Ethics Opinion

Summary: Although DR 7-109(C) prohibits a lawyer from paying compensation to ordinary witnesses for attending at, and preparing for, trial beyond the witness' expenses and any financial loss, a lawyer may pay a former employee of a client required to spend a fair amount of his time in trial preparation for that time and attendance irrespective of the witness' financial loss.

Facts: Pursuant to Mass. R. Civ. P. 30(b)(6) a corporation designated a former managerial employee to testify on matters as to which no current employee had firsthand knowledge. The employee was apparently required to spend a fair amount of time reviewing documents and refreshing his recollection of the relevant events in order to be able to testify competently. At the time of his deposition, the witness, who was between jobs, held himself out as a consultant and had performed some consulting. After the deposition, the witness submitted an invoice for compensation on an hourly basis for time spent preparing and testifying and for out-of-pocket expenses. While the corporation's law firm had earlier agreed to pay the expenses, nothing had been said about hourly compensation. The witness, who has now found employment and is located beyond the subpoena power of the court, has stated that he will not appear for trial unless he is compensated for time already spent and for time preparing for and attending trial. The inquiring law firm asks (1) may it pay the witness for the time spent on the deposition when he was unemployed but holding himself out as a consultant, (2) may it pay him for time spent in preparing for and attending trial now that he has secured employment, and (3) if we conclude that the witness may be compensated, what is the appropriate basis for determining reasonable compensation.
Discussion: Disciplinary Rule 7-109(C) states:
A lawyer shall not pay, offer to pay, or acquiesce in the payment of compensation to a witness contingent upon the content of his testimony or the outcome of the case. But a lawyer may advance, guarantee, or acquiesce in the payment of:
(l) Expenses reasonably incurred by a witness in attending or testifying.
(2) Reasonable compensation to a witness for his loss of time in attending or testifying.
(3) A reasonable fee for the professional services of an expert witness.
The imprecise wording of DR 7-109(C) and the divergent opinions of ethics committees, discussed below, reflect several policy considerations. It is clear that the courts are entitled to every person's testimony, whether the witness is compensated or not, and that giving or accepting payment in order to testify a certain way is unethical and may be criminal. On the other hand, it is acceptable to compensate for their preparation and testimony a wide variety of experts. Moreover, government witnesses, such as policemen, frequently draw overtime for court appearances and are often paid for time spent testifying. In business litigation, corporate employees spend substantial time preparing and testifying for which they are compensated as part of their employment. All such witnesses would be expected, just as would any witness, not to perjure themselves, and the facts of their compensation would provide fair grounds for efforts to impeach their testimony.
The text of DR 7-109(C) does not answer the inquiry whether a former employee may be paid for time spent in testifying or preparing to testify in such circumstances as presented here. Indeed, the wording of the Disciplinary Rule is rather peculiar. The only explicit prohibition is on payment of a contingent fee to a witness. A literal interpretation of the rule would suggest that so long as this prohibition was not violated any other payment may be made. Such an interpretation, however, would make the remainder of DR 7-109(C) surplusage, and we believe that we ought to attempt to give it some meaning. The remainder of the subsection provides that three types of payment may be made. The problem is that none of these three types of payment are prohibited by the first sentence of the subsection. The permission granted thus carries with it an implication of additional prohibitions not mentioned in the first sentence. In view of the explicit prohibition in the first section, we are doubtful the permissive language that follows should be read negatively to prohibit everything that does not fit within the permissive language. Indeed, the failure of the permissive language to mention payment of statutory witness fees surely does not imply that such payment is prohibited. On the other hand, the permissive language does suggest that some additional prohibitions were intended. Having been asked to try to make some sense of this very badly drafted language, we are inclined to seek a common sense solution in what seem to be the purposes of the prohibitions and the permissions contained in the rule.
The crucial permissive language for purposes of answering this inquiry is that which permits compensation for "loss of time in attending or testifying." Such language could be read as permitting payment beyond reimbursement for lost wages or the like. The language could be read to permit payment for time spent preparing testimony and attending depositions or a trial, whether or not that caused the witness to lose income from other sources.
On the other hand, the Ethical Considerations of the Model Code of Professional Conduct interpret the provision as requiring any payments to witnesses other than expert witnesses to be limited to reimbursement for financial loss. EC 7-28, commenting on DR 7-109, states:
A lawyer should not pay or agree to pay a non-expert witness an amount in excess of reimbursement for expenses and financial loss incident to his being a witness; however, a lawyer may pay or agree to pay an expert witness a reasonable fee for his services as an expert ... .
This interpretation, while relevant, is not conclusive. When the Supreme Judicial Court adopted the Model Code of Professional Conduct as the basis for our Disciplinary Rules, it did not adopt the Ethical Considerations that accompanied them. The court did, however, state that the Ethical Considerations "form a body of principles upon which the Canons of Ethics and Disciplinary Rules are to be interpreted." SJC Rule 3:07, Introduction. A problem with the Ethical Considerations is that they state that they "are aspirational in character and represent objectives toward which every member of the profession should strive." Ethical Considerations, Preliminary Statement. Noting therefore that EC 7-28 uses the term "should," it is difficult to know whether it was meant to be interpretive or aspirational in this instance.
Ethics committees from other jurisdictions that have considered the matter of the appropriate interpretation of DR 7-109(C) have divided. Several committees have concluded that a lawyer may compensate a witness for the reasonable value of the time spent preparing and testifying. See Committee on Professional Ethics, New York State Bar Ass'n, Opinion 547 (1982); Committee on Professional Ethics, Illinois State Bar Ass'n, Opinion 87-5; Standing Committee on Legal Ethics, Virginia State Bar, Opinion 587 (l984); and Committee on Professional Ethics, State Bar of Wisconsin, Opinion E-89-17. The New York committee commented:
Loss of time must therefore be translated into dollars. Clearly, a witness who earns a salary for his livelihood may be paid an amount equivalent to his lost wages. Problems may arise when the witness is self-employed or is compensated on a commission basis, or when weekends and night-hours are devoted to preparation, and in that event, closer consideration should be given to the matter of assessing the amount to be paid. But even recreation time is susceptible to valuation. Attorneys are frequently called upon to elicit proof of unliquidated damages, and should not feel at a loss in coping with the vagaries of the situation.
Other opinions, however, have followed EC 7-28 in concluding that a lawyer may pay to a non-expert witness only compensation to replace lost wages or other monetary loss. See Committee on Ethics, Maryland State Bar Association, Inc., Opinion 83-38 and Alabama State Bar Ethics Opinion 81-549.
We believe that there is substantial merit in the position advanced by EC 7-28. The purpose of DR 7-109(C) is not merely to preclude compensation to a witness contingent upon the content of his or her testimony or the outcome of the case. Another purpose is that stated in the first sentence of EC 7-28: "Witnesses should always testify truthfully and should be free from any financial inducements that might tempt them to do otherwise." Paying witnesses for their time, beyond reimbursement for expenses and financial loss, may well constitute such a financial inducement.
The argument advanced in the previous paragraph seems strongest when the witness is one whose testimony might otherwise be viewed as impartial, such as a fact witness with no relation to the party seeking his or her testimony. Permitting compensation to such witnesses on a time basis for preparation and attendance at trial, would permit a practice of paying all witnesses in all cases. That seems contrary to the purpose of DR 7-109(C). The permissive language of the subsection would have been written quite differently if that were its aim.
The inquiry that has prompted this opinion concerns quite a different type of witness. The witness is a former employee whose knowledge is critical to presentation of the party's case since no current employee has firsthand knowledge. The employee is not subject to the reach of subpoena, but that does not seem crucial to us. The fact is that more than just the appearance of the former employee is needed. The former employee had to spend a fair amount of time reviewing documents and generally refreshing his recollection of the events involved in the case for his testimony to have any value. This situation will not often present itself with the ordinary fact witness but it will often be the case with a former employee of a party. Indeed, it may often be the case with a busy employee of a party who will have to work overtime nights and weekends to prepare for testimony in a case. Since the employee and the former employee have such close ties to the employer-party already, paying them for their time (but only for their time) does not seem to present a substantial additional threat to the integrity of their testimony. Given the enormous ambiguity in the rule, we find it difficult to believe that the Supreme Judicial Court would conclude that it was a violation of DR 7-109(C) for a law firm to pay for the time of an employee or former employee taken in testifying and preparing to testify about a matter relating to his or her employment, at least in the circumstances of this case.
There are two methods of interpreting DR 7-109(C) to reach the result of permitting such a payment while at the same time not opening the door to payments to all witnesses, including stranger witnesses, in all cases. The first would be to interpret the "loss of time" language in DR 7-109(C) to permit payments for other than financial loss to witnesses with some professional tie to the party--e.g., employees or former employees--but not to others. One might be able to accomplish that by analogizing their situation to that of expert witnesses, but we acknowledge that such an interpretation does put strain on the language of DR 7-109(C). Another possibility is simply to acknowledge that here is yet another situation where the drafters of the code did not write a detailed set of regulations that covered all possible factual permutations and conclude that DR 7-109(C) was not drafted with the situation of witnesses like employees and former employees in the circumstances of this case in mind. It should therefore not be interpreted to include them. This is in fact our view of the most appropriate resolution of this difficult problem, given the very imprecise manner in which the subsection is drafted. We should make clear that we are addressing only the fact situation presented in this inquiry and are leaving other circumstances that raise similar policy considerations for the future.
The final question, what basis should be employed to determine reasonable compensation, is beyond our capacity to decide. We can only warn that any payment in excess of what the witness ordinarily had charged, and previously received, for his time might evidence an impermissible payment to induce testimony in favor of the paying party.