FSM 5 Intrm. 029-031

FSM SUPREME COURT

TRIAL DIVISION

Cite as Bank of Guam vs. SETS, INC., et al.,

5 FSM Intrm. 29 (Pon. 1991)

[5 FSM Intrm. 29]

BANK OF GUAM,

Plaintiff,

vs.

SETS, INC. et al.,

Defendants.

FSM Civ. 1986-056

OPINION

Edward C. King

Chief Justice

February 27, 1991

APPEARANCES:

For the Plaintiffs: Daniel J. Berman

RUSH MOORE CRAVEN

SUTTON MORRY & BEH

P.O. Box 1491

Kolonia, Pohnpei FM 96941

For the Defendant: R. Barrie Michelsen

Attorney-at-Law

P.O. Box 1450

State of Pohnpei

Kolonia, Pohnpei FM 96941

* * * *

HEADNOTES

Attorney, Trial Counselor and Client

Under Rule 3.7 of the Model Rules of Professional Conduct, when counsel for a party believes the attorney for the opposing party should be required to testify as to information which may be prejudicial to the opposing party, it is appropriate for counsel for the first party to move to disqualify opposing counsel from further representation of the opposing party, but this is not the only procedure which may be followed and counsel who fails to file such a motion may not be sanctioned for his failure in absence of harm to the opposing party or a showing of bad faith. Bank of Guam v. Sets, 5 FSM Intrm. 29, 30 (Pon. 1991)

[5 FSM Intrm. 30]

COURT'S OPINION

EDWARD C. KING, Chief Justice:

The appellate division of the FSM Supreme Court has remanded to the trial division, for decision by the trial court, two long pending motions filed by Sets, Inc., against Bank of Guam in the course 303 of proceedings in Civil Action No. 1986-056.

Several opinions have been issued by this Court in connection with the larger litigation of which this is a part, but the discussion most pertinent to the matters now at hand may be found in In re Island Hardware, 3 FSM Intrm. 332, 345-49 (Pon. 1988).

I. Sanctions

The first motion by Sets seeks an order imposing sanctions against Bank of Guam on the theory that the Bank placed Sets, Inc., and its counsel in an unfair position by calling counsel for Sets as a witness without sufficient advance notice to permit Sets to make other arrangements for representation at the hearing. Specifically, Sets urges that the Bank's method of notice, that is, simply setting out Mr. Michelsen's name on the Bank's list of proposed witnesses and the fact that this was done only a limited time before the evidentiary hearing was to be held, forced Sets to take emergency action by having a second attorney acquaint himself with the litigation and stand ready to take Mr. Michelsen's place in the event Mr. Michelsen was required to testify.

Sets contends that when one party intends to call the counsel for the opposing party as a witness the first party typically so indicates by filing a motion to disqualify the proposed witness from representing the opposing party in the litigation. Sets further argues that the failure of Bank of Guam to follow this procedure should result in imposition of sanctions against the Bank.

The authorities cited by Sets support its contention that when counsel for a party believes the attorney for the opposing party should be required to testify as to information which may be prejudicial to the opposing party, counsel for the first party quite typically moves to disqualify opposing counsel from further representation of the opposing party. This plainly is appropriate under Rule 3.7 of the Model Rules of Professional Conduct, made applicable within the Federated States of Micronesia by FSM Adm. R. VII.

However, counsel has not brought to this Court's attention, nor has the Court's independent research located, any authority saying that this is an exclusive or mandatory method to be employed by a party who seeks to obtain the testimony of counsel for an opposing party.

Such a rigid approach would be foreign to most of the law concerning professional conduct of attorneys.

[5 FSM Intrm. 31]

The Disciplinary Rules . . . are not per se mandates calling for literal application . . . . On the contrary even where a Disciplinary Rule is by its terms applicable we must examine the facts of a claimed violation of the Code and attempt to shape a remedy which will assure fairness to the parties and integrity to the judicial process.

Ross v. Great Atlantic & Pacific Tea Co., Inc., 447 F. Supp. 406, 409 (S.D.N.Y. 1978).

In this case, Mr. Michelsen's testimony was sought by the Bank to establish the time when Sets became aware of the Bank's claims against Island Hardware. Ultimately, Mr. Michelsen was not required to testify. As a price for that protection, however, the Court invoked a rebuttable presumption that Sets had knowledge of the general security issue as of September, 1985. Yet, this did not lead to a substantive ruling against Sets on the substantive issue under consideration. Specifically, the Court found that Sets did not mislead the Court or fail to make proper disclosures during the November 22, 1985 hearing. 3 FSM Intrm. at 347.

There is no contention by Mr. Michelsen or by Sets that the evidence which the Bank sought to elicit from Mr. Michelsen was not material or was not genuinely necessary, or that the information was obtainable elsewhere. The Bank's effort to obtain that information through opposing counsel is supported by the record and has not been shown to reflect bad faith on the part of the Bank.

Thus, the Court does not find that the Bank's effort to obtain Mr. Michelsen's testimony was improper or violative of professional responsibility, and Sets' request that sanctions be imposed against the Bank of Guam is denied.

II. Witness Fees

At this stage of these proceedings Sets' request for an award of witness fees for Carol McCord requires little careful consideration.

At the end of litigation, witness fees ultimately are to be borne by the losing party as part of costs. In this case, there are elements of victory and of loss for both Bank of Guam and Sets. The Court has not made an award of costs in favor of Sets, Inc., or against Bank of Guam and the Court now declines to require that the expenses incurred by Ms. McCord, an officer of Sets, Inc., be transferred to the Bank of Guam. Therefore the motion seeking an order for payment of witness fees pursuant to 6 F.S.M.C. 1013 is denied.

III. Conclusion

The motions of Sets, Inc. seeking imposition of sanctions and witness fees against the Bank of Guam are denied.

* * * *


	FSM SUPREME COURT TRIAL DIVISION Cite as Bank of Guam vs. SETS, INC., et al., 5 FSM Intrm. 29 (Pon. 1991) [5 FSM Intrm. 29] BANK OF GUAM, Plaintiff, vs. SETS, INC. et al., Defendants. FSM Civ. 1986-056 OPINION Edward C. King Chief Justice February 27, 1991 APPEARANCES: For the Plaintiffs: Daniel J. Berman RUSH MOORE CRAVEN SUTTON MORRY & BEH P.O. Box 1491 Kolonia, Pohnpei FM 96941 For the Defendant: R. Barrie Michelsen Attorney-at-Law P.O. Box 1450 State of Pohnpei Kolonia, Pohnpei FM 96941 * * * * HEADNOTES Attorney, Trial Counselor and Client Under Rule 3.7 of the Model Rules of Professional Conduct, when counsel for a party believes the attorney for the opposing party should be required to testify as to information which may be prejudicial to the opposing party, it is appropriate for counsel for the first party to move to disqualify opposing counsel from further representation of the opposing party, but this is not the only procedure which may be followed and counsel who fails to file such a motion may not be sanctioned for his failure in absence of harm to the opposing party or a showing of bad faith. Bank of Guam v. Sets, 5 FSM Intrm. 29, 30 (Pon. 1991) [5 FSM Intrm. 30] COURT'S OPINION EDWARD C. KING, Chief Justice: The appellate division of the FSM Supreme Court has remanded to the trial division, for decision by the trial court, two long pending motions filed by Sets, Inc., against Bank of Guam in the course 303 of proceedings in Civil Action No. 1986-056. Several opinions have been issued by this Court in connection with the larger litigation of which this is a part, but the discussion most pertinent to the matters now at hand may be found in In re Island Hardware, 3 FSM Intrm. 332, 345-49 (Pon. 1988). I. Sanctions The first motion by Sets seeks an order imposing sanctions against Bank of Guam on the theory that the Bank placed Sets, Inc., and its counsel in an unfair position by calling counsel for Sets as a witness without sufficient advance notice to permit Sets to make other arrangements for representation at the hearing. Specifically, Sets urges that the Bank's method of notice, that is, simply setting out Mr. Michelsen's name on the Bank's list of proposed witnesses and the fact that this was done only a limited time before the evidentiary hearing was to be held, forced Sets to take emergency action by having a second attorney acquaint himself with the litigation and stand ready to take Mr. Michelsen's place in the event Mr. Michelsen was required to testify. Sets contends that when one party intends to call the counsel for the opposing party as a witness the first party typically so indicates by filing a motion to disqualify the proposed witness from representing the opposing party in the litigation. Sets further argues that the failure of Bank of Guam to follow this procedure should result in imposition of sanctions against the Bank. The authorities cited by Sets support its contention that when counsel for a party believes the attorney for the opposing party should be required to testify as to information which may be prejudicial to the opposing party, counsel for the first party quite typically moves to disqualify opposing counsel from further representation of the opposing party. This plainly is appropriate under Rule 3.7 of the Model Rules of Professional Conduct, made applicable within the Federated States of Micronesia by FSM Adm. R. VII. However, counsel has not brought to this Court's attention, nor has the Court's independent research located, any authority saying that this is an exclusive or mandatory method to be employed by a party who seeks to obtain the testimony of counsel for an opposing party. Such a rigid approach would be foreign to most of the law concerning professional conduct of attorneys. [5 FSM Intrm. 31] The Disciplinary Rules . . . are not per se mandates calling for literal application . . . . On the contrary even where a Disciplinary Rule is by its terms applicable we must examine the facts of a claimed violation of the Code and attempt to shape a remedy which will assure fairness to the parties and integrity to the judicial process. Ross v. Great Atlantic & Pacific Tea Co., Inc., 447 F. Supp. 406, 409 (S.D.N.Y. 1978). In this case, Mr. Michelsen's testimony was sought by the Bank to establish the time when Sets became aware of the Bank's claims against Island Hardware. Ultimately, Mr. Michelsen was not required to testify. As a price for that protection, however, the Court invoked a rebuttable presumption that Sets had knowledge of the general security issue as of September, 1985. Yet, this did not lead to a substantive ruling against Sets on the substantive issue under consideration. Specifically, the Court found that Sets did not mislead the Court or fail to make proper disclosures during the November 22, 1985 hearing. 3 FSM Intrm. at 347. There is no contention by Mr. Michelsen or by Sets that the evidence which the Bank sought to elicit from Mr. Michelsen was not material or was not genuinely necessary, or that the information was obtainable elsewhere. The Bank's effort to obtain that information through opposing counsel is supported by the record and has not been shown to reflect bad faith on the part of the Bank. Thus, the Court does not find that the Bank's effort to obtain Mr. Michelsen's testimony was improper or violative of professional responsibility, and Sets' request that sanctions be imposed against the Bank of Guam is denied. II. Witness Fees At this stage of these proceedings Sets' request for an award of witness fees for Carol McCord requires little careful consideration. At the end of litigation, witness fees ultimately are to be borne by the losing party as part of costs. In this case, there are elements of victory and of loss for both Bank of Guam and Sets. The Court has not made an award of costs in favor of Sets, Inc., or against Bank of Guam and the Court now declines to require that the expenses incurred by Ms. McCord, an officer of Sets, Inc., be transferred to the Bank of Guam. Therefore the motion seeking an order for payment of witness fees pursuant to 6 F.S.M.C. 1013 is denied. III. Conclusion The motions of Sets, Inc. seeking imposition of sanctions and witness fees against the Bank of Guam are denied. * * * *