author: Smith, J.

text:
    STEVEN BURNETT, individually and on behalf of all others similarly situated, Respondent, v. PAGLIACCI PIZZA, INC., a Washington corporation, Appellant.
    No. 78356-4-I
    Court of Appeals of Washington, Division 1.
    FILED: June 17, 2019
    Michael William Droke, Todd Stuart Fairchild, Jasmine Hui, Dorsey & Whitney LLP, 701 5th Ave. Ste. 6100, Seattle, WA, 98104-7043, for Appellant.
    Toby James Marshall, Erika L. Nusser, Blythe H. Chandler, Terrell Marshall Law Group PLLC, 936 N 34th St. Ste. 300, Seattle, WA, 98103-8869, for Respondent.
    PUBLISHED OPINION
   Smith, J.

¶1 When Steven Burnett was hired as a delivery driver by Pagliacci Pizza Inc., he was required to sign an "Employee Relationship Agreement" to begin work. He was also given an employee handbook containing a mandatory arbitration policy and told to read it at home. When Burnett later sued Pagliacci for various wage-related claims, Pagliacci moved to compel arbitration under the policy printed in its handbook. Pagliacci appeals the trial court's denial of that motion.

¶2 We hold that because Burnett did not have a reasonable opportunity to review the arbitration policy before he was required to sign the Employee Relationship Agreement, the circumstances surrounding the formation of the parties' agreement to arbitrate were procedurally unconscionable. We hold further that the mandatory arbitration policy is substantively unconscionable because certain prerequisites to arbitration required by the policy unreasonably favor Pagliacci by limiting employees' access to substantive remedies and discouraging them from pursuing valid claims. Therefore, we affirm.

FACTS

¶3 Pagliacci hired Burnett as a delivery driver for Pagliacci's Valley Street location in October 2015. Upon hire, Burnett attended a mandatory orientation, which took between 40 minutes and an hour. At the orientation, Burnett was shown around the store, given Pagliacci T-shirts, and told about Pagliacci's history and values. He also watched some videos about how to succeed as a delivery driver. Additionally, Burnett was given some forms and told to sign them so that he could start working. One of those forms was an Employee Relationship Agreement (ERA), which Burnett signed. Burnett was also given a copy of Pagliacci's "Little Book of Answers" (Little Book) and told to read it at home. Although the ERA directs the employee to "learn and comply with the rules and policies outlined in our Little Book .... including those that relate to positive attitude, public safety, company funds, tips and FAIR [Fair and Amicable Internal Resolution] Policy," the ERA does not mention arbitration.

¶4 Pagliacci terminated Burnett's employment on January 22, 2017. In October 2017, Burnett filed a putative class action against Pagliacci, alleging among other things that Pagliacci failed to provide delivery drivers with required rest and meal periods, failed to pay all wages due to delivery drivers, wrongfully retained delivery charges, and made unlawful deductions from delivery drivers' wages.

¶5 Pagliacci moved to compel arbitration of Burnett's claims under its mandatory arbitration policy, which is printed in the Little Book. That policy provides:

The company has a mandatory arbitration policy with which you must comply for the binding resolution of disputes without lawsuits. If you believe you have been a victim of illegal harassment or discrimination or that you have not been paid for all hours worked or at less than the rate of pay required by law or that the termination of your employment was wrongful, you submit the dispute to resolution in accordance with the F.A.I.R. Policy and if those procedures are not successful in resolving the dispute, you then submit the dispute to binding arbitration before a neutral arbitrator pursuant to the Washington Arbitration Act.

The "F.A.I.R. Policy" referred to in the mandatory arbitration policy requires that before commencing arbitration, the employee first "report the matter and all details" to his or her supervisor (Supervisor Review). If Supervisor Review does not resolve the matter to the employee's satisfaction, he or she may initiate nonbinding conciliation, wherein the "F.A.I.R. Administrator will designate a responsible person at Pagliacci Pizza (who may be its owner) to meet face-to-face with you in a non-binding Conciliation." The F.A.I.R. Policy also includes the following limitations provision:

You may not commence an arbitration of a claim that is covered by the Pagliacci Pizza Arbitration Policy or commence a lawsuit on a claim that is not covered by the Pagliacci Pizza Arbitration Policy unless you have first submitted the claim to resolution in conformity with the F.A.I.R. Policy and fully complied with the steps and procedures in the F.A.I.R. Policy. If you do not comply with a step, rule or procedure in the F.A.I.R. Policy with respect to a claim, you waive any right to raise the claim in any court or other forum, including arbitration. The limitations set forth in this paragraph shall not be subject to tolling, equitable or otherwise.

¶6 Burnett opposed Pagliacci's motion to compel arbitration. He argued that the mandatory arbitration policy was both procedurally and substantively unconscionable, but the trial court did not reach those arguments. Instead, it concluded that although Burnett agreed under the ERA to "learn and comply with the rules and policies outlined in our Little Book," the Little Book was not incorporated by reference into the ERA. The court therefore denied Pagliacci's motion, finding there was no agreement to arbitrate.

¶7 Pagliacci moved for reconsideration, arguing that the Little Book was incorporated by reference into the ERA. Pagliacci also argued that regardless of whether it was incorporated by reference into the ERA, the Little Book created an agreement to arbitrate because Burnett received a copy of it and then continued his employment thereafter. The court denied Pagliacci's motion for reconsideration. Pagliacci appeals.

ANALYSIS

¶8 Pagliacci argues that the trial court erred by denying its motion to compel arbitration and its subsequent motion for reconsideration. We disagree.

¶9 Arbitrability is a question of law that we review de novo. McKee v. AT&T Corp., 164 Wash.2d 372, 383, 191 P.3d 845 (2008). "The burden of proof is on the party seeking to avoid arbitration." McKee, 164 Wash.2d at 383, 191 P.3d 845. "Regardless of whether the Federal Arbitration Act[ ]... or the Washington uniform arbitration act[ ]... applies, our analysis as to whether ... claims are subject to arbitration begins in the same manner." Weiss v. Lonnquist, 153 Wash. App. 502, 510, 224 P.3d 787 (2009). Specifically, "[a]s arbitration is a matter of contract, parties cannot be compelled to arbitrate unless they agreed to do so." Weiss, 153 Wash. App. at 510, 224 P.3d 787.

¶10 In determining whether an agreement to arbitrate exists, we first determine whether the parties have agreed to arbitrate a particular matter by applying ordinary contract principles. Weiss, 153 Wash. App. at 511, 224 P.3d 787 ; see also Tjart v. Smith Barney, Inc., 107 Wash. App. 885, 895-97, 28 P.3d 823 (2001) (considering whether an arbitration agreement existed before analyzing whether the arbitration agreement was enforceable). Where, as here, no material facts are in dispute, contract interpretation is a question of law that we review de novo. Dave Johnson Ins. v. Wright, 167 Wash. App. 758, 769, 275 P.3d 339 (2012). Additionally, if an agreement to arbitrate exists, "[g]eneral contract defenses such as unconscionability may invalidate arbitration agreements." McKee, 164 Wash.2d at 383, 191 P.3d 845. Unconscionability is also a question of law reviewed de novo. McKee, 164 Wash.2d at 383, 191 P.3d 845.

¶11 For the reasons that follow, we conclude that an agreement to arbitrate exists here but that the agreement is unconscionable and unenforceable.

Existence of Arbitration Agreement

¶12 Pagliacci argues that the trial court erred by concluding that the mandatory arbitration policy was not incorporated into the ERA and consequently there was no agreement to arbitrate. We agree.

¶13 "Incorporation by reference allows the parties to 'incorporate contractual terms by reference to a separate ... agreement to which they are not parties, and including a separate document which is unsigned.' " W. Wash. Corp. of Seventh-Day Adventists v. Ferrellgas, Inc., 102 Wash. App. 488, 494, 7 P.3d 861 (2000) (alteration in original) (quoting 11 SAMUEL WILLISTON & RICHARD A. LORD, A TREATISE ON THE LAW OF CONTRACTS § 30:25, at 233-34 (4th ed. 1999) ). " 'But incorporation by reference is ineffective to accomplish its intended purpose where the provisions to which reference is made do not have a reasonably clear and ascertainable meaning.' " Seventh-Day Adventists, 102 Wash. App. at 494, 7 P.3d 861 (quoting 11 WILLISTON & LORD , § 30:25, at 234). " '[I]t must be clear that the parties to the agreement had knowledge of and assented to the incorporated terms[.]' " Seventh-Day Adventists, 102 Wash. App. at 494-95, 7 P.3d 861 (alterations in original) (quoting 11 WILLISTON & LORD , § 30:25, at 234).

¶14 In Seventh-Day Adventists, the court held that a "Trade Contract" "clearly and unequivocally incorporate[d] the 'Contract Project Documents' and the 'Contract Documents' " by stating that work would be performed "in accordance with the 'Project Contract Documents' " and " 'in accordance with Contract Documents.' " Seventh-Day Adventists, 102 Wash. App. at 492, 495, 7 P.3d 861. Here, like the Trade Contract in Seventh-Day Adventists, the ERA clearly and unequivocally incorporates the Little Book. Specifically, the ERA expressly provides that employees will, on their own initiative, "learn and comply with the rules and policies outlined in our Little Book of Answers." Furthermore, Burnett does not argue that there was any lack of clarity that the Little Book described in the ERA is the same Little Book that he received at orientation. For these reasons, the rules and policies in the Little Book were incorporated by reference into the ERA.

¶15 Burnett makes no attempt to distinguish Seventh-Day Adventists even though he cites that case for the proposition that incorporation by reference must be clear and unequivocal. Instead, he argues that "an employment contract telling an employee to read 'on your own time' a separate employment handbook is not 'clear and unequivocal' incorporation by reference." But the ERA not only directs the employee to read the Little Book on his or her own time, it also requires the employee to comply with the rules and policies outlined therein. Therefore, Burnett's argument is not persuasive, and we conclude that an agreement to arbitrate exists here.

Enforceability of Arbitration Agreement

¶16 Having concluded that the parties agreed to arbitrate, we next consider whether the parties' agreement is enforceable. For the reasons that follow, we conclude that the circumstances surrounding the formation of the parties' arbitration agreement were procedurally unconscionable and that the mandatory arbitration policy is substantively unconscionable. We also conclude that severance of the substantively unconscionable provisions is inappropriate here and thus hold that the mandatory arbitration policy is unenforceable.

Procedural Unconscionability

¶17 Washington law recognizes two categories of unconscionability: substantive and procedural. Zuver v. Airtouch Commc'ns, Inc., 153 Wash.2d 293, 303, 103 P.3d 753 (2004). "Procedural unconscionability is 'the lack of meaningful choice, considering all the circumstances surrounding the transaction.' " Zuver, 153 Wash.2d at 303, 103 P.3d 753 (quoting Nelson v. McGoldrick, 127 Wash.2d 124, 131, 896 P.2d 1258 (1995) ). To determine whether an agreement is procedurally unconscionable, we look to the following circumstances surrounding the parties' transaction to determine whether the party claiming unconscionability lacked meaningful choice: (1) the manner in which the contract was entered, (2) whether the party claiming procedural unconscionability had a reasonable opportunity to understand the terms of the contract, and (3) whether the important terms were hidden in a maze of fine print. Zuver, 153 Wash.2d at 303, 103 P.3d 753. Our Supreme Court has cautioned that " 'these three factors [should] not be applied mechanically without regard to whether in truth a meaningful choice existed.' " Zuver, 153 Wash.2d at 303, 103 P.3d 753 (alteration in original) (quoting Nelson, 127 Wash.2d at 131, 896 P.2d 1258 ).

¶18 Although not determinative, if an agreement constitutes an adhesion contract, that supports a finding that the agreement is procedurally unconscionable. See Zuver, 153 Wash.2d at 305, 103 P.3d 753 (analyzing whether an arbitration agreement was an adhesion contract but observing that "the fact that [the] arbitration agreement is an adhesion contract does not end our inquiry"). Washington courts have adopted the following factors to determine whether an adhesion contract exists: " '(1) whether the contract is a standard form printed contract, (2) whether it was "prepared by one party and submitted to the other on a 'take it or leave it' basis", and (3) whether there was "no true equality of bargaining power" between the parties.' " Zuver, 153 Wash.2d at 304, 103 P.3d 753 (internal quotation marks omitted) (quoting Yakima County (W. Valley) Fire Prot. Dist. No. 12 v. City of Yakima, 122 Wash.2d 371, 393, 858 P.2d 245 (1993) ).

¶19 Here, the ERA, including the Little Book and Pagliacci's mandatory arbitration policy, constitutes an adhesion contract. Specifically, the ERA is a standard form printed contract that Burnett was required to sign to begin employment, i.e., on a "take it or leave it" basis. Moreover, Pagliacci does not argue that the ERA is not an adhesion contract. Rather, Pagliacci argues that even if the ERA is an adhesion contract, the circumstances surrounding its formation-and specifically the formation of the parties' agreement to arbitrate-were not procedurally unconscionable. But we disagree.

¶20 Mattingly v. Palmer Ridge Homes, LLC, 157 Wash. App. 376, 238 P.3d 505 (2010), is instructive. In Mattingly, Steven and Deborah Mattingly entered an agreement with Palmer Ridge Homes LLC under which Palmer Ridge would construct a custom home for the Mattinglys. Mattingly, 157 Wash. App. at 382, 238 P.3d 505. Six months later, the Mattinglys signed an application to enroll in Palmer Ridge's "2-10 Home Buyers Warranty new home warranty program" (2-10 HBW warranty). Mattingly, 157 Wash. App. at 383, 238 P.3d 505. As part of the enrollment, the Mattinglys acknowledged that they read a sample copy of the "Warranty Booklet" and understood that their claims and liabilities were limited by the terms and conditions in the booklet. Mattingly, 157 Wash. App. at 383, 238 P.3d 505. However, the Mattinglys did not in fact see a copy of the warranty booklet before they signed the enrollment application. Mattingly, 157 Wash. App. at 383, 238 P.3d 505.

¶21 After discovering problems with the construction of their home, the Mattinglys sued Palmer Ridge. Mattingly, 157 Wash. App. at 386, 238 P.3d 505. Palmer Ridge moved for summary judgment, arguing that the Mattinglys' claims were barred by the 2-10 HBW warranty's limitations provisions. Mattingly, 157 Wash. App. at 386, 238 P.3d 505. The trial court agreed and dismissed the Mattinglys' claims. Mattingly, 157 Wash. App. at 386, 238 P.3d 505.

¶22 On appeal, Division Two of this court concluded that the 2-10 HBW warranty limitations were unenforceable. Mattingly, 157 Wash. App. at 392, 238 P.3d 505. It held that the circumstances surrounding the 2-10 HBW warranty are "suspect, as there is no evidence in the record that the Mattinglys had a reasonable opportunity to understand the terms contained within the booklet, and the terms remain buried in the booklet." Mattingly, 157 Wash. App. at 392, 238 P.3d 505. Specifically, the court observed that the Mattinglys did not receive a sample copy of the booklet before signing the warranty enrollment and that even if the Mattinglys had received the booklet, the limitations provisions-though in bold and larger typeface than surrounding text-were on page 7 of a 32-page booklet. Mattingly, 157 Wash. App. at 391-92, 238 P.3d 505.

¶23 Here, as in Mattingly, the circumstances surrounding the formation of the parties' arbitration agreement are suspect. As in Mattingly, there is no evidence in the record that Burnett had a reasonable opportunity to understand the terms contained in the Little Book-and specifically the mandatory arbitration policy-before he signed the ERA. Instead, the record reflects that Burnett was not afforded an opportunity to review the Little Book before signing the ERA: Burnett testified that he was told to sign the ERA to begin work and instructed to read the Little Book at home. Furthermore, like the warranty limitations in Mattingly, Pagliacci's mandatory arbitration policy is buried in a booklet: Although it is written in plain English, it appears on page 18 of the 23-page Little Book, in the same font size and with the same formatting as surrounding sections. For these reasons, we conclude that Burnett lacked meaningful choice in agreeing to arbitrate, and thus the circumstances surrounding the formation of the parties' arbitration agreement were procedurally unconscionable.

¶24 Pagliacci argues that Mattingly is distinguishable because it does not concern an employment relationship. It also points out that while the Mattinglys did not receive the warranty booklet until well after they signed the agreement that incorporated it, the Little Book was reasonably available to Burnett throughout his employment. But the fact that Mattingly was not an employment case is not a relevant distinguishing factor because, as discussed, we apply ordinary contract law to determine the validity of an agreement to arbitrate. McKee, 164 Wash.2d at 383, 191 P.3d 845. And it is irrelevant that the mandatory arbitration policy was available to Burnett after he signed the ERA if he did not have a reasonable opportunity to review it before he signed the ERA into which it was incorporated. Pagliacci's arguments are not persuasive.

¶25 Pagliacci also contends that the mandatory arbitration policy is not " 'hidden in a maze of fine print' " and that Burnett's failure to read it is not a defense to enforcement. Pagliacci relies on Tjart to support its arguments. But in Tjart, the employee completed an employment application which itself contained an arbitration provision. Tjart, 107 Wash. App. at 891-92, 28 P.3d 823. Indeed, in concluding that the employee had a reasonable opportunity to understand that she was agreeing to arbitrate her future claims, we observed that "the arbitration provision was obvious in the fairly short contract." Tjart, 107 Wash. App. at 898-99, 28 P.3d 823. Here, by contrast, the arbitration policy is not printed-or even mentioned -in the ERA itself. Instead, it is buried in a separate booklet that, as discussed, Burnett did not have a reasonable opportunity to review before signing the ERA. Indeed, nothing in the ERA suggests that the Little Book contains an arbitration clause, and even the Little Book's own table of contents describes the section in which the arbitration policy appears as the "Mutual Fairness Benefits " section, giving no indication to the reader that it might contain a one-way arbitration clause. Tjart is not persuasive and neither is Pagliacci's argument that the mandatory arbitration policy is not hidden. Cf. Romney v. Franciscan Med. Grp., 186 Wash. App. 728, 349 P.3d 32 (2015) (holding that arbitration clause was not procedurally unconscionable where employees signed multiple employment contracts that contained the same arbitration agreement addendum).

¶26 Pagliacci next argues that the mandatory arbitration policy is not procedurally unconscionable because "the case law shows that an employer can impose new terms of employment on existing employees at any time, simply by amending a handbook and giving employees notice that the conditions of their employment have changed." Pagliacci asserts that the Little Book itself was enough to create a binding arbitration agreement even if not incorporated into the ERA, and that Burnett became bound by the mandatory arbitration policy because he received a copy of the Little Book and continued his employment thereafter. Pagliacci chiefly relies on Gaglidari v. Denny's Restaurants, Inc., 117 Wash.2d 426, 815 P.2d 1362 (1991), to support this assertion, but that reliance is misplaced.

¶27 In Gaglidari, the plaintiff, Ronda Gaglidari, was hired as a bartender by Denny's Restaurants Inc. (Denny's) in 1980. Gaglidari, 117 Wash.2d at 428, 815 P.2d 1362. On her first day of work, Gaglidari received a copy of the 1979 employee handbook, which described Denny's termination procedures. Gaglidari, 117 Wash.2d at 428, 815 P.2d 1362. The handbook stated that "fighting on duty was grounds for immediate dismissal" but provided for counseling review and review by a certain level of manager for infractions not covered by the immediate dismissal provision. Gaglidari, 117 Wash.2d at 428, 815 P.2d 1362. In 1986, Denny's gave Gaglidari an alcoholic beverage handbook stating that fighting on company premises, regardless of whether on duty or not, was grounds for immediate dismissal. Gaglidari, 117 Wash.2d at 429, 436, 815 P.2d 1362.

¶28 In 1987, Denny's fired Gaglidari after she was involved in a fight on company premises while off duty. Gaglidari, 117 Wash.2d at 429-30, 815 P.2d 1362. Gaglidari sued Denny's for failing to comply with the termination procedures in its 1979 employee handbook. Gaglidari, 117 Wash.2d at 430, 815 P.2d 1362. A jury returned a verdict in Gaglidari's favor. Gaglidari, 117 Wash.2d at 431, 815 P.2d 1362.

¶29 On appeal, our Supreme Court observed that although employment relationships are traditionally terminable at will, "an employment relationship terminable at will can be modified by statements contained in policy manuals or handbooks." Gaglidari, 117 Wash.2d at 433, 815 P.2d 1362. The court also stated that "[a]n employer may unilaterally amend or revoke policies and procedures established in an employee handbook" but that "an employer's unilateral change in policy will not be effective until employees receive reasonable notice of the change." Gaglidari, 117 Wash.2d at 434, 815 P.2d 1362. The Supreme Court explained, based on these principles, that the 1979 employee handbook formed a contract pursuant to which Denny's would have been required to follow certain procedures before terminating Gaglidari for fighting while off duty. Gaglidari, 117 Wash.2d at 433, 815 P.2d 1362. But the court held that the 1986 alcoholic beverage handbook achieved a modification to the 1979 handbook such that on-premises fighting, regardless of duty status, became grounds for immediate dismissal. Gaglidari, 117 Wash.2d at 436, 815 P.2d 1362. The court then remanded for a new trial on whether Denny's conclusion that Gaglidari was guilty of fighting was reasonable, in good faith, and supported by substantial evidence such that immediate dismissal was warranted. Gaglidari, 117 Wash.2d at 436, 451, 815 P.2d 1362.

¶30 In short, the Gaglidari court considered whether a contract was formed between Denny's and Gaglidari solely to determine what, if any, procedures an employer had agreed to follow before terminating an employee and whether the employer had complied with those procedures. Gaglidari, 117 Wash.2d at 431, 815 P.2d 1362. Gaglidari does not, as Pagliacci contends, stand for the proposition that an employee handbook can create an arbitration agreement enforceable by the employer against its employee. Furthermore, Pagliacci cites no Washington authority holding that an employer can foist an arbitration agreement on an employee simply by including an arbitration clause in an employee handbook that is provided to the employee. Therefore, we are not persuaded by Pagliacci's argument that the Little Book created an arbitration agreement merely because Burnett received a copy of it and continued his employment thereafter.

¶31 Pagliacci concedes that "[n]o reported Washington decision specifically addresses arbitration policies in the context of employee handbooks" but argues that under Gaglidari, employee handbooks create obligations that are binding on employees and the mandatory arbitration policy should be no exception. Specifically, Pagliacci attempts to analogize the Little Book to the handbook in Gaglidari, which Pagliacci observes "imposed a 'contractual' obligation on the employee not to fight on company premises as a condition of her employment." But this argument ignores the context in which the contract analysis in Gaglidari arose. The Gaglidari court did conclude that Denny's employee handbook, as modified by the alcoholic beverage handbook, created a contract between Gaglidari and Denny's, wherein Gaglidari agreed to abide by the policies and procedures outlined in the handbook. Gaglidari, 117 Wash.2d at 435-36, 815 P.2d 1362. But as discussed, the court reached this conclusion in the context of determining whether Gaglidari's behavior was grounds for immediate dismissal. An employee's agreement to comply with a policy or risk immediate dismissal is readily distinguishable from an employee's agreement to submit his or her claims to arbitration. That the former agreement can be secured by providing the employee with a handbook does not mean that the latter agreement can be secured in the same manner. Pagliacci's argument is not persuasive.

¶32 Pagliacci also relies on Govier v. North Sound Bank, 91 Wash. App. 493, 957 P.2d 811 (1998), to argue that an employer may unilaterally bind its employee to obligations via an employee handbook. Again, its reliance is misplaced. In Govier, the plaintiff, Deborah Govier, was hired by North Sound Bank in 1991 as a loan originator. Govier, 91 Wash. App. at 495, 957 P.2d 811. On Govier's first day of work, she received a copy of the bank's personnel handbook, which provided that after Govier reached the end of a 90-day probationary period, she would be considered a " 'permanent employee' " and dismissed " 'only after a thorough review of the performance record by the supervisor and the President or Vice President.' " Govier, 91 Wash. App. at 495, 957 P.2d 811 (emphasis omitted).

¶33 In 1993, North Sound Bank presented its loan originators, including Govier, with a new employment agreement. Govier, 91 Wash. App. at 496, 957 P.2d 811. The new agreement was for a 1-year period, changed the compensation structure for loan originators, eliminated sick leave and holiday and vacation pay, and allowed either party to terminate on 20 days' written notice. Govier, 91 Wash. App. at 496-97, 957 P.2d 811. Loan originators were directed to sign the new employment agreement or be terminated. Govier, 91 Wash. App. at 496, 957 P.2d 811. Govier, who was unhappy with the new terms, refused to sign the agreement and consequently was terminated. Govier, 91 Wash. App. at 497, 957 P.2d 811.

¶34 Govier sued, alleging that North Sound Bank had breached the employment contract embodied in the original personnel handbook. Govier, 91 Wash. App. at 497, 957 P.2d 811. Division Two of this court disagreed, holding that the personnel handbook had the force of a unilateral contract, i.e., "one in which the promisor does not receive a promise in return as consideration." Govier, 91 Wash. App. at 499, 957 P.2d 811. It recognized that in the handbook context, an employer that promises specific treatment in specific situations can revoke or modify those promises without mutual assent. Govier, 91 Wash. App. at 500, 957 P.2d 811. The court thus held that by receiving a new agreement changing the duration of her employment from indefinite to one year and eliminating other benefits, Govier could no longer enforce the former handbook terms against the bank. Govier, 91 Wash. App. at 501-02, 957 P.2d 811.

¶35 Like the Gaglidari court, the Govier court conducted its analysis in the context of determining whether an employer was bound by the promises it made to its employee. But as discussed, that is not the case here, where Pagliacci seeks to bind its employee. Neither Govier nor Gaglidari supports Pagliacci's argument that because an arbitration clause appeared in an employee handbook that was provided to Burnett, the parties' arbitration agreement is procedurally conscionable.

¶36 Pagliacci next observes that "[n]umerous state and federal courts have found binding agreements to arbitrate based on employee handbooks," citing-without discussion-to a number of federal and out-of-state cases. These cases are not binding, and we decline to address them.

¶37 Because we hold that Pagliacci's mandatory arbitration policy is procedurally unconscionable, we must next address Burnett's argument that procedural unconscionability alone is sufficient to render Pagliacci's mandatory arbitration policy unenforceable. He relies on Gandee v. LDL Freedom Enterprises, Inc., 176 Wash.2d 598, 603, 293 P.3d 1197 (2013), for the proposition that "either substantive or procedural unconscionability is sufficient to void a contract." Although Pagliacci does not argue otherwise, we note that this proposition, while accurately excerpted from Gandee, is not a complete statement of the law. Specifically, the Gandee court cited Adler v. Fred Lind Manor, 153 Wash.2d 331, 347, 103 P.3d 773 (2004), but in Adler, the Supreme Court expressly reserved ruling on whether procedural unconscionability-as opposed to substantive unconscionability-alone is sufficient to void a contract. Adler, 153 Wash.2d at 346-47, 103 P.3d 773. And in Gandee, only substantive unconscionability was alleged. Gandee, 176 Wash.2d at 603, 293 P.3d 1197.

¶38 That said, both Division Two and Division Three of this court have invalidated agreements based on procedural unconscionability alone. Specifically, in Mattingly, discussed above, Division Two invalidated the 2-10 HBW warranty limitations based solely on its conclusion that the circumstances surrounding the warranty's formation were procedurally unconscionable. Mattingly, 157 Wash. App. at 392, 238 P.3d 505. And in Gorden v. Lloyd Ward & Associates, PC, 180 Wash. App. 552, 323 P.3d 1074 (2014), Division Three invalidated an arbitration agreement based solely on procedural unconscionability.

¶39 Furthermore, and as discussed, Burnett was not afforded an opportunity to review the Little Book before signing the agreement into which it was incorporated. Indeed, even the ERA itself states that the employee "[o]n your own initiative ... will learn ... the rules and policies outlined in our Little Book of Answers," suggesting that employees are not expected to have had an opportunity to fully comprehend the Little Book's contents before signing the ERA. And as discussed, the ERA does not even mention the arbitration policy, which is buried toward the end of the Little Book. In short, it is apparent from this record that Burnett lacked meaningful choice in agreeing to arbitrate. Therefore, we hold that procedural unconscionability alone renders Pagliacci's mandatory arbitration policy unenforceable.

¶40 Finally, and although not necessary to our conclusion that procedural unconscionability alone renders Pagliacci's mandatory arbitration policy void, we observe that Pagliacci's mandatory arbitration policy requires employees to arbitrate discrimination, unlawful termination, and wage-related claims, which include claims with respect to which employees have a statutory right to maintain a civil action. See, e.g., RCW 49.60.030(2) (providing that any person deeming himself or herself injured by a violation of the Washington State Civil Rights Act "shall have a civil action in a court of competent jurisdiction"); RCW 49.52.070 (providing that any employer that willfully deprives an employee of any part of his or her wages "shall be liable in a civil action by the aggrieved employee"). And although not addressed by either party, waiver requires "an intentional and voluntary relinquishment of a known right." Jones v. Best, 134 Wash.2d 232, 241, 950 P.2d 1 (1998). Here, as discussed, Burnett did not have a reasonable opportunity to understand that he was agreeing to arbitrate-much less to understand the types of claims he was agreeing to arbitrate or to intentionally and voluntarily relinquish his right to pursue those claims in court. Therefore, we are very skeptical that under the circumstances presented here, Burnett effectively waived any statutorily conferred right to maintain a civil action.

Substantive Unconscionability

¶41 " 'Substantive unconscionability involves those cases where a clause or term in the contract is alleged to be one-sided or overly harsh.' " Zuver, 153 Wash.2d at 303, 103 P.3d 753 (quoting Schroeder v. Fageol Motors, Inc., 86 Wash.2d 256, 260, 544 P.2d 20 (1975) ). " 'Shocking to the conscience', 'monstrously harsh', and 'exceedingly calloused' are terms sometimes used to define substantive unconscionability." Nelson, 127 Wash.2d at 131, 896 P.2d 1258 (quoting Montgomery Ward & Co. v. Annuity Bd. of S. Baptist Convention, 16 Wash. App. 439, 444, 556 P.2d 552 (1976) ).

¶42 Here, Burnett argues that Pagliacci's mandatory arbitration policy is substantively unconscionable because (1) it requires employees, but not Pagliacci, to submit certain claims to arbitration and (2) the F.A.I.R. Policy, which is a prerequisite to arbitration, contains a limitations provision that is overly harsh. Although we disagree that the mandatory arbitration policy is substantively unconscionable merely because its arbitration requirement is not mutual, we agree that the F.A.I.R. Policy's overly harsh limitations provision renders the mandatory arbitration substantively unconscionable.

¶43 Zuver is instructive here. There, the court evaluated an employment arbitration agreement that included: (1) a confidentiality provision stating that all arbitration proceedings, including settlements and awards, would be confidential and (2) a remedy limitations provision under which the employee waived the right to seek punitive damages. Zuver, 153 Wash.2d at 298-99, 103 P.3d 753. Our Supreme Court held that these provisions were substantively unconscionable. Specifically, the court concluded that the confidentiality provision was substantively unconscionable because it "hampers an employee's ability to prove a pattern of discrimination or to take advantage of findings in past arbitrations." Zuver, 153 Wash.2d at 315, 103 P.3d 753. Additionally, "keeping past findings secret undermines an employee's confidence in the fairness and honesty of the arbitration process," potentially discouraging employees from pursuing valid discrimination claims. Zuver, 153 Wash.2d at 315, 103 P.3d 753. The court also concluded that the remedies limitation provision was substantively unconscionable because the provision "blatantly and excessively favors the employer" by barring the employee from collecting punitive or exemplary damages while allowing the employer to collect such damages in its claims against the employee. Zuver, 153 Wash.2d at 318, 103 P.3d 753.

¶44 In discussing the remedies limitation provision, the Zuver court also expressly rejected the concurrence/dissent's assertion that the plaintiff in Zuver was "seeking invalidity based simply on a lack of mutuality of obligations." Zuver, 153 Wash.2d at 317 n. 16, 103 P.3d 753. The court instead explained that the plaintiff was not complaining about mere lack of mutuality and stated, "[W]e are not concerned here with whether the parties have mirror obligations under the agreement, but rather whether the effect of the provision is so 'one-sided' as to render it patently 'overly harsh' in this case." Zuver, 153 Wash.2d at 317 n.16, 103 P.3d 753 (emphasis added) (quoting Schroeder, 86 Wash.2d at 260, 544 P.2d 20 ).

¶45 In short, the Zuver court's analysis demonstrates that arbitration agreements are not substantively unconscionable merely because they are not mutual. Therefore, we reject Burnett's argument that Pagliacci's mandatory arbitration policy is substantively unconscionable merely because it requires Burnett, but not Pagliacci, to arbitrate certain claims. Cf. Tjart, 107 Wash. App. at 901, 28 P.3d 823 (explaining that by agreeing to arbitrate, party does not give up substantive right but only the ability to raise it in court).

¶46 But Zuver also demonstrates that nonmutual provisions in an arbitration agreement are substantively unconscionable when, like the confidentiality and remedies limitations provisions in Zuver, they have the effect of limiting an employee's ability to access substantive remedies or discouraging an employee from pursuing valid claims. To that end, we conclude for the reasons that follow that the mandatory arbitration policy is substantively unconscionable because the F.A.I.R. Policy, which is a prerequisite to arbitration, contains a limitations provision that is substantively unconscionable.

¶47 First, as Burnett points out, the limitations provision "effectively shortens the statute of limitations for any claim by an employee who no longer works for [Pagliacci]" because a terminated employee has no way to "[i]nformally report the matter and all details to your supervisor," as required by the F.A.I.R. Policy's Supervisor Review procedure. In other words, the limitations provision acts as a complete bar to arbitration and suit for employees who do not become aware that they have a potential claim until after their employment with Pagliacci ends. Such a bar "blatantly and excessively favors" Pagliacci and is substantively unconscionable. Zuver, 153 Wash.2d at 318-19, 103 P.3d 753.

¶48 Pagliacci argues that "[t]he only reasonable interpretation of the F.A.I.R. policy is that it is intended to apply to current employees" and not to former employees. But Pagliacci's proffered interpretation would require us to read into the F.A.I.R. Policy an exception that is not expressed therein. Pagliacci's proffered interpretation also contradicts the F.A.I.R. Policy's unambiguous limitations provision, which states: "If you do not comply with a step, rule or procedure in the F.A.I.R. Policy with respect to a claim, you waive any right to raise the claim in any court or other forum, including arbitration." We are not persuaded by Pagliacci's liberal interpretation of this limitations provision, which Pagliacci itself drafted in unambiguous terms. Cf. Sales Creators, Inc. v. Little Loan Shoppe, LLC, 150 Wash. App. 527, 531, 208 P.3d 1133 (2009) ("In interpreting an arbitration clause, the intentions of the parties as expressed in the contract control.") (emphasis added).

¶49 Next, although not raised by Burnett, the limitations provision not only bars claims for terminated employees, but also effectively shortens the time period for any employee to assert claims against Pagliacci. Specifically, the F.A.I.R. Policy's limitations provision prohibits an employee from commencing arbitration (or filing suit) until he or she has fully complied with the policy's steps and procedures. And "a claim sought to be arbitrated is subject to the same limitations of time for the commencement of actions as if the claim had been asserted in a court." RCW 7.04A.090(3). Therefore, the F.A.I.R. Policy's limitations provision has the effect of shortening, by whatever time it takes to complete the procedures set out in the F.A.I.R. Policy, the period during which employees may assert their claims under Pagliacci's two-step arbitration policy.

¶50 To this end, our Supreme Court has repeatedly held that arbitration provisions that contain unreasonable contractual limitations periods are substantively unconscionable. For example, in Adler, the court held that an arbitration agreement's 180-day limitations period was substantively unconscionable because it provided the employer with unfair advantages. Adler, 153 Wash.2d at 357, 103 P.3d 773. Specifically, the Adler court observed that the limitations period could require employees to forgo the opportunity to file discrimination complaints with and have them investigated by the Equal Employment Opportunity Commission or the Washington Human Rights Commission. Adler, 153 Wash.2d at 357, 103 P.3d 773. The limitations period in Adler also deprived employees of continuing violation and tolling doctrines under federal and state discrimination laws. Adler, 153 Wash.2d at 356-57, 103 P.3d 773. In Gandee, the court held that a provision shortening the statute of limitations from the 4 years provided by the Consumer Protection Act to 30 days was substantively unconscionable.

Gandee, 176 Wash.2d at 607, 293 P.3d 1197. And in Hill v. Garda CL Northwest, Inc., 179 Wash.2d 47, 55, 308 P.3d 635 (2013), the court concluded that an arbitration clause's 14-day limitations provision was substantively unconscionable where employees would otherwise have a 3-year period to bring the type of claims contemplated.

¶51 Here, the mandatory arbitration policy does not contain a specified limitations period. But because the time required for F.A.I.R. Policy compliance is entirely indeterminate, it-like the contractual limitations periods in Adler, Gandee, and Hill-is substantively unconscionable because it provides Pagliacci with unfair advantages. Specifically, and as discussed, the F.A.I.R. Policy, which is a prerequisite to arbitration, acts as a complete bar to arbitration unless an employee has "fully complied with the steps and procedures in the F.A.I.R. Policy." Therefore, an employee must anticipate and build in time to fully comply with the F.A.I.R. Policy before the applicable limitations period expires. But the time required for compliance is not within the employee's control. Under the F.A.I.R. Policy, Pagliacci makes no commitment to address disputes or schedule nonbinding conciliation within a specified period of time after the employee has reported the matter or initiated conciliation. Nor does the policy provide any "release valve" that allows employees to commence arbitration if conciliation under the F.A.I.R. Policy takes more than a specified amount of time, or if the applicable statute of limitations is set to expire while the employee is attempting to comply with the F.A.I.R. Policy. Indeed, the F.A.I.R. Policy's limitations provision provides just the opposite: Regardless of how long the conciliation procedure takes, the bar to arbitration "shall not be subject to tolling, equitable or otherwise."

¶52 Finally, Pagliacci does not dispute that the F.A.I.R. Policy contains no exception to Supervisor Review even when the employee's supervisor is the person subjecting the employee to unfair conduct or harassment. In such cases, Supervisor Review, like the confidentiality provision in Zuver, "undermines an employee's confidence in the fairness and honesty of the arbitration process and thus potentially discourages that employee from pursuing a valid ... claim." Zuver, 153 Wash.2d at 315, 103 P.3d 753.

¶53 For these reasons and because full compliance with the F.A.I.R. Policy is a prerequisite to arbitration, the limitations provision in the F.A.I.R. Policy renders the mandatory arbitration policy substantively unconscionable.

¶54 Pagliacci argues that its mandatory arbitration policy is not substantively unconscionable because it does not contain any of the specific types of provisions that our Supreme Court has found to be substantively unconscionable, such as contractual limitations periods, fee-splitting requirements, or limitations on the amount or types of damages recoverable. But we are not limited by the specific types of provisions that the Supreme Court has already deemed substantively unconscionable. Rather, our inquiry is whether the effect of Pagliacci's two-step mandatory arbitration policy is "so one-sided and harsh that it is substantively unconscionable." Zuver, 153 Wash.2d at 318, 103 P.3d 753. For the reasons discussed, we conclude that it is.

Severance

¶55 As a final matter, Pagliacci argues that even if the mandatory arbitration policy is substantively unconscionable due to the F.A.I.R. Policy's limitations provision, the F.A.I.R. Policy must be severed from the mandatory arbitration policy, leaving the agreement to arbitrate intact. We disagree.

¶56 " 'Severance is the usual remedy for substantively unconscionable terms, but where such terms pervade an arbitration agreement, [this court] refuse[s] to sever those provisions and declare[s] the entire agreement void.' "

Woodward v. Emeritus Corp., 192 Wash. App. 584, 602, 368 P.3d 487 (2016) (alterations in original) (quoting Gandee, 176 Wash.2d at 603, 293 P.3d 1197 ). "Stated differently, when severance will 'significantly alter both the tone of the arbitration clause and the nature of the arbitration contemplated by the clause,' the appropriate remedy is to invalidate the entire agreement." Woodward, 192 Wash. App. at 602, 368 P.3d 487 (quoting Gandee, 176 Wash.2d at 607, 293 P.3d 1197 ). Nevertheless, severance cannot cure the procedural deficiencies concerning the formation of an arbitration agreement. Gorden, 180 Wash. App. at 565, 323 P.3d 1074.

¶57 Here, Pagliacci's mandatory arbitration policy is both substantively and procedurally unconscionable, so severance is inappropriate. Cf. Adler, 153 Wash.2d at 350 n.9, 351, 103 P.3d 773 (remanding to trial court for further proceedings regarding procedural unconscionability and noting that if the employee proved his procedural unconscionability claim on remand, "the arbitration agreement would be void").

¶58 Pagliacci chiefly relies on Zuver to argue that severance is required here, but that reliance is misplaced. In Zuver, the court did sever the substantively unconscionable terms from the arbitration agreement. Zuver, 153 Wash.2d at 320-21, 103 P.3d 753. But Zuver is distinguishable because there, the court concluded that the arbitration agreement in question was not procedurally unconscionable. Zuver, 153 Wash.2d at 306, 103 P.3d 753. Additionally, the Zuver court relied in part on the fact that the parties' arbitration agreement contained a severability clause. Zuver, 153 Wash.2d at 320, 103 P.3d 753. Here, severance cannot cure the arbitration policy's procedural deficiencies, and there is no severability clause in the ERA. Therefore, Zuver does not require severance.

¶59 We affirm.

WE CONCUR:

Andrus, J.

Mann, A.C.J.

      Although the trial court did not reach Pagliacci's unconscionability arguments in its written order, it indicated in its oral ruling that it had concerns regarding the Little Book both in terms of procedural unconscionability and substantive unconscionability.

      A superior court's order denying a motion to compel arbitration is not expressly listed as an appealable decision under RAP 2.2, and Pagliacci did not seek discretionary review under RAP 2.3. But in Stein v. Geonerco, Inc., 105 Wash. App. 41, 43-45, 17 P.3d 1266 (2001), we recognized that the right to arbitrate is a "substantial right" under RAP 2.2(a)(3) and held that an order denying a motion to compel arbitration is appealable on an interlocutory basis. Burnett does not argue otherwise.

      9 U.S.C. §§ 1 -16.

      Chapter 7.04A RCW.

      For this reason, we do not decide whether the Federal Arbitration Act applies, an issue that was raised below but not argued on appeal.

      Pagliacci argues in the alternative that the Little Book itself created an arbitration agreement regardless of whether it was incorporated into the ERA. Because we conclude that the mandatory arbitration policy was incorporated by reference into the ERA, we do not address Pagliacci's alternative argument here. But because Pagliacci raises that argument again in the context of procedural unconscionability, we address it in the next section.

      Pagliacci suggests that Burnett was required to file a cross appeal to argue that the parties' agreement to arbitrate is unconscionable. But this suggestion has no merit because we can affirm on any basis supported by the record. Bavand v. OneWest Bank, 196 Wash. App. 813, 825, 385 P.3d 233 (2016).

      (Emphasis added.)

      (Emphasis added.)

      Indeed, Pagliacci itself pointed out below that Burnett "never requested resolution via Pagliacci's internal F.A.I.R. Policy," suggesting that even Pagliacci believed at one time that the F.A.I.R. Policy applied to terminated employees like Burnett.

      Chapter 19.86 RCW.

      Burnett also argues that the mandatory arbitration policy is substantively unconscionable because (1) the procedure prescribed by the F.A.I.R. Policy conflicts with the ERA and (2) Pagliacci reserves for itself a unilateral right to amend the Little Book (and therefore the mandatory arbitration policy). But because we conclude that the mandatory arbitration policy is substantively unconscionable on other grounds, we do not consider these arguments.


source: Caselaw Access Project

author: Melnick, J.

license: Public Domain

text:
    STATE of Washington, Respondent, v. Alexander Jabbaar KITT, Appellant.
    State of Washington, Respondent, v. Jermohnn Elijah Nathaniel Gore, Appellant.
    State of Washington, Respondent, v. Clifford Jacare Krentkowski, Appellant.
    No. 49534-1-II consolidated with No. 49555-4-II No. 49556-2-II
    Court of Appeals of Washington, Division 2.
    Filed June 18, 2019
    Stephanie C. Cunningham, Attorney at Law, 4616 25th Ave. NE, # 552, Seattle, WA, 98105-4183, Maureen Marie Cyr, Washington Appellate Project, 1511 3rd Ave., Ste. 610, Seattle, WA, 98101-3647, Jared Berkeley Steed, Nielsen Broman & Koch PLLC, 1908 E. Madison St., Seattle, WA, 98122-2842, for Appellant.
    Mark Von Wahlde, Pierce County Prosecuting Attorney Office, 930 Tacoma Ave. S., Rm. 946, Tacoma, WA, 98402-2102, for Respondent.
    PUBLISHED IN PART OPINION
   Melnick, J.

¶ 1 The State alleged that on May 1, 2015, Alexander Kitt, Jermohnn Gore, Clifford Krentkowski, and three other men initiated a retaliatory drive-by shooting at a rival gang's territory in Tacoma. Law enforcement officers concluded their gunfire struck and killed Brandon Morris, who was unaffiliated with the rival gang but happened to be in the area. Kitt, Gore, and Krentkowski were jointly tried and convicted of murder in the first degree and four counts of assault in the first degree. In addition, Kitt and Gore were convicted of unlawful possession of a firearm in the first degree, and Gore was convicted of intimidating a witness for threats he made before the trial.

¶ 2 In the published portion of this opinion, we reverse Krentkowski's conviction because his trial counsel had an actual conflict of interest that affected the representation, and the trial court erred by not allowing him to withdraw. In the unpublished portion of this opinion, we affirm the majority of Kitt's and Gore's convictions, but remand for the trial court to dismiss their murder in the second degree convictions with prejudice, conduct a Miller hearing for Gore, and strike specific legal financial obligations (LFOs) for Kitt and Gore.

FACTS

I. INCIDENT

¶ 3 Kitt, Gore, and Krentkowski were all members of the Hilltop Crips street gang.

¶ 4 In the weeks before May 1, LeShaun Alexander, a member of the Knoccout Crips street gang, shot at some members of the Hilltop Crips, including Krentkowski. On the morning of May 1, Alexander shot at Kitt in the Tacoma Hilltop area outside the home of Trevion Tucker, another Hilltop Crips member.

¶ 5 A few minutes after the shooting, Gore called Tucker's house and said he intended to go look for the shooters. A group gathered in a white Cadillac Escalade, driven by fellow Hilltop Crips member Lance Milton-Ausley. The group included Milton-Ausley, Kitt, Gore, Krentkowski, and Tucker.

¶ 6 Kitt brought a backpack that contained two handguns. He kept one and gave the other to Gore. Kitt said he wanted to shoot Alexander. Krentkowski had an AK-47 semiautomatic assault rifle. The group planned to shoot at a convenience store, known as the "red store," in Knoccout territory where Knoccout members were known to gather. They planned to park somewhere near the store, get out, and shoot at it. They also planned to take pictures of themselves in Knoccout territory and post them on social media as a sign of disrespect to the rival gang.

¶ 7 As the group approached the red store, they noticed Alexander's car parked nearby. Milton-Ausley drove into the alley beside the red store. Alexander and several other Knoccout members were in a group near the store.

¶ 8 As soon as they pulled into the alley, Gore and Kitt began shooting in the direction of the store. Each of them fired one of Kitt's handguns. During the shooting, Milton-Ausley drove slowly down the alley. He accelerated away when the shooting subsided. Krentkowski had the assault rifle on his lap but did not shoot. Tucker testified that no one was aiming and none of them saw anyone get shot; they were "just shooting at the store." 14 Report of Proceedings (RP) at 2600.

¶ 9 That same day, Morris and four companions were walking in the alley behind the red store. A bullet fired from the Escalade struck Morris in the head and he died several days later. Another bullet struck a backpack worn by one of Morris's companions, but it did not injure him. None of the Knoccout members near the store was injured.

¶ 10 At the time of the shooting, Kitt was 23 years old, Gore was 16 years old, and Krentkowski was 17 years old.

¶ 11 The State charged Kitt, Gore, and Krentkowski each with one count of murder in the first degree and one count of murder in the second degree for the death of Morris. It also charged each of them with four counts of assault in the first degree, one for each of Morris's companions. It charged Kitt and Gore with unlawful possession of a firearm in the first degree and Gore with intimidating a witness. The case proceeded to a jury trial.

II. CONFLICT OF INTEREST

¶ 12 At the start of trial, Walter Peale, Krentkowski's lawyer, informed the court about a conflict of interest. He stated that he had represented Alexander in an unrelated case, in which the court had granted Peale's motion to withdraw based on his representation of Krentkowski. Peale argued that Krentkowski should be advised about the conflict by an independent counsel before the case could proceed.

¶ 13 The State argued that there was no actual conflict because Alexander was not involved in the case other than that his "name may come up." 1 RP at 10. It explained that it would not be calling Alexander as a witness, but that the facts involved back-and-forth shootings between the Hilltop Crips and the Knoccout Crips and that Alexander was a "principal[ ] on the Knoccoutz side." 1 RP at 10.

¶ 14 The court ruled that no conflict existed that required withdrawal. It stated that, "[i]f they're totally unrelated matters, the representation of either Mr. Krentkowski or Mr. Alexander is not directly adverse to the other client." 1 RP at 31. The court recognized that a conflict would exist if there was "a significant risk that the representation of one or more clients will be materially limited by a lawyer's responsibility to another client, a former client or a third person or by a personal interest of the lawyer," but stated that it would "be surprised that a criminal defense attorney would have such a conflict" and that, even in that case, the rule allowed representation "in certain circumstances." 1 RP at 31-32. The court said Peale could raise the issue again with additional citation to authority.

¶ 15 Several days later, Peale brought a motion to delay jury selection so that he could withdraw and Krentkowski could be appointed a new attorney or represent himself. Peale's motion raised his lack of preparation, his difficulties with the case, and the conflict of interest. The court denied the motion and stated that it had already ruled on Peale's motion to withdraw and substitute counsel. The court engaged in a colloquy with Krentkowski regarding self-representation. After conferring with Peale, Krentkowski withdrew his request to represent himself.

¶ 16 Peale raised the conflict of interest issue again the following day, after an independent counsel had reviewed the situation and opined that Peale had a conflict. The court stated that it had ruled on the issue and again denied Peale's motion to withdraw.

¶ 17 During its opening statement, the State told the jury that the evidence would show that Alexander had shot at Gore and Krentkowski a few days before the red store shooting. Peale then argued that the State had made Alexander a part of the case, "creat[ing] a relationship that [was] entirely different" from how the conflict had previously been explained. 4 RP at 710. He argued that his client was alleged to be the victim of his former client and that a central part of the State's case placed his clients at odds with one another, creating a "much greater risk of violating a variety of rules of professional responsibility." 4 RP at 711. Peale moved for a mistrial. The court denied Peale's mistrial motion and again denied his motion to withdraw.

¶ 18 During witness testimony, Peale raised the issue of his alleged conflict of interest two additional times. The first time, during Milton-Ausley's testimony, he stated that the case would require him to ask,

[W]hat was in the mind of Mr. Alexander? What was his reputation? What was his character? What do I know about him that would offer up an explanation in defense of Mr. Krentkowski? And why am I not pursuing that? And the reason I can't pursue it is because he's a former client.

8 RP at 1471. Peale argued that if evidence about Krentkowski and Alexander's interactions came in, he would be unable to respond due to his conflict of interest. The court delayed ruling until Peale had a chance to interview Tucker about his planned testimony.

¶ 19 After interviewing Tucker, Peale learned that Tucker intended to testify that Alexander was armed and present at the red store shooting and may have fired at Krentkowski. Peale suggested that the court exclude evidence of Alexander's involvement so he could continue representing Krentkowski despite the conflict. He argued that, otherwise, Tucker's testimony would "raise[ ] a considerable amount of information about [his] former client that in defense of [his] present client may be relevant to explore which [he couldn't] explore," preventing him from presenting a defense. 13 RP at 2372. The court denied Peale's motion.

¶ 20 At the conclusion of the trial, the jury returned guilty verdicts as to each count against all three defendants and found that each defendant was armed with a firearm during the commission of each murder and assault offense. The defendants appeal.

ANALYSIS

¶ 21 Krentkowski contends that he received ineffective assistance of counsel because the trial court denied his trial counsel's motion to withdraw based on a conflict of interest. He argues that, because an actual conflict of interest existed, we should presume prejudice and reverse his conviction. We agree.

¶ 22 The Sixth Amendment to the United States Constitution and article I, section 22 of the Washington State Constitution guarantee the right to effective assistance of counsel. Strickland v. Washington , 466 U.S. 668, 685-86, 104 S. Ct. 2052, 80 L. Ed. 2d. 674 (1984) ; State v. Grier , 171 Wash.2d 17, 32, 246 P.3d 1260 (2011).

¶ 23 We review claims of ineffective assistance of counsel de novo. State v. Sutherby , 165 Wash.2d 870, 883, 204 P.3d 916 (2009). To prevail on a claim of ineffective assistance of counsel, the defendant must show both (1) that defense counsel's representation was deficient, and (2) that the deficient representation prejudiced the defendant. Grier , 171 Wash.2d at 32-33, 246 P.3d 1260 ; State v. Linville , 191 Wash.2d 513, 524, 423 P.3d 842 (2018). Representation is deficient if, after considering all the circumstances, the performance falls " 'below an objective standard of reasonableness.' " Grier , 171 Wash.2d at 33, 246 P.3d 1260 (quoting Strickland , 466 U.S. at 688, 104 S.Ct. 2052 ).

¶ 24 Effective assistance of counsel includes a duty of loyalty and a duty to avoid conflicts of interest. State v. McDonald , 143 Wash.2d 506, 511, 22 P.3d 791 (2001). To establish a Sixth Amendment violation based on a conflict of interest, "a defendant must demonstrate that an actual conflict of interest adversely affected his lawyer's performance." State v. Regan , 143 Wash. App. 419, 427, 177 P.3d 783 (2008). This requires the defendant to show "both that his attorney had a conflict of interest and that the conflict adversely affected counsel's performance." State v. Reeder , 181 Wash. App. 897, 909, 330 P.3d 786 (2014). If the defendant meets this two-part test, prejudice is presumed. Reeder , 181 Wash. App. at 909, 330 P.3d 786.

¶ 25 To show that the conflict adversely affected his lawyer's performance, the defendant must show that the conflict either " 'cause[d] some lapse in representation contrary to the defendant's interests,' " or " 'likely' affected particular aspects of counsel's advocacy on behalf of the defendant." Regan , 143 Wash. App. at 428, 177 P.3d 783 (quoting State v. Robinson , 79 Wash. App. 386, 395, 902 P.2d 652 (1995) and United States v. Miskinis , 966 F.2d 1263, 1268 (9th Cir. 1992) ). "[T]he possibility of a conflict [is] not enough to warrant reversal of a conviction." State v. Dhaliwal , 150 Wash.2d 559, 573, 79 P.3d 432 (2003).

¶ 26 We review a trial court's decision on a motion to substitute counsel for an abuse of discretion. Reeder , 181 Wash. App. at 908, 330 P.3d 786. However, whether the circumstances demonstrate a conflict under ethical rules is a question of law we review de novo. Regan , 143 Wash. App. at 428, 177 P.3d 783.

¶ 27 "An actual conflict of interest exists when a defense attorney owes duties to a party whose interests are adverse to those of the defendant." State v. White , 80 Wash. App. 406, 411-12, 907 P.2d 310 (1995). The matters alleged to be in conflict must be "substantially related." State v. MacDonald , 122 Wash. App. 804, 813, 95 P.3d 1248 (2004).

¶ 28 RPC 1.7(a) provides that a concurrent conflict of interest exists if "the representation of one client will be directly adverse to another client" or "there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer." RPC 1.9(c) prohibits a lawyer who has formerly represented a client from "us[ing] information relating to the representation to the disadvantage of the former client" except as the ethical rules would permit or require.

¶ 29 To determine whether an actual conflict exists, the trial court should perform a three-prong factual inquiry:

"First, the court reconstructs the scope of the facts involved in the former representation and projects the scope of the facts that will be involved in the second representation. Second, the court assumes that the lawyer obtained confidential client information about all facts within the scope of the former representation. Third, the court then determines whether any factual matter in the former representation is so similar to any material factual matter in the latter representation that a lawyer would consider it useful in advancing the interests of the client in the latter representation."

MacDonald , 122 Wash. App. at 813, 95 P.3d 1248 (quoting State v. Hunsaker , 74 Wash. App. 38, 44, 873 P.2d 540 (1994) ).

¶ 30 In White , the defendant's lawyer had been appointed to represent a codefendant earlier in the case. 80 Wash. App. at 408-09, 907 P.2d 310. He reviewed the first client's file and police reports and recommended to the first client's relative that the first client should consider a guilty plea, but he never met with the first client. White , 80 Wash. App. at 408-09, 907 P.2d 310. Eleven days after his appointment, the lawyer was replaced. White , 80 Wash. App. at 409, 907 P.2d 310. Two weeks later, the court appointed the lawyer to represent White. White , 80 Wash. App. at 409, 907 P.2d 310. Neither party raised the conflict issue until after trial, when the lawyer noted in an affidavit that the police report from White's case had "seemed familiar" but he had not realized he had represented two codefendants until after it was brought to his attention. White , 80 Wash. App. at 409, 907 P.2d 310.

¶ 31 White concluded that the attorney had not " 'actively' represented conflicting interests" because he "never directly communicated with [the codefendant]" and was not "privy to any confidences that could create an active conflict of interest." 80 Wash. App. at 412, 907 P.2d 310. There was "nothing in the record to support White's allegation that Appointed Counsel's allegiance to him was impaired." White , 80 Wash. App. at 412, 907 P.2d 310.

¶ 32 In MacDonald , the trial court disqualified the defendant's chosen defense lawyer because of a conflict of interest. 122 Wash. App. at 812, 95 P.3d 1248. The disqualified lawyer had represented the victim's mother in an unrelated marital dissolution case. MacDonald , 122 Wash. App. at 812, 95 P.3d 1248. Although the matters were completely unrelated, the court assumed the lawyer had received confidential information about the victim in the course of representing her mother. MacDonald , 122 Wash. App. at 813-14, 95 P.3d 1248. This information "was relevant to [the victim's] credibility and, potentially, her current rape accusation." MacDonald , 122 Wash. App. at 814, 95 P.3d 1248. Because the marital dissolution action "would have necessitated receiving information about" the victim, and her testimony was "the sole evidence against" the defendant, a conflict existed and the lawyer could not represent the defendant. MacDonald , 122 Wash. App. at 814, 95 P.3d 1248.

¶ 33 In Dhaliwal , the defendant's lawyer had represented several witnesses who testified at trial. 150 Wash.2d at 564, 79 P.3d 432. The representation of the witnesses occurred both prior to and during the defendant's case. Dhaliwal , 150 Wash.2d at 564-65, 79 P.3d 432. The trial court asked the lawyer about his representation of the witnesses and the lawyer said there was no conflict. Dhaliwal , 150 Wash.2d at 565, 79 P.3d 432. Dhaliwal never objected and he said he wanted the lawyer to continue representing him. Dhaliwal , 150 Wash.2d at 565, 79 P.3d 432. The other representation involved a shareholder action which may have been related to the motive for the murder at issue in the case. Dhaliwal , 150 Wash.2d at 572, 79 P.3d 432.

¶ 34 Dhaliwal focused on the lawyer's actual performance at trial and concluded that Dhaliwal showed "the possibility that his attorney was representing conflicting interests," but "failed to establish an actual conflict because he ha[d] not shown how [his lawyer's] concurrent representation of the witnesses ... affected [his] performance at trial." 150 Wash.2d at 573, 79 P.3d 432. Dhaliwal did not show a "strong possibility that a conflict of interest had an effect on [his lawyer's] performance." Dhaliwal , 150 Wash.2d at 574, 79 P.3d 432.

¶ 35 In this case, Peale repeatedly raised a conflict of interest based on his representation of a rival gang member. Trial testimony established that Alexander had shot at Kitt the morning of the shooting and had shot at Krentkowski a few weeks prior. Alexander was one of the intended targets of the red store shooting. Peale said that the State's case raised a considerable amount of information about Alexander that may be relevant to his defense of Krentkowski, but that he could not explore this information because of his ongoing duty to Alexander.

¶ 36 We accept Peale's representations that he learned confidential information in his representation of Alexander that he could not use to defend Krentkowski. Although Peale no longer represented Alexander at the time of trial, RPC 1.9(c)(1) prohibited him from using any confidential information he had obtained in his representation of Krentkowski. Peale raised numerous issues that could have been helpful to his defense of Krentkowski that he could not explore due to his ongoing duty to Alexander, such as Alexander's reputation and character and his relationship to Krentkowski. He was unable to pursue a defense relying on this information because Alexander was his former client.

¶ 37 This case bears similarities to Dhaliwal , where the attorney represented numerous witnesses in the case. However, unlike in Dhaliwal , Peale raised the conflict numerous times before the trial court, repeatedly claiming that an actual conflict existed. Additionally, an independent counsel spoke with Krentkowski and concluded that Peale had a conflict of interest.

¶ 38 Peale had an actual conflict of interest that affected his defense of Krentkowski. He repeatedly informed the trial court of this conflict and stated that the conflict would limit his representation of Krentkowski throughout the trial. We conclude that Krentkowski received ineffective assistance of counsel. In so ruling, we are mindful that the lawyer made numerous motions to withdraw due to the conflict, and the court denied all of them. Although Krentkowski couches his argument as ineffective assistance of counsel, the true error is in the court's failure to grant the motions to withdraw. We reverse Krentkowski's convictions.

¶ 39 A majority of the panel having determined that only the foregoing portion of this opinion will be printed in the Washington Appellate Reports and that the remainder shall be filed for public record pursuant to RCW 2.06.040, it is so ordered.

We concur:

Worswick, P.J.

Sutton, J.

      Miller v. Alabama , 567 U.S. 460, 132 S. Ct. 2455, 183 L. Ed. 2d 407 (2012).

      The following facts provide some background information and relate to the published portion of this opinion. Additional relevant facts will be related in the unpublished portion.

      Witnesses related the following events at trial.