May 16, 2017
Held…”in recognition of the long recognized lawful authority to trim overhanging vegetation, the lawful authority to use and maintain property held in common with a cotenant, and the plain language of the timber trespass statute, we hold that where a tree stands on a common property line, the common owners of the tree may lawfully trim vegetation overhanging their property but not in a manner that the common owner knows will kill the tree.” To read the complete opinion go to: http://www.courts.wa.gov/opinions/pdf/D2%2048786-1-II%20Published%20Opinion.pdf.
May 8, 2017
By: Ian J. Pisarcik
In October, the Washington Supreme Court held, in a 5-4 decision, that the attorney-client privilege does not extend to postemployment communications between corporate counsel and former employees. In so holding, the Court eschewed the flexible approach articulated in Upjohn Co. v. United States; a United States Supreme Court decision that a majority of jurisdictions have relied on to extend the attorney-client privilege to include communications with former employees.
The case at issue, Newman v. Highland Sch. Dist. No. 203, 381 P.3d 1188 (Wash. 2016), concerned a plaintiff who suffered a brain injury while playing high school football. The plaintiff brought a negligence suit against the school three years after the injury based on the school’s violation of the Lystedt law, which requires the removal of a student athlete from competition if he or she is suspected of having a concussion. At the time of the lawsuit, most of the coaching staff that had been employed when the plaintiff was injured were no longer employed by the school. Counsel for the school interviewed the former staff and the plaintiff sought discovery concerning those communications. Counsel moved for a protective order to shield the communications, asserting the attorney-client privilege. The Superior Court denied the protective order and counsel sought discretionary review.
In its opinion, the Washington Supreme Court spent a great deal of time discussing Upjohn. In Upjohn, the United States Supreme Court declined to establish a bright-line rule regarding the scope of the attorney-client privilege in the corporate setting and instead articulated a functional framework for determining whether the purposes underlying the attorney-client privilege would be furthered by its extension to the communication at issue. The Washington Supreme Court, however, argued that the flexible approach articulated in Upjohn “presupposed attorney-client communications taking place within the corporate employment relationship.” The Court therefore explained that, while it had adopted Upjohn, it nevertheless declined to extend the attorney-client privilege to communications outside the employer-employee relationship.
The Washington Supreme Court recognized that legitimate concerns exist with respect to postemployment communications between corporate counsel and former employees, but ultimately found these concerns unpersuasive.
Former employees may possess vital information about matters in litigation, and their conduct while employed may expose the corporation to vicarious liability. These concerns are not unimportant, but they do not justify expanding the attorney-client privilege beyond its purpose.
In a strongly-worded dissent, Justice Wiggins argued that the bright-line rule adopted by the Court “is at odds with the functional analysis underlying the decision in Upjohn and ignores the important purposes and goals that the attorney-client privilege serves.”
The practical implication of the Newman decision is that corporate attorneys must take care to consider other bases for protecting their communications with former employees. For example, corporate attorneys should consider asserting the work-product doctrine or jointly representing the corporate entity and the former employee (though this latter action may present conflict-of-interest issues).
May 1, 2017
By: Ian J. Pisarcik
The U.S. Department of Health and Human Services Office for Civil Rights (OCR) recently published a document explaining how the Health Insurance Portability and Accountability Act (HIPAA) applies to cloud computing.
The OCR was motivated to offer guidance due to the proliferation and widespread adoption of cloud computing solutions and the corresponding confusion among HIPAA-covered entities and business associates with respect to how they can take advantage of cloud computing while not running afoul of HIPAA.
Perhaps the most important point stressed by the OCR is that when a covered entity engages the services of a cloud computing service provider (CSP) to create, receive, maintain, or transmit electronic protected health information (ePHI), the CSP is deemed a business associate under HIPAA. Similarly, when a business associate subcontracts with a CSP to create, receive, or transmit ePHI, the CSP subcontractor is deemed a business associate. This is true in both instances even if the CSP cannot view the ePHI because the ePHI is encrypted and the CSP does not have the decryption key.
The upshot is that the CSP must enter into a business associate agreement (BAA) with the covered entity (or the business associate) that is in compliance with HIPAA. If such an agreement is not entered into prior to services being performed, both the CSP and the covered entity will be directly liable under HIPAA.
For further information on how HIPAA applies to cloud computing, and how covered entities and business associates can take advantage of cloud computing without violating HIPAA, review the guidance document published on the U.S. Department of Health and Human Services website at:
April 24, 2017
Paine Hamblen is proud to announce that partner Kathryn McKinley represented the Sisters of the Holy Names with respect to the sale and permanent preservation of its Spokane River Property. Pursuant to the terms of the sale, the City of Spokane acquired 31.14 acres of the former 65 acre Sisters’ Spokane Campus on Fort George Wright Drive including 4,500 feet of Spokane River frontage. Ms. McKinley also represented the Sisters in the sale of an additional 34 acres to Catholic Charities which closed in September, 2016. Paine Hamblen and Ms. McKinley were honored to represent the Sisters. For a copy of the press release by the Sisters of the Holy Names, please click on the following link: Press Release
April 12, 2017
The Tax Court in Greenberg, David B., 147 T.C. No. 13 (2016), held that an attorney who had represented a taxpayer in an administrative proceeding was not a proper party to file a petition seeking an award of attorney’s fees for the representation, in part because he did not “incur” the costs. Rather, he was to be the recipient of any fees. Because the attorney was not a party to the underlying proceeding, he could not be a prevailing party under I.R.C. § 7430. Therefore, the attorney was not the proper party to file a claim under § 7430, and the Tax Court lacked jurisdiction.
The attorney sought the award of administrative costs (his attorney’s fees) with respect to an earlier administrative proceeding in which he represented a taxpayer (his client) before the I.R.S. pursuant to a power of attorney. His client’s matter was eventually resolved. The attorney was owed fees for this representation that remained outstanding, and his client agreed that the attorney would receive any administrative fees awarded under § 7430. The attorney filed his petition with the Tax Court arguing that he was the real party in interest because he was contractually entitled to any award of administrative costs to his client, and as such, had a right to claim administrative costs on this own behalf.
Under § 7430, in any administrative or court proceeding brought by or against the U.S. Government in connection with the determination, collection, or refund of any tax, interest, or penalty, the prevailing party may be awarded reasonable litigation and administrative costs. § 7430(f)(2) grants the Tax Court jurisdiction over petitions filed to contest a decision denying administrative costs. An I.R.S. decision denying a taxpayer’s request for reasonable administrative costs in whole or in part is subject to review by the Tax Court.
The court held that the attorney was not the proper party to file a § 7430 claim, and thus, it did not have jurisdiction over the case. The court considered a line of cases that construed fee awards under § 7430 and 28 U.S.C. § 2412, which is a fee-shifting statute under the Equal Access to Justice Act that similarly provides that a prevailing party may seek judgment for attorney’s fees. The court found that cases applying both laws have required the prevailing party to actually be a party to the underlying proceedings based on the plain, unambiguous language of the term. Also, the case law found that attorneys lack standing to apply for fees thereunder on their own behalf.
Further, § 7430(a) refers to administrative costs “incurred by” the prevailing party, which means that under its most natural reading, costs paid, not charged, by the prevailing party. The attorney did not “incur” these fees; rather, he was their intended recipient. The court said that this position was also supported by United States v. McPherson, 840 F.2d 244, 245 (4th Cir. 1988), in which the court denied § 7430 recovery to an attorney who represented himself, and thus, did not “incur” any fees for legal services. In addition, § 7430’s legislative history supported the court’s conclusion that only a party to an underlying action may pursue an award.
February 9, 2017
By Greg Johnson
In Taylor v. Intuitive Surgical Inc. (Feb 9, 2017) the Washington Supreme Court held that the Washington Product Lability Act imposes a statutory duty on manufacturers of medical products to warn hospitals of the products’ dangers when they purchase them. Manufacturers’ duty to warn purchasing hospitals is not excused by warning the doctors who use the devices because hospitals need to know the dangers of the products they purchase, which cannot be accomplished simply by the manufacturers’ warnings to the doctors who use the products. A copy of the Washington Supreme Court’s opinion can be found here: http://www.courts.wa.gov/opinions/?fa=opinions.disp&filename=922101MAJ
February 9, 2017
By: Tricia D. Usab
On July 7, 2016, the Washington Supreme Court handed down a decision in Jordan v. Nationstar Mortgage, 185 Wn.2d 876 (2016), that directly impacts a lender’s ability to exercise standard provisions found in many mortgages and deeds of trust recorded throughout the state of Washington. Many mortgages and deeds of trust contain provisions that allow a lender to enter into a borrower’s real property for the purpose of securing it after an event of default, but prior to a foreclosure. The provisions usually allow the lender to change the locks, winterize structures, or take other steps necessary to protect the value of the real property.
In Jordan v. Nationstar Mortgage, the Court held that provisions in a deed of trust or mortgage that allow a lender to enter into real property and change the locks, prior to a foreclosure are an exertion of physical control by the lender, and that such physical control exercised by the lender amounts to possession of the real property. The court examined various definitions of the word “possession” and determined that possession is an exertion of control over property. In Washington, an act of possession of real property by a lender prior to a foreclosure is prohibited by law. RCW 7.28.230, states “a mortgage of any interest in real property shall not be deemed a conveyance so as to enable the owner of the mortgage to recover possession of the real property, without a foreclosure and sale according to law.” In other words, a lender or mortgagee has a right to place a lien on the real property and to foreclose upon that lien, but the lender does not have a right to possess the property prior to the foreclosure. Accordingly, the court held that provisions in a deed of trust or mortgage that allow a lender to enter into a property for the purpose of changing the locks to secure it, prior to a foreclosure are prohibited by Washington law, as an act of possession by the mortgagee prior to a foreclosure.
The Court reasoned that a lender changing locks on a borrower’s real property is similar to a landlord changing locks on a tenant’s real property, and in Washington, the act of a landlord changing the locks on a tenant is deemed an exertion of control over the real property and an unlawful eviction against the tenant. The Court applied this rule to lenders and borrowers, even though the lender in the case thought the real property was abandoned and the borrower was provided with a telephone number to obtain access to the property.
After this decision, it difficult to know what a lender may do prior to a foreclosure sale, in order to protect or secure the real property pledged to the lender as collateral following an event of default under the loan. Clearly a lender may not enter into the real property to change the locks, even if the lender believes that the real property is abandoned and the lender provides a means of contact to the borrower for future access. Moving forward what acts will constitute an exertion of control by the lender under Washington law? Is winterizing without changing the locks an exertion of control over the real property? What about transferring payment of the electricity bill to the lender, in order to ensure that payment and services are continued in the winter months to avoid pipes from freezing?
According to the Spokesman Review, Washington appears to be the first state in the nation to invalidate these types of provisions, so we are venturing into new territory. The Spokesman Review article may be found by following the link below:
February 3, 2017
On January 20, 2017, the Ninth Circuit Court of Appeals issued a ruling in a case that has broad effect, potentially impacting your organization.
In the case of Syed v. M-I, LLC, Case No. 14-17186 (2017), the Court ruled that a prospective employer violates the Fair Credit Reporting Act when it procures a job applicant’s consumer report after including a liability waiver in the same document as the statutorily mandated disclosure. The Ninth Circuit Court of Appeals is the very first Court in the nation to rule on this particular issue. The Court also found that given the statute’s requirement that the disclosure document consist solely of the disclosure, a prospective employer’s violation is “willful” when the employer includes terms in addition to the disclosure, such as the liability waiver, before procuring a consumer report or causing one to be procured.
If your organization utilizes consumer reports when making business decisions, including hiring of employees, you should review your written disclosure statements issued to prospective employees to ensure that they comply with the Ninth Circuit’s ruling.
February 1, 2017
By: Tricia D. Usab
On October 6, 2016, the Washington Supreme Court handed down a decision in Whatcom County v. Hirst, 186 Wash. 2d 648 (2016), that directly impacts the development of land with permit-exempt wells in counties such as Spokane, that are subject to the Growth Management Act. The Growth Management Act is legislation that reinforces conservation goals, discourages sprawling low-density development patterns, and encourages future growth in urban areas. Permit-exempt wells allow a withdrawal of groundwater for domestic use in an amount not exceeding five thousand gallons per day without any water permit requirement, provided that the groundwater withdrawals do not infringe upon any senior water rights. The Court held that the Growth Management Act places an independent duty on counties within Washington to ensure that groundwater appropriations will not infringe upon any senior water rights, including minimum stream flows prior to allowing land development. The result is that counties can no longer rely upon the contention that water is presumptively available for permit-exempt wells provided that the county’s comprehensive plan is consistent with certain rules issued by the Department of Ecology. Prior to this ruling, counties regularly allowed owners of land with permit-exempt wells to obtain building permits without the applicant providing any evidence that water is legally available, or actually available on the land. Counties only confirmed that the well did not fall within one of the boundary areas identified by the Department of Ecology, as an area where water for development does not exist.
The Court stated in its analysis that the trend in the law is to retain sufficient water in streams and lakes in order to sustain wildlife, recreational, and navigational opportunities. The Court noted that the Growth Management Act shifted some of the obligation to protect local environments to local governments, instead of solely relying upon the Department of Ecology. The Court’s decision relied upon Washington’s precedent of protecting minimum instream flow rights, which are the minimum streams necessary for fish and other wildlife. The Court reasoned that since the adoption of the Department of Ecology rules in 1985, the understanding and methods of determining hydraulic continuity and the effect of groundwater withdrawals on surface water have changed. The Court noted that when the minimum instream flow rules were adopted, the Department of Ecology did not believe that withdrawals from deep contained aquifers impacted stream flows, but now it is well recognized that groundwater withdrawals can have a significant impact on surface water flows. Additionally, the rules issued by the Department of Ecology that Whatcom County and other counties have followed allow a permit-exempt well to appropriate water from an otherwise closed basin, unless the basin is closed to all future appropriations. Accordingly, in addition to holding that counties must consider the effect on senior water rights before approving building or subdivision permits, the Court held that if there is a conflict between the Growth Management Act and the Department of Ecology rules, the Growth Management Act controls.
Currently there are no systems in place for counties to analyze a well’s effect on senior water rights, since prior to this ruling, counties relied upon the Department of Ecology’s rules specific to each water basin. Justice Stephens, in her dissenting opinion, stated the practical result of this holding is to stop counties from granting building permits that rely on permit-exempt wells. Justice Stephens stated that the majority’s holding misinterpreted the phrase adequate water supply in the building code, to mean legal availability, not just actual presence of water. Justice Stephens reasoned that the Department of Ecology was tasked with developing and implementing the comprehensive state water resource program and water resource inventory areas, which Whatcom County and other counties across the state have relied upon prior to this decision. Justice Stephens opined that the building codes implemented by local governments should be aligned with the water resource areas, allowing counties to integrate the Department of Ecology’s water determinations into their comprehensive plans and rely upon them when reviewing building permit applications. According to Justice Stephens, the majority’s opinion assigns applicants who are otherwise exempt from obtaining a water permit, to obtain hydrogeological studies to determine complex effects on surface water from the use of a given well, that are difficult, if not impossible, to measure.
It is hard to know what a permit-exempt landowner will need to produce to obtain a building permit from a county governed by the Growth Management Act moving forward, but this case makes one point very clear, water is being classified as a limited commodity, and there is a trend toward increasing regulation that all users will be forced to navigate. In the wake of this decision, Spokane County has adopted an emergency county ordinance prohibiting any well to be drilled within 500 feet of an existing well. According to the Spokesman Review, Spokane County officials believe this ordinance complies with the controversial decision, but prevents a moratorium on building and reduces the burden of proof placed on an applicant with a permit exempt well. I will continue to monitor this issue for further developments and for more information on Spokane’s emergency ordinance, please follow the link below:
January 9, 2017
Paine Hamblen is proud to announce that its Employment Law Practice Group Partners, James M. Kalamon and Dale A. De Felice, successfully defended a local hospital in a significant wrongful termination lawsuit, in which the plaintiff sought over $1.2 million in economic loss damages. After a trial that lasted two weeks, the Court ruled against the plaintiff on all of the plaintiff’s causes of action. The Court specifically noted that Paine Hamblen’s representation was exceptional and counsel was well prepared, thoroughly organized and professional.
The result achieved on behalf of this client in this matter does not necessarily indicate similar results can be obtained for other clients on other matters. This result was case specific and depended on the specific facts of this case. Different facts in other cases may result in different outcomes.
January 5, 2017
By: Paul S. Stewart
The Idaho Supreme Court in Hoffer v. Shappard, 160 Idaho 870, 380 P.3d 681 (2016), held that attorney fees available to a prevailing party under I.C. § 12-121 will be awarded in any case when “justice so requires.” This is a departure from precedent based on I.R.C.P. 54(e)(1), which, until now, only permitted attorney fees under I.C. § 12-121 when a party prevailed against frivolous claims. The Court announced that its new interpretation of I.C. § 12-121 will go into effect March 1, 2017. Two dissenting justices characterized the majority’s decision as “a prominent step toward adopting the English Rule of attorney fee awards, whereby the losing party must pay for the prevailing party’s attorney fees.” The result, according to the dissent, would “inhibit access to justice” and “chill litigation.” The dissent further noted the “when justice so required” standard does not provide any direction to trial courts and makes it difficult for effective appellate review of attorney fee awards.
The new rule announced by the Idaho Supreme Court marks a significant departure from Idaho precedent. Although the dissent’s concerns about the new rule inhibiting access to justice and chilling litigation are reasonable, they may not be fully justified. The Court’s decision may, in fact, work against corporate defendants.
The rule change will shift Idaho courts’ attorney fees determinations from considering solely the merits of plaintiffs’ claims/defendants’ defenses to considering the totality of the circumstances. While Idaho courts will still consider whether litigants’ claims and defenses are frivolous, they will also be able to consider other factors, the most obvious being the financial positions of the parties. If the prevailing party is a large corporation or insurance company and the losing party is a low-income individual, a court may be reluctant to make the individual pay the corporation/insurance company’s attorney fees, even if the losing party’s claims/defenses were meritless.
This is the reality in Alaska, the only United States jurisdiction that adheres to the English Rule on attorney fees. Alaskan legal commentators have recognized that Alaska’s rule on attorney fees works as a “one-way street” whereby defense attorneys are unable to collect fee awards from losing plaintiffs.
In sum, the Hoffer decision signifies a new approach regarding awards of attorney fees in Idaho. But the effects of the decision may not be as momentous as argued by the dissenting justices. As evidenced by the experience of Alaskan courts, adherence to the English Rule on attorney fees does not necessarily result in a “chill” on litigation; in fact, the rule may act more to the detriment of corporate defendants than to poor plaintiffs.
For additional coverage of this topic, see a recent news article available at http://www.spokesman.com/stories/2016/dec/18/new-loser-pays-rule-over-idaho-court-system-could-/. We will continue to monitor judicial and legislative treatment on this issue.
December 20, 2016
By: Eric J. Sachtjen
On December 13, 2016, President Obama signed the 21st Century Cures Act which now allows individuals with disabilities with capacity to create their own self-settled special needs trust. Before the enactment of this law, individuals with disabilities had to rely upon third parties or the court to establish a special needs trust for their benefit. The new law allows capable individuals with disabilities to act in their own best interests without having to rely upon third parties or the court. This continues and expands a movement to enable individuals with disabilities to set aside additional funds for their survival.
December 9, 2016
By, Gregg R. Smith
On May 11, 2016 President Obama signed into law the Defend Trade Secrets Act which created a private cause of action for the owner of a trade secret that has been misappropriated. Prior to the enactment of this federal legislation trade secret law was left to the individual states, resulting in 48 variations of the Uniform Trade Secret Act and two states that relied upon common law.
The Defend Trade Secrets Act requires the owner of a trade secret to take reasonable steps to secure and protect its confidential tangible or intangible business, financial, scientific or other information from becoming publically known. The information that is to be protected as a trade secret must also derive independent economic value as a consequence of the owner maintaining its secrecy. A trade secret does not include reverse engineering of a legally acquired product, independent discovery or something that is the result of generally known information.
A key difference between the Defend Trade Secrets Act and the Uniform Trade Secrets Act found in most states, is the ability of the owner of a trade secret, in extraordinary circumstances, to seek an order that allows for the seizure of property that is necessary to prevent the disclosure of the misappropriated trade secret. The courts are beginning to analyze what is required to establish the basis for an order directing the seizure of property without a full hearing.
Owners of trade secrets will benefit from the Defend Trade Secrets Act with its truly uniform definitions and expanded protections, when compared to state trade secret laws. In those circumstances where a party would also benefit from a provision of the state laws, it would be possible for a lawsuit brought in federal court to state a cause of action under both the federal legislation as well as the laws of the state where the trade secret misappropriation took place.
Public Law 114-153,
November 28, 2016
Shane McFetridge’s practice focuses on complex litigation matters, including personal injury, auto/trucking accidents, premises liability, products liability and commercial and residential construction defect cases. He has successfully defended trucking companies, hotels, apartment owners, grocery stores, and restaurants in a variety of matters involving significant claims of personal injury, including traumatic brain injury and paralysis. He has also represented owners, developers and general contractors with respect to construction defect claims involving apartments, condominiums, high rise commercial buildings and single family homes.
Prior to joining Paine Hamblen, Shane was a partner at Lorber, Greenfield & Polito LP, where his practice also focused on personal injury, auto/trucking accidents, premises liability, products liability and commercial and residential construction defect cases. He received his Bachelor of Arts from Central Washington University and his Juris Doctor from Gonzaga University School of Law.
“We are very excited to have Shane as our Partner,” said Scott Cifrese, Paine Hamblen’s Managing Partner. “Shane brings a lot of litigation experience and knowledge with respect to handling construction defect and trucking cases, making him a great asset to our firm and clients.”
Shane is admitted to practice in Washington, Oregon and Arizona. He is a member of the Spokane County and King County Bar Associations, the Defense Research Institute and the Claim and Litigation Management Alliance, for which he also serves as the Spokane Chapter President.
November 28, 2016
By: Eric J. Sachtjen
The Washington Department of Revenue announced the 2017 Estate Tax Applicable Exclusion Amount is $2,129,000. The Applicable Exclusion Amount is the amount that can pass free of Washington’s estate tax.
The 2017 filing threshold remains at $2,000,000 so decedents with estates above $2,000,000, but below $2,129,000, will still must file Washington estate tax returns.
November 28, 2016
By: Eric J. Sachtjen
On November 23, 2016, the Washington Supreme Court held Washington’s B&O Tax Applies to National Sales and Drop-Shipped Sales.
Avnet is one of the largest distributor of electrical components and computer products. Avnet has 35 offices in the United States, including one in Redmond, Washington, where 40 employees worked. The Redmond employees performed many functions for Avnet’s Washington customers, including soliciting orders, responding to requests for quotes, receiving orders, and responding to questions, and market intelligence on Washington’s markets to Avnet’s corporate office.
Avnet earned more than $80 million of its gross receipts from “national sales” and “drop-ship sales.” Avnet didn’t pay B&O tax on its national sales or drop-ship sales.
In a “national sale” Avnet would make a wholesale sale to a customer in multiple states, including Washington. The goods would be delivered to the customer’s Washington office, but billed to the customer’s office in another state.
In a “drop-ship sale” Avnet’s out-of-state customer would place a wholesale order and direct Avnet to deliver the good to the ordering customer’s Washington customer.
The Court held the Redmond office was significantly associated with establishing and maintaining the market for its products in Washington. Therefore, Washington’s B&O Tax applied to Avnet’s Washington national sales and drop-shipped sales.
Avnet, Inc. v. Dep’t of Revenue, No 92080-0, 2016 WL 690220 (Wash. Nov. 23, 2016).
November 23, 2016
Paine Hamblen attorney Eric J. Sachtjen will be presenting December 1, 2016, at the Spokane County Bar Association CLE, Best Practices Potpourri. His topic will be Estate Planning Ethics. Interested parties may register for the CLE at http://www.spokanebar.org/cle.html.