National Union Fire Insurance Company v. Cyfred, Ltd.

• Court: Superior Court of Guam
• Decided: June 7, 2012
• Docket: CF1465-06
• Status: Unknown

Opinion

IN THE SUPERIOR COURT OF GUAM,

3 NATIONAL UNION FIRE INSURANCE ) CIVIL CASE NO.:CV1465-86 COMPANY OF PITTSBURGH, PA., ) 4 ) Plaintiff, ) 5 ) 6 vs. ) ) 7 CYFRED, LTD., KINI B. SANANAP and ) IOWANA M. SANANAP, ) 8 ) 9 Defendants. ) DECISION AND ORDER ) (Motion to DisqualifY Counsel & Motion for 10 Protective Order) II KINI B. SANANAP and lOWANA M. ) 12 SANANAP, ) ) 13 Counterclaim ant, ) 14 ) n. ) 15 ) NATIONAL UNION FIRE INSURANCE ) 16 COMPANY OF PITTSBURGH, P A., ) 17 ) ) 18 Counterclaim- ) Defendant. ) 19

21 INTRODUCTION 22 On March 23, 2012, this matter came before Judge Pro Tempore Richard H. Benson on 23 Plaintiff National Union Fire Insurance Company of Pittsburgh, PA's ("National Union") Motion 24 for a Protective Order and Motion to Disqualify Wayson W.S. Wong, Esq. ("Attorney Wong"). 25

26 Attorney Terrence E. Timblin ("Attorney Timblin") appeared on behalf of National Union.

27 Attorney Wong appeared on behalf of Kini B. Sananap and Iowana M. Sananap ("Sananaps"). 28 National Union seeks to disqualifY Attorney Wong because he is an anticipated witness and

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National Union Fire Insurance Co. of Pittsburgh, P.A. v. Cyfred LTD. et at. Decision and Order Civil Case No. 1465-06 also seeks a protective against the Sananaps' deposition request. Having considered the pleadings 2 and arguments presented, the Court now enters a Decision and Order granting the Motion to 3 Disqualify Counsel and denying the Motion for Protective Order. 4

5 BACKGROUND 6 This case stems from an alleged breach of a settlement agreement between National Union 7

8 and the Sananaps.

9 On February 3, 2012, National Union filed Motion for Protective Order and to Disqualify

10 Counsel for Defendant Kini B. Sananap and Iowana M. Sananap ("Motion"). On March 6, 2012, 11 the Sananaps filed Defendants Kini B. Sananap's and Iowana M. Sananap's Opposition to National 12 Union's Motion to DisqualifY Counsel and for a Protective Order ("Opposition"). On March 9, 13

14 2012, National Union filed National Union Fire Insurance Company of Pittsburgh, PA's Reply in

15 Support of Its Motion for Protective Order and to DisqualifY Counsel for Defendants Kini B. 16 Sananap and Iowana M. Sananap ("Reply"). 17

18 DISCUSSION 19 A. Disqualification of Counsel 20 National Union moves to disqualifY Attorney Wong from participating at trial based on his 21 dual role as witness-advocate. Attorney Wong and Attorney Louie J. Yanza ("Attorney Yanza") 22

23 are the only witnesses to the alleged settlement. Unlike Attorney Yanza, Attorney Wong is

24 functioning as both the Sananaps' counsel and as a key witness in this case. The question now is 25 whether Attorney Wong is permitted to serve as both a witness and advocate in the underlying 26 action. 27

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National Union Fire Insurance Co. o/Pittsburgh, PA v. Cy/red LTD. et at. Decision and Order Civil Casc No. 1465-06 Rule 3.7 of the Guam Rules Professional Responsibility is modeled after the American Bar 2 Association's Model Rules of Professional Conduct. Rule 3.7 provides a general rule and three 3 exceptions. 4 Rule 3.7: Lawyer as Witness. 5

6 (a) A lawyer shall not act as advocate at a trial in which the lawyer is likely to be a necessary witness unless: 7 (1) the testimony relates to an uncontested issue; 8

9 (2) the testimony relates to the nature and value of legal services rendered in the case; or 10

(3) disqualification of the lawyer would work substantial hardship I on the 11 client. 12 Guam R. Profl Conduct 3.7(a). The American Bar Association's Comments interpreting Rule 13

14 3.7(a)(3) provide:

15 [P]aragraph (a)(3) recognizes that a balancing is required between the interests of the client and those of the tribunal and the opposing party. Whether the tribunal is 16 likely to be misled or the opposing party is likely to suffer prejudice depends on the 17 nature of the case, the importance and probable tenor ofthe lawyer's testimony, and the probability that the lawyer's testimony will conflict with that of other witnesses. 18 Even if there is risk of such prejudice, in determining whether the lawyer should be disqualified, due regard must be given to the effect of disqualification on the 19 lawyer's client. It is relevant that one or both parties could reasonably foresee that 20 the lawyer would probably be a witness. The conflict of interest principles stated in Rules 1.7, 1.9 and 1.10 have no application to this aspect of the problem. 21 ABA Model Rule 3.7, cmt. 4. 22

23 The first issue is whether Rule 3.7 applies to bench trials. National Union argues that the

24 Sananaps improperly rely on Rule § 5-210 of the California Rules of Professional Conduct. Reply 25 at 5-6. National Union argues that California's rule, unlike Guam Rule of Professional Conduct 26 ("GRPC") 3.7(a), makes a distinction concerning jury and bench trials and contends that the 27

I Rule 1.0(1) of the Guam Rules of Professional Conduct defines "substantial" as "used in reference to degree or extent denotes a

material matter and weighty importance." Page 3 of 10

National Union Fire Insurance Co. of Pittsburgh. VA. v. Cyfi'ed LTD, et af. Deeision and Order Civil Case No. 1465-06 California rule is inapplicable, because it departs from the general rule. Id The Sananaps argue 2 that GRPC 3.7 does not prohibit an attorney from acting as both a witness and advocate during a 3 bench trial. Opposition at 7. The Sananaps cite California Rule of Professional Conduct § 5-210 4

5 which recognizes the difference between judge and jury trials. Id The Sananaps also refer to

6 Professor Wigmore's 1940 Treatise on Evidence to support their position. Id. at 8.

7 Rule § 5-210 of the California Rules of Professional Conduct ("CRPC") provides that "[a] 8 member shall not act as an advocate before a jury which will hear testimony from the member... 9 " CRPC § 5-210. The discussion section to California's rule states that the rule "is not intended 10

11 to encompass situations in which the member is representing the client in an adversarial

12 proceeding and is testifying before ajudge." In contrast, GRPC 3.7(a) states, "A lawyer shall not 13 act as advocate at a trial in which the lawyer is likely to be a necessary witness unless.... " Guam 14 R. Prof'l Conduct 3.7(a). The Court agrees with National Union that there is a distinction between 15 Guam's rule and California's rule and determines the latter is inapplicable. See Mt. Rushmore 16

t7 Broadcasting, Inc. v. Statewide Collections, 42 P.3d 478, 482 (Wyo. 2002) ("Regardless of any

merit in making such a distinction, California's rule is not relevant to Wyoming's situation based 19 on the obvious differences in the language of the two rules.,,)2; Royal Travel, Inc. v. Shell Mgmt. 20 Hawaii, Civil No. 08-00314, slip op. (D. Haw. March 12, 2009), 2009 WL 649929, at *5 21

22 "Nothing in [Rule 3.7(a)] or its commentary limits the rule's application to jury trials."). Finally,

23 the Court notes that Professor Wigmore's 1940 Treatise3 predates the ABA Model Rules 0

24 Professional Conduct, but even in light of this fact, Rule 3.7(a) and its Comments remain 25 unchanged. 26

2 Guam and Wyoming adopted the American Bar Association Model Rules of Professional Conduct. 3 6 Wigmore, Evidence sec. 191 t, at 777 (Chadbourn rev. ed. 1976).

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National Union Fire Insurance Co. ofPittsburgh, P.A. v. Cyfred LTD. et al. Decision and Order j iI Case No. 1465-06 Since GRPC 3.7 is not limited to jury trials, the next issue is whether Attorney Wong is a 2 "necessary witness" under GRPC 3.7(a). "Rule 3.7 does not dictate any standard for 'likely to be a 3 necessary witness,' but elsewhere, the ABA has explained that the term means 'no other witness 4 could testifY .... '" Fognani v. Young, 115 P.3d 1268, 1273 (Colo. 2005) (citations omitted). It is 5

6 undisputed that Attorney Wong is a necessary witness, as his testimony is unattainable elsewhere.

7 The Sananaps allege that on November 13, 2007, Attorney Wong and Attorney Yanza exchanged 8 correspondence which reflect a settlement agreement, and that these exchanges resulted in 9 National Union agreeing to pay the Sananaps $75,000.00. Only Attorney Wong and Attorney 10

11 Yanza are privy to whether a settlement occurred.

12 The next issue is whether there would be a "substantial hardship" under Rule 3.7(a)(3).4 If

13 a substantial hardship exists, then Attorney Wong could proceed as both a witness and advocate. 14 Rule 3.7(a)(3) requires "a balancing ... between the interests ofthe client and those of the tribunal 15 and the opposing party." ABA Model Rule 3.7, cmt. 4. The Comment to Rule 3.7(a) sets out the 16

17 following factors to determine if disqualification would cause substantial hardship to the client: (l)

18 the nature of the case; (2) the importance and probable tenor of the lawyer's testimony; (3) the 19 probability that the lawyer's testimony will conflict with other witnesses; and (4) whether both 20 parties could reasonably foresee that the lawyer would probably be a witness. Id. "The moving 21 party has the burden to establish grounds for disqualification and must allege facts that 22

23 demonstrate a potential violation of [Rule 3.7]." People v. Pasillas-Sanchez, 214 P.3d 520, 525

24 (Colo. App. 2009) (citing Fagnant, 115 P.3d at 1272). 25 It does not appear that the Supreme Court of Guam has interpreted GRPC 3.7(a), and so 26 this Court will rely on the ABA's Comments for guidance. The Preamble to the GRPC states that 27

4 Rule 3.7(a)(J) does not apply beeause the testimony relates to a contested issue. Rule 3.7(a)(2) does not apply beeause the testimony does not relate to the nature and value of legal serviees rendered. Page 5 of 10

National Union Fire insurance Co. of Pittsburgh, P.A. v. Cyfred LTD. et at. Deeision and Order Civil Case No. 1465-06 "[t]he Comment accompanying each Rule explains and illustrates the meaning and purpose of the 2 Rule. The Preamble and this note on Scope provide general orientation. The Comments are 3 intended as guides to interpretation, but the text of each Rule is authoritative." Guam R. Prof'l 4

5 Conduct Preamble ~ 21.

6 National Union first discusses the nature of this case. It contends that this is not a complex

7 case involving complex asbestos, securities, or admiralty law, as it involves whether a settlement 8 exists. Id. at 7-8. National Union next argues that the Sananaps have not expended substantial 9 resources defending this declaratory judgment case. Id. at 6. The Sananaps were only nominal 10

11 parties in the original declaratory judgment action between National Union and Cyfred and most of

12 the litigation expenses arose in Sananap et ai v. Cydred, Ltd., et ai., CV1448-08 (Super. Ct. 13 Guam), in which they sought the installation of infrastructure at the Gill Baza Subdivision. Id. at 14 7. As to the stage in the proceedings, National Union argues that after the Court granted the 15 Sananaps' additional counterclaim, no movement occurred because Cyfred had filed a petition for 16

17 bankruptcy on June 3, 2011. Id. at 6. National Union notes the automatic stay was lifted on

18 January 31, 2012, and since then, no trial date has been scheduled and no further discovery has 19 been conducted. Id. Finally, National Union contends it was foreseeable to both parties that 20 Attorney Wong could probably be a witness. Id. at 8. Attorney Wong has been aware of this fact 21

since November 2007. Id. 22

23 The Sananaps argue that Attorney Wong has maintained a long and extensive relationship

24 with them, their related cases, and this case. Opposition at 4. They note that Attorney Wong has 25 represented them for ten years in four major Gill-Baza Subdivision cases involving hundreds of 26 motions, a trial, five appeals and two bankruptcy cases. Id. The Sananaps argue they will suffer a 27

28 great hardship by losing such a valuable professional relationship and an attorney with extensive

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National Union Fire Insurance Co, of Pittsburgh, P,A, '1/, (~vfred LTD, et at. Decision and Order Civil Case No, 1465-06 knowledge and experience. Id. at 5. The Sananaps also state they will suffer substantial hardship 2 with the expense of replacing Attorney Wong. Id. 3 National Union also considers any possible prejudice it will suffer if Attorney Wong is not 4 disqualified. It argues that if Attorney Wong is not disqualified, then the trier of fact would be 5

6 unable to adequately distinguish among Attorney Wong's multiple roles: as a critical fact witness,

7 as an attorney responsible for holding the standard of ethical conduct, and as the Sananaps' 8 attorney. Motion at 8. Conversely, the Sananaps argue that National Union will not suffer any 9 prejudice. Opposition at 5. They argue that this case involves a very experienced trial judge, who IO

will afford the proper weight to Attorney Wong's testimony. Id. The Sananaps also note that 11

12 disqualification of Attorney Wong is unnecessary, since Attorney Wong intends to obtain co-

13 counsel for the sole purpose of questioning him. Id. at 6. 14 Here, the Court agrees with National Union that whether a settlement was reached is not a 15 complex issue. This case does not require specialized knowledge or expertise. This is essentially 16

17 a two page breach of contract case which has not been answered. The Court also determines that

18 financial hardship without more is insufficient to prevent disqualification. See Fognani, 115 P.3d 19 at 1275 ("An assertion that the attorney has consumed great resources and expended considerable 20 time in preparation for trial is insufficient alone to defeat disqualification.") (citation omitted). 21 The Sananaps argue that they will suffer financial hardship retaining a new attorney, but this 22

23 argument alone is insufficient. The fact that this case is in the pretrial stages reduces the likelihood

24 of substantial hardship. Finally, the foreseeability factor is present. Attorney Wong knew before 25 filing the counterclaim that he would probably be a witness at trial. The Sananaps counterclaim 26 alleges a settlement was reached between Attorney Wong and Attorney Yanza, and no other party 27

28 was involved in the settlement discussions.

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National Union Fire Insurance Co. of Pittsburgh, P.A. v. Cyfred LTD. et al. Decision and Order Civil Case No. 1465-06 The Court agrees that although judges are capable of distinguishing between an attorney's 2 role as witness and advocate, National Union will still suffer prejudice if Attorney Wong proceeds 3 as a witness-advocate. The Court is concerned about witness credibility. As a witness-advocate, 4 Attorney Wong intends to challenge Attorney Yanza's credibility while bolstering his own. 5

6 Based on the foregoing, the factors weigh in favor of Attorney Wong's disqualification.

7 The Sananaps' financial hardship argument does not outweigh the potential prejudice to National 8 Union, and National Union has met their burden establishing grounds for the disqualification. The 9 disqualification of Attorney Wong does not just safeguard against potential prejudice but IO

eliminates the appearance of impropriety. Attorney Wong is disqualified. His disqualification 11

12 applies to all pretrial and trial activities. 13

14 B. Protective Order 15 Attorney Yanza moves for a protective order preventing the Sananaps from deposing him. 16

17 Attorney Yanza did not appear at the February 6, 2012, deposition. The question now is whether

18 he is entitled to a protective order. 19 Rule 30(a)(l) of the Guam Rules of Civil procedure provides that "[a] party may take the 20 testimony of any person." GRCP Rule 30(a)(1) (2011). Rule 26(c) of the Guam Rules of Civil 21 Procedure governs motions for protective orders. Rule 26(c) provides that the Court may, upon a 22

23 showing of good cause, "make any order which justice requires to protect a party or person from

24 annoyance, embarrassment, oppression, or undue burden or expense." GRCP Rule 26(c). 25 "Following the Eighth Circuit Court of Appeals in Shelton v. America Motors Corp., 805 F.2d 26 1323, 1327 (8th Cir. 1986), the court held that the trial court' at least has the discretion under Rule 27 26( c) to issue a protective order against the deposition of opposing counsel when anyone or more 28

of the three Shelton criteria for deposition ... are not met.'" United Phosphorus, Ltd. v. lvfidland

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National Union Fire Insurance Co. of Pittsburgh, P.A. v. Cyfred LTD. et af. Decision and Order Civil Case No. 1465-06 Fumigant, Inc., 164 F.R.D. 245, 247 (D. Kan. 1995) (citation omitted). Under Shelton, the 2 Sananaps may depose Attorney Yanza if they can establish that: "(1) no other means exist to 3 obtain the information than to depose opposing counsel; (2) the infornlation sought is relevant and 4 nonprivileged; and (3) the information is crucial to the preparation of the case." Shelton, 805 F.2d 5

6 at 1327 (internal citations omitted).

7 The Sananaps argue that the only way to confirm statements Attorney Yanza made is to 8 depose him. Opposition at 8. The Sananaps maintain they seek to depose Attorney Yanza to 9 determine whether a settlement occurred. Id. They assert that the information they seek is not 10 privileged and involves what "was stated to Attorney Wong." Id. The Sananaps also add that 11

12 deposing Attorney Yanza is crucial to pursuing a motion for summary judgment, and if there are

13 material facts at issue, the information is then crucial to discover material facts in preparation for 14 trial. Id. at 8-9. 15 Attorney Wong and Attorney Yanza have repeatedly conceded they are the only 16

17 individuals with direct knowledge of the alleged settlement agreement. Next, the Sananaps

18 indicate that their questioning will not involve privileged information. The Sananaps assure the 19 Court that any questioning will be limited to that which "was stated to Attorney Wong." If an 20 issue arises as to privileged information, then Attorney Yanza may invoke the attorney-client 21 privilege. 5 The next question is whether the information is crucial. The Sananaps assert that this 22

23 information is necessary to prepare for summary judgment, and if necessary, trial. The Court

24 reiterates that this information cannot be acquired by any other means. This fact alone makes the 25 information crucial. 26

27 5 "As to privilege, that objection would not prevent depositions entirely, but at most might be invoked in the course of 28 depositions as to specific questions invading the attorney-client privilege." Spectra-Physics, Inc. v. Superior Court 198 Cal.App.3d 1487. 1497 (Cal. App. 6 Dist. 1988).

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National Union Fire Insurance Co, of Pittsburgh, PA v. C)/red LTD. et at. Decision and Order Civil Case No. 1465-06 In sum, the Sananaps have met their burden under Shelton and may proceed with deposing 2 Attorney Yanza. 3

4 CONCLUSION 5

6 Based on the foregoing, National Union's Motion to Disqualify Attorney Wong is

7 GRANTED. Attorney Wong is disqualified from acting as counsel for the Sananaps. The Motion 8 for Protective Order regarding the deposition of Attorney Yanza is DENIED. 9

10 SO ORDERED: V' I v II

12 Richard H. Benson Judge Pro Tempore I3 Superior Court of Guam 14

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National Union Fire Insurance Co, of Pittsburgh. PA v, CyFed LTD. et at. Decision and Order Civil Case No. 1465-06