279 P.3d 448
Wash. Ct. App.2012Background
- Powers & Therrien PS represented both LK Operating LLC (LKO) and The Collection Group LLC (TCG) in related matters, creating concurrent conflicts of interest under RPC 1.7.
- Brian Fair, managing member of TCG, proposed an investment and engagement where Powers & Therrien PS would provide legal services; LKO contributed funds.
- TCG purchased Unifund debt; funds from LKO flowed through Powers & Therrien PS, with no formal written agreement governing ownership or roles.
- In early 2005, Powers forwarded investment proposals and facilitated checks from LKO to TCG; attorney involvement spanned both sides.
- Trial court found Powers violated RPC 1.7; later concluded RPC 1.7 could not provide rescission basis, but RPC 1.8 could, based on business transaction concerns.
- Superior Court ultimately ordered rescission of the LKO–TCG agreement, and the malpractice action proceeded with bifurcated damages; on appeal, the court affirmed rescission on RPC 1.8 grounds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether RPC 1.7 was violated in representing both clients | LKO asserts Powers represented both LKO and Fair, creating a direct conflict | TCG contends representation of Fair and LKO was improper for a concurrent conflict | RPC 1.7 violated by Powers |
| Whether RPC 1.7 violation can ground rescission | LKO seeks rescission based on RPC 1.7 | RPC 1.7 is ethical rule, not civil-liability basis for rescission | RPC 1.7 cannot support rescission (rejected as sole basis) |
| Whether RPC 1.8 business transaction rule supports rescission | LKO argues no improper business transaction; no independent basis | Powers engaged in a client-side business transaction adverse to a client | RPC 1.8 provides alternative basis to rescind; rescission affirmed |
| Whether the contract was voidable under RPC 1.8 due to attorney-client transaction | LKO contends no undue influence and fair disclosure | Attorney-client transaction prima facie fraudulent; disclosure inadequate | RPC 1.8 violated; rescission affirmed |
Key Cases Cited
- Hizey v. Carpenter, 119 Wn.2d 251 (Wash. 1992) (ethics rules suit not private malpractice liability; disciplinary channel preferred)
- Valley/50th Ave., LLC v. Stewart, 159 Wn.2d 736 (Wash. 2007) (RPC 1.8 enforceability of fee agreements; public policy concerns)
- Ocean Shores Park, Inc., 132 Wn. App. 903 (Wash. App. 2006) (RPC 1.8 enforceability of attorney–client transactions; public policy)
- Holmes v. Loveless, 122 Wn. App. 470 (Wash. App. 2004) (business transactions with a client and related fee arrangements; public policy)