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Dewey v. Bechthold

United States District Court, E.D. Wisconsin

October 23, 2019

NANCY DEWEY individually and as a trustee, THE NANCY DEWEY LIVING TRUST, THE NANCY DEWEY 2015 NEA GRANTOR RETAINED ANNUITY TRUST, THE NANCY DEWEY 2015 P&D GRANTOR RETAINED ANNUITY TRUST, THE IRREVOCABLE TRUST FOR THE GRANDCHILDREN OF NANCY AND DOUGLAS DEWEY, JOHN DEWEY individually and as a trustee, THE JOHN D. DEWEY LIVING TRUST, THE JOHN D. DEWEY IRREVOCABLE CHILDREN'S TRUST, THE ABIGAIL DEWEY IRREVOCABLE TRUST, THE ERIN DEWEY IRREVOCABLE TRUST, THE IAN DEWEY IRREVOCABLE TRUST, THE SHEAMUS DEWEY IRREVOCABLE TRUST, THE ABIGAIL DEWEY DESCENDANTS TRUST, THE ERIN DEWEY DESCENDANTS TRUST, THE IAN DEWEY DESCENDANTS TRUST, THE SEPARATE TRUSTS FOR IAN DEWEY, SHEAMUS DEWEY, ERIN DEWEY, ABIGAIL DEWEY, and THE SHEAMUS DEWEY DESCENDANTS TRUST, Plaintiffs,
v.
KURT BECHTHOLD, MARK FILMANOWICZ, DAVID BECHTHOLD, PAYNE & DOLAN, INC., NORTHEAST ASPHALT, INC., CONSTRUCTION RESOURCES MANAGEMENT, INC., ZENITH TECH, INC., and TIMBERSTONE OF RICHFIELD, INC., Defendants.

          ORDER

          J.P. Stadtmueller U.S. District Judge.

         On September 10, 2019, Plaintiffs filed a motion to disqualify attorneys Bryan House (“House”) and Thomas Shriner (“Shriner”), who are longtime representatives of Defendants. (Docket #135). On September 20, 2019, Defendants responded with a motion for a protective order regarding the depositions and a motion to quash the depositions of House and Shriner. (Docket #170, #171). Those motions are all fully briefed. For the reasons explained below, Plaintiffs' motion to disqualify House and Shriner will be denied without prejudice. Defendants' motions for a protective order and to quash the depositions will also be denied.

         Since House and Shriner were to be deposed before the briefing on these motions was complete, they attended their depositions. (Docket #190). However, they were inflexible as to what they could be deposed about, and refused to answer many of Plaintiffs' questions. Following these depositions, Defendants filed a motion to terminate or limit the depositions to the single subjects about which the deponents had discussed in their declarations. (Docket #191). Plaintiffs, perceiving things very differently, filed an expedited motion to continue the depositions and compel testimony. (Docket #198). Both motions will be denied as moot for the reasons explained below.

         The Court will order the parties to resume the depositions of House and Shriner forthwith. As is customary, the attorneys will be able to depose House and Shriner on a range of issues in order to source discoverable information. Once the depositions are complete, the parties should explore the possibility of stipulating to House and Shriner's testimonies so that there is no issue of fact that would necessitate testimony at trial. If a stipulation cannot be reached, Plaintiffs may submit a renewed motion to disqualify trial counsel. However, they must include deposition transcripts of the proffered testimony that they believe is necessary, as well as evidence from the record that makes clear that the testimony is contested. If the Court is persuaded that House and Shriner will be required to testify at trial, then they will be precluded from serving as trial counsel so as to avoid confusing a jury. However, they will still be permitted to assist in the preparation of the case for trial. On the other hand, if Plaintiffs fail to show any genuine dispute of fact as to House and Shriner's testimony, the testimony will be treated as uncontested, and House and Shriner will be permitted to remain as trial counsel.

         1. MOTION TO DISQUALIFY

         1.1 Legal Standard

         “The advocate-witness rule generally bars a lawyer from acting as both an advocate and a witness in the same proceeding except under special circumstances.” United States v. Jones, 600 F.3d 847, 861-62 (7th Cir. 2010). Federal courts look to the relevant state court rules of professional conduct to determine the contours of the attorney-witness rule in a given state. Crafton v. Law Firm of Jonathan B. Levine, 12-CV-602, 2013 WL 3456982, at *1 (E.D. Wis. Jul. 9, 2013) (citing Diettrich v. N.W. Airlines, Inc., 168 F.3d 961, 964 (7th Cir. 1999) (applying the Wisconsin Rules of Professional Conduct to evaluate a trial attorney's misconduct in the district court)). Wisconsin's advocate-witness rule is set forth in Wisconsin Supreme Court Rule 20:3.7, which states that

(a) A lawyer shall not act as an advocate at a trial in which the lawyer is likely to be a necessary witness unless
(1) the testimony relates to an uncontested issue;
(2) the testimony relates to the nature and value of legal services rendered in the case; or
(3) disqualification of the lawyer would work substantial hardship on the client.

         The trial court has broad discretion to allow an attorney to testify in a case in which he or she is an advocate. State v. Foy, 557 N.W.2d 494, 499 (Wis. Ct. App. 1996); Harris v. State, 354 N.W.2d 291, 298 (Wis. 1977) (declined to follow on other grounds by Wilson v. State, 264 N.W.2d 234, 237 (Wis. 1978)). “There is, however, a longstanding ethical prohibition against an attorney testifying for his or her client in most cases.” Foy, 557 N.W.2d at 499. “The rule recognizes the danger that an attorney might not be a fully objective witness, as well as the risk that a jury could confuse the two roles when deciding how much weight to accord to a testifying attorney's statements.” Jones, 600 F.3d at 862. Accordingly, “courts should not usually permit an attorney who is an advocate in a trial to testify in that trial, especially where the value of the testimony is small or collateral to the ultimate issues.” Foy, 557 N.W.2d at 499.

         “The party seeking disqualification based on [Rule] 20:3.7 has the burden of proving the necessity for disqualification.” State v. Gonzalez-Villarreal, 824 N.W.2d 161, 164 (Wis. Ct. App. 2012). On the other hand, when an attorney knows in advance of trial that “his testimony will be required, ” it is “improper for [the] attorney to continue to conduct litigation.” In re Elvers' Estate, 179 N.W.2d 881, 884 (Wis. 1970). “If an attorney is to be a witness, he is under a duty to withdraw from the litigation.” Id.[1]

         1.2 Relevant Procedural Background

         The First Amended Complaint alleges several claims against Defendants including fraud, breach of fiduciary duty, and shareholder oppression. See (Docket #45 at 34-44). In support of these claims, Plaintiffs include excerpts of one of House's emails, which discusses whether John Dewey (“John”) would be estopped from challenging the validity of the 2014 transfer restriction. Id. ¶ 40. The email was sent to Plaintiffs' attorney, Vincent Louwagie (“Louwagie”). (Docket #114 ¶ 8). Louwagie and House discussed the proposed language of the transfer restriction, and contemplated the effects of the bylaw provision on the pending litigation. Id. ¶¶ 8-12. Based on this email, Plaintiff contends that “the Companies are estopped from asserting that John voted in favor of the 2014 Restriction.” (Docket #45 ¶ 91). The complaint also references “misrepresented” or “false” property lists as one of the bases for their claims of breach of fiduciary duty and fraud. Id. ¶¶ 6, 64, 73. Shriner was the attorney who drafted these property lists; he communicated about them with another of Plaintiffs' attorneys, Ralph Weber (“Weber”).

         On August 15, 2019, Defendants moved for summary judgment. (Docket #110). In lieu of deposing and providing affidavits from individuals who are not litigating the case but might have had knowledge of the disputed issues, such as, for example, Louwagie, Weber, the Bechthold brothers, Mark Filmanowicz, or John Dewey, ...


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