By: Jessica E. Stukonis
St. John’s Law Student
American Bankruptcy Institute Law Review Staff
An attorney who signed a proof of claim on his client’s behalf narrowly avoided disqualification in In re Duke Investments.[1] In Duke, the court refused to disqualify the attorney from representing his creditor-client in the chapter 11 case because the attorney was not a “necessary witness” despite his role in preparing, signing, and filing a creditor’s proof of claim.[2] The creditor’s attorney compiled the proof of claim based on information received from the creditor’s officers.[3] The court denied the debtor’s motion to disqualify the creditor’s attorney because the debtor failed to demonstrate that the attorney was a necessary witness. The attorney was not a necessary witness because he lacked “exclusive knowledge or understanding of the [proof of claim]. . . . [and the attorney’s] testimony would [not] be the sole source of information pertaining to the [proof of claim]”.[4] Moreover, even if the attorney was a “necessary witness,” he would not be disqualified because the debtor failed to demonstrate that his testimony would “substantially conflict” with Amergy’s testimony,[5] and Amergy consented to the attorney’s continued representation.[6]
The court applied the Texas Disciplinary Rules of Professional Conduct and the American Bar Association Model Rules of Professional Conduct in deciding the motion to disqualify.[7] The comments to both sets of rules note that the rationale behind attorney disqualification is to prevent prejudice, particularly in cases where an attorney is expected to play dual roles as a necessary fact witness for his client’s case and the client’s advocate.[8] While a fact witness’ testimony is limited to personal knowledge, an advocate must explain the importance and meaning of the witness testimony to the jury.[9] The jury may confuse the attorney’s fact testimony for an analysis of the evidence.[10] Where the factfinder’s confusion prejudices the opposing party, the attorney may be disqualified.[11] However, the courts recognize that attorney disqualification is a severe remedy[12] that should be applied sparingly.[13]
The risk of attorney disqualification is particularly acute where an attorney signs a proof of claim for his client, which is common practice. However, any convenience this practice offers an attorney’s client is outweighed by the possibility of litigation and the risk that the client may need to retain alternative counsel. While the Duke court determined that disqualification was unwarranted under the facts of that case, the court admonished attorneys against signing clients’ proofs of claim in the future[14] because of the risk that the attorney may become a necessary fact witness at his client’s trial.[15] The court instead recommended attorneys have their clients sign the proof of claim.[16] Following the court’s advice will allow attorneys to completely protect themselves from being disqualified as a necessary fact witness under similar facts.[17] Attorneys should take notice of the holding in Duke when considering the obligations and duties owed to clients and avoid the potentially harmful common practice of signing their clients’ proofs of claim.
[1]In re Duke Invs., Ltd., No. 10-36556, 2011 WL 2462681 (S.D. Tex. June 17, 2011).
[2] Id. at *7.
[3] Id. at *6.
[4] Id. at *7 (emphasis in original).
[5] Id. at *8 (quoting Chatham Holdings, Inc. v. Resolution Trust Corp., No. 3:95-CV-0854-P, 1996 WL 751052, at *4 (N.D. Tex. Dec. 30, 1996)).
[6] Id. at *8.
[7] Id. at *5. See also In re Dresser Indus., Inc., 972 F.2d 540, 543 (5th Cir. 1992).
[8] See Model Rules of Prof’l Conduct R. 3.7 cmt. 2 (2009) (“The tribunal has proper objection when the trier of fact may be confused or misled by a lawyer serving as both advocate and witness”); Tex. Disciplinary R. of Prof’l Conduct R. 3.08 cmt. 4 (1989) (“[T]he principal concern over allowing a lawyer to serve as both an advocate and a witness for a client is the possible confusion that those dual roles could create for the finder of fact.”).
[9] See Model Rules of Prof’l Conduct R. 3.7 cmt. 2; Tex. Disciplinary R. of Prof’l Conduct R. 3.08 cmt. 4.
[10] See Model Rules of Prof’l Conduct R. 3.7 cmt. 2 (“It may not be clear whether a statement by an advocate-witness should be taken as proof or as an analysis of the proof.”); Tex. Disciplinary R. of Prof’l Conduct R. 3.08 cmt. 4.
[11] See Model Rules of Prof’l Conduct R. 3.7 cmt. 2; Tex. Disciplinary R. of Prof’l Conduct R. 3.08 cmt. 4. But see FDIC v. U.S. Fire Ins. Co., 50 F.3d 1304, 1315 (5th Cir. 1995) (commenting opposing party has no say in disqualification where attorney’s testimony only prejudices his own client).
[12] NCNB Texas Nat’l. Bank v. Coker, 765 S.W.2d 398, 399–400 (Tex. 1989).
[13] See United States Fire Ins. Co., 50 F.3d at 1313, 1315.
[14] In re Duke Invs., Ltd., 2011 WL at *9.
[15] Id.
[16] Id.
[17] Id. at *8.
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