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IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
MWW, PLLC, a Washington No. 69109-1-
Professional Limited Liability Company
and DENNIS MORAN, DIVISION ONE
Respondents,
v.
KIRIBATI SEAFOOD COMPANY, LLC,
a Washington Limited Liability UNPUBLISHED OPINION
Company; OLYMPIC PACKER, LLC,
Defendants,
MONITOR LIABILITY MANAGERS LLC
and CAROLINA CASUALTY
INSURANCE COMPANY,
Appellants. FILED: January 13, 2014
Schindler, J. — Carolina Casualty Insurance Company, the legal malpractice
liability insurer for Moran, Windes, and Wong PLLC (MWW); and Monitor Liability
Managers LLC, the managing general underwriter for Carolina, appeal the "Order
Determining Reasonableness of Settlement" between MWW, Kiribati Seafood Company
LLC, and Olympic Packer LLC. We affirm.
No. 69109-1-1/2
FACTS
Nicholas Coscia and Charles Crovo own Kiribati Seafood Company LLC and
Olympic Packer LLC (Kiribati). Dennis Moran and Moran, Windes, and Wong PLLC
(MWW) represented Kiribati in several legal matters, including a lawsuit against the
Tahiti Port of Papeete for damage to a Kiribati fishing vessel. The December 18, 2004
fee agreement required Kiribati to pay $10,000 each month plus costs and expenses
and a 25 percent contingency fee on the Tahiti judgment.
In September 2008, Kiribati and Moran modified the terms of the December 2004
fee agreement to provide for a liquidated sum of $250,000 and 18.5 percent
contingency fee. Kiribati also agreed that Moran was entitled to "a first priority lien on
. . . any Gross Recovery" from the Tahiti case. The agreement states, in pertinent part:
The Gross Fee shall be due when any Gross Recovery is received by or
controlled by the client, its principals or agents .... Client grants Moran a
first priority lien on the cases, files and any Gross Recovery and proceeds
to secure the Gross Fees and expenses.
In January 2008, the Tahiti court entered a judgment in favor of Kiribati for
approximately $7 million. MWW served notice of the lien on Dechert LP, the Paris law
firm representing Kiribati.
On May 5, 2010, Dechert advised MWW that Kiribati would receive the first
payment on the judgment in the Tahiti case in the amount of $864,000, and requested
verification of the amount owed to MWW. After Kiribati "refused to discuss when, then
if, they would pay MWW," Dechert's managing partner "advised MWW that it would not
respect MWW's lien."
No. 69109-1-1/3
On May 25, MWW filed a breach of contract and lien foreclosure action against
Kiribati Seafood Company LLC, Olympic Packer LLC, Lawrence Crovo, Charles Crovo,
and Nicholas Coscia (collectively Kiribati). MWWalleged that the proceeds from the
judgment in the Tahiti lawsuit were subject to its first priority lien.1 MWW claimed
Kiribati owed approximately $1 million in attorney fees and costs.
Shortly after filing the complaint, MWW filed a motion asking the court to order
the transfer of $582,434 from the proceeds of the Tahiti judgment into the King County
Superior Court registry and appoint a receiver. The court granted the motion. The court
ordered Kiribati to transfer the funds by July 25, 2010 and appointed a receiver.
Kiribati filed an answer and counterclaims against MWW and Moran. Kiribati
denied the Tahiti judgment was subject to the lien foreclosure action. Kiribati asserted
as an affirmative defense that the contingency fee agreement violated the Rules of
Professional Conduct and was void. In the counterclaim against MWW, Kiribati alleged
Moran was negligent in "failing to perform his legal services in a manner in conformity
with the applicable standards of care," breach of fiduciary duty, and violation of the
Washington Consumer Protection Act, chapter 19.86 RCW. Kiribati sought damages
against MWW and Moran in excess of $2.5 million.
Carolina Casualty Insurance Company was the legal malpractice carrier that
insured MWW and Moran. Monitor Liability Managers LLC was the managing general
underwriter for Carolina (collectively Carolina). The malpractice insurance policy had an
aggregate limit of $1 million. Carolina agreed to defend MWW and Moran under a
reservation of rights.
1MWW also alleged that Kiribati violated the Uniform Fraudulent Transfer Act, chapter 19.40
RCW. MWW's amended complaint added the individual defendants and claims for theft of services,
conversion, and fraud.
No. 69109-1-1/4
Because Kiribati did not comply with the court order to deposit the Tahiti
proceeds into the court registry, the receiver filed a motion for contempt. The court
granted the motion for contempt. The court found that Charles Crovo on behalf of
Kiribati "intentionally violated this Court's Order." The August 26, 2011 order directs
Crovo to deposit funds into the court registry and imposes a $2,000 per day sanction for
failure to do so. Crovo deposited $315,000 into the court registry: $75,000 on
September 30 and $240,000 on October 3. On December 14, Dechert deposited into
the court registry a payment from the Port of Papeete of $511,611.42. Dechert told the
receiver additional payments were "expected soon."
Several of Kiribati's creditors intervened in the lawsuit and asserted claims
against Kiribati. As of March 2, 2012, there was approximately $1.3 million in the court
registry. The receiver reported to the court, "It appears that the potential sum of claims
of all creditors exceeds the Tahiti Court proceeds by hundreds of thousands of dollars."
For more than two years, Kiribati, MWW, and Moran engaged in contentious
litigation, including extensive discovery, joinder of multiple parties, and a number of
motions for summary judgment. The three-week trial was scheduled to begin on June
11,2012.
On April 17, Kiribati filed a motion for partial summary judgment arguing MWW
could not recover under the fee agreement or establish fees under a quantum meruit
theory. MWW filed a motion for partial summary judgment to dismiss Kiribati's legal
malpractice counterclaims.
No. 69109-1-1/5
On April 18, MWW, Moran, and Kiribati spent more than 12 hours in settlement
negotiations with mediator Lou Peterson. Carolina's coverage attorney Paul Fogarty
attended the mediation. Carolina's senior claims attorney Temperance Walker
participated by phone. The parties tentatively agreed to settle the attorney fee claims
for $600,000 and the counterclaims for $400,000. Despite the mediator's "efforts over
the next few weeks to hammer out a deal," the parties did not finalize the agreement.
On April 19, the court entered a judgment for CR 37 sanction against Kiribati in
the amount of $28,395.43. On May 18, the court heard oral argument on the motions
for summary judgment. The court denied the motion to dismiss the counterclaims. The
court reserved ruling on Kiribati's motion for partial summary judgment.
Over the next four days, the parties renewed efforts to settle. The parties
exchanged several offers through the mediator and on May 22, entered into a
settlement agreement and release. MWW agreed to settle the attorney fee claim for
$550,000 and to execute a satisfaction of the April 19 CR 37 judgment against Kiribati.
Kiribati agreed to settle the counterclaims against MWW for $550,000. The parties
agreed to execute a mutual release "of all possible claims and causes of action." MWW
released "those claims that were or could have been asserted in the Litigation including
against the proceeds of the Judgment in the matter Kiribati Seafood Company, et al. v.
Port of Papeete et al." The settlement was subject to approval of the court following a
reasonableness hearing. The "Confidential Settlement Agreement and Release"
provides, in pertinent part:
A. Kiribati shall pay $550,000 in full and final settlement of
MWW, PLLC's fee claims and lien and MWW PLLC's insurer shall pay
Kiribati $550,000.00 in full and final settlement of its legal malpractice and
breach of fiduciary duty claims. Payment shall be accomplished as
No. 69109-1-1/6
follows:
1. Within 10 (ten) calendar days of approval by the Court of this
settlement agreement at a reasonableness hearing, MWW's insurer shall
pay the full $550,000.00 into an escrow agreed by MWW and Kiribati.
Upon payment by MWW's insurer of the full $550,000 into the agreed
escrow, the following shall promptly and simultaneously occur:
2. The escrow shall pay Kiribati $550,000.00 by check and Kiribati
shall immediately endorse this check back to the escrow.
3. The escrow shall immediately pay MWW, PLLC $550,000.00 by
check.
B. Simultaneously with the execution of this agreement, MWW,
PLLC shall execute a satisfaction of the Judgment entered against Kiribati,
Coscia and Crovo in the amount of $28,395.43 on April 19, 2012 which
Kiribati may immediately file with the court.
On May 23, Kiribati's attorney notified the court that the parties had reached a
settlement. On May 31, MWW filed a "Motion for Determination of Reasonableness of
Settlement." MWW provided Carolina and the creditors with notice of the
reasonableness hearing scheduled for June 8. Moran, MWW attorney William Walsh,
and Kiribati attorney John Neeleman submitted declarations in support of the
reasonableness of the settlement agreement.
Carolina intervened and challenged the reasonableness of the settlement.
Carolina claimed the agreement was collusive. Carolina submitted a declaration from
senior claims attorney Walker stating that Carolina "was excluded from the negotiations
that led to [the April 18] tentative deal" and was "again excluded from the settlement
talks that led to the current proposed settlement of $550,000."
In response, MWW submitted a declaration from MWW attorney Walsh. Walsh
states Carolina's attorney attended the April 18 mediation and he kept Carolina
informed of the settlement negotiations after the April 18 mediation.
No. 69109-1-1/7
At the reasonableness hearing on June 8, Carolina did not challenge the
reasonableness of the amount the parties agreed to as part of the settlement
agreement. Carolina argued that the settlement was collusive because it was "largely
precluded from settlement talks."
The court found the argument that Carolina was excluded from settlement
negotiations was "without merit" and rejected the claim that the settlement was
collusive. The court ruled, in pertinent part:
[l]n terms of collusion, I can't think of another set of attorneys and parties
that are less likely to collude than this group. If there was an argument to
be made over five bucks, they would have spent $500 arguing over it.. ..
And again, they had a very well-respected mediator, they intensely
participated in mediation, they were going right up to trial, their claims
were both hard fought. There simply is no basis to find collusion.
The court concluded that the settlement was reasonable. The court stated,
"[T]his was probably a more transparent case than most cases, given the amount of
preparation and summary judgment motion practice that went into it. . . . [Ijt's very
apparent to me, given my knowledge about this case, that this is a fair settlement."
The court order determining the reasonableness of the settlement sets forth
detailed findings of fact. The court found that the structure of the settlement to pay the
insurance money into an escrow was reasonable given the "intervention of several
creditors, the presentation of various judgments and filing of competing security
interests, and the history of money tracing problems and contempt orders." The court
concluded as a matter of law that the settlement "is reasonable and prudent under the
circumstances, under RCW 4.22.060 and under the Glover121 factors."
Carolina appeals the determination that the settlement was reasonable.
2 Glover v. Tacoma General Hospital. 98 Wn.2d 708, 717, 658 P.2d 1230 (1983), overruled on
other grounds by Crown Controls. Inc. v. Smiley. 110 Wn.2d 695, 756 P.2d 717 (1988).
7
No. 69109-1-1/8
ANALYSIS
For the first time on appeal, Carolina argues the court did not have the authority
to hold a reasonableness hearing under RCW 4.22.060. Carolina concedes it did not
challenge the trial court's authority below to hold a reasonableness hearing. We do not
address arguments that were not presented to the trial court and are raised for the first
time on appeal. RAP 2.5(a); Lunsford v. Saberhaqen Holdings, Inc., 139 Wn. App. 334,
338, 160P.3d 1089(2007).
Next, Carolina argues the court erred in concluding the settlement was
reasonable under the Glover v. Tacoma General Hospital, 98 Wn.2d 708, 717, 658 P.2d
1230 (1983), factors. We review a trial court's reasonableness determination for abuse
of discretion. Water's Edge Homeowners Ass'n v. Water's Edge Assocs.. 152 Wn. App.
572, 584, 216 P.3d 1110 (2009). A superior court abuses its discretion when its
decision is manifestly unreasonable or is based on untenable grounds or untenable
reasons. Mayer v. Sto Indus., Inc., 156 Wn.2d 677, 684, 132 P.3d 115 (2006).
The determination of reasonableness necessarily involves findings of fact which
will not be disturbed on appeal if supported by substantial evidence. Schmidt v.
Cornerstone Invs., Inc., 115Wn.2d 148, 158, 795 P.2d 1143 (1990) (citing Glover, 98
Wn.2d at 718). "Substantial evidence is evidence in sufficient quantum to persuade a
fair-minded person of the truth of the stated premise." Schmidt, 115 Wn.2d at 158.
Unchallenged findings of fact are verities on appeal. Zunino v. Raiewski, 140 Wn. App.
215,220, 165 P.3d 57 (2007).
Under Glover, the court must consider the following factors in making a
reasonableness determination: (1) the releasing person's damages; (2) the merits of
8
No. 69109-1-1/9
the releasing person's liability theory; (3) the merits of the released person's defense
theory; (4) the released person's relative faults; (5) the risks and expense of continued
litigation; (6) the released person's ability to pay; (7) any evidence of bad faith, collusion,
or fraud; (8) the extent of the releasing person's investigation and preparation; and (9)
the interests of the parties not being released. Glover. 98 Wn.2d at 717.
Carolina asserts the record does not support the finding the agreement was not
collusive. The findings of fact state, in pertinent part:
The Court finds that the settlement was negotiated in good faith, at arm's
length through a competent mediator and there is no evidence of collusion
or fraud. . . . The claim that [Carolina] was "shut out" from settlement
negotiations is without merit. The Court finds no basis to find that the
settlement agreement was a result of bad faith, collusion or fraud.[3]
Substantial evidence supports the trial court findings that the settlement
agreement was negotiated in good faith and there was no evidence of collusion. The
record shows that the parties had engaged in extensive negotiations with the mediator
beginning in April, and the unchallenged finding establishes the parties "participated in
good faith, arm's length settlement negotiations which included an independent
mediator, on and off since April, 2012."
On April 18, the mediator spent more than 12 hours with MWW and Kiribati in
mediation. According to Kiribati's attorney, "For most of the mediation the parties were
more than $1 million apart -- Kiribati demanding over $500,000 net recovery and MWW
demanding over $500,000 net recovery." Late in the evening, the parties reached a
tentative agreement to settle the attorney fee claim for $600,000 and the counterclaims
for $400,000, but the parties were unable "to finalize the tentative agreement."
3Carolina does not challenge the finding that the case involved "more than two (2) years of
contentious litigation by all parties leading to this settlement agreement."
9
No. 69109-1-1/10
On May 3, Kiribati's attorney offered to settle the counterclaims for $600,000 and
satisfaction of the April 19 judgment against it for $28,395.43 if MWW agreed to settle
the fee claim for $550,000. After the May 18 hearing on the motions for partial
summary judgment, MWW offered to settle the attorney fee claim for $550,000 if Kiribati
would settle the counterclaims for $550,000. Kiribati rejected the offer.
Over the weekend, Kiribati made a counteroffer through the mediator to settle the
counterclaim for $750,000 and the attorney fee claim for $450,000. On Tuesday, May
22, Kiribati's attorney called the mediator and urged him to contact MWW again.
Kiribati's attorney was concerned about the "immense amount of work and expense and
potential vagaries and risks inherent in any three week jury trial." MWW expected "its
expenses and costs of trial preparation and a three-week trial to be around $180,000."
MWW told the mediator it was also concerned that "the uncertainty of trial remains and
so does the risk of MWW's potential exposure well beyond its insurance limits." The
mediator contacted Kiribati's attorney the afternoon of Tuesday, May 22. The mediator
said MWW would agree to settle the fee claim for $550,000 and execute a satisfaction
of the April 19 judgment if Kiribati would settle the counterclaims for $550,000.
Following a "difficult and searching discussion," Kiribati accepted the offer.
In the declaration submitted in support of the reasonableness hearing, Moran
states that "[t]he agreement was the product of a long and drawn out negotiations
process over the last two years." Kiribati's attorney Neeleman states that the two years
of litigation were "vigorous and taxing" and that "[e]ach side believed that the claims and
defenses they had asserted in the litigation had substantial merit."
10
No. 69109-1-1/11
Carolina also asserts the structure of the settlement shows the agreement was
collusive because it involved a "pass-through" payment from MWW's insurer to the court
escrow and then to MWW. The trial court's findings state, in pertinent part:
The Court finds that the structure of the settlement is reasonable. The
Court finds that under the circumstances of this case with the appointment
of a Receiver, the intervention of several creditors, the presentation of
various judgments and filing of competing security interests, and the
history of money tracing problems and contempt orders related thereto, it
is reasonable for the parties to structure the $550,000 insurance payment
into an escrow rather than have it paid into the registry of the court or
directly to Kiribati. The Court finds it is reasonable for the MWW fee claim
to be paid out of that escrow, under these circumstances where MWW has
a priority attorney's fee lien claim on the proceeds. The Court record
contains ample evidence, including numerous Receiver reports, regarding
the funds currently in the Court's Registry, amounts claimed by various
creditors and the potential disposition of those funds.
Substantial evidence supports the findings. The record shows that several of
Kiribati's creditors intervened claiming almost $700,000. One of the interveners
asserted a preferred maritime wage lien. Kiribati's attorney states in his declaration that
Moran's $1 million attorney fee claim was the largest of the claims against the Tahiti
proceeds and "Kiribati's members were anxious to ensure that they would realize a net
recovery from the Court registry." The receiver also described the difficulties of tracing
funds, the amounts claimed by Kiribati's other creditors, and the concern that those
amounts exceeded the amount in the court's registry.4
4Carolina also argues that the settlement was collusive because MWW had an incentive to inflate
the settlement amount. But Carolina did not argue below and does not argue on appeal that the
$550,000 amount was unreasonable. RAP 2.5(a); Lundsford, 139Wn. App. at 338. Therefore, we need
not address this argument.
11
No. 69109-1-1/12
In addition, Carolina claims the court improperly addressed coverage in a
handwritten finding and substantial evidence does not support the finding.5 The
handwritten finding states: "Kiribati's settlement offer of May 18 was timely [and] almost
immediately communicated to [Carolina]; [Carolina] did not timely respond."
Below, the parties argued the court should "not address underlying coverage
issues between Moran and [Carolina]" in ruling on the reasonableness of the settlement.
The court agreed and suggested adding language to that effect in the order:
THE COURT: What if we were to add a sentence that coverage
issues are not before the court?
[CAROLINA]: Ifthe court were to say coverage issues are not
before the court, and the court is not ruling at this time that it would be
reasonable for [Carolina] to have to pay that amount, I could live with that.
Accordingly, the order expressly states: "This Order does not include any
determination of coverage issues between MWW, PLLC, Mr. Moran and [Carolina]." In
context, it is clear that the handwritten finding related to timeliness is not related to
coverage. The finding is in response to Carolina's argument that it was excluded from
the settlement negotiations. The findings that include the court's handwritten footnote
state:
The Court finds that the settlement was negotiated in good faith, at arm's
length through a competent mediator and there is no evidence of collusion
or fraud. [Carolina]'s coverage counsel, Paul Fogarty, attended the entire
April 18, 2012 mediation in person. Ms. Walker had the opportunity to
attend the mediation in person but chose to attend by phone, which was a
business risk [Carolina] chose to take.* The claim that [Carolina] was
"shut out" from settlement negotiations is without merit. The Court finds
5Carolina also argues it "never had a meaningful opportunity to respond before the hearing" and
that the finding was not supported by admissible evidence. Carolina cites no authority to support these
arguments and does not identify why the evidence was inadmissible. We treat a party's failure to cite any
authority as a concession that the argument lacks merit. State v. McNeair. 88 Wn. App. 331, 340, 944
P.2d 1099(1997).
12
No. 69109-1-1/13
no basis to find that the settlement agreement was a result of bad faith,
collusion or fraud.
* Kiribati's settlement offer of May 18 was timely [and] almost
immediately communicated to [Carolina]. [Carolina] did not respond.
Substantial evidence also supports the handwritten finding. MWW attorney
Walsh states that he informed Carolina about the May 18 offer "the same day by email
and received no response." Walsh states that from May 18 to May 22, "both Mr. Moran
and I attempted to communicate continually with Ms. Walker regarding the settlement
communications that were taking place."
We affirm.
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WE CONCUR:
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13