BY BENJAMIN GOULD
Many wrongs can embroil their victim in litigation with a third party. A negligent title search can lead to a quiet-title action. A defamatory criminal accusation can give rise to a prosecution. Poor legal advice can spawn litigation over whatever the subject of the advice was. And when wrongs lead to third-party litigation, most American jurisdictions allow the victim to sue the wrongdoer to recover attorney fees incurred in that litigation.11 Robert L. Rossi, Attorneys’ Fees § 8:3 (3d ed. 2014); see also Restatement (Second) of Torts § 914 (Oct. 2021 update).
In Washington, however, a unique rule—the ABC Rule—strictly limits the recovery of attorney fees from third-party litigation. Anyone seeking to recover attorney fees incurred in collateral litigation should be aware of the ABC Rule.
The ABC Rule gets its name because it involves three parties that the courts have dubbed A, B, and C. But it tends to be easier to refer to these three parties as the wrongdoer, the injured person, and the third party. The wrongdoer has breached some duty to the injured person. That breach, in turn, has led to collateral litigation between the injured person and the third party.
The ABC Rule comes into play when the injured person seeks to hold the wrongdoer liable for the attorney fees incurred in collateral litigation. Under the Rule, the injured person may recover those fees as damages only if three elements are satisfied:
1. The wrongdoer has acted “wrongfully toward” the injured person.
2. The wrongdoer’s “wrongful act exposes or involves” the injured person in litigation with the third party.
3. The third party “was not connected with” the “wrongful act … toward” the injured person.22 Porter v. Kirkendoll, 194 Wn.2d 194, 210, 449 P.3d 627, 636–37 (2019) (citation and quotation omitted).
How the ABC Rule Works in Practice
The three elements of the ABC Rule permit the recovery of attorney fees only in narrow circumstances.
Take, for example, the ABC Rule’s “causation” element—the requirement that the wrong have exposed the injured person to, or involved her in litigation with, a third party. As the courts have applied this element, the wrong can’t be said to have caused the third-party litigation if the injured person’s own conduct helped lead to the litigation. This is true even if that conduct was faultless. In fact, an injured person’s “own conduct” includes actions taken at the instigation of the wrongdoer.
For example, if a landowner orders loggers to fell trees that turn out to be on a neighbor’s property and the neighbor then sues the loggers, the loggers’ own conduct in felling the trees helped lead to the litigation. Under the ABC Rule, therefore, the loggers can’t recover their attorney fees from the landowner who told them to cut the trees down, even if the loggers themselves were faultless.33 See id. (whether loggers were faultless was “not the critical inquiry; if it were, every faultless defendant would be entitled to attorney fees from another, at-fault defendant”).
Or consider a different case. Suppose you hire a surveyor to find the boundary between your property and your neighbor’s. You rely on his work to build a shed, but it turns out the surveyor was negligent and your shed is on your neighbor’s land. Under the ABC Rule, if your neighbor sues you for encroachment, you can’t recover your attorney fees from the surveyor because your own conduct led to the litigation: You may have been relying on the surveyor, but you were the one who built the shed.44 See Benjamin Gould, “Washington’s Flawed ABC Rule,” 58 Willamette L. Rev. 251, 261 (2022).
Courts have also stringently applied the requirement that the third party not be “connected with” the wrongful act. Under this requirement, the injured person can’t recover attorney fees from third-party litigation if the third party has any factual connection to the relationship between the wrongdoer and injured person.55 See LK Operating, LLC v. Collection Grp., LLC, 181 Wn.2d 117, 123–24, 330 P.3d 190, 193–94 (2014); Manning v. Loidhamer, 13 Wn. App. 766, 773–74, 538 P.2d 136, 141 (1975).
Again, it’s easier to understand this requirement by considering a concrete case. Imagine that an attorney, in violation of the Rules of Professional Conduct,66 RPC 1.7(a)(1) generally prohibits representation of one client when it is directly adverse to another client. Some concurrent conflicts under RPC 1.7(a)(1) are waivable, but only if both clients give their informed consent and the other conditions of RPC 1.7(b) are met. Conflicts under RPC 1.7(a)(1) are not waivable, however, if the representation involves the assertion of a claim by one client against another client represented by the lawyer in the same litigation or proceeding. RPC 1.7(b)(3). For an example of a concurrent conflict of interest, see In re Carpenter, 160 Wn.2d 16, 155 P.3d 937 (2007) (lawyer disciplined when conflict arose between jointly represented clients in same matter and lawyer did not withdraw). The hypothetical used in this article assumes that the conditions of RPC 1.7(b) have not been met. represents two clients with conflicting interests, thereby embroiling them in litigation with each other. Under the ABC Rule, neither client can recover its litigation fees from the unethical attorney, since the other client—the third party—was factually “connected with” the conflicted legal representation.77 See LK Operating, 181 Wn.2d at 124 (“If the wrongful action was Powers providing concurrent representation to LKO and Fair in violation of former RPC 1.7, LKO was connected to that action as one of the clients wronged by it”).
An Equitable Rule?
These results highlight an apparent tension in the ABC Rule. Washington courts say that the ABC Rule is an “equitable” exception to the usual rule that parties have to bear their own attorney fees.88 See id. at 123 (“The ABC Rule is an equitable rule under which attorney fees are compensable as consequential damages in certain situations”). But is it fair to describe the ABC Rule as “equitable”?
Go back to the case of the attorney who simultaneously represents two clients with conflicting interests, who then sue each other. The ABC Rule says that the attorney doesn’t have to pay his clients’ litigation bills because the two clients were “connected with” the same legal representation. In other words, precisely because the attorney harmed two concurrent clients rather than just one, he doesn’t have to pay for the litigation he spawned. It’s not immediately apparent that this result is equitable.
Recall also the hypothetical case of the surveyor, where you build a shed on your neighbor’s land because the surveyor you hired was negligent. The ABC Rule says that the surveyor doesn’t have to pay the attorney fees you spend in the neighbor’s ensuing lawsuit because you were the one who built the shed. But of course, you built the shed on your neighbor’s land precisely because the surveyor was negligent. Your mislocation of the shed was a predictable consequence of the surveyor’s negligence. Under the ABC Rule, though, that predictable consequence shields the surveyor from having to pay for the collateral litigation he caused. It seems like a stretch to call that result “equitable.”
The ABC Rule and the American Rule on Attorney Fees
In Washington, the “American Rule” prohibits the recovery of attorney fees as costs or damages absent an applicable exception (e.g., a contractual provision). The ABC Rule, Washington courts say, carves out an “exception” to the American Rule by allowing the recovery of attorney fees as damages in some circumstances.99 Porter, 194 Wn.2d at 209.
In framing the ABC Rule as an exception to the American Rule, Washington courts are also embracing a certain conception of the American Rule. They are assuming that in the absence of the ABC Rule, the American Rule would categorically bar the recovery of attorney fees incurred in collateral litigation against a third party.
Traditionally, however, that category of attorney fees has fallen outside the American Rule altogether. Courts have treated such fees as just one more category of compensatory damages, recoverable under the same rules that apply to other sorts of compensatory damages.1010 E.g., Compagnie de Navigation Francaise v. Burley, 183 F. 166, 171 (W.D. Wash. 1910), aff’d, 194 F. 335 (9th Cir. 1912); Int’l State Bank of Trinidad v. Trinidad Bean & Elevator Co., 245 P. 489, 489 (Colo. 1926); Philpot v. Taylor, 75 Ill. 309, 310–11 (1874); First Nat’l Bank of Hutchinson v. Williams, 63 P. 744, 745 (Kan. 1901); McGaw v. Acker Merrall & Condit Co., 73 A. 731, 734 (Md. 1909); Boston & Albany R.R. v. Richardson, 135 Mass. 473, 477–78 (1883); see also Gould, supra note 4, at 267–69 (discussing this case law).
This understanding of the American Rule used to be the law in Washington as well. A series of Washington Supreme Court decisions from 1907 to 1962 allowed the recovery of attorney fees incurred in collateral litigation against a third party, without imposing the strictures of the ABC Rule.1111 Wells v. Aetna Ins. Co., 60 Wn.2d 880, 882, 376 P.2d 644, 645 (1962); Longview Sch. Dist. v. Stubbs Elec. Co., 160 Wash. 465, 469–71, 295 P. 186, 187–88 (1931); Murphy v. Fid. Abstract & Title Co., 114 Wash. 77, 88, 194 P. 591, 595 (1921); Curtley v. Sec. Sav. Soc’y, 46 Wash. 50, 57–58, 89 P. 180, 183 (1907); see also Gould, supra note 4, at 271–76 (discussing these cases). These cases treated the recovery of those fees as governed not by the American Rule, but by generally applicable rules of liability.
This history brings out another curious feature of the ABC Rule: its relatively recent vintage. It first shows up in 1964, when the Washington Supreme Court decided a case involving the botched construction of a house.1212 Armstrong Constr. Co. v. Thomson, 64 Wn.2d 191, 390 P.2d 976 (1964). There, the court said that a plaintiff could recover attorney fees incurred in collateral litigation only if that litigation was against a third party—but it offered a novel definition of third parties: “persons not connected with the initial transaction or event” giving rise to the litigation.1313 Id. at 195; see also Gould, supra note 4, at 277–78 (discussing case). This new definition, by limiting who counted as third parties, limited the cases where injured persons could recover fees incurred in collateral litigation. The Supreme Court, however, seemed unaware that it was changing the law.
Some 10 years later, the Washington Court of Appeals applied the ABC Rule to an automobile crash in which the plaintiffs alleged negligent design against the state and simple negligence against a driver.1414 Manning v. Loidhamer, 13 Wn. App. 766, 538 P.2d 136 (1975). It was then that the ABC Rule was given its current formulation.1515 Id. at 769; see also Gould, supra note 4, at 278–79 (discussing case). The Rule, for better or worse, has been with us ever since.
NOTES
1. Robert L. Rossi, Attorneys’ Fees § 8:3 (3d ed. 2014); see also Restatement (Second) of Torts § 914 (Oct. 2021 update).
2. Porter v. Kirkendoll, 194 Wn.2d 194, 210, 449 P.3d 627, 636–37 (2019) (citation and quotation omitted).
3. See id. (whether loggers were faultless was “not the critical inquiry; if it were, every faultless defendant would be entitled to attorney fees from another, at-fault defendant”).
4. See Benjamin Gould, “Washington’s Flawed ABC Rule,” 58 Willamette L. Rev. 251, 261 (2022).
5. See LK Operating, LLC v. Collection Grp., LLC, 181 Wn.2d 117, 123–24, 330 P.3d 190, 193–94 (2014); Manning v. Loidhamer, 13 Wn. App. 766, 773–74, 538 P.2d 136, 141 (1975).
6. RPC 1.7(a)(1) generally prohibits representation of one client when it is directly adverse to another client. Some concurrent conflicts under RPC 1.7(a)(1) are waivable, but only if both clients give their informed consent and the other conditions of RPC 1.7(b) are met. Conflicts under RPC 1.7(a)(1) are not waivable, however, if the representation involves the assertion of a claim by one client against another client represented by the lawyer in the same litigation or proceeding. RPC 1.7(b)(3). For an example of a concurrent conflict of interest, see In re Carpenter, 160 Wn.2d 16, 155 P.3d 937 (2007) (lawyer disciplined when conflict arose between jointly represented clients in same matter and lawyer did not withdraw). The hypothetical used in this article assumes that the conditions of RPC 1.7(b) have not been met.
7. See LK Operating, 181 Wn.2d at 124 (“If the wrongful action was Powers providing concurrent representation to LKO and Fair in violation of former RPC 1.7, LKO was connected to that action as one of the clients wronged by it”).
8. See id. at 123 (“The ABC Rule is an equitable rule under which attorney fees are compensable as consequential damages in certain situations”).
9. Porter, 194 Wn.2d at 209.
10. E.g., Compagnie de Navigation Francaise v. Burley, 183 F. 166, 171 (W.D. Wash. 1910), aff’d, 194 F. 335 (9th Cir. 1912); Int’l State Bank of Trinidad v. Trinidad Bean & Elevator Co., 245 P. 489, 489 (Colo. 1926); Philpot v. Taylor, 75 Ill. 309, 310–11 (1874); First Nat’l Bank of Hutchinson v. Williams, 63 P. 744, 745 (Kan. 1901); McGaw v. Acker Merrall & Condit Co., 73 A. 731, 734 (Md. 1909); Boston & Albany R.R. v. Richardson, 135 Mass. 473, 477–78 (1883); see also Gould, supra note 4, at 267–69 (discussing this case law).
11. Wells v. Aetna Ins. Co., 60 Wn.2d 880, 882, 376 P.2d 644, 645 (1962); Longview Sch. Dist. v. Stubbs Elec. Co., 160 Wash. 465, 469–71, 295 P. 186, 187–88 (1931); Murphy v. Fid. Abstract & Title Co., 114 Wash. 77, 88, 194 P. 591, 595 (1921); Curtley v. Sec. Sav. Soc’y, 46 Wash. 50, 57–58, 89 P. 180, 183 (1907); see also Gould, supra note 4, at 271–76 (discussing these cases).
12. Armstrong Constr. Co. v. Thomson, 64 Wn.2d 191, 390 P.2d 976 (1964).
13. Id. at 195; see also Gould, supra note 4, at 277–78 (discussing case).
14. Manning v. Loidhamer, 13 Wn. App. 766, 538 P.2d 136 (1975).
15. Id. at 769; see also Gould, supra note 4, at 278–79 (discussing case).