Court Opinion

ID: 9560932
Source: CourtListenerOpinion
Date Created: 2023-08-21 17:59:33.756318+00
Date Added: 2024-06-11T09:13:21.219845
License: Public Domain

Johnson, J.
(dissenting in part, concurring in part) The majority affirms the trial court's summary judgment ruling that William James Denver violated DR 5-105 of the former Code of Professional Responsibility (CPR). In so holding, the majority concludes that CPR DR 5-105 may be violated whenever a "potential" conflict of interest exists, even though the rule is written in terms of "likely" conflicts of interest. The majority's unfortunate extension of CPR DR 5-105's clear language greatly burdens the attorneys of this state, for "potential" conflicts of interest exist in almost every case of multiple representation. I also disagree with *468the majority's conclusion that this issue involves solely questions of law and with certain of the majority's statements of fact. I conclude genuine issues of material fact exist and that summary judgment was improperly granted. For these reasons, I dissent on the CPR DR 5-105 claim. As to the issues under the Consumer Protection Act and the certification of the class action, I concur in part and dissent in part.
I
Disciplinary Rule 5-105 of the former Code of Professional Responsibility reads in relevant part as follows:
(A) A lawyer shall decline proffered employment if the exercise of his independent professional judgment in behalf of a client will be or is likely to be adversely affected by the acceptance of the proffered employment, except to the extent permitted under section (C).
(B) A lawyer shall not continue multiple employment if the exercise of his independent professional judgment in behalf of a client will be or is likely to be adversely affected by his representation of another client, except to the extent permitted under section (C).
(C) In the situations covered by sections (A) and (B), a lawyer may represent multiple clients if it is obvious that he can adequately represent the interest of each and if each consents to the representation after full disclosure of the possible effect of such representation on the exercise of his independent professional judgment on behalf of each.
(Italics mine.)
This rule makes clear that the mere possibility of an adverse effect on the attorney's judgment does not constitute a disciplinary violation. A violation can occur only if the attorney's judgment is at least likely to be affected. Yet the majority holds that a "potential" conflict of interest can amount to a violation of CPR DR 5-105. Majority, at 460-61.
Nothing in the majority's analysis justifies this departure from the rule's express language. The majority maintains that its result is justified under a broad construction of the attorney disciplinary rules. Majority, at 458-59. Unambiguous language, however, must be construed according to its *469terms; use of a liberal or broad, construction is appropriate only with regard to ambiguous language. See Clam Shacks of Am., Inc. v. Skagit Cy., 45 Wn. App. 346, 349, 725 P.2d 459 (1986), aff'd, 109 Wn.2d 91, 743 P.2d 265 (1987); 2A N. Singer, Statutory Construction § 58.05 n.4 (4th ed. 1984).
The majority's reliance on the Ethical Considerations underlying DR 5-105 is likewise improper here. The former CPR's Ethical Considerations were aspirational objectives toward which an attorney should strive, while the Disciplinary Rules represented "the minimum level of conduct below which no lawyer [could] fall without being subject to disciplinary action". See CPR Preliminary Statement. Although at times the Ethical Considerations may be used in interpreting language of the Disciplinary Rules, they should not be so used when they depart from a clear standard of conduct expressly and repeatedly stated in the Disciplinary Rules.
The majority's adoption of a standard involving "potential" conflicts of interest has severe consequences. Under the majority's interpretation, an attorney could be required to return fees even in cases where the chances of a conflict of interest are remote and unforeseeable. The consequences are especially severe when an attorney undertakes to jointly represent two or more clients. A potential conflict of interest would exist whenever an attorney jointly represented multiple clients, whether they be husbands and wives, general and limited partners, or corporate officers and shareholders. An attorney cannot foresee every possible situation that might arise when undertaking such a joint representation. Yet the majority's standard places exactly this burden on the attorney.
I also cannot concur in the majority's conclusion that determining whether CPR DR 5-105 has been violated involves only questions of law. See majority, at 457-58. Attorney disciplinary rules are to be interpreted according to the general principles of statutory interpretation. See In re McGlothlen, 99 Wn.2d 515, 522, 663 P.2d 1330 (1983). Whether a statute is violated involves mixed questions of *470law and fact; the applicability of a statute to a given factual situation entails questions of law, while proof of the underlying facts necessarily involves questions of fact. See Lobdell v. Sugar 'N Spice, Inc., 33 Wn. App. 881, 887, 658 P.2d 1267, review denied, 99 Wn.2d 1016 (1983). Thus, evaluating whether Denver violated CPR DR 5-105 involves not only questions of law, but also questions of fact.9
This much was recognized in Halvorsen v. Halvorsen, 3 Wn. App. 827, 830-31, 479 P.2d 161 (1970), review denied, 78 Wn.2d 996 (1971), where the Court of Appeals held that whether an attorney has a conflict of interest "is a fact question to be determined by looking to the reasonableness of the activity, under the whole circumstances of the case." See also Johnson v. Continental Cas. Co., 57 Wn. App. 359, 362-63, 788 P.2d 598 (1990) (discussing the appropriateness of summary judgment in terms of disputes as to material issues of fact).
Moreover, issues of fact are particularly involved given the rule here at issue. CPR DR 5-105's language shows that the foreseeability of future events is key to determining whether the rule is violated. When deciding whether to represent potential clients, an attorney must predict what issues are likely to arise and predict further what positions the attorney will likely have to take on those issues. Foreseeability issues, like these, involve questions of fact. See Bernethy v. Walt Failor's, Inc., 97 Wn.2d 929, 933, 653 P.2d 280 (1982); Anderson v. Dreis & Krump Mfg. Corp., 48 Wn. *471App. 432, 443, 739 P.2d 1177, review denied, 109 Wn.2d 1006 (1987); Lake Wash. Sch. Dist. 414 v. Schuck's Auto Supply, Inc., 26 Wn. App. 618, 622-23, 613 P.2d 561, review denied, 94 Wn.2d 1024 (1980).
The majority concludes that the evidence shows "potential" conflicts of interest existed from the outset of Denver's representation of the promoters and investors. Majority, at 460. Because I believe the proper standard is whether "likely" conflicts of interest existed, I will review the majority's analysis of the evidence to show that it does not establish a likely conflict of interest.
The majority bases its conclusion first on the fact that "Denver recognized from the beginning that a potential conflict of interest existed." Majority, at 460. Denver did state in his deposition that he knew buyers could assert claims against sellers if problems with their sale later developed. This statement establishes merely the possibility of future conflicts of interest, not their likelihood.
Moreover, Denver's deposition testimony makes clear that although he initially recognized the existence of a potential conflict of interest, he considered this possibility "nebulous" and "remote". Respondents' Clerk's Papers, at 46-47, 86-87, 91, 96. He filed an affidavit explaining this point further:
Although there is always a potential that a conflict may develop between the clients in a joint representation, I felt that a future conflict with respect to my MRTF representation was unlikely because I saw little or no possibility that the promoters and investors would have any interest in taking adverse positions with respect to the IRS challenges.
(Italics mine.) Appellants' Clerk's Papers, at 393.
The majority also bases its conclusion on the following depiction of Denver's state of mind:
The source of that potential conflict is obvious. When Denver undertook the joint representation, he knew the IRS was disallowing these types of tax shelters. He knew the IRS would audit every investor, and he believed the IRS would disallow the tax credits and deductions. Most importantly, he knew that if the IRS disallowed the tax credits, his investor clients *472would potentially have claims against his promoter clients, and the potential for a conflict of interest would be enhanced.
Majority, at 460-61.
These statements are not fully supported by the record. First, while the majority implies that Denver knew the IRS was denying the tax benefits in all similar cases, the record reveals merely that he knew the IRS was "almost" automatically denying these benefits. Respondents' Clerk's Papers, at 52. Second, Denver did not indicate the IRS would audit every investor, rather Denver merely agreed with a statement in an exhibit to the effect that "[e]ven if you are not now under audit, you should assume that you may come under audit sooner or later." (Italics mine.) Respondents' Clerk's Papers, at 78. When Denver undertook the representation, only a small portion of the investors were then being audited, although he believed it was likely that "more" would be audited in the future. Respondents' Clerk's Papers, at 68. Although my reading of the record on these points does not differ markedly from that of the majority's, these differences do come into play in determining if factual issues exist.
Of greater significance is the majority's statement that Denver believed the tax benefits in this case were sure to be denied. This statement finds no support in the record. Denver never admitted to any such belief, and in fact he agreed to represent the MRTF only after reviewing tax laws and after determining that the transactions did not suffer from the documentation deficiencies that had prevented previous programs from receiving the desired tax benefits:
The legal issues were relatively simple. The IRS was arguing that the taxpayers were not involved in a trade or business for production of income or, in the alternative, that the transactions lacked sufficient economic substance to justify claimed credits and deductions. My review of many other similar programs revealed them lacking in certified costs, adequate appraisals, and actual product distribution. In the case of the programs purchased by Mr. Johnston, however, appraisals did exist, prepared by nationally recognized appraisers; also, the law firm of Kafer, Good, St. Mary & Mitchell had prepared an opinion of letter purporting to reflect *473certified acquisition and production costs of each of the Masters. Additionally, it appeared that Gerald B. Dennon, then president of Jerden Industries [for whom the promoters in this case acted as sellers], had numerous years of entertainment industry background. Based upon that investigation and my investigation of the tax laws in effect at that time, I agreed to represent Mr. Johnston and clients of his similarly situated [with respect to obtaining tax benefits].
Respondents' Supplemental Clerk's Papers, at 29.
Thus, factual issues remain unresolved even on the question of whether the tax benefits in this case were likely to be denied when Denver began representing the promoters and investors.
Yet further factual issues exist. Even if the record did establish that Denver believed the benefits would be denied, the investors would not have proven a likely conflict of interest. This is because the interests of the promoters and the investors were identical with respect to the granting or denying of tax benefits. The promoters as well as the investors had purchased the master sound recordings, and they all wanted to obtain an IRS determination that their investments were entitled to credits and deductions. Each of the MRTF members opted to participate in the fund's hiring of a single attorney to pursue this goal. In this regard, the promoters and the investors were all similarly situated when Denver agreed to represent them. Expert affidavits from two prominent attorneys establish that under these circumstances no conflict of interest arises. Appellants' Clerk's Papers, at 384-85, 388-89.
Nor have the plaintiffs established that any future events were likely to cause these interests to diverge. Widespread title and appraisal problems were not discovered until a year and a half after Denver undertook representation of these clients, and the investors do not even allege that Denver had any reason to know about these problems earlier.
The plaintiffs have also speculated that as the negotiations with the IRS proceeded without immediate resolution, the interests of the promoters and investors began to diverge as to the speed with which the negotiations were *474pursued. They point out that the promoters continued to sell the recordings, and therefore had a motivation for delaying an IRS decision, while the investors' potential tax obligations were accruing interest, causing the investors to want a prompt decision. Even aside from the speculative nature of this argument,10 it wholly fails to establish that at the outset of Denver's representation, the IRS proceedings were likely to drag on so long that the promoters and investors would have developed different interests in this regard.
I believe in light of the foregoing discussion that genuine issues of material fact remain on the plaintiffs' CPR DR 5-105 claim. Even though very few of the facts presented by the plaintiffs have been contradicted by Denver, the inferences flowing from those facts are certainly open to different interpretations. Specifically, reasonable minds could differ as to the foreseeability, as measured at the outset of Denver's representation, that events causing a divergence of interests between the investors and promoters were likely to occur. Summary judgment is improper, even if the basic facts are not in dispute, if those facts are reasonably subject to conflicting inferences. See Coffel v. Clallam Cy., 58 Wn. App. 517, 520, 794 P.2d 513 (1990); Southside Tabernacle v. Pentecostal Church of God, Pac. Northwest Dist., Inc., 32 Wn. App. 814, 821, 650 P.2d 231 (1982).
II
The parties have also appealed from various trial court rulings addressing both the Consumer Protection Act (CPA) and certification of the class action. I concur in the majority's resolution of these issues, except for a portion of its analysis of the CPA.
The majority holds that a genuine issue of material fact exists regarding application of the CPA. Majority, at
*475463-65.1 agree. The majority proceeds to hold that the trial judge properly exercised his discretion in refusing to treble the amount of the disgorged fees and in refusing to award attorney fees. Majority, at 465.1 agree in part and disagree in part.
RCW 19.86.090 expressly provides that a trial court's decision whether to treble damages is discretionary. I agree with the majority that discretion was not abused on this point.
I disagree with the majority, however, with respect to the attorney fee issue. Under RCW 19.86.090, a prevailing CPA plaintiff is entitled to reasonable attorney fees incurred in pursuing the CPA action. The trial court has discretion in setting the amount of the attorney fees, see State v. Ralph Williams' North West Chrysler Plymouth, Inc., 87 Wn.2d 298, 314, 553 P.2d 423 (1976), appeal dismissed, 430 U.S. 952 (1977), but not in deciding whether attorney fees should be awarded in the first place. See State v. Black, 100 Wn.2d 793, 805, 676 P.2d 963 (1984) (concluding that the award of attorney fees in a private action under RCW 19.86.090 is mandatory, while the award of fees in an Attorney General action under RCW 19.86.080 is discretionary).
The majority errs in allowing the trial court to deny attorney fees as a matter of discretion. I would reverse the trial court's denial of attorney fees. The plaintiffs should be granted attorney fees if they prevail on their CPA claim at trial on remand.
In smn, I would reverse the trial court's summary judgment ruling that CPR DR 5-105 had been violated; I would reverse in part and affirm in part the trial court's summary judgment rulings concerning the CPA; and I would affirm the trial court's rulings regarding the class certification issues. I would remand the case for further proceedings.
Dot,t.tver. and Andersen, JJ., concur with Johnson, J.

Cases cited by tbe majority involving the attorney disciplinary rules and conflicts of interest do not conflict with my conclusion. In Stroud v. Beck, 49 Wn. App. 279, 287-89, 742 P.2d 735 (1987), the Court of Appeals resolved summary judgment issues under the attorney disciplinary rules as a matter of law. This holding, however, does not reveal whether the issues involved questions of law or fact. Questions of law by definition may be resolved as a matter of law, but also under certain circumstances so may questions of fact. See, e.g., Central Wash. Bank v. Mendelson-Zeller, Inc., 113 Wn.2d 346, 353, 779 P.2d 697 (1989). In Marquardt v. Fein, 25 Wn. App. 651, 654-56, 612 P.2d 378 (1980), the Court of Appeals affirmed a trial court's conclusion of law that an attorney had a conflict of interest. This conclusion of law, however, was based on findings of fact as to the circumstances establishing the conflict of interest. Thus, the issue was not purely one of law.

The promoters, along with the investors, had purchased recordings and therefore had the same incentive as the investors in minimizing the accrual of interest. The record provides no basis for determining whether this accruing interest would offset the gains that promoters would gamer from additional sales. Moreover, the investors’ statement that they wanted the matter speedily resolved is not supported by any record evidence that an investor at any point indicated dissatisfaction with the speed of the ongoing negotiations.