Case 1:03-cv-02504-REB-CBS
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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 03-cv-2504-REB-CBS PETER HORNICK, an individual, Plaintiff, v. GARY BOYCE, and JOANNE BOYCE, individuals Defendants.
DEFENDANTS' RESPONSE TO ORDER TO SHOW CAUSE
Defendants, Gary and Joanne Boyce (collectively, the "Boyces"), by their counsel, Hale Friesen, LLP, respond to the Order to Show Cause, dated July 18, 2005, as follows (the "Response"). The Response describes why no counsel for either party should be disqualified from further participation in this case pursuant to C.R.P.C. 3.7. INTRODUCTION The final pretrial conference was held before Judge Shaffer on July 18, 2005 (the "July 18th Conference"). At that conference, the Court noted that the parties had only days before filed a Stipulated Motion to Vacate Trial Date because counsel for both parties had been designated as possible witnesses at trial and, therefore, the issue of attorney disqualification was raised. The Court issued its Order to Show Cause, dated July 18, 2005, and asked for written explanations and analyses from the parties.
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As explained in detail below, events subsequent to the conference have made it unnecessary for the Boyces to designate Plaintiff Peter Hornick's ("Hornick") counsel, Robert Bruce ("Bruce"), as a witness. Consequently, the Boyces will file a revised witness list deleting Bruce as a witness. In turn, Bruce designated the Boyces' counsel as rebuttal witnesses in the event Bruce was called to testify. As Bruce is no longer a witness, this designation is no longer necessary and, therefore, disqualification of the Boyce's counsel is not appropriate. FACTUAL BACKGROUND Villa Grove Ranch Co., LLC ("Villa Grove") is a Colorado limited liability company in which Hornick owns a 50% membership interest, and the Boyces jointly own a 50% membership interest. Villa Grove currently owns and operates a ranch in Saguache County, Colorado, consisting of approximately 5,000 deeded acres, and a 12,000 acre Bureau of Land Management allotment. On October 12, 2000, the Boyces and Hornick entered into an Option Agreement (the "Option"), in which Hornick was given an option to purchase the Boyces' 50% membership interest in Villa Grove (the "Boyces' Interest"), for $500,000. One year later, on October 10, 2001, Hornick exercised the Option and a closing date of December 11, 2001, was triggered pursuant to the terms of the Option (the "Closing Date"). Prior to the Closing Date, Hornick assigned his rights and interests under the Option to Ross Brupbacher ("Brupbacher"). The nature and extent of the Brupbacher assignment was never disclosed to the Boyces, however, as a condition of closing, Brupbacher required certain representations and warranties with respect to Villa Grove and the Boyces' Interest none of which were negotiated into or required by the Option. -2-
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The Boyces tendered performance on the Closing Date, as reflected in closing documents called for in this transaction. Specifically, and pursuant to the precise terms of the Option, the Boyces were to: (i) deliver an assignment of their membership interest; (ii) Gary Boyce was to tender resignation as Manager of Villa Grove; and, (iii) deliver the instruments necessary to effect the transfer of the Boyces' Interest to Hornick. Although the Boyces performed all of these terms on or prior to the December 11, 2001, Closing Date, Hornick failed to pay the balance of the purchase price in immediately available funds on the Closing Date (the "Closing Payment"). By failing to make the Closing Payment as required by the Option, Hornick has either breached or abandoned the Option; consequently, Hornick is not entitled to have either the Option enforced, or to recover damages, as his Complaint demands. PROCEDURAL BACKGROUND Attorneys were designated as possible trial witnesses in the proposed Final Pretrial Order for the following reasons. In a December 2001, telephone call after the failed Closing Date, Bruce told John G. Lubitz ("Lubitz") and Timothy M. Tymkovich ("Tymkovich"), both of whom were representing the Boyces at the time, that Bruce had attempted to close by going to Messrs. Lubitz and Tymkovich's office with the Closing Payment. Bruce claimed it was after 5:00 p.m. and there was no one around so he left. Messrs. Lubitz and Tymkovich disputed Bruce's statements because they were at their office until later in the evening and Bruce never appeared. When the Boyces served written discovery upon Hornick and asked for documents supporting Hornick's contention that he "tendered" the Closing Payment, the documents were promised but were never disclosed or produced. After conferring on a motion to compel, on May -3-
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20, 2005, Hornick finally responded that the $500,000 Closing Payment had been deposited into Bruce's trust account. Again, however, no documents were produced or disclosed. At this point, the Boyces' counsel sought to take the depositions of both Hornick and Bruce without success. Without the documents to support Hornick's claim that he in fact had the Closing Payment, and having been unable to take either the deposition of Hornick or Bruce, the Boyces' counsel was uncertain if Hornick would offer Bruce as a witness at trial to testify that the Closing Payment had been "tendered". Therefore, the Boyces' counsel erred on the side of caution and added counsel for all parties to their witness list in the proposed Final Pretrial Order. Shortly after the July 18th Conference, Hornick and Bruce finally produced some documents showing that $500,000 was deposited into Bruce's trust account by Hornick or Brupbacher prior to the Closing Date. More important, these documents also show that the $500,000 had not been withdrawn from the trust account on December 11, 2001, the Closing Date. When these documents were produced, Bruce's office personnel cautioned that there might be additional documents. Just recently, Bruce confirmed in writing that he had produced all responsive documents. Therefore, any conversation between Bruce and Messrs. Lubitz and Tymkovich about tendering the Closing Payment is now irrelevant. Consequently, the Boyces do not intend to call Bruce or any other counsel as a witness at trial. ARGUMENT As the Court is aware, the issue of disqualification of counsel arose because the parties designated opposing counsel as a potential witnesses in this action. See World Youth Day, Inc. v. Famous Artists Merchandising Exchange, Inc., 866 F. Supp. 1297, 1302 (D. Colo. 1994)(identifying -4-
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opposing counsel on a party's witness list is tantamount to filing a motion for disqualification). Hornick did not timely disclose or produce documents reflecting the deposit of the Closing Payment into Bruce's trust account. When Bruce subsequently thwarted the Boyces' efforts to inspect his documents or take Hornick's deposition the Boyces were unable to determine whether Bruce's testimony (or the testimony of other counsel) would be necessary at trial on this issue. Once Bruce produced account statements for his trust account and confirmed to the Boyces' counsel that his document review was complete, the Boyces were able to finally determine that neither Bruce's trial testimony nor deposition testimony will be necessary. Accordingly, the Boyces will file a revised witness list removing Bruce and other counsel. Messrs. Hale, Hyman, and Lubitz were identified by the Boyces as "may call" witnesses only for the remote possibility that their respective testimony might be needed to rebut the possible testimony of Bruce. As noted above, a revised witness list will be submitted removing these counsel as witness for Boyce. To the extent that the Boyces need to demonstrate why their counsel should not be disqualified, Colorado law is well-settled that the law firm of Hale Friesen, LLP ("Hale Friesen") may continue to represent them in this action whether or not Messrs. Hale, Hyman, or Lubitz are disqualified. By virtue of D.C.COLO.LCivR 83.4, the rules of professional conduct adopted by the Colorado Supreme Court are the standards of professional responsibility which apply in this federal judicial district. As such, Colorado Supreme Court case law interpreting the Colorado Rules of Professional Conduct is applicable as well.
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C.R.P.C. 3.7, which governs the issue of attorney as witness, states: (a) A lawyer shall not act as advocate at a trial in which the lawyer is likely to be a necessary witness except where: (1) the testimony relates to an uncontested issue; (2) the testimony relates to the nature and value of legal services rendered in the case; or, (3) disqualification of the lawyer would work substantial hardship on the client. A lawyer shall not act as advocate in a trial in which another lawyer in the lawyer's firm is likely to be called as a witness unless the requirements of Rule 1.7 or Rule 1.9 have been met.
(b)
As explained in Fognani v. Young, -- P.3d --, 2005 WL 332715 (Colo. 2005), the policy rationale behind C.R.P.C. 3.7 addresses concerns about placing an advocate in the unseemly position of arguing his own credibility to a jury, as such participation would disclose to the jury the attorney's dual roles as advocate and witness. Moreover, a jury might have trouble distinguishing among such an attorney's multiple roles as advocate, law partner, and witness. Id. In fact, the United States District Court for the District of Colorado emphasized that the overriding purpose of C.R.P.C. 3.7 is to avoid prejudice associated with jury confusion. See, World Youth Day, Inc., 866 F. Supp. at 1304. As such, an attorney should not participate in any pretrial activity that could be admissible at trial and that would reveal the attorney's dual role to a jury. This case, however, is a bench trial. Id. at 1303. See, Fognani, at 8. Nonetheless, C.R.P.C. 3.7 addresses two distinct issues: (1) disqualification of an individual lawyer under 3.7(a); and, (2) imputed disqualification of a disqualified lawyer's firm under Rule 3.7(b). C.R.P.C. 3.7(a) permits an attorney to act as both an advocate and a witness when, as is pertinent here, disqualification of the lawyer would work substantial hardship on the client. Without -6-
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arguing the merits of the "substantial hardship" test,1 the Boyces will undoubtedly suffer "substantial hardship" in the event that Messrs. Hale, Hyman, or Lubitz are required to withdraw from representation in this matter. See, Fognani v. Young, -- P.3d --, 2005 WL 332715 (Colo. 2005)(When determining whether an attorney's disqualification under the advocate-as-witness rule would impose a substantial hardship on the client, courts consider all relevant factors in light of the specific facts before the court, including the nature of the case, financial hardship, the stage in the proceedings and the time at which the attorney became aware of the likelihood of his testimony, and whether the client has secured alternative representation.) But, whether or not a member of Hale Friesen should be disqualified from further representation in this action is immaterial to the determination of whether Hale Friesen may continue to represent the Boyces in this action, because, under either scenario, Colorado law does not disqualify Hale Friesen. Again, C.R.P.C 3.7 states that "[a] lawyer shall not act as advocate in a trial in which another lawyer in the lawyer's firm is likely to be called as a witness unless the requirements of Rule 1.7 or Rule 1.9 have been met."2 While a bit confusing, the Colorado Supreme Court has clarified and affirmed this rule in the very recent Fognani opinion. Fognani v. Young, -- P.3d --, 2005 WL
The issue of Messrs. Hale's, Hyman's or Lubitz's disqualification is not before the Court and all defenses to such a challenge are preserved until that time. In addition, the party moving for disqualification of an attorney has the burden of establishing grounds for the disqualification. See, Fognani, at 3. As is relevant here, C.R.P.C. 1.7 states that "[a] lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, unless: (1) the lawyer reasonably believes the representation will not be adversely affected; and (2) the client consents after consultation [disinterested lawyer standard]." Moreover, C.R.P.C. 1.9 generally prohibits an attorney from representing a current client in a manner adverse to a former client; C.R.P.C. 1.9 does not apply here. -72
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332715 (Colo. 2005). In Fognani, the Court held that a law firm may continue to represent a client, despite disqualification of an attorney from the firm under C.R.P.C. 3.7, so long as the client consents to representation by the firm, and such consent is objectively reasonable. Fognani, at 9. Moreover, the Court explained that even an attorney who is disqualified from acting as an advocate because he is likely to be called as a witness at trial may participate fully in pretrial litigation activities such as strategy sessions, pretrial hearings, mediation conferences, motions practice, and written discovery, so long as the client has consented to the representation, and unless such participation would disclose to the jury the attorney's dual roles as advocate and witness. Fognani, at 8. With that said, Hale Friesen may continue to represent the Boyces in this action and, even in the event that a member of Hale Friesen is disqualified under C.R.P.C. 3.7(a), that individual may continue to participate fully in the pretrial litigation activities set forth above. See, Culebras Enterprises Corp. v. Rivera-Rios, 846 F.2d 94, 100 (1st Cir. 1988)(This case was cited with approval by the Colorado Supreme Court in Fognani, supra, at 8, and this Court states that "...the purposes served by the advocate-witness rule are not greatly undermined by the lawyer's participation in the pretrial stages of the suit."). CONCLUSION FOR THE REASONS SET FORTH ABOVE, Messrs. Hale, Hyman, and Lubitz should not subject to disqualification under C.R.P.C. 3.7(a), and Hale Friesen should be permitted to continue as counsel for the Boyces.
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Respectfully submitted this 10th day of August, 2005. Allan L. Hale s/ Allan L. Hale John G. Lubitz Robert T. Hoban Hale Friesen, LLP 1430 Wynkoop Street, Suite 300 Denver, Colorado 80202 (720) 904-6000 (720) 904-6006 [email protected] [email protected] [email protected] Attorneys for Defendants
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CERTIFICATE OF SERVICE I hereby certify that on August 10, 2005, I electronically filed the foregoing with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following email addresses: Robert J.Bruce, Esq. at [email protected] Allan L. Hale s/ Allan L. Hale John G. Lubitz Robert T. Hoban Hale Friesen, LLP 1430 Wynkoop Street, Suite 300 Denver, Colorado 80202 (720) 904-6000 (720) 904-6006 [email protected] [email protected] [email protected] Attorneys for Defendants
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