American Safety Casualty Insurance Company v. Happy Acres Enterprises Co Inc
2:16-cv-00044
W.D. Wash.Jan 20, 2017Background
- American Safety Casualty Insurance Company filed suit seeking breach of contract, declaratory relief, and unjust enrichment after indemnity obligations and a performance bond dispute arising from a construction contract and a related arbitration involving Happy Acres and Doe Bay.
- American alleges it issued a performance bond and signed a General Agreement of Indemnity with Happy Acres, then incurred approximately $175,000 in defense and related costs after Doe Bay tendered a claim on the bond and the parties arbitrated the dispute.
- Happy Acres contends American joined the arbitration over its objection, that American (and its counsel) did not meaningfully participate or present witnesses, and asserts affirmative defenses including failure to mitigate and lack of necessity for incurred fees.
- Defendants moved to disqualify American’s counsel, Todd Blischke (and his firm Williams Kastner & Gibbs), under Washington RPC 3.7 (advocate-witness rule), claiming Blischke is a necessary material witness regarding decisions and fees in the underlying matter.
- The Court found the motion premature and unsupported by evidence that Blischke’s testimony is unobtainable elsewhere; it concluded the likely testimony falls within RPC 3.7(a)(2)’s exception (testimony as to nature/value of legal services) and declined to disqualify counsel or the firm.
- The Court granted sanctions against Defendants for failing to timely disclose Blischke and another attorney as potential witnesses after discovery closed, precluding Defendants from calling them under Fed. R. Civ. P. 37(c)(1).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether counsel Blischke must be disqualified under RPC 3.7 | Blischke is not a necessary trial witness; rule prohibits advocating at trial only and exceptions apply | Blischke will be a material, necessary witness on decisions and fees and thus must be disqualified | Denied — premature, insufficient proof counsel is necessary witness; RPC 3.7(a)(2) exception applies |
| Whether entire firm should be disqualified due to witness conflict | Firm may continue; RPC 3.7 permits another firm member to act unless other rules preclude | Firm disqualification is warranted because lead counsel is a witness | Denied — broad firm disqualification not authorized by RPC 3.7 and not shown necessary |
| Whether Defendants timely disclosed witnesses under Fed. R. Civ. P. 26 | Defendants disclosed late; untimely disclosure prejudiced Plaintiff | Defendants offered no justification for late disclosure | Plaintiffs' sanction motion granted; Defendants precluded from calling the untimely disclosed witnesses |
| Whether the undisclosed testimony was unobtainable elsewhere and prejudicial | Testimony about legal services is appropriately supplied by counsel and falls under RPC exception | Defendants failed to show testimony unobtainable elsewhere or that not calling counsel would be harmless | Court found no showing of unobtainability; exclusion of late witnesses was not harmless |
Key Cases Cited
- Pub. Util. Dist. No. 1 of Klickitat County v. Int'l Ins. Co., 124 Wn.2d 789 (Wash. 1994) (setting standard for disqualification: materiality, unobtainability elsewhere, prejudice)
- Ollier v. Sweetwater Union High Sch. Dist., 768 F.3d 843 (9th Cir. 2014) (discussing prejudice from late witness disclosure and district court discretion to exclude)
- Torres v. City of Los Angeles, 548 F.3d 1197 (9th Cir. 2008) (burden on sanctioned party to show late disclosure was justified or harmless)
- Republic of Ecuador v. Mackay, 742 F.3d 860 (9th Cir. 2014) (Rule 26 disclosures are mandatory)
- Optyl Eyewear Fashion Int'l Corp. v. Style Cos., 760 F.2d 1045 (9th Cir. 1985) (motions to disqualify deserve strict scrutiny)
- Freeman v. Chicago Musical Instrument Co., 689 F.2d 715 (7th Cir. 1982) (disqualification is a drastic remedy to be applied sparingly)
- Cottonwood Estates, Inc. v. Paradise Builders, Inc., 128 Ariz. 99 (Ariz. 1981) (disqualification standard quoted regarding materiality and unobtainability)