Short v. Demopolis

• Decision Date: 06 November 1984
• Docket Number: No. 49617-0,49617-0
• Court: Washington Supreme Court
• Parties: , 53 USLW 2276 Kenneth P. SHORT, Paul R. Cressman, Sr., P.S., William Hintze, John O. Burgess, P.S., Douglas R. Hartwich, Robert E. Heaton, P.S., John H. Strasburger, P.S., Donald W. Ferrell, P.S., James A. Oliver, David R. Koopmans, Kenneth L. Myer, Robert S. Jaffe, Joseph D. Puckett, Robert J. Shaw, Carl B. Goodwin, Jr., Keith G. Baldwin, P.S., Paul R. Cressman, Jr., P.S., doing business as Short & Cressman, Respondents, v. Chris DEMOPOLIS, Petitioner.

Page 52

103 Wn.2d 52

691 P.2d 163, 53 USLW 2276

Kenneth P. SHORT, Paul R. Cressman, Sr., P.S., William Hintze, John O. Burgess, P.S., Douglas R. Hartwich, Robert E. Heaton, P.S., John H. Strasburger, P.S., Donald W Ferrell, P.S., James A. Oliver, David R. Koopmans, Kenneth L. Myer, Robert S. Jaffe, Joseph D. Puckett, Robert J. Shaw Carl B. Goodwin, Jr., Keith G. Baldwin, P.S., Paul R Cressman, Jr., P.S., doing business as Short & Cressman, Respondents, v. Chris DEMOPOLIS, Petitioner.

No. 49617-0.

Supreme Court of Washington,

En Banc.

Nov. 6, 1984.

William Bishin, Christopher Otorowski, Seattle, for petitioner.

Lane, Powell, Moss & Miller, John R. Tomlinson, Timothy Brown, Thomas C. Sorenson, Seattle, for respondents.

DOLLIVER, Justice.

May lawyers be subject to liability under the Consumer Protection Act (CPA), RCW 19.86? Defendant Chris Demopolis appeals the Superior Court order which dismissed his counterclaims under CR 12(b)(6) for CPA violations against the plaintiffs' law firm of Short and Cressman.

In March 1980, Demopolis met with Douglas Hartwich, partner in plaintiffs' law firm, to discuss representation in two pending lawsuits. The first involved dissolution of a real estate partnership. The complaint alleged damages in excess of $200,000. After 2 days of trial, the action settled for $7,500. Attorney fees totaled $19,958.53. The second case involved a real estate forfeiture action. Defendant prevailed and was entitled to immediate possession of the premises, rental delinquencies, and damages.

A dispute ensued over the rendering of legal services. Defendant contends he hired Hartwich to handle personally his legal matters but that without his consent or knowledge Hartwich had a younger partner (Ferrell) and an associate (Mayotte) do the legal work. Plaintiffs maintain Hartwich personally introduced Ferrell and Mayotte to Demopolis, that he told Demopolis they would be handling the cases, and that Demopolis agreed to this arrangement.

The parties also contest the payment of attorney fees. Defendant asserts he rejected plaintiffs' first bill and made a final settlement of $14,000. The second bill for $29,122.80 is considered excessive by defendant as he holds numerous grievances with the quality of representation. Plaintiffs state they attempted to obtain payment from Demopolis but were unsuccessful. Subsequent to filing a notice of intent to withdraw in August 1980, but before the effective date, plaintiffs maintain they entered into an agreement with Demopolis.

In a letter dated September 3, 1980, Hartwich wrote Demopolis confirming (1) plaintiffs' acceptance of $14,000 as full payment for the partnership matter; (2) withdrawal of their notice to withdraw; (3) plaintiffs' intent to bill at their regular hourly rates for time expended on the second case; and (4) noting "You will be working on the [second] case directly with Don Ferrell and Jim Mayotte, as was the case in the partnership action." A handwritten statement, signed by Demopolis, to hold Short and Cressman harmless for the release of trust funds totaling $3,025.35 held by them for Demopolis' former attorney is on the first page of this letter. However, Demopolis' affidavit states he never received the original or a copy of the letter, he only agreed to hold plaintiffs harmless for the release of trust funds, and was not told he was waiving any legal rights to complain about the fees or the handling of the first case.

Plaintiffs sued Demopolis for breach of an express contract to pay for legal services. Demopolis denied liability and asserted affirmative defenses and counterclaims. He alleged 10 causes of action: (1) unfair and deceptive practices in violation of the Consumer Protection Act (CPA), RCW 19.86; (2) breach of contract; (3) violation of Code of Professional Responsibility (CPR) DR 2-106 (excessive fees); (4) violation of CPR DR 6-101 (incompetence); (5) negligence and malpractice; (6) fiduciary duty violations; (7) misrepresentation; (8) violation of CPR DR 2-110 (threat to withdraw) causing mental distress; (9) reformation of contract; and (10) attorney fees assessment.

Plaintiffs moved for summary judgment which was denied, except for defendant's claim for emotional distress damages which was dismissed. Subsequently, and before a second judge, plaintiffs made a CR 12(b)(6) motion to dismiss defendant's first, third, fourth, eighth, and tenth causes of action. This latter motion was granted and the counterclaims were dismissed with prejudice. Three reasons were cited for dismissing defendant's counterclaims for CPA violations. First, the practice of law did not constitute the conduct of any trade or commerce within the meaning of the CPA or Washington case law. Second, to regulate the legal profession through the CPA was an unconstitutional infringement on the power of the judiciary to regulate the practice of law. Third, other adequate remedies (breach of contract and malpractice) were available.

Defendant was granted direct discretionary review and assigns error to the dismissal of his CPA violation counterclaims pursuant to CR 12(b)(6) ("failure to state a claim upon which relief can be granted").

I

The first issue we consider is whether the practice of law falls within "trade or commerce" as that term is defined by RCW 19.86. RCW 19.86.020 provides:

Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful.

" 'Trade' and 'commerce' shall include the sale of assets or services, and any commerce directly or indirectly affecting the people of the state of Washington." RCW 19.86.010(2).

The trial court, relying on Lightfoot v. MacDonald, 86 Wash.2d 331, 544 P.2d 88 (1976), interpreted the CPA as exempting the practice of law. In Lightfoot, a client allegedly suffered damages as a result of her attorney's nonfeasance. We disallowed her CPA claim because of her failure to show sufficient public impact. 86 Wash.2d at 338-39, 544 P.2d 88.

A breach of a private contract affecting no one but the parties to the contract, whether that breach be negligent or intentional, is not an act or practice affecting the public interest.

86 Wash.2d at 334, 544 P.2d 88. In dictum we "implicitly recognized the lack of precedent for the concept that the legal profession is involved in trade and commerce ..." 86 Wash.2d at 338, 544 P.2d 88. Subsequent case law does not appear finally to have answered the question. See Anhold v. Daniels, 94 Wash.2d 40, 47-48, 614 P.2d 184 (1980) (Rosellini, J., concurring) ("[w]hether the lawyer [MacDonald] who was sued in that action was engaged in 'trade or commerce' was a question which we left unanswered"); Salois v. Mutual of Omaha Ins. Co., 90 Wash.2d 355, 361, 581 P.2d 1349 (1978) ("Lightfoot is correct on its facts in that there was a failure to show that the private dispute affected the public interest or was within the sphere of trade or commerce ..."); Bowers v. Transamerica Title Ins. Co., 100 Wash.2d 581, 591-92, 675 P.2d 193 (1983) (unauthorized practice of law by employees of an escrow agent is a violation of the CPA).

The CPA contains no language expressly including or excluding attorneys from its purview. The act, however, contains its own guide to statutory construction. RCW 19.86.920 provides:

The legislature hereby declares that the purpose of this act is to complement the body of federal law governing restraints of trade, unfair competition and unfair, deceptive, and fraudulent acts or practices in order to protect the public and foster fair and honest competition. It is the intent of the legislature that, in construing this act, the courts be guided by final decisions of the federal courts ... interpreting the various federal statutes dealing with the same or similar matters and that in deciding whether conduct restrains or monopolizes trade or commerce ... To this end this act shall be liberally construed that its beneficial purposes may be served.

(Italics ours.)

Some earlier cases from the United States Supreme Court seem by dictum to have recognized a "learned professions" exemption to the antitrust laws. This exemption was based on judicial interpretations of what constituted a trade--"[w]herever any occupation, employment, or business is carried on for the purpose of profit, or gain, or a livelihood, not in the liberal arts or in the learned professions ..." Atlantic Cleaners & Dyers, Inc. v. United States, 286 U.S. 427, 436, 52 S.Ct. 607, 610, 76 L.Ed. 1204 (1932). See Annot., "Learned Profession" Exemption in Federal Antitrust Laws (15 U.S.C. §§ 1 et seq.), 39 A.L.R. Fed. 774 (1978). The question as to whether there could be restraint of "trade or commerce" when the activities restrained were the professional activities of members of a "learned profession" was not reached until Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975).

In Goldfarb, the United States Supreme Court held minimum fee schedules, published by a county bar association and enforced by the state bar, violated the Sherman Act, 15 U.S.C. § 1 (1976). The bar association argued immunity under the Sherman Act because the practice of law was a learned profession--not trade or commerce. The association maintained competition was inconsistent with the practice of a profession because enhancing profit was not the goal of professional activities; the goal was to provide community services. 421 U.S. at 786, 95 S.Ct. at 2012. The Court said neither the nature of an occupation in and of itself nor the claim of public service controlled in determining whether section 1 included performance. The Court went on to state:

The language of § 1 of the Sherman Act, of course, contains no exception.... And our cases have repeatedly established that there is a heavy presumption against implicit exemptions ... Indeed, our cases have specifically included the sale of services within § 1. ......