IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

DIVISION ONE

CZj <»c;

JESSE FULLER, No. 73807-1- &*-* r^c; cr Pr<

Appellant/Cross-Respondent, G~5 i oo r-£ ^ f~. v. UNPUBLISHED OPINION 3D*

CO FISHERMEN'S FINEST and NORTH PACIFIC FISHING, INC., c-j^z

Respondents/Cross-Appellants. FILED: August 8, 2016

Schindler, J. — Jesse Fuller appeals the award of attorney fees and costs against him and against his attorney for violation of CR 11 and RCW 4.84.185. Because the court erred in concluding the complaint and the amended complaint against Fishermen's Finest Inc. and North Pacific Fishing Inc. violated CR 11 and RCW 4.84.185, we reverse and remand to vacate the judgment. Crewmember Contract

Beginning in 2005, Jesse Fuller worked in Alaska during the fishing season as a deckhand on the "FA/American No. 1." The FA/American No. 1 is "a 160 foot factory catcher processor." North Pacific Fishing Inc. (North Pacific) owns FA/ American No. 1 and Fishermen's Finest Inc. manages the vessel.

On June 24, 2013, Fuller entered into a "Crewmember Contract" with North Pacific to work as a deckhand on the FA/ American No. 1 for "sixty (60) consecutive Days (Term')." The contract states the term begins when Fuller reports for duty aboard the vessel to work a "Trip." A "Trip" begins when the vessel leaves port to fish and concludes when the vessel completes the offload of the fish. Ifthe 60-day term ends when the vessel is at sea, the contract states the term "shall automatically extend until the Vessel next returns to port for an off-load and the Crewmember is released by the Captain after the off-load is completed." The Crewmember Contract states, in pertinent part:

AMERICAN NO. 1 CREWMEMBER CONTRACT (Rev. 1/13)

Printed Crewmember Name: Jesse Fuller Crew Position: Deckhand Point of Hire: Seattle, WA Crewshare Percentage ("CP") shall be 1.0% Contract Term: 60 days Trip Crewshare Percentage ("TCP") shall be CP x 85

1. CONTRACT PARTIES. This contract ("Agreement") is entered into by and between North Pacific Fishing, Inc. ("Owner"), as owner of the American No. 1 ("Vessel"), and Mr. Jesse Fuller ("Crewmember") for employment aboard that Vessel.

2. CONTRACT TERM. The Term of this contract shall begin the date Crewmember first reports for duty aboard the Vessel with the intention of working on a Trip, as defined in the following paragraph. The term of this Agreement is for sixty (60) consecutive Days ("Term"). If the Vessel is at sea when the Term ends, the Term shall automatically extend until the Vessel next returns to port for an off-load and the Crewmember is released by the Captain after the off-load is completed. Ifthe Term ends within thirty (30) days of a cessation of fishing operations, then the Term shall automatically extend until the Vessel returns to Seattle.

A Trip begins when the Vessel leaves a port to fish and concludes when the Vessel completes an offload of at least 16,500 cases offish product.

Under the terms of the Crewmember Contract, if the crewmember "successfully completes working a Trip," North Pacific shall pay "Trip Wages within thirty (30) days of the expiration of each Trip" calculated as a Trip Crewshare Percentage of 1 percent multiplied by the "Trip Net Vessel Proceeds." The contract also states that "within thirty (30) days of completion of the Term," North Pacific shall pay a term bonus of 15 percent of the Crewshare Percentage multiplied by the "Term Net Vessel Proceeds." The Crewmember Contract states:

5. CREWMEMBER WAGES, BONUSES. AND PAYMENTS.

a) Trip Wages: If and only if Crewmember successfully completes working a Trip, the Owner shall pay Crewmember the following amounts as Trip Wages within thirty (30) days of the expiration of each Trip. TCP x Trip Net Vessel Proceeds.

b) Term Bonus: If and only if Crewmember completes working a full Term, Owner shall pay as a Term Bonus within thirty (30) days of completion of the Term. .15 x CP x Term Net Vessel Proceeds.

"Net Vessel Proceeds" is equal to the "Gross Vessel Proceeds" less "Vessel Expenses."

The contract also provides that North Pacific may reimburse the cost of return transportation to the "point of hire."1

The Crewmember Contract includes a provision that requires "[a]ll disputes of any nature whatsoever" between North Pacific and the crewmember shall be subject to mandatory binding arbitration and governed by statutory and federal maritime law.^[2] The contract states:

13. JURISDICTION, VENUE, ARBITRATION, CHOICE OF LAW, CLAIMS BAR DATE, SUBSTITUTE SECURITY, MERGER. This Contract is made in Seattle, Washington. Owner and Crewmember submit to jurisdiction in Washington State. All disputes of any nature whatsoever Contract. FFI asserted Fuller quit on October 20, 2013 and he "has no basis to claim a higher wage rate" under federal law. FFI reserved the right to file a motion to request an award of attorney fees under CR 11 and RCW 4.84.185 after the arbitration.

In support of the motion to compel arbitration, FFI submitted the declaration of Captain Vanderpol and General Manager Uri. According to Captain Vanderpol, Fuller agreed to continue working after August 31, 2013 and on October 20, 2013, Fuller told Captain Vanderpol that "he quit and asked me, for the first time, to be released from crew duty." Uri states Fuller quit but on January 29, 2014, FFI paid his crew wages and made a direct deposit for "a final contract completion bonus" and airfare. The court granted the motion to compel arbitration and stayed the proceedings. Arbitration

The arbitration hearing was scheduled for October 6, 2014. The parties agreed to "submit the dispute for consideration to the Arbitrator on the record that had been submitted."

Fuller argued the 60-day written contract ended after the offload on August 31, 2013 and the oral contract did not meet the requirements of federal law, 46 U.S.C. section 10601 (a). Because the contract was void under 46 U.S.C. section 11107, as alleged in his complaint, Fuller asserted he was entitled to recover the highest rate of wages paid at the port of engagement and attorney fees under federal maritime law.

FFI claimed that even if the written contract expired after the offload on August 31, the oral agreement between Fuller and Captain Vanderpol did not violate 46 U.S.C. section 10601.

The arbitrator issued a decision and order on October 29, 2014. The arbitrator agreed that an oral contract is void under federal maritime law, 46 U.S.C. section 11107. But the arbitrator found that because Fuller was not under duress, coercion, or deception and the oral agreement did not alter the terms of the written agreement, there was no violation of federal law. The arbitrator found Fuller asked to continue working and agreed to extend the terms of the written contract.^[4]

The arbitrator concluded FFI did not act in bad faith by delaying payment of the term bonus. The arbitrator found FFI attorneys Walsh and Moran relied on erroneous information from Captain Vanderpol and General Manger Uri that Fuller quit in concluding he was not entitled to the term bonus.

The arbitrator notes FFI reserved seeking attorney fees in superior court under CR 11 and RCW 4.84.185. The arbitrator states, "After reading this opinion and considering the 'American Rule,' counsel may wish to reconsider the matter requesting attorneys' fees." The arbitrator also addressed FFI's failure to contact Merriam.

The Arbitrator believes that it would have been better practice for Fishermen's Finest to have sent Mr. Merriam a copy of the email and a copy of the payment letter on the dates that they were sent to Mr. Fuller. Award of Attorney Fees under CR 11 and RCW 4.84.185

On November 13, 2014, FFI filed a motion in superior court for an award of attorney fees under CR 11 and RCW 4.84.185. FFI argued the original complaint and the amended complaint "constitute^] a baseless filing" because there was no dispute the "amounts requested were fully paid prior to the filing of that complaint." In support, FFI submitted excerpts from the deposition of Fuller, the WSBA letter dismissing the grievance against Moran, and copies of the e-mails between Walsh and Merriam and between Moran and Merriam. Fuller filed a response opposing the motion.

On February 2, 2015, the court granted the request for an award of attorney fees under CR 11 and RCW 4.84.185 but reserved ruling on the amount. The February 2, 2015 order states:

Defendants Fishermen's Finest. . . Petition for Attorneys' Fees ... is GRANTED, and to be determined as to amount(s) and proper submissions, including proposed [findings of fact]/[conclusions of law] and lodestar compliance.

FFI submitted an "Application for Fees and Costs," proposed findings of fact and conclusions of law, and a proposed judgment. FFI asserted the "total amount of fees and costs related to this case has been $67,805.00 and $2,513.43 respectively, for a collective total of $70,318.43."

On May 14, 2015, the court entered an order granting the application for fees under CR 11 and RCW 4.84.185. The court found "certain billed efforts" were "duplicative, unnecessary, or overstated" and reduced the request of $70,318.43 to an award of $29,635.43.

Fuller filed a motion in opposition to the proposed findings of fact and conclusions of law and judgment. Fuller objected to a number of the findings including the proposed finding that "[o]n January 29, 2014, Defendants paid Mr. Fullerthe full amount that was in dispute." Fuller argued that under federal law, the amount in dispute was not limited to the term bonus paid by FFI.

Fuller claimed an increased crewshare per 46 U.S.C. §11107 for defendants' failure to have an unexpired written contract in effect as required by 46 U.S.C. §10601.... Plaintiff further claimed damages for tortious interference with the attorney-client relationship, based on the conduct by Dennis Moran. . . . Finally, plaintiff claimed prejudgment interest on the delayed payment of wages and punitive damages under the general maritime law for the conduct of Mr. Moran.

On June 4, 2015, the court entered findings of fact and conclusions of law and the final judgment. The court adopted the proposed findings of fact and conclusions of law with minimal changes. The conclusions of law state the "filings of the Original Complaint and Amended complaint were both frivolous and baseless filings in violation of CR 11 and RCW 4.84.185" and Fuller and his attorney "shall be held jointly and severally liable for attorneys' fees and costs." But the court "halve[d] the determined amount of reasonable attorney fees." The court entered a final judgment against Fuller and Merriam for $16,074.43. The court denied the motion for reconsideration. Appeal

Fuller contends the court erred in concluding the complaint and the amended complaint were "frivolous and baseless" pleadings that violated CR 11 and RCW 4.84.185 and entering the judgment against him and his attorney. We agree.

The trial court has the discretion to award attorney fees and costs under CR 11 and RCW 4.84.185. Skimming v. Boxer, 119 Wn. App. 748, 754, 82 P.3d 707 (2004). We review" 'whether the court's conclusion was the product of an exercise of discretion that was manifestly unreasonable or based on untenable grounds or reasons.'" Skimming, 119 Wn. App. at 754 (quoting Tiger Oil Corp. v. Dep't of Licensing, 88 Wn. App. 925, 938, 946 P.2d 1235 (1997)). Applying the wrong legal standard is an abuse of discretion. Mayer v. Sto Indus., Inc.. 156 Wn.2d 677, 684, 132 P.3d 115 (2006).

"The purpose behind CR 11 is to deter baseless filings and to curb abuses of the judicial system." Bryant v. Joseph Tree, Inc., 119 Wn.2d 210,219, 829 P.2d 1099 (1992).5 "CR 11 is not meant to act as a fee shifting mechanism, but rather as a deterrent to frivolous pleadings." MacDonald v. Korum Ford, 80 Wn. App. 877, 891, 912 P.2d 1052 (1996). Civil Rule 11 addresses two types of problems: (1) filings that are not grounded in fact and warranted by law and (2) filings interposed for an improper purpose. Bryant, 119 Wn.2d at 217.6 Because CR 11 sanctions may have a chilling effect, the court should impose CR 11 sanctions "only when it is patently clear that a claim has absolutely no chance of success." Skimming, 119 Wn. App. at 755. RCW 4.84.185 authorizes an award of attorney fees based on written findings that a lawsuit is frivolous in its entirety. Biggs v. Vail, 119 Wn.2d 129, 136-37, 830 P.2d 350 (1992).7

Fuller contends the court abused its discretion in finding the original complaint and the amended complaint was baseless because the disputed wages had been paid in full. FFI contends the record supports the finding that the original and amended complaint was not well-grounded in fact and filed without reasonable inquiry. FFI claims that "[e]ven though Mr. Fuller was not entitled to his completion bonus, Fishermen's Finest proceeded to gratuitously pay Mr. Fuller the disputed amounts."

A court may not impose CR 11 sanctions for filing baseless claims unless it "finds that the attorney who signed and filed the complaint failed to conduct a reasonable inquiry into the factual and legal bases of the claim." Bryant. 119 Wn.2d at 220.8 We use an objective standard to determine whether "a reasonable attorney in like circumstances could believe his or her actions to be factually and legally justified." Bryant. 119 Wn.2d at 220. The court may also consider the need for discovery to develop factual circumstances underlying a claim. Bryant, 119 Wn.2d at 220-21.9 Courts should be "reluctant to impose sanctions . . . before there has been an opportunity for discovery" because the notice pleading rule "contemplates that discovery will provide parties with the opportunity to learn more detailed information about the nature of a complaint." Bryant. 119 Wn.2d at 222. The fact that a complaint "does not prevail on its merits is by no means dispositive of the question of CR 11 sanctions." Bryant. 119 Wn.2d at 220. "To avoid being swayed by the benefit of hindsight, the trial court should impose sanctions only when it is 'patently clear that a claim has absolutely no chance of success.'" Korum Ford, 80 Wn. App. at 884 (quoting Oliveri v. Thompson, 803 F.2d 1265, 1275 (2nd Cir.1986)).

When Fuller filed the original complaint and the amended complaint, it was not " 'patently clear'" that his claims had " 'absolutely no chance of success.'" Korum Ford.

80 Wn. App. at 884 (quoting Oliveri, 803 F.2d at 1275). The record establishes a factual and legal basis to file a lawsuit against FFI for violation of 46 U.S.C. section 10601 and an award of wages under 46 U.S.C. section 11107.

The Crewmember Contract expired when the FA/ American No. 1 offloaded its fish product on August 31, 2013, but Fuller continued to work as a deckhand until October 20, 2013. The original complaint and the amended complaint allege the June 24, 2013 60-day Crewmember Contract expired in August and Fuller "continued working for defendants without a written contract required by 46 U.S.C. §10601." In accord with

46 U.S.C. section 11107, Fuller requested "the highest rate of wages paid to a similarly- situated deckhand hired out of the port of engagement."

Under 46 U.S.C. section 10601(a), "the owner, charterer, or managing operator ... of a fishing vessel, fish processing vessel, or fish tender vessel shall make a fishing agreement in writing with each seaman employed on board."10 The written agreement must "state the period of effectiveness" and "include the terms of any wage, share, or other compensation arrangement peculiar to the fishery in which the vessel will be engaged during the period of the agreement." 46 U.S.C. § 10601(b)(1), (2). If a vessel owner fails to comply with this requirement, the seaman "is entitled to recover the highest rate of wages at the port from which the seaman was engaged or the amount agreed to be given the seaman at the time of engagement, whichever is higher." 46 U.S.C. §11107.

But where an agreement includes both written and oral provisions, the agreement is void "only if the oral terms were imposed under duress, or involved the kind of coercion or deception that section 10601(a) is designed to prevent." Flores v. Am. Seafoods Co., 335 F.3d 904, 914 (9th Cir. 2003). In Flores. the Ninth Circuit held a contract is void if the oral agreement "was 'materially different' from the written agreement." Flores, 335 F.3d at 914-15 ("the written contract provided that each seaman was to receive a share of the catch, but under an oral agreement, the seamen were to receive, for each fish, a fixed sum set in advance and not based on the market price") (quoting Crowell v. United States, 6 F. Cas. 912, 913 (C.C.D. Mass. 1856) (No. 3447)).

In addition, there was a legal basis to assert a claim for an award of equitable attorney fees under federal maritime law. In Golden Pisces, Inc. v. Fred Wahl Marine Construction, Inc.. 495 F.3d 1078, 1081 (9th Cir. 2007), the Ninth Circuit recognized an equitable exception to an award of attorney fees:

[F]ederal courts have created a limited set of equitable exceptions to the American Rule and will award attorneys' fees even in the absence of an applicable statutory or contractual provision when, for example, the losing party acted in bad faith or willfully disobeyed a court order. See also Madeia v. Olympic Packers. LLC. 310 F.3d 628, 635 (9th Cir. 2002) ("The equitable grant of attorney's fees is appropriate in admiralty only when the shipowner acted arbitrarily, recalcitrantly, or unreasonably."); Vaughan v. Atkinson, 369 U.S. 527, 531-32, 82 S. Ct. 997, 8 L. Ed. 2d 88 (1962); Kopczvnski v. The Jacqueline, 742 F.2d 555, 559 (9th Cir. 1984).

There was also a factual and legal basis to assert a claim against FFI under state law for delaying payment of the completion bonus. Under RCW 49.52.050(2), an employer cannot "[w]ilfully and with intent. . . deprive the employee of any part of his or her wages" and "shall [not] pay any employee a lower wage than the wage such employer is obligated to pay such employee by any statute, ordinance, or contract." Our Supreme Court defines "willful withholding" as " 'the result of knowing and intentional action and not the result of a bona fide dispute as to the obligation of payment'" Champagne v. Thurston County, 163 Wn.2d 69, 81, 178 P.3d 936 (2008) (quoting Wingert v. Yellow Freight Svs.. Inc., 146 Wn.2d 841, 849, 50 P.3d 256 (2002)). "A bona fide dispute is a ' "fairly debatable" dispute over whether an employment relationship exists, or whether all or a portion of the wages must be paid.'" Champagne, 163 Wn.2d at 81 (quoting Schilling v. Radio Holdings, Inc.. 136 Wn.2d 152, 161, 961 P.2d 371 (1998)). Delayed payment of wages owed to an employee may provide a cause of action under RCW 49.52.050(2) if the delay was willful. See Champagne. 163 Wn.2d at 89. Although FFI took the position that there was a bona fide dispute because Fuller had quit, the Last Day of Work Form signed by Captain Vanderpol does not indicate he "Voluntarily] Quit" or was "Fired."

FFI's reliance on an out-of-context portion of the answer Fuller gave in his deposition to assert the record supports an award of attorney fees under CR 11 and RCW 4.84.185 is unpersuasive. In response to the question, "Once you received that [$5,816.43], did you feel like you had been fully compensated?," Fuller responded, "I did." But FFI ignores the remainder of Fuller's response that he had "a different opinion today."

Q. Once you received that [$5,816.43], did you feel like you had been fully compensated?

A. I did.

Q. Do you have a different opinion today?

A. I do.

Q. What is that?

A. The fact that I had to retain a lawyer to even get paid for something that I had completed and the fact that it took me to get a lawyer for them to even pay me doesn't feel right to me, doesn't seem right.

Q[.] ... So, really, what this is about is paying Mr. Merriam?

[A.] Yes and no. Yes, to pay him because of the fact that I assumed that they had went through my lawyer with the pay and then I received mine.

And then also the fact that for almost four years, I dedicated that much time of my life to this company, never once said "no" to these people, never once missed a flight, never once failed a urine test, never- went above and beyond to help them on many occasions. And then to get treated like a piece of garbage and not even paid for something, because I had spent four months up there and because I didn't spend the next three weeks up there, they felt they didn't have to pay me the rest of what they owed me.

We reverse the award of attorney fees and costs under CR 11 and RCW 4.84.185 and remand to vacate the judgment.^[11]

S*cv. >kOQ. lC) WE CONCUR: f/^t^cv fiU