Ethics – NWSidebar

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How the IRS Views Structured Legal Fees

All lawyers pay taxes and know that legal fees are income. They are ordinary income and even subject to self-employment taxes. But what about timing? Much in the tax law is about timing. A classic tenet of tax-planning is to try to defer income and to accelerate deductions. For generations, tax lawyers have explored all manner of tax-deferral strategies. According to the IRS, you have income for tax purposes when you have an unqualified, vested right to receive it. Asking for payment later doesn’t change that. The idea is to prevent taxpayers from deliberately manipulating their income. A classic example is a bonus check available in December, where the employee asks to have the employer hold it until Jan. 1. Normal cash accounting suggests that the bonus is not income until paid, but the employer tried to pay in December and made the check available. To the IRS, that makes the bonus income in December, even though it is not collected until January.

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Court of Appeals: New Management Entitled to Law Firm File

Division I of the Washington Court of Appeals in Seattle recently held that new management of an entity is entitled to a law firm’s file involving work prepared for the entity under prior management. Although the case does not plow any new conceptual ground, it offers Washington support for this general proposition with specific reference […]

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What You Need to Know About Washington’s Silenced No More Act

On March 24, Washington Gov. Jay Inslee signed into law the Silenced No More Act, greatly restricting the scope of nondisclosure and nondisparagement provisions that employers may enter into with employees who either work or reside in Washington state. Effective June 9, the new law prohibits employers from requiring or requesting that an employment agreement contain a provision: “Not to disclose or discuss conduct, or the existence of a settlement involving conduct, that the employee reasonably believed under Washington state, federal or common law to be illegal discrimination, illegal harassment, illegal retaliation, a wage and hour violation, or sexual assault, or that is recognized as against a clear mandate of public policy….” However, employers will still be able to enter into agreements that (1) prohibit the disclosure of the amount paid in a settlement agreement; and (2) protect “trade secrets, proprietary information, or confidential information that does not involve illegal acts.” An employer that violates the law can be found liable in a civil action for “actual damages or statutory damages of $10,000, whichever is more, as well as reasonable attorneys’ fees and costs.”

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New Advisory Opinion on Malpractice Insurance Disclosure

In September 2021, the Washington Supreme Court adopted amendments to RPC 1.4, which now require disclosure regarding minimum malpractice insurance levels. With some exceptions, this new requirement applies to all practicing attorneys and has generated many questions.

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Washington Court of Appeals Addresses ‘Professional Judgment’ Rule in Legal Malpractice

Division I of the Washington Court of Appeals recently addressed the “professional judgment” rule in Angelo v. Kindinger, 2022 WL 1008314 (Wn. App. Apr. 4, 2022). The rationale of the rule, which is a long-standing part of the decisional law of legal malpractice, is that a lawyer should not be held liable for malpractice for a good faith judgment within a range of reasonable alternatives.

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Federal Court Finds No Personal Jurisdiction Over Out-of-State Attorney

The federal district court in Tacoma recently concluded that it did not have personal jurisdiction over a Mississippi attorney and his law firm who handled matters in Louisiana and Virginia for a Washington client. Bullis v. Farrell, 2022 WL 656204 (W.D. Wash. Mar. 4, 2022) (unpublished), involved claims for legal malpractice, breach of fiduciary duty, and violation of the Washington Consumer Protection Act by a Washington resident living in Dupont against a lawyer and his firm officed in Jackson, Mississippi. The claims arose out of lawsuits the lawyer handled for the client in Louisiana and Virginia. Neither of those involved conduct in Washington and the lawyer was not licensed in Washington.

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How Lawyers Can Create an Inclusive Environment for Coworkers and Clients

Our language, a shared communication tool, reflects our society. As such, we can use it to create a more inclusive environment where all belong. Part of this work is actively and continuously creating a space where gender and pronouns are not assumed. For lawyers especially, this is a critical part of ensuring a healthy workplace and happy clients.

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Strange New Trip: The Emerging World of Psychedelic Law and Decriminalization

After substances like LSD (acid), MDMA (ecstasy), and notably psilocybin (magic mushrooms) were classified as federally prohibited Schedule 1 drugs, a new wave of research into their therapeutic potential is growing, state and local governments are decriminalizing their use, and new areas of law are opening up. “Now there’s what’s referred to as a psychedelic renaissance …,” said Kathryn Tucker, special counsel at Emerge Law Group. “It’s just an incredible surge of interest.”

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Washington Supreme Court Outlines Contours of Confidentiality Rule

The Washington Supreme Court recently addressed the scope of the confidentiality rule RPC 1.6 in In re Cross. Cross had represented a client in a criminal case arising out of an accident involving an all-terrain vehicle the client was driving. When the criminal case resolved, Cross and the client held a confidential discussion about the possibility of pursuing a product liability claim against the ATV manufacturer. Based on Cross’s advice, the client decided not to file a product liability claim. A passenger in the ATV accident later sued Cross’s by-then former client. When the former client’s defense lawyer in the civil case moved to add an affirmative defense attributing the accident to a product defect, the passenger opposed the motion. To support the opposition, the passenger’s lawyer obtained a declaration from Cross in which he disclosed the confidential conversation he had with the former client evaluating the possibility of bringing a product claim and revealing that the former client had decided not to pursue such a claim in light of the costs and risks. A bar grievance followed.

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NWSidebar’s Top 10 Most-Read Blogs in 2021

It’s hard to believe that 2021 is already over. After a painfully slow 2020 during which the entire world was coming to grips with a (hopefully) once-in-a-lifetime pandemic, things almost began to feel normal this past year, and the weeks and months seemed to fly by. We started going out. We dared to think about things other than the virus. We gave our streaming services a much-needed break. The virus remained an ever-present part of life in 2021, but nowhere near what it was in the year before. You can see that reflected in the variety of topics covered on NWSidebar this year. Although the pandemic has remained a challenge for lawyers and non-lawyers alike, the blogs over the past year began to stretch beyond the limitations of COVID life and back into some semblance of normalcy. As has become our annual tradition, take a look back at 2021 to see the 10 most-read blogs of the year

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Federal Court Enforces Arbitration Provision in Engagement Agreement

The federal district court in Seattle recently enforced an arbitration provision in a lawyer’s engagement agreement in Dodo International, Inc. v. Parker, No. C20-1116-JCC, 2021 WL 4060402 (W.D. Wash. Sept. 7, 2021) (unpublished). The lawyer had represented some of the plaintiffs in a series of business transactions that the court described as “ill-fated.” Litigation followed against both the lawyer and the counterparties.

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Federal Court Looks to Choice-of-Law Provision in Legal Malpractice Case

The federal district court in Seattle recently looked to a choice-of-law provision in an engagement agreement in denying summary judgment on the statute of limitations in a legal malpractice case. U.S. Bank, N.A. v. The Glogowski Law Firm, 2021 WL 3375942 (W.D. Wash. Aug. 3, 2021) (unpublished), involved legal malpractice claims by the plaintiff bank against the defendant law firm for work in Washington and Oregon. A choice-of-law provision in the engagement agreement involved, however, designated Minnesota law as controlling because the bank is headquartered there.

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Federal Court Looks at Prospective Client Rule

The federal district court in Seattle recently discussed the prospective client rule—RPC 1.18—in denying a motion to disqualify a law firm. Collins v. Nova Association Management Partners LLC, No. C20-1206-JCC, 2021 WL 2184879 (W.D. Wash. May 28, 2021) (unpublished), involved Fair Debt Collection Practices Act and related claims by a condominium unit owner against his owners association and its management company.

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Court of Appeals Voids Fee-Sharing Agreement

Division I of the Washington Court of Appeals recently refused to enforce a fee-sharing agreement between two plaintiffs’ lawyers because the arrangement had not been confirmed in writing with the client as required by RPC 1.5(e)(1)(ii). Kayshel v. Chae, __ Wn. App.2d __, 483 P.3d 1285 (2021), involved an individual employment discrimination claim and a separate wage class action. The attorney who was retained initially by the client—the claimant in the individual case and the then-potential class representative in the class action—later associated another lawyer in the class action. The two lawyers eventually agreed on a fee split in percentage terms. They wrote the agreement by hand over breakfast and later confirmed the terms between themselves by email. Although the second lawyer related that he had received the client’s oral consent in a telephone call, the client was never presented with the written agreement.

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The History and Mechanics of Qualified Immunity and Police Accountability

Among the many issues at the center of debates over police-involved killings, particularly killings of people of color, few are as impactful as qualified immunity. But for as often as qualified immunity is pulled into wider debates, the concept itself is idiosyncratic and opaque, perhaps even among legal professionals. It is not a law but a precedent, not an act of government but a judicially created doctrine. King County Superior Court Judge David Whedbee is one of the organizers behind a planned full-day event aimed at examining qualified immunity. On May 7, Whedbee and Washington Supreme Court Justice Mary I. Yu will cohost “Qualified Immunity 360,” sponsored by the Washington State Minority and Justice Commission and featuring panelist presentations and discussion “to educate practitioners, judges, law students, and the public on the mechanics, history, and public policy behind the doctrine.”

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Court of Appeals Issues Rare Decision on Revoking Consent to Conflict Waiver

Earlier this year, Division I of the Washington Court of Appeals issued a decision touching on an area of the Rules of Professional Conduct (RPC) that is rarely litigated: revoking consent to conflict waivers. The decision was “unpublished” under General Rule 14.1, but is instructive nonetheless—both for its illumination of this comparatively “unplumbed” area of conflicts law and as an illustration of the result.