Culebras Enterprises Corp. v. Rivera Rios, Civ. No. 79-425 HL.

• Decision Date: 08 April 1987
• Docket Number: Civ. No. 79-425 HL.
• Citation: 660 F. Supp. 540
• Parties: CULEBRAS ENTERPRISES CORP., etc., Plaintiffs, v. Miguel A. RIVERA RIOS, et al., Defendants.
• Court: U.S. District Court — District of Puerto Rico

660 F. Supp. 540

CULEBRAS ENTERPRISES CORP., etc., Plaintiffs, v. Miguel A. RIVERA RIOS, et al., Defendants.

Civ. No. 79-425 HL.

United States District Court, D. Puerto Rico.

April 8, 1987.

COPYRIGHT MATERIAL OMITTED

Jaime Sifre, San Juan, P.R., for plaintiffs.

Miguel de la Cuétara, John Mudd, Dept. of Justice, San Juan, P.R., for Dept. of Justice of Puerto Rico.

Alberto Tellechea, Orlando, Fla., for Kenneth Black, etc.

OPINION AND ORDER

LAFFITTE, District Judge.

The Court considers plaintiffs' application for attorney's fees and costs under 42 U.S.C. § 1988. Plaintiffs' petition for attorney's fees was originally denied in an order dated June 27, 1985.¹ After considering the opinion in De Arroyo v. Romero Barcelo, 765 F.2d 275 (1st Cir.1985), released after that date, the Court partially reconsidered its opinion and order and granted plaintiffs attorney's fees on the ground they were prevailing parties under sect. 1988.² Plaintiffs then submitted an affidavit concerning fees and expenses per the reconsidered opinion and order. The affidavit/application raises fee issues involving legal ethics, attorney pro se litigants, the extent to which plaintiffs prevailed, and the reasonableness of time spent.

ETHICAL CONSIDERATIONS

A total of five attorneys, five law clerks, and one paralegal are claiming fees for working on this case at various times between 1978 and 1984. Requested for this cummulative effort is $241,601.50. Two of the attorneys, Edward M. Borges and Raymond C. O'Neill, are also involved as clients in the litigation, being directors and stockholders in the plaintiff corporations. They are also the founding partners of O'Neill and Borges, the law firm retained by plaintiffs to prosecute the case. They personally account for $101,271.50 of the requested fees. Another member of the firm is Walter Klasson, who is listed in the application to the amount of $62,425. Two attorneys outside of the firm were apparently retained for ethical reasons to be attorneys of record when it appeared O'Neill and Borges would be called as witnesses at trial. They account for $56,815 in requested fees. The remaining $21,090 is abscribed to the work done by law clerks and paralegals.

Defendants object to plaintiffs' request for attorney's fees for O'Neill, Borges, and the other members of the firm, on the ground that they are not attorneys of record. Defendants argue that since DR5-101(B) of the Model Rules of Professional Responsibility requires withdrawal and disqualification of lawyers and members of their firm when it appears the lawyer may be called as a witness, with certain exceptions,³ no fees are due from that time for work done on the case by any member of the firm O'Neill and Borges.

It is clear on the plain language of the canon that O'Neill and Borges, and their firm by imputation, should have disqualified themselves from representing plaintiffs. They admit they knew that as stockholders of plaintiffs they "ought" to be called as witnesses. That they had an inkling of the potential impropriety is evidenced in their decision to hire outside counsel as attorneys of record in order to maintain the appearance of propriety. But the appearance of impropriety is merely one of the reasons for the canon. The dual roles of witness and lawyer are inconsistent with the integrity of the adversarial system. It causes prejudice to the lawyer's client by impeaching the credibility of the lawyer as a witness and diminishing his persuasiveness as a lawyer. Conversely, it creates prejudice to the opposing party by inhibiting cross-examination of the lawyer-witness and imbuing his role as lawyer with the purifying effects of having taken the oath before the eyes of the jury. ABA/BNA Lawyer's Manual on Professional Conduct, sect. 61:505.

Plaintiffs have not offered any arguments why O'Neill and Borges should fall within the exceptions of the canon. The content of their potential testimony was not revealed to the Court. It assuredly would not have related to an uncontested matter or a formality. As stockholders and directors they were in a position to explain the actions of plaintiffs previous to filing the lawsuit. Refusal to allow them to act as counsel would not work a substantial hardship on the plaintiffs as their services were not of distinctive value in this case. To the contrary, Borges stated that the firm does not usually accept this type of case but did it as a favor to him and O'Neill. That they and plaintiffs willingly farmed out some of the work to outside counsel is another indication that the firm is not the "only man for the job."

It is true that the harmful effects the canon seeks to prevent are diminished somewhat by the retention of counsel other than the potential witnesses for actual trial advocacy. At least one state bar has ruled that where a corporate president testifies in a trial at which a member of his law firm is counsel for the corporation, imputed disqualification is not necessary, even in the absence of the exceptions, where the prejudice to the client would be de minimus. ABA/BNA Lawyer's Manual on Professional Conduct: Ethics Opinions, No. 84-3, p. 801:1320 (Arizona). This ruling, however, merely stands for the notion that the prejudicial effect of non-appearing, testifying counsel is less than that of appearing, testifying counsel. Under such a formulation it remains in the discretion of the court to determine when a non-appearing counsel's testimony is prejudicial to a client and harmful to the adversarial system. In the situation at bar, even under the most liberal of standards, the Court finds that the presence of O'Neill and Borges as founding partners of the law firm, and especially as lawyers still working on the case, would have caused credibility problems, and prejudiced both parties such that the opportunity for a fair and rightful adjudication would have been unduly compromised. The taint brought by O'Neill and Borges as witnesses undoubtedly would have extended to the work of all members of their firm who worked on this case. That no member of the firm appeared as counsel is more than offset by O'Neill and Borges continuing to work on the case.

Denial of attorney's fees is an appropriate sanction for violation of an ethical canon in certain circumstances. Disqualification and/or withdrawal is the preferred response when an ethical conflict arises. Should no withdrawal be forthcoming, however, and the plaintiff prevails, courts will generally not reverse a judgment. A better sanction is to deny fees, where appropriate. See Hill v. Douglas, 271 So.2d 1 (Fla.1973).

Since plaintiffs are seeking fees under Sect. 1988, denial is a simple and appropriate sanction. Declaring at this stage that the law firm should have withdrawn and denying them fees they have accrued ostensibly believing them compensable is a harsh remedy. Had they wished to avoid the risk that certain of plaintiffs' attorneys would not be paid for their services, they should have made known their involvement from the beginning. The Court could have ruled on disqualification then and the performance of uncompensable legal work might have been avoided.

ATTORNEY PRO SE LITIGANTS

As support for their contention that legal ethics preclude awarding attorneys fees to O'Neill and Borges, defendants argue that the situation presented here is not that of attorney pro se litigants, as urged by plaintiffs, because O'Neill and Borges are not parties to the suit. The effect of this pro se litigant distinction on the ethical considerations is significant, though perhaps not necessary to disposition of the entire issue of fees for these lawyers, as courts are divided on whether attorney pro se litigants are entitled to fees.

There is merit in defendants' characterization of O'Neill's and Borges' postures in this case. Borges and O'Neill are stockholders and officers in the three plaintiff corporations. While this fact no doubt led to O'Neill's and Borges' belief that they might be called as witnesses, and therefore should retain outside counsel, yet it does not completely identify the two lawyers with the interests of the corporation. There have been no attempts on either side to pierce the corporate veil. As neither O'Neill nor Borges are named plaintiffs in the complaint, they are not litigants, but merely potential witnesses.

The distinction can be important because some courts hold that the ethical ramifications are different when the lawyer-witness is also a party. Credibility concerns are not implicated. "No confusion of role or undue enhancement of advocacy results where the lawyer-witness' lack of disinteredness is evident from his or her status as a party-litigant." Bottaro v. Hatton Associates, 680 F.2d 895, 897 (2nd Cir.1982); see also, International Electronics Corp. v. Flanzer, 527 F.2d 1288 (2nd Cir.1975). There is nothing in the ethical canons to prevent a lawyer from representing himself. To allow non-lawyers to proceed pro se while denying the same privilege to lawyers would run counter to logic and work an injustice. Duncan v. Poythress, 777 F.2d 1508, 1515, n. 21 (11th Cir.1985).

Regardless, courts which have allowed fees for, and not just participation as, an attorney pro se litigant, have gone on to hold, in keeping with the strict standard of DR5-101(B), that attorneys "had an ethical obligation to withdraw as counsel when it became apparent that their testimony would be necessary during trial." All compensation for hours after that point were disallowed. Rybicki v. State Board of Elections of State of Illinois, 584 F.Supp. 849, 861 (N.D.Ill.1984). See also, Shakman v. Democratic Organization of Cook County, 634 F.Supp. 895, 901 (N.D.Ill. 1986). Under this rationale and under DR5-101(B), even if O'Neill and Borges could be considered parties to the suit, they should have completely withdrawn at the point at which they became aware their testimony would be needed at trial.

Furthermore, it is far...