Asset Realty LLC v. Wilson

• Court: District Court, W.D. Washington
• Decided: February 10, 2023
• Docket: 2:21-cv-00081
• Status: Unknown

Opinion

6 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON 7 AT SEATTLE 8

9 ASSET REALTY, LLC, Case No. C21-81-RSM

10 Petitioner, ORDER 11 v. 12 13 MICHELLE WILSON, et al.,

14 Respondents.

16 I. INTRODUCTION 17 This matter comes before the Court on Petitioner Asset Realty, LLC (“Asset Realty”)’s 18 Motion for Determination of Attorney Lien Against Former Attorney (Dkt. #45), Creditor 19 Williams Kastner & Gibbs, PLLC (“WKG”)’s response (Dkt. #54), and Asset Realty’s reply 20 (Dkt. #55). Having reviewed the briefing and the associated declarations and submissions, the 21 22 Court DENIES the motion, refusing to exercise its ancillary jurisdiction to adjudicate this matter. 23 II. BACKGROUND 24 This dispute has a lengthy and convoluted history in multiple forums outside this Court 25 that will not be repeated here. In fact, by both parties’ own admissions, the Court may not even 26 be fully aware of all that has transpired. See e.g., Dkt. #54 at 1–2 (WKG accusing Asset Realty 27 28 for “complete lack of candor”); Dkt. #55 at 2 (Asset Realty accusing WKG of omitting “important” details in its Response). From what the Court has gathered in the limited briefing 1 2 before it, WKG is a law firm that represented Asset Realty in litigation against eXp World 3 Holdings, Inc. and Respondents in this case, Michelle Wilson and Chad Cooley, in the fall of 4 2020. Dkt. #54, Ex. A (“King County Action Complaint”) ¶ 1.1–1.4.1 Arbitration was then 5 separately commenced against Respondents Wilson and Cooley before the Honorable John 6 Erlick (Ret.) (the “Arbitrator”). Dkt. #1 at 8. 7 8 On December 10, 2020, following oral argument before the Arbitrator, Asset Realty was 9 granted an Interim Arbitration Award. Dkt. #1-1 at 4-5. On January 21, 2021, Asset Realty 10 moved this Court to confirm and enter the Interim Arbitration Award. Dkt. #1. On July 1, 2022, 11 WKG filed a Notice of Withdrawal in this case. Dkt. #21. On July 21, 2021, this Court confirmed 12 13 and entered the Interim Arbitration Award. Dkt. #20. On September 20, 2021, the Arbitrator 14 issued in the same arbitration an Amended Arbitration Award After Final Hearing and on 15 December 15, 2021, the Arbitrator signed and issued Exhibit A to the Amended Arbitration 16 Award After Final Hearing. Dkt. #22 at 2. On October 3, 2022, Asset Realty moved this Court 17 to confirm and enter the Amended Arbitration Award After Final Hearing and its Exhibit A 18 19

20 1 In WKG’s response to Asset Realty’s Motion, it attaches pleadings from state court litigation initiated by WKG against Asset Realty. Asset Realty correctly points out that WKG failed to 21 request judicial notice of these documents per the Local Rules. Dkt. #55 at 2 n.1. However, 22 Asset Realty confirms Exhibit A, the King County Complaint is a “true and correct copy of the Complaint WKG filed in the State Court Litigation, and Asset does not object to this Court 23 considering it. No such concession is made to the other Exhibits to WKG’s Response.” Id. The court may take judicial notice of documents filed in Washington state court cases. See Khazali v. 24 Berns, No. C16-1022JLR, 2016 WL 4479915, at *1 n.3 (W.D. Wash. Aug. 24, 2016) (collecting 25 cases). However, “[i]f the facts in such documents are disputed, ‘judicial notice is limited to recognizing that the documents exist, but not for the truth of the matters set forth therein, as 26 those factual matters remain contested.’” IDS Prop. Cas. Ins. Co. v. Ivanov, No. C18-1161-JCC, 2019 WL 2646112, at *3 (W.D. Wash. June 27, 2019) (quoting Brown v. Home Depot, No. C14- 27 0896 RSM, 2015 WL 9839773, at *3 (W.D. Wash. Feb. 5, 2015)). As such, the Court will take 28 judicial notice as to the exhibits attached to Dkt. #54 as to their existence, but not for the truth of the matters set forth therein. (collectively, the “Amended Award”). Dkt. #22. WKG then filed a Notice of Attorney Lien on 1 2 November 3, 2022. Dkt. #26. On November 21, 2022, Respondent Wilson paid to the order of 3 WKG $2,235.06 pursuant to the Amended Award. Dkt. #45 at 2. 4 On November 22, 2022, Asset Realty’s Supplemental Motion to Confirm Arbitration 5 Awards was granted. Dkt. #35. There were further proceedings before this Court regarding 6 Asset Realty’s Motion for Contempt (Dkts. #30–31) and Asset Realty’s Motion for Temporary 7 8 Restraining Order (Dkt. #32), which are not relevant here. 9 Unbeknownst to this Court, Asset Realty and WKG were meanwhile embroiled in 10 litigation over allegedly unpaid fees in King County Superior Court. On June 15, 2022, WKG 11 filed a lawsuit seeking judgment against Asset Realty regarding its claims for the unpaid legal 12 13 fees incurred on Asset Realty’s behalf. See Williams Kastner & Gibbs, PLLC v. Asset Realty, 14 LLC, King County Superior Court No. 22-209082-1 (“King County Action”); King County 15 Complaint. The next month, on July 1, 2022, WKG filed a Notice of Withdrawal in this case. 16 Dkt. #21. The King County Action is assigned to the Honorable Chad Allred, who continues to 17 issue orders (as recently as last month), which enable WKG to lien, garnish or otherwise attach 18 19 any such sums that are paid to Asset Realty and are potentially recoverable by WKG. Dkt. #54 20 at 3; Id., Ex. D. 21 Asset Realty concedes WKG has the right to claim a lien on amounts Respondent Wilson 22 may pay pursuant to the now-confirmed arbitration award. Dkt. #45 at 3. However, Asset Realty 23 brings this motion to set forth summary procedures to determine the amount, if any, WKG is 24 25 entitled to for the services it performed in this action. Id. WKG opposes Asset Realty’s motion 26 and argues the Court lacks jurisdiction over WKG and that the Court should defer any issues (if 27 28 properly before this Court) regarding the propriety of WKG’s claims for fees to Judge Allred in 1 2 the King County Action. 3 III. ANALYSIS 4 A. Washington Law of Attorney Liens 5 “In order to realize on a lien, absent agreement with the client, there must be an 6 adjudication respecting the lien.” Marjorie Rombauer, 27 Washington Practice: Creditors’ 7 8 Remedies and Debtors' Relief § 4.29 (2008). That adjudication need not occur at the court with 9 jurisdiction over the dispute that gave rise to the lien itself: “[A]n attorney claimant may, after 10 filing the lien, bring an action to foreclose and have the right to the lien and its reasonableness 11 determined in any proper forum.” Id. (emphasis added). 12 13 In Washington State, attorney liens are a creation of statute. Wash. Rev. Code §§ 14 60.40.010–030. They have generated few cases, but much confusion. See Zach Elsner, Note, 15 Rethinking Attorney Liens: Why Washington Attorneys Are Forced Into “Involuntary” Pro Bono, 16 27 Seattle U. L. Rev. 827, 829 (2004) (noting that “only a few Washington cases have addressed 17 attorney liens[,]” and that “ethical and judicial interpretations have transformed Washington’s 18 19 attorney lien statute into a confused and illogical body of law that frustrates the statute’s 20 purpose[.]”). See also Rombauer at § 4.21 (concluding that “the attorney lien statute leaves open 21 many questions.”). 22 In 2004, the Washington State Legislature amended the attorney lien statute for the first 23 time since it was adopted by the Territorial Legislature in 1863. See 2004 Wash. Legis. Serv. ch. 24 25 73. Although the Legislature’s stated purpose was only to “end double taxation of attorneys’ 26 fees obtained through judgments and settlements,” the amendments made substantial textual 27 revisions. One commentator noted that the amendments would do much more than affect tax 28 status, and would “undoubtedly [have] some unintended consequences.” See Deborah Brookings, 1 2 Strange Bedfellows: The New Washington Attorney Lien Statute and the Blaney Cases, 58 3 WASH. ST. B. NEWS 19 (Dec. 2004), available at https://wabarnews.org/wp- 4 content/uploads/2023/02/2004-VOL-58-NO-12.pdf (last accessed Feb. 9, 2023). 5 B. Federal Jurisdiction 6 Federal courts are courts of limited subject-matter jurisdiction. See, e.g., Louisville & 7 8 Nashville R.R. v. Mottley, 211 U.S. 149 (1908). There are two primary restrictions on federal 9 judicial power: the cases and controversies requirement of Article III, and the requirement of a 10 federal statute authorizing jurisdiction. These limitations on federal-court jurisdiction promote 11 many important constitutional values, including respect for the independence of state judiciaries 12 13 in the American federalist system. See Erwin Chemerinsky, Federal Jurisdiction 266 (5th ed. 14 2007). The burden of establishing jurisdiction rests upon the party asserting jurisdiction. McNutt 15 v. Gen. Motors Acceptance Corp., 298 U.S. 178, 182–83 (1936). Subject-matter jurisdiction is 16 non-consentable, and may be raised by the court sua sponte. See Mottley, 211 U.S. 149 (1908); 17 see also Chemerinsky at 267–68. 18 19 Concerns about state judicial independence notwithstanding, federal courts often 20 adjudicate state-law matters that are ancillary to the claims that meet the requirements of original 21 federal jurisdiction. See 28 U.S.C. § 1367 (“[I]n any civil action of which the district courts have 22 original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims 23 that are so related to claims in the action within such original jurisdiction that they form part of 24 25 the same case or controversy under Article III of the United States Constitution.”). The exercise 26 of supplemental jurisdiction promotes important judicial values, like convenience and economy, 27 by providing litigants with a single forum in which to resolve their entire dispute and avoiding 28 wasteful uses of state-court resources. See Charles Wright & Arthur Miller, 13 Federal Practice 1 2 and Procedure § 3523 (3d 2008). One of the most typical exercises of supplemental jurisdiction 3 is the compulsory counterclaim, which “arises out of the transaction or occurrence that is the 4 subject matter of the opposing party’s claim[.]” See Fed. R. Civ. P. 13(a)(1). 5 Closely related to this concept of supplemental jurisdiction is ancillary jurisdiction, 6 which allows a federal court to hear collateral proceedings that arise from transactions or 7 8 occurrences separate from the facts of the original case. Id. § 3523.2. Federal courts exercise 9 ancillary jurisdiction “for two separate, though sometimes related, purposes: (1) to permit 10 disposition by a single court of claims that are, in varying respects and degrees, factually 11 interdependent; and (2) to enable a court to function successfully, that is to manage its 12 13 proceedings, vindicate its authority, and effectuate its decrees.” Kokkonen v. Guardian Life Ins. 14 Co., 511 U.S. 375, 380 (1994) (internal citations omitted). Adjudications regarding attorney fees 15 fall within a federal court’s ancillary jurisdiction. See Wright & Miller § 3523.2. 16 It is clear that this Court has the authority to adjudicate many ancillary issues involving 17 attorney fees. See, e.g., Fed. Sav. & Loan Ins. Corp. v. Ferrante, 364 F.3d 1037, 1041 18 19 (“Determining the legal fees a party to a lawsuit properly before the court owes its attorney, with 20 respect to the work done in the suit being litigated, easily fits the concept of ancillary 21 jurisdiction.”) (dictum). It is equally clear that the Court may exercise its discretion to refuse to 22 hear ancillary issues involving attorney fees. In fact, the Court has been found to have abused 23 its discretion to exercise such jurisdiction in some cases. In Federal Savings & Loan, the Ninth 24 25 Circuit cited with approval the case of Bounougias v. Peters, 369 F.2d 247 (7th Cir. 1966), in 26 which the appellate court reversed the district court for having improperly exercised ancillary 27 jurisdiction in a dispute involving attorney fees. The court noted that the district court did not 28 have to adjudicate the state-law claim to resolve the Article III case over which it had original 1 2 jurisdiction: 3 [T]hese proceedings do not relate to any matter which full justice, logic, or even convenience would have required a decision upon by the trial court as part of the original 4 litigation. Whatever the result may finally be in this litigation, it will not make more 5 complete or satisfactory or, indeed, even affect the judgment of the district in the negligence suit. Nor can it be said that this suit relates to matters coming so near to the 6 life and dignity of the district court that an exercise of inherent powers to protect its authority was necessary. 7 8 Id. at 249. See also Wright & Miller § 3523.2 (collecting cases). 9 C. Asset Realty’s Motion for Determination Of Attorney Lien 10 This Court declines to adjudicate this matter. The typical justifications for ancillary 11 jurisdiction, like promoting judicial economy and protecting the authority of the federal courts, 12 do not attach here. This Court is not especially acquainted with the efforts that WKG has 13 14 expended on Asset Realty’s behalf as it has only submitted limited briefing to this Court before 15 filing its Notice of Withdrawal (Dkt. #21). It would not consume much of the Washington State 16 Judiciary’s resources to review WKG’s brief submissions to this Court, and a state-court judge 17 would be equally competent to hold an evidentiary hearing at which evidence of their efforts 18 could be submitted. Moreover, because this controversy has no relationship with the underlying 19 20 dispute between Asset Realty and Respondents Wilson and Cooley, it does not come “so near to 21 the life and dignity” of this Court that an exercise of its inherent power is necessary to vindicate 22 its authority. Bounougias, 369 at 249. 23 The controversy between Asset Realty and its former attorneys present complicated 24 25 issues already before Judge Allred in King County Superior Court, and would require this Court 26 to tread upon an area uniquely reserved to the Washington State Judiciary: the supervision of the 27 State Bar. Asset Realty accuses WKG of breaching ethical duties that sound chiefly in the 28 Washington State Rules of Professional Conduct. See Dkt. #55 at 2–3. The supervision of the Washington State Bar and the interpretation of the State Rules of Professional Conduct are 1 2 uniquely the responsibility of the Washington courts. See Matter of Washington State Bar Ass’n, 3 548 P.2d 310, 315 (Wash. 1976) (“[T]he regulation of the practice of law in this state is within 4 the inherent power of this court.”); see also Restatement of the Law Governing Lawyers (Second) 5 § 1 Comment c (contrasting the plenary role of state high courts with the more limited supervision 6 of the federal courts in the regulation of lawyering). 7 8 In sum, balancing supervisory responsibility over the State Bar with the 2004 9 amendments to the attorney lien statute are most appropriately handled by state-court judges, 10 absent a compelling need otherwise. No such need presents itself here. The state courts provide 11 a competent forum in which to litigate these issues. 12 13 IV. CONCLUSION 14 The Court has reviewed the submissions associated with Asset Realty’s Motion for 15 Determination of Attorney Lien Against Former Attorney (Dkt. #45). For the reasons stated 16 above, the Court DENIES the Motion. 17

18 19 DATED this 10th day of February, 2023. 20 21 A 22 23 RICARDO S. MARTINEZ UNITED STATES DISTRICT JUDGE 24 25 26 27 28