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### IN THE SUPREME COURT OF THE STATE OF WASHINGTON LK OPERATING, LLC, a Washington limited liability company, Petitioner,

v. ) ) ) ) ) ) ) THE COLLECTION GROUP, LLC, a ) Washington limited liability company; and ) BRIANFAIR and SHIRLEY FAIR, ) husband and wife, and their marital ) community composed thereof, ) Respondents, LESLIE ALAN POWERS and PATRICIA POWERS, husband and wife, and KEITH THERRIEN and MARSHATHERRIEN, husband and wife, Petitioners/Intervenors. ) ) ) ) ) ) ) ) ) 

## ___________________________) NO. 88132-4

ENBANC

Filed 

## JUL 3 

## 12014

FAIRHURST, J.-In this case and its companion, LK Operating, LLC v. Collection Grp., LLC,No. 88846-9 (Wash. July 31, 2014), we considerissues arising from a joint·venture proposal regarding a debt collection business. The debt collection business operated according to the functional terms ofthejoint venture proposal from approximately winter 2005 through summer 2007, at whichpointtheLK Operating, LLCv. Collection Grp., LLC, No. 88132-4 disagreements underlying the present litigation surfaced. This opinion addresses whether the proceedings below complied with due process requirements; whether,
as a matter oflaw, thejointventure proposal was enteredby an attorney in violation ofone or both offormer RPCs 1.7 (1995) and 1.8(a) (2000); and, ifso, whether the remedy imposedbythe trial court and affirmed on appeal is appropriate. We affirm. The proceedings below satisfied the requirements ofprocedural due process because the parties received sufficient notice and a meaningful opportunity to be heard regarding the issues presented forjudicial determination. We hold, though on differentreasoning from thatused by the Court ofAppeals, thatthe undisputed facts establish as a matter oflaw that thejoint venture proposal contemplated a business transaction subjectto, agreed to, and entered into in violation offormer RPC 1.8(a). We affirm that the former RPC 1.8(a) violation renders the terms ofthe business transaction unenforceable under the circumstances presented and the remedy imposedwas appropriate. We further affirmthatthebusinesstransactionwas entered in violation offormer RPC 1.7. We need not, and decline to, determine whether the former RPC 1.7 violation would alsojustify the remedy imposed.



### 2LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 I. FACTUAL AND PROCEDURAL HISTORY At all relevant times, Leslie Powers (Mr. Powers) and Keith Therrien (Mr. Therrien) 1practiced law as Powers & Therrien, PS (LawFirm). InDecember 2003, Mr. Powers and Mr. Therrien formed LK Operating (LKO), a limited liability company (LLC). LKO has five members, each of which is a corporation. Each corporation has a single shareholder, and each shareholder is a trust. One ofMr. Powers' orMr. Therrien's adultchildrenis named as the trustee and sole beneficiary ofeach ofthose five trusts. LKO is managed byPowers & TherrienEnterprises Inc. (P&TEnterprises). Mr. Powers andMr. Therrienarethe officers ofP&TEnterprises. The LawFirm, LKO, each ofLKO's member corporations, andP&TEnterprises all apparently used the same mailing address during the relevant time frame. In early 2004, Brian Fair retained the Law Firm in connection with Fair's formation ofaNevada-basedLLC, which is notimplicatedhere. Fair, who practiced

as a certifiedpublic accountant from 1995 through 2007, had prior familiarity with the Law Firm through common clients. Several months later, Fair and his wife, without the assistance ofany attorney, formed The Collection Group LLC (TCG) to

1Where actions are alleged to have been taken, or arguments are raised, by only Leslie Powers or Keith Therrien, the discussion will identify the relevant attorney using the title "Mr." and the pronoun "he." Where both attorneys are implicated, theirjoint assertions and arguments will be attributed to "Powers," without any title, using the pronoun "it." This terminology is used solelyfor clarity, and we intend no disrespect inusing titles when referring to Mr. Powers and Mr. Therrien butnot other individuals. 3LK Operating, LLCv. Collection Grp., LLC, No. 88132-4

run a debt collection business. Fair acted as manager ofTCG, and, at the time ofits formation, TCGhad only two members-Fair and his wife. In early fall 2004, Fair, in his capacity as TCG's agent, asked Mr. Powers if he, Mr. Therrien, and/or the LawFirm2 wouldbe interested in investing in TCG and operating it as ajoint venture. Fair proposed each party to thejoint venture would contribute 50 percent of the costs, Fair would provide administrative and management services at no itemized or hourly cost, the Law Firm and/or Powers would provide legal services at no itemized or hourly cost, Fair would own 50 percent ofTCG, and the Law Firm and/or Powers would own the other 50 percent ofTCG. Powers claims itexplicitlyrejectedthis offerbutsuggestedto FairthatLKO might be interested in investing. Fair claims Mr. Powers expressed interest in the ideabut did not give an explicitresponse and did notmentionLKO as a prospective investor. This factual dispute is not material to our holding and does not require resolution. In late October 2004, Fair e-mailed Powers at its Law Firm e-mail address. Fair again set out hisjoint venture proposal and attached a proposed purchase and sale agreement for a debt portfolio from a company called Unifund (which is not otherwise implicatedhere) to TCG. In this e-mail, Fair described the proposedjoint

2It is unnecessary for purposes ofthis decision to determine whether Fair's proposal was directed to all three ofthese parties or to some subset ofthem, and we do not do so. 

### 4LK Operating, LLCv. Collection Grp., LLC, No. 88132-4

venture as "between myself and you two." Clerk's Papers (CP) at 22. Mr. Powers made extensive notations, edits, and suggestions onthe proposedpurchase and sale agreement and e-mailed this annotated version back to Fair in December 2004. However, Mr. Powers' e-mail did notrespond directly regarding Fair'sjointventure proposal. Mr. Powers asserts his annotations to the Unifund purchase and sale agreement were not for TCG's benefit; rather, they were "designed to make the investment safer and acceptable to our children's company [LKO]" and were a part ofthe "due diligence" required ofMr. Powers "as an officer ofthe manager and for the exclusive benefit ofour children's company." CP at 1411. Apparently interpreting Mr. Powers' e-mail response as an acceptance ofthe joint venture proposal, Fair then contacted the Law Firm, through both its legal assistant and its boold<eeper, to request half ofthe funds needed to purchase the Unifund debt portfolio. While awaiting the funds, TCG purchased the Unifund portfolio withits ownmoney. InFebruary 2005, Fairultimatelyreceived a checkfor half the purchase price ofthe Unifund debt portfolio. The check was a "counter check," 3 and so there was no preprinted information on the check regarding the account holder. Rather, the check included a handwritten notation at the upper left3A "countercheck" is a check issuedby and redeemable at a banlc. WEBSTER'S THIRDNEW INTERNATIONAL DICTIONARY 519 (2002). 

### 5LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 hand corner reading, "LK Operating, LLC." CP at 833. The check was signed by Michele Briggs, a Law Firm employee. Fair asserts hehadno ideawhat "LKOperating, LLC" was, butherecognized the checkas preciselythe amounthehadrequested onbehalfofTCGfor theUnifund purchase and assumed the check came from Powers or the LawFirm, knowing Mr. Powers and Mr. Therrien have the first initials "L" and "K," respectively. Powers asserts Fair knew all along the money was coming from LKO and knew LKO was
an entirely separate entity from the LawFirm. This factual dispute is not material to
our decision onreview and does notrequire resolution. Shortly after the first check was sent, Fair e-mailed Powers to request further funds on behalf of TCG and stated, "Les[lie Powers], this gives you guys 1

### h ownership in the company. You can formalize however you wish." CP at 311. No written agreementorotherformalization ofthejointventurewasproposedorentered by Powers or Fair. For a little over two years, Fair continued to engage in debt collectionthrough TCG andrequested and receivedmultiple checks for one-halfthe purchase price ofother debt portfolios; each such check was a counter check with "LK Operating, LLC" handwritten or typed in the upper-left hand corner, and each check was signed by Michele Briggs. The LawFirm, primarilythroughMr. Powers and a legal assistant, Diane Sires, provided legal services to TCG as requested. The LawFirm did notbill TCG for its legal services.

6LK Operating, LLCv. Collection Grp., LLC, No. 88132-4
In April2007, Fairproposed to Powers a formalizedjointventure agreement, whichwould modify TCG's ownership structure from that originally proposed. Fair proposed his percentage ofownership would be 55 percent, his mother would have a 7 percent interest, and Powers would have a 38 percent interest. Fair asserted this apportionment ofownership interest was based on the differing amounts ofmoney and work each party had contributed to TCG over the years. Powers objected, asserting the originaljointventure agreementprovided for 50/50 ownership. OnJune 29,2007,Fair gave Powers notice, throughtheirrespective attorneys, that TCG would no longer purchase new debt portfolios and intended to contract with another entity for its debt collection work. P&T Enterprises, through its attorney, responded by stating Mr. Powers, Mr. Therrien, and the Law Firm did not have or claim any interest in TCG, andLKO was the only otherpartyto the business transaction contemplated by TCG'sjoint venture proposal. LKO alleges Fair then began transferring TCG's accounts to another debt collection LLC, which was owned entirely by Fair, to the detriment ofTCG. OnJuly 10, 2007, LKO filed a complaint againstFairandTCGfor declaratory reliefregardingthe allocation ofownership interests in TCG, breachofcontract, and breach offiduciary duty (the contract action). Fair and TCG later filed a complaint against Powers for legal malpractice (the malpractice action). The trial court consolidatedthe actions.

7LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 

### Fair moved for partial summaryjudgment. Although Fair would not concede
ajoint venture agreement had in fact been entered, he argued that even ifit were, any such agreement would be void as violative ofpublic policy because Powers did not comply with former RPC 1.8(a), which restricts an attorney's ability to enter business transactions with current clients. TCG filed a motion for partial summary judgment based on an argument similar to Fair's and claimed Powers violated several other former RPCs in addition to former RPC 1.8(a). Powers filed across motion for partial summaryjudgment,requesting the trial court to dismiss the legal malpractice action. Powers argued that there was ajoint venture agreement between TCG and LKO, no attorney was a party to that agreement, and no RPC violation could have occurred as a matter oflaw. Powers also argued that neither Fair nor TCG was a client ofthe Law Firm when thejoint venture proposal was offered and accepted, so former RPC 1.8(a) would not apply
even ifPowers or the Law Firm were a party to that agreement. Finally, Powers asserted Fair had not suffered any damages and could not assert even a prima facie
case for legal malpractice. LKO joined Powers' cross motion for summary judgment, requesting thetrial courthold, as amatter oflaw,thatthere was no former RPC 1.8(a) violation. The trial court reviewed the voluminous materials provided by the parties, took the matter under advisement, and issued two memorandum decisions,

8LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 ultimatelydetermining on summaryjudgmentthatMr. Powers4violatedformerRPC 1.7 because the LawFirm simultaneously represented LKO and Fair in his personal capacity, without obtaining informed consent from either. 5 Therefore, the trial court held the business transaction contemplated by the joint venture proposal was voidable pursuant to 

### C.B.&T Co. v. Hefner, 1982-NMCA-131, 98 N.M. 594, 651 P.2d 1029, whichthe trial court considered as persuasive authority, having found no Washington State case law directly on point. The trial court determined that rescission of the joint venture agreement was the appropriate remedy for Mr. Powers' breach offiduciary dutyregardingthe former RPC 1.7 violation. Therefore, the trial court determined that whether former RPC 1.8(a) was also violated was a moot issue. Consequently, the trial court entered an order, prepared by counsel for TCG, incorporating the court's memorandum decisions by reference, granting Fair's and TCG's motions for summaryjudgment, denying Powers' cross motion for summary judgment, dismissing with prejudice the claims brought by LKO against Fair and TCG, andreservingruling onthe questions ofattorney fees and damages. Onmotion

4The trial court determined there was a genuine issue offact as to whether Mr. Powers' former RPC 1.7 violation couldbe imputed to Mr. Therrien. 5It appears the trial courtraised the question offormer RPC 1.7 sua sponte. The parties do not challenge the propriety ofthis onreview. 9LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 byFair andTCG, and overLKO's objections,thetrial courtthenorderedthecontract action andthe malpractice action bifurcated for trial purposes. The remaining issues to be addressed atthe contract actiontrial were whether LKO was the real party in interest, the amount of damages flowing from the rescission, whether andhowmuch interest should accrue onthe investments already made in TCG, and attorney fees. Following a bench trial, the trial court issued an oral decision that it would award LKO damages ofthe total funds it had invested in TCG, plus pre- andpostjudgment interest. The parties filed substantial briefing regarding the findings of fact and conclusions of law that should issue following the bench trial and participated in further oral argument. Ultimately, thetrial courtenteredfindings offact, conclusions oflaw, and a finaljudgment and order dismissing withprejudice all claims byLKO against Fair and his wife and marital community. In addition to the damages award

as announced in its oral decision, the trial court awarded statutory attorney fees of $250 to LKO, andthe court deniedFair's andTCG'srequest for attorney fees. LKO appealed, and Fair and TCG cross appealed. LKO argued on appeal that the trial court erred in determining that Fair or TCGwas a LawFirm client duringthe relevanttime period; thatthetrial court erred in ordering summaryjudgmentwhenmaterial facts were still indispute; that even if there were a former RPC 1.7 violation, it would notjustify rescission; that the trial

10LK Operating, LLCv. Collection Grp., LLC, No. 88132-4

court failed to properly consider all the equitable implications of rescission, particularly because no fraud or misrepresentation was found; and that the appropriate remedy, ifthere were a violation offormer RPC 1.7, would be limited to an attorney disciplinary action against Mr. Powers. Fair and TCG argued on appeal that the trial court should be affirmed in its decisions that Mr. Powers violated former RPC 1.7 and that rescission was the appropriate remedy. Fair and TCG also argued that the Court of Appeals could affirm on the alternate basis thatMr. Powers violated former RPC 1.8(a) as a matter oflaw. Mr. Powers and Mr. Therrien werepermittedto intervene inthe direct appeal in their personal capacities. Powers argued that the Court ofAppeals should not consider the merits ofwhether Mr. Powers violated former RPC 1.8(a). The Court of Appeals, Division Three, affirmed the trial court's rescission order and final judgment in a published opinion. 

### LK Operating, LLC v. Collection Grp., LLC, 168 Wn. App. 862, 279 P.3d 448, 287 P.3d 628 (20 12). The appellate court agreedMr. Powers hadviolated former RPC 1.7butdeterminedrescissionwas not the appropriate remedy for that violation. However, the appellate court went on to determine thatMr. Powers hadviolatedformer RPC 1.8(a), and thatviolation was
a proper ground upon which to affirm the remedy ofrescission. LKO and Powers petitioned for review, arguing that the Court of Appeals violated their due process rights in analyzing Mr. Powers' alleged violation of

11LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 former RPC 1.8(a) on the merits; that the Court ofAppeals erred in holding Mr. Powers had violated former RPC 1.8(a); and that, in any event, rescission was not the appropriate remedy. We granted the petitions. LK Operating, LLCv. Collection Grp., LLC, 176 Wn.2d 1027, 301 P.3d 1048 (2013). II. ISSUES 1. Didthe Court ofAppeals violate Powers' or LKO's due process rights in considering the merits ofFair's and TCG's claim that Mr. Powers entered the business transaction contemplated by TCG'sjoint venture proposal in violation of former RPC 1.8(a)? 2. Did the Court ofAppeals err in holding that Mr. Powers entered the business transaction in violation offormer RPC 1.8(a)? 3. Did the Court ofAppeals err in affirming the trial court's holding that Mr. Powers entered the business transaction in violation offormer RPC 1.7?6 4. Did the Court ofAppeals err in affirming the trial court's remedy of rescission? III. ANALYSIS A. The proceedings below satisfied procedural due process LKO and Powers both contend thatthe Court ofAppeals erred in considering the merits ofMr. Powers' alleged former RPC 1.8(a) violation because doing so violated their due process rights under article I, section 3 ofthe Washington State

6Powers raises this issue in the companion case, which is before this court on direct appeal pursuant to RAP 4.4. LK Operating, LLC v. Collection Grp., LLC, No. 88846-9. Because it has significantly more relevance to this opinion and very little relevance to the resolution of the companion case, Mr. Powers' alleged former RPC 1.7 violation is addressed only here, and is reviewed in light ofthe conclusionsreachedondirect appeal. CfRAP 2.4(b)(l). We do notaddress the former RPC 1.7 issues in the companion case to avoid unnecessarily duplicative opinions. Cf Sprague v. Safeco Ins. Co. of Am., 174 Wn.2d 524, 528,276 P.3d 1270 (2012). 12LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 Constitution and the Fifth and Fourteenth Amendments to the United States Constitution.7 Constitutional challenges present questions oflaw reviewed de novo. City of Redmondv. Moore, 151 Wn.2d 664, 668, 91 P.3d 875 (2004). We are first tasked with evaluating the interests Powers and LKO assert to determine whether they assert life, liberty, or property interests subject to due process protections as a matter oflaw. Wilkinson v. Austin, 545 U.S. 209, 221, 125 S. Ct. 2384, 162 L. Ed. 2d 174 (2005). Ifwehold that eitherparty asserts aprotected interest, we must then determine whether, in light ofthe protected interest at stake, the proceedings below were sufficient to satisfy due process demands. Ky. Dep 'tof Carr. v. Thompson, 490 U.S. 454, 460, 109 S. Ct. 1904, 104 L. Ed. 2d 506 (1989). We hold that Powers has not asserted any interest in this litigation subject to due process protections. LKO has asserted a protected property interest in enforcement ofthe business transaction contemplatedby thejointventure proposal, butthe proceedings below satisfied due process. 1. Powers does not assert any interest in the contract action subjectto due process protections Powers has repeatedly denied any interest in the enforcement ofthe business transaction contemplated by the joint venture proposal itself. Powers' asserted interests in the contract action are Powers' professional reputation and license to

7Wepresumethe analysis is the sameunderbothconstitutions, as theparties do notcontend otherwise. See Hardee v. Dep 't ofSoc. & Health Servs., 172 Wn.2d 1, 7 n.7, 256 P.3d 339 (2011). 13LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 practice law. 8 Neither is subject to procedural due process protections under the circumstances presentedherein. Neither Mr. Powers' nor Mr. Therrien's asserted interest in his professional reputation is, without more, a liberty or property interest subject to procedural due process protections. In re Pers. RestraintofMeyer, 142 Wn.2d 608, 620-22, 16 P.3d 563 (2001) (citing Paul v. Davis, 424 U.S. 693, 96 S. Ct. 1155, 47 L. Ed. 2d 405 (1976)). The reputational interest (as opposed to professional licensing interest) the attorneys assert is consistent with the "interest in reputation and future employment opportunities"the United States SupremeCourthas heldis notsubjectto dueprocess protections. Jd. at 620 (citing Paul, 424 U.S. at 701; see Br. ofIntervenors or Br. of Amici Les Powers and Keith Therrien at 4 ("Powers could
... suffer harm to his personal and professional reputation. Therrien, as Powers' law partner, could likewise be prejudiced personally and professionally."). While the Law Firm could possibly assert aprotectablebusiness interest in its reputation in the community, the Law Firm, as an entity, is not a party in the matter on review before this court. As to Powers' interest in its license to practice law, that interest is not implicated here. The authority Powers offers to show an attorney has a due process

8Powers' interests in the contract action, for due process purposes, are not actually identified in Powers' briefing to this court. Pursuant to RAP 1.2, we will assume Powers asserts the same interests here as those it asserted tojustify its intervention in the direct appeal pursuant to RAP 10.6(b). See Br. oflntervenors or Br. ofAmici Les Powers and Keith Therrien at 4. 14LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 right to participate in his or her own disciplinary proceedings is not material. E.g., ELC 2.13(a), 10.11, 10.13, and 10.14(b); In re Disciplinary Proceeding Against Haley, 156 Wn.2d 324, 126 P.3d 1262 (2006);In reDisciplinaryProceedingAgainst Greenlee, 82 Wn.2d 390, 510 P.2d 1120 (1973); In re Disciplinary Proceeding Against Little, 40 Wn.2d 421, 244 P.2d 255 (1952). Attorney disciplinary actions implicate the respondent attorney's interests directly in ways that are simply not comparable to the interests at stake in other legal proceedings where RPC violations
are legally relevant. In the attorney discipline context, a respondent attorney may be subject to financial penalties, limitations onthe attorney's licenseto practice law, orboth. ELC 13.1. Governmental restrictions on or deprivations of one's professional license clearly implicate interests subject to due process protections. Wash. Med. DisciplinaryBd. v. Johnston, 99 Wn.2d466, 4 74, 663 P.2d457 (1983). Thepotential for such consequences easilyjustifies the application ofdue process protections in attorney disciplinary matters. In re Disciplinary ProceedingAgainst Romero, 152 Wn.2d 124, 136-37, 94 P.3d 939 (2004). No comparable potential consequence attaches here-no money judgment
was issued against Powers or the Law Firm, and Powers' license to practice law cannot be limited in any way as a direct consequence ofthis proceeding. Attorney disciplinary actions require a higher standard ofproofthan the civil preponderance

15LK Operating, LLC v. Collection Grp., LLC, No. 88132-4 

### standard, ELC 10.14(b), and whether a given set offacts establish an RPC violation is a question oflaw, In re Disciplinary ProceedingAgainst King, 

### 170 Wn.2d 738, 741, 246 P.3d 1232 (2011). Further, even when an RPC violation has been proved in a disciplinary proceeding, the violation is not, 

### in itself, sufficient to impose any discipline on the attorney. In re Disciplinary Proceeding Against Cramer, 

### 165 Wn.2d 323, 339, 198 P.3d 485 (2008); In re Disciplinary Proceeding Against McGlothlen, 

### 99 Wn.2d 515, 526-27, 663 P.2d 1330 (1983) (holding that while respondent attorney violated former Code of Professional Responsibility Disciplinary Rule 5-l04 (1972) in entering a business transaction with a client without necessary safeguards, professional discipline was not warranted due to the "relatively undefined" nature of the attorney-client relationship at issue, the attorney's good faith, and the lack ofharm to the client). Because Powers' asserted interests are either not subject to due process protections or not implicated here, Powers could not have been deprived of due process in the proceedings below, as amatter oflaw. 2. LKO was provided sufficient due process to protect its interest LKO plainly asserts a protected interest in the enforcement ofthe business transaction contemplatedbythejointventure proposal and is entitledto due process in anyjudicialproceeding in which it faces potential deprivation ofthat interest. Cf DixSteel Co. v. Miles Constr., Inc., 

### 74 Wn.2d 114, 119, 443 P.2d 532 (1968) ("The

16LK Operating, LLCv. Collection Grp., LLC, No. 88132-4

courts will uphold whatever lawful agreement the parties made with each other."). LKO argues it had no meaningful opportunity to present a defense regarding the alleged former RPC 1.8(a) violation because the trial court did not adjudicate that issue, determining at summaryjudgmentthat it was moot. LKO's arguments do not establish any procedural due process violation; at most, LKO alleges legal errors, subject to reviewbythis court. In the context of a judicial proceeding, where a denial of due process is alleged, a reviewing court must consider: "Theprecise nature ofthe interest thathas been adversely affected, the manner in which this was done, the reasons for doing it, the available alternatives to the procedure that was followed, the protection implicit in the office ofthe functionary whose conduct is challenged, [and] the balance ofhurt complained ofand good accomplished." 

### Olympic Forest Prods., Inc. v. Chaussee Corp., 82 Wn.2d 418, 423-24, 511 P.2d 1002 (1973) (alteration in original) (quoting 

### Joint Anti-Fascist Refugee Comm. v. McGrath, 341 U.S. 123, 163, 71 S. Ct. 624, 95 L. Ed. 817 (1951) (Frankfurter, J., concurring)). "[D]ue process requires, at a minimum, that absent a countervailing state interest ofoverriding significance, persons forced to settle their claims ofright and duty through thejudicial process must be given a meaningful opportunity to be heard." 

### Boddie v. Connecticut, 401 U.S. 371, 377, 91 S. Ct. 780, 28 L. Ed. 2d 113 (1971).

17LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 

### The nature of the interest here is LKO's property interest in the business transaction contemplated by the joint venture proposal-this interest is purely financial, and so the level of due process that is constitutionally required, though real, is on the low end ofthe spectrum. Hardee v. Dep 't of Soc. & Health Servs., 

### 172 Wn.2d 1, 23-24 & 

### n.l3, 256 P.3d 339 (2011). The record clearly shows LKO had sufficient notice that former RPC 1.8(a) would be at issue on appeal. Fair raised former RPC 1.8 as an issue before any of this litigation commenced; at the trial court level, TCG moved for partial summary judgment based, in part, on an argument that Powers violated former RPC 1.8(a); TCG and Fair raised the former RPC 1.8(a) issue in their direct cross appeal;9 

### and Powers was permittedto intervene and file briefing atthe CourtofAppealsregarding the former RPC 1.8(a) issue. LKO also had ample opportunity to be heard on the question of Powers' former RPC 1.8(a) violation, and both Powers and LKO presented forceful arguments to the Court of Appeals that former RPC 1.8(a) did not apply to the business transaction contemplated by thejoint venture proposal as a matter oflaw. Where an issue oflaw is raised, briefed, and argued by the parties but not decided bythe trial court, an appellate courtmay resolve the issue onreview, andthat is what

9LKO's assertion that the Court ofAppeals raised the former RPC 1.8 issue sua sponte is not supported by the recordbutwould not, in itself, constitute a due process violation in any event. See City of Seattle v. McCready, 123 Wn.2d 260,268-70, 868 P.2d 134 (1994). 

### 18LK Operating, LLC v. Collection Grp., LLC, No. 88132-4 

### happened here. Cf Weden v. San Juan County, 135 Wn.2d 678, 695-96, 958 P.2d 273 (1998); Bockv. State, 91 Wn.2d 94,95 n.1, 586 P.2d 1173 (1978). LKO argues two alternative procedures should have been employed in the context of the matter before us. We hold neither was required to comply with procedural due process. LKO first argues that the trial court should have sua sponte joinedPowers as anecessary or indispensablepartyto the benchtrial onthe contract action. 10 

### LKO does not specify whether it means to argue Powers was merely a necessary party within the meaning of CR 19(a), or also an indispensable party within the meaning ofCR 19(b). See generallyAuto. United Trades Org. v. State, 175 Wn.2d 214, 222-35, 285 P.3d 52 (2012). In either event, this argument is unpersuasive in light of substantial authority outside the attorney disciplinary contextwhere courts have neededto determine whether anonparty attorney violated
one or more RPCs to resolve claims between the parties. E.g., 

### State v. Shelmidine, 166 Wn. App. 107, 114, 269 P.3d 362 (2012) (rejecting ineffective assistance of counsel claim because "defense counsel could competently and diligently represent Shelmidine in compliance with the RPCs"); Sanders v. Woods, 121 Wn. App. 593, 597-600, 89 P.3d 312 (2004) (reversing trial court's refusal to disqualify

10LKO notes that Powers did nottestify at trial. We cannot make any factual findings as to why Powers did nottestify. Old Windmill Ranch v. Smotherman, 69 Wn.2d 383,390-91,418 P.2d 720 (1996). We also do notdraw any legal conclusions therefrom-distinctinquiries are presented in determining whether a party is necessary, whether a witness may testify as a matter oflaw, and whether a witness should testify as a matter oftrial strategy. Compare, e.g., CR 19, withER 601, andState v. Thomas, 71 Wn.2d 470,472,429 P.2d 231 (1967). 

### 19LK Operating, LLC v. Collection Grp., LLC, No. 88132-4 respondent's attorney where attorney had a conflict ofinterestunder RPC 1.9); Pub. Util. Dist. No. 1 of Klickitat County v. Int'l Ins. Co., 124 Wn.2d 789, 811-12, 881 P.2d 1020 (1994) (affirming trial court's refusal to disqualify respondent's attorney in light ofRPC 3.7); see generally Ellen 

### S. Podgor, Criminal Misconduct: Ethical Rule Usage Leads to Regulation ofthe Legal Profession, 61 TEMP. L. 

### REv. 1323, 1333-35 & nn.66-74, 78-83 (1988). LKO also argues the CourtofAppeals shouldhave sua sponte directedfurther fact-finding pursuant to RAP 9.11 because the record did not contain sufficient, undisputed facts to decide Fair's and TCG's claim regarding former RPC 1.8(a). However, the protections inherent injudicial review ensure that, even assuming the Court ofAppeals should have requested further fact-finding, its failure to do so was
an error of law, not a due process violation. Ifthe Court ofAppeals erroneously made and relied on new factual findings to support its holdings, those findings are
mere surplusage to be disregarded on review. Grader v. City of Lynnwood, 45 Wn. App. 876, 879, 728 P.2d 1057 (1986). Ifthe undisputed facts in the record do not supportthe CourtofAppeals' holdings as a matter oflaw,those holdings are subject to reversal by this court. DGHIEnters. v. Pac. Cities, Inc., 137 Wn.2d 933, 942-43, 977 P.2d 1231 (1999). Based on the foregoing, the proceedings below did not violate either Powers'
or LKO's rights to procedural due process.

20LK Operating, LLCv. Collection Grp., LLC, No. 88132-4
B. The Court ofAppeals did not err in holding Mr. Powers entered the business transaction contemplated by thejoint venture proposal in violation offormer RPC 1.8(a) Whether a given set offacts establish an RPC violation is a question oflaw subjectto de novo review. King, 170 Wn.2d at 741. Becausethe alleged violation of former RPC 1.8(a) is before this court, ultimately uponTCG's and Fair'smotion for summaryjudgmentatthe trial level, all reasonable inferences and disputed facts will be construed in favor ofLKO and Powers, the nonmoving parties. Schroeder v. ExcelsiorMgmt. Grp., LLC, 177 Wn.2d 94, 104,297 P.3d 677 (2013). 11 In determiningthatthe business transaction contemplatedbythejointventure proposal was entered in violation offormer RPC 1.8(a), 12 the Court ofAppeals held
as follows: Mr. Powers may not have been the "alter ego" ofLKO but that is not dispositive. He acceptedthe offerto invest in TCG in his capacity as an attorney and then caused LKO to contribute the funds. He had a substantial interest in the success ofLKO-itwas his family. LK Operating, 168 Wn. App. at 880. LKO and Powers argue that the Court of Appeals' decision renders the contours of former RPC 1.8(a) unconstitutionally

11RAP 9.12 notwithstanding, in orderto facilitate a decision on the merits, we conduct our review in light ofthe entire record. RAP 1.2(a), (c); Eagle Pac. Ins. Co. v. Christensen Motor Yacht Corp., 85 Wn. App. 695, 702, 934 P.2d 715 (1997). The record includes the trial court's findings offact following the bench trial in the contract action. Those findings are not challenged on review and thus treated as verities. State v. Hill, 123 Wn.2d 641, 644, 870 P.2d 313 (1994). Additionally, any facts thetrial courtdeemedundisputedat summaryjudgmentbecameestablished facts in the contract action at the point the bench trial commenced. CR 56(d). This approach is consistent withthat taken in the parties' briefing. 12Former RPC 1.8 has many subsections. Thoughthe Court ofAppeals does not specify, it is clear it based its holding on former RPC 1.8(a). 21LK Operating, LLCv. Collection Grp., LLC, No. 88132-4
vague because it applies former RPC 1.8(a)to abusiness transaction solely between nonlawyers-TCG and LKO. We agree that the Court ofAppeals' ruling could be misread as giving former RPC 1.8(a) an overly nebulous scope. However, that does not end our inquiry, as an appellate court may affirm a decision on any ground supported by the record. Otis Hous. Ass 'n v. Ha, 165 Wn.2d 582, 587, 201 P.3d 309 (2009). We begin with the text ofthe rule at issue. At the relevant time, former RPC 1.8 provided inpart: A lawyer who is representing a client in a matter: (a) 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 transmittedinwritingto the client in a mannerwhich canbe reasonably understood by the client; (2) The clientis givenareasonable opportunityto seekthe advice ofindependent counsel in the transaction; and (3) The client consents thereto. LKO and Powers argue TCG'sjoint venture proposal led to an agreement between only LKO and TCG, and because neither is an attorney, former RPC 1.8(a) cannot apply as a matter oflaw. TCG and Fair, meanwhile, argue Mr. Powers entered the business transaction contemplated by the joint venture proposal, as did his client TCG, and Mr. Powers did not comply with former RPC 1.8(a) as required.

22LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 We agree with TCG and Fair. The business transaction at issue, for the purposes offormer RPC 1.8(a), is comprised ofall the terms TCG proposed in its October 2004 e-mail to Powers. One such term was that TCG would give up an ownership interest in its business in exchange for no-cost legal services. As such, the business transaction contemplated by the joint venture proposal is within the scope offormer RPC 1.8(a) andthe attorneyproviding legal services pursuantto this business transaction would be subject to the requirements offormer RPC 1.8(a). It is undisputed Mr. Powers provided TCG legal services pursuant to the business transaction contemplatedbythejointventureproposal, andMr. Powers did notmeet the requirements offormer RPC 1.8(a). 1. The business transaction at issue is the entire set of arrangements contemplated by thejointventure proposal To determine whether former RPC 1.8(a) applies at all, a preliminary issue is what, precisely, the underlying business transaction actually is. The benefits and burdens that were to be exchanged are not disputed, but the appropriate characterization of that exchange, and to whom the benefits and burdens were intended to accrue, is heavily disputed. LKO andPowers characterizethe arrangements as follows: LKO, throughMr. Powers as its agent, accepted TCG's joint venture proposal as offered in a late October 2004 e-mail. In doing so, LKO assumed responsibility for 50 percent of TCG's costs and for arranging, at no additional cost, the legal services TCG needed
23LK Operating, LLC v. Collection Grp., LLC, No. 88132-4


### to run its business. In exchange, LKO received a 50 percent ownership interest in TCG. LKO then made an entirely separate, unwritten agreement with Mr. Powers that the Law Firm would provide TCG's legal services. Wash. Supreme Court oral argument, LKOperating, LLCv. Collection Grp., LLC, 

### No. 88132-4 (Oct. 8, 2013), at 13 min., 22 sec., audio recording by 

### TVW, Washington State's Public Affairs Network, available at 

### http://www.tvw.org. Because this issue is before us on summary judgment, we assume that LKO's and Powers' characterization is an accurate description ofthe facts. We hold that the relevant business transaction, for purposes offormer RPC 1.8(a), encompasses all the terms ofTCG's joint venture proposal as set forth in Fair's October 2004 e-mail. The agreementby which Mr. Powers and LKO divided thebenefits and burdens ofthe business transactionbetweenthemselves does not, as
a matter of law and under the facts presented, change the essential nature ofthe business transaction at issue for the purposes ofTCG's claimthatthe agreementwas entered in violation offormer RPC 1.8(a). When interpreting the meaning ofany RPC, we apply settled principles of statutory construction. In re Disciplinary ProceedingAgainstBlauvelt, 

### 115 Wn.2d 735, 741, 801 P.2d 235 (1990). Our goal is to give effect to the intent behind the rule, which we discern, where possible, from the plain language ofthe rule at issue in the context ofthe RPCs as a whole. In re Pers. Restraint of Adams, 

### 178 Wn.2d

24LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 

### 417, 423, 309 P.3d 451 (2013). Former RPC 1.8(a) applies to "business transaction[s]." This term is not defined within the RPCs, so we look to dictionary definitions for its ordinary meaning. State v. Taylor, 150 Wn.2d 599, 602, 80 P.3d 605 (2003). Even ifLKO and Powers are correct in their assertion that this case presents two discrete agreements, it presents only one business transaction, within the ordinary meaning ofthat term. A 

### "businesstransaction" may be defined as "[a]nactionthat affectsthe actor's financial or economic interests, including the making ofa contract." BLACK'S LAW DICTIONARY 

### 227 (9th ed. 2009). Under this definition, because "transactions" include "contracts," "transactions" necessarily represents a broader set of arrangements than "contracts"-inthe same sense that all squares are rectangles but not all rectangles are squares. Ifformer RPC 1.8(a) were intended to apply only to the narrower set of discrete "contracts," the rule would use the word "contract," rather than the broader term "transaction." See In re Dependency of 

### J. W.H, 147 Wn.2d 687, 696, 57 P.3d 266 (2002) ("Unambiguous statutory language is accorded its plain meaning on the theory that the legislature is presumed to mean 'exactly what it says.'" (internal quotation marks omitted) (quoting Davis v. Dep't of Licensing, 137 Wn.2d 957, 964, 977 P.2d 554 (1999))). Former RPC 1.8(a) uses the broader term, and we interpretthat language as a conscious choice on the partofthe drafters.

25LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 Further support for this broad definition can be found in the comments to the corresponding American Bar Association's former Model Rules ofProfessional Conduct (2004) (ModelRules), which we may lookto as an "'instructive"' resource when considering the application of the former RPCs. 13 In re Disciplinary Proceeding Against Carmick, 146 Wn.2d 582, 595, 48 P.3d 311 (2002) (quoting State v. Hunsaker, 74 Wn. App. 38, 46,873 P.2d540 (1994)). The commentsprovide that the rule governs transactions "even when the transaction is not closely related to the subjectmatter oftherepresentation." MODELRULESR. 1.8 cmt. 1. Theyfurther specify where certain agreements that might normally be considered "business transactions" are notcovered: It does not apply to ordinary fee arrangements between client and lawyer, whichare governedbyRule 1.5, althoughits 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. In addition, the Rule does not apply to standard commercial transactions betweenthe lawyer andthe client for products or services thatthe client generally markets to others. Id. The decision to include defined, specific exemptions indicates that anything reasonably characterized as an attorney-client business transaction is subject to the

13Atthe time thejointventure proposal was made and acted upon, former RPC 1.8(a) did nothave any official commentary; official comments were first addedto the RPCs in2006. WASH. STATE BAR Ass'N, Report andRecommendation of the Special Committeefor Evaluation ofthe Rules a/Professional Conduct (Ethics 2003) to the Board ofGovernors 9 (2004), available at http://www.wsba.org/Resources-and-Services/Ethics/Ethics-2003/Final-Report (Report

- Part 1 (Table ofContents, Overview, Summary ofRecommendations, Conclusion)); JohannaM. Ogden, Comment, Washington's New Rules of Professional Conduct: A BalancingAct, 30 SEATTLEU. L. REv. 245, 246 (2006). 26LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 rule's requirements unless specifically exempted. SeeIn re DisciplinaryProceeding AgainstSanai, 177 Wn.2d 743, 767-68, 302 P.3d 864 (2013). As characterizedbyLKO and Powers, in enteringthejointventure withTCG, LKO assumed a contractual duty to arrange for the provision of TCG's legal services. IfLKO had not done so, the tenns ofthe joint venture-the "action" by which TCG's "financial or economic interest[]" was to be "affect[ed]," BLACK'S LAw DICTIONARY at 227-wouldnot have been completed. 14 Itis thus clearthat the agreement between LKO and Mr. Powers arranging for TCG's legal services was nothing more than an incidental component ofthe overall business transaction set forth in TCG'sjointventure proposal. Inthe context offormer RPC 1.8(a), we cannotholdthejointventure between LKO and TCG represents a distinct business transaction from the agreement arranging for TCG's legal services between LKO and Mr. Powers. Under the particular factual circumstances presented and for purposes offormer RPC 1.8(a),
we hold the relevant business transaction encompasses all the terms contemplated by TCG's joint venture proposal as memorialized in its October 2004 e-mail to

14We do not meanto imply that had LKO not arranged for legal services, TCG's financial interest would be entirely unaffected on a theory that such partial nonperformance might allow TCG to rescind the business transaction based on contract principles (or any similar argument). We are not asked to and do not make any such determination. 27LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 

### Powers. These terms are not disputed, and we are thus able to analyze whether and how former RPC 1.8(a) applies as a matter oflaw. 2. The terms ofthe business transaction at issue place it within the scope offormer RPC 1.8(a) Having defined the relevant business transaction, we must next determine whether, based on its terms, that transaction falls within the scope offormer RPC 1.8(a). We hold it does because the joint venture proposed an exchange of legal services for an ownership interest in TCG, notwithstanding the fact thatMr. Powers did not personally acquire that ownership interest. Construed in the light most favorable to Powers and LKO, TCG became a Law Firm client contemporaneously with and by virtue ofthe business transaction contemplated by TCG'sjoint venture proposal. Ordinarily, a business transaction entered at the outset ofan attorney-client relationship establishing the amount and terms ofpaymentthe clientwilltenderin exchange for legal services-thatis to say,
afee agreement-wouldbe governedby former RPC 1.5. MODELRULES R. 

### 1.8cmt. 1. 

### However, where "the lawyer accepts an interest in the client's business or other nonmonetary property as payment ofall or part ofa fee," former RPC 1.8(a) also applies. MODELRULES R. 

### 1.8 cmt. 1. This case presents an unusual situation. TCG offered an ownership interest in itself as consideration for legal services and financial contributions. Because we construe the facts in favor ofthe nonmoving parties, we assume neither Powers nor 

### 28LK Operating, LLC v. Collection Grp., LLC, No. 88132-4 LKO ever intendedthatthe consideration offeredbyTCGwould flow to the attorney actuallyproviding legal services (Mr. Powers). Rather, we assume the consideration offered by TCG was intended by Powers and LKO to flow solely to LK0. 15 Nevertheless, former RPC 1.8(a) is implicated where an attorney "enter[s] into a business transaction with a client or knowingly acquire[s] an ownership, possessory, security or other pecuniary interest adverse to a client." Under ordinary principles ofstatutory construction, the use ofthe disjunctive clearly contemplates a situation where an attorney enters a business transaction with a client without actually acquiring any pecuniary interest adverse to the client (or vice versa). 

### See State v. Hecht, 173 Wn.2d 92, 94-95, 264 P.3d 801 (2011) (citing

### In reMarriage of Caven, 136 Wn.2d 800, 807, 966 P.2d 1247 (1998)). Based on the terms ofthejoint venture proposal, we can conclude only that any attorney providing TCG with legal services pursuant to the proposal's terms wouldnecessarily effect atransfer ofTCG's ownership interest away from TCG and to some other party. Therefore, that attorney, assuming he or she was aware ofthe proposal terms, would have accepted a business transaction wherein an ownership in the client's business would clearly be exchanged for legal services. Whether the

15C,f Wash. Supreme Court oral argument, LK Operating, LLC v. Collection Grp., LLC, No. 88846-9 (Oct. 8, 2013), at 31 min., 53 sec., audio recording by TVW, Washington State's Public Affairs Network, available athttp://www.tvw.org (Powers asserting at oral argument inthe companion case thatthe only consideration Mr. Powers received for his legal services to TCG was the psychological benefit ofaiding LKO's investment in TCG). 29LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 attorney and a thirdparty agreedbetweenthemselves that the thirdpartywouldtake possession of that ownership interest is not material to the question actually presented-Where ajointventure proposal for a business transaction offers a share inthe client'sbusiness in exchange for attorney services and financial contributions, does an attorneyproviding legal services pursuant to the terms oftheproposal have to comply with former RPC 1.8(a)? The answer, under the circumstances presented and as discussed above, is clearlyyes. 3. Mr. Powers entered the business transaction at issue in his capacity as an attorney Thus far, we have established that all terms of the joint venture proposal comprise a single business transaction, for purposes offormer RPC 1.8(a), and we have established that the terms ofthat transaction necessarilyimplicate former RPC 1.8(a) as to the attorney who provided legal services pursuant to that transaction. Now we must determine whether Mr. Powers is that attorney. We have little difficulty in doing so. Powers and LKO rightly arguethat as a generalproposition, the RPCs govern only attorney conduct. 16 

### See, e.g., RPC pmbl. para. 13 ("Lawyers playa vital role in thepreservation ofsociety. The fulfillment ofthis rolerequires an understandingby

16There are exceptions to this general proposition, but none are relevant here. E.g., RPC 5.3 (requiring attorneys with managerial or supervisory authority to make reasonable efforts to ensure nonattorney assistants complywiththe RPCs). 30LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 lawyers oftheirrelationshipto ourlegal system. The [RPCs], whenproperly applied,
serve to define that relationship."). Therefore, Powers and LKO argue that former RPC 1.8(a) cannot apply to the business transaction contemplated by TCG'sjoint venture proposal if that transaction was solely between nonattomeys. However, based on the undisputed facts and as a matter of law, Mr. Powers did enter this business transaction, at least in part, in his capacity as an attorney. As discussed above, thejointventure proposal contemplated the exchange of
an ownership interest in TCG for legal services and financial investments. The trial court found, and the parties do not dispute, that "LKO is not a law firm, and is not in the business ofproviding legal services." CP at 1252. The trial court also found, and the parties do not dispute, that "[p]rofessionallegal services sought by TCG as part ofthe Proposal were providedby Powers & Therrien, P.S." CP at 2304. In light of these findings, and because the business transaction at issue for purposes of former RPC 1.8(a) includes all terms in thejointventure proposal, it simply cannot be the case that only TCG and LKO were parties to that business transaction. Mr. Powers, LKO, and TCG all entered the business transaction at issue. Because Mr. Powers' role in this business transaction was, at least in part, the provision oflegal services to TCG, it is axiomatic that Mr. Powers entered the business transaction in his role as an attorney. See GR24(a).

31LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 LKO and Powers assert that because the damages following rescission were awarded to only LKO, the trial court made an implied finding of fact that the business transaction at issue was between exactlytwo parties-LKO andTCG. This is incorrect. The fact thatthe damages were awardedto LKO simplyreflects the trial court's finding that LKO made the financial contributions in TCG contemplated by thejoint venture proposal. It is undisputed that financial contributions were not the only consideration TCG was to receive under the joint venture proposal-TCG would also receive legal services at no cost to run its business. Thetrial courtdidnot decide whether Powers violated former RPC 1.8(a) and didnot analyzethe scope oftherelevantbusinesstransactionorpartiesthereto within the meaning ofthatrule. The record contains no written17 findings onthis issue, and, indeed, the findings that were entered suggest the trial court intentionally declined to reach it. CP at 2311-12. 18 The fact that there is no explicit trial court decision on

17We lookto the trial court's written findings, rather than its oral statements, as atrial court is free to reconsider its determinations betweenthe time it announces an oral decision and the time it enters written findings. Ferree v. Doric Co., 62 Wn.2d 561, 566-67, 383 P.2d 900 (1963). 18Finaljudgment entered by the trial court, including the phrase "the court having ruled that TCG is liable to plaintiffas a result ofthe court previously having found that any business transaction between LKO and TCG is subjectto rescission." CP at 2311-12. The trial court clearly handwrote the word "any." CP at 2312. "Washington courts have repeatedly construed the word 'any' to mean 'every' and 'all'." State v. Smith, 117 Wn.2d 263, 271, 814 P.2d 652 (1991). The trial court's intentional use ofthis "broad and inclusive term," S.L. Rowland Construction Co. v. Beall Pipe & Tank Corp., 14 Wn. App. 297, 306, 540 P.2d 912 (1975), reflects the care taken by the trial court to ensure its findings and conclusions accurately reflected only the determinations it actually made. That one determination it did notmake was the precise nature ofand parties to the business transactions underlying this case for the purposes of former RPC 1.8(a). 32LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 

### the scope of or parties to the transaction is significant because the record clearly reflects an admirable level of care and conscientiousness on the part of the trial judge. 19 

### Finally, even ifthe trial court had clearly determined the business transaction at issue was limited to ajoint venture agreement between LKO and TCG, such a determination would rest on the interpretation offormer RPC 1.8(a) as applied to a given factual arrangement-amatter oflaw, not one offact. The business transaction at issue provided that TCG would receive financial investments and professional legal services. It

### is undisputed that LKO provided the financial investments and Mr. Powers and the LawFirmprovidedthe legal services. As a matter oflaw, TCG, LKO, and Mr. Powers were all parties to the business transaction at issue. In providing legal services to TCG pursuant to this business transaction, Mr. Powers necessarily acted in his capacity as an attorney. GR 24(a). Therefore, as a matter of law, this business transaction was not solely between nonlawyers. 4. Mr. Powers violated former RPC 1.8(a) as a matter oflaw Because the business transaction contemplated by thejoint venture proposal falls within the scope offormer RPC 1.8(a) and because Mr. Powers entered the

19For instance, the clerk's papers contain over 150 pages ofmaterials relating solely to the entry offindings, conclusions, andjudgment following the benchtrial held in the contract action, including memoranda, multiple proposed drafts by the parties, and minute entries from several hearings. CP at 2149-258, 2269-313. 33LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 

### transaction in his role as an attorney, we are now tasked with determining whether Mr. Powers complied with former RPC 1.8(a). "The burden ofproving compliance with RPC 1.8 rests with the lawyer; 'an attorney-client transaction is prima facie fraudulent."' Valley/50th Ave., LLC v. Stewart, 159 Wn.2d 736, 745, 153 P.3d 186 (2007) (quoting In re Disciplinary Proceeding Against Johnson, 118 Wn.2d 693, 704, 826 P.2d 186 (1992)). "A lawyer must prove strict compliance with the safeguards ofRPC 1.8(a)." Jd. 

### Based on the undisputed facts taken in the light most favorable to LKO, Mr. Powers did not meet the requirements offormer RPC 1.8(a). While it is undisputed that TCG proposed the initial terms, the agreement ultimately entered was not the
same as the agreement originally proposed. The parties do not dispute that thejoint venture proposal was made by TCG to Powers. As discussed above, the resulting business transaction ultimately entered was between TCG, Powers, and LKO. Powers and LKO acknowledge Mr. 

### Powers never made any written communication to TCG setting forth the final parties to thejointventure and the parties' respective roles. Surelytheparties to atransaction are essentialterms ofthattransaction. It

### does not matter that the trial court found that TCG did not care who made the financial investment-compliance with former RPC 1.8(a) is entirely the attorney's responsibility, Valley/50th Ave., 159 Wn.2d at 745, and the rule contains no exceptions for apathetic clients.

34' LK Operating, LLCv. Collection Grp., LLC, No. 88132-4
Because the business transaction contemplated in thejoint venture proposal
was never memorialized in a writing reflecting both its provisions and the parties to it, the "transaction and terms" were not "fully disclosed and transmitted in writing to the client" as required by former RPC 1.8(a)(l). We need go no further to hold the business transaction contemplated by thejoint venture proposal was entered in violation offormer RPC 1.8(a). C. The Court ofAppeals did not err in holding Mr. Powers violated former RPC 1.7 On review, it is abundantly clear that Mr. Powers did, as a matter of law, violate former RPC 1.7,20 as the Court ofAppeals correctly held in 

### LK Operating, 168 Wn. App. at 872-73. We seeno needto expandonthe CourtofAppeals' analysis
on this point:

2°Former RPC 1.7 provides, in pertinent part: (a) A lawyer shall not represent a client ifthe representation ofthat client will be directly adverse to another client, unless: (1) The lawyer reasonably believes the representation will not adversely affect the relationship with the other client; and (2) Each client consents inwriting after consultation and a full disclosure of the material facts (following authorization from the other client to make such a disclosure). (b) A lawyer shall not represent a client ifthe representation ofthat client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, unless: (1) The lawyer reasonably believes the representation will notbe adversely affect; and (2) The client consents in writing after consultation and a full disclosure of the material facts (following authorization from the other client to make such a disclosure). When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation ofthe implications ofthe common representation and the advantages and risks involved.
35LK Operating, LLCv. Collection Grp., LLC, No. 88132-4
Mr. Powers represented both Mr. Fair and LKO in separate, unrelated matters andthenrepresentedLKO inthe business transaction with Mr. Fair by relaying the investment proposal and forwarding the funds. Mr. Powers had a duty to disclose his personal interest inLKO, his legal duties as manager ofLKO, and his professional duties as an attorney for LKO. The representation ofMr. Fair was directly adverse to therepresentation ofLKO inthe transaction andthere is no evidence that either client gave informed consent in writing. Id. at 873. We affirm. D. The Court ofAppeals didnot err in affirmingthetrial court'srescission ofthe business transaction contemplated by thejointventure proposal LKO assertsthatrescindingthebusinesstransactioncontemplatedbythejoint venture proposal was not the proper remedy because it penalizes LKO, which did nothing wrong. As a matter oflaw, "[c]ontractterms are unenforceable on grounds of public policy when the interest in its enforcement is clearly outweighed by a public policy against the enforcement ofsuch terms." State v. Noah, 103 Wn. App. 29, 50, 9 P.3d 858 (2001) (citing RESTATEMENT (SECOND) OF CONTRACTS 

### § 178 (1981)). We hold, as a matter oflaw, thatthe business transaction contemplated by thejointventure proposal is unenforceable onpublic policy grounds, and we affirm the remedy imposed by the trial court. 1. Contracts formed in violation of the RPCs are unenforceable to the extentthat they contravene public policy We have previously and repeatedly held that violations ofthe RPCs or the former CodeofProfessionalResponsibilityintheformation ofa contractmayrender that contractunenforceable as violative ofpublic policy. 

### E.g., Valley/50thAve., 159
36LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 Wn.2d at 743; Belli v. Shaw, 98 Wn.2d 569,578,657P.2d 315 (1983). We take this opportunity to explain why and to address the concerns raised by the dissent. a) The RPCs can be sources of public policy relevant to the enforceability ofcontracts '"In general, a contract which is not prohibited by statute, condemned by judicial decision, or contrary to the public morals contravenes no principle ofpublic policy."' State Farm Gen. Ins. Co. v. Emerson, 102 Wn.2d 477, 481, 687 P.2d 1139 (1984) (quoting 17 C.J.S. Contracts § 211, at 1024 (1963)). Former RPC 1.8(a) is not a statute, ofcourse, and we decline to address the nebulous realm ofthe public morals in this opinion. One could argue the RPCs, as rules promulgated by this court, represent a "judicialdecision," butitis notnecessaryto do so becausethereis nothingtalismanic about the words "statute" or "judicial decision." Ifthere were, we could not find principles ofpublic policy in, for example,the state and federal constitutions or court rules governing civil procedure. Our cases, however, have recognized both as potential public policy sources. Torgerson v. One Lincoln Tower, LLC, 166 Wn.2d 510, 524, 210 P.3d 318 (2009) (distinguishing, but implicitly approving, a Court of Appeals opinion holding a contract violates public policy where it would, among otherconcerns, injure aperson's "rightto counsel andto a fair trial" (citingMarshall

v. Higginson, 62 Wn. App. 212, 216, 813 P.2d 1275 (1991))); Scott v. Cingular

37LKOperating, LLCv. Collection Grp., LLC, No. 88132-4 

### Wireless, 160 Wn.2d 843, 851,161 P.3d 1000 (2007) (citing CR 23 as a source of state publicpolicy). The underlying inquiry when detennining whether a contract violates public policy is whether the contract "has a tendency "'to be against the public good, orto beinjurious to thepublic.""'

### Scott, 160 Wn.2d at 851 (quoting

### Kingv. Riveland, 125 Wn.2d 500, 511, 886 P.2d 160 (1994) (quoting 

### Marshall, 62 Wn. App. at 216)). Therefore, whether something can be a source ofpublic policy in the context of contract enforceability shoulddepend on whetheritis primarilyintendedto promote the public good or protect the public from injury, and whether it was issued by an entitywiththe legal power and authorityto setpublic policyin the relevant context. Because "the Supreme Court['s power] to regulate the practice of law is inviolate,"this courthas legal authorityto setpublicpolicyinthe context ofattorney ethics. 

### Kommavongsa v. Haskell, 149 Wn.2d 288, 311, 67 P.3d 1068 (2003). The RPCs are clearlydirected atpromoting thepublic good andpreventingpublic injury: The legal profession's relative autonomy carries with it special responsibilities ofself-government. Theprofession has aresponsibility to assure that its regulations are conceived inthe public interest and not in furtherance ofparochial or self-interested concerns ofthe bar
.... Neglect ofthese responsibilities compromises the independence ofthe profession and the public interest which it serves. MODEL RULES pmbl. para. 12. It would also make little sense to say that ajudicial decision in a particular case may set public policy, but a carefully drafted set of ethical rules promulgated bythe onlybody with the authority to set such rules may 38LK Operating, LLCv. Collection Grp., LLC, No. 88132-4

not. It is therefore possible, as a general matter, to find principles ofpublic policy relevantto the enforceability ofcontracts in the RPCs. b) We do not hold that every RPC violation necessarily renders every contract connected to the violation is voidable in all circumstances Just because the RPCs can be a valid source ofpublic policy does not mean that every violation of every RPC that relates a contract renders the contract unenforceable. The underlying inquiry in determining whether a contract is unenforceable because it violates public policy is whether the contract itself is injurious to the public. While all RPC violations are in some way injurious to the public, not all RPC violations will render anyrelated contractinjuriousto the public. Some RPCs are generally unsuitable for this context altogether because they

are unlikely to be relevant, or because they are discretionary or aspirational, encouraging certain activities withoutprohibiting or condemning aparticular course ofaction. 

### E.g., former RPC 2.1 (1985) ("In rendering advice, a lawyermay refer not only to lawbutto other considerations such as moral, economic, social and political factors, that may be relevant to the client's situation."); former RPC 6.1 (2003) ("A lawyer should aspire to render at least thirty (30) hours ofpro bono public service per year."). As to those RPCs that can be suitable in this context, under some circumstances, anRPC violationmayhave somerelation orconnectionto a contract,

39LK Operating, LLCv. Collection Grp., LLC, No. 88132-4
but the contract itselfdoes not violate the public policy announced in the rule, and

so is still enforceable. We explicitly recognize that a contract is not automatically unenforceable based solely on the fact that it has some connection to some RPC violation. Such a holding would shiftthe guiding inquiry from whetherthe contract is injurious to the publicto whethertheRPCviolation is injurious to thepublic-the former is relevant when determining whether a contract is unenforceable because it violates public policy, while the latter is relevant in attorney disciplinaryproceedings. Itwould also ignorethe clear admonishmentthat "thepurpose oftheRules canbe subvertedwhen they are invokedby opposingparties as procedural weapons." MODEL RULES Scope para. 20. c) We reaffirm that a contract entered in violation offormer RPC 1.8(a) is presumptively, butnotnecessarily, unenforceable While certainly not true of all RPCs, former RPC 1.8(a)'s requirements are mandatory, clear, and go directlytothe formation andterms ofbusinesstransactions, including contracts, between attorneys and their clients. The public policy underlying former RPC 1.8(a) is to guard against "overreaching when the lawyer participates in a business, property or financial transaction with a client," a possibility created by the "lawyer's legal skill and training, together with the relationship oftrust and confidence between lawyer and client." MODEL RULES R.

40LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 1.8 cmt. 1. Former RPC 1.8(a)'s safeguards address the terms and procedures by which suchtransactions are entered in order to promote its underlyingpublic policy. A contract formed in violation offormer RPC 1.8(a), by definition, includes at least one attorney and one current client as parties to the contract and, by definition, meets at least one ofthe following criteria:

• Its terms are unfair to the client, former RPC 1.8(a)(l);

• Its terms are unreasonable as to the client, id.;

• Its terms were not fully disclosed to the client, id.;

• Its terms were not transmitted to the client in writing in a way the client canreasonably understand them, id.;
• The client had no reasonable opportunity to seek independent advice on the contract, former RPC 1.8(a)(2); or
• The client never consentedto the contract, former RPC 1.8(a)(3). There is no way to enter a contract in violation of former RPC 1.8(a) without implicatingthe formation orterms ofthe contract itself. Therefore, aviolation ofthe rule presumptively, though not necessarily, results in a contract violative of the public policy underlying former RPC 1.8(a). A contract entered in violation of former RPC 1.8(a) may still be enforced where it is shown, based on the specific factual circumstances that, notwithstanding the violation, the contract itself does not contravene the public policy underlying former RPC 1.8(a):

41LK Operating, LLCv. Collection Grp., LLC, No. 88132-4
To justify a transaction with a client, the attorney has the burden of showing: "(1) there was no undue influence; (2) he or she gave the client exactlythe same information or advice as wouldhave been given by a disinterested attorney; and (3) the client would have received no greater benefithad he or she dealt with a stranger". 

### In re Disciplinary Proceeding Against McMullen, 127 Wn.2d 150, 164, 896 P.2d 1281 (1995) (quoting

### In re DisciplinaryProceedingAgainstMcGlothlen, 99 Wn.2d 515, 525, 663 P.2d 1330 (1983)). We do not purport to set out any all-encompassing rule for how violation of any RPC in connection with a contract might affect that contract's enforceability. We simply reaffirm that a contract entered in violation offormer RPC 1.8(a) may not be enforced unless it can be shown that notwithstanding the violation, the resulting contract does not violate the underlying public policy ofthe rule. d) 

### Hizey is neither controllingnorpersuasive authority onthis issue Unquestionably, the RPCs do not purport to set a standard for civil liability. 

### Hizey v. 

### Carpenter, 119 Wn.2d 251, 258, 830 P.2d 646 (1992); RPC scope para. 20. In a legal malpractice action, it is thus inappropriate to suggest or argue that an attorney's violation ofone or more RPCs evidences the attorney's alleged breach of the applicable standard ofcare. Id. at 265-66. We do not depart from or disapprove ofthis long-standing rule in our decision today because it does not apply directly and its reasoning is inapposite in this context.

42LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 By its ownterms, Hizey is not controlling as to the issue presentedhere: "We realize courts have relied on the [former Code ofProfessional Responsibility] and RPC for reasons other than to find malpractice liability and our holding today does notalter oraffect suchuse."Id. at264. TheRPCs do not settheprofessional standard ofcare applicable in a legal malpractice action, butthe professional standard ofcare applicable in a legal malpractice action also does not setthe standard for the public policy exceptionto enforceability applicable in a contract action. The reasoning underlyingHizey also does not have muchpersuasive value in this context. While Hizey draws a distinction between statutes that may be used as evidence ofnegligence and ethicalrules adoptedbythis courtto regulatethepractice of law, id. at 261, as discussed above, that distinction is not determinative as to whether something mightbe a source ofpublic policy relevant to the enforceability ofcontracts. Hizey also expressed concern that the RPCs "provide only vague guidelines"

as to the professional standard of care in a legal malpractice action, particularly because the RPCs set only minimum standards, ratherthanthe conduct a reasonable lawyer would engage in under specific circumstances. Id. at 261-62. Whether a contract was entered in violation offormer RPC 1.8(a) does not depend on whether the attorney acted as a reasonable attorney would in similar circumstances-it depends on whether the attorney complied with former RPC 1.8(a)'s mandatory

43LKOperating, LLCv. Collection Grp., LLC, No. 88132-4 directives. Whether a contract may be enforced notwithstanding the fact that it was entered in violation of former RPC 1.8(a) is an entirely separate inquiry, noted above, which does not depend on whether the attorney breached the applicable standard of care-it depends on whether the contract actually violates the public policyunderlying former RPC 1.8(a). Hizey furtherholdsthatuse oftheRPCs inthe legalmalpractice contextwould contravene the purposes ofthe RPCs, which are to "protect both the public andthe integrity ofthe profession." Id. at 263. The RPCs serve that second purpose "'by forcefully reminding attorneys that their first loyalty is to the court."' !d. (quoting Jean E. Faure & R. Keith Strong, The Model Rules of Professional Conduct: No Standard for Malpractice, 47 MONT. L. REv. 363, 375 (1986)). Using the RPCs to determine the professional standaEd ofcare applicable in the attorney malpractice context, Hizey holds, elevates the attorney-client relationship over the integrity of the profession. Id. This is certainly a potential concern where the attorney's duties to the client may conflict with his orher duties to the court, andthe rules in question

are designed "to temper an attorney's zeal in representing his clients." Faure & Strong, supra, at 3 7 5 (discussing former Montana Rules ofProfessional Conduct 1.6(b) (1984) (governing confidentiality of information related to client representation), 3.3 (1984) (requiring disclosure ofauthority adverse to the client's position)). Former RPC 1.8(a) is designed to temper the attorney's zeal in entering

44LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 

### business transactions with clients, not representing them. Compliance with former RPC 1.8(a) serves both the client and the integrity of the legal profession, and noncompliance has the potential to damage both the client and the profession. Hizey provides an admirable analysis ofthe issue that was before the court. The issue before the court today, however, is not controlled by Hizey, and the reasoning in Hizey does not apply here. e) We respectfully disagree withthe dissent's remaining concerns The dissent describes this case as presenting an issue of first impression: "Whether the RPCs canjustify rescission of a third party contract." Dissent at 4. While this case certainly presents the application of several principles oflaw to a particular set offacts, it does notpresent an issue offirst impression. That a contract entered in violation of former RPC 1.8(a) may be unenforceable as violative of publicpolicy was a settled issue beforethis case. It

### is also already a settled issue that
a contract that violates public policy is unenforceable in the courts. Finally, the fact that a contractthat is inextricably intertwined with an unenforceable contract is also unenforceable was a settled issue before this case. Although we are confronted with
an unusually convoluted set offacts, we are not breaking new legal ground. We do not need to address, analyze, approve of, or disapprove of In re Corporate Dissolution ofOcean Shores Park, Inc., 132 Wn. App. 903, 134 P.3d 1188 (2006), review denied, 159 Wn.2d 1009, 154 P.3d 918 (2007). Ocean Shores

45LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 is a Court ofAppeals opinion not binding on this court, and a party's choice as to which authorities to rely onin its briefing does notlimitthe authorities the courtmay rely on. We do notrely on Ocean Shores. To the extentthatthe dissent asserts thatthe RPCs are simplytoo complicated for trial courts andjuries, we respectfully disagree. 21 Thejudges inthe trial courts of this state have a long history ofgrappling with difficult and complicated questions oflaw with competence, diligence, and integrity, and we are confident they are up to the challenge. The issue ofwhether aviolation offormer RPC 1.8(a) shouldresult in professional discipline is not relevant to determining whether a contract is enforceable in light ofthe public policy implications ofthat violation. 2. The business transaction contemplated by thejointventure proposal is violative ofpublic policy and unenforceable The business transaction here was entered in violation offormer RPC 1.8(a). Even ifthe onlypart ofthe business transactionthat violated former RPC 1.8(a) was Powers' providing TCG with legal services, there can be no question that all the arrangements by which the terms ofthe joint venture proposal were fulfilled are inextricably intertwined, and neither LKO nor Powers has argued that the provision for legal services is severable from the rest ofthe business transaction contemplated

21Because this case comes to this court following a decision on summaryjudgment,jury issues are not implicated here, butwe do note thatjuries determine the facts andjudges determine the law. WASH. CONST. art. IV, § 16. Whether an RPC has been violated is a matter oflaw. King, 170 Wn.2d at 741. Whether a contract is enforceable notwithstanding a violation offormer RPC 1.8(a) depends on questions offact. See McMullen, 127 Wn.2d at 164, 168. 

### 46LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 by thejoint venture proposal. Therefore, the entire business transaction is tainted withMr. Powers' violation offormer RPC 1.8(a). 

### CfSherwood &

### Roberts-Yakima, Inc. v. Leach, 67 Wn.2d 630, 637, 409 P.2d 160 (1965). As discussed above, while a contractformed inviolation offormer RPC 1.8(a) 1s presumptively unenforceable, such a contract may still be enforced where, notwithstanding the violation, the contract itselfdoes not violate the public policy underlying the rule. LKO argues that because the former RPC 1.8(a) issue was not decided at summaryjudgment and not addressed at trial, LKO was deprived ofits opportunity to provide evidentiary support for the enforceability of the business transaction, notwithstanding Mr. Powers' former RPC 1.8(a) violation. LKO is wrong. Fair and TCG moved for summaryjudgment at the trial court, arguing any transaction made would be void as violative ofpublic policy because it was entered in violation of former RPC 1.8(a), clearly putting LKO on notice that it should respond on all issues relevant to the enforceability ofthe transaction under former RPC 1.8(a). LKO and Powers responded that former RPC 1.8(a) does not apply to the facts presented. Any arguments intended to justifY the business transaction notwithstanding the former RPC 1.8(a) violation should have been made to the trial court. They were not and will not be considered now.

47LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 

### 3. Rescission was an appropriate remedy Where a contract is entered in violation ofpublic policy, "the rule is to leave the parties in the positions where the court finds them, even ifthey acted in good faith," Fallahzadeh v. Ghorbanian, 

### 119 Wn. App. 596, 605, 82 P.3d 684 (2004), and "regardless ofwhether the situation is unequal as to the parties," Morelli v. Ehsan, 

### 110 Wn.2d 555, 562, 756 P.2d 129 (1988). It 

### is thus arguable that LKO got more 

### than that to which it was strictly entitled when the trial court ordered ajudgment in its favor for all the funds it had invested in TCG, with both pre- and postjudgment interest. TCG has not sought review ofthat decision. We also note that while LKO is not responsible for Mr. Powers' violation offormer RPC 1.8(a), neither is TCG. Because the former RPC 1.8(a) violation is sufficient to justify the remedy imposed, we need not determine whether rescission would also be appropriate for the former RPC 1.7 violation. We do not, however, definitively foreclose that potential outcome in the appropriate case. IV. CONCLUSION Neither LKO's nor Powers' rights to procedural due process were violated. The record supports the Court of Appeals' holding that Mr. Powers entered the business transaction contemplated by the joint venture proposal in violation of former RPC 1.8(a), and rescission is the appropriate remedy for that violationunder the unusual facts presented. Mr. Powers also violated former RPC 1.7 by engaging

48LK Operating, LLCv. Collection Grp., LLC, No. 88132-4 in simultaneous representation of multiple clients with adverse interests without making the necessary disclosures or receiving the clients' informed consent. We neednot determine whetherthe former RPC 1.7violationprovides an alternate basis
on which to rescind the business transaction contemplated by the joint venture proposal. We affirm the Court ofAppeals.

49LK Operating, LLCv. The Collection Grp., LLC, No. 88132-4



### WE CONCUR:

50LKOperatingLLCv. The Collection Grp., LLC, No. 88132-4 (Gordon McCloud, J., concurring)

No. 88132-4 GORDON McCLOUD, J. (concurring)-! agree with the majority that Mr. Powers violated former Rules ofProfessional Conduct (RPC) 1.8(a) (2000). I also agree with the majority that, under prior controlling precedent of this court, that violation supports the remedy ofrescission under the undisputed facts presented here. I thereforejointhe majority in result. ButIrespectfully disagree withmany ofthe views expressed inParts III.D.l.a and b. See majority at 37-40. I think these sections will produce unnecessary uncertainty about the circumstances in which the courts will enforce a contract that is connected to an RPC violation. I believe that those sections are unnecessary to supportthe majority's conclusion. I therefore concur.

1LKOperatingLLCv. The Collection Grp., LLC, No. 88132-4 (Gordon McCloud, J., Concurrence)

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### F-**·-·~**LKOperating, LLCv. The Collection Grp., LLC

No. 88132-4 Madsen, C.J. (dissenting)-The majority holds that contract rescission was
a proper remedy for an attorney's violation ofthe Rules ofProfessional Conduct (RPC). These rules, however, were never intended to serve as the basis for civil law actions or remedies. Because using the RPCs in this manner is contrary to both their Scope section and this court's decision inHizey, 1 I dissent. Paragraph 20 to the RPCs' Scope section reads: Violation ofa Rule should not itselfgive rise to a cause ofaction against a lawyer nor should it create any presumption in such a case that a legal duty has beenbreached.
. . . The Rules are designed to provide guidance to lawyers and to provide a structure for regulating conductthrough disciplinary agencies. They are not designed to be a basis for civil liability. Furthermore, the purpose ofthe Rules can be subverted when they are invoked by opposing parties as procedural weapons. Strongpolicyjustifications supportthe Scope section's preference for separating the law ofethics codes from other civil law decisions. See StephenE. Kalish, How To Encourage Lawyers To Be Ethical: Do Not Use the Ethics Codes

as a Basisfor RegularLawDecisions, 13 GEO. J. LEGALETHICS 649 (2000). In Hizey, 119 Wn.2d at 263, this court expressed a concern that ifethics violations

1Hizey v. Carpenter, 119 Wn.2d 251, 830 P.2d 646 (1992). -1-No. 88132-4 Madsen, C.J. (dissenting)
may result in civil actions, attorneys will likely overemphasize their clients' interests in order to protect themselves fromjudgments against them. This would result in attorneys focusing on the interests oftheir clients to the detriment of others including the general public. Hizey involved a legal malpractice action against an attorney who allegedly had an impermissible conflict ofinterest in a real estate transaction. The court held that in legal malpractice actions, expert witnesses may neither explicitly refer to the CPR (Code ofProfessional Responsibility) nor the RPCs, nor may their existence be revealedto thejuryvia instructions. !d. at 254. Based on the Scope section ofthe RPCs, most courts considering this issue have held that violations ofthe CPR or RPCs do not give rise to an independent

cause ofaction against the attorney. !d. at 258-59. The Hizey court noted that [t]he result ofsuch holdings, with which we concur, has been that breach ofan ethics rule provides only a public, e.g., disciplinary, remedy and not a private remedy. Because the CPRand RPC explicitly, and in what we deem to be clear and unambiguous language, disclaim any intent to create civil liability standards, we refuse to hold their violation creates a cause ofaction for malpractice. !d. at 259 (citations omitted). In addition to the admonition ofthe Scope section to the RPCs, the Hizey court also noted public policy grounds for separating disciplinary actions from civil actions. The CPR and RPCs are not statutes or administrative regulations. They were adopted by this court, rather than the legislature, pursuant to our power -2-No. 88132-4 Madsen, C.J. (dissenting)

to regulate the practice oflaw. ld. at 261. The Supreme Court has the inherent power and solejurisdiction to regulate the practice oflaw. Id. (citing Graham v. State BarAss 'n, 86 Wn.2d 624, 631, 548 P.2d 310 (1976)). Furthermore, the CPR and RPCs often contain only vague guidelines since they were never intended to be the basis for civil liability. ld. There are differences between a civil action and disciplinary action, which advise against the
use ofthe RPCs in this manner. For example, lawyers can be disciplined even if they do not cause damage. ld. at 262 (quoting 1Ronald E. Mallen & Jeffrey M. Smith, LegalMalpractice§ 1.9, at 33 (3d ed. 1989)). Moreover, the use ofthe rules in civil actions throws offthe balance they intend to create and instead misaligns lawyer incentives. Using the RPCs as the basis for civil liability overemphasizes the attorney/client relationship over other important responsibilities such as those to the legal system at large. Id. at 263 (quoting Jean E. Faure & R. Keith Strong, The ModelRules of Professional Conduct: No Standard for Malpractice, 47 MONT. L.REv. 363, 375 (1986)). Finally, plaintiffs already have other available theories under which to bring malpractice actions. Id. at 263-64 (collecting cases). The Hizey court held that experts andjudges could rely on the CPR and RPCs but could not specifically refer to them. Id. at 265. The court "realize[d] courts have relied on the CPR and RPC for reasons other than to find malpractice liability and our holding today does not alter or affect such use." Id. at 264. -3-No. 88132-4 Madsen, C.J. (dissenting) Although Hizey did not definitively foreclose future courts from using the RPCs as the basis for civil actions, it does indicate this court's desire to keep separate disciplinary and civil actions rather than follow theRestatement's approach which conflates the two. See Kalish, supra, at 662; RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS (Proposed Final DraftNo.2 1998). One ofthe principal cases cited by The Collection Group LLC (TCG) to justifyrescission is In re Corporate Dissolution of Ocean Shores Park, Inc., 132 Wn. App. 903, 134 P.3d 1188 (2006). The majority in this case, however, declines to meaningfully address either Ocean Shores or Hizey. Whether the RPCs canjustify rescission ofa third party contract is an issue offirst impression for this court. The majority has missed an opportunity to thoughtfully consider this issue. In Ocean Shores, a couple deeded real property to a corporation. When issuing shares, the attorney deeded some shares to himselfand his wife. He later died, and his clients sued his widow to void the land transfer and dissolve the corporation. The Court ofAppeals held thatthe issuance ofshares was void as againstpublic policy ifthe attorney violated the RPCs by failing to give adequate advice and consideration. The case was remanded for a determination ofwhether the attorney could produce evidence to avoid summaryjudgment in favor ofthe clients. Id. at 906.

-4-No. 88132-4 Madsen, C.J. (dissenting)
The Court ofAppeals held that agreements violating the RPCs are contrary to public policy. !d. at 910 (citing Danzigv. Danzig, 79 Wn. App. 612, 617, 904 P.2d 312 (1995)). "Courts generally do not enforce contracts that are contrary to public policy." !d. (citingDanzig, 79 Wn. App. at 616). Ocean Shores appears to stand for the propositionthattransactions that occur in violation oftheRPCsare generally void as againstpublic policy and may be rescinded even to the detriment ofinnocent third parties. Ocean Shores, however, relies heavily on Danzig, which indicated reluctance to use rescission as aremedy to an RPC violation when it would deprive a third party ofthe benefit ofhis bargain. InDanzig, a lay "runner" who solicited clients for an attorney filed a breach ofcontract claim against the attorney for failing to pay him. The trial court dismissed his contract claimbut ordered the attorney to pay $89,000 into the court's registry pending investigation ofthepropriety ofthe fee. The Court of Appeals reversed the trial court's dismissal ofthe contract claim and reversed the order to pay money into the court registry. Danzig, 79 Wn. App. at 615. The Court held that the contract was not void as against public policy under the specific facts ofthe case. !d. at 618-19. As the Danzig court observed, "[A] superior court lacks authority to conduct disciplinary proceedings. It has, ofcourse, the authority and duty to see to the ethical conduct ofattorneys inproceedings before it. Upon proper grounds, it can disqualify an attorney. It has the powerto punish for contempt. Butas to matters which do notaffect thoseproceedings, the disciplinarypower rests exclusively in [the Supreme Court]." -5-No. 88132-4 Madsen, C.J. (dissenting)
Danzig, 79 Wn.App. at 620 (first alteration in original) (quoting Hahn v. Boeing Co., 95 Wn.2d 28, 34, 621 P.2d 1263 (1980))_2 The court's decision to reverse the $89,000 paymentrested, inpart, on the fact that the trial court was not attempting to fashion a proper remedy or policing the conduct ofan attorney in an action before it. Instead, the courtwas attempting to discipline the attorney for his conduct. "The superior court did not have authority to do so; that power rests exclusively with the supreme court. Thus, the superior court did nothave cognizance ofthis type ofcase." !d. at 621. In my view, Ocean Shores stretchedDanzigtoo far, improperly stepping back from this court's decision in Hizey, which intended to keep separate the law ofethics codes from civil law actions. In this case, the majority affirms rescission as the properremedy for Leslie Powers' former RPC 1.8 (2000) violation. Due inpartto LK Operating's (LKO) investment funding and arrangement oflegal services, TCG's value increased from the original cash investment to approximately $1.5 million. "Underthe principle offreedom to contract, parties are free to enter into, and courts are generally willing to enforce, contracts that do not contravene public policy." Keystone Land & Dev. Co. v. Xerox Corp., 152 Wn. 2d 171, 176, 94 P.3d 945 (2004). '"In general, a contract which is not prohibited by statute, condemned by

2 While Eriks v. Denver, 118 Wn.2d 451,462, 824 P.2d 1207 (1992), allows trial courts to disgorge fees from attorneys who have violated the RPCs, Danzigplainly rejects trial court actions that are disciplinary in nature. Danzig, 79 Wn. App. at 620-21. -6-No. 88132-4 Madsen, C.J. (dissenting) judicial decision, or contrary to the public morals contravenes no principle of public policy."' State Farm Gen. Ins. Co. v. Emerson, 102 Wn.2d 477, 481, 687 P.2d 1139 (1984) (quoting 17 C.J.S. Contracts § 211, at 1024 (1963)). Rescission improperly prevents LKO from realizing the benefit ofits bargain. The lawful contract between LKO and TCG should not have been invalidated based on a third party attorney's purported violation ofthe RPCs. There is no basis in the law for such a remedy. In blurring the lines between this court's disciplinary authority and trial courts' civil decision making, the majority undoubtedly creates confusion for both judges and practitioners. The majority's complicated analysis ofthe purported RPC violations spans many pages, yet it is unclear whether such decisions will be left tojudges orjuries. Itis unreasonable to expect ajuryto perform such an analysis, especially in light ofHizey's directive thatjuries be shielded from the particulars ofthe RPCs. Itis equally untenable to expect a trialjudgeto determine ifan RPC violation has occurred when such disciplinary discretion is vested solely in this court. The unfortunate effect ofthe majority is to leave more questions unanswered than resolved. Conclusion This court's decision in Hizey as well as the Scope section to the RPCs provide strong policy reasons to separate the law ofethics codes from civil actions. Although the majority relies on public policy grounds tojustify -7-No. 88132-4 Madsen, C.J. (dissenting) rescission, the public policy in this case favors maintaining the separation between attorney discipline and civil actions. Because rescission is an improper remedy for Powers' purported RPC violation, I dissent.

-8-No. 88132-4 Madsen, C.J. (dissenting)

I 

# I

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