Co-counsel may not sue each other for lost prospective fees

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At the trial court, we moved for summary judgment and won on the grounds that the attorneys owed duties solely to their client, not to each other, and that a bright-line rule prohibiting claims between co-counsel for lost prospective contingent fees was a better policy choice. Although there were no Washington cases on point, the trial court agreed with us that California authority on this issue was persuasive. The trial court also rejected Mazon’s collateral-source rule argument, ruling that Mazon was not entitled to recover from Krafchick money paid by his insurance company to settle their client’s malpractice claim. We argued that Mazon was attempting to use the collateral-source rule as a sword, whereas that evidentiary rule always was intended as a shield.

Mazon appealed. The Court of Appeals affirmed the trial court’s dismissal of Mazon's claim for recovery of lost prospective contingent fees, but reversed on the collateral-source issue. The court held that “the collateral source rule applies because Mazon’s portion of the [ex-client’s] settlement was an ‘injury’ to him that was in turn covered by his insurance company. As required by the rule, we cannot consider who actually covered the cost of the injury.” Both parties filed petitions to the Washington Supreme Court for review, which the Court accepted.

The Court agreed with us on all points. It held that the sacrosanct duty of loyalty to the client dictated a bright-line rule that no duties exist between co-counsel that would allow recovery for lost or reduced prospective fees. Otherwise, the Court noted, “potential conflicts of interest that harm the client’s interests may arise. Co-counsel may develop an impermissible self-interest in preserving the claim for the prospective fee, even when the client’s interests demand otherwise.”

The Court also agreed with us on the collateral-source rule. It reversed the Court of Appeals’ decision on that point and held that the collateral-source rule is an evidentiary rule that does not create a cause of action to recover money an insurer paid to settle a claim on Mazon's behalf.