Allyis, Inc., App. v. Simplicity Consulting, Inc., Res.

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

ALLYIS, INC., a Washington corporation, )
) No. 74511-5-1
Appellant, )
) DIVISION ONE
v. )
) UNPUBLISHED OPINION
)
)
JEREMY AND NICOLE SCHRODER, ) C.r)
C=1
) >
Defendants, )
)
SIMPLICITY CONSULTING INC., a )
Washington corporation, ) CI)1..71
:C

)
Respondent, )
IN)
)
MATTHEW F. DAVIS, attorney for Allyis, )
Inc., )
)
Appellant. ) FILED: February 27, 2017
)
APPELWICK, J. — Allyis sued its former employee and his new employer,
Simplicity, for breach of a noncompete agreement. The court dismissed Allyis's

case with prejudice. It awarded attorney fees and costs under RCW 4.84.185 for

a frivolous case and CR 11 sanctions for Allyis's failure to perform a reasonable

inquiry before filing the complaint. Allyis and its counsel appeal. We affirm.
No. 74511-5-1/2

FACTS

Allyis Inc. is a Washington company that was originally formed as Essential

Web Design & Consulting Inc. Its business began as internet design and

consulting, and it expanded to providing contract workers to technology

companies.

Jeremy Schroder was hired by Allyis in 2002, when it was still doing

business as Essential Web Design. He was provided an employee handbook,

which contained a noncompete agreement and a confidentiality agreement.

Schroder ended his employment with Allyis on May 7,2014. Prior to leaving

Allyis, Schroder expressed an interest in working for Simplicity Consulting Inc.

Simplicity is a marketing talent agency that provides consultants to other

companies. Simplicity offered Schroder a position as an account manager on April

21, 2014. Schroder accepted.

After Schroder began working with Simplicity, Allyis became concerned that

Schroder was soliciting Allyis employees to join him at Simplicity. Through its

attorney, Allyis asked Schroder to stop inducing Allyis employees to leave Allyis.

On September 22, 2014, Allyis filed a complaint against Schroder, his wife,

and Simplicity. It alleged that Schroder had breached the terms of his noncompete

and confidentiality agreements. And, it alleged that Simplicity tortiously interfered

with these agreements, violated the Consumer Protection Act(CPA),1

I Chapter 19.86 RCW.

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No. 74511-5-1/3

communicated false and injurious information about Allyis to other persons, and

violated the Uniform Trade Secrets Act(UTSA).2

On March 10, 2015, Allyis filed an amended complaint. This complaint

withdrew the four claims previously asserted against Simplicity, replacing them

with an unjust enrichment claim.

Simplicity served discovery requests on Allyis on March 16, 2015. By July

9, 2015, Allyis had not produced any discovery, despite Simplicity's multiple

requests, so Simplicity filed a motion to compel discovery. On July 17, 2015, the

trial court granted the motion. Simplicity scheduled depositions of two Allyis

executives to take place on July 23, 2015. But, counsel for Allyis, Matthew Davis,

failed to appear with the witnesses. And, Allyis still failed to respond to discovery

requests. On August 14, 2015, the court entered a second order, holding Allyis

and Davis in contempt of the July 17 order.

Simplicity moved for summary judgment on August 7, 2015. The motion

was set for a hearing on September 4, 2015. But, on September 3, 2015, Allyis

moved to voluntarily dismiss the case. Simplicity in turn moved for a dismissal with

prejudice.

The trial court granted Simplicity's motion to dismiss with prejudice. It found

that Allyis and its counsel had willfully disregarded two of the court's orders and

engaged in discovery abuse. And, it found that any lesser sanction was unlikely

to deter Allyis from engaging in further discovery abuse or contempt of court.

2 Chapter 19.108 RCW.

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No. 74511-5-1/4

Simplicity moved for fees and costs for opposing a frivolous action. It

argued that fees were warranted under RCW 4.84.185, because Allyis recognized

its original four claims lacked merit by dropping them and it knew or should have

known that its unjust enrichment claim was frivolous. Alternatively, Allyis argued

that the court should award CR 11 sanctions.

The trial court granted Simplicity's motion for fees and costs. It found that

Allyis's claims were frivolous and that Davis violated CR 11 by pursuing the claims

against Simplicity. After Allyis moved for reconsideration, the trial court amended

the order and entered additional findings. Allyis and its attorney Davis appeal.

DISCUSSION

Allyis challenges both the CR 11 sanctions and the award offees and costs

under RCW 4.84.185. It challenges a number of the trial court's findings of fact as

lacking substantial evidence. We address the challenged findings in the context

of the CR 11 sanctions and the RCW 4.84.185 attorney fees.

I. CR 11 Sanctions

We review a trial court's decision to impose or deny CR 11 sanctions for an

abuse of discretion. Bldg. Indus. Ass'n. v. McCarthy, 152 Wn. App. 720, 745, 218

P.3d 196 (2009). The court abuses its discretion where its conclusion was the

result of an exercise of discretion that was manifestly unreasonable or based on

untenable grounds or reasons. Skimming v. Boxer, 119 Wn. App. 748, 754, 82

P.3d 707(2004).

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No. 74511-5-1/5

CR 11 relates to the signing of pleadings, motions, and legal memoranda.

It states,

The signature of a party or of an attorney constitutes a certificate by
that party or attorney that the party or attorney has read the pleading,
motion, or legal memorandum, and that to the best of the party's or
attorney's knowledge, information, and belief,formed after an inquiry
reasonable under the circumstances:(1) it is well grounded in fact;
(2) it is warranted by existing law or a good faith argument for the
extension, modification, or reversal of existing law or the
establishment of new law; (3) it is not interposed for any improper
purpose, such as to harass or to cause unnecessary delay or
needless increase in the cost of litigation; and (4) the denials of
factual contentions are warranted on the evidence or, if specifically
so identified, are reasonably based on a lack of information or belief.

CR 11(a). Where a party or an attorney violates this rule, the court may impose

appropriate sanctions upon the party or person who signed the pleading, motion,

or legal memorandum, or both. Id.

CR 11 envisions two violations of the rule: filings that are not well grounded

in fact and warranted by law, and filings that are made for an improper purpose.

Bryant v. Joseph Tree, Inc., 119 Wn.2d 210, 217, 829 P.2d 1099 (1992). Before

imposing CR 11 sanctions for a baseless filing, the court mustfind that the attorney

failed to conduct a reasonable inquiry into the factual and legal basis of the claim.

Id. at 220. Courts use an objective standard in determining whether the attorney

engaged in an appropriate inquiry. Stiles v. Kearney, 168 Wn. App. 250, 261-62,

277 P.3d 9 (2012). The court must make findings that specify the actionable

conduct to impose CR 11 sanctions for a baseless complaint. Id. at 262. Namely,

the court must make a finding that either (1)the claim was not grounded in fact or

law and the attorney failed to perform a reasonable inquiry into the law or facts, or

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No. 74511-5-1/6

(2) the filing was made for an improper purpose. Biggs v. Vail, 124 Wn.2d 193,

201, 876 P.2d 448 (1994).

In this case, the trial court found that Allyis and Davis violated CR 11 and

therefore imposed CR 11 sanctions jointly and severally against Allyis and Davis.

It did so after finding that neither the unjust enrichment claim nor the original four

claims were well grounded in fact or warranted by existing law or a good faith

argument to modify the law. Consequently, it found that Allyis and Davis failed to

perform a reasonable inquiry prior to filing the original complaint and the amended

complaint. The court noted that Davis's conduct throughout the lawsuit was not

consistent with a claim filed in good faith. And, it inferred that Allyis and Davis filed

the original and amended complaints for an improper purpose: to bring and keep

Simplicity's presumably deep pockets into the litigation.

Allyis contends that the trial court erred by sanctioning both it and its

attorney, failing to enter the required findings, and entering findings that were not

supported by the record. As discussed below, we conclude that the trial court did

not abuse its discretion in imposing CR 11 sanctions.

A. Joint and Several Liability

Allyis argues that the trial court erred in entering CR 11 sanctions jointly and

severally against it and its attorney. It suggests that CR 11 sanctions can be

imposed against only the attorney, not the client. But, CR 11(a)specifically states,

"If a pleading, motion, or legal memorandum is signed in violation of this rule, the

court, upon motion or upon its own initiative, may impose upon the person who

signed it, a represented party, or both, an appropriate sanction." The rule gives

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No. 74511-5-1/7

broad discretion for the trial court to determine who should be sanctioned. In re

Cooke, 93 Wn. App. 526, 529, 969 P.2d 127(1999). Sanctions directly on a party

are permissible where the party is responsible for the frivolous filing. Id. at 529-

30. Here, counsel for Allyis signed the original complaint and the amended

complaint. Allyis's chief financial officer, Rakesh Garg, signed the verification

attached to the original complaint, verifying that its contents were accurate. Thus,

both Allyis itself and its counsel were responsible for the filing, and could be

sanctioned under CR 11.

B. Necessary Findings

Allyis contends that the trial court failed to enter the required findings to

support CR 11 sanctions. And, it argues that the findings that were entered do not

support the judgment. We disagree. The trial court made not one, but both Biggs

findings: that the claims were not grounded in fact or law and Allyis and Davis failed

to perform a reasonable inquiry before filing the original and amended complaints,

and that the claims were filed for the improper purpose of bringing Simplicity's deep

pockets into the litigation. Further, as discussed below, we conclude that the

court's findings on all of Allyis's claims support the CR 11 sanctions.

1. Unjust Enrichment

In its amended complaint, Allyis argued that Schroder's breach of the

noncompete and confidentiality agreements conferred a financial benefit on

Simplicity: namely, profits from employees and clients who were wrongfully

recruited from Allyis. Allyis contended that Simplicity was aware of the benefit it

would obtain from Schroder's actions and intended to obtain it. And, it asserted

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No. 74511-5-1/8

that Schroder breached the noncompete and confidentiality agreements on behalf

of Simplicity and as Simplicity's agent. During the course of litigation, Allyis did not

comply with Simplicity's discovery requests to obtain more information about this

claim.

On appeal, Allyis and Simplicity continue to dispute the correct legal

standard for an unjust enrichment claim under Young v. Young, 164 Wn.2d 477,

191 P.3d 1258 (2008).3 Allyis argues that under Young, unjust enrichment

requires only that the defendant received a benefit at the plaintiffs expense.

Simplicity argues that Young requires that the plaintiff conferred a benefit on the

defendant.

In Young, the plaintiff sued for quiet title of property. 164 Wn.2d at 480.

The defendants counterclaimed, arguing that the plaintiff had been unjustly

enriched by improvements they made to the property. Id. The trial court awarded

the defendants the market value of the improvements, but subtracted general

contractor's costs. Id. at 482.

The only issue on appeal was the appropriate measure of recovery. Id. at

483, 487. To answer this question, the court had to resolve whether the measure

of recovery was unjust enrichment or quantum meruit. Id. at 483. It defined unjust

enrichment as,"the method of recovery for the value of the benefit retained absent

any contractual relationship because notions of fairness and justice require it." Id.

3 In Simplicity's motion for fees and costs pursuant to RCW 4.84.185, it
argued that Allyis's unjust enrichment claim was advanced without reasonable
cause, because Allyis never conferred any benefit on Simplicity. Allyis responded
that Simplicity's interpretation of the doctrine of unjust enrichment was too narrow,
and that Simplicity misinterpreted Young.

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No. 74511-5-1/9

at 484. Quoting a Court of Appeals case, the court listed the elements of unjust

enrichment: " 'a benefit conferred upon the defendant by the plaintiff; an

appreciation or knowledge by the defendant of the benefit; and the acceptance or

retention by the defendant of the benefit under such circumstances as to make it

inequitable for the defendant to retain the benefit without the payment of its

value.'" Id. at 484(emphasis added)(quoting Baile Commc'ns, Ltd. v. Trend Bus.

Sys., Inc., 61 Wn.App. 151, 159-60,810 P.2d 12,814 P.2d 699(1991)). The court

then put these elements in its own words:"(1)the defendant receives a benefit,(2)

the received benefit is at the plaintiffs expense, and (3) the circumstances make

it unjust for the defendant to retain the benefit without payment." Id. at 484-85

(emphasis added).

Allyis claims that the trial court erroneously interpreted Young as requiring

the plaintiff to directly confer a benefit on the defendant for an unjust enrichment

claim to succeed. It argues that the Young court did not approve this element, and

instead required the defendant to receive a benefit at the plaintiffs expense.

Since Young, Washington courts have clarified the first element of unjust

enrichment. See, e.g., Austin v. Ettl, 171 Wn. App. 82, 92, 286 P.3d 85(2012)("a

plaintiff conferred a benefit upon the defendant"); Nat'l Sur. Corp. v. lmmunex

Corp., 162 Wn. App. 762, 778 n.11, 256 P.3d 439 (2011)("a party must show a

benefit conferred upon the defendant by the plaintiff), affd, 176 Wn.2d 872, 297

P.2d 688(2013); Cox v. O'Brien, 150 Wn. App. 24, 37, 206 P.3d 682(2009)("one

party must have conferred a benefit to the other"). But, Allyis argues that

Washington courts have still not clarified this element. It cites Norcon Builders,

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No. 74511-5-1/10

LLC v. GMP Homes VG, LLC, 161 Wn. App.474, 254 P.3d 835(2011)to contend

that this court has adopted the defendant must receive a benefit test, not the

plaintiff conferred a benefit test.

Norcon phrased the first element of unjust enrichment as "the defendant

receives a benefit." Id. at 490. However, the court also specifically noted, "The

mere fact that a defendant has received a benefit from the plaintiff is insufficient

alone to justify recovery. The doctrine of unjust enrichment applies only if the

circumstances of the benefits received or retained make it unjust for the defendant

to keep the benefit without paying." Id. Thus, we disagree with Allyis's reading of

that case. Norcon is consistent with a requirement that the plaintiff confers a

benefit to the defendant. That courts have phrased this requirement in different

ways does not create two competing tests, but a single test explained in several

ways.

Considering that other courts have applied the same elements of unjust

enrichment as the trial court did here, we conclude that the court did not apply an

incorrect legal standard. Therefore, the trial court did not err in finding that the

unjust enrichment claim is not warranted by existing law or a good faith argument

to modify the law.4

Allyis further argues that the trial court's findings of fact regarding the unjust

enrichment claim are not supported by substantial evidence. It challenges finding

of fact 7, which stated, "At no point did Allyis present evidence showing that it

never argued that the rule announced in Young should be extended,
4 Allyis
modified, or reversed—instead, it argued for an interpretation of the case that is
not supported by the law.

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No. 74511-5-1/11

conferred a benefit on Simplicity, nor did plaintiff present compelling or persuasive

argument suggesting that the law as articulated in Young and its progeny did not

apply here. Thus, Allyis's unjust enrichment claim was not well grounded in fact

or warranted by existing law." It also challenges findings of fact 25 and 26, that

the unjust enrichment claim was not well grounded in fact or warranted by either

existing law or an argument to modify the law.

We review findings of fact for substantial evidence. Robinson v. Safeway

Stores, Inc., 113 Wn.2d 154, 157-58, 776 P.2d 676 (1989). Substantial evidence

is evidence in sufficient quantum to persuade a fair-minded person of the truth of

the premise. Id. If substantial evidence supports the findings, we review whether

the findings support the trial court's conclusions of law and judgment. Id.

Under Young, Allyis had to show that it conferred a benefit on Simplicity,

and the circumstances made it unjust for Simplicity to retain the benefit without

paying. 164 Wn.2d at 484-85. Allyis never argued that it conferred a benefit on

Simplicity, contending instead that Schroder improperly bestowed profits from

Allyis employees and clients on Simplicity. Given these allegations, we conclude

that substantial evidence supports the trial court's findings that Allyis's unjust

enrichment claim was not well grounded in fact or warranted by existing law or a

good faith argument to modify the law.

2. Tortious Interference

Allyis contends that its tortious interference claim was supported by current

Washington law. It argues that while an issue existed as to consideration, the

claim was at least arguable. In its original complaint, Allyis alleged that Simplicity

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No. 74511-5-1/12

knowingly interfered with the noncompete and confidentiality agreements between

Allyis and Schroder. It contended that Simplicity used improper means to solicit

and encourage a breach of these agreements.

Relying on Goodyear Tire & Rubber Co. v. Whiteman Tire, Inc., 86 Wn.App.

732, 935 P.2d 628 (1997), Allyis argues that this tortious interference claim was

supported by the law. Goodyear set out the elements of tortious interference: "(1)

the existence of a valid business expectancy; (2) defendant's knowledge of that

expectancy; (3) defendant's intentional interference with that expectancy; (4)

defendant's improper purpose or use of improper means in so interfering; and (5)

the plaintiffs resultant damages." Id. at 745.

Allyis rests its argument on the first element, whether a valid business

expectancy existed. But, Allyis never elicited evidence that could establish the

other four elements of tortious interference. It did not produce any evidence that

Simplicity intentionally induced a breach of these agreements, that it did so for an

improper purpose or utilized improper means, and that Allyis had resulting

damages. See Goodyear, 86 Wn. App.at 745. Even if the first element was met,

the remaining elements were not.

Nor are we persuaded by Allyis's argument that a valid business expectancy

existed here. For Allyis to have had a potential claim on this theory, it needed to

show the existence of a valid contract. See Newton Ins. Agency & Brokerage, Inc.

v. Caledonian Ins. Grp., Inc., 114 Wn. App. 151, 158,52 P.3d 30(2002)("A valid

business expectancy includes any prospective contractual or business relationship

that would be of pecuniary value."). A noncompete agreement may be enforceable

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No. 74511-5-1/13

if it is validly formed and reasonable. Labriola v. Pollard Grp., Inc., 152 Wn.2d 828,

833, 100 P.3d 791 (2004). Generally, consideration for such an agreement exists

if the employee enters into the noncompete agreement when he or she is first

hired. Id. at 834. A noncompete agreement entered into after the employee begins

employment will be enforced only if supported by independent consideration. Id.

Independent consideration means that the parties make additional promises or

take on additional obligations. Id. For example, the employee may receive

additional wages, a promotion, or a bonus in exchange for signing the agreement.

Id.

Allyis asserted that two agreements originally contained in its employee

handbook, the noncompete agreement and the confidentiality agreement,

established a contract between Allyis and Schroder. The noncompete agreement

provides that Schroder would not"engage in a business similar to or in competition

with the business of [Allyis]" during his employment or for a period of five years

afterward. The confidentiality agreement provides that Schroder would not

disclose any confidential information for three years after the term of the

agreement. Both agreements were signed by Schroder on July 23, 2002.

Schroder had already begun his employment with Allyis by that time. He

was hired on May 10, 2002. Therefore, these agreements lacked consideration,

unless Schroder received an additional benefit in exchange for his promises. See

Labriola, 152 Wn.2d at 834. Allyis suggests that there was a debatable issue as

to consideration, because Schroder continued to be employed with Allyis and was

promoted from an entry position to management.

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No. 74511-5-1/14

But, the Labriola court rejected a similar argument. There, the employee

sought a declaratory judgment that the noncompete agreement was null and void.

152 Wn.2d at 832. The employer argued that continued employment served as

consideration for the noncompete agreement, which was signed after the

employee began work for the employer. Id. at 835-36. The court held that because

the employer did not incur any additional duties or obligations from the

noncompete agreement, continued employment did not serve as consideration.

Id. at 836. The employer also argued that training received after the employee

signed the noncompete agreement functioned as consideration. Id. The court

rejected this argument as well, noting that the noncompete agreement did not

mention any additional training that would serve as consideration for the

employee's promise not to compete. Id. at 836-37.

Here, nothing in the noncompete agreement or Schroder's circumstances

of employment suggests that he continued to be employed or that he was

promoted as a result of his promise not to compete. Labriola makes clear that later

training and continued employment alone are not sufficient to constitute

independent consideration. Nothing in the record would support an inference, let

alone a conclusion, that Schroder's later promotion was given as consideration for

a noncompete agreement. Thus, Allyis never alleged any facts that would support

an inference of independent consideration. Without a valid noncompete

agreement, there can be no basis for the tortious interference claim as pleaded.

There was no legal or factual basis for Allyis's tortious interference claim.

Consequently, the trial court did not err in finding that this claim was not well

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No. 74511-5-1/15

grounded in fact or warranted by existing law or a good faith argument to modify

the law.

3. Injurious Falsehood

Allyis asserts that its injurious falsehood claim was supported by the law

and the facts. In the original complaint, Allyis stated that Schroder conveyed false

and misleading information about Allyis's status and business plans to Allyis

employees. And, it stated that this false and misleading information was conveyed

to and used by Simplicity in an attempt to harm Allyis. On appeal, Allyis argues

that while this claim was based on hearsay statements, a lawsuit may be based

on hearsay evidence.

Allyis argues that Washington recognizes the tort of injurious falsehood. It

cites the Restatement (Second) of Torts § 623A (Am. Law Inst. 1977) for the

elements of injurious falsehood, recognizing that it has not been adopted in

Washington. Those elements are:

One who publishes a false statement harmful to the interests of
another is subject to liability for pecuniary loss resulting to the other
if

(a) he intends for publication of the statement to result in
harm to interests of the other having a pecuniary value, or either
recognizes or should recognize that it is likely to do so, and

(b) he knows that the statement is false or acts in reckless
disregard of its truth or falsity.
Id.

Even assuming that Washington law supports a claim of injurious falsehood,

Allyis has not alleged any action by Simplicity that would meet the elements. While

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No. 74511-5-1/16

Allyis asserted that Simplicity used false information to harm Allyis, Allyis never

specified what false information Schroder gave to other Allyis employees. Nor did

it specify how Simplicity used this information. Allyis did not file any declarations

or provide any information via discovery to clarify the factual basis for this claim

prior to withdrawing it.5 We conclude that the trial court did not err in finding that

Allyis's injurious falsehood claim was not well grounded in fact or warranted by law

or a good faith argument to modify existing law.

4. Uniform Trade Secrets Act

Allyis also argues that the trial court had no basis to find its UTSA claim to

be frivolous. In its original complaint, Allyis alleged that Simplicity and Schroder

had violated the UTSA. It claimed that Allyis's employee and compensation

information were trade secrets that Simplicity had acquired through Schroder.

And, it stated that Schroder and Simplicity used this confidential information to

recruit Allyis employees for Simplicity. Allyis alleged that Simplicity knew or had

reason to know that these trade secrets were acquired by improper means.

Under the UTSA, actual or threatened misappropriation of trade secrets

may be enjoined, or a complainant may recover damages for actual loss caused

by misappropriation. RCW 19.108.020(1), .030(1). Misappropriation means the

acquisition of a trade secret by a person who knows or has reason to know that it

was acquired by improper means, or disclosure or use of another's trade secret

5 Simplicity attempted to elicit information about this claim in its discovery
requests. But, shortly before Simplicity served its discovery requests on Allyis,
Allyis amended its complaint to withdraw its original claims against Simplicity,
replacing them with the unjust enrichment claim.

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No. 74511-5-1/17

without express or implied consent, where the person used improper means to

learn of the trade secret. RCW 19.108.010(2). A trade secret is information that

derives independent economic value from not being generally known and that is

protected by reasonable efforts to maintain secrecy. RCW 19.108.010(4).

Before it withdrew this claim, Allyis did not provide any additional

information in declarations or through discovery that would support its allegation

that Simplicity used confidential information to recruit Allyis employees. Given the

lack of a factual basis for this claim, the trial court did not err in finding that Allyis's

UTSA claim was not well grounded in fact or warranted by existing law or a good

faith argument to modify the law.

5. Consumer Protection Act

Allyis argues that it stated a claim for a CPA violation due to its tortious

interference claim. In the original complaint, Allyis alleged that Simplicity's and

Schroder's actions constituted unfair and deceptive acts and practices in the

conduct of trade or commerce.

RCW 19.86.020 provides that unfair methods of competition and unfair or

deceptive acts in trade or commerce are unlawful. Allyis's CPA claim rested on

the alleged actions that constituted its other claims, discussed above. Because

we conclude that these claims were not well grounded in fact or warranted by

existing law or a good faith argument to modify the law, it follows that the same is

true for Allyis's CPA claim.

None of the claims Allyis brought against Simplicity were well grounded in

fact or existing law or a good faith argument to modify the law. From this, we infer

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No. 74511-5-1/18

that Davis did not perform a reasonable inquiry before filing the original or

amended complaint—otherwise, he would have discovered that these claims were

not supported by the law or facts. The trial court's findings of fact relating to CR

11 sanctions6 are supported by substantial evidence in the record. Therefore, we

conclude that the trial court did not abuse its discretion in ordering CR 11 sanctions

jointly and severally against Allyis and Davis.

II. RCW 4.84.185 Attorney Fees

Allyis also challenges the trial court's award of attorney fees and costs

under RCW 4.84.185. It contends that the court's findings underlying this award—

findings of fact 4, 7, 9, 22, 31, and 33—are not supported by substantial evidence.

The decision to award attorney fees under RCW 4.84.185 is within the trial

court's discretion. Timson v. Pierce County Fire Dist. No. 15, 136 Wn. App. 376,

386, 149 P.3d 427(2006). This court will not disturb such an award absent a clear

showing of abuse. Highland Sch. Dist. No. 203 v. Racy, 149 Wn. App. 307, 312,

202 P.3d 1024 (2009). Thus, we must ask whether the trial court exercised its

discretion in a manner that was manifestly unreasonable or based on untenable

grounds or reasons. Tiger Oil Corp. v. Dep't of Licensing, 88 Wn. App. 925, 938,

946 P.2d 1235 (1997).

RCW 4.84.185 permits the trial court to require the nonprevailing party to

pay the prevailing party's reasonable expenses incurred in opposing a claim that

was frivolous and advanced without reasonable cause. A frivolous action is one

that cannot be supported by any rational argument on the law or facts. Goldmark

6 Specifically, findings 7, 8, 10, 23, 24, 25, 26, 27, 28, and 29.

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No. 74511-5-1/19

v. McKenna, 172 Wn.2d 568, 582, 259 P.3d 1095 (2011). Before fees may be

awarded under this statute, the trial court must enter findings that the action in its

entirety is frivolous. Biggs v. Vail, 119 Wn.2d 129, 131, 830 P.2d 350(1992).

As a preliminary matter, Allyis challenges finding of fact 4, which found that

counsel for Simplicity told Davis that Allyis's claims against Simplicity were

frivolous on multiple occasions. Allyis argues that this finding treated the

statements of counsel as proof that the claims were frivolous. But, nothing in the

finding states that the court was drawing such an inference. Rather, it appears to

be a correct statement of the facts from the record: counsel for Simplicity told

counsel for Allyis on multiple occasions that he believed the claims were frivolous.

This finding is supported by substantial evidence.

The trial court's findings on RCW 4.84.185 treated the unjust enrichment

claim individually and the original four claims collectively. Given the detailed

analysis of the original four claims in section 1, this section treats those claims as

a collective.

A. Uniust Enrichment

Allyis argues that the unjust enrichment claim was not frivolous or advanced

without reasonable cause. It challenges the trial court's finding of fact 7, finding

that this claim was frivolous in part because Allyis has never had any interaction

with Simplicity outside of this lawsuit. It argues that Simplicity interacted with Allyis

via Schroder when Schroder solicited an Allyis employee with Simplicity's

permission and on its behalf.

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No. 74511-5-1/20

During the deposition of Simplicity representative Annie Gleason, Allyis

asked whether Schroder ever contacted his former co-workers at Allyis to recruit

them for Simplicity. Gleason responded that Schroder did contact one person to

recruit her for Simplicity. But, that person's contract was ending and she was

looking for new work. Schroder told Gleason that this person was looking for a

new role and had a skill set that Simplicity needed. Gleason stated that she did

not tell Schroder to do anything to recruit this person, but responded along the

lines of," 10]h, okay. Great.'"

Allyis's unjust enrichment claim was based on Schroder's wrongful

recruitment of Allyis employees and clients7 for Simplicity. Allyis appears to argue

that this claim was not frivolous, because Gleason's deposition shows that

Schroder, acting as Simplicity's agent, recruited at least one Allyis employee to

work for Simplicity. However, even assuming that this Allyis employee was

ultimately hired by Simplicity, Allyis does not dispute that Gleason stated that this

employee's contract was about to expire.8 Nor does it challenge Simplicity's

assertion that the employee was looking for work elsewhere before her contract

expired or that she started work for Simplicity after her contract expired. Nor does

it assert that it wished to retain this employee. This evidence supports the trial

court's finding that Allyis did not confer a benefit on Simplicity.

7 Although Allyis claimed that Schroder recruited Allyis employees to work
for Simplicity and bring their clients with them, it never identified any clients that
Simplicity gained from Allyis.
8 At oral argument, Allyis contended that while Gleason said this, that does
not necessarily make it true.

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As discussed in section I.A.1, Allyis's unjust enrichment claim was not

grounded in fact or warranted by the law. Consequently, we conclude that Allyis's

unjust enrichment claim cannot be supported by a rational argument on the law or

facts and thus is frivolous.

B. Original Claims

Allyis also argues that the four claims in its original complaint were not

frivolous or advanced without reasonable cause. It challenges the trial court's

findings of fact 9 and 22, which found that these claims were frivolous and inferred

that Allyis filed them to bring Simplicity into the lawsuit and drive a settlement.

Allyis suggests it was illogical for the trial court to infer that Allyis filed the

original claims because it believed Simplicity would pay a settlement. But, given

the dearth of evidence that Simplicity took any actions that merited being sued,

this inference is not illogical. Davis's constant refusals to engage in discovery

combined with his requests that Simplicity compromise could be read as

supporting the trial court's inference—that Davis did not believe he had a case

against Simplicity and wanted to push for a settlement.

Because Allyis failed to ever specify the conduct supporting its unjust

enrichment, tortious interference, injurious falsehood, UTSA, or CPA claims, there

was substantial evidence that these claims were frivolous and advanced without

reasonable cause. The trial court's findings of fact 4, 7, 9, and 22 are supported

by substantial evidence.

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III. Amended Order

After Allyis moved for reconsideration of the trial court's initial order

awarding attorney fees and CR 11 sanctions, the court entered an amended order.

The amended order contained additional findings, including several that addressed

the propriety of the original order. Finding of fact 31 provides that the evidence

and reasonable inferences therefrom support the original order. Finding of fact 33

states that due to Allyis's and its attorney's conduct throughout litigation, including

filing frivolous claims, the original order did substantial justice in compensating

Simplicity for having to defend against these claims.

Allyis challenges these findings, arguing that there was no evidence to

support finding of fact 31, and that finding of fact 33 demonstrates that the trial

court was motivated by something other than the record.9 Both findings are better

construed as conclusions of law, and we treat them accordingly. See Grundy v.

Brack Family Trust, 151 Wn. App. 557, 567, 213 P.3d 619 (2009)("We review

conclusions of law mislabeled as findings of fact de novo as conclusions of law.").

The trial court's findings pertaining to CR 11 sanctions and RCW 4.84.185 support

both conclusions. Because Allyis's claims were not well grounded in fact or law or

a good faith argument to modify existing law, and they were advanced without

reasonable cause, the trial court's original order imposing CR 11 sanctions and

awarding attorney fees under ROW 4.84.185 was justified. The trial court did not

err in entering findings of fact 31 and 33 in its amended order.

9 We note that Allyis challenges whether any sanctions should have been
imposed, not the amount of the sanctions.

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IV. Attorney Fees on Appeal

Simplicity argues that it is entitled to attorney fees on appeal, because the

appeal was necessary to recover paymentfrom Allyis and because the appeal was

frivolous. This court may award attorney fees for a frivolous appeal. RAP 18.1;

RAP 18.9(a). An appeal is frivolous where it presents no debatable issues or

legitimate arguments for an extension of law. Harrington v. Pailthorp, 67 Wn. App.

901, 913, 841 P.2d 1258 (1992). Here, Allyis pursued claims against Simplicity

that were not supported by the facts or the law. It has not presented any debatable

issues on appeal. We conclude that Simplicity is entitled to attorney fees and costs

on appeal.

We affirm.

WE CONCUR:

cKe-K

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