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Disqualification Premised Upon the “Lawyer as Witness” Rule

An attorney’s conflict search incident to a potential new matter provides information which will assist counsel in determining whether engagement is appropriate.  There are bright-line rules regarding entering an appearance in light of counsel’s obligation to avoid various conflicts of interest.  In a recent decision from Suffolk’s Commercial Division by Justice Pines, the Court provides a review of the Lawyer as Witness rule codified in Disciplinary Rule 5-102(b), as well as the case law interpreting the same.  The Order by Justice Pines is consistent with two recent decisions from the Second Department which likewise deny motions to disqualify counsel premised upon 5-102(b).

In Health Care Network Associates, LLC. v. Central Suffolk Hospital, Inc. and Peconic Bay Medical Center, Justice Pines was presented with a motion to disqualify defense counsel premised upon a purported violation of the lawyer as witness rule.  According to the decision, plaintiff commenced an action against defendants for breach of contract arising out of a relationship between the parties wherein plaintiff was to procure tax-exempt bonds to facilitate financing efforts by the defendant Hospital.  Pursuant to the terms of an unsigned proposal sent by plaintiff to the Hospital, plaintiff was to provide financial advisory services to the Hospital to further the Hospital’s plans to issue tax exempt bonds to refinance its outstanding tax-exempt debt and fund a number of new projects.  “The submissions reflect that plaintiff was ultimately unable to secure the proposed financing for the Hospital and that the Hospital engaged another financial consultant to assist in the same, which efforts were successful.”   Plaintiff thereafter filed the breach of contract and quantum meruit action to recover damages for services rendered.

Plaintiff sought to disqualify the defense firm on the ground that the defense firm was also the defendant’s counsel during the underlying transaction, and claimed that those same attorneys will be called as witnesses at trial.  Plaintiff’s motion to disqualify was premised upon DR 5-102(b), which provides:

(b) Neither a lawyer nor the lawyer’s firm shall accept employment in contemplated or pending litigation if the lawyer knows or it is obvious that the lawyer or another lawyer in the lawyer’s firm may be called as a witness on a significant issue other than on behalf of the client, and it is apparent that the testimony would or might be prejudicial to the client.

Plaintiff argued that the existing defense firm worked so closely with plaintiff during the course of the underlying transaction that testimony from members of the defense firm would be  necessary at trial.  The defense firm submitted opposition arguing that disqualification was neither necessary nor appropriate (asserting that the motion to disqualify was simply a litigation tactic) because the vast majority of the transactional work performed by the defense firm was conducted by two attorneys who had already departed from the defense firm, and that the defense firm’s department head had rather nominal involvement in the matter.  Defense counsel, although admittedly involved in the Hospital’s subsequent successful financial efforts, contended that he did not have any relevant, non-cumulative, and prejudicial information linking the successful transaction to plaintiff’s earlier unsuccessful attempts.

Before analyzing the contentions at bar, Justice Pines summarized the prevailing common law interpreting DR 5-102(b) and highlighted that:

The Courts have held that the mere fact that an attorney was involved in the transaction that is the subject of the litigation, or that his proposed testimony would be “relevant or highly useful” is insufficient to warrant disqualification. … The test rather is whether the subject testimony is necessary, “taking into account such factors as the significance of the matter, the availability of other evidence, and the weight of the testimony.”  … Moreover, even if it can be demonstrated that the testimony is necessary, to warrant disqualification, such testimony must also be prejudicial to the client [internal citations omitted].

Justice Pines ruled that the plaintiff failed to carry its burden of demonstrating that disqualification of the defense firm was warranted because plaintiff failed to demonstrate that the testimony of any member of the defense firm was “necessary” in the action at bar. The defense firm’s department head affirmed that he was only minimally involved in the transaction at issue and was not expected to testify at trial on behalf of the defendant because any evidence would be elicited through testimony of the parties and/or documentary evidence.  As for plaintiff’s contention that he expected the defense firm’s department head to be a witness at trial, plaintiff failed to demonstrate that even if such testimony were “necessary”, that the requisite prejudice would follow.

Subsequent to the decision by Justice Pines, the Second Department issued Hudson Valley Marine Inc. v. Town of Cortlandt, regarding attorney disqualification pursuant to 5-102(b).  In Hudson Valley Marine, plaintiff initiated an action against the defendant municipality for, inter alia, malicious prosecution, asserting that the Town’s issuance of a stop-work order, and the Town’s prosecution of the charges that were ultimately dismissed, caused the plaintiff to sustain damages. Following depositions of the plaintiff’s principals and their nonparty son, it became apparent that certain advice allegedly given to the plaintiff by its attorney with respect to the stop-work order, as well as certain communications between the attorney and the nonparty son, might be material to the issue of the plaintiff’s damages.  The defendant municipality moved to disqualify premised upon DR 5-102(b) on the ground that testimony was necessary on the issue of whether the plaintiff’s alleged damages were the result of the defendants’ actions or the attorney’s advice. The Second Department affirmed the Supreme Court’s denial of the defendants’ motion and noted that:

A party’s entitlement to be represented in ongoing litigation by counsel of its choice is a valued right. …  Nevertheless, an attorney may be disqualified when, in the exercise of discretion, the court determines that the attorney’s testimony is necessary (citing, inter alia, Code of Professional Responsibility DR 5- 102) [other internal citations omitted].

The Second Department ruled that the defendant movant failed to carry its burden of establishing to the Court that the attorney’s testimony was “necessary” because “the persons who received the advice may testify about it and other persons who communicated with the attorney about matters relevant to the case may offer evidence regarding the content of those communications, thereby rendering the attorney’s own testimony unnecessary.”   The Hudson Valley Marine Court cited the Goldstein v. Held (also cited by Justice Pines in the Health Care Network Associates decision) wherein the Second Department again affirmed the Supreme Court’s refusal to grant a disqualification motion because the movant there failed to establish the content or subject matter of testimony that might be elicited from the respondents’ attorney, and she also did not demonstrate how such testimony would be so adverse so to warrant disqualification.

These three recent decisions provide litigators with an excellent outline for the heavy burden that a movant must meet to disqualify counsel premised upon 5-102.




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