Opinion
No. 45851-5-I.
Filed: November 6, 2000. PUBLISHED OPINION
Appeal from Superior Court of King County, No. 97-2-21558-7, Hon. Peter Jarvis, November 3, 1998, Judgment or order under review.
Counsel for Appellant(s), Richard D. Reed, Attorney At Law, 1218 3rd Ave Ste 1500, Seattle, WA 98101.
Counsel for Respondent(s), Charles E. Peery, Peery Hiscock Pierson Ryder, 505 Madison St., Ste 300, Seattle, WA 98104.
Michael E. Ricketts, Peery Hiscock Pierson Kingman Peabody, 505 Madison St., #300, Seattle, WA 98104.
Thomas V. Harris, Merrick Hofstedt Lindsey, 710 9th Ave, Seattle, WA 98104-2017.
Mary C. Kinerk, 1000 2nd Ave Ste 3500, Seattle, WA 98104.
In August 1997, Stephen Henley petitioned for dissolution of his law firm, Lee, Smart, Cook, Martin, and Patterson, P.S., Inc. (hereinafter Lee Smart), and asserted a host of claims, including discrimination, retaliation, shareholder oppression, and negligence, against the firm and individually against two of its shareholders, David Martin and Michael Patterson. In his appeal from the trial court's dismissal of his claims, Henley presents three broad issues: (1) whether Washington's Law Against Discrimination confers broader protection than Title VII to shareholders in professional service corporations; (2) whether the defendants' actions constituted shareholder oppression under RCW 23B.14.300(2)(b); and (3) whether shareholders in professional service corporations have fiduciary duties to each other. After narrowing and reviewing the factual bases for each of Henley's claims, we conclude that the trial court erred in only two respects: by dismissing Henley's retaliation claim and rendering judgment on the pleadings on his shareholder oppression claim.
The Supreme Court denied Henley's request for discretionary review on the issue whether 'an attorney can maintain an unlawful discrimination action under RCW 49.60 against a firm in which he was a shareholder or partner.'
Henley also contends that his negligence claims should not have been dismissed on summary judgment, but his argument on this issue (a string cite supporting the contention that 'a duty was owed to him') is insufficient to warrant review. In addition, although respondents brief negligent supervision and retention, and intentional and/or negligent infliction of emotional distress, Henley's briefs give no indication that he intended to raise these issues on appeal.
FACTS
Henley, a trial lawyer specializing in medical malpractice, practiced with Lee Smart from October 1981 until he resigned in March 1998. He became a shareholder in 1984 and served on the firm's board of directors from 1986 to 1992. Like the other non-name partners at Lee Smart, Henley held three shares of the firm at all times relevant to this appeal, while Martin, Patterson, and Cook held 25 shares each. In 1995, after Henley observed what he believed to be improper billing practices, Henley's relationship with Lee Smart began to sour. When Martin learned at a November 1995 shareholders' meeting that Henley had contacted various legal authorities, including the Federal Bureau of Investigation, to inquire about this alleged billing impropriety, Martin became enraged. Thereafter, Martin was 'cold and distant' in his relations with Henley.
In March 1996, a female attorney's confrontation of Martin about harassing, sexually inappropriate behavior caused Martin to launch into an extended tirade. As a result of this confrontation and complaints about Martin by two other women at the firm, Ronald Gardner, Lee Smart president at that time, hired Ellen Kremer to investigate these harassment allegations. During an interview with Kremer, Henley gave a statement that 'strongly supported the women complainants and was candid in his description of the abusive behavior by Martin, and the need for strong corrective measures.' Henley also informed Kremer of the billing improprieties he suspected and advocated disseminating the results of her investigation. Henley claims that as a result of his cooperation with Kremer and his investigation of the billing issue, he was effectively 'frozen out' of the firm. During this time, Henley began experiencing significant health problems, which his cardiologist diagnosed as severe stress attacks. On his cardiologist's recommendation, Henley took a two-month leave of absence from the firm. During his leave, Henley learned that Patterson had replaced Gardner as Lee Smart president and that the results of Kremer's investigation would not be circulated. This information caused further deterioration in Henley's health, and he eventually sought treatment for depression.
When he returned to the firm, most of his cases had been permanently reassigned and, according to Henley, Martin told him that he would not assign him new cases, but that he would continue to assign cases to other attorneys in the firm. As a result, Henley's billable hours and compensation dropped substantially. Martin and Patterson explained that the declining workload for medical malpractice defense lawyers at Lee Smart resulted from the consolidation of several of their primary insurance company clients, and that Henley was treated no differently from other attorneys in the medical malpractice division.
Henley continued to receive a base salary and bonuses.
Henley filed suit in August 1997 against Lee Smart and against Martin and Patterson individually seeking judicial dissolution of Lee Smart and equitable relief and damages for breach of fiduciary duty, shareholder oppression, violation of Washington's Law Against Discrimination (WLAD), negligent supervision, and negligent and/or intentional infliction of emotional distress.
RCW 49.60.
The gravaman of this complaint, according to Henley, is that Martin and Patterson 'rule the law firm with oppressive conduct, and retaliate against and exclude others from the law firm for personal reasons.' In December 1997, the trial court dismissed the dissolution petition on the pleadings. In October 1998, the court dismissed all of Henley's WLAD claims. A few months later, the court dismissed Henley's remaining claims for breach of fiduciary duty and negligence, reasoning, in its oral opinion:
Mr. Henley's complaints are that he could not get along with his fellow shareholders, his partners, the lawyers that he officed with. And no matter how that lack of ability to get along manifested itself, short of physical beatings, I suppose, they don't give rise to any kind of a cause of action that can be characterized as a fiduciary one. . . . Many people who talk about and write about law practice do it in the context of a marriage. We don't permit husbands and wives to sue each other for what, many times, is much more egregious conduct than what is alleged here. We just permit them to divide apart and go their separate ways and make financial provisions for what they once owned together. . . .
Henley appeals these rulings.
DISCUSSION
Adopted in 1969, Washington's Professional Service Corporation Act (PSCA) provides for the incorporation of an individual or group of individuals to render professional services. Unlike partnership associations, shareholders in professional service corporations enjoy limited personal liability, but this limitation is not as great as that afforded under Washington's Business Corporation Act (BCA) because a person who renders professional service remains personally accountable to the recipient of those services 'for any negligent or wrongful acts or misconduct committed by him or by any person under his direct supervision and control{.}'
Title 23B RCW.
RCW 18.100.700.
However, because the PSCA provides only for personal liability arising out of the rendition of professional services, the act contains a provision directing that the BCA 'shall be applicable except to the extent that any of the provisions of this chapter are interpreted to be in conflict with the provisions thereof. . . .' Thus, where, as here, a claim against a professional service corporation does not allege wrongful or negligent commission of professional services, BCA provisions apply. Relying primarily on the BCA, Henley claims, among other things, that '{c}ontrolling shareholders of law firms cannot oppress and exclude their law partners who are minority shareholders. Lawyers practicing together have fiduciary duties of utmost good faith and fair dealing, which are not obviated by incorporation.' We agree with these broad statements, but stress at the outset our reluctance to delve too deeply into the inner workings of professional business organizations, especially when the corporation is meeting its primary responsibilities to its clients and a clear threat to the financial viability of the corporation itself is not readily apparent. With that caveat, we turn to the facts of this case.
Disability Discrimination
Henley first contends that as a lawyer in a professional services corporation, he is 'entitled to the protections' of the WLAD. The trial court dismissed Henley's WLAD claims without explanation, but judging from its order certifying this issue for immediate appeal, it concluded based on federal authority that as a shareholder of Lee Smart, Henley lacked standing under the WLAD. Although both the WLAD and Title VII appear by their terms to protect any person who suffers discrimination in an employment context, federal courts consistently hold that despite its 'any individual' language, 'Title VII is directed at, and only protects, employees and potential employees.'
RCW 49.60.180(3), entitled 'Unfair practices of employers,' prohibits employers from discriminating 'against any person in compensation or in other terms or conditions of employment because of age, sex, marital status, race, creed, color, national origin, or the presence of any sensory, mental, or physical disability. . . .' This provision closely tracks Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-2 (1994), entitled 'Unlawful Employment Practices,' which provides that it 'shall be an unlawful employment practice for an employer . . . to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's race, color, religion, sex, or national origin.' 42 U.S.C. § 2000e-2 (a)(1).
Serapion v. Martinez, 119 F.3d 982, 985 (1st Cir. 1997), cert. denied, 522 U.S. 1047, 118 S.Ct. 690, 139 L.Ed.2d 636 (1998).
To determine whether shareholders or partners are employees for the purposes of Title VII, federal courts therefore undertake a detailed factual analysis 'aimed at determining whether an individual described as a partner actually bears a close enough resemblance to an employee to be afforded the protections of Title VII.' Typically, this analysis results in a conclusion that, based on their degree of ownership, remuneration, and management responsibilities in the firm, shareholders are owners of their firms, and as such, may not assert Title VII discrimination claims as employees. Apparently, the trial court found this federal precedent persuasive and reasoned that as an employer of Lee Smart, Henley could not sue it for discrimination. Henley argues that Title VII authority is not persuasive here because the Legislature intended the WLAD to confer broader protection than Title VII. But before venturing into a thicket of comparative statutory construction and legislative intent behind Title VII and WLAD, we first address the threshold issue of whether Henley has presented a prima facie claim for disability discrimination.
Serapion, 119 F.3d at 987-88. See also Devine v. Stone, Leyton Gershman, P.C., 100 F.3d 78, 81 (8th Cir. 1996) (examined 'the extent to which {the plaintiff} manage{d} and own{ed} the business' and concluded that he could not be considered an employee).
Although Henley makes clear that he alleges only disability discrimination, respondents inexplicably devote considerable attention to phantom claims of discrimination based on age and marital status.
With his repeated assertions that the factual merits of his claim are not at issue on appeal, Henley disregards the fact that this court can affirm the trial court on any basis. If Henley has failed to present a prima facie disability discrimination claim, whether he has standing to assert such a claim under RCW 49.60.180 is irrelevant. Henley's complaint alleges 'disability discrimination and failure to reasonably accommodate disabilities. . . .' under RCW 49.60.180, which prohibits discrimination based on 'age, sex, marital status, race, creed, color, national origin, or the presence of any sensory, mental, or physical disability{.}' A prima facie case for disability discrimination requires (1) the existence of a disability and (2) discrimination by the employer because of that disability. As for the disability element, Henley claims that as a result of the stressful situation at work, he began experiencing 'significant health problems, including chest pains, night sweats, headaches, insomnia, inability to concentrate, appetite problems and mood disturbance.' During the medical leave of absence recommended by his cardiologist, Henley learned that Patterson had replaced Gardner as president of the firm and that investigation of the allegations against Martin had been abandoned. Deeply discouraged by this news, Henley experienced further 'deterioration of his health and mood' that necessitated treatment for depression and anxiety.
Henley claims in his reply brief that this court 'need not determine the facts in order to decide this case, but should take this case to establish that a lawyer who has been very badly treated by his law partners must not be denied an opportunity to seek a remedy.'
Vikingstad v. Baggott, 46 Wn.2d 494, 498, 282 P.2d 824 (1955).
We conclude based on Henley's own allegations of depression and anxiety related to his employment situation that he has not presented sufficient evidence to support the disability element of his prima facie case. Although clinical depression is typically characterized as a disability, we agree with Division Three's decision in Snyder v. Medical Service Corporation and the federal precedent on which it relies and hold that severe depression and anxiety caused by an employer or employment situation does not constitute a disability under the WLAD. As for the discrimination element, Henley claims that when he returned to the firm after his leave of absence, 'most of his case load had been permanently taken from him' and that Martin had instructed shareholders in the firm not to assign him new cases. This evidence does not itself support an inference that either Martin or Patterson decided, after learning of Henley's depression, to discriminate against him on that basis. According to Henley's own allegations, their 'freeze-out' tactics, if they occurred, seem to stem more from retaliatory motivations than from any disability Henley may have suffered. Because Henley has failed to present a prima facie case for disability discrimination, we need not address the more complex question whether the WLAD allows shareholders to assert discrimination claims against their own firms.
See WAC 162-040.
Snyder v. Medical Service Corp., 98 Wn. App. 315, 988 P.2d 1023 (1999).
Snyder, 98 Wn. App. at 326 n. 1 (citing Gaul v. Lucent Technologies, Inc., 134 F.3d 576, 580 n. 3 (3rd Cir. 1998) (noting 'we strongly suspect that a plaintiff who is unable to work with individuals who cause him 'prolonged and inordinate stress' fails to meet the definition of disabled under the Americans with Disabilities Act (ADA)'); Siemon v. ATT Corp., 117 F.3d 1173, 1176 (10th Cir. 1997) (holding that employee who suffered from severe depression and anxiety allegedly caused by a particular supervisor was not disabled under the ADA because employee asserted he could work outside of the particular supervisor's chain of command); Weiler v. Household Finance Corp., 101 F.3d 519, 524-25 (7th Cir. 1996) (holding that because employee suffering from stress disorders allegedly caused by her supervisor claimed she could do the same job for a different supervisor she is not disabled under the ADA)).
The discrimination element is satisfied if the employee demonstrates that the employer took action against the employee because of his or her condition (disparate treatment) or failed to take steps reasonably necessary to accommodate the employee's disability (failure to accommodate). Doe v. Boeing Co., 121 Wn.2d 8, 17, 846 P.2d 531 (1993).
Retaliation
We next address Henley's retaliation claim under RCW 49.60.210. RCW 49.60.210 does not allow 'any employer, employment agency, labor union, or other person to discharge, expel, or otherwise discriminate against any person because he or she has opposed any practices forbidden' by this chapter. On the standing issue, Henley claims that unlike Title VII, which is limited to employment discrimination, employment is not a prerequisite for standing to sue under RCW 49.60.210 because it is sufficient to be a person 'injured by any act in violation of this chapter{.}' This argument finds support in a recent Division Two decision. In Galbraith v. TAPCO Credit Union, the court concluded that due to the 'broad language of RCW 49.60.210, the Legislature's mandate for liberal construction, and the strong public policy against discriminatory practices,' the 'plain language of RCW 49.60.210 supports the conclusion that the WLAD is not limited to claims by employee against employer.' We agree, and hold that although Henley was a shareholder, he has standing to assert a retaliation claim against Lee Smart regardless of his employment status.
Citing RCW 49.60.030(2).
Galbraith v. TAPCO Credit Union, 88 Wn. App. 939, 946 P.2d 1242 (1997), review denied, 135 Wn.2d 1006 (1998).
Galbraith, 88 Wn. App. at 951.
The next question is whether Henley has standing to assert a retaliation claim individually against Martin and Patterson. Patterson contends that Henley may not sue him and Martin individually for retaliation because this court held in Malo v. Alaska Trawl Fisheries, Inc. that employees may not assert RCW 49.60.210 claims against co-workers. The Malo court reasoned that although RCW 49.60.210 prohibits employers and 'other person{s}' from retaliating against people who have opposed practices forbidden by RCW 49.60, this 'other person' language 'is directed at entities functionally similar to employers who discriminate by engaging in conduct similar to discharging or expelling a person who has opposed practices forbidden by RCW 49.60.' Because the defendant in Malo was the plaintiff's co-worker, and as such did not 'employ, manage or supervise Malo,' and 'was not in a position to discharge Malo or to expel him from membership in any organization,' the court held that Malo was not acting as an employer. We conclude that Martin and Patterson, like Malo, were not in a position to manage and supervise Henley.
Malo v. Alaska Trawl Fisheries, Inc., 92 Wn. App. 927, 965 P.2d 1124 (1998), review denied, 137 Wn.2d 1029 (1999).
Malo, 92 Wn. App. at 930-31.
Malo, 92 Wn. App. at 930.
Malo, 92 Wn. App. at 930.
The fact that they wielded considerable power at Lee Smart does not mean that they were 'functionally similar to employers' for the purposes of RCW 49.60.210. As such, Henley may not assert an individual retaliation claim against either of them. Having determined that Henley may bring a retaliation claim against Lee Smart, however, we must again consider whether the facts Henley presents support his claim. To establish a prima facie case for retaliation, a plaintiff must show that he or she suffered an adverse employment action after engaging in statutorily protected activity, and that a causal link exists between the activity and the action. The plaintiff need not show that retaliation was the only or 'but for' cause of the adverse employment action, but he or she must establish that it was at least a substantial factor. To defeat summary judgment, the employee must establish specific and material facts to support each element of his or her prima facie case. In approximately one page of briefing on the retaliation issue, Henley refers to his opposition to Martin's alleged sexual harassment and his participation in the Kremer investigation and claims that 'shortly after {his} participation and opposition his case assignments ceased, and other adverse actions impacting his employment occurred{.}'
We note that an individual retaliation claim against Patterson would have failed for lack of factual support as well.
RCW 49.60.210 provides, in part:
(1) It is an unfair practice for any employer, employment agency, labor union, or other person to discharge, expel, or otherwise discriminate against any person because he or she has opposed any practices forbidden by this chapter, or because he or she has filed a charge, testified, or assisted in any proceeding under this chapter.
Delahunty v. Cahoon, 66 Wn. App. 829, 839, 832 P.2d 1378 (1992).
Allison v. Housing Authority of City of Seattle, 118 Wn.2d 79, 85-96, 821 P.2d 34 (1991).
Allison, 118 Wn.2d at 85-96.
Sexual harassment of subordinates is a forbidden practice under RCW 49.60.210(1). Glasgow v. Georgia-Pacific Corp., 103 Wn.2d 401, 406-07, 693 P.2d 708 (1985).
Although there is some evidence in the record that these 'adverse actions' resulted not from retaliation, but rather from the fact that several significant providers of medical malpractice cases stopped referring cases to Lee Smart, Henley alleges that he would have been receptive to case assignments in any field, not just medical malpractice. Although the factual basis for this claim is thin, the record does support a possibility that 'adverse employment actions' occurred as a result of Henley's actions, and therefore, the trial court erred in dismissing this claim on summary judgment. We do not mean to imply, as Henley argues, that either Martin or Patterson had a 'duty' to refer cases to Henley; we hold only that if Henley's reasonably reliable stream of case assignments abruptly stopped after he participated in the sexual harassment investigations and questioned firm billing practices, he should have an opportunity to prove at trial that these 'adverse employment actions' were substantially motivated by retaliatory purposes.
If Henley proves retaliation at the trial level, he will be entitled to an award of fees and costs he expended on this claim under RCW 49.60.030(2).
Oppression
We next address Henley's oppression claim. Although Henley originally sought dissolution of Lee Smart and 'other equitable relief' under RCW 23B.14.300(2)(b), he has abandoned his dissolution claim on appeal to focus on the 'full panoply of equitable remedies, not merely dissolution of the corporation.' Washington law does not clearly provide for equitable relief other than dissolution when oppression is established. Other state courts, however, have held that dissolution statutes similar to Washington's authorize equitable remedies in addition to dissolution. For example, Oregon's dissolution statute authorizes dissolution if '{t}he directors or those in control of the corporation have acted, are acting or will act in a manner that is illegal, oppressive or fraudulent{.}' Oregon courts have interpreted this provision as allowing for equitable remedies, such as buyout of minority shares, as alternatives to dissolution. This approach is reasonable, and we adopt it here.
See RCW 23B.14.300(2)(b).
See Douglas K. Moll, Shareholder Oppression v. Employment at Will in the Close Corporation: The Investment Model Solution, 1999 U. Ill. L. Rev. 517, 526-27 (1999).
Baker v. Commercial Body Builders, Inc., 264 Or. 614, 507 P.2d 387 (1973).
The trial court granted Lee Smart's CR 12(c) motion for judgment on the pleadings on Henley's RCW 23B.14.300(2)(b) claim for shareholder oppression in December 1997. Nearly a year later, before the summary judgment hearing on his breach of fiduciary duty and negligence claims, Henley moved to reinstate this cause of action, arguing that the 'operative facts upon which {he} seeks relief for breach of fiduciary duty and negligence also constitute oppression under the law.' The trial court indicated it would treat this motion for reinstatement as a motion for reconsideration and entered an order denying the motion in December 1998. In a separate order, the court entered summary judgment on the negligence and breach of fiduciary duty claims. Lee Smart contends that Henley's motion for reinstatement 'connected' the oppression cause of action to the fiduciary duty and negligence claims and transformed the trial court's dismissal of this claim to a summary judgment dismissal. We disagree. Although a trial court's review of matters outside the pleadings necessitates appellate review under the summary judgment standard, there is no indication here that in denying Henley's motion for reconsideration, the trial court considered the underlying facts of Henley's oppression claim. Thus, we must determine whether the pleadings themselves allege a cognizable claim for oppression.
Beaman v. Yakima Valley Disposal, Inc., 116 Wn.2d 697, 701 n. 3, 807 P.2d 849 (1991).
RCW 23B.14.300 provides that superior courts may dissolve a corporation if a shareholder in the corporation establishes that the 'directors or those in control of the corporation have acted, are acting, or will act in a manner that is illegal, oppressive, or fraudulent. . . .' Washington courts have not adopted a specific test for finding 'oppressive' shareholder action, but in Robblee v. Robblee this court recognized two primary tests for shareholder oppression used in other jurisdictions. The first, referred to as the 'reasonable expectations' test, defines oppression as "a violation by the majority of the 'reasonable expectations' of the {minority}." The second, or 'fair dealing' test, describes
Robblee v. Robblee, 68 Wn. App. 69, 76, 841 P.2d 1289 (1992).
Robblee, 68 Wn. App. at 76 (quoting Gimpel v. Bolstein, 125 Misc.2d 45, 50, 477 N.Y.S.2d 1014 (1984)).
oppression as burdensome, harsh and wrongful conduct; a lack of probity and fair dealing in the affairs of a company to the prejudice of some of its members; or a visible departure from the standards of fair dealing, and a violation of fair play on which every shareholder who entrusts his money to a company is entitled to rely.
Robblee, 68 Wn. App. at 76 (quoting Gimpel, 125 Misc.2d at 50-51 (quoting Baker, 264 Or. at 628-69)).
Baker v. Commercial Body Builders, Inc., an Oregon case cited by Robblee, offers the following specific examples of oppressive conduct:
Baker v. Commerial Body Builders, Inc., 264 Or. 614, 507 P.2d 387 (1973).
{A}n abuse of corporate position for private gain at the expense of the stockholders is 'oppressive' conduct. Or the plundering of a 'close' corporation by the siphoning off of profits by excessive salaries or bonus payments and the operation of the business for the sole benefit of the majority of the stockholders, to the detriment of the minority stockholders, would constitute such 'oppressive' conduct as to authorize a dissolution of the corporation. . . .
Baker, 264 Or. at 629 (citing George D. Hornstein, A Remedy for Corporate Abuse, 40 Col. L.Rev. 220, 235 (1940); F. Hodge O'Neal, Oppognancy and Oppression in Close Corporations, 1 B.C. Ind. and Com. L. Rev. 1, 3 (1959)).
The Baker court also recognized that 'even a continuing course of 'oppressive' conduct may not be sufficient {to authorize the dissolution of a corporation} unless it appears that, as a result, there has been a disproportionate loss to the minority or that those in control of the corporation are so incorrigible that they can no longer be trusted to manage it fairly in the interests of its stockholders.
Baker, 264 Or. at 630 (citing James O'Malley Tingle, The Shareholder's Remedy of Corporate Dissolution, at 42-43 (1959)).
We stress, however, that a claim of shareholder oppression may not be maintained simply by alleging that a shareholder's personal management style or penchant for playing favorites has become 'oppressive' to other shareholders. Henley's assertion that '{c}ontrolling shareholders of law firms cannot oppress and exclude their law partners who are minority shareholders' impermissibly simplifies the legal cause of action for shareholder oppression.
To sustain a prima facie cause of action for oppression, a shareholder must present specific factual evidence that the actions of the majority shareholder have, or undoubtedly will, directly affect the financial, and not personal, interests of the firm's minority shareholders. A minority shareholder's perception that he was excluded, degraded, or ignored, and that these actions indirectly affected the compensation he received, will not satisfy the requirement that a majority shareholder's oppressive acts must result in financial harm to individual shareholder's interests.
Lee Smart argues that shareholders are not oppressed simply because they 'are not in a position to play leading roles in the conduct of the enterprise.' This is correct, but Henley's pleadings allege far more than an inability to control the firm's affairs. He claims that Lee Smart, Martin, and Patterson have, among other things, committed billing improprieties, engaged in sexual discrimination and harassment, retaliated against firm members for taking steps to oppose sexual harassment and other tortious conduct, created a hostile work environment by 'turning the topic of conversations to subjects such as sexual matters, female anatomy, urination and defecation,' engaged in a pattern or practice of over billing clients, intentionally or negligently inflicted severe physical and emotional harm on Henley resulting in temporary disability, displayed a pattern or practice of 'freeze-out' tactics, engaged in conduct that resulted in an extreme number of attorneys leaving the firm, and aided, abetted, encouraged, and incited violations of the WLAD. We must assume on appeal from a judgment on the pleadings that the facts underlying Henley's claims are true. Given that assumption, if the atmosphere at Lee Smart was sufficiently illegal, oppressive, and hostile to drive attorneys from the firm and exposed the firm to liability for illegal billing practices, shareholders' financial interests in the firm were undoubtedly affected. As such, the trial court erred in dismissing this claim.
Citing F. Hodge O'Neal Robert B. Thompson, O'Neal's Oppression of Minority Shareholders § 1.01 (2d ed. 1991).
In assessing CR 12(c) motions for judgment on the pleadings, factual allegations of the complaint are to be accepted as true on appeal. Berge v. Gorton, 88 Wn.2d 756, 759, 567 P.2d 187 (1977).
We express no opinion about the success of Henley's claim on remand. We hold only that, because review of Henley's oppression claim should have been confined to the pleadings, and because Henley's pleadings, on their face, allege direct harm to the continued financial viability of Lee Smart, the trial court erred in concluding the pleadings did not allege a cognizable claim. Breach of Fiduciary Duty.
We next address Henley's breach of fiduciary duty cause of action. Henley claims that he was 'attacked vociferously by Martin and treated as an outcast, an incompetent and disloyal member of the firm for raising his concerns about billing improprieties and sexual harassment,' and that as a result, the quantity and quality of the work assigned him, as well as his compensation, dropped substantially. The parties acknowledge that Henley's oppression and breach of fiduciary duty claims derive from similar factual and legal sources. But because the trial court dismissed the breach of fiduciary duty claim on summary judgment, we undertake a de novo review of the record to determine whether the trial court correctly dismissed this claim. Interlake Porsche + Audi, Inc. v. Bucholz sets forth the elements necessary to establish liability for breach of fiduciary duty: (1) that a shareholder breached his or her fiduciary duty to the corporation and (2) that the breach was a proximate cause of the losses sustained.
See Baker, 264 Or. 614 ('We agree, however, that the question of what is 'oppressive' conduct by those in control of a 'close' corporation as its majority stockholders is closely related to what we agree to be the fiduciary duty of a good faith and fair dealing owed by them to its minority shareholders.' Baker, 264 Or. at 629 (footnote omitted)).
Interlake Porsche + Audi, Inc. v. Bucholz, 45 Wn. App. 502, 509, 728 P.2d 597 (1986).
In that case, a breach of fiduciary duty was established due to a shareholder's 'unauthorized personal use of corporate funds.' The court also noted that '{d}irectors and officers stand in a fiduciary relation to the corporation they serve and are not permitted to retain any personal profit or advantage gleaned 'on the side." Washington courts have not outlined the scope of the duty owed by a shareholder to his or her fellow shareholders beyond this common sense prohibition against retaining personal profit owing to the corporation. But even applying standards developed by states who have imposed fiduciary duties of 'good faith and utmost loyalty' towards other shareholders in close corporations, Henley's claim fails because the specific factual basis for the claim appears to be that Martin failed to assign him cases after he returned from disability leave. Even assuming Martin harbored and displayed animosity towards Henley, created an 'oppressive' atmosphere within the firm, and chose, for whatever reason, not to assign as many cases to Henley as he had in the past, the specific facts supporting these allegations do not establish a breach of fiduciary duty. Henley, a shareholder of the firm in his own right, was not precluded from developing clients of his own and he continued to receive a base salary and bonuses during the period relevant to this appeal. The trial court correctly dismissed his claim for breach of fiduciary duty.
Interlake Porsche + Audi, Inc., 45 Wn. App. at 509.
Interlake Porsche + Audi, Inc., 45 Wn. App. at 508-09 (citing Leppaluoto v. Eggleston, 57 Wn.2d 393, 402, 357 P.2d 725 (1960)).
See Zimmerman v. Bogoff, 402 Mass. 650, 660-61, 524 N.E.2d 849 (1988).
In sum, we conclude that Henley has failed to present a prima facie claim for disability discrimination and breach of fiduciary duty, but hold that his retaliation claim against Lee Smart survives summary judgment and the trial court erred in dismissing his oppression claim on the pleadings.
We have not addressed Henley's claims for aiding and abetting or negligence due to the lack of support for these issues in Henley's briefs. Because RAP 10.3(a)(5) specifically requires parties to provide 'argument in support of the issues presented for review, together with citations to legal authority and references to relevant parts of the record,' we decline to review assignments of error and arguments that fail to meet this criteria. See Cowiche Canyon Conservancy v. Bosley, 118 Wn.2d 801, 809, 828 P.2d 549 (1992). As for the marital privilege issue, we cannot conceive of a tenable reason to introduce Nadine Henley's testimony on either the retaliation or shareholder oppression claims, and therefore, decline to address that issue as well.
Affirmed in part, reversed in part, and remanded for further proceedings.
We concur:
WALTER E. WEBSTER
WILLIAM W. BAKER