CPA Claim for Bad-Faith Handling of Claim by Insurance Company Upheld

St. Paul Fire and Marine Ins. Co. v. Onvia, Inc., 196 P.3d 664 (Wash. Nov 26, 2008) (NO. 80359-5)

Even though the insurance company had no duty to defend, it could be held liable for damages caused by its failure to handle the tender of defense in good faith. Under Washington law every insurer has a duty to act promptly, in both communication and investigation, in response to a claim or tender of defense. WAC 284-30-330(2)-(4); WAC 284-30-360(1), (3); WAC 284-30-370.

In order to prevail on a CPA claim, the claimant must satisfy the five-part test announced in Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wash.2d 778, 784-85, 719 P.2d 531 (1986): (1) an unfair or deceptive act or practice, (2) in trade or commerce, (3) that impacts the public interest, (4) which causes injury to the party in his business or property, and (5) which injury is causally linked to the unfair or deceptive act. Where a violation of chapter 284-30 WAC is shown, the first two elements of a CPA claim are proved. Hayden v. Mut. of Enumclaw Ins. Co., 141 Wash.2d 55, 62, 1 P.3d 1167 (2000).

Interlocutory Appeal Not Available for Inadvertent Disclosure

Truckstop.net, LLC v. Sprint Corp., 547 F.3d 1065, (9th Cir.(Idaho) Oct 28, 2008) (NO. 07-35123)

Interlocutory appeal was filed under the collateral order rule arguing that the trial court ruling on attorney-client privilege of inadvertently disclosed email. An order is immediately appealable under “collateral order” doctrine when it: (1) conclusively determines a disputed question; (2) resolves an important issue completely separate from merits of action; and (3) is effectively unreviewable on appeal from final judgment.

The court reasoned that once the claimed privileged material is disclosed the alleged irreparable harm has occurred. Thus the third element of the test is not met. The alleged error is reviewable on appeal.

Wouldn’t it be better to add “irreparable harm” as a fourth element to the test for a collateral order?

“All Claims” Does Not Include Legal Fees – A Trap for the Unwary

McGuire v. Bates, --- P.3d ----, (Wash.App. Div. 1 Dec 15, 2008) (NO. 60463-5-I)

Contractor Bates made an offer of to settle “all claims” in the full amount of the damages claimed by the plaintiff McGuire. McGuire accepted. McGuire was also seeking attorney fees as the prevailing party with a claim less than $10,000 under RCW 4.84.250-280.

Since the statute provides for attorney fees as “costs” and neither costs nor attorney fees were specifically mentioned in the offer, McGuire could accept the offer and still seek attorney fees as the prevailing party. The court held McGuire was the prevailing party even though a decision had not been rendered by the arbitrator and judgment had not been entered. The Ninth Circuit similarly requires waiver of attorney fees to be specific. See Nusom v. Comh Woodburn, Inc, 122 F.3d 830, 832 (9th Cir.1997).

“Close” Works for Horseshoes and Judicial Estoppel

Baldwin v. Silver, 196 P.3d 170 (Wash.App. Div. 3 Nov 18, 2008) (NO. 26793-8-III)

The debtors listed a potential claim in the statement of affairs section of bankruptcy schedules but did not list that potential claim in the assets section of the schedules.

Judicial estoppel is an equitable remedy designed to prevent “a party from gaining an advantage by asserting one position in a court proceeding and later seeking an advantage by taking a clearly inconsistent position.” Cunningham v. Reliable Concrete Pumping, Inc., 126 Wash.App. 222, 224-25, 108 P.3d 147 (2005). The doctrine aims to “ ‘preserve respect for judicial proceedings without the necessity of resort to the perjury statutes; to bar as evidence statements by a party which would be contrary to sworn testimony the party has given in prior judicial proceedings; and to avoid inconsistency, duplicity, and waste of time.’” Johnson v. Si-Cor, Inc., 107 Wash.App. 902, 906, 28 P.3d 832 (2001) (quoting Seattle-First Nat'l Bank v. Marshall, 31 Wash.App. 339, 343, 641 P.2d 1194 (1982)). A court may properly apply judicial estoppel when the following elements are shown: (1) a party asserts a position that is “clearly inconsistent” with an earlier position; (2) judicial acceptance of the inconsistent position would indicate that either the first or second court was misled; and (3) “‘the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party.’” McFarling v. Evaneski, 141 Wash.App. 400, 404, 171 P.3d 497 (2007); Arkison v. Ethan Allen, Inc., 160 Wash.2d 535, 538-39, 160 P.3d 13 (2007) (quoting New Hampshire v. Maine, 532 U.S. 742, 750-51, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001)).

The federal bankruptcy code imposes an express, affirmative duty on bankruptcy petitioners to disclose prepetition claims in the bankruptcy reorganization plan or in the petitioner's schedules or disclosure statements. Bartley-Williams v. Kendall, 134 Wash.App. 95, 98, 138 P.3d 1103 (2006) (citing 11 U.S.C. § 521(a)). And while some cases refer specifically to the requirement that the claim be disclosed in the bankruptcy “schedules,” others refer simply to “bankruptcy proceedings.”

In Baldwin, Division III held that “proceedings” include the statement of affairs and the bankruptcy was close enough to full compliance that judicial estoppel does not apply.

Although not stated – the rule seems to be that if third parties who reasonably read the petition would have been aware of the claim then there is no inconsistent position taken later by the debtors when they bring the claim.

American Rule Bites the Dust - Again

Kaintz v. PLG, Inc., --- P.3d ----, (Wash.App. Div. 1 Dec 15, 2008) (NO. 61333-2-I)


The American Rule generally provides that each party to litigation pays her own attorney fees. The English Rule awards attorney fees to the prevailing party. Courts have chipped away at the American Rule with so many exceptions that it is beginning to look more like the English Rule.


Kaintz is a case in which the purchaser of a business was not able to negotiate a new lease with the seller’s landlords. The landlords sued to evict the purchaser. The purchaser counterclaimed with arguments that it was entitled to rights under the prior lease. The purchaser moved out prior to trial. The landlords asked for attorney fees. The purchaser argued that attorney fees could not be awarded because it was not a party to the seller’s lease.


RCW 4.84.330 provides that a unilateral provision for attorney fees becomes bilateral in litigation. If one side can obtain attorney fees, the other side can also. Even though RCW 4.84.330 did not apply in Kaintz because the contract had bilateral provisions for attorney fees, the court announced that Washington law has a well-established equitable principle of mutuality of remedy.


This well-established new rule is hard to articulate but it apparently means that whenever a party has negotiated remedies for itself that are different than the remedies negotiated for the other party, both parties can claim the remedies of the other party.


Wouldn’t it have been easier for Division I to have merely held that equity placed the purchaser in the shoes of the seller because the purchaser made claims under the seller’s lease?


Stay tuned to see how far the well-established principle of mutuality of remedy penetrates the law of Washington State.

Oregon’s Lemon Law Clarified

Liles v. Damon Corp., --- P.3d ----, (Or. Dec 11, 2008) (NO. CA A129113, SC S054734, CC 033086)

Oregon’s Supreme Court reversed a bizarre decision by the Court of Appeal written by pro tempore judge J. Barron. The good news is the Supreme Court got it right. The bad news is the Court of Appeals again shows its deficiencies.

The case turned on whether the actions required to invoke the Lemon Law must be taken in any particular order. The general rule is that a statute is strictly construed and the court will not imply unwritten conditions. The Court of Appeals decided that there was an implied priority in the statute and therefore the manufacturer must be given written notice and then an opportunity to repair the vehicle. If the manufacturer is given opportunity to repair the vehicle before the formal written notice, plaintiff cannot bring the action.

Plaintiffs bought a new motor home that had severe leaks whenever it rained. According to the trial court's finding, plaintiffs “began contacting the factory representatives by phone in April of 2003 regarding the water leak problems they were experiencing with the unit. They contacted the factory representative about the many problems with the motor home numerous times between April 2003 and December 2003. The Plaintiffs also presented numerous times between April 2003 and December 2003. The Plaintiffs also presented numerous repair orders from the selling dealer representing many unsuccessful attempts to repair the water leaks in this unit during that same period [of] time.”

The vehicle dealer performed most of the unsuccessful attempts to repair the leaks. However, the trial court found that, on one occasion, defendant directed plaintiffs to submit the vehicle for repair at a different repair shop. That attempted repair occurred on December 9, 2003, but it, too, was unsuccessful. According to the trial court, that attempted repair “was specifically authorized by the manufacturer as their attempt to cure the defect[ ]” and “was an opportunity to correct the defect before the lawsuit was filed even though written notice wasn't given.”

On December 23, 2003, an attorney representing plaintiffs sent a letter to defendant under Oregon's Lemon Law. The letter described the water leak problems and plaintiffs' unsuccessful efforts to resolve them through multiple repair efforts and through several discussions with defendant's representatives, including its president and “the field person for Damon in charge of repairs.” The letter requested the replacement remedy under the Lemon Law, ORS 646A.404(1)(a), which we quote below.

Defendant received the letter described above on December 29, 2003. Plaintiffs filed their action the next day, December 30, 2003, because of a mistaken belief the statute of limitations was about to expire. In January 2004, plaintiffs informed defendant that it could have access to the vehicle, but defendant took no further action to assess or repair the rainwater leaks.

The Supreme Court pointed out that the Legislature knows how to use words like “prior to,” “before,” and “10 days prior notice” when it want to establish priority. The Lemon Law merely requires that the manufacturer is given a reasonable opportunity to fix the vehicle.

No Implied Private Right of Action under SOX 304

In re Digimarc Corp. Derivative Litigation, --- F.3d ---, (9th Cir.(Or.) Dec 11, 2008) (NO. 06-35838)

In a derivative action, shareholders alleged that current and former officers and directors of Digimarc breached their fiduciary duties to the corporation and its shareholders by issuing misleading financial statements and misrepresenting the business and prospects of Digimarc in violation section 304 of the Sarbanes-Oxley Act, 15 U.S.C. § 7243. In agreement with other circuits that had considered the question, the Ninth Circuit held that there is no private right of action under section 304. Only the government can bring the action.