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Henley v. Lee11/6/2000
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.
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 lawye
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