In recent cases where lawyers have signed proofs of claim for their clients and litigation ensued, the signing attorneys were deposed with respect to the facts surrounding submission of the claims. For some time, an attorney who signed a proof of claim on his client’s behalf has been risking disqualification or being called as a fact witness concerning the factual basis for the claim in related litigation.
In In re Duke Invs., Ltd., 454 B.R. 414 (Bankr. S. D. Tex. 2011), while a Texas bankruptcy court ultimately refused to disqualify the attorney from representing his creditor client in a chapter 11 case, the court discussed whether the attorney would be a “necessary witness” and exposed the risk inherent in this all too common practice. In deciding whether to disqualify the attorney, the court applied the Texas Disciplinary Rules of Professional Conduct as well as the American Bar Association Model Rules of Professional Conduct. The comments to both the Texas Rules and the ABA Model Rules reveal that the rationale behind attorney disqualification is to prevent prejudice, particularly in cases where an attorney is expected to play dual roles as a necessary fact witness for his client’s case and the client’s advocate. Rule 4-3.7 of the Rules of Professional Conduct in Florida also provides that combining the roles of advocate and witness can prejudice the tribunal and the opposing party. While a witness is required to testify on the basis of personal knowledge, an advocate is expected to explain and comment on evidence given by others, including his client.
Although the Duke court did not order disqualification, attorneys representing creditors in bankruptcy cases ought to think twice before signing proofs of claim for their clients. While it may be common for an attorney to sign a client’s proof of claim, the risk of disqualification based on the Professional Rules of Conduct in many states, including Florida, or the possibility of serving as a fact witness, should cause the attorney to pause. Any convenience this practice offers could be outweighed by the possibility of litigation and the risk that the client may need alternate counsel. In addition to disqualification, the attorney-client privilege and the work product doctrine could be implicated. The attorney-client privilege may be waived either by consent or if (1) the party asserting the privilege is seeking affirmative relief; (2) the privileged information is outcome-determinative; and (3) the disclosure of the confidential communication is the only means by which the aggrieved party may obtain the evidence. By signing the proof of claim, not only might the lawyer become a fact witness, but questions which would normally be considered improper intrusions into privileged communications might be deemed proper to seek the basis for factual assertions made by a fact witness. See In re Rodriguez, 2013 Bankr. LEXIS 5048 (Bankr. S.D. Tex. 2013).