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In re Hutton

May 5, 1997


Appeal from Superior Court of King County. Docket No: 94-2-09531-5. Date filed: 10/25/95. Judge signing: Hon. Robert S. Lasnik.

Petition for Review Denied October 7, 1997,

Authored by C. Kenneth Grosse. Concurring: Mary K. Becker, Ronald E. Cox.

The opinion of the court was delivered by: Grosse

GROSSE, J. -- Shulkin Hutton, Inc., P.S. (Shulkin) appeals an adverse judgment after arbitration in favor of former majority shareholders of the law firm (Bucknell), alleging as error the trial court's refusal to disqualify counsel for the Bucknell group on the basis of a conflict of interest. Shulkin did not move to vacate the arbitration award in superior court, but moved only to modify the arbitration award seeking deletion of an attorney fees award. Here, Shulkin appeals the order denying disqualification of counsel, and further claims that all proceedings in the arbitration should be declared invalid. Because no prejudice has been shown with regard to what is little more than a technical conflict of interest on the part of Bucknell's counsel, we affirm.

This dispute arises out of the dissolution of the law firm of Shulkin, Hutton & Bucknell, Inc., P.S. During the negotiations leading up to the agreement dissolving the firm, Bucknell retained counsel whose fees were initially paid by the corporation. Shulkin also retained counsel. The agreement reached provided for redemption of the shares of the corporation, and retention of control by Shulkin, renamed Shulkin Hutton, Inc., P.S. Shulkin remained in the offices of the former firm. The form of the dissolution was, in part, to avoid the serious tax consequences of an outright dissolution of the corporation.

In short order, the parties became embroiled in new disputes, principally whether amounts payable to the Bucknell group from accounts receivable, collected by the Shulkin group, were to be reduced by income taxes paid by the corporation. When the new Shulkin corporation notified the Bucknell group of its intention to reduce the payments, the Bucknell group called on its counsel to respond on its behalf. Upon hearing from him, the new firm objected to his representation of the Bucknell group, claiming that the corporation was a former client. Counsel refused to withdraw.

The redemption agreement provided for arbitration. The parties agreed to arbitrate the dispute, but when they were unable to agree on an arbitrator, an action was filed in superior court seeking appointment of an arbitrator pursuant to RCW 7.04.050. In the same cause, a motion to disqualify the prior attorney for the corporation was filed, seeking disqualification of the lawyer representing the Bucknell group because he had represented the corporation in a "substantially related" matter and the two clients now had substantially adverse interests. The motion to disqualify was denied and an arbitrator was appointed. Shulkin appealed the denial of the motion to disqualify counsel for Bucknell. The appeal proceeded until Bucknell filed a motion to determine appealability. A commissioner of this court and the Supreme Court agreed that discretionary review was not appropriate.

There were three issues presented for arbitration: the tax liability question; whether certain leasehold assets were assets; and the division of fees collected. The arbitrator held for Bucknell on two issues and held for Shulkin on one. The issue of representation was not presented to the arbitrator; although in the decision, it is clear the arbitrator thought the issue could have been decided at arbitration. In superior court, Shulkin moved to modify the award claiming that part of the attorney fee award was based on an issue not properly before the arbitrator. Notably, Shulkin did not request vacation of the arbitration award on the grounds of the "disqualification" issue, only a portion awarding fees.

Shulkin claims that Bucknell's counsel and his law firm are disqualified by operation of law and under the provisions of Washington Rules of Professional Conduct (RPC) 1.9 and 1.10. RPC 1.9 states:

A lawyer who has formerly represented a client in a matter shall not thereafter:

(a) Represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client consents in writing after consultation and a full disclosure of the material facts; or

(b) Use confidences or secrets relating to the representation to the disadvantage of the former client, except as Rule 1.6 would permit. [Circumstances not germane to the case at bar.]

The determination of whether an attorney's continued representation violates the Rules of Professional Conduct is a question of law and is reviewed de novo by this court. *fn1

Shulkin relies solely on its legal argument and does not contend that Bucknell's counsel used any confidences or secrets to the disadvantage of the corporation, and further asserts that if counsel is disqualified, all members of the firm ...

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