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Bellevue Farm Owners Association v. Stevens

Court of Appeals of Washington, Division 1

April 3, 2017

BELLEVUE FARM OWNERS ASSOCIATION, A Non-profit Corporation; LAUREN BARRETT and WILLIAM BARRETT, husband and wife respectively, trustees of the Laurie Barrett Residential Trust and of the Bill Barrett Residential Trust; WEBSTER AUGUSTINE III, an individual; HOOPOE LLC, a Washington Limited Liability Company; GIGI BIRCHFIELD and MARK BAUTE, husband and wife; TIMOTHY DOHERTY and CHRISTINE DOHERTY, husband and wife; GLEN CORSON and KIM KYLO-CORSON, husband and wife; JANTANA KUPPERMANN and BARUCH KUPPERMANN, husband and wife; RODNEY SMITH and MARY MARGARET SMITH, husband and wife; MATTHEW STRAIGHT and VERONICA STRAIGHT, husband and wife; TOM TUCCI and DIANE TUCCI, husband and wife; and DANA PIGOTT, an individual, Respondents,
CHAD STEVENS and "JANE DOE" STEVENS, husband and wife, Appellants, PETE FINDLEY and "JANE DOE" FINDLEY, husband and wife; CASCADE MOUNTAIN RENTALS LLC, a Washington limited liability company; ROBERT STEVENS, an individual; and DOES 1 to 10, Inclusive, Defendants.

          SCHINDLER, J.

         To establish abuse of process, the claimant must prove (1) an ulterior purpose to accomplish an object not within the proper scope of the process, (2) an act not proper in the regular prosecution of proceedings, and (3) harm caused by the abuse of process. Chad Stevens filed a counterclaim against Mark Baute for abuse of process. Stevens alleged as damages that he incurred attorney fees and costs as a result of abuse of process. We affirm the August 5, 2015 order to produce the "Attorney's Fees for Abuse of Process" spreadsheet. We also affirm denial of the motion to bifurcate liability and damages, lift the temporary stay of the August 5, 2015 discovery order, and remand.


         The original owners of the Friday Harbor Bellevue Farm property owned the waterfront portion of the property as tenants in common. In 1991, the owners recorded a "Grant Deed of Conservation Easement." In 1994, the owners recorded a short plat to create four lots and a common waterfront. In May 1997, the Bellevue Farm Owners Association (BFOA) recorded a declaration of protective covenants, conditions, and restrictions.

         In 2005, Chad Stevens purchased 10 acres of waterfront property in the Bellevue Farm plat. Mark Baute and his spouse Gigi Birchfield own waterfront property located adjacent and to the south of Stevens' property. Baute and Birchfield also co-own waterfront property with Jantana and Baruch Kuppermann adjacent and to the north of Stevens' property.

         Baute was a BFOA board member and an attorney licensed to practice in California. Baute began representing BFOA in May 2012. In August 2012, BFOA board members clarified and amended the covenants, conditions, and restrictions and adopted a revocable license agreement.

         In September 2012, BFOA filed a lawsuit against Stevens alleging violation of the covenants, conditions, and restrictions. In November, the court granted the motion to admit Baute pro hac vice. Baute acted as lead attorney in the lawsuit.

         Stevens asserted a number of counterclaims against BFOA, BFOA board members, and other property owners (collectively, BFOA). Stevens alleged the 2012 clarification and amendments to the covenants, conditions, and restrictions and adoption of the revocable license agreement were unlawful. In counterclaim 12, Stevens asserts BFOA did not comply with the statutory requirements that govern a homeowner association, chapter 64.38 RCW. Stevens sought declaratory and injunctive relief.

         In April 2013, the court revoked pro hac vice admission of Baute. The court found, in pertinent part:

Mr. Baute's personal interest as a party plaintiff appeared to be causing a relatively straightforward lawsuit to be increasingly characterized by unprofessional personal invective, excessive and unnecessary pleadings, and a lack of civility between himself and counsel for the defendants.
Mr. Baute has ignored the court's warning and again engaged in unnecessary and intentionally provocative behavior that has only increased the level of personal antagonism and rancor that infects this litigation.
Provocation is exactly the type of behavior the court had warned Mr. Baute to refrain from and that should no longer be tolerated. .....the Court is convinced that Mr. Baute's conduct continues to manifest an intentional disregard for this Court's directions and a flippant disregard for the clearly adverse effect his personal feelings of animosity and disrespect for the Defendants and their attorneys have had on the manner in which this lawsuit has been conducted.[1]

         Stevens filed a motion for leave to file amended counterclaims to add a counterclaim against Baute and the marital community (collectively, Baute) for abuse of process, counterclaim 13. Stevens also alleged breach of fiduciary duty and sought damages against BFOA under chapter 64.38 RCW.

         The abuse of process counterclaim alleged that during the course of the litigation, Baute engaged in conduct "based upon the existence of his ulterior motives and was coercion for the purpose of obtaining collateral advantage."

The conduct of Baute has been based upon the existence of his ulterior motives and was coercion for the purpose of obtaining collateral advantage not properly involved in the litigation process itself, and constitutes the misuse of the litigation process for purposes other than those which constitute legitimate litigation proceedings.
... As a result of the conduct of Baute, Defendant/Counterplaintiff Chad Stevens has been damaged.

         Stevens alleged the litigation strategy was designed to harass Stevens and "needlessly increase" litigation costs. The counterclaim alleged that despite the April 2013 court order revoking pro hac vice admission, Baute "continued and continues to provide to the plaintiffs legal advice and engaged in the unlawful practice of law for the continued purpose of harming Stevens through use of the litigation process." Over the objection of BFOA and Baute, the court granted the motion to file the amended counterclaims on May 6. BFOA filed a demand for a jury trial.

         On June 13, 2014, Baute propounded interrogatories and requests for production of documents to Stevens, including a request to produce invoices for the legal fees and costs allegedly incurred for abuse of process.[2] In a June 19 letter, the special master directed the parties to "confer about how to approach this issue" and urged the parties to take steps to preserve attorney client privilege and attorney work product.[3]

         In July 2014, Stevens filed a motion to stay discovery and a motion to file amended counterclaims. Stevens alleged Baute made assertions in pleadings that Baute knew were false, continued to harm Stevens through "the litigation process, " and engaged in conduct designed to "harass" and "needlessly increase Stevens' litigation costs." Stevens alleged Baute was "liable for the attorney's fees and costs that defendant Stevens has incurred as a result of Mr. Baute's abuse of process." Stevens alleged BFOA was "liable for the attorney's fees and costs that defendant Stevens has incurred because of their breach of fiduciary duty to him." Stevens argued the court should stay discovery on the counterclaims for breach of fiduciary duty and abuse of process, counterclaim 12 and counterclaim 13.

         BFOA did not object to filing the amended counterclaims. BFOA objected to the motion to stay discovery on counterclaim 12 and counterclaim 13. The court denied the motion to stay discovery on the counterclaims.

         In late August, BFOA filed a motion to compel Stevens to respond to the June 13, 2014 interrogatories and requests for production. The motion states BFOA sought information that was "not privileged" on "the amount of legal fees that [Stevens] claims are linked to any alleged abuse of process by Mr. Baute." The discovery master granted the motion to compel based on the "agreement of the parties." The order states Stevens "is not at this time required to produce privileged time sheets."

         Stevens filed a motion to stay the order of the special master granting the motion to compel and certification to the appellate court. The court denied the motion to stay. The court ruled the discovery master "was correct in ruling that [Stevens'] attorney's fees are discoverable because he had alleged that those fees are his damages under Counterclaims 12 and 13." The court ruled that "where attorney's fees constitute an element" of tort damages, "they must be proved to the trier of fact." But the court granted the request to certify "whether [Stevens'] alleged damages of attorney fees/costs under abuse of process and breach of fiduciary duty are discoverable, where those fees/costs are the only allegation of proximately caused harm under each claim."

         On February 23, 2015, Stevens submitted supplemental responses to the interrogatories and requests for production. Stevens states he is entitled to $204, 000 in attorney fees and costs as damages for abuse of process and $185, 000 in attorney fees and costs as damages for breach of fiduciary duty under chapter 64.38 RCW. Stevens did not provide attorney time sheets.

         BFOA filed a motion for sanctions under CR 37. BFOA argued the responses did not allow BFOA to evaluate whether the attorney fees were the proximate cause of breach of fiduciary duty or abuse of process. Baute propounded additional discovery requests asking for production of attorney fee invoices including time entries and task descriptions.[4]

         The discovery master conducted an in camera review of the attorney billing records. On March 31, the special master issued a letter ruling. The discovery master denied the motion for CR 37 sanctions.

         The discovery master ruled that to establish liability for breach of fiduciary duty and abuse of process, Stevens must prove the fact of damages.

[T]o establish liability on his counterclaims, defendant must prove the fact of damage, and his only claimed damages are his attorney fees. Permitting defendant to claim the full amount of his attorney fees without allowing plaintiffs' discovery of them violates plaintiffs' right to a fair trial.

         The special master agreed BFOA was entitled to determine whether the attorney fees were proximately caused by the alleged breach and harm.

Plaintiffs are correct that plaintiffs are entitled to test the validity of the claimed fees by examining whether they were proximately caused by plaintiffs alleged misconduct, and whether they are overstated, duplicated, or unrelated to the issue, etc.

         However, based on the in camera review, the special master concluded that there "is no way to reasonably redact" attorney communications and work product and that producing the billing records would disclose information protecting the attorney client privilege and work product.

However, a review of the billings indicates that producing them would disclose both descriptions of attorney/client communications and attorney work product, i.e. strategy, areas of research, names of individuals being interviewed, etc. Of course, many of the entries are innocuous .... But there is no way to reasonably redact sensitive entries and permit examination of the rest. It would be an overly burdensome and expensive task and the redacted billings would not give an accurate picture of what the attorney fees are.

         Because disclosure would violate the attorney client privilege and work product, the special master concluded production of the attorney billing records before a trial on liability was not inappropriate.

The Discovery Master cannot appropriately order that defense counsel produce these billing records before the liability trial without invading the attorney/client privilege and work product doctrine protections. Disclosure of the billings pre-trial would compromise defense counsel's ability to represent his client.

         As a solution to the competing interests, the special discovery master suggested the parties stipulate to the fact of damages and to bifurcate the trial on liability and damages.

One solution is for the parties to stipulate (1) to the fact of damage; (2) to plaintiffs' full discovery of defendant's fees and costs post trial, as is customary, if the jury finds for defendant; [and] (3) to [the] Judge['s]... determination of ...

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