Court Opinion

ID: 3201785
Source: CourtListenerOpinion
Date Created: 2016-05-09 19:28:28.750755+00
Date Added: 2024-06-11T14:28:15.837670
License: Public Domain

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

GEOFFREY CHISM,
                                                DIVISION ONE
      Appellant/Cross-Respondent,
                                                No. 72844-0-1

                                                PUBLISHED OPINION
TRI-STATE CONSTRUCTION, INC.,
and LARRY AGOSTINO,

      Respondents/Cross-Appellants,             FILED: May 9, 2016

      Dwyer, J. - Following a month-long jury trial, attorney Geoffrey Chism

was awarded $750,000 for breach of two compensation contracts by his former

employer, Tri-State Construction, Inc., and exemplary damages for unlawful
wage withholding. The trial court then dramatically reduced Chism's recovery,
premised on findings that Chism violated Washington's Rules of Professional
Conduct (RPCs) during his time as Tri-State's in-house general counsel. By

ordering disgorgement ofChism's wages based on novel interpretations of
several RPCs, the trial court exceeded the disciplinary authority delegated to it by
our Supreme Court. Moreover, the trial court disregarded the strong legislative
policy preference in favor of payment of earned wages by failing to even
acknowledge that, unsupported by precedent, it was ordering disgorgement of an
No. 72844-0-1/2

attorney's wages, as opposed to an attorney's fee. Accordingly, we reverse the

trial court's challenged rulings and remand the cause for entry of judgment

consistent with the jury's verdict.

                                                  I

        1. Background

        Tri-State Construction, Inc. (Tri-State) is a closely held construction firm

that provides general contractor services. Ron, Tom, and Larry Agostino2 are the
current owners and corporate directors of Tri-State. Theirfather, Joe, formed the

company in the late 1950s and eventually turned the company overto his sons,
appointing Ron, the middle son, as president in 1996. Larry and Tom joined Ron
as members of Tri-State's board of directors (Board) sometime in the mid-2000s.

Findings of Fact 1, 3.

        Chism began working with Tri-State as outside counsel in the early 1980s.
Over the next three decades, Chism developed relationships of mutual trust and

loyalty with Joe and Ron. During that time, Chism became Tri-State's primary
attorney, performed the majority of the company's general legal work, and was
perceived by himself and Tri-State as the company's general counsel. He initially
reported to Joe, and later reported to Ron when Ron became president. Finding
of Fact 2.

         1Our recitation offacts is, essentially, an abridged version ofthe trial court's factual
 findings. While Chism assigns error to many of the trial court's findings, he does not persuasively
 contest that any ofthem are unsupported by substantial evidence.
         2To avoid confusion, the Agostinos are referred to by their given names.

                                                 -2-
No. 72844-0-1/3

       2. Chism represents Tri-State as outside counsel

       Chism's financial arrangement with Tri-State changed several times over

his long relationship with the company. Finding of Fact 4. For the first two

decades, Chism billed Tri-State for legal services on an hourly basis under a

conventional billing arrangement. Finding of Fact 5. In late 2002, Chism began

charging a flat monthly fee for non-litigation matters while continuing to bill

litigation matters separately on an hourly basis. Finding of Fact 6.
       Chism memorialized this new arrangement in a December 2002 letter to

Ron. Therein, Chism set forth the parties' understanding that the non-litigation

matters, which were characterized as "General Counsel" (GC) services, were

expected to be "far-reaching and broadly encompassing" and included "all of [Mr.
Chism's] personal time on all matters . . . other than matters that are in formal
dispute resolution." Finding of Fact 6. Consistent therewith, Chism repeatedly
testified at trial to his understanding that, under the GC arrangement, he would
"do whatever it took" and "whatever Tri-State asked" under the flat monthly fee

billing arrangement. Findings of Fact 7, 17.
        The December 2002 letter did not refer to Chism's hourly rate or indicate

whether his services under the retainer were expected to be limited to a specified

number of hours or in any other way, otherthan that they would not include
litigation and other matters in formal dispute resolution, for which Chism would
continue to bill by the hour.3 Finding of Fact 8. Despite Chism's trial testimony
that the monthly retainers were based on an understanding that Chism would

        3Indeed, after the inception of the monthly retainer, Chism continued to track his time
spent on Tri-State litigation matters and to submit detailed monthly invoices showing time worked
 and tasks performed on those matters. Finding of Fact 9.

                                               -3-
No. 72844-0-1/4

spend an average of approximately 1.5 hours per day on Tri-State matters, the

trial court found that "[tjhere was no credible or persuasive evidence that Mr.

Chism's flat monthly fee arrangement was ever tied to him working an average

number of hours per day, week, or month."4 Finding of Fact 17.

       Chism's flat fee began at $10,000 per month in November 2002. Finding

of Fact 8. In January 2005, Chism increased the monthly GC retainer to $12,000

per month. Finding of Fact 12. By July 2007, Chism also began charging a

separate monthly flat fee for "Joint Venture/Design Build/405" (JV) GC services.

The fees for those were $2,000 per month, as of July 2007, and $5,000 per

month, as of October 2007. Thus, as of October 2007, Chism's total flat monthly

fee was $17,000, comprised of $12,000 for GC services and $5,000 for JV GC

services. Finding of Fact 14. During this time, Chism's hourly rate for Tri-State

litigation matters increased from $325 in November 2002 to $500 in June 2008.

Findings of Fact 8, 15.

        Chism did not create any documentation similar to the December 2002

letter regarding the increases in his GC retainer, the initiation of the JV retainer,

or the increase in that retainer. He testified that the scope of his work under both

retainers was always that he would do whatever it took and whatever he was

asked to do. In addition, Chism testified that all the retainer amounts since 2002

were intended to be a good deal for Tri-State—that is, they were supposed to

         4 Notably, Chism's purported understanding that the retainer amount was based on an
anticipated number of hours of non-litigation work per week is not necessarily contrary to his
repeated statements that he intended the retainer to cover whatever Tri-State wanted him to do.
In fact, the likelihood that "whatever it takes" actually stood for a rough estimate of anticipated
hours is reflected in the fact that, when Chism was required to spend additional time, the parties
agreed to him receiving an additional flat monthly fee.

                                                -4-
No. 72844-0-1/5

cover more hours than a simple division of the retainer by Chism's hourly rate.

Finding of Fact 16.

      3.   Chism moves in-house at Tri-State

      Sometime in 2008, Chism told Ron that he was planning to leave his law

firm and work for a few existing clients out of his home. Chism proposed that he

become a Tri-State employee and provide his services to the company as in-

house GC. Chism preferred becoming an employee as opposed to continuing as

outside counsel because he wanted healthcare coverage and did not want to

deal with obtaining coverage on his own. He also considered it important that he
not be required to keep timesheets. Finding of Fact 22.
       Chism proposed thatTri-State pay him an annual salary of$190,000. He
testified that he came up with that number by multiplying $17,000, the monthly
total of his two retainers, by 12, then reducing the $204,000 annual total by
$14,000 to reflect the extra costs of healthcare and taxes that he estimated the
company would have to pay as a result of his becoming its employee. Finding of
Fact 23. Similar to his work as outside counsel, Chism's employment

arrangement with Tri-State did not provide for or otherwise contemplate the
payment of any bonuses to him, annual or otherwise. Finding of Fact 28.
       At the time of Chism's hiring, the parties did not discuss the number of
hours that he would be expected to work. Finding of Fact 25. Chism assured
Ron that he would continue to do "whatever it t[ook]," other than litigation work,

for which Tri-State would need to hire outside counsel. Chism and Ron

 understood that there would be no significant changes in the general parameters

                                        -5
No. 72844-0-1/6

of the arrangement established in the December 2002 letter, other than that

Chism would now be an employee and be paid a salary and basic benefits rather

than monthly retainers. Finding of Fact 26.

       Ron informed Tri-State's controller, Kristi MacMillan, that Chism was

becoming a full-time Tri-State employee. MacMillan understood that to mean

that Chism generally would be working 40 hours per week, and she enrolled him

to receive Tri-State healthcare coverage, showing him as working 40 hours per

week. Tri-State's health plan required employees to work at least 32 hours per

week to be eligible. MacMillan testified that she would not have enrolled Chism
for healthcare benefits or have shown him as working 40 hours per week if she

had known that he was expected to work only part time. Finding of Fact 27.
       Once he moved in-house, Chism did not track or record the matters he

worked on or the time he spent on them because his salary covered all of his
work—litigation and non-litigation tasks, legal and non-legal tasks, and paralegal
or associate and partner-level tasks. Findings of Fact 29-30. He did not work a
regular schedule. For the first couple of years as an employee, Chism worked
primarily from his home or other locations, and he continued to do so throughout
his employment with Tri-State. Finding of Fact 30.
       4. Tri-State agrees to modify Chism's compensation structure and awards
           him a $310,000 bonus for fiscal year (FY) 2010.

       In September 2010, after serving as an in-house lawyer for approximately
20 months, Chism proposed a new salary arrangement. Pursuant to this
 proposal, retroactive to January 1, 2010, in addition to his base salary and
 benefits, Chism would be eligible for a discretionary bonus. Chism testified that

                                          6-
No. 72844-0-1/7

he presented the proposed arrangement to Ron as being more beneficial to Tri-

State than simply raising his salary because he would be paid for only the time

he actually worked, he would be paid for any extra hours only at the end of the

fiscal year, and the amount of any bonus would be solely within Ron's discretion.

Finding of Fact 38.

       Ron agreed to the new arrangement. Chism drafted their agreement and

e-mailed it to Ron (September 2010 memo). Ron initialed a copy. Finding of

Fact 39.

       The September 2010 memo began by stating that Chism's $190,000

annual salary was based on working part-time at 1.5 hours per day, not full-time.
       My current compensation, which believe it or not we originally set
       over ten years ago, is based on me spending an average of less
       than an hour and a half a day on Tri-State matters, or about seven
       hours a week. It has always taken a little more than that to get
       things done but, until the last year or two, Ithink the arrangement
       worked well for both of us. Needless to say, for the past couple of
       years the time requirements have been a little more demanding.
Finding of Fact 40.

       This was the first time that one of Chism's e-mails stated that his

compensation was based on a particular number of hours. Ron testified that he
was not aware at the time that he received the September 2010 memo of a 7.5-

hour per week base for Chism's salary.

       The memo then addressed the discretionary bonus process.

       Immediately prior to the end ofTri-State's fiscal year Iwill give you
       my best estimate of the total amount of time Ispent during that year
       on Tri-State matters. I will defer to your judgment as to what
       bonus/adjustment you feel is appropriate to compensate for any
       effort over the 1.5 hour a day base. You can make the
       bonus/adjustment any time you want so as to include it in either the
No. 72844-0-1/8

       past or upcoming fiscal year. I am a calendar year taxpayer so the
      timing doesn't make any difference to me.

Finding of Fact 42.

       Under the new bonus structure, at the end of each fiscal year (September

30), Chism would submit an annual "best estimate" of the time he spent on all
Tri-State matters and Ron would use his judgment to determine an "appropriate"

"bonus/adjustment" to compensate Chism for work done over the "1.5 hour a day
base." Finding of Fact 43. Chism interpreted "best estimate" to mean that,
consistent with his practice as in-house counsel, he was free not to track or

record his time in any formal way. Finding of Fact 63.

       In addition, according to the September 2010 memo, Tri-State would
reimburse Chism for his bar dues, professional insurance premiums, cellular
telephone and e-mail data charges, and continuing legal education expenses
retroactive to FY 2010. Tri-State would also provide Chism a company car and,
until the car was provided, would reimburse him for his gas, maintenance,
repairs, and insurance for use of his own vehicle. Finding of Fact 48.
       As part of the September 2010 agreement, Chism and Ron also agreed
that Tri-State would award a bonus to Chism for his past work during the

previous fiscal year (FY 2010). This bonus was calculated under the new bonus
structure. Finding of Fact 46.

          Chism provided the hours estimate for FY 2010 in a September 30, 2010
e-mail.

          As per our recent discussion regarding my compensation, we
          agreed that Iwould provide you with an estimate of the actual time

                                         -8
No. 72844-0-1/9

      spent on Tri-State matters at the end of your fiscal year, September
      30. . . .

      The reference to the 1.5 hour a day base is to the fact that my base
      compensation was originally set on the assumption that I would
      average about 1.5 hours a day, or 380 hours a year on Tri-State
      matters at my old hourly billing rate of $500 per hour.

      This has been, as you know, a pretty busy year. In addition to the
      routine issues, I have spent a considerable amount of time on
      several somewhat out-of-the ordinary matters ....

      As we discussed this morning, realistically I have probably been
      averaging something over 60% of a normal work day on your
      matters. To be conservative, let's call it 50%. That translates into
      1,000 hours of time, of which 380 hours have been covered by my
      base compensation.

      As I have said, I defer to you and your sense of fairness to make
      whatever adjustment you think is right.

Finding of Fact 46.

      The trial court found that, "[although not actually stated, Mr. Chism's

memo essentially requested a $310,000 bonus: 1,000 hours minus 380 hours

times $500 an hour." Finding of Fact 47. Indeed, Tri-State calculated Chism's

bonus using the identical numbers provided by Chism in his September 30, 2010
e-mail: 620 excess hours (1,000 - 380) x $500/hour rate, or $310,000. Tri-State

paid the $310,000 bonus to Chism in three installments. Finding of Fact 62.
       Ron forwarded both September e-mails to Larry and Tom. Findings of

Fact 39, 61. Subsequently, at its annual meeting, Tri-State's Board of Directors

ratified and confirmed "all corporate activity since the last annual meeting and

business decisions of the Corporation's officers, directors and shareholders,

while acting for the Corporation." Finding of Fact 70.
No. 72844-0-1/10

       The trial court found that the "underpinnings" cited by Chism in the

September 2010 memo and the September 30 e-mail "were inaccurate in several

key respects." Finding of Fact 49.

       First, Mr. Chism's claim that his current compensation had been set
       over ten years ago was not accurate. Mr. Chism's retainer
       arrangement did not even begin until late 2002, or eight years prior
       to September 2010. But more importantly, Mr. Chism's "current
       compensation" of $17,000 a month was based on his monthly
       retainer set in October 2007, which was only 15 months before he
       went in-house. During those fifteen months, Tri-State only paid him
       $500 an hour for the last six months .... Mr. Chism was far more
       familiar with his rate history than Tri-State.

       . . . Second, Mr. Chism's claim that his retainer arrangement with
       Tri-State equated to him spending an average of less than an hour
       and a half a day on Tri-State matters, or about seven hours a week
       was contrary to his repeated testimony that in exchange for the
       retainer, he would do whatever Tri-State wanted no matter how
       long it would take. That Mr. Chism's retainer was not based on an
       expectation of his spending less than an average of an hour and a
       half a day or about seven hours a week on Tri-State matters finds
       further support in the fact that... Mr. Chism's hourly rate would
       increase without a commensurate increase in the retainer, and his
       retainer would increase without a commensurate increase in his
       hourly rate[.]. . .

       . . . Even assuming that he based his monthly retainer on the
       assumption that he would work a certain number of hours a day, he
       never worked less than an average of an hour and a half a day or
       about seven hours a week, with the exception of a ten month period
       from March 2004 to January 2005. And during the critical time
       when his "current compensation" was $17,000 a month, dividing
       that retainer by his hourly rate would mean that Mr. Chism worked
       anywhere from 2.13 hours per day/10.6 hours a week to 1.7 hours
       per day/8.5 hours a week.[5]

       5 We note that the basis for the trial court's calculations is unclear and the results appear
to be incorrect. If Chism's $17,000 monthly retainer is divided by his $400 hourly rate from
October 2007, the result is 42.5 hours per month, which is approximately 9.77 hours per week or
1.95 hours per day. If Chism's $17,000 monthly retainer is divided by his $500 hourly rate from
June 2008, the result is 34 hours per month, which is approximately 7.82 hours per week or 1.56
hours per day.

                                              -10-
No. 72844-0-1/11

      . . . Finally, Mr. Chism mischaracterizes his salary as "originally set
      on the assumption that I would average about 1.5 hours a day, or
      380 hours a year on Tri-State matters at my old hourly billing rate of
      $500 per hour." Were the cost of his benefits included, Mr. Chism
      would actually owe 408 hours a year ($204,000 + $500/hour), not
      380 hours. Mr. Chism subtracts his salary, not his salary with
      benefits, when he subsequently provides his estimate of hours
      worked for the bonuses described below, thus effectively double-
      charging Tri-State for benefits.

Findings of Fact 49-52.

      The trial court believed that

      Mr. Chism crafted his September 2010 memo and September 30,
      2010 emails as though the new arrangement he sought was a
      direct outgrowth of his and Tri-State's longstanding practice, which
      convinced Ron that Tri-State owed Mr. Chism more money for the
      same work that Mr. Chism had earlier agreed to perform for a fixed
      salary—including the work Mr. Chism had already performed in FY
      2010. In so doing, Mr. Chism laid the foundation for seeking
      compensation that exceeded even what he would have been paid
      as outside counsel, while enjoying the guaranteed income, benefits,
      and freedom from timekeeping of his inside-counsel position.

Finding of Fact 53.

      The trial court also found that Chism's estimate of his hours for FY 2010,

offered in his September 30, 2010 e-mail to Ron as justification for a $310,000

bonus, "[wa]s not reliable." Finding of Fact 65.

       5. Chism takes over as president of Tri-State's Canadian subsidiary; Tri-
          State awards him a $500,000 bonus for FY 2011

       In April 2010, Ron was diagnosed with early onset Alzheimer's disease.

Finding of Fact 108. By the summer of 2011, Chism observed that Ron's health
condition and memory lapses were noticeably impacting his ability to run Tri-

State. Finding of Fact 72. Chism suggested that, due to his condition, Ron

would likely need to step down as president ofTri-State. Chism also advised the

                                         11
No. 72844-0-1/12

Agostino brothers that Tri-State had a fiduciary duty to inform its partners in a

major, ongoing Canadian project about Ron's health. Finding of Fact 73.

       Chism offered to replace Ron as president of the joint venture running the

Canadian project, TRP Contractors, Inc. (TRP). Ron and Tom agreed and, in

mid-October 2011, appointed Chism as TRP's president. Chism did not request

any additional compensation for taking on the TRP president position and its

attendant responsibilities. Finding of Fact 78.

       During FY 2011, Tri-State had a net loss of approximately $27 million,

largely attributable to the Canadian project. During FY 2011 and FY 2012,

Chism's efforts and acumen helped Tri-State to stay in business, preserve its

bonding capacity, and avoid default on that project, which, in turn, could have

cost Tri-State a minimum of $27 million. Tri-State's bonding company's

representative, Eric Mausolf, testified that Tri-State's risk offailure on the
Canadian project was substantial and that, with the fate ofTri-State on the line,
Chism capably handled the troubled project on behalf of Tri-State. Finding of
Fact 79. The trial court found that "Tri-State exists today because it survived the

crisis associated with the Canadian project and it survived that crisis in large part

due to Mr. Chism's efforts and hard work." Finding of Fact 80.

       On October 21, 2011, when Chism and Ron were driving back from a

meeting in Vancouver, B.C. related to the Canadian project, Chism raised the
issue of a bonus for FY 2011. Chism did a spontaneous calculation of the hours

that he had worked during the previous year, multiplied them by $500, subtracted
his salary from this total, and proposed a bonus of $500,000. Chism testified that

                                          12
No. 72844-0-1/13

Ron agreed to his proposal. Finding of Fact 81. However, Ron testified that he

told Chism that, due to the company's financial difficulties, he could not pay him a

bonus (much less the proposed sum) until a pending legal claim was successfully

settled. Finding of Fact 82.

       Chism drafted an agreement memorializing the terms of their discussion in

the car (November 2011 memo). The memo stated that Chism's bonus

arrangement, which was meant to "account for the additional time spent which
was not anticipated in our longstanding flat compensation arrangement," had
been operating for "the last couple ofyears."6 Chism acknowledged in the memo
that, due to Tri-State's limited cash availability, he did not "expect any accrued
supplement/bonus" to be paid until the following year and that he was "happy to
wait until cash [wa]s available." Finding of Fact 83. The memo did not make
payment of the bonus conditional on successful settlement of the legal claim but,
instead, stated that Chism did not expect any bonus to be paid until the next
year, "maybe out of the [anticipated] settlement." The memo also stated that Ron
had already indicated that he thought the proposed $500,000 bonus was fair.
Finding of Fact 84. Finally, the memo stated that Ron should let Chism know if
he recalled their conversation differently. Ron signed the memo. Finding of Fact

85.

        The trial court found that, as with his request for a $310,000 bonus for FY
2010, Chism did not demonstrate that he had a reliable basis for estimating his
 hours worked in FY 2011. Finding of Fact 89.

        6The trial courtfound that this last statement was not accurate, as Chism had just
 initiated the arrangement regarding a possible bonus one year earlier. Finding of Fact 83.

                                              -13-
No. 72844-0-1/14

        In a meeting in mid-January 2012 regarding the company's financial

issues, MacMillan said something needed to be put on the books reflecting

Chism's bonus so that the FY 2011 financial statement could be completed. Up

to that time, the Agostinos had not agreed to book any amount for a FY 2011

bonus for Chism, but they agreed to add $400,000 as a liability owed to Chism.

Finding of Fact 92. In follow up to the January 2012 meeting, on February 6,

2012, MacMillan recorded $400,000 as "wages" owed to Chism in Tri-State's

general ledger. Finding of Fact 93.

        Tri-State never paid the $500,000 bonus memorialized in the November

2011 memo. Finding of Fact 107.

        6. Larry succeeds Ron; Chism negotiates for a mid-year bonus in March
               2012

        Larry succeeded Ron as Tri-State's president in March 2012. Soon
thereafter, Larry met with Chism to discuss his FY 2011 bonus and the possibility
of a mid-year bonus for FY 2012. Finding of Fact 97. Regarding FY 2011, Larry
told Chism that he would have a hard time collecting the $500,000 bonus

because he had taken advantage of Ron to obtain the agreement. Finding of

Fact 99.

        Regarding FY 2012, Chism stated that he had worked enough hours in the
past six months to have earned himself a bonus of from $500,000 to $750,000,
as measured with reference to his $500 hourly rate.7 Chism and Larry

negotiated and, eventually, Chism said that he would accept a $250,000 bonus

            7The trial court found that, as with his previous estimates of his hours, Chism's estimate
 regarding how many hours he had worked in the first half of FY 2012 was not reliable. Finding of
 Fact 98.

                                                  -14-
No. 72844-0-1/15

for that time period and $300 per hour going forward, as long as he was paid a

minimum salary of $1,500 per week. Chism also wanted ownership of his

company computer, cell phone, and the company automobile when he left Tri-

State. Larry appeared to agree. Finding of Fact 101. Chism said he would

prepare a memo reflecting their agreement before he left on vacation the

following day. Finding of Fact 103.

      As promised, Chism drafted a memo memorializing the agreement.

Finding of Fact 103. Chism subsequently revised a single provision and resent
the agreement to Larry the following day (March 2012 memo). Each of Chism's
e-mails concluded by stating that, if Larry found the contents ofthe memo to be
consistent with their discussion, he should initial two copies of the memo.

Finding of Fact 104.

       Larry reviewed the e-mails and wrote back to object only to the provision
stating that, upon Chism's departure from the company, Tri-State would give him
the computer, cell phone, and car. Larry disputed that he had agreed to the
transfer of the car and other property and told Chism that he would have to

deduct $50,000 from the payment they had discussed if Chism wanted the
automobile. Larry did not object to any of the other terms. Finding of Fact 105.
       On April 10, 2012, Chism and Larry met to follow up on the issue of
Chism's compensation. Chism said that they should get the matter settled. Larry
responded that there was no need to talk about it, as Tri-State was unwilling to
 provide Chism the additional compensation that they had discussed. When
 Chism asked about the $500,000, Larry said that he understood it to be an open

                                         15-
No. 72844-0-1/16

issue. Chism said that under the circumstances, he would have to resign. He

did so the same day. Finding of Fact 107.

        Tri-State never paid Chism the $250,000 bonus. Finding of Fact 107.

        7. Chism sues Tri-State; Tri-State asserts defenses to enforcement and
            counterclaims seeking disgorgement of any compensation found owing
             to Chism

        Chism sued Tri-State and Larry to recover the $750,000 in unpaid

bonuses, coupled with exemplary damages due to Tri-State's willful withholding

of his wages. Tri-State counterclaimed, asserting common law breach of
fiduciary duty and violations of RPCs 1.5, 1.7, 1.8, and 8.4.8 The same claims
were also asserted as defenses to enforcement of the bonus contracts. In

addition, Tri-State asserted an undue influence defense related to Ron's

Alzheimer's. Finding of Fact 108.

         Chism's contract and wage withholding claims were tried to a jury, as was

Tri-State's undue influence defense. Because they were based on the RPCs, the

remainder of Tri-State's claims and defenses were tried to the court. The

exceptions were those based on RPC 1.5, which were dismissed pretrial.
Finding of Fact 109. At Chism's suggestion, the trial court also obtained advisory
opinions from the jury pursuant to CR 39(c)9 related to whether, assuming that it
should be understood as an attorney fee contract entered into after an attorney-

         8Tri-State styled this as a claim for "breach of fiduciary duty based on violations of
professional conduct rules."                                                                 .
         9CR 39(c) provides: "Advisory Jury and Trial by Consent. In all actions not triable of
 right by ajury the court, upon motion or of its own initiative, may try an issue with an advisory jury
or it may, with the consent of both parties, order a trial with a jury whose verdict has the same
 effect as if trial byjury had been a matter of right."

                                                  -16-
No. 72844-0-1/17

client relationship existed, the September 2010 modification was enforceable.10

Findings of Fact 111-112.

       After a month-long trial, the jury found that Chism had proved his contract

claims for the FY 2011 bonus of $500,000 and the FY 2012 bonus of $250,000,

awarding $750,000 to Chism. It also found that Tri-State had willfully withheld

these wages, subjecting it to double damages and attorney fees, pursuant to

RCW 49.52.070, and an award of attorney fees pursuant to RCW 49.48.030.

The jury found that the undue influence defense was not proved. Finding of Fact

112. The jury also answered all three advisory questions in Chism's favor.

       Several months later, the parties reconvened for the trial court to decide

Tri-State's remaining counterclaims and defenses. In addition to the trial

testimony heard by the jury, the court also considered the testimony of expert
witnesses for both Chism and Tri-State on the subject of a lawyer's common law

       10 The jury was asked the following questions on the verdict form:
       QUESTION 1: With respect to Mr. Chism's contention that an enforceable
       contract arose between himself and Tri-State in or around September of 2010
        regarding a modification ofhis compensation arrangement, whether predicated
       on Exhibit 9 or otherwise, do you find that Mr. Chism has proven, by a
        preponderance ofthe evidence, that the contract was fair and reasonable?
       QUESTION 2: With respect to Mr. Chism's contention that an enforceable
       contract arose between himself and Tri-State in or around September of 2010
        regarding a modification of his compensation arrangement, whether predicated
        on Exhibit 9 or otherwise, do you find that the [sic] Mr. Chism has proven, by a
        preponderance of the evidence, that the contract was free from undue influence?
        QUESTION 3: With respect to Mr. Chism's contention that an enforceable
        contract arose between himself and Tri-State in or around September of 2010
        regarding a modification ofhis compensation arrangement, whether predicated
        on Exhibit 9 or otherwise, do you find that the [sic] Mr. Chism has proven, by a
        preponderance ofthe evidence, that he made a full and fair disclosure ofthe
        facts upon which the contract was predicated?
Finding of Fact 112.
        The questions relate to the requirements for modifying attorney fee contracts during the
course of the attorney-client relationship set forth in Kennedy v. Clausing, 74 Wash. 2d 483, 490-91,
445 P.2d 637 (1968). There is some question as to the continued relevance ofthe Kennedy
requirements independent of the requirements of RPC 1.8 given the significant overlap between
the two. Sftft Valley/SOtti Ave.. LLC v. Stewart. 159 Wash. 2d 736, 743-44, 153 P.3d 186 (2007)
(addressing the Kennedy requirements in a discussion of RPC 1.8).

                                              -17-
No. 72844-0-1/18

fiduciary duties and RPC-based professional obligations, which had been given

at trial, outside of the jury's presence. Finding of Fact 110.

       The trial court subsequently entered findings and conclusions, reflecting

its determination that Chism had committed numerous RPC violations. It

declined to void the bonus contracts, concluding that Chism was entitled to

recover for Tri-State's breach of his employment agreement. However, it also

concluded that Chism must disgorge $550,000 of the $1,060,000 in bonuses to

which he otherwise would have been entitled. Finding of Fact 85.

       For FY 2011, the jury had awarded Chism $500,000; the trial court

reduced that amount by $165,000. For FY 2012, the jury had awarded Chism

$250,000; the trial court reduced that amount by $113,000. The trial court also
reduced Chism's FY 2010 bonus from $310,000 to $38,000. Because Tri-State

had already paid Chism the $310,000, Tri-State was required to pay Chism only
an additional $200,000. The trial court also determined that Chism was entitled

to recover double damages, pursuant to RCW 49.52.070, on the net wage award
(after disgorgement) and receive an award of reasonable attorney fees, pursuant
to RCW 49.48.030 and RCW 49.52.070. Chism appealed to this court. Tri-State

cross-appealed.

       Subsequently, the trial court entered findings of fact and conclusions of
law awarding Chism the overwhelming bulk of the attorney fees that he incurred
in prosecuting his wage claims. The court rejected Tri-State's contention that the
fees awarded as a result of its deliberate withholding of Chism's wages should be

 reduced in light of the trial court's fiduciary duty rulings. The trial court entered

                                          -18
No. 72844-0-1/19

judgment on April 24, 2015 to reflect its fee decision. Both Chism and Tri-State

filed amended notices of appeal from that judgment.

                                                  II

        Based on several alleged violations of the RPCs, the trial court effectively

ordered disgorgement of $1.1 million of the total damage award to which Chism

was entitled pursuant to the jury's verdict.11 We begin by examining the source

of, and any limitations to, the trial court's power to enter such an order.

        "[T]he regulation of the practice of law in [Washington] is within the

inherent power of [the Supreme Court]."12 Graham v. State Bar Ass'n, 86 Wash. 2d
624, 631, 548 P.2d 310 (1976). Indeed, "[t]he Supreme Court has an exclusive,

inherent power to admit, enroll, discipline, and disbar attorneys." Short v.
Demopolis, 103 Wash. 2d 52, 62, 691 P.2d 163 (1984). "[T]he exercise of 'this

power is necessary for the protection of the court, the proper administration of
justice, the dignity and purity of the profession, and for the public good and the
protection of clients.'" Demopolis, 103 Wash. 2d at 62 (internal quotation marks
omitted) (quoting Citv of Seattle v. Ratliff, 100 Wash. 2d 212, 215, 667 P.2d 630
(1983)).

          11 The jury's verdict supported a total award of $1.5 million, the sum of $750,000 in
unpaid bonuses and $750,000 in exemplary damages for unlawful wage withholding. Pursuant to
the trial court's judgment, Chism was awarded a total of $400,000, comprised of $200,000 in net
unpaid bonuses and $200,000 in exemplary damages.
         12 This authority derives from the state constitution and separation of powers principles.
See, e.g.. Kommavonasa v. Haskell. 149 Wash. 2d 288, 311, 67 P.3d 1068 (2003) ("[0]ur state
constitution vests the judicial power of the State in this court. Const, art. IV, § 1. Under this
 provision the power of the Supreme Court to regulate the practice of law is inviolate."); Short v.
 Demopolis, 103 Wash. 2d 52, 62, 691 P.2d 163 (1984) (considering whether the application ofthe
 CPA to the practice of law "would be an unconstitutional legislative invasion of the jurisdiction of
 the Supreme Court in its power to regulate the practice of law").

                                                -19-
No. 72844-0-1/20

       "[P]ursuant to its power to regulate the practice of law within

[Washington]," our Supreme Court adopted the RPCs. Hizev v. Carpenter, 119
Wash. 2d 251, 261, 830 P.2d 646 (1992). "The Rules are designed to provide

guidance to lawyers and to provide a structure for regulating conduct through

disciplinary agencies." RPC Scope cmt. 20. Although all lawyers admitted to
practice in Washington are bound by the RPCs, Rules for Enforcement of Lawyer
Conduct (ELCs) 1.2, the individual rules do not apply uniformly to all lawyers.

See, e.g., RPC 1.11 (concerning only government lawyers).

        "Failure to comply with an obligation or prohibition imposed by a Rule is a

basis for invoking the disciplinary process." RPC Scope cmt. 19. The
disciplinary process procedure is governed by the ELCs,13 which provide for a
variety of sanctions (e.g., disbarment and suspension) and remedies (e.g.,
restitution and probation) "[u]pon a finding that a lawyer has committed an act of
misconduct" in violation of the RPCs. ELC 13.1.

        Apart from this formal, public process, "[the Rules] are not designed to be
a basis for civil liability." RPC Scope cmt. 20. Indeed, "the purpose of the Rules
can be subverted when they are invoked by opposing parties as procedural
weapons." RPC Scope cmt. 20. Thus, "[t]he fact that a Rule is a just basis for a
lawyer's self-assessment, or for sanctioning a lawyer under the administration of
a disciplinary authority, does not imply that an antagonist in a collateral
 proceeding or transaction has standing to seek enforcement of the Rule." RPC
 Scope cmt. 20.

         13 ELC 1.1 ("[The ELCs] govern the procedure by which a lawyer may be subjected to
 disciplinary sanctions oractions for violation ofthe [RPCs].").

                                                -20-
No. 72844-0-1/21

           Nevertheless, violations of the RPCs may be relevant to litigation between

private parties. In particular, pursuant to its inherent disciplinary power, our

Supreme Court has authorized lower courts to impose certain "public remedies"

for RPC violations in the context of ongoing litigation.14 See Hizev, 119 Wash. 2d at

259 ("[BJreach of an ethics rule provides only a public, e.g., disciplinary, remedy

and not a private remedy."). For example, courts may determine that a violation

of the RPCs in the formation of a contract renders that contract unenforceable as

violative of public policy.15 LK Operating. LLC v. Collection Grp., LLC, 181
Wash. 2d 48, 85, 331 P.3d 1147 (2014): accord Vallev/50th Ave.. LLC v. Stewart,

159 Wash. 2d 736, 743, 153 P.3d 186 (2007).

           Courts may also deny or disgorge attorney fees in response to an RPC
violation. Eriks v. Denver, 118 Wash. 2d 451, 462, 824 P.2d 1207 (1992) ("The

general principle that a breach of ethical duties may result in denial or

         14 Consistent with the principle that attorney discipline falls within the exclusive province
of the judiciary, whether an attorney violated an RPC is a question of law for the court to
determine. See Eriks v. Denver, 118 Wash. 2d 451, 457-58, 824 P.2d 1207 (1992).
           While the burden of proof for establishing an RPC violation outside ofdisciplinary
proceedings does not appear to have been directly addressed, the disciplinary procedural rules
provide that violations must be established by a "clear preponderance of the evidence." ELC
m 14(h)- accord In re Disciplinary Proceeding Against Marshall, 160Wn.2d 317, 330, 157 P.3d
859 (2007). In seeking advisory opinions from the jury in this case, the trial court instructed the
jury on the preponderance of the evidence (or "fair preponderance of the evidence") standard
from Kennedy. 74 Wash. 2d at 499.
           15 The Supreme Court explained the relationship between the RPCs and public policy as
follows:
                    Because"the Supreme Court['s power] to regulate the practice of law is
           inviolate "this court has legal authority to set public policy in the context of
           attorney ethics. Kommavongsa v. Haskell. 149 Wash. 2d 288, 311, 67 P.3d 1068
           (2003). The RPCs are clearly directed at promoting the public good and
           preventing public injury .... It would also make little sense to say that a judicial
           decision in a particular case may set public policy, but a carefully drafted set of
           ethical rules promulgated by the only body with the authority to set such rules
           may not. It is therefore possible, as a general matter, to find principles of public
        policy relevant to the enforceability ofcontracts in the RPCs.
 LK Operating. LLC v. Collection Grp.. LLC, 181 Wash. 2d 48, 86-87, 331 P.3d 1147 (2014) (first
 alteration in original).

                                                  -21 -
No. 72844-0-1/22

disgorgement of fees is well recognized."); accord Behnke v. Ahrens. 172 Wn.

App. 281, 298, 294 P.3d 729 (2012) (stating that "[disgorgement of fees is a

reasonable way to discipline specific breaches of professional responsibility, and

to deter future misconduct of a similar type," and holding that it was proper for the

trial court to limit the sanction for an RPC violation to disgorgement of fees paid);

Cotton v. Kronenberg, 111 Wash. App. 258, 272, 275, 44 P.3d 878 (2002) (holding

that a trial court order disgorging all fees paid was a proper consequence of an
attorney's RPC violation). Consistent with the principle that disgorgement is
meant to redress a public wrong, a party seeking disgorgement need not

establish either damage or causation related to the alleged RPC violation.16
Eriks, 118Wn.2dat462.

         It bears repeating thatthe Supreme Court's disciplinary authority is
"plenary."17 Indeed, this plenary authority is the source of the disciplinary
authority exercised by all other actors, including other courts and the Washington
State Bar Association (WSBA).18 See ELC 2.1 ("Persons carrying out the

         16 Because the disgorgement sanction is untethered to an opposing party's injury, any
private benefit derived from its imposition is necessarily a windfall.
         This is unlike the restitution remedy available in disciplinary proceedings, which is tied
directly to harm suffered by the party to be compensated. See, e.g., Marshall, 160 Wash. 2d at 350
("A lawyer subject to discipline may be ordered to make restitution to persons financially injured
by the lawyer's conduct."); In re Disciplinary Proceeding Against Longacre, 155 Wash. 2d 723, 734,
122 P.3d 710 (2005) (Disciplinary Board declined to impose restitution because it found that client
did receive value from attorney's representation).
         17 As the Supreme Court has explained, in the disciplinary context, it has "'the inherent
 power to promulgate rules of discipline, to interpret them, and to enforce them.'" In re Disciplinary
 Proceedings Against Haley, 156 Wash. 2d 324, 333, 126 P.3d 1262 (2006) (quoting ]n_re
 Disciplinary Proceeding Against Stroh. 97 Wash. 2d 289, 294, 644 P.2d 1161 (1982) (emphasis
 added)) Thus, unlike in other contexts, in the context of attorney discipline, the Supreme Court
 exercises its authority both top-down, as the author ofthe RPCs, and bottom-up, as an error
 correction court.
         18 It is said thata disgorgement order is "within the inherent power ofthe trial court to
 fashion judgments." Eriks. 118 Wash. 2d at 463. This is true, but the trial court's authority to order
 disgorgement asdiscipline for attorney misconduct derives from the Supreme Court's authority to
 regulate the practice of law.

                                                -22-
No. 72844-0-1/23

functions set forth in these rules act under the Supreme Court's authority.").

Because the disciplinary authority of these actors derives from the Supreme

Court's authority, such authority must be exercised consistently with the manner

in which the Supreme Court elects to exercise its own authority. Were it

otherwise, the Supreme Court's disciplinary power would not truly be "inviolate."

See Kommavongsa v. Haskell, 149 Wash. 2d 288, 311, 67 P.3d 1068(2003).

Moreover, to permit superior courts to impose disciplinary penalties in

circumstances in which the Supreme Court would not do so would be to

encourage the development of varying standards of professional conduct

throughout the state's 39 counties.

       It follows that, in order to evaluate whether a trial court's disciplinary action

was proper, we must determine whether the court exercised its authority
consistent with Supreme Court precedent. That is, we must determine whether
the superior court properly limited its application of punishment to misconduct for
which the Supreme Court would itself impose sanctions. In order to make this
determination, we must give effect to the Supreme Court's own disciplinary

practices.

       Two ofour Supreme Court's practices are particularly relevant to this
case. First, disciplinary action must be based on one or more specific rule
violation(s). See ELC 1.1 ("These rules govern the procedure by which a lawyer
may be subjected to disciplinary sanctions or actions for violation of the [RPCs]."
Though some of the RPCs are related to traditional lawyer-client fiduciary duties,
see, e.g., RPC 1.8 cmt. 17 (the prohibition on lawyer-client sexual relationships

                                         -23
No. 72844-0-1/24

stems from the historical fiduciary relationship between the two), there is no

possibility of imposing discipline based on a general claim of "breach of fiduciary

duty."

         Second, when a rule is "impermissibly vague" as to its applicability, a

Supreme Court interpretation thereof applies prospectively only.19 In re

Disciplinary Proceedings Against Haley, 156 Wash. 2d 324, 338, 126 P.3d 1262

(2006). Factors that contribute to a disciplinary rule being deemed impermissibly

vague include "'the absence of clear guidance'" from the Supreme Court, the
"absence of a prior decision from [the Supreme Court]," and "the presence of

conflicting or equivocal authority from other jurisdictions and legal
commentaries." Haley, 156 Wash. 2d at 336, 338. This is consistent with the

statement in the RPCs that "[t]he Rules presuppose that disciplinary assessment

of a lawyer's conduct will be made ... in recognition of the fact that a lawyer
often has to act upon uncertain or incomplete evidence of the situation." RPC
Scope cmt. 19.

         The Haley decision is instructive. Therein, an attorney who was

representing himself pro se directly contacted the opposing party in that action,
who he knew to be represented by counsel. Haley, 156 Wash. 2d at 328-29. The
Supreme Court was tasked with deciding whether attorney Haley's conduct
violated RPC 4.2, which provides, "In representing a client, a lawyer shall not
communicate about the subject of the representation with a person the lawyer
 knows to be represented by another lawyer in the matter, unless the lawyer has

         19 This practice avoids a looming due process problem. Haley, 156 Wash. 2d at 335-36
 (addressing the contention that the pertinent rule was "unconstitutionally vague, [thereby]
 violating [the attorney's] constitutional due process rights").

                                                  -24
No. 72844-0-1/25

the consent of the other lawyer or is authorized to do so by law or a court order."

(Emphasis added.) Was Haley—proceeding pro se— "representing a client"

such that his conduct was subject to the rule? The court determined that Haley's

conduct was both subject to and violative of the rule in question but,

nevertheless, dismissed the related charge against him. Haley. 156 Wash. 2d at

343. This was the appropriate resolution, the court announced, because there

was no guiding authority from the Supreme Court on the question, and pertinent
authority from otherjurisdictions was equivocal. Therefore, the court held, its
interpretation of the rule was to be applied prospectively only. Haley. 156 Wash. 2d
at 343; see also In re Disciplinary Proceeding Against Halverson. 140Wn.2d
475, 491-92, 998 P.2d 833 (2000) (declining to find a violation offormer RLD 1.1
(1997) ("Commission of Act of Moral Turpitude") because—at the time—"a bright-
line rule prohibiting attorney-client sexual relations does not exist").
       Asuperior court may exercise its delegated disciplinary authority only in
response to misconduct for which the Supreme Court would itself impose
disciplinary sanctions. Accordingly, the superior court's authority to order
disciplinary remedies is limited to the subset of cases involving violations of the
RPCs in which the applicability of the cited RPC to the attorney's conduct has
been clearly established.

       We bear this limitation in mind as we review the decision of the trial court

 herein.

                                           25
No. 72844-0-1/26

       Tri-State alleged that Chism violated RPCs 1.5, 1.7, 1.8, and 8.4. The

claim related to RPC 1.5 was dismissed on summary judgment. Thereafter, the

trial court concluded that the remaining RPCs applied to Chism's conduct,

determined that he had acted in violation of those rules, and ordered him to

disgorge a significant portion of the wages that, according to the jury, he was

owed.20 We now examine, taking each rule in turn, whether the trial court was

authorized to order disgorgement of wages based on the identified violations.

        RPC 1.5—Fees

        Tri-State contends, contrary to the superior court's order on summary

judgment dismissing the claim, that Chism violated RPC 1.5 by negotiating
substantial compensation in addition to his salary and benefits as in-house

counsel.

        "When interpreting the meaning of any RPC, . . . [o]ur 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 of the RPCs as a whole." LK
Operating, 181 Wash. 2d at 75. '"[I]t is fundamental that... we avoid absurd

results.'" In re Marriage of McDermott. 175 Wash. App. 467, 488, 307 P.3d 717

        20 Tri-State also alleged, and the trial court agreed, that each ofthe rule violations that it
identified also constituted a violation of a fiduciary duty that Chism owed to Tri-State as its
attorney. However, breach offiduciary duty is a separate common law cause ofaction, with
specific, clearly established elements. Micro Enhancement Int'l. Inc. v. Coopers &Lvbrand. LLP,
110 Wash. App. 412, 433-34, 40 P.3d 1206 (2002) ("The plaintiff [in a breach offiduciary duty
action] must prove (1) existence ofa duty owed, (2) breach ofthat duty, (3) resulting injury, and
(4) that the claimed breach proximately caused the injury."); see also 6 Washington Practice:
Washington Pattern Jury Instructions: Civil 107.10 (6th ed. Supp. 2013). Tri-State neither
alleged nor established at least two of those elements—causation and damages. Therefore, the
trial court erred by concluding that Tri-State proved actionable breaches offiduciary duties.
       We focus, instead, on the alleged violations of particular RPCs, which could, in theory, be
a proper basis for the trial court's disgorgement order.

                                                -26-
No. 72844-0-1/27

(2013) (alterations in original) (quoting Lowv v. PeaceHealth, 174 Wash. 2d 769,

779, 280 P.3d 1078 (2012)).

        RPC 1.5 provides, in pertinent part, "A lawyer shall not make an

agreement for, charge, or collect an unreasonable fee." RPC 1.5(a).

        Tri-State's argument equivocates between "fees," the explicit object of the

rule, and "wages," the type of compensation herein at issue.21 This is contrary to
the plain meaning and common usage of the words.22 Moreover, Tri-State cites
no authority—from Washington or elsewhere23—in support of its proposed

expansion of the rule's application.

        This lack of authority supporting Tri-State's position struck the trial court,

which noted, in its order granting partial summary judgment dismissal ofthe RPC

1.5 claim,

                 The Court concludes as a matter of law that Plaintiff's status
        as in house counsel renders the disgorgement of fees . . . based on
        alleged violations of RPC 1.5 unavailable as an affirmative defense
        or a counter-claim for the Defendants. No Washington case
         supports the Defendant's legal position on this issue.
         In short, at the time that Chism negotiated his various compensation
agreements, there was no clear guidance from our Supreme Court—or, indeed,
from any court—as to the application of RPC 1.5 to wage contracts. Accordingly,
         21 This question was settled with finality by the jury's verdict, which Tri-State does not
challenge on appeal.
         22 Webster's Third New International Dictionary defines "fee" in this sense of the word as
"compensation often in the form of a fixed charge for professional service . . . ." Webster's Third New International Dictionary833 (2002). "Wage" is defined as "a
pledge or payment of usu. monetary remuneration by an employer esp. for labor or services usu.
according to contract and on an hourly, daily, or piecework basis and often including bonuses,
commissions, and amounts paid by the employer for insurance, pension, hospitalization, and
other benefits." Webster's, supra, at 2568. In short, "wage" presupposes an ongoing employer-
 employee relationship, whereas "fee" suggests retaining a professional on a temporary basis for a
 specific, limited purpose.
        23 Foreign authority is potentially relevant to our understanding of the rules herein at issue
 because the pertinent sections mirror the American Bar Association model rules.

                                                 -27-
No. 72844-0-1/28

the superior court properly granted summary judgment in Chism's favor on Tri-

State's claim for disgorgement based on the alleged violation(s) of RPC 1.5.

        RPC 1.7—Conflict of Interest: Current Clients

       Tri-State alleged, and the trial court agreed, that Chism violated RPC 1.7

when he requested the $500,000 bonus for FY 2011 and, again, when he

advised Larry that Tri-State owed him that bonus.24

        24 Specifically, the trial court concluded, in pertinent part:
        44. Mr. Chism breached his fiduciary duty to Tri-State, in violation of RPC 1.7, by
        requesting that Tri-State pay him $500,000 for FY 2011[ ]and indicating that was
        reasonable, where: (a) Mr. Chism, as Tri-State's GC and only in-house lawyer,
        was also advising Tri-State in connection with the company's severe financial
        difficulties; (b) paying such an amount of money to Mr. Chism would have been
        counter to Tri-State's best interests given its financial straits; (c) the bonus in
        question served to further only Chism's personal financial interest; (d) Mr. Chism
        knew that Ron trusted him and would believe anything he proposed was
        reasonable and in Tri-State's interest; (e) Mr. Chism took no steps to advise Tri-
        State that itwas not legally obliged to pay him a bonus at all and had the
        discretion to reject his request in its entirety; (f) given the unique, extraordinary,
        and atypical bonus/adjustment Mr. Chism proposed, Mr. Chism took no steps to
        advise Ron oranyone else at Tri-State that he was acting in his own personal
        interest, which created a conflict; (g) and Mr. Chism did not seek Tri-State's
        informed consent to continued representation or advise Ron or anyone else to
        consult independent counsel regarding his proposed bonus.
        45. Mr. Chism also breached his fiduciary duty to Tri-State, in violation of RPC
        1.7, by advising Larry during the winter of 2011 and the spring of 2012 that the
        company owed Mr. Chism the $500,000 he had supposedly been promised by
        Ron and attempting to obtain Larry's independent written agreement that Tri-
        State would pay Mr. Chism that amount after: (a) Larry had specifically stated his
        belief that Mr. Chism took advantage of Ron's impairment in the manner in which
        Mr. Chism procured the supposed approval for this bonus; (b) Mr. Chism
        recognized that Larry's belief in that regard created a conflict in Mr. Chism's
        continued representation ofTri-State and working for Larry; (c) Mr. Chism's
        seeking of a new agreement with Larry to secure the $500,000 purportedly
        agreed to by Ron served only Mr. Chism's own personal financial interests and
         no interest ofTri-State; (d) Mr. Chism did not disclose to Larry that Ron had been
         under no obligation to pay Mr. Chism anything at the time Mr. Chism sought the
         bonus, and that the underlying premises for the bonus were inaccurate and
         unfair; (e) Mr. Chism took no steps to advise Larry that he was acting in Mr.
         Chism's own personal interest, not that of Tri-State, which created a conflict; and
         (f) Mr. Chism did not advise Larry or anyone else at Tri-State of Chism's personal
         interest or conflict, seek Tri-State's informed consent to continued representation
         in negotiating a new agreement, or advise Larry or anyone else at Tri-State to
         consult independent counsel.
 Conclusions of Law 44-45.
         Curiously, the trial court's RPC 1.7 conclusions focus exclusively on the FY 2011 bonus.
 This appears to be because Tri-State was experiencing financial difficulties at the time and, so

                                                 -28-
No. 72844-0-1/29

       RPC 1.7 provides, in pertinent part:

             (a)... a lawyer shall not represent a client if the
       representation involves a concurrent conflict of interest. A
       concurrent conflict of interest exists if:

             (2) there is a significant risk that the representation of one or
       more clients will be materially limited ... by a personal interest of
       the lawyer.

        By concluding that it was a conflict of interest for Chism to negotiate with

Tri-State for the FY 2011 bonus, the trial court must have concluded that Chism

represented Tri-State in its negotiations over his own wages. If this dubious

conclusion were correct, it would cast doubt on the wage negotiations of scores

ofWashington attorneys—not only in-house corporate counsel like Chism, but
also government attorneys and numerous non-profit attorneys. Yet, Tri-State is
unable to cite any authority—from Washington or elsewhere—supporting its

proposed interpretation.

        Indeed, it is Chism who cites the only authority specific to this issue.

Relative to the trial court's conclusion regarding the March 2012 request for

payment of the FY 2011 bonus, Chism cites an advisory opinion from the Los
Angeles County Bar Association (LACBA). Therein, the LACBA opined that a fee
dispute did not, by itself, create a conflict of interest preventing continued

the theory goes, additional costs, in the form of increased wages for Chism, would have been
particularly difficult for Tri-State to bear. The trial court's attempt to truss up its conclusions with
so-called "bad facts" distorts the key issue—whether it is an inherent conflict of interest for a
lawyer-employee to negotiate a wage increase from his or her current client-employer. If the
answer is no, then the circumstances of the negotiation, including Tri-State's financial situation,
are not a proper object of our scrutiny.
        It is also notable that a number of the "bad facts" that the trial court used to buttress its
conclusions were contrary to the jury's verdict. For example, the trial court casts doubt upon
Chism's statement to Larry that Tri-State owed the FY 2011 bonus to him, yet the jury—acting in
its constitutionally-prescribed role—found this to be true.

                                                  -29-
No. 72844-0-1/30

representation in litigation by a law firm whose client disputed its fee bill. LACBA

Prof'l Responsibility & Ethics Comm., Op. 521 (2007).

       In any case, the absence of authority supporting Tri-State's contention

speaks volumes. The trial court's exercise of disciplinary authority based on a

lawyer-employee negotiating a wage increase and then requesting payment of

the increased wages was without precedent. Accordingly, even were we to

decide that the trial court's conclusions were correct (a decision that we need not

make), the resulting disgorgement order exceeded its authority.

       In entering the challenged order, the superior court lost sight of its role and

did not properly exercise the derivative power bestowed upon it by the Supreme

Court. The Supreme Court has determined that, when it announces a novel

application of a professional conduct rule, its pronouncement is to have only
prospective effect. Haley. 156 Wash. 2d at 343. Here, the superior court
announced a—literally—unprecedented application of RPC 1.7 to in-house

counsel. Yet, rather than treating the issue as one implicating attorney discipline

and public (as opposed to private) rights, the superior court entertained the claim
as if it were simply a tort claim subject to the traditional process of common law
adjudication and judicial pronouncement of rights and duties—with its decision
necessarily affecting the legal rights ofthe litigating parties. In doing so, it erred.
Had itfollowed the mandate of the Supreme Court's Haley decision, the superior

court would have recognized the novelty of its legal ruling, declined to impose a

sanction, and dismissed the claim. This is what the Supreme Court did in Haley.

It is what the superior court should have done here.

                                           30
No. 72844-0-1/31

      RPC 1.8—Conflict of Interest: Current Clients: Specific Rules

      Tri-State alleged, and the trial court agreed, that Chism violated RPC 1.8

by negotiating with Ron for the September 2010 bonus arrangement and for

negotiating with Larry for payment of the FY 2011 bonus and a mid-FY 2012

bonus.25

       RPC 1.8 provides, in pertinent part:

               (a) A lawyer 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

       25 The trial court concluded, in pertinent part:
       36. The Court concludes that Mr. Chism's proposed modified fee arrangement
       with Ron in September 2010 was not an "ordinary" fee agreement, because the
       proposal involved a significant change in the parameters of Mr. Chism's
       compensation, was made after the representation had already begun and after
       an existing fee agreement had already been in place for more than a year, and
       the new provisions benefitted only Mr. Chism. . . .
       37. Mr. Chism's procurement of Ron's agreement to the new compensation
       arrangement in-September 2010 was a "business transaction" that was subject to
       the requirements of RPC 1.8(a).
       38. Mr. Chism has not demonstrated he satisfied any of the requirements of RPC
       1.8(a) in connection with his dealings with Ron regarding the new arrangement.
       50. Mr. Chism's negotiations with Larry and the resulting putative agreement
       were not ordinary fee discussions. Mr. Chism was not merely proposing
       payment under the parameters ofthe September 2010 arrangement, he was
       negotiating the payment ofwhat Mr. Chism believed to be an outstanding debt to
       him for a $500,000 unpaid bonus for FY 2011, plus for the first time, payment of
       a m/d-vear bonus (in the amount of $250,000). Moreover, the particular
       transaction that Mr. Chism proposed, and later claimed Larry had agreed to,
       included a transfer of nonmonetary property of Tri-State—a Mercedes Benz
       owned by Tri-State worth at least $50,000, a computer, and a cell phone—as
       partial payment for Mr. Chism's services. These circumstances made Mr.
       Chism's negotiations with Larry in March 2012, and the putative "contract" that
       Mr. Chism argued and the jury concluded resulted therefrom, a business
       transaction within the scope of RPC 1.8(a).

       59. . . . Mr. Chism has not proven he satisfied any of the requirements of RPC
       1.8(a). He failed to overcome the presumption offraud as tothe transaction with
       Larry in March 2012 and he violated his duty to Tri-State under RPC 1.8(a) by
       entering into it.
Conclusions of Law 37-38, 50, 59.

                                                -31 -
No. 72844-0-1/32

       disclosed and transmitted in writing in a manner that can be
       reasonably understood by the client;

               (2) the client is advised in writing of the desirability of
       seeking and is given a reasonable opportunity to seek the advice of
       an independent lawyer on the transaction; and

               (3) the client gives informed consent, in a writing signed by
       the client, to the essential terms of the transaction and the lawyer's
       role in the transaction, including whether the lawyer is representing
       the client in the transaction.

       "[The Rule] does not apply to ordinary fee arrangements between client
and lawyer, which are governed by Rule 1.5." RPC 1.8 cmt. 1. However, "its
requirements must be met when the lawyer accepts an interest in the client's
business or other nonmonetary property as payment ofall or part of a fee." RPC
1.8 cmt. 1. The rule likely also applies to fee agreement modifications after the
attorney-client relationship is formed.26
        In addition, the Rule does not apply to standard commercial
        transactions between the lawyer and the client for products or
        services that the client generally markets to others, for example,
        banking or brokerage services, medical services, products
        manufactured or distributed by the client, and utilities' services. In
        such transactions, the lawyer has no advantage in dealing with the
        client, and the restrictions in paragraph (a) are unnecessary and
        impracticable.

RPC 1.8 cmt. 1.

        26 This is a sensible result. Kennedy, 74 Wash. 2d 483, concerned mid-representation
modifications to fee agreements, and the Kennedy requirements were incorporated into RPC
18(a)(1).                                                                       .u.„ .     .   .
         Indeed, Chism's own expert witness on attorney professional responsibility has opined
that the concerns involved in midstream modifications ofattorney fee agreements trigger the
 requirements of RPC 1.8(a).
        [Authorities strongly suggest that the Washington Supreme Court, when faced
        with the issue, may well decide that a change to a fee agreement midstream
        benefiting the lawyer constitutes a business transaction with a client (and
        therefore a prohibited conflict of interest) unless the rigorous requirements of
         RPC 1.8(a) are met.                                                                   ,
 Tom Andrews et al., The Law of Lawyering in Washington § 9, at 9-6 (Wash. State Bar ass n
 2012) (chapter authored by Arthur Lachman, Chism's professional responsibility expert).

                                               -32-
No. 72844-0-1/33

       "'[A]n attorney-client transaction is prima facie fraudulent.'" Vallev/50th

Ave.. 159 Wash. 2d at 745 (quoting In re Disciplinary Proceedings Against Johnson.

118 Wash. 2d 693, 704, 826 P.2d 186 (1992)). "The burden of proving compliance

with RPC 1.8 rests with the lawyer." Vallev/50th Ave.. 159 Wash. 2d at 745.

       The trial court concluded that the September 2010 and March 2012 bonus

agreements constituted fee arrangements but that neither was an "ordinary" fee

arrangement and, thus, both were subject to the rule. The September 2010
agreement was not an ordinary fee arrangement, the trial court concluded,
because it was a modification of an existing arrangement. The same was true of

the March 2012 agreement, which the trial court also concluded was not an

ordinary fee agreement because it involved some nonmonetary compensation.27
       The trial court's conclusions regarding these agreements gloss over the

essential differences between fee agreements and wage contracts. Under the
trial court's interpretation of the rule, every compensation agreement entered into
between a lawyer-employee and a current client-employer would be subject to
RPC 1.8(a). This would include, for example, every agreement increasing a
lawyer-employee's wages or benefits. This interpretation would also include
every contract for a lawyer-employee's compensation that promised
nonmonetary compensation, such as a company cell phone or computer and,
perhaps, even health benefits.

        By rendering their compensation agreements prima facie fraudulent, the
trial court's interpretation would disturb the settled expectations of many lawyer-

          27 Per the March 2012 memo, upon his separation from the company, Chism was entitled
 to retain the company vehicle, computer, and cell phone. Finding ofFact 101.

                                            -33-
No. 72844-0-1/34

employees. It would also subject standard wage contracts for lawyer-employees,

which frequently include nonmonetary compensation, to greater scrutiny overall

than standard fee contracts, which are generally exempt from the rule.

Moreover, it would do this without addressing whether lawyer wage contracts

should be exempt from the rule as another type of "transaction! in which] the

lawyer has no advantage in dealing with the client," RPC 1.8 cmt. 1, given that, in

general, employees are thought to have relatively little power compared with that

of their employers. Cf. Rickman v. Premera Blue Cross. 184Wn.2d 300, 309,

358 P.3d 1153 (2015) (stating, regarding the wrongful termination cause of

action, "allowing an exception to the at-will doctrine serves to equalize the

imbalance of power that exists in an employment relationship").

       More to the point for our purposes, the trial court's order appears, once

again, to be without any specific precedent. In support of its application of RPC

1.8 to Chism in his role as general counsel, the trial court cited a New Jersey

appellate court decision—Kave v. Rosefielde, 75 A.3d 1168 (N.J. Super. Ct. App.

Div. 2013), rev'd in part, 121 A.3d 862 (N.J. 2015). Therein, the court held that,

at least in some circumstances, that state's equivalent to RPC 1.8 applies to in-

house counsel. Rosefielde, 75 A.3d at 1203. It upheld a trial court's

determination that Rosefielde, an in-house lawyer and corporate executive, had

violated the RPC 1.8 equivalent by engaging in several business transactions

that defrauded his employer (he was also found to have committed common law

fraud). Rosefielde, 75 A.3d at 1203. However, the case did not concern

Rosefielde's in-house counsel compensation. In fact, when Rosefielde

                                        -34
No. 72844-0-1/35

attempted to argue that RPC 1.8 should not apply to him as in-house counsel at

all because it would then necessarily apply to employment offers, the trial court

dismissed the argument as a "straw man" that was not at issue and, therefore,

would lead to irrelevancies. Rosefielde. 75 A.3d at 1203 n.30.

        For his part, Chism cites WSBA advisory opinion 1045 in support of his

interpretation and actions. Therein, the WSBA opined that itwas not a violation

of RPC 1.8 for a lawyer to negotiate an employment contract to move in-house

with a current client.28 This opinion, if correct, indicates that it also would not

violate RPC 1.8 for an attorney to negotiate a supplemental employment

contract—for example, an agreement to add a bonus structure—with a current

client.29

        Both parties also presented expert testimony at trial regarding the

professional duties owed by a lawyer-employee to a client-employer related to
negotiation of the lawyer-employee's compensation. The trial court first heard
from Tri-State's expert, David Boerner, who previously taught professional
responsibility courses at Seattle University School of Law as well as numerous

        28 The full opinion states:
        Alawyer negotiated with corporate management over an employment contract to
        serve as legal counsel. The contract provided that partofthe lawyer's
        compensation would be shares in the publicly traded corporation. The
        Committee was of the opinion that negotiations as described by you in working
        out an employment contract for the full time job oflegal counsel for a corporation
         does not violate RPC 1.8. Itappeared to be an arm's length transaction, and it
         did not appear that you were in any way giving legal advice to the corporation.
WSBA Rules of Profl Conduct Comm., Advisory Op. 1045 (1986).
         Because RPC 1.8 only applies to current clients, it must be the case that the potential
employer in question was also a current client of the attorney. See Rafel Law Grp. PLLC v.
Defoor, 176 Wash. App. 210, 220, 308 P.3d 767 (2013).
         29 Interestingly, the opinion does not even mention the general prohibition against
conflicts in RPC 1.7. By skipping that rule and focusing, instead, on the specific prohibitions in
RPC 1.8, the opinion implies that RPC 1.7 is not implicated by the employment contract in
question! This also supports Chism's contention regarding the inapplicability of RPC 1.7 to his
situation.

                                               -35-
No. 72844-0-1/36

continuing legal education (CLE) seminars on the same subject. Boerner

conducted some research into the question herein presented,30 but he was

already aware from his experience in this area that there was no authority directly

on point. Nevertheless, based on his interpretation of the limited related authority

available, Boerner opined that a lawyer-employee is generally bound by a

fiduciary duty and the requirements of RPCs 1.7 and 1.8 when negotiating with

his or her client-employer for compensation.

       The trial court heard next from Chism's expert, Arthur Lachman. Lachman

is a current practitioner in the area of attorney professional responsibility. He
previously taught professional responsibility courses at the University of
Washington School of Law, as well as CLE seminars on the same subject, and is
one of the authors of the treatise entitled "The Law of Lawyering in Washington."

See, supra note 26. In preparation for offering an opinion in this case, Lachman
consulted various written resources, including treatises, cases, and bar opinions

from across the country, and contacted other experts in the field ofattorney
professional responsibility. Having done so, Lachman concluded, like Boerner,
that there was no direct authority on the question presented. Nevertheless,
based on the related resources available, Lachman opined that a lawyer-

employee is not generally bound by a fiduciary duty or the requirements of RPCs

        30 Boerner conducted markedly less research on the relevant topic than Chism's expert.
Aside from studying the particular circumstances of this case, he relied heavily on his preexisting
 knowledge.

                                               -36-
No. 72844-0-1/37

1.7 and 1.8 when negotiating his or her own compensation with the client-

employer.31

       The stark contrast between Boerner's and Lachman's expert opinions

illustrates the lack of clarity regarding the professional obligations of a lawyer in

Chism's position. At the time that he engaged in the conduct now at issue,

Chism could not have anticipated the ethical and disciplinary consequences of

his actions. And he could have achieved no certainty with regard to those

consequences even if he had recognized the ethical question now presented and

retained two top experts in the field of professional responsibility to get their

opinions.

       Thus, in this instance, like the last, the application of the rule to these

circumstances was unclear at the time that Chism acted and, therefore, even

were we to decide that the trial court's interpretation was correct (a decision that

we need not make), Chism's conduct could not have served as the basis for
penalizing the alleged professional misconduct. In such circumstances, only
prospective application of the newly interpreted RPC is warranted. Haley, 156
Wash. 2d at 343. The superior court should have declined to impose discipline and

dismissed the claim.

        RPC 8.4—Misconduct

        Tri-State alleged, and the trial court agreed, that Chism violated RPC
8.4(c) numerous times related to the bonus arrangement. Specifically, the trial
court concluded that he violated the rule: (1) by stating that his original in-house

        31 He concluded that this was so because issues related to a lawyer-employee's own
compensation are not generally considered to be within the scope of that lawyer's representation
of his client-employer.

                                             -37-
No. 72844-0-1/38

salary was based on him working an average of approximately 1.5 hours per day,

or 380 hours per year, (2) when he stated in the September 2010 memo that his

current compensation was "set over ten years ago," though it was at most eight

years, (3) when he provided an estimate of his FY 2010 hours in September
2010, (4) when he stated in the November 2011 memo that the bonus
arrangement had been in effect for "the last couple ofyears," though it had been
just over a year, (5) when he gave the November 2011 estimate of his FY 2011
hours, (6) when he stated in the November 2011 memo that Ron had agreed that
Chism would be paid the bonus, without stating that it was conditional on
settlement of the legal claim, and (7) by advising Larry that Tri-State was

"obligated" to pay Chism a bonus for the first half of FY 2012.'          32

       32 The trial court concluded, in pertinent part:
       61. Mr. Chism violated his duty of honesty and forth rig htness to Tri-State under
       RPC 8.4(c) and Washington common law by misrepresenting to Ron in
       September 2010 that his then-current compensation was "based on me spending
       an average of less than an hour and a half a day on Tri-State matters, or about
       seven hours a week," when Mr. Chism knew at the time he made this statement
       that his existing salary and the retainers that preceded it were always meant to
       compensate him for all of the non-litigation hours that he worked for Tri-State and
       that he had raised his retainer several times to reflect that the amount ofwork
       had increased over time.
       62. Mr. Chism violated his duty to Tri-State under RPC 8.4(c) and Washington
       common law by misrepresenting to Ron, in that same communication, that his
       "current compensation" was "set over ten years ago," when Mr. Chism knew at
       the time he made this statement that his true "current" compensation—i.e., his
       $190,000 salary—had just been set a year-and-a-half previously. The same is
       true even if Mr. Chism meant the memo to reference the GC retainer, which had
       been initiated in 2002. Not only was that compensation initiated eightyears ago,
       rather than ten, his compensation of$500 an hour had only been set during the
       preceding six months or so before he went in-house.
       63 Mr. Chism violated his duty to Tri-State under RPC 8.4(c) and Washington
       common law by stating to Ron in September 2010 that during the prior fiscal
       year, "realistically Ihave probably been averaging something over 60% of a
       normal workday on your matters. To be conservative, let's call it 50%. That
       translates into 1,000 hours oftime, ofwhich 380 hours have been covered by my
       base compensation." Mr. Chism knew at the time he made this statement that he
       had kept no records of the time he spent on Tri-State work and had no other
       reliable basis to say how many hours he had worked during the prior fiscal year,
       and yet he misrepresented these figures to Ron as reasonable estimates. Mr.

                                                  38-
No. 72844-0-1/39

       To begin, some of the trial court's RPC 8.4 conclusions are clearly

improper. In particular, there is no authority for the trial court's conclusion that

Chism violated the rule twice by providing Tri-State "unreliable" estimates of the

number of hours that he had worked during specific periods of time (supra (3)

and (5)). In reaching its conclusions, the trial court relied on cases prohibiting

lawyers from seeking payment based on reconstructed billing records. See

Conclusion of Law 60 (citing, inter alia, In re Disciplinary Proceedings Against

Dann, 136 Wash. 2d 67, 960 P.2d 416 (1998)). Those cases do not apply to the

circumstances herein. Chism did not create an impression of precision by

presenting Tri-State a detailed invoice, nor did he expressly demand payment of

       Chism also knew at the time he made this statement that there had been no
       agreement that his salary covered only 380 hours a year; rather, he had agreed
       to do "whatever it takes" in exchange for his salary just as he had agreed to do
       whatever it takes in exchange for his GC retainer.
       64. Mr. Chism violated his duty to Tri-State under RPC 8.4(c) and Washington
       common law by misrepresenting to Ron in November2011 that Mr. Chism's
       bonus arrangement had been in effect"[f]or the last couple of years," when
       Chism knew at the time he made this statement that he had only received one
       prior bonus and that the arrangement had been in effect forjust barely over one
       year.
       65. Mr. Chism violated his duty to Tri-State under RPC 8.4(c) and Washington
       common law by stating to Ron in November 2011 that during the prior fiscal year,
       Mr. Chism had "actually been working full time, plus, on your matters ...
       conservatively call it 70%, or 1,400 hours," when Mr. Chism knew at the time he
       made this statement that he had kept no records of the time he spent on Tri-
       State work and had no other reliable basis to say how many hours he had
       worked during the prior fiscal year, and yet he misrepresented these figures to
       Ron as reasonable estimates.
       66. Mr. Chism violated his duty to Tri-State under RPC 8.4(c) and Washington
       common law by misrepresenting to Ron in November 2011 that they had agreed
       Mr. Chism would get paid a $500,000 bonus the following year, whether out of
       the DEA claim or some other matter, when Mr. Chism knew at the time he made
       this statement that Ron had told him Tri-State could and would not pay Mr.
       Chism any bonus until the money from the DEA claim, in particular, came in.
       67. Mr. Chism violated his duty to Tri-State under RPC 8.4(c) and Washington
       common law by advising Larry in March 2012 that Tri-State was obligated to pay
       Mr. Chism a bonus for work performed during the first half of FY2012, when Mr.
       Chism knew at the time he made this statement, by reason of the very terms of
       the memo he had presented to Ron in September 2010, that whether or not any
       bonus was ever to be paid to Mr. Chism was purely discretionary on Tri-State's
       part, and that no obligation to pay a bonus existed.
Conclusions of Law 61-67.

                                             -39-
No. 72844-0-1/40

any specific amount. Rather, per the parties' agreement, he gave Tri-State his

"best estimate" of the hours that he had worked during certain periods and left it

to Ron or Larry's discretion to determine the amount of any corresponding bonus.

There was no misrepresentation in violation of RPC 8.4.

       The trial court's determination that Chism also violated the rule by

misrepresenting the mid-year FY 2012 bonus as Tri-State's obligation, rather
than within its discretion, supra (7), is also flawed. The trial court's description of

the relevant interaction in its conclusion is inconsistent with the court's

descriptions ofthe same interaction in its findings and, thus, the conclusion is
unsupported. Compare Conclusion of Law 67 with Findings of Fact 97, 101.
       Aside from the question ofthe propriety ofthe trial court's remaining RPC
8.4 conclusions,33 the court's disgorgement order presents a significant legal

hurdle. In particular, it raises the question of whether a trial court is empowered
to disgorge an attorney's wages, as opposed to an attorney's fees.
        The trial court's order disgorging Chism's wages appears to be without
precedent. While the parties cite numerous cases involving fee disgorgement,
see, e.g.. Eriks, 118 Wash. 2d 451, they cite no case authorizing the disgorgement
of an attorney's wages. Neither do they cite any other authority, such as a bar
opinion, in support of this proposition. Indeed, counsel for Tri-State confirmed at

        33 An assumption of propriety would be dubious in this case. The parties do not cite any
 examples of attorneys being disciplined under RPC 8.4 for misconduct comparable in magnitude
 to some of Chism's alleged misconduct.

                                              -40-
No. 72844-0-1/41

oral argument in this court that, to his knowledge, no such authority exists—in

Washington or elsewhere.34

       The lack of authority supporting the trial court's disgorgement order is not

mere coincidence but, rather, reflects important differences in the treatment of

attorney fees versus wages. For example, whereas our Supreme Court has

actively regulated attorney fees, see, e.g.. RPC 1.5, it has not at all regulated

attorney wages. By contrast, the legislature has engaged in active regulation in

the wage and hour context. The legislature has passed extensive legislation with

the purpose of protecting employee wages, including laws regarding the

minimum wage, overtime, and wage withholding. See Schilling v. Radio

Holdings. Inc.. 136 Wash. 2d 152, 159, 961 P.2d 371 (1998) ('"[T]he fundamental

purpose ofthe [pertinent wage] legislation ... is to protect the wages of an
employee against any diminution or deduction therefrom.'" (first alteration in
original) (quoting State v. Carter, 18Wn.2d 590, 621, 140 P.2d 298, 142 P.2d
403 (1943))); Jumamil v. Lakeside Casino. LLC. 179 Wash. App. 665, 682, 319
P.3d 868 (2014) ("The wage statutes were enacted to prevent abuses by
employers in the labor-management setting, and they reflect the legislature's
strong policy in favor of payment ofwages to employees."). Indeed, lawyer-
employees are protected by the same wage and hour laws that apply to
employees in comparable positions. See, e.g.. Corev v. Pierce County. 154 Wn.
App. 752, 225 P.3d 367 (2010) (deputy prosecuting attorney who prevailed on a
wrongful termination claim entitled to an award ofattorney fees based on

        34 Wash. Court ofAppeals oral argument, Chism v. Tri-State Constr., Inc., No. 72844-0-
(Feb. 24, 2016), at 18 min., 30 sec. (on file with court).

                                                 -41 -
No. 72844-0-1/42

recovery of a judgment for wages owed). Our Supreme Court has never

questioned the propriety of the legislature's occupation of this regulatory field.

       The question presented arises at the intersection of judicial power over the

practice of law and legislative power over the conditions of employment. Our

Supreme Court has offered some guidance about resolving such situations,

stating, "While we should jealously protect our prerogatives, if the legislative
power is not limited by the constitution, it should be unrestrained." Demopolis,
103 Wash. 2d at 65. As previously stated, in the area of attorney wages, the

Supreme Court has taken no action, but the legislature has enacted a broad
policy in favor of the payment of employee wages. Given this stark contrast, we
defer to the strong legislative policy in this area.

       This conclusion is consequential for how we view the application of the
disgorgement sanction to attorney wages. As has been described, disgorgement
does not require proof of either causation or damage, only misconduct. This is
unlike other, related claims, including breach of fiduciary duty and restitution,
both of which require such proof. Because there is no standard measure for a
disgorgement order, nor a requirement that it be imposed as a compensatory
measure, it poses a significant threat to the legislative policy in favor of the
consistent payment of employee wages.

        This threat is illustrated by the trial court's order in this case. Herein, Tri-
 State chose to pursue only disgorgement from Chism, not a separate claim for

                                            42
No. 72844-0-1/43

damages or restitution.35 Accordingly, Tri-State was never required to prove that

it suffered any injury as a result of Chism's alleged misconduct. Nevertheless,

the trial court ordered Chism to disgorge $550,000 in wages (plus another

$550,000 in exemplary damages for wage withholding).

       The trial court exceeded its disciplinary authority by ordering Chism to

disgorge a significant portion of the wages otherwise owed to him without either

acknowledging that it was disgorging wages, not fees, or accounting for the

strong legislative preference in favor of employers paying earned employee

wages. Therefore, the trial court's order was improper as a matter of law.

                                                  IV

        Based on our resolution of the preceding issues, we need not reach the

additional issues raised by the parties.36

        Chism is also entitled to an award of reasonable attorney fees on appeal

pursuant to RCW 49.48.030 and RCW 49.52.070. Upon compliance with RAP
18.1, a commissioner of this court will enter an appropriate order.

        35 Presumably, this was a strategic choice stemming from the difficulty of proving damage
from a lawyer's misconduct when the lawyer in question was found by the trial court to have
saved the company through his efforts.
        36 There is no basis for Tri-State's counterclaims, which all presuppose the validity of the
trial court's disgorgement order. In particular, we reject its challenge to the trial court order
awarding Chism reasonable attorney fees.

                                                 -43-
No. 72844-0-1/44

       Reversed and remanded to the trial court for entry of judgment upon the

jury's verdict.37

We concur:

     ^%J                                                       eoe

         37 Statutory damages must also be calculated based on the jury's verdict.

                                              -44-