Sessions & Co. v. Carlson
DO NOT CITE. SEE RAP 10.4(h).
Court of Appeals Division I
State of Washington
Opinion Information Sheet
Docket Number: 51124-6-I
Title of Case: Sessions & Co., P.S., Appellants v. Clyde
E. Carlson and NW Seaplanes, Inc., Respondents
File Date: 12/29/2003
SOURCE OF APPEAL
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Appeal from Superior Court of King County
Docket No: 01-2-05825-8
Judgment or order under review
Date filed: 08/26/2002
JUDGES
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Authored by H Joseph Coleman
Concurring: Anne L Ellington
Marlin J. Appelwick
COUNSEL OF RECORD
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Counsel for Appellant(s)
Michael T. Schein
Maltman Reed Ahrens & Malnati PS
801 2nd Ave Ste 1415
Seattle, WA 98104-1517
Counsel for Respondent(s)
Richard B. Kilpatrick
Attorney at Law
9 Lake Bellevue Dr Ste 210
Bellevue, WA 98005-2454
Charles Kenneth Wiggins
Attorney at Law
241 Madison Ave N
Bainbridge Island, WA 98110-1811
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
SESSIONS & CO., P.S., ) NO. 51124-6-I
)
Appellant, ) DIVISION ONE
) ))
CLYDE E. CARLSON and ) NORTHWEST SEAPLANES, INC., )
Unpublished Opinion
) Respondents. )
FILED:
)
COLEMAN, J. An attorney sought payment of fees from a former client
for legal work performed in an unsuccessful attempt to acquire a Canadian
airline. At trial, the jury awarded the attorney a significantly reduced
fee and the trial court forfeited the entire fee award because the attorney
violated his fiduciary duties to his client. The attorney appealed,
claiming that the trial court erred in (1) forfeiting the fees;
(2) allowing evidence of ethical violations to be presented in the jury's
presence; (3) ordering an award of attorney fees against him; (4)
denying his motion for a new trial based on improper comments made during
closing argument; and (5) entering judgment against him as an individual.
We affirm the forfeiture order and hold that all claims of trial error are
moot because it is clear that the trial court would have forfeited any fee
awarded by the jury. Additionally, we affirm the award of attorney fees at
trial, affirm the judgment against the attorney personally, and award
attorney fees on appeal.
Facts
John T. Sessions is an attorney practicing law as Sessions & Co., P.S.1
Clyde Carlson is a pilot and the sole owner of Northwest Seaplanes, Inc., a
Washington corporation. Beginning in 1996, Carlson retained Sessions to
work on matters related to Northwest Seaplanes. Sessions testified that he
mailed one copy of his 'Terms of Engagement' to Carlson and personally
delivered a second copy to him. Carlson, however, denied receiving the
document.
In April 2000, Carlson asked Sessions to assist him in acquiring a
Canadian charter airline (Air Rainbow). Sessions testified that he had
experience in international transactions, but not the specific type of
acquisition Carlson sought. The nature of the transaction changed several
times, first as a direct purchase of the airline, then as a stock purchase,
and finally as a purchase of the assets. Although initially believed to be
unnecessary, it became apparent that Air Rainbow would have to obtain a new
operating permit from the Canadian Transport Agency (CTA). To obtain an
operating permit, Carlson would have to show that Air Rainbow had at least
75 permit Canadian ownership. Eventually, Sessions retained a Canadian
attorney, Terry Stewart, to assist in filing the CTA application. In July
2000, Sessions sent his first bill of $43,089.93 to Carlson for work on the
Air Rainbow matter. Carlson did not pay the invoice. Sessions made
several attempts to collect payment from Carlson, while still working on
the Air Rainbow matter. Eventually Sessions withdrew from representation,
and Carlson's attempt to obtain the necessary operating permit was
ultimately unsuccessful. At the time the complaint was filed, Sessions
alleged that Carson owed him $67,813.15.2
Sessions & Co. sued Carlson, claiming an express contract under
Sessions' terms of engagement, seeking payment of fees for work on the Air
Rainbow matter and additional attorney fees for enforcing the contract. In
the alternative, Sessions sought recovery based on an implied contract.
Carlson answered, claiming that Sessions breached his fiduciary duties and
performed below the standard of care for a reasonably prudent lawyer.
Carlson sought forfeiture of any fees awarded by the jury and disgorgement
of the fees already paid. In addition, Carlson sought attorney fees under
RCW 4.84.330.3 Sessions successfully argued that the jury should determine
whether there was a contract and what fee was owed, while the court was to
determine whether Sessions violated his fiduciary duties and whether any
fee awarded should be forfeited. Evidence on all issues, including the
breach of fiduciary duties, was presented before the jury. The trial court
instructed the jury that it was not to decide the issue of breach of
fiduciary duties, as that issue was reserved for the court. The jury found
that Sessions and Carlson did not have an express contract but that under
an implied contract, the reasonable value of Sessions' legal services was
$14,329.98, in addition to the $8,049 already paid.
After trial, the parties presented briefing on the breach of fiduciary
duties to the court. The trial court determined that Sessions violated the
Rules of Professional Conduct (RPC) and forfeited the entire fee awarded by
the jury, but did not disgorge the amount already paid. Additionally, the
trial court found that Carlson was the substantially prevailing party and
thus entitled to attorney fees under RCW 4.84.330. The trial court entered
judgment against both Sessions & Co. and John Sessions individually.
Sessions & Co. and John Sessions filed a timely notice of appeal.
Discussion
The first issue we address is whether the trial court properly
forfeited the fee awarded by the jury. The trial court has discretion to
forfeit fees for attorney misconduct. Simburg, Ketter, Sheppard, & Purdy,
LLP v. Olshan, 109 Wn. App. 436, 445, 988 P.2d 467 (1999). Forfeiting
attorney fees is a reasonable way to ''discipline specific breaches of
professional responsibility, and to deter future misconduct of a similar
type.'' Eriks v. Denver, 118 Wn.2d 451, 463, 824 P.2d 1207 (1992) (quoting
In re Eastern Sugar Antitrust Litig., 697 F.2d 524, 533 (3d Cir. 1982)).
In reviewing a trial court's exercise of discretion, we will reverse only
if the trial court's decision is manifestly unreasonable or based on
untenable grounds. State ex rel. Carroll v. Junker, 79 Wn.2d 12, 26, 482
P.2d 775 (1971).
In ordering the forfeiture, the trial court found that Sessions
violated his ethical duty under RPC 1.5 to charge a reasonable fee. RPC
1.5 provides guidelines for determining when a fee is reasonable.4
Evidence was presented that: (1) Sessions did not have experience in this
type of transaction; (2) he billed at a flat rate for all hours worked; (3)
he changed the nature of the transaction several times and did not reduce
the fee to account for this; and (4) the fee far exceeded any fee
previously charged to Carlson or Northwest Seaplanes. The trial court
specifically found:
{T}hat the fee charged to Clyde Carlson was unreasonable. The flat
billing rate of $300.00 an hour for all work regardless of the type of work
(i.e., delivery of documents on a Sunday), the lack of clear written
communication outlining the fee structure, the duplication of fees, and the
sum total given the acknowledged lack of experience in such Canadian
transactions is a violation of RPC 1.5(a).
This finding is supported by substantial evidence and, therefore, the trial
court did not abuse its discretion.
In its forfeiture order, the trial court also found that Sessions
improperly attempted to coerce Carlson into paying the unreasonable fee.
Sessions sent an email to Carlson stating, 'I think it would be best for me
to take a break from your several matters long enough to allow you to
liquidate your accounts.' When Carlson did not pay, Sessions sent another
email stating: 'Based on our conversation last week, I expected that the
balance due would be paid by the end of last week. I must ask that you
liquidate the balance by the end of this week such that we may continue to
render assistance.' Still receiving no payment, Sessions sent a letter
stating,
We are unable to devote further time to the ongoing efforts to obtain
Transport Canada operating authority as several promises of payment have
not been fulfilled.
Please pay the account without further delay. Once you have done so,
we will transfer our files to you or any other counsel of your choosing.
Sessions argues that these statements were not improper because he was
polite and signed the letters as 'your friend.' The message Sessions was
sending, however, was quite clear I will ignore your case until you pay.
The communications' message is relevant to our analysis, not the
pleasantries employed. While it is correct that a lawyer is not required
to continue working on a case without being paid, a lawyer may not attempt
to coerce payment by threatening to neglect the client's case. The
appropriate action to take when payment is not received is to withdraw from
the case and return the file to the client. Here, however, Sessions
comments suggest that he will simply put Carlson's case aside and stop
working on it until payment is made. In fact, even after Sessions informed
Carlson that he was withdrawing from the case, he stated that the files
would be returned once payment was made. This evidence is more than
sufficient to support the trial court's finding that Sessions'
communications with Carlson were threats to stop working on Carlson's case
in an attempt to coerce payment.
In challenging the court's finding, Sessions also argues that because
he did not actually cease to work on the matter, he did not violate his
fiduciary duty. This argument, however, is without merit. The threat
itself is improper, and the fact that Sessions did not actually stop work
is immaterial. The trial court did not abuse its discretion in
interpreting these statements as threats to cease work to the client's
detriment.
The trial court also found that Sessions improperly withheld Carlson's
file. An attorney may place a lien against a client's file as long as
there is not a dispute over the fee and the lien will not harm the client's
case. Sessions concedes that withholding the file was improper, as there
was an ongoing fee dispute. The trial court did not abuse its discretion
in finding a breach of fiduciary duty.
Finally, the trial court found that Sessions improperly attempted to
prevent Carlson from obtaining alternate counsel. Sessions argues that
this assertion is irrelevant because the alternate counsel, Terry Stewart,
would not have represented Carlson because he knew about the unpaid fees.
This argument is meritless because Stewart's intent is irrelevant. The
improper conduct was the attempt to interfere with Carlson obtaining
counsel. Whether Stewart would have in fact represented Carlson absent
Sessions' conduct is immaterial. Moreover, evidence was introduced that
Sessions did not consent to Stewart representing Carlson. The trial court,
therefore, did not abuse its discretion in determining that Sessions
improperly attempted to interfere with Carlson retaining alternate counsel.
As discussed above, there was sufficient evidence for the trial court
to determine that Sessions violated the RPC by his conduct and that the
trial court did not abuse its discretion in forfeiting his fees.
Sessions also argues that the trial court abused its discretion in
determining the forfeiture amount. In its order of forfeiture, the trial
court forfeited the entire fee awarded by the jury for Sessions' breach of
his fiduciary duties to Carlson. The trial court stated that this was 'a
reasonable and measured means of disciplining the specific breaches of
professional responsibility.'
Sessions argues that it was improper for the trial court to consider
the unreasonable fee when determining the forfeiture amount because the
jury had reduced the fee to a reasonable amount. Sessions argues that by
allowing both the jury reduction and the forfeiture, he was penalized twice
for the unreasonable fee. Sessions' argument misses the mark. The purpose
of the forfeiture order is not to reduce the fee to a reasonable one.
Rather, the purpose is to ''discipline specific breaches of professional
responsibility, and to deter future misconduct.'' Eriks, 118 Wn.2d at 463
(quoting In re Eastern Sugar Antitrust Litig., 697 F.2d 524, 533 (3d Cir.
1982)). Here, the jury's verdict reduced Sessions' fee to a reasonable fee
and the trial court's forfeiture order punished Sessions for charging the
unreasonable fee in the first place. Thus, the trial court properly
considered the unreasonableness of the fee in determining the forfeiture
amount.
Additionally, Sessions argues that his conduct was not so egregious as
to warrant forfeiting the entire fee awarded by the jury. While Sessions
attempts to minimize his conduct, there was substantial evidence to show
that Sessions committed serious breaches of his fiduciary duties.
Sufficient evidence was produced to support the trial court's findings that
Sessions charged an unreasonable fee, attempted to coerce payment of the
fee, attempted to prevent Carlson from obtaining alternate counsel, and
improperly withheld Carlson's file. Based on the seriousness of these
violations, the trial court did not abuse its discretion in forfeiting the
entire fee, and therefore, the forfeiture award is affirmed.
We next determine whether the forfeiture order renders any trial
errors moot. Carlson argues that the alleged trial errors are moot because
the trial court forfeited the entire jury award based on Sessions' breach
of fiduciary duties and that it is clear that the trial court would have
forfeited any fee awarded by the jury. On the other hand, Sessions argues
that the trial court's ruling did not suggest that the court would have
forfeited the entire amount of a larger fee had one been awarded. Sessions
points to the court's decision not to disgorge the portion of the fee
already paid to suggest that the trial court was not prepared to forfeit
any more than $14,329. In addition, Sessions points to language in the
forfeiture order stating that the forfeiture was 'a reasonable and measured
means of disciplining the specific breach of professional
responsibility{.}'
In its findings of fact entered after the forfeiture order, the court
stated that it accepted John Greene's testimony and found his testimony to
be credible. Greene testified that Sessions' attempt to collect anything
above the $8,049 already paid by Carlson was unreasonable. The court's
finding, taken together with Greene's testimony, shows that the court
agreed that any fee over the amount already paid by Carlson would be
inappropriate and explains the court's decision not to disgorge the portion
paid.
The court also made findings that Sessions did not competently
represent Carlson and that Sessions' 'breaches were fundamental to a
lawyer's obligations to clients. They were multiple, substantial, and
justify forfeiture of the amount awarded by the jury for any reasonable
value of work provided by John Sessions.' These findings demonstrate that
the trial court considered Sessions' breaches to be so serious that it
would not allow Sessions to receive any additional fee, regardless of the
size of the jury award.
Thus, it is abundantly clear that the trial court would have forfeited
any fee awarded by the jury. Any trial errors are therefore moot because
even if a new trial resulted in a higher fee award, the trial court would
forfeit any fee awarded by the jury on account of Sessions' breaches of his
fiduciary duties. To remand this case for a new trial in light of the
forfeiture would be futile and would waste the time and resources of the
parties and the court.
Finally we address the issue of attorney fees authorized by statute.
Both Sessions and Carlson argue that they are the substantially prevailing
party and thus entitled to an award of attorney fees under RCW 4.84.330.
'As used in this section 'prevailing party' means the party in whose favor
final judgment is rendered.' RCW 4.84.330. Here, Sessions sought $67,813
plus interest in damages for the unpaid fees. The jury awarded him
$14,329, all of which was forfeited for ethical violations. Sessions
argues that including the forfeiture judgment in determining whether
Carlson was a prevailing party amounts to an additional punishment. This
argument is without merit. As required by statute, the court must look to
the final judgment when determining the prevailing party. The final
judgment rendered in this case was in Carlson's favor, despite the jury
award in Sessions' favor. Therefore, Carlson is the prevailing party and,
thus, entitled to attorney fees.
Additionally, Sessions argues that the trial court erred in entering
judgment for attorney fees against him personally when he was not a party
to the suit. As a general rule, ''one is not bound by a judgment in
personam in a litigation in which he is not designated as a party or to
which he has not been made a party by service of process.'' City of
Seattle v. Fontanilla, 128 Wn.2d 492, 502, 909 P.2d 1294 (1996) (quoting
Martin v. Wilks, 490 U.S. 755, 761, 109 S. Ct. 2180, 104 L. Ed. 2d 835
(1989)). This general rule that a court does not have jurisdiction over a
nonparty, however, does not apply when, as here, the nonparty controls the
litigation. Fontanilla, 128 Wn.2d at 503. This exception recognizes that
the persons for whose benefit and at whose direction a cause of action is
litigated cannot be said to be 'strangers to the cause. . . . {O}ne who
prosecutes or defends a suit in the name of another to establish and
protect his own right, or who assists in the prosecution or defense of an
action in aid of some interest of his own . . . is as much bound . . . as
he would be if he had been a party to the record.'
Montana v. United States, 440 U.S. 147, 154, 99 S. Ct. 970, 59 L. Ed. 2d
210 (1979) (quoting Souffront v. Compagnie des Sucreries, 217 U.S. 475,
486-87, 30 S. Ct. 608, 54 L. Ed. 846 (1910)). Here, Sessions sued Carlson
on Sessions & Co.'s behalf. Sessions clearly controlled and directed the
litigation, even though he was not officially a party to the suit. Thus,
Sessions is personally liable for the attorney fees award.
Finally, Carlson seeks an award of attorney fees on appeal. Because
Carlson was properly awarded attorney fees at trial he is also entitled to
attorney fees on appeal subject to compliance with RAP 19.1.
We affirm.
WE CONCUR:
1 Sessions & Co., P.S. was the plaintiff in the original suit. John T.
Sessions, though not a party to the original suit, was held personally
liable for the attorney fees and costs awarded at trial and, therefore,
joined in this appeal.
2 The entire fee charged was $75,862.15 and one payment of $8,049 was
received, leaving a balance of $67,813.15.
3 RCW 4.84.330 provides:
In any action on a contract or lease entered into after September 21, 1977,
where such contract or lease specifically provides that attorney's fees and
costs, which are incurred to enforce the provisions of such contract or
lease, shall be awarded to one of the parties, the prevailing party,
whether he is the party specified in the contract or lease or not, shall be
entitled to reasonable attorney's fees in addition to costs and necessary
disbursements.
Attorney's fees provided for by this section shall not be subject to waiver
by the parties to any contract or lease which is entered into after
September 21, 1977. Any provision in any such contract or lease which
provides for a waiver of attorney's fees is void.
As used in this section "prevailing party" means the party in whose favor
final judgment is rendered.
4 RPC 1.5 provides:
(a) A lawyer's fee shall be reasonable. The factors to be considered in
determining the reasonableness of a fee include the following:
(1) The time and labor required, the novelty and difficulty of the
questions involved, the skill requisite to perform the legal services
properly and the terms of the fee agreement between the lawyer and the
client;
(2) The likelihood, if apparent to the client, that the acceptance of the
particular employment will preclude other employment by the lawyer;
(3) The fee customarily charged in the locality for similar legal
services;
(4) The amount involved in the matter on which legal services are rendered
and the results obtained;
(5) The time limitations imposed by the client or by the circumstances;
(6) The nature and length of the professional relationship with the
client;
(7) The experience, reputation, and ability of the lawyer or lawyers
performing the services; and
(8) Whether the fee agreement or confirming writing demonstrates that the
client had received a reasonable and fair disclosure of material elements
of the fee agreement and of the lawyer's billing practices.