Davis Wright Tremaine LLP v. Peterson

• Decision Date: 01 May 2017
• Docket Number: No. 75014-3-I,75014-3-I
• Court: Washington Court of Appeals
• Parties: DAVIS WRIGHT TREMAINE LLP, a limited liability partnership, Respondent, v. FREDERICK PETERSON, Appellant.

DAVIS WRIGHT TREMAINE LLP, a limited liability partnership, Respondent, v. FREDERICK PETERSON, Appellant.

No. 75014-3-I

COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION ONE

May 1, 2017

UNPUBLISHED OPINION

SCHINDLER, J. — Davis Wright Tremaine LLP (DWT) filed a lawsuit for unpaid legal fees against Frederick Peterson. Following a bench trial, the court ruled Peterson breached the legal services agreement. The court found the majority of the fees were reasonable, entered a judgment in favor of DWT, and awarded DWT attorney fees as the prevailing party. Peterson appeals the judgment and the award of attorney fees to DWT as the prevailing party. We affirm.

Meilinger Lawsuit

Frederick Peterson is the president of Retaining Walls Northwest Inc. (RWNW). In July 2010, Trent Meilinger, Larry Westling, and Tower and Cabling Services Inc. filed a lawsuit against Peterson and Patrick McHugh (the Meilinger lawsuit). The complaint alleged Peterson breached the agreement "to provide financing of up to $2,000,000" to Tower and Cabling Services. The lawsuit sought damages and attorney fees.

Peterson discussed the Meilinger lawsuit with his longtime friend Gregory Hendershott. Hendershott is a partner at Davis Wright Tremaine LLP (DWT). Peterson asked DWT to represent him in the Meilinger lawsuit.

On October 14, 2010, DWT sent Peterson an "Engagement Letter" and the "Standard Terms of Engagement for Legal Services" (Legal Services Agreement). The letter states DWT would bill Peterson monthly for legal fees based on a number of factors including the "time and effort required"; the "novelty and complexity of the issues presented"; the "amount of money or value of property involved and the results obtained"; and the "experience, reputation and expertise of the lawyers performing the services." The Engagement Letter states, in pertinent part:

Engagement

At Davis Wright Tremaine LLP we believe it is essential that our clients and we have the same understanding of the client-attorney relationship. With this in mind, attached for your review is a copy of our Standard Terms of Engagement for Legal Services, which describes in greater detail the basis on which we provide legal services to our clients.

As with most firms, fees for services at Davis Wright are based on a variety of factors including, for example, the time and effort involved, the experience of those doing the work, and the complexity of the matter. Of these and other considerations, the time devoted and the experience of those providing the services will be given the most weight. For example, John Theiss's present rate is $435.00 per hour. Rates are subject to adjustment from time to time. Depending on circumstances that may arise, other Davis Wright attorneys or paralegals may assist at rates consistent with their skills and experience. John will advise you before any attorney besides John does substantial work on this matter. Our services are billed monthly. Please let me know if you ever have a question or concern on a bill.

The Legal Services Agreement states the client agrees to "make payment within 30 days of receiving our statement," pay the expenses of collecting the debt, and pay reasonable attorney fees. The Legal Services Agreement states, in pertinent part:

Billing Arrangements and Terms of Payment

We will bill you on a regular basis, normally each month, for both fees and disbursements. You agree to make payment within 30 days of receiving our statement. . . .

We will give you prompt notice if your account becomes delinquent, and you agree to bring the account or the retainer deposit current. If the delinquency continues and you do not arrange satisfactory payment terms, you agree that we may withdraw from the representation and pursue collection of your account. You agree to pay the expenses of collecting the debt, including court costs, filing fees and a reasonable attorney's fee.

DWT partner John Theiss and associate Carly Summers represented Peterson. Peterson told the attorneys to "act aggressively in the Meilinger Lawsuit." DWT investigated a broad range of claims against McHugh, Meilinger, Westling, and the officers of Tower and Cabling Services. DWT filed counterclaims alleging breach of contract, breach of fiduciary duties, securities fraud, fraudulent misrepresentation, conversion, and unjust enrichment. DWT also filed a cross claim against McHugh alleging breach of contract and breach of fiduciary duty and a third-party complaint against the officers of Tower and Cabling Services.

Between October 2010 and September 2012, DWT "engaged in considerable litigation." From October 2010 through September 2012, DWT billed Peterson $122,415.90—$119,779.00 for professional services and $2,636.90 for costs and other expenses. Theiss billed 44.7 hours at an hourly rate of $435.00 in 2010 and $475.00 per hour by 2012. Summers billed 338.1 hours at an hourly rate of $250.00 in 2010 and$290.00 by 2012. Peterson paid DWT $40,817.27. DWT "expended considerable effort in attempting to resolve the unpaid invoices" with Peterson.

In September 2012, DWT withdrew from representing Peterson in the Meilinger lawsuit. Peterson retained another law firm and filed a motion for partial summary judgment.¹ The motion relied on evidence obtained by DWT during discovery. The court granted partial summary judgment in favor of Peterson. The court dismissed the complaint and ruled in Peterson's favor on the counterclaim against Westling. But the court denied summary judgment on the counterclaim against Meilinger. On May 17, 2013, the parties stipulated to dismissal of all claims.

DWT Lawsuit

On January 22, 2014, DWT filed a lawsuit against Peterson for the unpaid legal fees. DWT alleged Peterson incurred $119,779.00 in legal fees and $2,636.90 in costs and other expenses but paid only $40,817.27. DWT sought judgment in the amount of the unpaid balance of $81,630.97.

Peterson asserted a number of affirmative defenses including that DWT charged unreasonable fees in violation of RPC 1.5(a) and that the fee agreement violated the RPCs and is "void as against public policy."

Plaintiff has breached RPC 1.5(a) by charging an unreasonable fee for its services. Plaintiff cannot collect an unreasonable fee for the services it may have rendered. Plaintiff's fee request must be limited to a reasonable fee and all amounts Plaintiff collected in excess of a reasonable fee must be disgorged to Defendant.

. . . .

. . . . The cause of action and fee agreement are void as against public policy because they violate the Washington Rules of Professional Conduct.

DWT and Peterson presented testimony during the three-day bench trial.

Theiss and Summers testified at length about the legal services and representation of Peterson in the Meilinger lawsuit. Theiss testified his hourly rates were "fairly similar to [partners] with the same tenure as me" and the hourly rates for Summers were the same as other associates at DWT. Theiss stated DWT billed Peterson at its standard hourly rates and the hourly rates were "generally similar" to the rates charged by other large law firms. Theiss testified the hours billed for Summers were "comparable" to the hours other associates spent on similar lawsuits and "reasonable for the tasks she was asked to do."

At the conclusion of DWT's case, Peterson moved to dismiss. Peterson argued DWT did not present evidence to show the legal fees incurred were reasonable. DWT argued the witnesses testified about the work performed and "the need for the work that was performed because of [the] complexity of the case." The court denied the motion to dismiss.

Peterson called attorney David Nold as an expert witness on the reasonableness of the legal fees. Nold testified the fees were "grossly unreasonable." According to Nold, DWT billed "approximately 90 percent" of the hours for the work of an associate and he had "never seen an associate with . . . one year of experience to whom this amount of responsibility should have been given." In his opinion, 36 hours for Theiss and 93 hours for Summers was reasonable. Nold testified a reasonable fee for the work DWT performed on the Meilinger lawsuit was $40,455.

The trial court entered extensive findings of fact and conclusions of law. The court found Peterson breached the Legal Services Agreement. The court found DWTbilled Peterson $119,779.00 in fees and $2,636.90 in costs for the Meilinger lawsuit. The court found Theiss's testimony "credible on hourly rates being reasonable generally for himself and Ms. Summers." The court concluded the hours billed were "reasonable in part." The court found Theiss "spent a reasonable number of hours working on Peterson's case." However, the court concluded the "hours spent on the matter by the associate were too high." The court reduced the hours billed for Summers by one-third from 338.1 to 225.5 for "some duplication (conferences with Mr. Theiss) and considerable hours wasted because of inexperience, unproductive claims, or lack of client management."

Using an average hourly rate of $455.00 for the 44.7 hours of work performed by Theiss, the court found a reasonable fee was $20,338.50. Using an average hourly rate of $270.00 for Summers, the court concluded a reasonable fee for her work was $60,885.00. The court concluded the total reasonable legal fees and costs for the Meilinger lawsuit was $83,860.40—$81,223.50 in attorney fees and $2,636.90 in costs. After subtracting the $40,817.27 that Peterson had paid, the court awarded DWT $43,043.13. The court found DWT was "the prevailing party under the Billing Arrangements and Terms of Payments section of the Engagement Agreement and [Legal Services Agreement] and is entitled to recover its attorneys' fees and costs" incurred in the breach of contract lawsuit.

DWT filed a motion for an award of $130,285.74 in attorney fees and costs as the prevailing party. Peterson argued DWT was not entitled to an award of attorney fees and costs as the prevailing party beca...