Monday, December 31, 2018
The Florida Supreme Court answered a question of the interpretation of its pre-2014 version of Rule 3.4(b)
This case involves a dispute over the recoverable amount of prevailing party fees and costs. The issue presented is whether the pre-2014 version of Rule Regulating the Florida Bar 4-3.4(b), which addresses witness payments and the prohibition against offering inducements to witnesses, prevents the prevailing party in this case from taxing as costs certain payments made to fact witnesses for their “assistance with case and discovery preparation.” This Court has for review Trial Practices, Inc. v. Hahn Loeser & Parks, LLP, 228 So. 3d 1184, 1191 (Fla. 2d DCA 2017), in which the Second District Court of Appeal concluded that the witness payments were permitted under rule 4-3.4(b) and were thus recoverable. The Second District then certified the following as a question of great public importance...
Based on our analysis of the issue presented by this case and consistent with the text of the rule, we rephrase the certified question as follows:
Does the pre-2014 version of rule 4-3.4(b) of the Rules Regulating the Florida Bar permit a party to pay a fact witness for the witness’s assistance with case and discovery preparation that is not directly related to the witness preparing for, attending, or testifying at proceedings?
We answer the rephrased question in the negative and remand for further proceedings consistent with this opinion.
The relevant events began in August 2005 when Petitioner, Trial Practices, Inc. (“TPI”), entered into an agreement with Jack J. Antaramian to provide litigation consulting services to Antaramian concerning a multi-million-dollar dispute with his business partner, David E. Nassif, about commercial real estate holdings (the “Nassif suit”). The consulting agreement provided that TPI would receive 5% of Antaramian’s “gross recovery” in the Nassif suit. After the Nassif suit ended in a mistrial, Antaramian and Nassif resolved their dispute by entering into a complex settlement agreement involving various entities. The principal architects and drafters of the settlement agreement were Antaramian’s longtime tax and business attorneys with the Boston-based firm Burns & Levinson LLP.
In the wake of the settlement agreement, TPI claimed the 5% fee based on the value of certain transferred property and the settlement of related litigation involving Antaramian and Nassif. Antaramian denied owing TPI the 5% fee, asserting that the settlement agreement with Nassif was a “walk away” agreement with no “gross recovery” to either side. In June 2006, TPI sued Antaramian for breach of the consulting agreement. Extensive discovery ensued regarding Antaramian’s finances and his dealings with Nassif.
At trial in 2011, TPI presented several expert witnesses who testified that the settlement agreement in the Nassif suit resulted in a gross recovery to Antaramian of up to $100 million based on certain economic benefits including cancellation of indebtedness. Antaramian presented his own expert witness as well as ten fact witnesses, seven of whom testified in some manner to the issue of “gross recovery.” Those seven witnesses—all licensed professionals involved in the Nassif suit and the resulting settlement agreement—included: (1) two of Antaramian’s attorneys in the Nassif suit; (2) one of Nassif’s attorneys in the Nassif suit; (3) three lawyers from Burns & Levinson LLP; and (4) Antaramian’s longtime accountant who prepared Antaramian’s federal income tax returns. The gist of their testimony was that the settlement agreement was designed to provide no recovery to either Antaramian or Nassif, and that there was no tax fraud or cancellation of debt income.
Antaramian won at trial and sought costs and fees.
We are asked to determine whether rule 4-3.4(b) of the Rules Regulating the Florida Bar permits a party to make certain payments to fact witnesses. This issue presents a pure question of law that is subject to de novo review...
We think the more appropriate inquiry is whether the witness’s “assistance with case and discovery preparation” is directly related to the witness “preparing for, attending, or testifying at proceedings.” Although less than perfectly precise, viewing the payments through that narrower lens is consistent with the language of the rule and avoids prejudicing parties in highly complex cases such as this where they are dependent upon professionals. Indeed, not only was Antaramian required to defend himself, including against accusations of tax fraud, but it appears the professionals upon whom he was dependent also had to defend themselves against accusations of wrongdoing. One of Antaramian’s former trial attorneys testified at the fee hearing regarding the “very adversarial” nature of the litigation, the “[t]ons of documents,” and TPI’s “theory of the case . . . that everybody on Mr. Antaramian’s side of the transaction was a crook, was actually a thief and a liar.” That testimony was consistent with that of others, including Antaramian’s longtime accountant as well as the Burns & Levinson attorney who was the principal architect of the settlement agreement. That Burns & Levinson attorney also testified regarding “a host of complicating factors” in the case.
It would be unfair and prejudicial to conclude that, beginning the moment TPI filed suit, Antaramian’s longtime professionals who had the necessary knowledge for him to begin to defend the suit, who were involved in the transaction that was the very subject of the suit, and whose own actions and character were seemingly in question, could not be reasonably compensated for any “assistance” regarding complex matters about which they would later be called to testify. We conclude that the rule does not require such a result. But we reiterate that a fact witness’s “assistance” must be directly related to the witness “preparing for, attending, or testifying at proceedings.”
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