DocketNumber： 06-36020
Judges： Bea, Smith, Hood
Filed Date： 8/11/2008
Status： Precedential
Modified Date： 11/5/2024
Opinion by Judge BEA; Dissent by Judge MILAN D. SMITH, JR.
We are called on to decide whether attorney misconduct towards clients, involving violations of rules of professional conduct binding on the attorney, requires forfeiture of the attorneys’ fees paid to them when, after all righteous furor is vented, the fees were eminently reasonable for the result produced.
Jeffrey and Amy Bertelsen, their now-defunct company Bertelsen Food & Gas, Inc., and Jeffrey Bertelsen’s parents Dr. Richard and Janice Jo Bertelsen (“Appellants”), appeal the district court’s judgment after a bench trial in favor of Appellants’ former attorney Roger Harris and his law firm (“Appellees”) on Appellants’ breach of fiduciary duty claims.
Appellants claimed Harris and his firm (1) violated Washington Rule of Professional Conduct (“RPC”) § 5.4(a) by agreeing to share legal fees with a nonlawyer; (2) failed to comply with Washington law when they modified their legal fee agreements during the course of representation; (3) overcharged Appellants by miscalculating their contingency fee and failed to comply with RPC § 1.5(c)(3)’s requirement that at the conclusion of a contingency fee matter, the attorney provide his client with a written statement showing the method of contingency fee calculation; and (4) failed fully to inform Appellants of conflicts of interest in their joint representation and obtain written waivers of the conflicts.
This case does not call upon us to determine whether Appellees breached their fiduciary duty to their clients as a matter of Washington state law. Nor is this occasion to express opprobrium at an attorney’s failure to abide by the rules of professional responsibility in representing his clients. Rather, our task is a limited one: we must decide whether the district court abused its discretion when it declined to award disgorgement of fees. We hold there was no abuse of discretion.
I.
In the 1990s, Jeffrey and Amy Bertelsen owned six gas stations, which they operated through the now-dissolved Bertelsen Food and Gas, Inc. (“BFG”), a Washington corporation. BFG operated the gas stations under the ARCO brand. BFG ceased operations in December 2000, because it had no money to pay ARCO for gasoline or to pay other vendors for other products. On January 3, 2001, ARCO sent BFG a “notice of termination.” The notice stated ARCO’s intent to terminate its franchise agreements with BFG in 90 days (on April 9, 2001).
Jeffrey and Amy Bertelsen retained attorney Bill Hames for advice on filing for bankruptcy for the Bertelsens individually and for BFG. Hames advised the Bertel-sens to speak with an attorney with experience in the gas franchise industry. In lieu of immediately filing for bankruptcy, Hames and Jeffrey Bertelsen contacted Roger Harris, an Oregon attorney who had gas franchise industry experience.
A. The March 21, 2001 Retainer Agreement
In March 2001, Jeffrey and Amy Bertel-sen signed a retainer agreement (“the March 2001 agreement”) with Harris and his firm, Harris Berne Christensen LLP. The agreement stated the Bertelsens, for and on behalf of BFG, retained Harris and his firm “as attorneys for the purpose of representing and handling any and all legal matters on behalf of[BFG] which may, from time to time, be requested. You have specifically requested that we work to negotiate a resolution of the ARCO franchise terminations and related issues.” The agreement also stated BFG would pay the firm on an hourly basis, at its rates of $150-$195/hour for attorneys. The agreement also required BFG to pay a $10,000 retainer, which the Bertelsens paid on or about April 23, 2001.
Jeffrey and Amy Bertelsen received detailed bills describing services rendered between March 2001 and May 2001, with a breakdown of time spent and hourly rates, from Harris’s firm. They paid these bills
During Spring 2001, it became clear ARCO had no interest in continuing a business relationship with BFG and did not intend to rescind the notice of termination. Indeed, ARCO filed an action against BFG in August 2001 for money due under loan agreements with BFG. The Bertelsens decided they would try to sell the six gas stations as a business solution, to avoid bankruptcy. In May 2001, Jeffrey and Amy Bertelsen asked Harris and McPherson (the non-attorney industry consultant) to seek a buyer for the stations.
B. The May 29, 2001 Corporate Resolution
By May 2001, however, Jeffrey and Amy Bertelsen did not have money to pay hourly attorney or consulting fees. They asked Harris and McPherson if they would work on a contingency fee basis; Harris and McPherson agreed.
Harris then drafted a “Terms of Engagement pursuant to Corporate Resolution (Authorization) and Limited Power of Attorney,” which Jeffrey and Amy Bertel-sen signed on May 29, 2001 on behalf of BFG. The resolution stated BFG retained “the services of’ McPherson and Harris for 90 days (i.e., expiring August 27, 2001). The resolution further stated “Harris and McPherson will be reimbursed for their services associated with the undertaking ... at the rate of 1% of the gross value of any transaction(s) entered into with third parties plus full reimbursement of all out-of-pocket expenses incurred by Harris and McPherson.” The resolution also stated the Bertelsens could terminate the agreement, and Harris and McPherson would be entitled to compensation for work performed at their hourly rates of $195 and $150, respectively. Harris and McPherson agreed to split the contingency fee evenly between themselves (“50/50”).
C. The September 19, 2001 Corporate Resolution
During the 90-day term of the May 2001 corporate resolution, no buyer for the gas stations was found. As early as July 2001, however, Tesoro Petroleum had expressed interest in doing a deal with BFG, but no offer had come to fruition. At the time of the expiration of the May 2001 corporate resolution on August 27, 2001, Jeffrey and Amy Bertelsen wanted to sign a new contingency fee agreement with Harris and McPherson to continue to try to sell the gas stations. Harris discussed with Jeffrey and Amy Bertelsen the fact the new agreement would be based on a 1.5% contingency (up from 1%).
On September 19, 2001, Jeffrey and Amy Bertelsen, on behalf of BFG, signed a revised corporate resolution and limited power of attorney. The term of the agreement was for one year and stated Harris and McPherson would receive “1.5% of the gross value of any transaction(s) entered into with third parties plus full reimbursement of all out-of-pocket expenses.” Like the May 2001 corporate resolution, the September 2001 corporate resolution stated the Bertelsens could terminate the agreement and Harris and McPherson would be entitled to compensation at their hourly rates of $195 and $150, respectively.
At some point, Tesoro agreed to enter into a lease/option to buy agreement with BFG. On September 20, 2001 (the day after the Bertelsens signed the September 2001 corporate resolution), Harris faxed to Tesoro executed signature pages of the “Tesoro/Bertelsen Agreement to Lease.”
The transaction closed on October 31, 2001. Harris determined the contingency fee under the agreement would be $142,500, which he calculated by taking 1.5% of $9.5 million — the $1 million Tesoro paid for the option plus the $8.5 million option price (even though Tesoro never exercised the option). Jeffrey and Amy Bertelsen received correspondence from Harris prior to the October 31, 2001 closing that showed this $142,500 contingency fee. At the October 31, 2001 closing, Jeffrey and Amy Bertelsen did not object to the fee. The Bertelsens do not claim they were afraid the Tesoro transaction would not go forward if they did not agree to the contingency fee or if they had not agreed to the terms of either of the May or September 2001 corporate resolutions.
The invoice Harris’s firm sent to BFG described the services billed as “Services rendered from June 1, 2001 through October 31, 2001 pursuant to that Limited Power of Attorney and Terms of Engagement as revised and extended, including services rendered by consultant, Ron McPherson.” The space under the heading on the invoice for “Hours” was blank. Under “Amount,” the invoice simply stated “$142,500.” The invoice did not explain how the amount of the contingency fee was calculated; nevertheless, the Bertelsens paid the fee.
Harris’s firm paid McPherson $70,000 as his part of the fee. Harris received $72,500. Jeffrey Bertelsen testified he “did not feel that Mr. McPherson did anything improper and that Mr. McPherson earned his $70,000 of this $142,500 payment.”
Written records showing the exact number of hours Harris spent on marketing and putting together the gas station transaction no longer exist. Harris testified he recalled that, during the period from May 29, 2001 to October 31, 2001, he spent approximately 400 hours on the matter. Based on his hourly rate of $195, his fee on an hourly basis would have been at least $78,000 — more than his half of the contingency fee.
E. The ARCO Litigation
On August 10, 2001, ARCO filed an action in Washington state court against BFG, Jeffrey and Amy Bertelsen, and Dr. and Mrs. Bertelsen (Jeffrey Bertelsen’s parents). ARCO claimed the Bertelsens and BFG defaulted on loan agreements. ARCO further claimed the loans were personally guaranteed by Jeffrey and Amy
Dr. Bertelsen knew Harris was representing his son in the ARCO lawsuit. After he was served with ARCO’s complaint, Dr. Bertelsen contacted Harris and set up a meeting in September 2001. Prior to the meeting, Harris sent a letter dated August 30, 2001, to Dr. and Mrs. Bertelsen enclosing documents that ARCO’s counsel provided to Harris that “purport[ed] to be” personal guarantee agreements signed by Dr. and Mrs. Bertelsen. Harris stated he had “some question about the validity of these signatures.”
At the September 2001 meeting, Harris “discussed potential conflicts that could arise in representing all the Bertelsens and suggested to Dr. and Mrs. Bertelsen that they confer with their own counsel to evaluate whether they should be separately represented.” During the meeting, Harris explained “the possible conflict that might arise in the future if the Bertelsen family clients did not agree upon a trial strategy or began ‘finger pointing’ at one another.” Harris did not recall whether he discussed with the Bertelsens the potential conflict of interest between Dr. and Mrs. Bertelsen as guarantors, and Jeffrey and Amy Bertelsen as debtors.
After the meeting, Harris sent Dr. and Mrs. Bertelsen a letter dated September 7, 2001, to “conflrm[ ] the substance” of their meeting. Harris noted his firm had been retained to defend the interests of Dr. and Mrs. Bertelsen, as well as Jeffrey and Amy Bertelsen and BFG. He further stated: “We understand those interests to be, in large part, identical and I understand that you have waived any conflict that may arise. At this point in time I am not aware of any such conflict, and have so informed you.”
The letter enclosed the firm’s retainer agreement, which Dr. and Mrs. Bertelsen signed and returned.
F. The October 23, 2001 Waiver
On October 22, 2001, Harris sent another letter to Dr. and Mrs. Bertelsen. In the letter, Harris stated: “We are agreed, following extended discussion and full disclosure, that there is no conflict of interest and that all parties will proceed in an effort to fully defend against the allegations and the claims made by ARCO and will assert all affirmative defenses, offsets, discounts and counterclaims that might be available to any and all parties in that litigation.”
The Harris letter then discussed the Tesoro transaction and a potential conflict of interest created by requirements Tesoro was imposing. Tesoro required Dr. and Mrs. Bertelsen to reconvey the deeds of trust they had against the six gas station properties to reduce the amount of debt of record. Tesoro also required Dr. and Mrs. Bertelsen, along with all secured lenders, to execute a Non-Disturbance and Attornment Agreement. The Harris letter explained:
These requirements, imposed by Tesoro, ... create a potential conflict of interest between our representation of Jeff and Amy Bertelsen and [BFG] and you [i.e., Dr. and Mrs. Bertelsen] in connection*1053 with the proposed transaction. Jeff and Amy Bertelsen and [BFG] desire that you execute the deeds of reconveyance and Non-Disturbance Agreement, pursuant to Tesoro’s Agreement to Leased7 ] Therefore, we recommend that you seek new and separate legal counsel with respect to this matter in order to determine your rights, remedies and obligations under the proposed transaction with Tesoro.
In consideration for Dr. and Mrs. Bertel-sen’s compliance with Tesoro’s requirements, Jeffrey and Amy Bertelsen agreed, among other things, to assume all defense costs in connection with the ongoing ARCO litigation against all Bertelsens, indemnify Dr. and Mrs. Bertelsen against any judgment against them by ARCO, and assume payments on' a loan secured by Dr. Bertelsen.
Finally, in the letter, Harris stated that, if Dr. and Mrs. Bertelsen chose to proceed to discuss the matter with him without the benefit of new legal counsel, he required them to sign an attached waiver. The waiver stated: “We, separately and as husband and wife, hereby waive any and all conflict of interest as to the representation of Harris Berne Christensen LLP for and in connection with the proposed transaction under the Agreement to Lease, by and between Tesoro West Coast Petroleum Company and Jeff and Amy Bertel-sen and [BFG].”
Dr. and Mrs. Bertelsen signed the waiver on October 23, 2001, and did not seek independent counsel. Jeffrey and Amy Bertelsen were not asked to sign this conflict waiver.
G. The October 29, 2001 Letter
On October 29, 2001, Harris sent a letter to Jeffrey and Amy Bertelsen, and Dr. and Mrs. Bertelsen. The letter “summarize[d], describe[d] and memorialize[d] [the parties’] resolution and understanding of the disposition of the various debts, liens against real property and financing of the ongoing litigation with ARCO,” and stated the parties “acknowledge^] the rights and obligations” pursuant to the Tesoro Lease Agreement. The letter set forth the agreement among the Bertelsens under the terms of the October 23, 2001 waiver letter.
The final paragraph of the letter stated: “I ask that each of you review this document and if consistent with your understanding of the arrangements made, please execute as shown below ... You have been previously advised and it is again recommended that you seek separate legal counsel in connection with this matter in order to be fully advised with respect to your rights, remedies and obligations herein.” On October 30, 2001, Dr. and Mrs. Bertel-sen signed the agreement; on October 31, 2001, Jeffrey and Amy Bertelsen signed the agreement. The document does not discuss any potential or actual conflict of interest created by Harris’s representation of the parties in entering into the terms of the agreement outlined in the letter.
Throughout the ARCO litigation, neither Jeffrey Bertelsen nor Dr. Bertelsen thought Harris failed to render effective legal representation or behaved in any manner detrimental to any of the Bertel-sens because of Harris’s joint representa
Events in September and October 2002 led Harris to conclude he must withdraw from representing all the Bertelsens. First, in September 2002, Amy Bertelsen told Harris that Jeffrey Bertelsen had paid a vendor a $3,000 “kickback” for generating a false invoice, which Jeffrey Bertelsen somehow used to obtain approximately $178,000 of funding from ARCO for work he never intended to be done.
After these events, Harris — after consultation with the Oregon State Bar Association and ethics counsel — decided he must withdraw as counsel as to all four of the Bertelsens, and so informed them. Harris advised the Bertelsens to seek new counsel. Ultimately, all four Bertelsens settled with ARCO — Jeffrey Bertelsen dealt directly with ARCO, while Dr. Ber-telsen retained an attorney to review the Bertelsen-ARCO settlement agreement. Pursuant to the settlement agreement, Dr. and Mrs. Bertelsen paid ARCO $225,000, while Jeffrey and Amy paid ARCO $550,000.
II.
On December 20, 2004, Appellants filed a complaint against Harris and his law firm in federal district court invoking diversity of citizenship jurisdiction. Appellants claimed Appellees breached their fiduciary duties when they violated various sections of the Washington Rules of Professional Conduct (“RPC”).
After a five-day bench trial, the district court entered judgment in Appellee attorneys’ favor and dismissed Appellants’ claims. The court issued an oral ruling, which it then supplemented with Findings of Fact and Conclusions of Law. The court found as follows.
1. Unlawful fee-splitting
Appellants claim Harris and his firm breached their fiduciary duty by entering into the May and September 2001 “corporate resolutions” under which Harris and McPherson would share the contingency fee. They claim the agreement violated RPC § 5.4(a), which prohibits a lawyer or law firm from sharing legal fees with a nonlawyer.
2. Improper modification of the fee agreement
Appellants also claimed the May 2001 corporate resolution, which provided for a 1% contingency fee, was a modification of the hourly fee agreement in the March 2001 retainer agreement, and this modification did not comply with Washington law.
3.Contingency fee over-charge and failure to set forth the method for calculating the fee
Appellants also claimed Harris overcharged them under the September 2001 corporate resolution, by calculating the 1.5% fee based in part on the price of Tesoro’s option to purchase the stations, which it had not exercised.
The district court held, even if Jeffrey and Amy Bertelsen had a valid breach of fiduciary duty claim as to the May and September 2001 corporate resolutions, the claim was barred by Washington’s three-year statute of limitations for such actions, because the Bertelsens did not file their action until December 2004.
B. Conflict of Interest
Appellants also claim Harris and his firm breached their fiduciary duty by failing fully to advise Appellants of potential conflicts of interest and to obtain written waivers of the conflicts during the ARCO litigation. The district court found no breach of fiduciary duty. The district court held Appellants waived the conflict of interest at the outset of the ARCO litigation, Harris “continually” advised Appellants to seek independent counsel, and Harris did not favor one client over another during the ARCO litigation.
C. Disgorgement
Most importantly for this appeal, the district court held: “Assuming for the sake of argument that all of plaintiffs’ assertions concerning violations of RPCs are true, this judicial officer cannot conclude that the conduct of Harris and his firm was so egregious as to justify disgorgement of fees paid.” The court noted “the consulting arrangement with McPherson could easily have been provided in a separate document.” Moreover, while Appellants “understandably” took issue with the fees paid in the Tesoro transaction “since they were based on an option that was never exercised, this judicial officer infers that the fee was ultimately reasonable, given the testimony of all concerned, and specifically the fees paid to McPherson, the description of the services provided and the result achieved.” Finally, the court stated it did “not find that there is sufficient grounds for disgorgement or sufficient equitable concerns ... to justify disgorgement based upon the evidence.”
As to the breach of fiduciary duty claim based on the purported conflict of interest, the court held disgorgement of fees was not warranted because “[tjhere is no showing that the giving of independent advice to the plaintiffs at the times material to plaintiffs’ claims would have changed the strategic positions taken by them or the ultimate outcome of either the Tesoro transaction or the Arco litigation.”
III.
We review the district court’s findings of fact after a bench trial for clear error and review the district court’s conclusions of law de novo. Lentini v. Cal. Ctr. for the Arts, Escondido, 370 F.3d 837, 843 (9th Cir.2004). Whether an attorney’s conduct violates a rule of professional conduct is a question of law. Eriks v. Denver, 118 Wash.2d 451, 824 P.2d 1207, 1211 (1992). We review a trial court’s decision whether to award disgorgement of fees for an attorney’s breach of his fiduciary duty for abuse of discretion. See Kelly v. Foster, 62 Wash.App. 150, 813 P.2d 598, 602 (Ct.App.1991).
IV.
The only damages Appellants seek here for their various claims of breach of fiduciary duty is disgorgement of attorneys’ fees paid to Appellees, plus interest and their own attorneys’ fees and costs in prosecuting this disgorgement claim. Note, Appellants do not claim they suffered any injury by the actions of Harris and his firm, apart from having to pay their attorneys’ fees. That is, they do not complain Harris and his firm bungled their extrica-tions from the ARCO contract, nor that Harris brought about a disadvantageous
Under Washington law, disgorgement of fees is a remedy committed to the discretion of the trial court: “Disgorgement of fees is a reasonable way to discipline specific breaches of professional responsibility, and to deter future misconduct of a similar type. Such an order is within the inherent power of the trial court to fashion judgments.” Eriks, 824 P.2d at 1213 (internal quotation marks and citation omitted). A court is not required to order disgorgement, even where a breach of fiduciary duty is proven. See Kelly, 813 P.2d at 602. A court’s refusal to disgorge fees, whether a breach of fiduciary duty is proven or not, is overturned only for an abuse of discretion. Id.
The district court explicitly stated, even assuming Appellants had established their breach of fiduciary duty claims, the court nevertheless would not order disgorgement. In other words, the district court held, even if its legal conclusions on the merits of Appellants’ claims were incorrect — as the dissent contends — the court would not order disgorgement on this set of facts. We hold the district court did not abuse its discretion in so holding.
Washington state law does not set forth particular factors a trial court must consider to decide whether to order disgorgement, or factors we must consider to determine whether the trial court abused its discretion in rendering that decision. We find Kelly v. Foster, 62 Wash.App. 150, 813 P.2d 598 (Ct.App.1991), instructive. Kelly, the sole beneficiary of her uncle’s estate, brought an action for breach of fiduciary duty against attorney Foster, who represented the estate’s executor. Id. at 599. Foster recommended the estate sell its land to a third party below market value, but failed to disclose he had an interest in the land sale; after the sale, the third party sold part of the land to Foster and his wife. Id. The jury found Foster breached his fiduciary duty to Kelly and awarded damages of $85,000. Id. at 600. The trial court denied Kelly’s motion for disgorgement of fees. Id. The Washington Court of Appeals affirmed. It held “the trial court did not find factors present in this case justifying a reimbursement to Kelly of attorney’s fees paid by the estate. Such a ruling is well within the court’s discretion and will not be overturned.” Id. at 602.
In contrast to Kelly, Appellants here claim no damages caused by Appellees’ purported breach of fiduciary duty, apart from the attorneys’ fees they want reimbursed. Compare with Cotton v. Kronenberg, 111 Wash.App. 258, 44 P.3d 878 (Ct.App.2002) (affirming award of disgorgement of fees in breach of fiduciary duty action where criminal defense attorney took title to his client’s real property as his retainer fee, sold the property, and then refused to refund the unearned balance of his fees after prosecutors successfully moved to remove the attorney from representation of the client for having tampered with a prosecution witness).
As in Kelly, the district court here found the equities did not justify an award of disgorgement of fees, for several reasons. Foremost, it held the $72,500 contingency fee paid to Appellees was reasonable for the work done and value of the Tesoro transaction. This is an eminently reasonable conclusion, given that Harris and McPherson’s work led to a multi-mil-lion dollar rental deal, kept the six gas stations as Bertelsen property, and prevented Appellants from having to file for bankruptcy.
There is no basis upon which to find the district court abused its discretion by refusing to order disgorgement of fees. Whether the district court made an error of law in its assessment of the merits of Appellants’ breach of fiduciary duty claims, as the dissent contends, is of no moment to our determination whether the court abused its discretion as to the remedy. Remember: In Kelly, there was a finding of breach of fiduciary duty and damages caused thereby ($85,000), but there was no disgorgement of fees kept by the errant attorney. Here, the district court considered the facts and circumstances of this case and determined they did not warrant a discretionary award of disgorgement of fees. It gave multiple, sound reasons for doing so. The district court acted within its discretion in refusing to order disgorgement of fees. See Kelly, 813 P.2d at 601.
We acknowledge that disgorgement of attorney’s fees serves an important goal: “It deters attorney misconduct, a goal worth furthering regardless of whether a particular client has been harmed.” Hendry v. Pelland, 73 F.3d 397, 402 (D.C.Cir.1996). Similarly, rules of professional conduct serve a critical role to maintain the integrity of the legal profession and ensure an attorney abides by his duty as his client’s fiduciary. Of course, nothing herein is meant to excuse Harris for any breach of his professional duties imposed by Washington State’s Rules of Professional Conduct, should that State’s Bar proceed against him for sanctions. See Wash. Rules for Enforcement of Lawyer Conduct § 1.1 et seq.; In re Gillingham, 126 Wash.2d 454, 896 P.2d 656, 660 (1995) (en banc) (“Attorney misconduct is defined by the RPC, and any violation of the RPC may be grounds for attorney discipline.”).
But, under Washington law, the award of disgorgement of fees is not mandatory even where the attorney who got the fees also violated Washington’s Rules of Professional Conduct for attorneys; instead, whether to order disgorgement is placed firmly within the discretion of the trial
AFFIRMED.
. Although Harris was licensed in Oregon, the parties do not dispute the Washington Rules of Professional Conduct apply to him and Appellants' action is governed by Washington law.
. The corporate resolution did not state Harris and McPherson would split the contingency fee. Harris, however, testified he told the Bertelsens of the 50/50 arrangement and the Bertelsens agreed to it. The record does not state whether the Bertelsens admitted they were aware of the 50/50 arrangement, and the district court did not make a finding on that point.
. Also on September 20, 2001, Harris faxed McPherson a cover sheet stating: “Hallelujah! Please find attached the signed Power of Attorney and corporate resolution authorizing our work. I will move ahead and execute the Tesoro documents.”
. This is according to the district court's findings of fact. An executed copy of the lease agreement is not in the record before this court. Instead, the parties have included a September 15, 2001 draft of the agreement; according to that draft, the lease was a triple net lease, with a fixed annual rate of $722,500 for years 1 through 5, increased by 10% to $794,750 annually for years 6 through 10.
.Nevertheless, Appellants seek to recover the entire $142,500 fee from Harris and his firm in this action.
. The letter also stated: "We have agreed that we will vigorously contest this matter working initially to extricate you from the lawsuit and ensure that if any liability is incurred, it will be primarily, if not exclusively, borne by Jeff and Amy Bertelsen and [BFG], Jeff and Amy Bertelsen have agreed to this approach and litigation strategy.”
. In other words, Dr. and Mrs. Bertelsen had to give up their secured status by reconveying their title (held as security), as well as agree to keep in place the lease agreement between BFG and Tesoro, should ownership of the gas stations eventually fall into Dr. and Mrs. Ber-telsen's hands. The letter noted this would create a potential conflict of interest for Harris, representing Jeffrey and Amy Bertelsen on the one hand, who want the deal to go forward, and Dr. and Mrs. Bertelsen on the other hand, who would have to give up their security interests in the real property.
. Neither the district court decision nor the record explains the details of the alleged kickback scheme. The district court made no finding whether Jeffrey Bertelsen in fact engaged in such a scheme, only that Amy Ber-telsen told Harris that Jeffrey Bertelsen had engaged in such a scheme and that Jeffrey Bertelsen did not deny he did so.
. In its complaint ARCO sought $2,015,232 plus interest from the Bertelsens jointly and severally.
. Appellants also alleged Appellees violated the Washington Consumer Protection Act, Wash. Rev.Code § 19.86.020 et seq., and committed legal malpractice. The district court entered judgment in Appellee attorneys' favor on those claims; Appellants have abandoned those claims on appeal.
. RPC § 5.4 provides various exceptions to this rule; no party contends any of these exceptions apply here.
. Under Washington law, when an attorney’s fee agreement is renegotiated after the attorney-client relationship is established, the fee modification is “void or voidable until the attorney establishes that the contract with his client was fair and reasonable, free from undue influence, and made after a fair and full disclosure of the facts upon which it is predicated.” Ward v. Richards & Rossano, Inc., 51 Wash.App. 423, 754 P.2d 120, 124 (Ct.App.1988) (internal quotation marks and citation omitted).
. Specifically, the district court found the May 2001 corporate resolution and the March 2001 retainer agreement were separate agreements: the March hourly retainer dealt with Harris’s "work in trying to resurrect the Ber-telsen[s'] business relationship with ARCO. The May [2001] corporate resolution dealt with the potential sale of the six gas stations through the efforts of Mr. Harris and Mr. McPherson.” The district court also held the subsequent September 2001 corporate resolution was not a modification of the May 2001 corporate resolution, because the May 2001 resolution had expired by its own terms.
.Appellants contend Harris thus breached his fiduciary duty by violating RPC § 1.5(c)(4): “A contingent fee consisting of a percentage of the monetary amount recovered for a claimant, in which all or part of the recovery is to be paid in the future, shall be paid only (i) by applying the percentage to the amounts recovered as they are received by the client, or (ii) by applying the percentage to the actual cost of the settlement or award to the defendant.” (emphasis added).
. We do not establish a rule that an attorney is excused from a breach of fiduciary duty
. Contrary to Appellants' contention, the district court did not misapply Washington law by purportedly requiring Appellants to prove Appellees' conduct caused them harm and to prove such conduct was ‘‘egregious.” Rather, the district court assessed the circumstances of this case and concluded they did not warrant the exercise of its discretion to award disgorgement of fees.