IN THE SUPREME COURT OF THE STATE OF WASHINGTON
LK OPERATING, LLC, a Washington )
limited liability company, )
)
Petitioner, )
) NO. 88132-4
v. )
)
THE COLLECTION GROUP, LLC, a )
Washington limited liability company; and )
BRIAN FAIR and SHIRLEY FAIR, ) ENBANC
husband and wife, and their marital )
community composed thereof, )
)
Respondents, )
) Filed JUL 3 1 2014
LESLIE ALAN POWERS and PATRICIA )
POWERS, husband and wife, and KEITH )
THERRIEN and MARSHA THERRIEN, )
husband and wife, )
)
Petitioners/Intervenors. )
___________________________)
FAIRHURST, J.-In this case and its companion, LK Operating, LLC v.
Collection Grp., LLC, No. 88846-9 (Wash. July 31, 2014), we consider issues arising
from a joint· venture proposal regarding a debt collection business. The debt
collection business operated according to the functional terms of the joint venture
proposal from approximately winter 2005 through summer 2007, at which point the
LK Operating, LLC v. Collection Grp., LLC, No. 88132-4
disagreements underlying the present litigation surfaced. This opinion addresses
whether the proceedings below complied with due process requirements; whether,
as a matter of law, the joint venture proposal was entered by an attorney in violation
of one or both of former RPCs 1.7 (1995) and 1.8(a) (2000); and, if so, whether the
remedy imposed by the trial court and affirmed on appeal is appropriate. We affirm.
The proceedings below satisfied the requirements of procedural due process
because the parties received sufficient notice and a meaningful opportunity to be
heard regarding the issues presented for judicial determination. We hold, though on
different reasoning from that used by the Court of Appeals, that the undisputed facts
establish as a matter of law that the joint venture proposal contemplated a business
transaction subject to, agreed to, and entered into in violation of former RPC 1.8(a).
We affirm that the former RPC 1.8(a) violation renders the terms of the business
transaction unenforceable under the circumstances presented and the remedy
imposed was appropriate. We further affirm that the business transaction was entered
in violation of former RPC 1. 7. We need not, and decline to, determine whether the
former RPC 1.7 violation would also justify the remedy imposed.
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LK Operating, LLC v. Collection Grp., LLC, No. 88132-4
I. FACTUAL AND PROCEDURAL HISTORY
At all relevant times, Leslie Powers (Mr. Powers) and Keith Therrien (Mr.
Therrien) 1 practiced law as Powers & Therrien, PS (Law Firm). In December 2003,
Mr. Powers and Mr. Therrien formed LK Operating (LKO), a limited liability
company (LLC). LKO has five members, each of which is a corporation. Each
corporation has a single shareholder, and each shareholder is a trust. One of Mr.
Powers' or Mr. Therrien's adult children is named as the trustee and sole beneficiary
of each of those five trusts. LKO is managed by Powers & Therrien Enterprises Inc.
(P&T Enterprises). Mr. Powers and Mr. Therrien are the officers ofP&T Enterprises.
The Law Firm, LKO, each ofLKO's member corporations, and P&T Enterprises all
apparently used the same mailing address during the relevant time frame.
In early 2004, Brian Fair retained the Law Firm in connection with Fair's
formation of a Nevada-based LLC, which is not implicated here. Fair, who practiced
as a certified public accountant from 1995 through 2007, had prior familiarity with
the Law Firm through common clients. Several months later, Fair and his wife,
without the assistance of any attorney, formed The Collection Group LLC (TCG) to
1
Where actions are alleged to have been taken, or arguments are raised, by only Leslie
Powers or Keith Therrien, the discussion will identify the relevant attorney using the title "Mr."
and the pronoun "he." Where both attorneys are implicated, their joint assertions and arguments
will be attributed to "Powers," without any title, using the pronoun "it." This terminology is used
solely for clarity, and we intend no disrespect in using titles when referring to Mr. Powers and Mr.
Therrien but not other individuals.
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LK Operating, LLC v. Collection Grp., LLC, No. 88132-4
run a debt collection business. Fair acted as manager ofTCG, and, at the time of its
formation, TCG had only two members-Fair and his wife.
In early fall 2004, Fair, in his capacity as TCG's agent, asked Mr. Powers if
he, Mr. Therrien, and/or the Law Firm2 would be interested in investing in TCG and
operating it as a joint venture. Fair proposed each party to the joint venture would
contribute 50 percent of the costs, Fair would provide administrative and
management services at no itemized or hourly cost, the Law Firm and/or Powers
would provide legal services at no itemized or hourly cost, Fair would own 50
percent of TCG, and the Law Firm and/or Powers would own the other 50 percent
ofTCG. Powers claims it explicitly rejected this offer but suggested to Fair thatLKO
might be interested in investing. Fair claims Mr. Powers expressed interest in the
idea but did not give an explicit response and did not mention LKO as a prospective
investor. This factual dispute is not material to our holding and does not require
resolution.
In late October 2004, Fair e-mailed Powers at its Law Firm e-mail address.
Fair again set out his joint venture proposal and attached a proposed purchase and
sale agreement for a debt portfolio from a company called Unifund (which is not
otherwise implicated here) to TCG. In this e-mail, Fair described the proposed joint
2
It is unnecessary for purposes of this decision to determine whether Fair's proposal was
directed to all three of these parties or to some subset of them, and we do not do so.
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LK Operating, LLC v. Collection Grp., LLC, No. 88132-4
venture as "between myself and you two." Clerk's Papers (CP) at 22. Mr. Powers
made extensive notations, edits, and suggestions on the proposed purchase and sale
agreement and e-mailed this annotated version back to Fair in December 2004.
However, Mr. Powers' e-mail did not respond directly regarding Fair's joint venture
proposal. Mr. Powers asserts his annotations to the Unifund purchase and sale
agreement were not for TCG's benefit; rather, they were "designed to make the
investment safer and acceptable to our children's company [LKO]" and were a part
of the "due diligence" required ofMr. Powers "as an officer ofthe manager and for
the exclusive benefit of our children's company." CP at 1411.
Apparently interpreting Mr. Powers' e-mail response as an acceptance of the
joint venture proposal, Fair then contacted the Law Firm, through both its legal
assistant and its boold