LK Operating, LLC v. Collection Group, LLC, 181 Wn. 2d 48

331 P.3d 1145 (2014) · Supreme Court of Washington · July 31, 2014 · No. 88132-4

Summary

The Washington Supreme Court considered whether a joint venture proposal for a debt collection business was entered into in violation of former Washington RPC 1.8(a) and RPC 1.7. The court held that the proceedings satisfied procedural due process, the business transaction violated former RPC 1.8(a) and RPC 1.7, the transaction was unenforceable under the circumstances, and rescission was an appropriate remedy.

Holdings

  1. The proceedings below satisfied procedural due process. Powers did not assert a protected liberty or property interest in the contract action, and LK Operating received sufficient notice and a meaningful opportunity to be heard regarding former RPC 1.8(a).
  2. The joint venture proposal constituted a business transaction subject to former RPC 1.8(a), and Powers entered that transaction in his capacity as an attorney even though LK Operating, rather than Powers personally, received the ownership interest.
  3. Powers violated former RPC 1.8(a) as a matter of law because the transaction and its essential terms and parties were never fully disclosed and transmitted to Collection Group in writing.
  4. Powers violated former RPC 1.7 by representing Fair and LK Operating in matters involving directly adverse interests without the required written informed consent and disclosures.
  5. The business transaction was presumptively unenforceable as contrary to the public policy embodied in former RPC 1.8(a), and rescission was an appropriate remedy under the circumstances.

Questions Presented

  1. Whether considering the merits of the alleged former RPC 1.8(a) violation violated Powers's or LK Operating's procedural due process rights.
  2. Whether Powers entered the business transaction contemplated by the joint venture proposal in violation of former RPC 1.8(a).
  3. Whether Powers violated former RPC 1.7 by representing clients with directly adverse interests without the required written informed consent.
  4. Whether rescission was an appropriate remedy for the RPC violations and the resulting public-policy infirmity of the transaction.

Disposition

affirmed

Cases Cited (39)

  • LK Operating, LLC v. Collection Grp., LLC, 181 Wn.2d 117, 330 P.3d 190 (2014)(related proceeding)
  • C.B. & T. Co. v. Hefner, 98 N.M. 594, 651 P.2d 1029 (N.M. Ct. App. 1982)(considered by lower court)
  • City of Redmond v. Moore, 151 Wn.2d 664, 668, 91 P.3d 875 (2004)(followed)
  • Wilkinson v. Austin, 545 U.S. 209, 221, 125 S. Ct. 2384, 162 L. Ed. 2d 174 (2005)(followed)
  • Kentucky Department of Corrections v. Thompson, 490 U.S. 454, 460, 109 S. Ct. 1904, 104 L. Ed. 2d 506 (1989)(followed)
  • In re Personal Restraint of Meyer, 142 Wn.2d 608, 620-22, 16 P.3d 563 (2001)(followed)
  • Paul v. Davis, 424 U.S. 693, 701, 96 S. Ct. 1155, 47 L. Ed. 2d 405 (1976)(followed)
  • Washington Medical Disciplinary Board v. Johnston, 99 Wn.2d 466, 474, 663 P.2d 457 (1983)(followed)
  • In re Disciplinary Proceeding Against Romero, 152 Wn.2d 124, 136-37, 94 P.3d 939 (2004)(followed)
  • In re Disciplinary Proceeding Against King, 170 Wn.2d 738, 741, 246 P.3d 1232 (2011)(followed)

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