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                                                                                 FILED
                                                                              APRIL 29, 2014
                                                                        In the Office of the Clerk of Court
                                                                      WA State Court of Appeals, Division III



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                IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
!                                  DIVISION THREE



I    KASSA INSURANCE SERVICES, INC., a ) 

     Washington Corporation,           )


                          Respondent and
                          Cross-Appellant,
                                                    )

                                                    )

                                                    )

                                                              No. 31196-1-111
                                                              (consolidated with
                                                              No. 31300-0-111)


                                                    )

                   v.                               )         UNPUBLISHED OPINION
                                                    )
     RYAN PUGH and JANE DOE PUGH, a                 )
     Marital Community, and RJC/CAK, INC. a         )
     Washington Corporation,                        )
                                                    )
                          Appellant.                )


            BROWN, J.-Insurance agent Ryan Pugh and insurance agency RJC/CAK, Inc.

     (RJC) appeal the trial court's judgment awarded to Kassa Insurance Services, Inc.

     (Kassa). The trial court decided Mr. Pugh had misappropriated trade secrets before he

     left Kassa's agency to work with RJC and RJC had thereafter tortiously interfered with a

     Kassa business expectancy. Mr. Pugh contends the trial court erred in (1) finding him

     and his marital community liable for misappropriating trade secrets, (2) calculating

     damages and awarding prejudgment interest, (3) disallowing his mitigation of damages

     affirmative defense, and (4) awarding Kassa attorney fees and costs. RJC contends the

     trial court erred in finding tortious interference liability, calculating damages, and
No. 31196-1-111 consol. wiNo. 31300-0-111
Kassa Ins. Servs. v. Pugh


awarding prejudgment interest. On cross appeal, Kassa contends the trial court erred in

failing to hold RJC vicariously liable for misappropriating trade secrets. We affirm all but

remand to vacate the awards of prejudgment interest against Mr. Pugh and RJC, and to

modify the cost award.

                                          FACTS

       Tim Kassa incorporated Kassa in 1998 as an insurance claims-adjusting firm in

Spokane. In late 2002 or early 2003, Mr. Kassa decided to sell insurance as well, and

added an agency department on a separate floor of his business. Mr. Kassa hired Mr.

Pugh out of college as an agent in his new department. Mr. Kassa trained Mr. Pugh

and paid him a combination of salary and commission. Mr. Pugh developed clients by

"cold calling," getting referrals, and following leads from other Kassa employees.

Report of Proceedings (RP) at 76.

      Mr. Pugh had no written employment contract and no noncompete covenant. In

about August 2005, he asked Mr. Kassa for a written employment agreement to, in part,

establish his ownership of the "book of business," the client list he developed at Kassa.

RP at 284. But after Mr. Kassa initially agreed to run Mr. Pugh's contract suggestions

by an attorney, Mr. Kassa decided a written agreement was unnecessary. Mr. Pugh

asserts he was told he had a right to his book of business; Mr. Kassa disagrees.

      On February 7,2007, before he had two employment discussions with RJC

owner Joe Connor, Mr. Pugh had a chance discussion with someone from RJC about

employment there. Five days later, late on Sunday night, Mr. Pugh and his wife went to



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No. 31196-1-111 conso!. wINo. 31300-0-111
Kassa Ins. Servs. v. Pugh


Kassa's office and began preparing a list of clients he worked with, using information

from the file folders kept behind the reception desk. He sent the list to his home e-mail

address. Mr. Kassa and his wife happened to drive by the office while Mr. Pugh was

there and asked him the next day what he had been doing. He told them his home

computer was broken, so he had been working on his taxes at the office.

      When Mr. Pugh told Mr. Kassa on February 27 he was taking a job at another

agency, Mr. Kassa asked Mr. Pugh not to sabotage Kassa by taking client information

with him. Mr. Pugh insisted he owned his book of business, but Mr. Kassa disagreed

and threatened to sue. Mr. Kassa later agreed to pay Mr. Pugh for the commissions he

earned after leaving Kassa through the date he began working for RJC.

      On March 1, 2007, Mr. Pugh signed an employment agreement with RJC and

began working there as an insurance agent. The agreement provided Mr. Pugh was

100 percent vested in deferred compensation for commissions he brought to RJC from

the first day of employment, unlike other new employees who typically waited five years.

      Mr. Pugh immediately began calling the more than 300 people on the client list.

Within his first month at RJC, he had contacted most on the list and had sent out "agent

of record" change forms to formally transfer their policies from Kassa to RJC. Exs. 16,

17. Once the agent of record forms had been signed and the policies were renewed,

the clients were placed in RJC's files. According to Mr. Kassa, within two weeks after

Mr. Pugh began at RJC, Kassa received 160 of 260 agent of record change forms. Mr.




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     No. 31196·1·111 consol. wINo. 31300-0-111
     Kassa Ins. Servs. v. Pugh

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     Kassa testified the lost clients-around 135 families, some with multiple policies­
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i    represented a $40,000 per year loss to the agency for the three years it took to recover.
1           In April 2007, Kassa entered into an agreement to perform adjusting services for
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     Continental Western Group, which writes commercial insurance. Tonia Kassa, Mr.

     Kassa's wife, was primarily responsible for adjusting Continental claims. She testified

     she had never received a complaint from Continental and the number of claims received

     from the insurance group steadily increased over time. In May 2008, Continental

     stopped sending claims to Kassa. Later, Mr. Kassa heard from a Continental employee

     that an agency had called Continental, asserted it was a conflict of interest for Kassa to

     both sell insurance and adjust claims from other agencies, and demanded Continental

     not use Kassa for adjusting services. Over defense objections, Mr. Kassa testified he

     later read interoffice e-mails from Continental indicating someone from RJC complained

     Kassa had tried to "drum up business" while adjusting claims for Continental. RP at

     126.

            In August 2008, Kassa sued, alleging (1) Mr. Pugh misappropriated trade secrets

     and breached his employment contract, and (2) RJC vicariously misappropriated trade

     secrets and tortiously interfered with a business expectancy. Kassa later abandoned a

     consumer protection claim against RJC. After a bench trial, the court found in favor of

     Kassa on all claims against Mr. Pugh. The trial court dismissed the vicarious liability

     claim against RJC, but concluded RJC tortiously interfered with Kassa's business

     expectancies. Mr. Pugh was ordered to pay Kassa $84,640, including doubled



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Kassa Ins. Servs. v. Pugh


exemplary damages, for willful and malicious misappropriation of trade secrets, plus

$17,738 for unjust enrichment. The trial court ordered Mr. Pugh to pay Kassa $156,388

in attorney fees, $21,482 in costs, and $37,950 in prejudgment interest. Kassa was

awarded $86,000 from RJC, plus $18,481 in prejudgment interest. Mr. Pugh and RJC

appealed. Kassa cross appealed.

                                         ANALYSIS

                           A. Misappropriation of Trade Secrets

       The issue is whether the trial court erred in concluding Mr. Pugh misappropriated

trade secrets under Washington's Uniform Trade Secrets Act (UTSA), chapter 19.108

RCW. Mr. Pugh contends the client list is not a trade secret, and even if it were, he did

not willfully and maliciously misappropriate it. After a bench trial, our review is limited to

determining whether substantial evidence supports the trial court's findings of fact, and

if so, whether the findings support the trial court's conclusions of law and judgment.

Saviano v. Westport Amusements, Inc., 144 Wn. App. 72, 78,180 P.3d 874 (2008).

Unchallenged findings are treated as verities on appeal. Nordstrom Credit, Inc. v. Oep't

of Revenue, 120 Wn.2d 935,941,845 P.2d 1331 {1993}.

       Generally, employees like Mr. Pugh, who do not sign an agreement not to

compete, are free to engage in competitive employment after leaving an employer. Ed

Nowogroski Ins., Inc. v. Rucker, 137 Wn.2d 427,437,971 P.2d 936 (1999). This

means the former employee "may freely use general knowledge, skills, and experience

acquired under his or her former employer." Id. But the former employee "remains



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Kassa Ins. Servs. v. Pugh


under a duty not to use or disclose, to the detriment of the former employer, trade

secrets acquired in the course of previous employment." Id.

      Although the definition of a trade secret is a matter of law, the determination of

whether specific information is a trade secret is a question of fact. West   v. Port of
Olympia, 146 Wn. App. 108, 120,192 P.3d 926 (2008). Plaintiffs asserting a trade

secrets claim under the UTSA must first prove the existence of legally protectable

secrets. Boeing Co. v. Sierracin Corp., 108 Wn.2d 38, 49,738 P.2d 665 (1987). The

UTSA defines a trade secret as

             information, including a formula, pattern, compilation, program,
      device, method, technique, or process that:
             (a) Derives independent economic value, actual or potential, from
      not being generally known to, and not being readily ascertainable by
      proper means by, other persons who can obtain economic value from its
      disclosure or use; and
             (b) Is the subject of efforts that are reasonable under the
      circumstances to maintain its secrecy.

RCW 19.1 08.01 0(4)(a)(b).

      The trial court found that substantial, uncontroverted evidence from all of the

parties indicated the Kassa client list, or book of business, had independent economic

value, "although the amount of that value was in dispute." Clerk's Papers (CP) at 866.

Mr. Pugh argues the list of names, policy numbers, telephone numbers, and addresses

does not constitute a protectable trade secret because the information was a public

commodity and was easily ascertainable by any insurance agent with access to a             ,
marketing service.




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Kassa Ins. Servs. v. Pugh


       As noted in Boeing, 108 Wn.2d at 50, a trade secrets plaintiff does not need to

prove that every element of a compilation of information is unavailable elsewhere.

"Such a burden would be insurmountable since trade secrets frequently contain

elements that by themselves may be in the public domain but together qualify as trade

secrets." Id. A confidential customer list generally is a trade secret if the information in

it is not readily accessible from trade directories or telephone books and is the result of

effort and expense on the employer's part. Nowogroski, 137 Wn.2d at 441-42; Thola v.

Henschell, 140 Wn. App. 70, 78, 164 P.3d 524 (2007).1 Such a list may be "entitled to

trade secret protection if the claimant demonstrates it compiled the list by expending

substantial efforts to identify and cultivate its customer base such that it would be

difficult for a competitor to acquire or duplicate the same information." Calis; v. Unified

Fin. Servs., LLC, 232 Ariz. 103, 107,302 P.3d 628 (2013) (applying Arizona's UTSA,

which employs the same definition of "trade secret"). See also McCallum v. Allstate

Prop. & Cas. Ins. Co., 149 Wn. App. 412, 424,204 P.3d 944 (2000) (a key factor in

determining whether information has economic value under the UTSA is the effort and

expense that was expended to develop the information).

      The trial court found when Kassa started selling insurance, it "decided that

clientele would be generated from scratch" rather than from the purchase of a book of

business from a marketing service. CP at 863. Mr. Pugh did not assign error to this

finding of fact, and it is therefore a verity on appeal. Nordstrom Credit, 120 Wn.2d at


      1 In Nowogroski and Thola, the appellants did not dispute the fact that the
information was trade secrets. Nowogroski held that even memorized client information

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Kassa Ins. Servs. v. Pugh


941. Mr. Kassa described substantial efforts to establish a customer base from cold

calls, referrals, acquaintances, leads from Kassa employees, and some leads that were

bought from an online lead service. He testified Mr. Pugh's salary did not equal the

commissions from these customers until four years after Mr. Pugh was employed.

Although the telephone numbers and addresses of the customers may have been

readily ascertainable in a telephone book, the names of the policyholders had been

obtained with substantial effort. Moreover, the nonpublic policy numbers of each

customer-many of them with multiple insurance policies through Kassa-are included

on the list. These policy numbers may be used to access extensive policy information,

including a customer's Social Security number, education, career, family members,

birthdays, driver's license, and home and vehicle details. Mr. Pugh obtained economic

value by using the list to elicit transfers of Kassa customers to RJC. Under these

circumstances, the client list satisfies the first element of a trade secret under RCW

19.108.010(4)(a).

       Mr. Pugh argues Kassa did not use reasonable efforts to maintain the secrecy of

the client information, the second element of a protectable trade secret. RCW

19.108.010(4)(b). The evidence, however, supports the trial court's finding that "Kassa

employed efforts that were reasonable under the circumstances to maintain the secrecy

of the client lists." CP at 866. Mr. Kassa testified that Kassa kept its master client list

password-protected on the computer and the individual client files in paper folders in a



could be a confidential trade secret. 137 Wn.2d at 450.

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Kassa Ins. Servs. v. Pugh


protected area unavailable to the public. Solely employees had keys to the building.

During company meetings and employee training, he testified, client confidentiality was

frequently discussed and the employees were told that client information was not to be

taken out of the office. Kassa's administrator, JUlie Kemink, testified that the company

had periodic meetings on policy, including the confidentiality of client information. She

testified the insurance companies they represented required this security.

          Mr. Pugh argues any secrecy was lost when Kassa sent him monthly

commission statements containing the client names and policy numbers. By doing so,

he contends, Kassa was "free, open and reckless" with the client information.

Appellant's (Pugh) Br. at 20. The nature of the employment relationship, however,

"imposes a duty on employees and former employees not to use or disclose the

employer's trade secrets." Nowogroski, 137 Wn.2d at 439. Otherwise secret client

information does not lose its confidentiality just because it is revealed to a former

employee who is entitled to that information and who is under a duty not to disclose it.

While Mr. Pugh correctly notes he received a commission statement from Kassa

containing some client names and policy numbers after he started working for RJC, Mr.

Pugh had already taken this information and had begun contacting these clients by that

time. On balance, we conclude sufficient evidence supports the trial court's finding that

the client list, or book of business, was a confidential trade secret. West, 146 Wn. App.

at 120.




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Kassa Ins. Servs. v. Pugh


       Finally, Mr. Pugh argues the client list was not willfully and maliciously

misappropriated under RCW 19.108.010(2) and RCW 19.108.030(1). Relevant to these

facts, "misappropriation" is the disclosure or use of a trade secret without express or

implied consent by a person who has reason to know that the knowledge of the trade

secret was "acquired under circumstances giving rise to a duty to maintain its secrecy or

limit its use," or "derived from or through a person who owed a duty to the person

seeking relief to maintain its secrecy or limit its use." RCW 19.108.01 0(2)(b )(ii). If the

misappropriation is willful and malicious, the court may award exemplary damages up to

twice the actual damages. RCW 19.108.030.

       Mr. Pugh argues he thought he owned the client list or at least thought he had

Mr. Kassa's consent to use it. But the record shows Mr. Pugh went to Kassa late on a

Sunday night before he left employment, compiled the client list from the paper files and

e-mailed them to his home address "in a clandestine manner." CP at 865. Asked the

next day what he had been doing after business hours, he falsely claimed he had been

working on his taxes. When he told Mr. Kassa he was quitting and Mr. Kassa told him

not to take client information, Mr. Pugh did not reveal he had already e-mailed the

information to his home computer. As the trial court stated, "One who believed he truly

owned the lists might reasonably be expected to inform his employer of the e-mail

transmission of the client lists." CP at 865. Substantial evidence supports the trial

court's finding that Mr. Pugh intentionally took the confidential client information without

permission, misappropriating Kassa's trade secrets.



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     No. 31196-1-111 consol. wINo. 31300-0-111
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            A trial court's decision to award exemplary damages for willful and malicious

     misappropriation under UTSA is discretionary and will not be reversed unless the trial


I    court clearly abused its discretion. Boeing, 108 Wn.2d at 61-62; Tho/a, 140 Wn. App. at




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     89. Because neither "willful" nor "malicious" is defined by statute, we resort to dictionary

     definitions for clarification. State v. Kintz, 169 Wn.2d 537, 547, 238 P.3d 470 (2010).

     "Willful" is synonymous with "voluntary" and "intentional." BLACK'S LAw DICTIONARY 1630

     (8th ed. 2004). And "malicious" is defined as "1. Substantially certain to cause injury.

     2. Without just cause or excuse." BLACK'S, supra, at 977. The record shows Mr. Pugh

     knew he acted with dubious legality, clandestinely obtained the client list, and

     intentionally took and used the client list for his own advantage. Substantial evidence

     supports the conclusion that his misappropriation was voluntary, substantially certain to

     cause injury to Kassa, and without just cause or excuse. Accordingly, the trial court did

     not clearly abuse its discretion in concluding Mr. Pugh willfully and maliciously

     misappropriated trade secrets. See Boeing, 108 Wn.2d at 62.

                                   B. Marital Community Liability .

           The issue is whether the trial court properly awarded judgment against the Pugh

     marital community for the intentional tort of willful and malicious misappropriation of

     trade secrets. Mr. Pugh contends the marital community is not liable for his individual

     tort. Whether Kassa's claims against Mr. Pugh implicate the Pughs' community

     property is a mixed question of fact and law we review de novo. Clayton v. Wilson, 168

     Wn.2d 57, 62, 227 P.3d 278 (2010).



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    Kassa Ins. Servs. ~Pugh
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I          Generally a marital community is not liable for the spouse's torts unless the

    wrongful act either (1) "'results [in] or is intended to result in a benefit to the

I   community,'" or (2) is committed while engaged in the business of the community. Id. at


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    63 (quoting LaFramboise v. Schmidt, 42 Wn.2d 198,200,254 P.2d 485 (1953)). Mr.



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    Pugh was accompanied by his wife when he collected, copied, and e-mailed the client

    list to his home computer. The client information was used by him to benefit his work at

1   RJC and to benefit the community's income. His tort resulted in a benefit to the
i
I   community and was committed while engaged in the community's business. Thus,
•
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    substantial evidence supports the trial court's award against the Pugh marital

    community for Mr. Pugh's tort.

            B. Damage Calculations, Mitigating Damages, and Prejudgment Interest

           The issue is whether the trial court erred in calculating the damages award

    against the Pughs, disallowing their mitigation affirmative defense, and awarding

    prejudgment interest against them. We review a damages award for abuse of

    discretion. Banuelos v. TSA Wash., Inc., 134 Wn. App. 607, 613,141 P.3d 652 (2006).

    See also Boeing, 108 Wn.2d at 61-62 (the decision to award exemplary damages under

    RCW 19.108.030(2) is discretionary and the amount awarded will not be reversed

    unless clearly erroneous). A trial court's award of damages will be reversed if it is

    outside the range of relevant evidence, shocks the conscience, or results from passion

    or prejudice. Mason v. Mortg. Am., Inc., 114 Wn.2d 842,850,792 P.2d 142 (1990).




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I     No. 31196-1-111 con so!. wINo. 31300-0-111
      Kassa Ins. Servs. v. Pugh


             Under RCW 19.108.030(1), the complainant in an action for misappropriation of
1
I     trade secrets may recover damages "for the actual loss caused by misappropriation."

      Traditionally, these damages are calculated by determining the profits on sales
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      attributed to the use of the trade secrets. Petters v. Williamson & Assoc., Inc., 151 Wn.
1


      App. 154, 165,210 P.3d 1048 (2009) (citing RESTATEMENT (THIRD) OF UNFAIR

      COMPETITION § 45 cmt. f., at 516-17 (1995)).

            At trial, Kassa presented the testimony of Dan Harper, a certified public

      accountant experienced in forensic accounting and business valuation, to show how the

      transfer of clients to RJC economically impacted Kassa. According to his research,

      RJC earned commissions of approximately $30,366 in 2008 on former Kassa accounts.

      Taking into account that insurance agencies from 2007 through 2008 experienced "slow

      organic growth" affecting the sale value of an agency's book of business, Mr. Harper

      estimated the sale value of Kassa's lost accounts was 1.5 times RJC's commissions, or

      $42,320. RP at 311, 320. He opined this was a conservative estimate of the economic

      consequences to Kassa of losing these accounts to RJC, and he estimated the value of

      the accounts to RJC was actually three times that amount. Mr. Kassa testified he

      estimated losses of around $40,000 per year for the 5 years it took his agency to

      recover from the loss of the accounts, for a total of $200,000.

            The trial court adopted Mr. Harper's calculations and concluded Kassa's actual

      damages were $42,320. Mr. Pugh argues Mr. Harper's estimate fails to take into

      account the testimony of his expert, Thomas Lees, who calculated the total



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No. 31196-1-111 consol. wINo. 31300-0-111
Kassa Ins. Servs. v. Pugh


commissions for Kassa accounts transferred to RJC in 2007 and 2008 were close to 


$19,000, but discounted this by .75 based on what he considered a lack of profitability in 


the Kassa client list due to the lack of goodwill or of a noncompete agreement. 


Although he did not do the math, $19,000 times .75 is $14,250. 


       Thus, the range of evidence before the trial court was $14,250 to $200,000. Mr.

Harper's $42,320 damages estimate for Mr. Pugh's misappropriation of Kassa's trade

secrets was well within the range of evidence. The trial court then properly exercised its

discretion to double the damages to $84,640 under RCW 19.108.030{2) for willful and

malicious misappropriation. Because the trial court's computation of damages for Mr.

Pugh's misappropriation of trade secrets is within the range of credible evidence, we

find no abuse of discretion.

       The UTSA specifically allows damages for unjust enrichment: "A complainant

also may recover for the unjust enrichment caused by misappropriation that is not taken

into account in computing damages for actual loss." RCW 19.108.030(1). The trial

court awarded Kassa $17,738 for the value vested in Mr. Pugh's deferred compensation

for commissions brought to RJC from Kassa. The court adopted the calculations in Mr.

Harper's written financial analysis, which multiplied the annual premiums produced by

Mr. Pugh at RJC by an estimated premium renewal rate of 11 percent to get a total of

$19,535, reduced by ,present value to $17,738. 2 Mr. Pugh argues the award cannot be



       2 At trial, Mr. Harper related RJC's annual premiums produced by Mr. Pugh were
higher: $210,914. He related the actual value of the unjust enrichment was therefore 11
percent of $210,914, or $20,656.

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No. 31196-1-111 consol. wINo. 31300-0-111
Kassa Ins. Servs. v. Pugh


justified because the deferred compensation amount will be unknown until five years

after he retires from RJC, an unknown date. He points out his evidence shows

insurance renewals actually deplete by 15 percent annually.

       Although the amount recoverable for unjust enrichment may be difficult to

ascertain with preciseness, Kassa is entitled to compensation under RCW

19.108.030(1). Mr. Pugh's 100 percent deferred compensation vesting for commissions

he brought to RJC is a benefit to him separate from the damages Kassa suffered for the

actual loss of the clients and directly arises from the misappropriated client information.

The difficulty of proving the exact damages for this unjust enrichment should not profit

the tortfeasor. See Box v. Crowther, 3 Wn. App. 67, 75, 473 P.2d 417 (1970)

(discussing damages for lost profits). The trial court's unjust enrichment award is within

the range of credible evidence and is therefore a proper exercise of discretion. Mason,

114 Wn.2d at 850.

       Mr. Pugh contends the trial court erroneously refused to consider his mitigation of

damages affirmative defense because Kassa waited over a year to file suit. He argues

Kassa should have attempted to prevent the solicitation of its clients by seeking an

injunction under RCW 19.108.020 or at least by protesting. He notes Kassa actually

agreed to pay Mr. Pugh commissions earned on the accounts after he left Kassa, up to

the date Mr. Pugh began working for RJC.

      The doctrine of avoidable consequences, also called mitigation of damages,

prevents recovery of damages the injured party could have avoided with reasonable



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        No. 31196-1-111 conso!. wiNo. 31300-0-111 

        Kassalns.Servs. ~Pugh 


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1       effort. Bullard   v. Bailey, 91 Wn. App. 750, 759, 959 P.2d 1122 (1998); Cobb v.
i
~       Snohomish County, 86 Wn. App. 223, 230, 935 P.2d 1384 (1997). The wrongdoer has
1
f       the burden to prove the failure to mitigate. Bullard, 91 Wn. App. at 759-60; Cobb, 86
t
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        Wn. App. at 230. The doctrine requires the plaintiff to act as a reasonable person: '''If a
1
i       choice of two reasonable courses presents itself, the person whose wrong forced the

I       choice cannot complain that one rather than the other is chosen.'" Cobb, 86 Wn. App.


I       at 233 (quoting Hoglund v. Klein, 49 Wn.2d 216, 221, 298 P.2d 1099 (1956».

        Additionally, if the damages arise from intentional conduct, no duty to mitigate arises.

        Bullard, 91 Wn. App. at 760; Cobb, 86 Wn. App. at 232.

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               The UTSA specifically affords the injured plaintiff a choice of remedies: an

        injunction andlor damages for the actual loss caused by misappropriation of trade

        secrets. RCW 19.108.020(1), .030(1}. Because most of the clients on the

        misappropriated list had been contacted about moving their accounts to RJC within the
                                                                                                          I
                                                                                                          r
        first month after Mr. Pugh left Kassa, an injunction had little likelihood of turning the tide.

        The choice of a suit for damages was reasonable as a result. And, the trial court found

        Mr. Pugh's misappropriation was willful and malicious. Accordingly, the doctrine of

        avoidable consequences was unavailable to him. Bullard, 91 Wn. App. at 760; Cobb,

        86 Wn. App. at 232.

               The court ordered Mr. Pugh to pay $37,949.66 in prejudgment interest. He

        contends prejudgment interest is inappropriate because Kassa's damages due to the

        misappropriation are unliquidated. We review a trial court's award of prejudgment



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No. 31196-1-111 consol. wiNo. 31300-0-111
Kassa Ins. Servs. v. Pugh


interest for abuse of discretion. Scoccolo Constr., Inc. v. City of Renton, 158 Wn.2d

506, 519, 145 P.3d 371 (2006). The trial court abuses its discretion if its decision is

manifestly unreasonable or exercised on untenable grounds or for untenable reasons.

State ex rei. Carroll v. Junker, 79 Wn.2d 12, 26,482 P.2d 775 (1971).

       Prejudgment interest is appropriate if the damages amount claimed is liquidated.

Dep't of Corr. v. Fluor Daniel, Inc., 160 Wn.2d 786, 789, 161 P.3d 372 (2007); Spradlin

Rock Prods., Inc. v. Pub. Util. Dist. No.1 of Grays Harbor County, 164 Wn. App. 641,

665, 266 P .3d 229 (2011). Damages are "liquidated" if they can be determined by

reference to a fixed standard or if the evidence provides data that makes it possible to

compute the amount with exactness, without reliance on opinion or discretion. Fluor,

160 Wn.2d at 789; Spradlin, 164 Wn. App. at 665. "It is the character of the original

claim, rather than the court's ultimate method for awarding damages, that determines

whether prejudgment interest is allowable." Spradlin, 164 Wn. App. at 665 (citing Prier

v. Refrigeration Eng'g Co., 74 Wn.2d 25, 33,442 P.2d 621 (1968». Damages "that

cannot be calculated without the use of discretion are not liquidated." Fluor, 160 Wn.2d

at 790. That a claim is disputed does not render it unliquidated, as long as the

damages may be determined by reference to an objective source, such as fair market

value. Egerer v. CSR West, LLC, 116 Wn. App. 645, 653, 67 P.3d 1128 (2003).

      The trial court ordered Mr. Pugh to pay prejudgment interest on the trade secrets

misappropriation and unjust enrichment damages. As discussed above, the court had          I
disputed testimony concerning the proper method of calculating Kassa's losses due to
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I
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        those claims. The trial court exercised discretion to determine which of the expert and

        lay opinions to rely upon, without a fixed standard provided by contract term, statute, or


I
i
        objective source. Calculation of the unjust enrichment damages was complicated by

        the uncertainty of the value of the deferred compensation related to commissions from

I
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        former Kassa clients. Accordingly, Kassa's claims for damages against Mr. Pugh were


i

]
        uncertain, and therefore not liquidated. Fluor, 160 Wn.2d at 789; Spradlin, 164 Wn. 


I       App. at 665; Douglas Nw., Inc.   v.   Bill O'Brien & Sons Constr., Inc.. 64 Wn. App. 661,

        691-92,828 P.2d 565 (1992).3 Thus, the trial court's award of prejudgment interest


I       against Mr. Pugh was exercised on untenable grounds. Therefore. we conclude the trial

        court abused its discretion and reverse solely the prejudgment interest portion of the

        judgment against Mr. Pugh. Carroll, 79 Wn.2d at 26.

                                       C. Attorney Fees and Costs

               The issue is whether the trial court erred in its award of attorney fees and costs.

        Under RCW 19.108.040, a trial court may award reasonable attorney fees to the

        prevailing party on a claim of willful and malicious misappropriation of trade secrets.

        Review of an attorney fees award is for abuse of discretion. Chuong Van Pham         v.
        Seattle City Light, 159 Wn.2d 527. 538, 151 P.3d 976 (2007); Boeing, 108 Wn.2d at 65.




               3 We note prejudgment interest is generally disallowed for exemplary damages,
        such as the double damages awarded here for willful and malicious misappropriation of
        trade secrets. See Blake v. Grant. 65 Wn.2d 410, 413,397 P.2d 843 (1964); JDFJ
        Corp. v. Int'l Raceway, Inc., 97 Wn. App. 1, 10, 970 P.2d 343 (1999); Ventoza v.
        Anderson. 14 Wn. App. 882, 897, 545 P.2d 1219 (1976) (timber trespass cases under
        RCW 64.12.030, concerning treble damages for waste).

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     Kassa Ins. Servs. V. Pugh



j           In exercising its discretion to award attorney fees and costs, a trial court uses the

     lodestar formula, determining the number of hours reasonably expended on the

I    successful claims and multiplying that number by the reasonable hourly rate of the

     various attorneys. See Bowers    V.   Transamerica Title Ins. Co., 100 Wn.2d 581, 597,675


I    P.2d 193 (1983) (lodestar factors). The attorneys must provide reasonable

     documentation of the work they performed indicating the number of hours worked, the

     type of work, and the category of attorney who did the work. Id. "This documentation

     need not be exhaustive or in minute detail." Id. But the documentation must show

     which hours were spent on unsuccessful claims, duplicated effort, or otherwise

     unproductive time. Id. The award of fees generally is limited to fees attributable to

     successful claims if unrelated and separable from the unsuccessful claims. Brand V.

     Dep't of Labor & Indus., 139 Wn.2d 659, 672, 989 P.2d 1111 (1999). But in cases

     where the claims for relief involve a common core of facts, and much of the attorneys'

     time is devoted generally to the litigation as a whole, the court may award attorney fees

     on all of the issues. Id. at 672-73. After determining the number of hours reasonably

     expended on recoverable claims, the trial court then multiplies that number by the

     reasonable hourly rate of compensation. Id. Usually the attorneys' established hourly

     rate is considered a reasonable rate. Id.

           The trial court considered affidavits from two law firms representing Kassa and

     applied the lodestar formula. The attorneys provided reasonable documentation for the

     hours worked, discounting the time spent on anything other than the trade secrets



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    Kassa Ins. Servs. v. Pugh 



    claim, duplicated effort, and other unproductive time. They documented the work



I   performed by each attorney and the established hourly rate of each. Bowers, 100

    Wn.2d at 597.

           Mr. Pugh argues Kassa's attorneys grossly exaggerated the time spent on the

    successful trade secrets claim. In its findings of fact and conclusions of law in support

    of the attorney fees award, however, the trial court states it "conducted an independent

    analysis of the work" dedicated to pursuing the trade secrets claim and concluded that

    this claim "arose out of a common core of facts that overlapped with other claims." CP

    at 1004. The court reviewed the adjustments Kassa's attorneys made for

    nonrecoverable claims, duplicative work, and other issues, and found the reduction

    adopted by the attorneys was "fairly allocated." Id. Finally, the trial court found the

    hourly rates were reasonable. Thus, the trial court properly exercised its discretion in

    determining the award of attorney fees. Mr. Pugh unpersuasively argues the trial court

    did not address his specific challenges but the findings address the lodestar formula

    with sufficient specificity for us to conclude the court did not abuse its discretion.

           Mr. Pugh argues the court erred in awarding costs, first because the cost bill was

    not properly filed within the 10-day period after judgment was entered as required by

    RCW 4.84.090. But the record shows judgment was entered on June 8,2012, and the

    affidavits of the attorneys in support of fees and costs were filed on June 15, 2012,

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within 10 days.4 Second, Mr. Pugh argues not all of the claimed costs are recoverable

under RCW 4.84.010. He claims the witness fee for Mr. Harper is not authorized.

       In awarding attorney fees and costs, Washington follows the American rule,

which provides that fees and expenses generally are not recoverable except by specific

statutory authority, contractual provision, or recognized ground in equity. Wagner v.

Foote, 128 Wn.2d 408, 416,908 P.2d 884 (1996). An expert witness's charges are not

authorized by statute or court rule and are not a proper element of damages or costs.

Id. at 416-17; Estep v. Hamilton, 148 Wn. App. 246, 263, 201 P.3d 331 (2009). See

RCW 4.84.010 (definition of costs), .030 (costs available to prevailing party), .080

(attorney fees as costs); RCW 2.40.010 (witness fees and mileage). As stated in Fiorito

v. Goerig, 27 Wn.2d 615, 620,179 P.2d 316 (1947), "[w]here an expert is employed and

is acting for one of the parties, it is not proper to charge the allowance of fees for such

expert against the losing party as part of the costs of the action." (Quoted in Wagner,

128 Wn.2d at 417-18, and in Estep, 148 Wn. App. at 263).

       The costs awarded to Kassa include the professional fee for Kassa's expert

witness, Dan Harper. One of the two law firms representing Kassa at trial submitted a

cost bill affidavit stating that Mr. Harper's total charges for this case were $14,867,

which were then reduced by $2,230.05 for the time Mr. Harper spent on unsuccessful

claims. Thus, the portion of the trial court's $21,482.02 award of costs to Kassa that


       4 Without authority, Mr. Pugh appears to argue the affidavits with exhibits are not
a cost bill. RCW 4.84.090 states the request for necessary disbursements "shall be
stated in detail and verified by affidavit" and served on the opposing party and filed with
the court within 10 days. The affidavits and attachments suffice.

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Kassa Ins. Servs. v. Pugh


related to Mr. Harper's expert witness fee was $12,636.95. Because we conclude the

trial court erred in awarding the expert witness fee, the award of costs is reversed and

will be reduced by $12,636.95.

                                 D. Tortious Interference

      The issue is whether the trial court erred in concluding RJC was liable for tortious

interference with Kassa's business contract or expectancy with Continental. We review

whether the trial court's findings are supported by substantial evidence and whether the

findings support the conclusions of law. Saviano, 144 Wn. App. at 78.

      A claim of tortious interference with a business contract or expectancy requires

evidence of (1) the existence of a valid contractual relationship or business expectancy

of which the defendant had knowledge; (2) intentional interference, with an improper

purpose or improper means, that causes breach or termination of the relationship; and

(3) resultant damages. Elcon Constr., Inc. v. Eastern Wash. Univ., 174 Wn.2d 157,

168,273 P.3d 965 (2012); Manna Funding, LLC v. Kittitas County, 173 Wn. App. 879,

897,295 P.3d 1197, review denied, 178 Wn.2d 1007 (2013). A "business expectancy"

is any prospective contractual or business relationship or reasonable expectation that a

business relationship will continue. F.D. Hill & Co. v. Wallerich, 67 Wn.2d 409, 413, 407

P.2d 956 (1965); Manna, 173 Wn. App. at 897. This relationship must be of pecuniary

value and must be known to the one interfering. Manna, 173 Wn. App. at 897.

Evidence of purposeful interference denotes purposefully improper interference.

Leingang v. Pierce County Med. Bureau, Inc., 131 Wn.2d 133, 157,930 P.2d 288



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I   (1997). Exercising a legal interest in good faith is not improper interference. Elcon, 174

    Wn.2d at 168.

           The trial court found Kassa had entered into a claims adjusting contract with

    Continental in April 2007 that ran through late May 2008, when Continental stopped

    sending claims to Kassa. Kassa had been recommended to Continental by others in

    the insurance industry. Ms. Kassa, who primarily performed claims adjusting for

    Continental, reported she had never received complaints about her work. The court

    further found the agreement with Continental was abruptly terminated after Continental

    received a complaint about Kassa's alleged conflict of interest and "an assertion of

    Kassa misusing contacts with adjusting business clients to generate sales business."

    CP at 869. RJC admits Mr. Connor was the one who complained to Continental:

                   Defendant admits that it was Mr. Connor who made the complaint
           to Continental Western. The precipitating event for Mr. Connor's call to
           Continental Western occurred when Mr. Connor learned that one of his
           clients' claims was assigned to Kassa to do the adjusting around the
           relevant time period as discussed here.

    CP at 869. RJC does not assign error to the trial court's findings that it is a

    "primary customer" of and does significant business with Continental, and that

    Kassa's adjusting agreement with Continental was terminated immediately after

    Mr. Connor lodged his complaint. CP at 871. These unrefuted facts establish an

    ongoing business contract or expectancy between Kassa and Continental, as

    well as intentional interference that induced the termination of that relationship.




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Kassa Ins. Servs. v. Pugh


       RJC argues Mr. Connor did not ask Continental to stop sending all of its

claims to Kassa, solely claims from RJC's clients. Mr. Connor testified he told a

Continental agent his company had "bad vibes" with Kassa and he did not think it

was right for Kassa to both adjust claims and sell insurance policies because this

was a conflict of interest. According to Mr. Connor, he had talked to other people

and believed Kassa's roles as insurance agency and claims adjuster would be

considered a conflict of interest industry-wide. Thus, RJC argues, Mr. Connor's

complaint was a good faith effort to protect a legitimate business interest.

       But the record shows RJC did more than ask Continental to protect RJC's

interests in its clients. RJC accused Kassa of unethical business behavior. Mr.

Connor told the Continental agent that by selling insurance as well as adjusting

claims for other insurance agencies, Kassa had a conflict of interest. Ms. Kassa

testified she understood Mr. Connor had told someone at Continental that Kassa

had attempted to "cross-sell" to one of RJC's insureds. RP at 155.

       RJC argues the real basis for the trial court's interference conclusion was

improper reliance on exhibit 34. In its letter opinion, the trial court cited exhibit

34: e-mail communications between executives at Continental. These e-mails

indicate someone from RJC had called and complained that Kassa "'has tried to

drum up business when adjusting claims'" for Continental. CP at 889. At trial,

exhibit 34 was rejected as hearsay. But Mr. Kassa was later allowed to state he

only learned why Continental had terminated the agreement when he read



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Kassa Ins. Servs. v. Pugh


Continental's interoffice e-mails. Over RJC's objection, the trial court allowed this 


testimony as "state of mind" evidence under ER 803(a)(3). RP at 126. Mr. 


Kassa then related he learned an RJC agent called Continental and claimed 


Kassa was trying to "drum up business" while adjusting claims for Continental. 


RP at 126. 


       "Hearsay is an out-of-court statement offered for the truth of the matter

asserted, and it is generally inadmissible absent an applicable exception."

Domingo v. Boeing Employees' Credit Union, 124 Wn. App. 71, 79, 98 P.3d 1222

(2004). Under the hearsay exception of ER 803(a)(3), a party is permitted to

present a "statement of the declarant's then existing state of mind, emotion,

sensation, or physical condition ... , but not including a statement of memory or

belief to prove the fact remembered or believed." Exhibit 34, containing out-of­

court statements by Continental executives, was properly excluded as hearsay to

the extent it was offered to prove Continental terminated the adjusting agreement

because RJC told it Kassa was improperly soliciting clients. Reference to this

hearsay by Mr. Kassa is relevant to Mr. Kassa's then existing state of mind solely

to the extent it explains why he finally decided to file a suit against RJC.

       In response to RJC's objections to the trial court's reliance on exhibit 34,

the court reconsidered its letter opinion and sent another letter to the parties

before final judgment. Noting that later testimony addressed the same subject

matter, the trial court concluded its reference to exhibit 34 was harmless error



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Kassams.Servs. ~Pugh


because the outcome was the same. No reference to exhibit 34 is in the trial

court's findings of fact and conclusions of law. The findings instead refer to

evidence that Continental had been satisfied with Kassa's adjusting work and

had been abruptly terminated after Mr. Connor complained about a conflict of

interest and misuse of contacts to generate sales. The unchallenged testimony

of Mr. Connor and Ms. Kassa supports this finding. The trial court found

Continental had terminated the Kassa agreement because RJC was a primary

customer with significant Continental business. Finally, the trial court found RJC

had provided insufficient evidence of the alleged conflict of interest. As the trial

court stated, "Mr. Mallory's 'common sense' characterization of a conflict of

interest does not make it so." CP at 871.

       In sum, we hold the trial court did not err in concluding that RJC was liable

for tortious interference with a contract or expectancy.

                E. Damages Calculations for Tortious Interference

       The issue is whether the trial court erred in awarding $86,000 in damages for

RJC's tortious interference with a business contract, plus $18,480.57 in prejudgment

interest. Our review is for abuse of discretion. Banuelos, 134 Wn. App. at 613.

       Generally, damages must be established with reasonable certainty. Lewis River

Golf, Inc. v. O.M. Scott & Sons, 120 Wn.2d 712, 717. 845 P.2d 987 (1993). This

certainty relates more to the fact of damage rather than to the amount of damages. Id.

Once the loss is proved with certainty, uncertainty or difficulty in determining the amount



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Kassa Ins. Servs. v. Pugh


of the loss will not prevent recovery. Id. at 717-18. Although mathematical certainty is

not required, the amount of damages must be supported by competent evidence. Fed.

Signal Corp. v. Safety Factors, Inc., 125 Wn.2d 413, 443,886 P.2d 172 (1994).

Evidence of damage is sufficient if it gives the trier of fact a reasonable basis for

estimating the loss and does not require mere speculation or conjecture. Clayton v.

Wilson, 168 Wn.2d 57, 72, 227 P.3d 278 (2010).

       When asked what losses Kassa had suffered in losing Continental's business,

Mr. Kassa related the loss was hard to measure because Kassa had not adjusted

claims for Continental for very long. But he noted Continental had been increasing its

marketing in Spokane and estimated claims would have increased significantly. His

administrator, Ms. Kassa, affirmed the number of claims from Continental had been

steadily increasing before termination of the contract. Assuming the contract with

Continental would have continued at least three more years, Mr. Kassa estimated the

loss as $40,000 per year, for a total of $120,000.

      Mr. Harper opined on the value of lOSing Continental's business. He determined

Kassa earned on average a little over $6,000 in profits per year in the 16 months of its

contract with Continental. He projected growth in the number of Continental claims to

be adjusted, based on similar growth in the claims from another of Kassa's insurance

agency clients. Without an increase in the number of claims, Mr. Harper calculated a

static loss of about $26,000 after the contract ended in May 2008, but with the predicted

growth rate, he estimated a total loss of $86,490. RJC provided no rebuttal evidence.



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       RJC argues the sole nonspeculative way to value the loss of the Continental

account was by looking at the actual profits for one year, about $6,000. RJC pOints out

the Continental contract was terminable at will. But considering the unrebutted findings

that Continental appeared to be satisfied with Kassa's work and was increasingly relying

on Kassa for claims adjustment, it was reasonably certain the Continental account

would have continued long-term, as had Kassa's other adjusting accounts. RJC

discounts Mr. Harper's capitalization approach to valuing the growth rate. Given that

the trial court found Mr. Harper's testimony "persuasive and credible," RP at 891, we

leave questions of witness credibility and evidence weight for the trier of fact. Burnside

v. Simpson Paper Co., 123 Wn.2d 93,108,864 P.2d 937 (1994).

      Given all, we conclude the trial court did not err by abusing its discretion in

awarding $86,000 because that amount is within the range of credible evidence

received from Mr. Harper and Mr. Kassa discussed above. Mason, 114 Wn.2d at 850.

But, considering the open-ended nature of the agreement between Kassa and

Continental making it impossible to determine a liquidated sum for damages, we

conclude the trial court erred by abusing its discretion in awarding Kassa $18,480.57 in

prejudgment interest against RJC. The award cannot be computed with exactness,

without reliance on opinion or discretion. Fluor, 160 Wn.2d at 789; Spradlin, 164 Wn.

App. at 665.




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Kassa Ins. Servs. v. Pugh


                                     F. Cross Appeal

       The issue on cross appeal is whether the trial court erred in concluding that RJC

was not vicariously liable for Mr. Pugh's misappropriation of trade secrets. We review

whether substantial evidence supports the trial court's findings of fact and whether the

findings support the conclusions of law. Saviano, 144 Wn. App. at 78.

       Under the doctrine of respondeat superior, an employer or principal is vicariously

responsible for the torts of an employee or agent who is acting on the employer's or

principal's behalf. Niece v. E/mview Grp. Home, 131 Wn.2d 39, 48,929 P.2d 420

(1997); Tho/a, 140 Wn. App. at 79. When the employee (or agent) steps aside from the

employer's (or principal's) purposes and pursues a personal objective, the employer is

not vicariously liable. /d. An employer is liable solely for an employee's activities over

which the employer has a right of control. Stephens v. Omni Ins. Co., 138 Wn. App.

151,183,159 P.3d 10 (2007). But an employer may become liable for the actions of

even a future employee under a theory of ratification if the employer accepts the

benefits of the acts with full knowledge of the facts. See Riss v. Ange/, 131 Wn.2d 612,

636,934 P.2d 669 (1997); Tho/a, 140 Wn. App. at 86,88-89. An employer may be held

vicariously responsible for violations of the UTSA. Tho/a, 140 Wn. App. at 81.

      The trial court found RJC was not vicariously liable for Mr. Pugh's acts of

misappropriation because (1) RJC had no control over his actions when he compiled

the client list and e-mailed it to himself, and (2) Kassa failed to prove Mr. Connor knew




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the list of clients did not belong to Mr. Pugh or that Mr. Pugh was violating an

agreement with Kassa by taking the client list. The evidence supports these findings.

       First, Kassa fails to show anyone at RJC had discussed the book of business

with Mr. Pugh before he compiled the client list and sent it to his home e-mail address.

Mr. Pugh admitted he compiled the list five days after he casually discussed

employment at RJC with an RJC agent he ran into at a business lunch. The book of

business had been misappropriated before Mr. Connor offered him a job. Kassa offers

no countering evidence showing the act of misappropriation was completed after RJC

had a right to control Mr. Pugh's actions.

       Second, Kassa failed to present evidence showing RJC ratified Mr. Pugh's trade

secrets misappropriation. Both Mr. Pugh and Mr. Connor related Mr. Pugh always

asserted he owned his book of business. Mr. Pugh further related when Mr. Connor

offered to buy his book of business from Kassa, Mr. Pugh told Mr. Connor that was

unnecessary because he already owned it. And, Mr. Connor testified he was not very

interested in Mr. Pugh's "personal lines" clients because RJC is predominantly a

"commercial lines" agency.5 RP at 584-85.

      Although Mr. Connor admitted he advised Mr. Pugh to send out change of agent

forms to validly transfer the clients from Kassa to RJC, this testimony does not establish

that Mr. Connor or anyone at RJC knew Mr. Pugh had misappropriated the book of

business. Mr. Connor's April 2007 call to Mr. Kassa offering to buy the book of


      5 As of January 2008, RJC had Mr. Pugh devote himself entirely to commercial
business clients.

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Kassa Ins. Servs. v. Pugh


business is also insufficient to rebut the balance of evidence showing no one at RJC

knew Mr. Pugh had misappropriated the client list. The offer was made in the limited

context of Mr. Kassa and Mr. Connor deciding how to split the commissions made on

policies while Mr. Pugh worked for their respective companies.

       In sum, despite Kassa's suggested inferences, contrary sufficient evidence, and

inferences arising from that evidence, exist to support the trial court's findings that RJC

had no right of control over Mr. Pugh for his acts of misappropriation before he began

working for RJC. Additionally, when weighing the competing evidence and judging

witness credibility, sufficient evidence exists for the trial court to reject RJC's ratification

of Mr. Pugh's misappropriation. We conclude the trial court did not err in concluding



                                                                                                   I
that RJC was not vicariously liable for Mr. Pugh's tortious acts.

                           G. Appellate Attorney Fees and Costs
                                                                                                   r
       Kassa requests attorney fees and costs based on RAP 18.1 and RCW                            I
19.108.040. Mr. Pugh and RJC briefly ask for similar fees and costs, but Mr. Pugh has

not prevailed here, and is not entitled to either fees or costs.

       RCW 19.108.040 authorizes reasonable attorney fees to the prevailing party in

an action for willful and malicious misappropriation of trade secrets. Because Kassa

has prevailed in this appeal against Mr. Pugh's UTSA challenge, Kassa is entitled to

reasonable attorney fees for that portion of the appeal corresponding to Mr. Pugh's

UTSA arguments. RAP 18.1; Boeing, 108 Wn.2d at 668; Eagle Group, Inc. v. Pullen,

114 Wn. App. 409, 424, 58 P.3d 292 (2003). RJC fails to support its request with



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argument or authority. Accordingly, we have been provided no basis to award attorney

fees or costs to RJC. See Phillips Bldg. Co. v. An, 81 Wn. App. 696, 705, 915 P.2d

1146 (1996) (a party seeking attorney fees and costs is required by RAP 18.1(b) to

provide argument and citation to authority to establish that the expenses are warranted).

      Affirmed but remanded to vacate prejudgment interest awards and to modify cost

award consistent with this decision.

      A majority of the panel has determined this opinion will not be printed in the

Washington Appellate Reports, but it will be filed for public record pursuant to RCW

2.06.040.




                                                  Brown, J.

WE CONCUR:




                                                  Lawrence-Berrey, J.




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