Trial Practices, Inc. v. Hahn Loeser & Parks, LLP

260 So.3d 167

TRIAL PRACTICES, INC., Petitioner,

v.HAHN LOESER & PARKS, LLP, etc., Respondent.

No. SC17-2058

Supreme Court of Florida.

December 28, 2018

G. Donovan Conwell, Jr., of Conwell Business Law, LLLP, Tampa, Florida; Raymond T. Elligett, Jr., of Buell & Elligett, P.A., Tampa, Florida; and John F. Romano of Romano Law Group, Lake Worth, Florida, for Petitioner

Edmond E. Koester and Matthew B. Devisse of Coleman, Yovanovich & Koester, P.A., Naples, Florida, for Respondent

CANADY, C.J.

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:

DOES 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?

Id. This Court has jurisdiction. See art. V, § 3(b)(4), Fla. Const.

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. Before explaining our decision, we review the language of the rule as well as the facts and procedural history of the case.

I. RULE 4-3.4(b)

Rule 4-3.4 is generally titled "Fairness to Opposing Party and Counsel." At all relevant times in this case, including when the case went to trial in 2011, rule 4-3.4(b) provided as follows:

A lawyer shall not:

....

(b) fabricate evidence, counsel or assist a witness to testify falsely, or offer an inducement to a witness, except a lawyer may pay a witness reasonable expenses incurred by the witness in attending or testifying at proceedings; a reasonable, noncontingent fee for professional services of an expert witness; and reasonable compensation to reimburse a witness for the loss of compensation incurred by reason of preparing for, attending, or testifying at proceedings ....

In 2014, this version of rule 4-3.4(b) was amended to its current form.¹ Unless otherwise indicated, all references to rule 4-3.4(b) are to the pre-2014 version.

II. BACKGROUND

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 (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.

In April 2011, the jury returned a verdict squarely in favor of Antaramian.³ Antaramian then moved for attorney's fees and costs under a broad fee-shifting provision in the consulting agreement. Antaramian sought approximately $2.5 million, of which $715,467.61 related to what Antaramian's controller described as "Various Fees, Costs and Expenses" and included approximately $236,000 for amounts paid or owed to the seven fact witnesses' professional firms. Approximately 75% of the $236,000 amount was for payments to Burns & Levinson, three of whose attorneys were deposed by TPI and later testified at trial. In 2013, TPI requested detailed billings, which Antaramian provided. As it relates to the seven fact witnesses, the billings reflect time spent on various items, including the following: traveling to and testifying at depositions and trial; reviewing documents and conferencing in advance of deposition and trial testimony; reviewing other correspondence and documents relating to TPI's lawsuit, including in response to TPI's requests for voluminous discovery; and assisting with things such as responding to interrogatories.

An evidentiary hearing was held, and TPI argued against any fee award in part on the ground that Antaramian had secretly paid the fact witnesses at their professional billing rates for their testimony and other services. TPI cited section 92.142(1), Florida Statutes (2013), for the proposition that fact witnesses may only be paid a statutory rate of $5 for each day of "actual attendance." TPI also cited two disciplinary opinions from this Court—namely, Florida Bar v. Wohl , 842 So.2d 811 (Fla. 2003), and Florida Bar v. Jackson , 490 So.2d 935 (Fla. 1986) —for the proposition that it is unlawful and sanctionable conduct to pay a fact witness more than the statutory amount.

The trial court—noting that TPI had "aggressively litigated" the case, and not sharing TPI's level of concern regarding the general nature of the witness compensation—awarded Antaramian approximately $2 million in attorney's fees and costs, of which $317,873.64 represented the allowable portion of the $715,467.61 in "Various Fees, Costs and Expenses" sought by Antaramian. But it is unclear how much of the $236,000 in witness payments was included in the trial court's cost award. Regarding the amounts charged by the fact witnesses for their time spent testifying at trial or deposition, the trial court appears to have awarded Antaramian $5 per day, relying on Moakley v. Smallwood , 826 So.2d 221 (Fla. 2002), for the proposition that an attorney called to testify as a fact witness is only entitled to be paid $5 per day under section 92.142(1). As to the remaining amounts charged—for the witnesses' non-testimony time—the trial court appears to have awarded Antaramian some or all of those amounts on the ground that the witnesses were acting as "consulting experts" who "assisted in both case and discovery preparation."

On appeal, the Second District recognized the uncertainty regarding the cost award, noting that the amounts paid for the witnesses' non-testimony time "were apparently part of a $317,873.64 cost award." Trial Practices , 228 So.3d at 1187 (emphasis added). Nevertheless, the Second District "agree[d] with the trial court's analysis of section 92.142 as well as the trial court's conclusion that Antaramian was entitled to recover (as costs) the fees paid to witnesses for their assistance with case and discovery preparation." Id. at 1190.

The Second District began by examining rule 4-3.4(b), noting that the relevant language in effect at the time of trial permitted a lawyer to pay a witness "reasonable compensation to reimburse a witness for the loss of compensation incurred by reason of preparing for, attending, or testifying at proceedings." Id. at 1189 (quoting R. Regulating Fla. Bar 4-3.4(b) ). The Second District also noted the 2014 amendments to the rule but dismissed their relevance. Id. at 1189-90. In the Second District's view, "both versions of the rule acknowledge the value of a witness's time," and "neither version of the rule makes [the payments at issue] unethical or illegal." Id. at 1190. Indeed, according to the Second District, payments to a witness for "time spent preparing for, attending, or testifying at the proceedings ... have long been permitted as long as the payment is not conditioned on the content of the testimony." Id. (citing ABA Formal Op. 96-402 (1996), Propriety of Payments to Occurrence Witnesses). And the Second District concluded that the rule language permitting such payments "is broad enough to encompass" payments for "assistance with case and...