## Facts

- A nonlawyer (Steven) alleged that a Washington attorney (Jeffrey) proposed paying Steven one-third of any fee collected from clients Steven referred to Jeffrey.
- Steven alleged he accepted, referred multiple clients, and was paid in a manner disguised as hourly billing statements that tracked one-third of Jeffrey’s collected fees.
- Steven alleged he referred a client in March 1993 and that one-third of the fee for that matter was about $89,000, which Jeffrey refused to pay.
- Steven sued Jeffrey, his spouse, and his law firm for breach of the alleged fee-sharing/client-referral contract.
- The trial court dismissed the contract claim with prejudice under CR 12(b)(6), ruling the agreement was illegal and unenforceable because it violated Washington’s barratry statute and the Rules of Professional Conduct.
- Despite dismissing the claim, the trial court ordered Jeffrey to deposit $89,000 into the court registry pending investigation of the propriety of the fee; the order was stayed pending appeal.

## Issues

1. Whether the complaint could be dismissed under CR 12(b)(6) where the alleged agreement was illegal, but the pleadings plausibly invoked the in pari delicto exception because the parties might not be equally at fault.
2. Whether the superior court had subject-matter jurisdiction in this private contract action to order the attorney to deposit $89,000 of a legal fee into the court registry as a disciplinary-type measure.

## Decision

- The appellate court reversed the CR 12(b)(6) dismissal and remanded for further proceedings.
- The court held that, taking the allegations as true, the pleadings were sufficient to raise the in pari delicto exception and thus could not be rejected as a matter of law at the pleading stage.
- The appellate court reversed the registry-deposit order, holding the superior court lacked jurisdiction to sequester the fee in this case for disciplinary or regulatory purposes.

## Legal Principles

- Contracts that are illegal or contrary to public policy are generally not enforced, but this is subject to exceptions grounded in public-policy analysis.
- The in pari delicto exception may allow enforcement (or other relief) when the parties are not equally culpable and denying relief would not protect the public but would unjustly benefit the more culpable party.
- In evaluating the exception, relevant considerations include whether the transaction is complete, whether serious moral turpitude is involved, whether the defendant bears greater moral fault, and whether applying the general rule would cause unjust enrichment.
- Where ethical rules and solicitation prohibitions regulate attorneys (not lay participants), a court may infer greater culpability on the attorney’s part for purposes of the in pari delicto analysis at the pleading stage.
- A court’s authority to regulate attorney conduct and fees is tied to matters properly before it; absent subject-matter jurisdiction in the proceeding, the court cannot impose ad hoc disciplinary-type orders such as requiring deposit of fees unrelated to the case before it.

## Conclusion

The court held that a nonlawyer’s claim for payment under an unlawful referral-based fee arrangement could not be dismissed on the pleadings where the allegations plausibly showed unequal fault under the in pari delicto exception, and it also held that the trial court lacked jurisdiction to order the attorney to deposit the disputed fee into the registry in a private contract action.


Danzig v. Danzig, 79 Wn. App. 612, 904 P.2d 312 (Wash. Ct. App. 1995)