In a recent letter ruling, the Court of Chancery deferred any decision on whether or not there was a violation of Rule 3.7(a) of the Delaware Lawyers’ Rules of Professional Conduct. In Re Straight Path Communications Inc. S’holder Litig., C.A. No. 2017-0486-VCG (Del. Ch. July 12, 2021).

Rule 3.7 generally prohibits a lawyer from simultaneously appearing as a trial advocate and as a witness, but Rule 3.7(a), when used as a sword, is problematic and disfavored.

Although the court explains what must be demonstrated in order to successfully apply the rule to prevent a lawyer from being both an advocate and a witness in the same case, the court deferred decision because the issue had not been properly “teed-up.”

Moreover, the court acknowledged a principle previously made clear by the Delaware Supreme Court, that only the Delaware Supreme Court has the authority to enforce the Rules of Professional Conduct, with a limited exception.

The Court of Chancery did not decide whether that limited exception applied to the facts of this case, and declined to determine whether or not a violation of ethical precepts affected the ability of the trial court to do justice. Such a finding would allow the trial court to enforce the Rules of Professional Conduct as an exception to the Delaware Supreme Court’s exclusive jurisdiction to rule on that issue.

The latest Chancery decision in hotly contested litigation captioned In re Oxbow Carbon LLC Unitholder Litigation, Consol., C.A. No. 12447-VCL, (Del. Ch. July 28, 2017), addresses several issues that are of practical importance for all trial lawyers. Several prior Delaware decisions in this case that have been highlighted on these pages  provide additional background.  Among the key principles addresses in this decision is the application of Rule 3.7(a) of the  Delaware Lawyers’ Rule of Professional Conduct, which generally bars a lawyer from acting as an advocate at the same trial in which the lawyer is likely to be a necessary witness – – with three exceptions.  After a careful application of the rule to the facts of this case, the Delaware Court of Chancery reasoned that, on balance, the lawyer involved should not be prevented from testifying, although his testimony would be approached with care.

Court’s Analysis

The opinion explained that the lawyer involved was present during the trial but that he was not acting as an advocate to the extent that he did not have a speaking role. This was intentional because it was expected that he might be needed as a rebuttal witness.

Importantly, the court emphasized that his testimony would not undermine the fairness of the proceedings, especially because it is a bench trial and the court fully understood the difference between the role of a fact witness and the role of a counsel for one of the parties. The court provided ample citations to authority including the well-known Delaware Supreme Court decision entitled Appeal of Infotechnology, Inc., 582, A.2d 215, 221 (Del. 1990), which generally stands for the principle that a non-client litigant only has standing to enforce a rule of professional conduct such as an alleged conflict “when he or she can demonstrate that the opposing counsel’s conflict somehow prejudiced his or her rights.”  Moreover, the court is aware that rules of professional conduct are sometimes used as a tactical weapon to seek inappropriately to disqualify opposing counsel. See footnotes 22 through 24.

Trial Practice Tips from the Court

This opinion also features a practical commentary from the court with insights on trial practice regarding the order that witnesses are called, and the preference of calling a witness only once when he will be both an adverse witness and a witness favorable to the other party. The alternatives in calling an adverse witness for a party’s case in chief, involve the court deciding whether or not the party calling the adverse witness will question the party first as part of his case-in-chief.  In this case, the court decided to permit counsel to conduct a direct examination first, followed by the cross examination by the adverse party.  This approach allowed the party who has the burden of proof to determine the order of witnesses by calling adverse witnesses for its case-in-chief.  But that party here did not have the opportunity to question an adverse witness from the outset as a hostile witness.  Instead, counsel for the witness had the opportunity to present the witness first, after which opposing counsel would cross-examine.  The court preferred this approach as a more efficient use of trial time, although it deprives the party with the burden of proof of calling and questioning a hostile witness from the outset.

The author of this opinion also explained that generally he prefers to give the party with the burden of proof the ability to first question – – even an adverse witness, but in this case because both sides had asserted interrelated claims and defenses where they each technically bore the burden of proof, there was less ability to view one side as having the burden such that they should also receive the tactical advantages that accompany that burden.

Lastly, the opinion included a useful discussion of Delaware Rule of Evidence 615 regarding sequestration of witnesses and the ability of the court at the request of a party to order witnesses excluded from the trial so that they can hear the testimony of other witnesses – – with the exception of a party who was a natural person, or an officer or an employee of a party which is not a natural person, or a person whose presence is necessary to the presentation of the cause.

In denying a motion to disqualify counsel based on a claim that the opposing attorney might be a witness in violation of Rule 3.7, the court viewed the motion as a tactical maneuver. The court focused on the procedural context as relevant to the nature of enforcement, but not the need to enforce the rule. The court found that the movant would not be prejudiced at this stage of the case, the opposing party would not receive an advantage, and disqualification could cause undue economic impact. The motion was denied without prejudice to renewing it at a later time. Benge v. Oak Grove Motor Court, Inc., download file.

Prior blog posts over the last 19-plus years on these pages have addressed the difficulty of succeeding on a motion to disqualify counsel. The recent Delaware Court of Chancery decision in Brex Inc. v. Su, C.A. No. 2022-0758-MTZ (Del. Ch. May 22, 2024), is no exception.

This ruling explains why disqualification of counsel was denied based on an alleged violation of Rule of Professional Conduct 3.7(a), which provides the general prohibition of an attorney acting as a necessary witness and an advocate in the same trial. See prior blogs posts on these pages with highlights of court decisions addressing this rule.

Rule of Professional Conduct 1.9 may bar current representation of a client that is adverse to a prior representation of a former client. But in this case, delay in seeking disqualification on this basis, was the reason why the court determined that the argument was waived. See prior blog posts on these pages with highlights of court decisions addressing this rule.

Homsey Architects, Inc. v. Nine Ninety Nine, LLC, C.A. No. 4412-VCP (Del. Ch. June 14, 2010), read opinion here.

This 31-page opinion from the Delaware Court of Chancery addressed the definition of “substantial performance” in connection with rejecting a statute of limitations defense relating to an AIA agreement between an architect and a developer.

Key Issues

1) The discussion in this opinion of “substantial performance” as that term is defined in the standard AIA Agreement between architects and owners will be useful for the many parties who use that widely exercised agreement.

2) The Court also addresses the 2009 amendments to the Delaware Uniform Arbitration Act (“DUAA”) which eliminated the provision that formerly gave the Court of Chancery jurisdiction to address the statute of limitations defense to an arbitration claim.

3) The Court addressed the difference between substantive arbitrability and procedural arbitrability in terms of whether those issues are to be addressed by the Court or by the arbitrator.

Overview

This dispute between an architectural firm and a developer addressed whether the developer could proceed with an arbitration claim against the architectural firm in connection with issues that arose regarding design services on a townhome complex.

This opinion will be of interest to anyone who uses or needs to interpret the AIA document: B141-1997 “Standard Form of Agreement Between Owner and Architect.” The AIA refers to the American Institute of Architects and their agreements are the most commonly used in construction contracts. In this case, the architect incorporated by reference into the agreement the proposals of the consultants used by the architect for engineering, mechanical and electrical matters.

The agreement required that all claims and disputes arising out of the agreement be submitted to arbitration pursuant to the Construction Industry Arbitration Rules of the American Arbitration Association. The agreement also included an accrual clause which provided that the statute of limitations defense would not commence to run any later than the date when the services of the architect were substantially completed. See Section 1.3.7.3 of the agreement. The agreement also contained the definition of “substantial completion” at Section 9.8.1.

The Court’s opinion provides complete and detailed descriptions of the factual foundation of the dispute between the parties. On a procedural level, the architect had sued to obtain an injunction to prevent the developer/owner from proceeding with arbitration based on the argument that the statute of limitations of three years had expired prior to the date that the arbitration demand was made. The Court explained all the factual reasons why it determined that the services of the architect were not substantially completed within three years of the arbitration demand being made. The work of the consultants for the architect was not substantially completed until well after the architect’s services were completed. As indicated, the services of the architect were defined to include the services of his consultants which were incorporated by reference into the AIA agreement.

The Court observed that neither party cited to any Court decision that defined when the services of an architect were considered to be “substantially completed,” as those words are used in the AIA agreement. See footnote 68 (referring to the definition in the AIA agreement). See also footnotes 71 to 74 and accompanying text. The conclusion of the Court’s decision was that the owner/developer was allowed to proceed with his arbitration claims against the architect.

 

 

Although I only occasionally summarize on this blog decisions of the Delaware Superior Court,  the trial court of general jurisdiction in Delaware,  for example, when they are of special commercial import or they apply generally to business litigators, this is such an instance. 
In Dunlap v. State Farm Fire and Casualty Co., 2007 WL 2390682 (Del. Super. 2007),  read opinion here, the Delaware Superior Court granted a Motion to Disqualify filed by one party, based on Rule of Professional Conduct 3.7 which prohibits attorneys advocating in a trial to also serve as witnesses, but then, sua sponte, (which for the non-Latin lovers among my readers, means "on its own"), the Court also disqualified the opposing attorney who filed the motion. The Court reasoned that: both attorneys  "… used some very strong language about positions the other side has taken….[and] it is beyond proper  vigorous advocacy. Both counsel have lost too much professional detachment in their "vigorous" advocacy.The Court, therefore, believes that both sides need new counsel."

Far be it from me to  pontificate, as there but for the grace of God go I, though it is easy to observe that litigation should not be about the lawyers, and as hard as it is to do, even if the other attorney is insulting and boorish, the goal is to focus on the issues in the case. Here and here are two separate follow-up opinions denying a motion for reargument and denying a motion for "clarification" of the ruling.