Opinion ID: 2586049
Heading Depth: 1
Heading Rank: 3

Heading: Recovery of Prospective Fees

Text: ¶ 11 The extent to which an attorney may sue cocounsel for the loss of prospective fees is an issue of first impression in Washington. The Court of Appeals followed the approach of the California courts and rejected the argument that cocounsel owe fiduciary duties to each other on the theory that the latter's malpractice in handling their mutual client's case reduced or eliminated the fees the former expected to realize from the case. Mazon, 126 Wash.App. at 216-17, 108 P.3d 139. Relying on Beck v. Wecht, 28 Cal.4th 289, 290, 48 P.3d 417, 121 Cal.Rptr.2d 384 (2002), the Court of Appeals noted, it would violate public policy to allow attorneys to sue each other on the theory that `cocounsel have a fiduciary duty to protect one another's prospective interests in a contingency fee.' Mazon, 126 Wash.App. at 215, 108 P.3d 139 (quoting Beck, 28 Cal.4th at 291, 121 Cal. Rptr.2d 384, 48 P.3d 417). ¶ 12 The court recognized that Mazon's claim in this case did not create an actual conflict with his and Krafchick's undivided loyalty to Layouni, but decided that public policy dictates against allowing claims between cocounsel for lost prospective fees because of the potential conflict with the undivided loyalty owed to the client. The court reasoned that a bright-line rule is preferable because it prevents conflicts from arising at any point during the representation, assures the client's interest is paramount regardless of the issue, and is easy to administer. Mazon, 126 Wash.App. at 220, 108 P.3d 139. Thus, the court rejected Mazon's claim on the basis that recovering damages for a prospective contingency fee lost through a misfeasance of cocounsel assumes a duty to conduct the lawsuit in a manner that does not diminish or eliminate the fee each expects to collect. We agree. Imposing a duty to protect prospective fees would create potential impermissible conflicts with the duty of loyalty the attorneys owe their clients. ¶ 13 The potential conflict of interest identified by the California Supreme Court in Beck involved the undivided duty of loyalty that attorneys owe to their clients. The court held this duty may be violated if cocounsel were allowed to sue one another based on a fiduciary duty to protect one another's prospective interests in a contingency fee. In Beck, cocounsel represented two clients in a personal injury action against a truck manufacturer. Pretrial settlement efforts were unsuccessful. On the evening before closing arguments, the defendant offered to settle the case for $6 million. The clients instructed the attorneys to accept the settlement. But the local counsel failed to accept the settlement offer as instructed by the clients, and the jury returned a defense verdict. The lead counsel sued the local counsel seeking to recover the contingency fee he had expected to earn in the case. The California Supreme Court denied relief on the basis that his claim was contrary to public policy. To avoid any detriment to the jointly represented clients, the court held that no collateral duties could arise that would interfere with the duty of undivided loyalty and total devotion owed to the clients. See Beck, 28 Cal.4th at 297-98, 121 Cal. Rptr.2d 384, 48 P.3d 417. ¶ 14 Consistent with Beck, the Court of Appeals in this case recognized that Washington ethical rules are clear that `[t]he standards of the legal profession require undeviating fidelity of the lawyer to his client. No exceptions can be tolerated.' Public policy prohibits an attorney from owing a duty to anyone other than the client when the collateral duty creates a risk of divided loyalty due to conflicts of interest or breaches of confidence. Mazon, 126 Wash.App. at 216-17, 108 P.3d 139 (footnote omitted) (internal quotation marks omitted) (quoting Tank v. State Farm Fire & Cas. Co., 105 Wash.2d 381, 388, 715 P.2d 1133 (1986)). The Court of Appeals rejected Mazon's argument that his claim based on Krafchick's malpractice did not create a potential conflict of interest with either attorney's overriding duty to their client. The court reasoned that Krafchick did not owe Mazon a duty to pursue the case in any particular manner because those duties were to Layouni alone. Therefore, the court concluded that allowing cocounsel to sue each other for lost prospective fees, regardless of the basis for the claim, implicates the same concerns as discussed in Beck. ¶ 15 We agree with the Court of Appeals' reasoning and adopt a bright-line rule that no duties exist between cocounsel that would allow recovery for lost or reduced prospective fees. As cocounsel, both attorneys owe an undivided duty of loyalty to the client. The decisions about how to pursue a case must be based on the client's best interests, not the attorneys'. The undivided duty of loyalty means that each attorney owes a duty to pursue the case in the client's best interests, even if that means not completing the case and forgoing a potential contingency fee. ¶ 16 If we were to recognize an attorney's right to recover from cocounsel prospective fees, potential conflicts of interest that harm the client's interests may arise. Cocounsel may develop an impermissible self-interest in preserving the claim for the prospective fee, even when the client's interests demand otherwise. Additionally, the question of whether an attorney's claim conflicts with the client's best interests may be difficult to answer. Discretionary, tactical decisions, such as whether to advise clients to settle or risk proceeding to trial and determining the amount and structure of settlements, could be characterized by cocounsel as a breach of the contractual duties or general duties of care owed to one another and provide a basis for claims seeking recovery of prospective fees. As the California Supreme Court recognized, in comparing the issue to lawsuits for prospective fees between successive attorneys, [p]ublic confidence in the legal system may be eroded by the spectacle of lawyers squabbling over the could-have-beens of a concluded lawsuit, even when the client has indicated no dissatisfaction with the outcome. Considerations of public policy support the conclusion that an attorney's duty of undivided loyalty to his client should not be diluted by imposing upon him obligations to the client's former attorney, or at least obligations greater than the client himself owed to the former attorney. Beck, 28 Cal.4th at 296, 121 Cal.Rptr.2d 384, 48 P.3d 417. ¶ 17 Mazon contends that prohibiting cocounsel from suing each other for prospective fees would undermine the public's confidence in the legal system because cocounsel could not be held fully liable to each other. He states that when an attorney can recover only nominal damages from cocounsel, despite the loss of a substantial prospective fee, but is confronted with a significant claim for professional negligence from the client through no fault of his own, the incentive will be to collude with cocounsel to minimize or to conceal the client's malpractice claim. Absent a viable legal remedy to recover his own damages, an attorney is thus more likely to be less diligent about protecting the interests of the client, rather than more. Mazon's Pet. for Review at 12-13. Under these circumstances, he argues, the attorney's interest in protecting himself from liability will trump his duty of undivided loyalty to the client. ¶ 18 However, we find this argument unpersuasive because it presumes that allowing cocounsel to recover prospective fees will eliminate attorneys' incentive to collude and protect themselves from liability. Instead, we believe that allowing cocounsel to recover prospective fees would create the opposite incentives to overemphasize the informal divisions of responsibilities between cocounsel, overlook any failings of cocounsel, and later claim that cocounsel's failures were not their responsibility. Prohibiting cocounsel from suing each other for prospective fees arising from an attorney's malpractice in representing their mutual client provides a clear message to attorneys: each cocounsel is entirely responsible for diligently representing the client. ¶ 19 The Court of Appeals correctly recognized that this approach encourages cocounsel to back each other up and ensure that there are fewer mistakes in pursuing the best outcome for the client. Cocounsel are in the best position to ensure that they are not injured by each other's mistakes. This approach is consistent with the attorneys' duty to maintain undivided loyalty to the client. The public interest is best served by this approach because attorneys must exercise diligence when choosing and working with cocounsel to preserve the undivided duty to the client. We affirm the Court of Appeals on this issue and adopt the bright-line rule rejecting the recognition of a duty upon which cocounsel could recover from each other prospective attorney fees.