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FREEMAN v. KULICKE & SOFFA INDUS.

May 2, 1978

ROBIN J. FREEMAN and VISION ENGINEERING LTD.
v.
KULICKE & SOFFA INDUSTRIES, INC. and VISION SYSTEMS, INC.



The opinion of the court was delivered by: LORD, III

 Plaintiff Vision Engineering Ltd. ("VEL") and defendant Kulicke and Soffa Industries, Inc. ("K & S"), in 1973 formed a corporation, defendant Vision Systems, Inc. ("VSI"), for the purpose of manufacturing microscopes. VSI entered into voluntary bankruptcy in June 1975, and six months later plaintiffs Freeman, the principal shareholder and chief executive officer of VEL and VEL filed this suit, alleging inter alia that K & S breached its contractual and fiduciary duties to plaintiffs. Plaintiffs have moved to disqualify trial counsel for defendant K & S, *fn1" the law firm of Pepper, Hamilton & Scheetz and a partner and an associate of that firm, on the ground that Allison F. Page, another partner in that firm, was involved in the transactions giving rise to this litigation and that the plaintiffs will call Page as a witness, at which time his testimony will or may be prejudicial to the case of K & S.

 I. LEGAL STANDARD FOR DISQUALIFICATION

 Plaintiffs place principal reliance on Canon 5 of the American Bar Association's Code of Professional Responsibility, adopted as the standards of conduct under Local Rule 11 of the United States District Court for the Eastern District of Pennsylvania, and Disciplinary Rule 5-102(B) promulgated under the canon. Canon 5 mandates, "A lawyer should exercise independent professional judgment on behalf of a client," and DR 5-102(B) provides:

 
"If, after undertaking employment in contemplated or pending litigation, a lawyer learns or it is obvious that he or a lawyer in his firm may be called as a witness other than on behalf of his client, he may continue the representation until it is apparent that his testimony is or may be prejudicial to his client."

 Plaintiffs contend that K & S's trial counsel must terminate their representation in this case because it is apparent that Page's testimony, based upon his deposition taken by plaintiffs and other evidence obtained through discovery, will be or may be prejudicial to K & S. This motion raises the legal issues of the meanings of "is or may be" and "prejudicial" in DR 5-102(B) under the circumstances of this case.

 A. "Prejudicial" Testimony.

 DR 5-102(B) prescribes standards of conduct for a lawyer in a situation in which the lawyer (or a member of his or her firm) would give testimony adverse to the client's case. The concern of the Rule is that in such a situation the trial counsel might be inhibited from attacking the credibility or arguing to the fact-finder the lack of credibility of his or her own or a partner's testimony, thereby restricting his or her independent professional judgment. We think the policy underlying the disciplinary rule gives rise to the test of what is "prejudicial": the projected testimony of a lawyer or firm member must be sufficiently adverse to the factual assertions or account of events offered on behalf of the client, such that the bar or the client might have an interest in the lawyer's independence in discrediting that testimony.

 K & S maintains that the standard of prejudice applicable under DR 5-102(B) is whether the testimony in question would taint the overall fairness of the trial. Defendant's Brief at 6-7. Defendants cite for that proposition Greenebaum-Mountain Mortgage Co. v. Pioneer National Title Insurance Co., 421 F. Supp. 1348, 1353 (D.Colo. 1976), citing W. T. Grant Co. v. Haines, 531 F.2d 671, 677 (2d Cir. 1976). While the effect of an alleged breach of this disciplinary rule on the litigation generally is doubtlessly relevant to a motion to disqualify, we do not believe this to be the controlling test. We know of no case discussing DR 5-102(B) in which the court focused its inquiry on the impact of alleged misconduct upon the trial generally. An adverse effect of a lawyer's or partner's testimony on any material and disputed aspect of a client's case would be sufficient to constitute prejudice under this disciplinary rule.

 K & S also suggests that the prejudice must be great to justify disqualification, on the authority of Universal Athletic Sales Co. v. American Gym, Recreational & Athletic Equipment Corp., Inc., 546 F.2d 530, 539 n.21 (3d Cir. 1976), where the court concluded that the language of DR 5-101 and DR 5-102(A) suggests that these sections "were concerned only with the lawyer-witness who has crucial information in his possession which must be divulged." Defendant's Brief at 6. That conclusion does not apply to the very different structure and policy of DR 5-102(B). We agree with K & S, however, that disqualification under DR 5-102(B) requires that the prejudice which would or might result from the testimony be more than de minimis -- that is, that it be substantial enough that an independent lawyer might seek to cross-examine the witness and/or to question his or her credibility.

 This limiting construction is drawn from the overall policy of the rule and from note 31 to Canon 5, which notes that the canon "was not designed to permit a lawyer to call opposing counsel as a witness and thereby disqualify him as counsel," Canon 5 n.31, quoting Galarowicz v. Ward, 119 Utah 611, 620, 230 P.2d 576, 580 (1951). It follows from this concern that the spirit of the canon would not be advanced were a lawyer permitted to project that he would call opposing counsel's partner as a witness, to get him to testify in a way that confirms his own witness's testimony or conflicts with his partner's client's witnesses on a point that is not disputed or is totally insignificant, and to disqualify counsel on that basis. *fn2" We reject, consequently, a literal interpretation of "prejudicial" in the disciplinary rule. See J. P. Foley & Co., Inc. v. Vanderbilt, 523 F.2d 1357, 1360 (2d Cir. 1975). The testimony need not be absolutely crucial for a disqualification motion to be granted, but neither can it be so insignificant that it raises suspicions that the motion is a tactical artifice or that it does not violate the policy underlying Canon 5, full independence of lawyers in the service of clients.

 Such a limiting construction of DR 5-102(B) seems particularly appropriate where, as here, the motion is made long after the suit was brought, shortly before trial is scheduled to begin and near the close of discovery. Under such circumstances, granting the motion would impose considerable expense and hardship upon the client of disqualified counsel; consequently, a court must be sensitive to the possibility that the motion is tactically motivated. Furthermore, when much discovery has been taken, the movant ought to be in a position to make out potential prejudice that is specific and material rather than vague and incidental if the concern about counsel's non-independence is a legitimate one.

 B. Probability of Prejudice.

 For similar reasons, we believe that a limiting construction must be applied to the language "is or may be" in the disciplinary rule. The spirit of the rule will not be served if a movant's assertion that the testimony of his opponent (or opponent's partner) may be or will be prejudicial is sufficient grounds for disqualification. Rather, the moving party bears the burden of demonstrating the likelihood that prejudice will or might result. The Third Circuit has recognized the insufficiency in a motion to disqualify under DR 5-102(B) of a mere allegation that the testimony of opposing counsel's partner, if called, may prejudice opposing counsel's client. Kroungold v. Triester, 521 F.2d 763, 766 (3d Cir. 1975). *fn3" Where the contention of the movant that prejudice will or may result from the testimony of counsel or a partner is rebutted by an assertion of opposing counsel that that testimony will not or may not be prejudicial, the movant's assertion is not sufficient grounds for disqualification, at least where the motion is ...


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