 41(a)(1)(A).”
On September 10, 2018, the court entered an order dismissing all claims with
prejudice based on the stipulation between the parties.
In January 2019, Bagot filed a second lawsuit against SMRB, Green Acres
Pharms, RTSI, Russell, and Griffithe, this time in King County Superior Court.
Bagot again raised claims of breach of contract, unjust enrichment, fraud,
negligent misrepresentation, conversion, promissory estoppel, civil conspiracy,
breach of fiduciary duty, breach of good faith and fair dealing, and violation of
Washington’s LLC Act records disclosure requirements, with an additional claim
for violation of the Washington Securities Act.
The action was stayed from January 2020 to March 2021 due to RTSI’s
bankruptcy filing. After the stay was lifted, the parties engaged in extensive
motions practice. Bagot, Griffithe, and Russell/SMRB all filed motions for
summary judgment. The court held two days of oral arguments in June 2021. On
September 10, the court denied Bagot’s and Griffithe’s motions and continued
the hearing on Russell/SMRB’s summary judgment motion until October.
6 Bagot agreed to dismiss the claims with prejudice within five days of receiving the first
monthly payment, which, according to a schedule attached to the settlement agreement, was due
on August 3, 2018.
6
No. 84440-7-I/7 (consol. with No. 84905-1-I)
In September 2021, Russell/SMRB and Griffithe each filed second
motions for summary judgment that, for the first time, argued that the claims in
Bagot’s King County lawsuit were precluded by res judicata due to the settlement
of the Skagit County case. Bagot responded to the motions for summary
judgment, claiming that defendants failed to demonstrate that the King County
and Skagit County lawsuits shared the same causes of action and subject matter
as required for claim preclusion. In October 2021, the trial court heard argument
on Russell/SMRB’s original summary judgment motion and the defendants’
motions based on claim preclusion.
On November 19, 2021, the trial court issued two separate orders on the
summary judgment motions. One order was based on Russell/SMRB’s original
motion for summary judgment filed on May 7, 2021, and granted summary
judgment dismissal of Bagot’s claims of breach of contract, breach of good faith
and fair dealing, promissory estoppel, breach of fiduciary duty, conversion, and
violation of the Washington LLC Act. That order denied Russell/SMRB’s request
for summary judgment on the claims of fraud, negligent misrepresentation, civil
conspiracy, unjust enrichment, and violation of Washington Securities Act. The
second order granted partial summary judgment and dismissal of all of Bagot’s
claims against Russell/SMRB and Griffithe based on the application of res
judicata except unjust enrichment, and denied summary judgment on Bagot’s
claim for violation of the Washington Securities Act.
Bagot and Russell/SMRB both filed motions for reconsideration.
Russell/SMRB requested reconsideration of the denial of summary judgment on
7
No. 84440-7-I/8 (consol. with No. 84905-1-I)
the Securities Act claim. Russell/SMRB also sought clarification as to the court’s
ruling on the unjust enrichment claim, which had been omitted from the order on
summary judgment based on res judicata. Bagot sought reconsideration of the
dismissal of the remaining claims and also claimed that the defendants had
waived res judicata by failing to plead the affirmative defense in their answer and
pursuing the case for more than two years before seeking dismissal on this
basis.
In an order issued February 1, 2022, the trial court denied Russell/SMRB’s
motion for reconsideration on the Securities Act claim, but clarified that the unjust
enrichment claim was dismissed under res judicata. In another order issued the
same day, the trial court requested that Russell/SMRB provide responsive
briefing on the issue of waiver of the res judicata defense.
During a status conference in April 2022, Russell/SMRB requested leave
to file a renewed motion for summary judgment based on new evidence. Griffithe
had discovered that Bagot’s counsel had included him on an April 2018 e-mail to
another person involved with the investment scheme. Sent the day Bagot filed
the lawsuit in Skagit County Superior Court, the e-mail stated “I am going after
you and the 502 company that lured [Bagot] to invest. You and your colleagues
have committed securities fraud.” The trial court granted Russell/SMRB’s request
to file this renewed motion for summary judgment and dismissal of the Securities
Act claim on the grounds of res judicata. The court also allowed Bagot to file a
motion for summary judgment on the Securities Act claim. Griffithe joined
8
No. 84440-7-I/9 (consol. with No. 84905-1-I)
Russell/SMRB’s motion and their response to Bagot’s motion. The court
subsequently denied the cross-motions for summary judgment.
Russell/SMRB filed a motion for discretionary review of the denial of the
renewed motion for summary judgment on the Securities Act claim. Bagot
requested discretionary review of the court’s order granting summary judgment
dismissal of all claims except for the Securities Act claim. 7 The two motions for
discretionary review were consolidated. A commissioner of this court granted
discretionary review of the trial court’s denial of the summary judgment on the
Securities Act claim but denied Bagot’s request for review of the summary
judgment dismissal of his other claims. 8 Griffithe is not a party to this appeal.
DISCUSSION
The trial court granted summary judgment dismissing Bagot’s claims
against Russell/SMRB except for the claim based on the Securities Act. 9 We
review orders on summary judgment de novo. Kim v. Lakeside Adult Fam. Home,
185 Wn.2d 532, 547, 374 P.3d 121 (2016). We construe evidence and
reasonable inferences in the light most favorable to the nonmoving party. Id.7 Bagot also moved for discretionary review of the trial court’s denial of his motion
seeking summary judgment in his favor on the Securities Act claim. A commissioner of this court
denied discretionary review.
8 While the commissioner determined that Bagot’s request for review of dismissal of his
other claims under the res judicata doctrine did not meet any of the criteria for discretionary
review, for the purposes of judicial economy, allowed Bagot to provide briefing on the applicability
of res judicata to his other claims for consideration as appropriate.
9 Bagot repeatedly refers to Russell’s renewed motion for summary judgment as
defendants’ second motion for reconsideration of the partial summary judgment on res judicata.
Bagot cites the abuse of discretion standard of review that applies to review of a trial court’s
motion for reconsideration rather than the de novo standard that applies to review of summary
judgment decisions. According to the record, Russell requested leave to file a new motion for
summary judgment, which the court granted. The motion was brought outside the 10-day filing
period for a motion for reconsideration. CR 59. Regardless of the procedural posture, appellate
courts review application of the claim preclusion doctrine de novo. Weaver v. City of Everett, 194
Wn.2d 464, 473, 450 P.3d 177 (2019).
9
No. 84440-7-I/10 (consol. with No. 84905-1-I)
Summary judgment is appropriate when there is no genuine issue of material fact
and the moving party is entitled to judgment as a matter of law. Folsom v. Burger
King, 135 Wn.2d 658, 663, 958 P.2d 301 (1998) (citing CR 56(c)).
The summary judgment decisions at issue were based on res judicata.
The term “res judicata” is often referred to as claim preclusion and refers to
restrictions on relitigating the same claim or cause of action. 10 14A DOUGLAS J.
ENDE, W ASHINGTON PRACTICE: CIVIL PROCEDURE § 35:20, at 552 (3d ed. 2018).
Claim preclusion is an equitable remedy that precludes relitigation of already
determined causes in the interest of judicial finality and economy. Weaver v. City
of Everett, 194 Wn.2d 464, 472-73, 450 P.3d 177 (2019).
Claim preclusion prevents relitigation of an entire claim when a prior
proceeding involving the same parties and issues culminated in a judgment on
the merits. Id. at 480. The party asserting claim preclusion has the burden of
proof to establish that the prior action and the challenged action have
“concurrence of identity” in four areas: (1) subject-matter; (2) cause of action;
(3) persons and parties; and (4) the quality of the persons for or against whom
the claim is made. Id. All four elements must be satisfied to establish claim
preclusion. Hisle v. Todd Pac. Shipyards Corp., 151 Wn.2d 853, 866, 93 P.3d
108 (2004). The parties in this case do not dispute that the prior lawsuit ended in
10 As the U.S. Supreme Court has noted, the terms “claim preclusion” and “issue
preclusion” “have replaced a more confusing lexicon. Claim preclusion describes the rules
formerly known as ‘merger’ and ‘bar,’ while issue preclusion encompasses the doctrines once
known as ‘collateral estoppel’ and ‘direct estoppel.’ ” Taylor v. Sturgell, 553 U.S. 880, 892 n.5,
128 S. Ct. 2161, 171 L. Ed. 2d 155 (2008) (citing Migra v. Warren City Sch. Dist. Bd. of Ed., 465
U.S. 75, 77 n.1, 104 S. Ct. 892, 79 L. Ed. 2d 56 (1984)).
10
No. 84440-7-I/11 (consol. with No. 84905-1-I)
a final judgment and they have a concurrence of identity as to parties and the
quality of the persons. 11
In addition to precluding claims that were brought, the doctrine of claim
preclusion applies to entire claims that could have been brought in a prior action.
Weaver, 194 Wn.2d 481. When the parties to two successive proceedings are
the same and the first proceeding resulted in a final judgment, “a matter may not
be relitigated, or even litigated for the first time, if it could have been raised, and
in the exercise of reasonable diligence should have been raised, in the prior
proceeding.” Kelly-Hansen v. Kelly-Hansen, 87 Wn. App. 320, 328-29, 941 P.2d
1108 (1997).
Determining whether a matter should have been litigated requires
consideration of several factors, including “whether the present and prior
proceedings arise out of the same facts, whether they involve substantially the
same evidence, and whether rights or interests established in the first proceeding
would be destroyed or impaired by completing the second proceeding.” Id. at
330. Courts have determined that a matter should have been raised for the
purposes of claim preclusion if it is “merely an alternate theory of recovery, or an
alternate remedy.” Id. at 331. Claim preclusion does not apply if a necessary fact
was not in existence at the time of the first proceeding, or if there were valid
reasons for not asserting the claim earlier. Kelly-Hansen, 87 Wn. App. at 331.
11 A stipulated dismissal with prejudice is a final judgment on the merits for the purposes
of claim preclusion. Berschauer Phillips Const. Co. v. Mutual of Enumclaw Ins. Co., 175 Wn. App.
222, 228 n.11, 308 P.3d 681 (2013).
11
No. 84440-7-I/12 (consol. with No. 84905-1-I)
Whether claim preclusion applies is a question of law reviewed de novo. Weaver,
194 Wn.2d at 473.
I. Waiver of Affirmative Defense
Bagot claims Russell/SMRB waived the affirmative defense of claim
preclusion through the civil rules and common law waiver. Generally, affirmative
defenses such as claim preclusion are waived unless they are pleaded, asserted
in a CR 12(b) motion, or tried by the express or implied consent of the parties.
CR 8(c); Bickford v. City of Seattle, 104 Wn. App. 809, 813, 17 P.3d 1240 (2001).
Additionally, “under the common law doctrine of waiver, waiver of affirmative
defenses can occur under certain circumstances in two ways: if the defendant’s
assertion of the defense is inconsistent with the defendant’s previous behavior
and if defendant’s counsel has been dilatory in asserting the defense.” Oltman v.
Holland Am. Line USA, Inc., 163 Wn.2d 236, 246, 178 P.3d 981 (2008).
However, “the rule’s policy is to avoid surprise and affirmative pleading is not
always required.” Bickford, 104 Wn. App. at 813.
Russell/SMRB does not dispute that they neither pleaded claim preclusion
in their answer nor filed a motion under CR 12(b). Despite these omissions,
Bagot responded to the motion for summary judgment and contested application
of the doctrine during oral arguments before the trial court. 12 Bagot thoroughly
participated in contesting the merits of the claim preclusion argument in response
12 For the first time on appeal, Bagot argues the April 2018 e-mail from Bagot’s counsel
was inadmissible as summary judgment evidence. Bagot did not raise the issues of admissibility
or authenticity below. Without an objection and trial court ruling to review, we cannot address the
issue of admissibility Bagot now raises. “It is our duty to review evidentiary rulings made by the
trial court; we do not ourselves make evidentiary rulings.” Jacob’s Meadow Owners Ass’n v.
Plateau 44 II, LLC, 139 Wn. App. 743, 756, 162 P.3d 1153 (2007). Furthermore, the trial court
considered the e-mail exhibit on summary judgment. Bagot waived his evidentiary challenge.
12
No. 84440-7-I/13 (consol. with No. 84905-1-I)
to Russell/SMRB’s summary judgment motion. “When issues that are not raised
by the pleadings are tried by express or implied consent of the parties, they will
be treated in all respects as if they had been raised in the pleadings.” Dewey v.
Tacoma Sch. Dist. No. 10, 95 Wn. App. 18, 26, 974 P.2d 847. Bagot’s litigation of
the issue of claim preclusion before the trial court constituted implied consent.
Thus, he waived his claim that Russell/SMRB waived the affirmative defense.
II. Application of Doctrine of Claim Preclusion
Russell/SMRB claims the trial court erred by failing to dismiss the
Securities Act claim as precluded under the doctrine of claim preclusion.
Russell/SMRB argues that Bagot pleaded a common law securities claim in
Skagit County, relying on the e-mail message to show that Bagot knew of the
Securities Act when he filed the Skagit lawsuit. Bagot contends because he did
not know of the fraudulent investment scheme at the time of the Skagit lawsuit,
his claims were not ripe, and therefore he could not have brought the Securities
Act claim in April 2018. We agree with Russell/SMRB.
Securities Act claims require a fraudulent or deceitful act committed in
connection with the offer, sale or purchase of any security. RCW 21.20.010;
Kinney v. Cook, 159 Wn.2d 837, 842, 154 P.3d 206 (2007). For the purposes of
the Act, the definition of a “security” “ ‘embodies a flexible rather than a static
principle, one that is capable of adaptation to meet the countless and variable
schemes devised by those who seek the use of the money of others on the
promise of profits.’ ” Cellular Eng’g, Ltd. v. O’Neill, 118 Wn.2d 16, 24, 820 P.2d
13No. 84440-7-I/14 (consol. with No. 84905-1-I)
941 (1991) (quoting Securities & Exch. Comm’n v. W.J. Howey Co., 328 U.S.
293, 299, 66 S. Ct. 1100, 90 L. Ed. 1244 (1946)).
The Skagit complaint effectively pleaded the Securities Act violation
through common law claims. For instance, the claim for negligent
misrepresentation includes an allegation of defendants’ failure to disclose that
“the ownership interest held by the non-i502 Nevada limited liability company
(Green Acres Pharms, LLC) in SMRB d.b.a. Green Acres Pharms that may
substantially dilute or limit the interest Plaintiff was caused to believe he was
purchasing by and from Defendants.” Further, the Skagit complaint alleges that
“the disclosure of this information would have caused Mr. Bagot to act differently
in ways including, but not limited to, issuing the $100,000 (one hundred thousand
dollar) principal at issue in this action, signing the Agreement, and acquiring
ownership interest in Green Acres Pharms.” In support of the negligent
misrepresentation cause of action, Bagot’s complaint alleges a deceitful act—the
failure to disclose—in connection with the sale of interest which meets the
elements of a Securities Act claim.
Similarly, the conspiracy claim in the Skagit case alleged, “A combination
of Defendants SMRB d.b.a. Green Acres Pharms, Green Acres Pharms, LLC,
Robert Russell, and Guy Griffithe worked in concert to unlawfully deprive Mr.
Bagot of his money, ownership interest and resulting rights in, and quarterly
disbursements from SMRB d.b.a. Green Acres Pharms.” This pleading describes
a deceitful act related to Bagot’s purchase of an interest in the companies. Again,
these allegations state facts that could establish a Securities Act claim. The
14
No. 84440-7-I/15 (consol. with No. 84905-1-I)
promissory note did not provide an ownership interest. And the Skagit lawsuit
names multiple defendants, even though the promissory note was signed only by
Bagot and Griffithe. Therefore, the pleadings in the Skagit case pertain to more
than just the promissory note; they reach the investment scheme as a whole.
Proof of the Skagit claim requires evidence regarding the entire investment
relationship between the various parties, beyond the limited scope of default on
the promissory note.
The King County Securities Act claim includes language similar to that
used in the Skagit complaint. The complaint alleges that the defendants offered
for sale non-registered corporate securities, including stock/membership interest
in RTSI and/or SMRB which was an unlawful offer and sale of security, and they
“made untrue statements and/or omitted material facts, and engaged in an act,
practice, course of business, or employed a device, scheme, or artifice in order to
operate a fraud or deceit upon Plaintiff.” These allegations mirror the Skagit
lawsuit claim that Defendants’ misrepresentations caused him to purchase
ownership in the companies. The claims arise out of the same facts: the alleged
misrepresentations and the $650,000 investment for ownership in the
companies. Both the Skagit misrepresentation claim and the King County
Securities Act claim would hinge on evidence related to the entire investment
transaction.
Moreover, the April 2018 e-mail from Bagot’s lawyer, sent the day the
Skagit lawsuit was filed, confirms Bagot was aware of the facts giving rise to his
claim that that the investment scheme violated the Securities Act. “Knowledge by
15
No. 84440-7-I/16 (consol. with No. 84905-1-I)
the attorney is imputed to the client.” Hill v. Dep’t of Lab. & Indus., 90 Wn.2d 276,
279, 580 P.2d 636 (1978). The e-mail stated that Bagot was “lured” to invest and
informed one of the investment group executives, “You and your colleagues have
committed securities fraud.” The e-mail indicates that Bagot knew the facts
underlying his claims of securities violations and the claim was ripe at the time of
filing of the Skagit lawsuit.
This situation differs from cases where the facts related to the second
lawsuit had yet to occur when the first was concluded. For example, in Weaver,
the plaintiff filed for temporary disability believing that he was cured of his cancer-
related claims, but later discovered the cancer had metastasized. 194 Wn.2d at
482. The permanent disability claim did not exist and, therefore, could not be
litigated at the time of the temporary disability claim. Id. By contrast, the record
here indicates Bagot already knew that securities violations had occurred when
he filed the Skagit case.
As for the trial court’s grant of the defendants’ motions for summary
judgment dismissing Bagot’s other claims based on claim preclusion, the
commissioner denied discretionary review, ruling that Bagot had failed to meet
any of the criteria for review under RAP 2.3(b)(1), (2), and (3). Bagot did not seek
modification of the commissioner’s ruling. Accordingly, we decline to review the
issues raised in Bagot’s motion for discretionary review.
CONCLUSION
Bagot’s Securities Act claim could have been brought at the time of the
Skagit case and is, therefore, precluded under the doctrine of claim preclusion.
16
No. 84440-7-I/17 (consol. with No. 84905-1-I)
We reverse the trial court’s denial of summary judgment as to that claim and
remand for further proceedings consistent with this decision.
WE CONCUR:
17