Cascade Designs, Inc., Respondent/cr-appellant V. Robert Lerner, Appellant/cr-respondent ( 2021 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
ROBERT A. LERNER,
No. 81445-1-I
Appellant/ (consolidated with 82105-9-I)
Cross-Respondent,
DIVISION ONE
v.
UNPUBLISHED OPINION
CASCADE DESIGNS, INC., a
Washington corporation,
Respondent/
Cross-Appellant,
MATESKY LAW PLLC,
Intervenor/Cross-
Respondent/Appellant.
SMITH, J. — After Robert Lerner obtained an arbitration award against
Cascade Designs, Inc. (CDI), the trial court confirmed the award, consolidated
the action with a previous case between the parties, and entered a judgment that
offset the awards and placed preconditions on Lerner’s injunctive relief. The
court also granted Lerner’s attorney, Matesky Law, an attorney fee lien on the
judgment for the arbitration award, but declined to enforce the lien until Lerner
paid CDI the offset judgment from the previous case. Lerner appeals the
judgment, and CDI cross-appeals the court’s entry of an attorney lien and its
denial of attorney fees to CDI. Matesky Law intervenes to address the attorney
lien issue.
Because the court failed to enter a judgment confirming the award and
thereby frustrated the outcome of the arbitration, we reverse. We also hold that
Citations and pin cites are based on the Westlaw online version of the cited material.
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Matesky Law properly established its attorney lien on the judgment, and that this
lien should take priority over CDI’s offset judgment. Finally, we affirm the trial
court’s denial of attorney fees to CDI and award Lerner reasonable attorney fees
on appeal.
FACTS
In 1996, Robert Lerner sold the patents for certain inventions to CDI under
an Asset Purchase Agreement (APA). The APA granted Lerner the “right to
review such records of [CDI’s] as is reasonably necessary to establish the level
of sales” upon which his payments were based, at Lerner’s expense. The APA
also provided that except for an emergency injunction, any controversy arising
from the APA must be submitted to arbitration.
In 2016, Lerner filed a suit in King County Superior Court, alleging that
CDI had breached the APA’s record review provisions and requesting injunctive
relief. CDI moved to stay the proceedings so that the parties could proceed to
arbitration, as required under the APA, and the court granted the motion. In
2018, after Lerner failed to initiate arbitration, the court dismissed the case for
want of prosecution and granted attorney fees to CDI. Lerner appealed and we
affirmed and granted CDI additional attorney fees. Lerner v. Cascade Designs,
Inc., No. 78570-2-I, slip op. at 7 (Wash. Ct. App. Aug. 26, 2019) (unpublished),
https://www.courts.wa.gov/opinions/pdf/785702.pdf. In total, CDI was awarded
$183,118.99 in attorney fees.
Later, the parties proceeded to arbitration and the arbitration panel
entered an award in Lerner’s favor. The arbitration award ordered CDI to
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produce several types of records for review. It also declared Lerner to be the
prevailing party, and awarded him $26,631.25 in costs and $84,535 in
reasonable attorney fees.
In February 2020, Lerner returned to Superior Court to confirm the
arbitration award. On February 28, 2020, after filing the motion to confirm,
Lerner’s attorney, Matesky Law, filed a notice of an attorney fee lien. On March
10, the court granted the motion to confirm the award over CDI’s objection but
did not enter a judgment in conformity with the award. On April 9, the court
granted CDI’s motion to consolidate the 2016 and 2020 cases. On April 14, the
court entered a judgment in the consolidated cases. The judgment deducted
Lerner’s arbitration costs from the amount he owed CDI under the 2016 action,
explaining that the 2016 judgment “that originated as $183,118.99 shall now be
$149,418.99 with an attorney’s lien against it of $84,535. (The court deducted
the $33,700 amount owed but kept in the attorney’s fees award due to the Notice
of Attorney Lien.)” The judgment further ordered that “Lerner shall be entitled to
that document review and production described in the [arbitration award] upon
satisfaction of and compliance with the [judgment against Lerner] and paying in
advance for the . . . document review and production.” 1
The court subsequently denied CDI’s petition for attorney fees and costs.
Matesky Law filed a motion to enforce its attorney fee lien against the judgment,
and the court denied the motion, reasoning that its intent was for “Lerner to first
pay CDI’s offset judgment, and then for CDI to pay Matesky Law from the
1 Emphasis added.
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proceeds of that judgment.” Lerner appealed, and CDI cross-appealed. We
subsequently permitted Matesky Law to intervene in the appeal to address the
attorney lien issue.
ANALYSIS
Lerner contends that the trial court erred by entering a judgment adding
preconditions to his ability to exercise his rights under the arbitration award. CDI
challenges the validity of Matesky Law’s attorney lien, whereas Matesky Law
challenges the court’s denial of its motion to enforce the lien. Finally, CDI
contends that the court erred by denying its motion for attorney fees. 2
Modification of Arbitration Award
Lerner contends that the court erred by entering a judgment that added
preconditions to his ability to exercise his rights under the arbitration award. We
agree.
Our courts encourage arbitration as a simpler, faster, and less expensive
alternative to litigation. Mainline Rock & Ballast, Inc. v. Barnes, Inc., 8 Wn. App.
2d 594, 608, 439 P.3d 662, review denied, 193 Wn.2d 1033, 447 P.3d 158(2019). To prevent parties from frustrating this goal by relitigating arbitration
Lerner also asks us to revisit the court’s original ruling granting CDI
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attorney fees as the “prevailing party” under RAP 2.5(c), which permits the court
to “review the propriety of an earlier decision of the appellate court in the same
case and, where justice would best be served, decide the case on the basis of
the appellate court’s opinion of the law at the time of the later review.” However,
Lerner does not raise this issue until his reply brief, which precludes review.
Boyd v. Davis, 127 Wn.2d 256, 265, 897 P.2d 1239 (1995); Reply Brief of
Appellant at 34. Furthermore, Lerner contends the award of attorney fees after a
dismissal without prejudice was error under Wachovia SBA Lending, Inc. v. Kraft,
165 Wn.2d 481, 492, 200 P.3d 683 (2009), but Wachovia concerned a voluntary
dismissal, not a dismissal for want of prosecution.
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awards, we give significant deference to arbitrators. See Boyd v. Davis, 127
Wn.2d 256, 262-63, 897 P.2d 1239 (1995). Under the uniform arbitration act, ch.
7.04A RCW, courts may only modify an arbitration award on one of the narrow
statutory grounds listed in RCW 7.04A.240(1)(a)-(c), or vacate the award for the
limited reasons in RCW 7.04A.230(1)(a)-(f). Otherwise, on a motion from a
party, the court must issue an order confirming the award. RCW 7.04A.220;
Kenneth W. Brooks Tr. v. Pac. Media LLC, 111 Wn. App. 393, 398-99, 44 P.3d
938 (2002). “The confirming court does not have collateral authority to go behind
the face of the award or to determine whether additional award amounts are
appropriate.” Price v. Farmers Ins. Co. of Wash., 133 Wn.2d 490, 496-97, 946
P.2d 388 (1997). Furthermore, after entering its order confirming the award, “the
court shall enter a judgment in conformity with the order.” RCW 7.04A.250(1)
(emphasis added). This requirement imposes “a mere ministerial duty to reduce
the award to judgment.” Price, 133 Wn.2d at 497.
Here, the court’s judgment was not in conformity with its order. The court
entered an order confirming the award for arbitrator compensation and
administrative fees, attorney fees, and “all injunctive and other relief set forth” in
the award. The court was then required to enter a simple judgment reflecting this
award. Instead, the court’s judgment offset the award against the 2016 judgment
and limited Lerner’s relief by conditioning his injunctive relief upon his satisfaction
of and compliance with the 2016 judgment and paying in advance for the
document review. None of these provisions were in the arbitration award or the
order confirming the award, so the court failed to perform the “mere ministerial
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duty” required by RCW 7.04A.250(1). Price, 133 Wn.2d at 497. While the
arbitration award directly ordered CDI to produce certain records for inspection,
the court’s judgment effectively modified this outcome by adding new
preconditions to CDI’s responsibility. In doing so, the court frustrated the
outcome of the arbitration, and remand is necessary for the court to enter a
judgment that simply reflects the arbitration award.
CDI disagrees and contends that the court was merely using its discretion
under CR 42 to consolidate the actions and then structure its post-consolidation
judgment efficiently. CR 42(a) permits the court to consolidate actions involving
common questions of law or fact and to “make such orders concerning
proceedings therein as may tend to avoid unnecessary costs or delay.”
However, CR 42 does not authorize the court to violate the terms of the uniform
arbitration act. When a dispute is settled by an arbitrator, even if there are
further unresolved disputes that are properly under the court’s jurisdiction, the
court must still enter a judgment reflecting the result of the arbitration before
resolving the remaining disputes. Price, 133 Wn.2d at 501. Thus, while CDI
could properly ask the court to offset the judgments against each other, the court
must still enter a judgment confirming the arbitration award first. CDI cites cases
suggesting that a court may offset an arbitration award against other judgments,
but it cites no law establishing that the court need not enter the judgment in
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conformation with the award first, let alone that it may impose preconditions on
clear injunctive relief awarded by the arbitrator. 3
The arbitration award directly ordered CDI to produce certain records for
inspection. The court exceeded its authority by modifying this award in its post-
consolidation judgment. On remand, it must enter a judgment confirming the
result of the arbitration, including the fees, costs, and injunctive relief, and other
matters as agreed by the parties. Price, 133 Wn.2d at 501. Because the court
has discretion to consolidate cases and offset judgments, it may then offset the
monetary relief in the 2016 and 2020 judgments. CR 42(a); Eagle Point Condo.
Owners Ass’n v. Coy, 102 Wn. App. 697, 701, 9 P.3d 898 (2000). However,
because the injunctive relief was in the scope of the arbitrators’ jurisdiction, the
court may not alter this relief by imposing preconditions on it. Price, 133 Wn.2d
at 501-02.
Attorney Fee Lien
CDI contends that the court erred by recognizing Matesky Law’s attorney
lien. Matesky Law contends that the court abused its discretion by refusing to
3 See Fluor Enter., Inc. v. Walter Constr., Ltd., 141 Wn. App. 761, 769,
172 P.3d 368 (2007) (holding that in consolidated case, court could delay entry of
judgment on one claim until resolution of arbitrated claim, so that the court “could
offset the judgments on both claims before allowing enforcement of them.”).
Furthermore, the court’s second requirement, that Lerner pay for record
production in advance, is entirely unrelated to the consolidation of the two cases
and has no basis in the arbitration award or the APA. And even if the APA did
include this requirement, the court would still have erred by going beyond the
face of the award to examine evidence underlying the arbitration decision.
Broom v. Morgan Stanley DW Inc., 169 Wn.2d 231, 239, 236 P.3d 182 (2010).
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enforce the lien until after CDI’s judgment is satisfied. We agree with Matesky
Law.
1. Validity of Lien
RCW 60.40.010(1) provides that an attorney may assert a lien to recover
attorney fees. This may include a lien “[u]pon a judgment to the extent of the
value of any services performed by the attorney in the action.”
RCW 60.40.010(1)(e). The attorney must file notice of this type of lien “with the
clerk of the court in which such judgment is entered, which notice must be filed
with the papers in the action in which such judgment was rendered, and an entry
made in the execution docket, showing name of claimant, amount claimed and
date of filing notice.” RCW 60.40.010(1)(e).
The meaning of this statute “is a question of law which we review de
novo.” Aiken, St. Louis & Siljeg, P.S. v. Linth, 195 Wn. App. 10, 15, 380 P.3d 565(2016). “A party seeking to invalidate a statutory lien bears the burden of
producing evidence to justify the motion.” Gustafson v. City of Seattle, 87 Wn.
App. 298, 304, 941 P.2d 701 (1997).
Here, after the arbitration panel issued its award but before the court’s
judgment on the award, Matesky filed a notice of an attorney fee lien, including
upon the judgment under RCW 60.40.010(1)(e). It identified the amount of the
lien as $84,535, plus interest, which was the value of reasonable attorney fees as
determined by the arbitration panel. Because this notice met the statutory
requirements, it was sufficient to establish Matesky Law’s lien.
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CDI contends that the notice of the attorney fee lien was insufficient
because Matesky Law never produced its contingency fee agreement. We
disagree. The amount of the lien was established by the arbitration award. We
do not look beyond the face of an award to determine whether the award is valid,
and CDI has given no reason to inquire into the arbitration panel’s determination
of Matesky Law’s reasonable attorney fees. Broom v. Morgan Stanley DW Inc.,
169 Wn.2d 231, 239, 236 P.3d 182 (2010).
CDI also cites Matesky Law’s failure to serve Lerner with notice as a
reason that the lien is invalid, but fails to cite any law that service to one’s own
client is required. “Where no authorities are cited in support of a proposition, the
court is not required to search out authorities, but may assume that counsel, after
diligent search, has found none.” DeHeer v. Seattle Post-Intelligencer, 60 Wn.2d
122, 126, 372 P.2d 193, 195 (1962). We therefore reject this contention and
conclude that Matesky Law has established a valid attorney lien.
2. Enforcement of Lien
“A proceeding to enforce a lien is an equitable proceeding,” and courts
have broad discretion in determining equitable remedies. King County v.
Seawest Inv. Assocs., LLC, 141 Wn. App. 304, 314, 170 P.3d 53 (2007).
Accordingly, we review the court’s denial of the motion to enforce the lien for
abuse of discretion. Seawest, 141 Wn. App. at 314.
Although an attorney lien against a judgment may be filed before the
judgment is formally entered, the lien does not attach until the judgment is in
place. Jones v. Int’l Land Corp. Ltd., 51 Wn. App. 737, 745, 755 P.2d 184 (1988)
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(lien against judgment which was filed on May 5 became effective on May 12, the
day the judgment was entered); Cline Piano Co. v. Sherwood, 57 Wash. 239,
242, 106 P. 742 (1910). Once an attorney lien has attached to a judgment, a
court may not offset a second judgment against it without regard to the lien.
Spokane Sec. Fin. Co. v. Bevan, 172 Wash. 418, 422, 20 P.2d 31 (1933).
Instead, the lien must take precedence. Bevan, 172 Wash. at 422-23.
Here, we have determined that the court was required to enter a simple
judgment confirming the terms of the arbitration award. Upon entering this
judgment, Matesky Law’s lien would attach. Although the court could
subsequently offset the judgment, the lien would take priority over the offset
judgment. Because the court did not follow this procedure, its denial of the
motion to enforce the lien was an abuse of discretion.
Attorney Fees
CDI contends that the court abused its discretion by not awarding fees to
CDI as the prevailing party. We disagree and grant reasonable attorney fees to
Lerner on appeal.
In an action on a contract with an attorney fee provision, the prevailing
party “shall be entitled to reasonable attorneys’ fees.” RCW 4.84.330. The
prevailing party is “the party in whose favor final judgment is rendered.”
RCW 4.84.330. “If neither party wholly prevails, then the party that substantially
prevails on its claims is the prevailing party.” Hawkins v. Diel, 166 Wn. App. 1,
10, 269 P.3d 1049 (2011). If the court determines that both parties prevailed on
a major issue, it may conclude that neither is a prevailing party entitled to
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attorney fees. Hertz v. Riebe, 86 Wn. App. 102, 105, 936 P.2d 24 (1997).
“Whether a party is a ‘prevailing party’ is a mixed question of law and fact that we
review under an error of law standard.” Hawkins, 166 Wn. App. at 10.
Here, the court did not err by denying CDI’s request for attorney fees,
because CDI did not substantially prevail on its claims. CDI’s contention that it is
the prevailing party relies on the fact that it succeeded in its motion to consolidate
the cases and offset Lerner’s award against CDI’s. However, the substantial
issue in this case was the meaning of the APA and the parties’ rights and
responsibilities under it, and Lerner prevailed on that issue. See McLelland v.
Paxton, 11 Wn. App. 2d 181, 223, 453 P.3d 1 (2019) (“The fact that the claim of
goodwill constitutes the substantial issue” supported the court’s determination
that the party who won on goodwill was the prevailing party). Furthermore, to the
extent that CDI contends it prevailed because it was awarded the larger
monetary judgment, its argument fails. In a case such as this, where the only
money judgments awarded are for costs and attorney fees, relying on the size of
the judgments for the determination as to who prevailed would tend to result in
rewarding the party who had more money to spend on attorneys. The court did
not err by declining to award attorney fees to CDI.
Finally, Lerner requests attorney fees on appeal under RCW
7.04A.250(3), which permits an award of attorney fees to the prevailing party in a
judicial proceeding after confirming an arbitration award. Because Lerner has
prevailed on appeal, we award his reasonable attorney fees.
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We reverse and remand for the court to enter a judgment in conformity
with the arbitration award and to enforce the attorney fee lien in Matesky Law’s
favor, and we affirm the denial of CDI’s attorney fees.
WE CONCUR:
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