Petition — Person v. Association of the Bar of New York

Supreme Court brief1977

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Bago Coun. 8)

SEP 12 1977

WROWAEL RODAK, JR. CLERK

In The

SUPREME COURT OF THE UNITED STATES

ones Ta "Beg .

No.

CARL E. PERSON,

Petitioner,

THE ASSOCIATION OF THE BAR OF THE CITY ~

OF NEW YORK, SUPREME COURT, APPELLATE

DIVISION, FIRST DEPARIMENT, SUPREME COURT,

APPELLATE DIVISION, SECOND DEPARIMENT,

and ATTORNEY GENERAL OF NEW YORK STATE,

132 Nassau Street

New York, N.Y. 10038

(212) 349-4616

September 12, 1977

TABLE OF CONTENTS a ii

Ss Page

Page Protection clause of the

fourteenth amendment for

reasons outlined at pp.

34=36 -RRRRARESERSERE RESET SE SS 34

II, DR 7=109C, prohibiting the

Opinions BELOW cccccccccccccccceces 2

Jurisdiction cesccccccscccccccesese 3

Questions Presented ccccccccccccess 3

a contingent-fee basis,

Constitutional, Statutory and : impermissibly interferes

Rules Provisions Involved eecess 12 with substantial rights of

petitioner and his clients,

Statement of the CaSe seccccccceeee 23 and is a denial of equal

protection under the four~

1. Procedural Background .eceee 23 teenth amendment for reasons

2. Naboor Antitrust Action .... 24

3. Antitrust Law Enforcement of expert witnesses on a

Is Political Activity .ecee. 29 , 3 contingent-fee basis, is a

denial of procedural and

= 4. DR 7-109C Prevented + as applied, substantive ‘

Substantial Justice for . due process under the

the Naboor Plaintiffs ...... 31 fourteenth amendment for

reasons outlined at pp.

5. New York's Automatic - 41-43 eeeeeeeeooooaooe eee eee eoe 41

Adoption of DR 7=109C .seee. 32

IV. DR 7=-109C, prohibiting use

6. No Issues Of Fact cccccccces 33 of expert witnesses on a

fee basis, vio-

Reasons for Granting the Writ ..... 34 lates the first amendment,

’ through the fourteenth

The Court of Appeals has decided amendment, by the overbreadth

an important of federal doctrine and by unconstit:-

law which has not been, but tional application of the

should be, settled by this Court 34 . rule, because of its sub-

stantial and unjustified

I. DR 7-109C, prohibiting use of interference with first

expert witnesses on a contin- amendment freedoms, as

gent-fee basis, is irrational outlined at pp. 46-47 ..... 46

Conclusion Seeeeeeseeeeeeeeeeeeeeee

A - Memorandum and Order

dated March 24, 1976 by Judge

Dooling of the United States Dis-

trict Court the Eastern

for

District of New eeeeeceeaeaeee .

B = Memorandum and Order

dated June 25, 1976 by Judge

Dooling (RR RERRRERRRAR RE RE RRR EER SE SS

Appendix C = Memorandum and Order

Gated August 10, 1976 by Judge

Dooling (RE RRERERERERER ERE SR ESE ES SE SS

Appendix D - Judgment dated

and entered August 12, 1976 .eeee

Appendix E = Opinion of Circuit

Judge Smith of the United States

Court of Appeals for the Second

Circuit, dated April 29, 1977

reversing judgment of District

Court and dismissing action .....

Appendix F - Order of Court of

Appeals for the Second Circuit,

dated June 14, 1977, denying

Petitioner's petition for a

rehearing eeeeeceeaoeoeoaoeoeoeooeene eee eed

G =~ Order of Court of

Appeals for the Second Circuit,

dated June 14, 1977, denying

Petitioner's petition for a

rehearing en banc eeececece: *geee

21a

37a

40a

TABLE OF CITATIONS

* Cases Cited:

* eeeeees ee eoeee eed 47

‘Bigelow v. Commonwealth of ‘Virginia,

421 U.S. BOT (1975) eeeeeeeeeeeeed 48

‘ ‘Boddie v, Connecticut, 401 U.S.

371 (197T) eeeeeeeeeeeeeeeeeeeeed 41

‘Dandridge v. Williams, 397 U.S.

‘71 (T5970) eeeeeeeeeeeeeeeeeeeeesd 49

A.D. ’ eiewve (ist

1961), aff'd, 11 N.Y.2d

679 (1962) eccccceccoocococccccce 37

Massachusetts Board of Retirement v.

’ eve eeece 36

‘NAACP v. ‘Button, 371 U.S. 415 (1963) 47-48

- National ‘Auto Brokers’ -

General Motors " 7 Civ.

‘ Ortwein v. Sciwab, 410 U.S. 656

Sisteiet vy. Reirigues 4 eSe

T (1973)

‘ United States v. Kras, 409 U.S. 434

‘ Winters v. Miller, 446 F.2d 65, 71

(ind Cir. 1977)

‘ United States Constitution:

Amendment 1, Peaceable Assemblage

clause eeeeeeeeeeeeeeeeeeeeeeeee

Amendment 1, Petition clause ..cece

Amendment 14, § 1, Due Process

clause Seeeeeee eee eeeeeeeeeeeee

Amendment 14, § 1, Equal

Protection clause

11-12, 39-40,

46-47, 49-49

11-12, 39-40,

46-47, 48-49

9, 11, 13,

41-42, 44,

46-47, 48-49

6, 8, 13,

34-36, 39-40

’ "Statutes Cited:

28 U.S.C. % 1254 (1) eeeeeeeeeeeeeee

‘28 U.S.C. 4 1343 (3) eeeeeeeoeeeeeee

28 U.S.C. § 2201 eeeeeee eee eeeee eee

42 U.S.C. § 1983 eeeeee ee eeeeeeeees

"s Consolidated Laws of New

York, Book 29, Judiciary Law,

§ 90 (2) SCeeeeeeeeSeeeeeeeeeeeeee

’ Rules Cited:

Rule 56 (f), F.R.Civ.P. eeeeeeeeeeee

Rule 704, Federal Rules of Evidence

Rule 7=109C of the

Code of Professional Responsibil-

ity adopted by the New York State

Bar Association,

published in

, Judiciary

Law, Appendix, at 351, 499 coceee

ABA Canon 39, adopted in 1928

4, 17, 21-22,

17-18, 23

9, 10-11, 18,

29, 40, 43

;

New York, § 603.2 cccccccccecececs 21-22, 32

Supreme

New York, § 691.2 ccccccccccccsee 22, 32 GUL E. ce,

‘Petitioner,

‘ Other Authorities Cited:

THE ASSOCIATION OF THE BAR OF THE CITY

Casencte, "Professicnal Respansi- OF NEW YORK, SUPREME COURT, APPELLATE

bility = A Constitutional DIVISION, FIRST DEPARIMENT, SUPREME COURT,

Challenge to Disciplinary Rule APPELLATE DIVISION, SECOND DEPARIMENT, and

7=109(C)", 55 N.C.L. Rev. ’ ATTORNEY GENERAL OF NEW YORK STATE,

709=21 (Apr. 1977) cccccccccceces Mm, 45 se

e ‘Respondents.

nesses - Is linary Rule

7109 (C) Dead?", 81 Dick. L. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED

Rev. 655-661 (Spr. 1977) eesccee 45-46 STATES COURT OF APPEALS FOR THE SEQOND CIRCUIT

a. ‘Court ‘and

: The petitioner, Carl E. Person, respectfully

1154-1169 ones -nontvomentiecee 46 prays that a writ of certiorari issue to review

, ne an the judgment of the United States Court of

“DTS BT Warv.Le¥ev. T, 57-67 ... 40 Appeals for the Second Circuit, rendered in

this action on April 29, 1977.

2 3

OPINIONS BELOW JURISDICTION

The Memorandum and Order dated dated March | The decision of the Court of Appeals for

24, 1976 by the District Court for the Eastern the Second Circuit reversing the judgment of the

District of New York (Dooling, J.) is reported District Court and dismissing the action was made

at 414 F. Supp. 139 and is reproduced in Appendix and filed on April 29, 1977. See Appendix E, p.

A to this petition. The Memorandim and Order 40a, infra. Petitioner's petition for a rehearing

dated June 25, 1976 by Jutige Dooling is reported en banc was denied by two orders each dated

at 414 F. Supp. 144 and is reproduced in Appendix June 14, 1977. See Appendices F and G, pp.

B to this petition, The Memorandum and Order 64a and 66a, infra, The jurisdiction of this Court

Gated August 10, 1976 by Judge Dooling, not j in invoked uder 28 U.s.C. § 1254(1).

@ ss reported, is reproduced in Appendix C to this &

petition. The opinion of Circuit Judge Smith . QUESTIONS PRESENTED

of the United States Court of Appeals for the Disciplinary Rule DR 7-109C of the American

Second Circuit, decided April 29, 1977, is Bar Association ("ABA") Code of Professional

reported at 554 F.2d 534 and is reproduced in Responsibility, adopted in New York State and in

Appendix E to this petition. chusst G3 Chas ctaten » guiiiidte exh

attorney from using or acquiescing in the use of

bility - A Constitutional to

Disciplinary Rule 7-109(C)", 55 N.C.L.Rev.

709 (Apr. 1977).

an expert witness on a contingent-fee basis, no

matter how reasonable the contingent compensation

may be, and irrespective of the financial condi-

tion of the party, the type of lawsuit, or his

need to experts to prepare for testifying, and

to testify.

Violation of the rule by an attorney is

professional misconduct under § 90(2) of the

New York Judiciary Law, but the prohibition does

not apply to the experts themselves, the clients

of an attorney, or parties in litigation acting

on a pro se basis. Also, the rule does not

prohibit certain contingencies having far

greater prospective monetary value, such as a

substantial ongoing business relationship between

the expert witness and the attomey who retained

him or the attorney's client.

The rule was adopted by bar associations

controlled by attorneys for major corporations

which benefit from the rule (by reducing the

possibility that plaintiffs with meritorious

cases will succeed in litigation against the

corporation), and there was no independent

legislative or judicial review of the rule in

New York.

Because of the prohibition of DR 7-109C,

Petitioner, as attorney for 10 plaintiffs in a

major federal antitrust action (the "Naboor

action") against General Motors Corporation

("GM") and mmerous others, was not able to

employ the services of any expert witnesses to

prepare for and then testify at an evidentiary

hearing or at the trial.

This inability to employ expert witnesses

in opposition to the substantial amount of

expert preparation and testimony used by Gi

caused Petitioner's clients to lose, in 1973, a

critical motion for a preliminary injunction to

stop G4 from interfering with the clients’

sources of supply of new automobiles, on a

"fleet" basis, from willing Gi dealers.

The trial in the Naboor Action was held

during October, November and early December,

1976, and the action was dismissed, at the end

of the plaintiffs’ case, for alleged insufficiency

of evidence. The plaintiffs in the Nabcor

action had no expert witnesses to testify at the

trial for the above reasons. (An appeal is

pending in the Second Circuit under Docket No.

77-7037.)

The questicns presented are:

I. Whether DR 7-109C, prohibiting use of

expert witnesses on a contingent-fee basis, is

irrational and in violation of the Equal

Protection clause of the fourteenth amendment

because the rule:

(a)

(b)

(c)

(a)

makes directly conflicting assumptions

thinks atta 0 vennembiie fan fox

testifying could induce an expert

witness to commit perjury;

makes directly conflicting assumptions

about the need for contingent fees to

attorneys. and expert witnesses and

whether the use of either of such types

of contingent fees would induce the

attorney to suborn perjury;

prohibits all types of contingent fees

to expert witnesses, whether or not

the fees are small or reasonable;

does not regulate expert witnesses or

parties to litigation, only the attorney,

thereby permitting the attorney's client

or wnrepresented parties to use expert

witnesses on a contingent-fee basis,

reasonable or unreasonable (if the

attorney is not involved);

8 9

(e) does not prohibit an expert witness fron injunction to stop, and to recover for,

owning shares of stock in the client or | the illegal activities of major

from buying a percentage of the claim corporations which are destroying the

itself; | business and property of the clients;

(£) does not prohibit an attorney from using (b) does not permit petitioner or his clients

expert witnesses who have more substan- to make any showing of need to use

tial contingencies in the form of ongoing expert witnesses on a contingent-fee

business relationships and expectations; basis; and

and (c) prevents petitioner from introducing

: (g) does not prohibit a party or its ; opinion testimony on the ultimate

a employees and shareholders from cs facts in issue under Rule 704, Federal

testifying as an expert witness. Rules of Evidence, thereby giving

wealthy defendants a substantial,

II, Whether DR 7-109C, prohibiting the use unfair and unnecessary advantage.

of expert witnesses on a contingent-fee basis,

impermissibly interferes with substantial rights III, Whether DR 7-109C, prohibiting the use of

of petitioner and his clients, and is a denial expert witnesses on a contingent-fee basis, is a

of equal protection under the fourteenth denial of procedural and, as applied, substantive

amendment because the rule: due process under the fourteenth amendment

(a) prevents them from having the access because the rule:

to the courts they need to obtain an

(a) was adopted by persons having a substan-

tial interest in the prohibition without

independent review by the New York

legislature or judiciary;

(b) impermissibly interferes with the

fundamental property rights of

petitioner's clients to obtain a court

injunction against, and damages fron,

persons who, through violations of

federal antitrust laws, are destroying

business and property interests of

petitioner's clients;

of the use of their own property (the

claim in litigation) to finance the

litigation without permitting them an

Opportumity to show need to hire

expert witnesses on a contingent-fee

basis; and

(d) deprives them of the substantial

advantages of Rule 704, Federal Rules

IV. Whether DR 7-109C, prohibiting the use of

expert witnesses on a contingent-fee basis,

violates the first amendment, through the

fourteenth amendment, by the overbreadth

doctrine and unconstitutional application of

the rule, because of its substantial and

unjustified interference with first amendment

freedoms:

(a) to petition the courts for a redress

of grievances as to antitrust claims

for injunctive and monetary relief; and

(b) to engage as a private attorney general

_ dn peaceable assembly and political

- . | 13

patina ia ices The Due Process clause in § 1 of the

nathihnnind tae the anna oe fourteenth amendment to the United States

Constitution provides:

"ee nor shall any State deprive any

without any opportumity to make a showing of

economic need to use expert witnesses on a

(reasonable) contingent=-fee basis. person of life, liberty, or property,

without due process of law...."

RULES PROVISIONS INVOLVED The Equal Protection clause in § 1 of the

The Peaceful Assemblage clause in the first fourteenth amendment to the United States

amendment to the United States Constitution Constitution provides:

e miscae? pace . ) "eee nor shall any State ... deny to

Congress : any person within its jurisdiction

eee abridging ... the right of the equal protection of the laws."

the people peaceably to assemble...."

The statute describing when cases in the

The Petition clause in the first amendment courts of appeals may be reviewed by the

to the United States Constitution provides: Supreme Court, 28 U.S.C. § 1254, reads in

"Congress shall make no law pertinent part as follows:

eee abridging ... the right of "Cases in the courts of appeals may

the people ... to pstitic the be reviewed by the Supreme Court by

Goverment for a redress of the following methods:

grievances."

"(1) By writ of certiorari granted Congress providing for equal

Upon the petition of any rights of citizens or of all

‘party to any civil or criminal persons within the jurisdic-

case, before or after rendition tion of the United States,"

of judgment or decree;"

The statute providing for declaratory

The statute providing jurisdiction to the judgments, 28 U.S.C. § 2201, reads in pertinent

District Court to hear civil actions, 28 U.S.C, part:

§ 1343, reads in pertinent part as follows: "Creation of remedy

“The district courts shall have original ; "In a case of actual controversy

jurisdiction of any civil action . 2 within its jurisdiction, ... any court

authorized by law to be commenced by of the United States, upon the filing

any person: of an appropriate pleading, may

allt Geclare the rights and other legal

"(3) To redress the deprivation, relations of any interested party

under color of any State law, seeking such declaration, whether or

statute, ordinance, regulation, not further relief is or could be

custom or usage, of any right, | sought. Any such declaration shall

privilege or immmity secured have the force and effect of a final

by the Constitution of the judgment or decree and shall be

United States or by any Act of

reviewable as such." Unchanged by

amendment effective Oct. 4, 1976.

The statute providing petitimer with the

right to sue for denial of his civil rights,

42 U.S.C. § 1983, provides in pertinent

part as follows:

"§1983. Civil Action for deprivation

of rights

"Every person who, under color of

e any statute, ordinance, regulation,

. custom, or usage, of any State

or Territory, subjects, or causes to

be subjected, any citizen of the

United States or other person within

the jurisdiction thereof to the

deprivation of any rights, privileges,

or immmities secured by the Costi-

tution and laws, shall be liable to

the party injured in an action at

law, suit in equity, or other proper

proceeding for redress."

The New York statute making violation of

DR 7-109C an act of professional misconduct,

§ 90(2) of the New York Judiciary Law, published

in McKinney's Consolidated Laws of New York,

Book 29, reads in pertinent part:

“The supreme court shall have power

and control over attorneys ..., amd the

appellate division of the supreme court

in each department is authorized to censure,

suspend from practice or remove from office

any attorney ... who is quilty of

professional misconduct..., or amy conduct

prejudicial to the administration of

justice...."

Rule 56(f) of the Federal Rules of Civil

Procedure, providing for summary judgments,

reads in pertinent part:

"(a) For Claimant. A party seeking

to .e. Gbtain a declaratory judgment may,

at any time after the expiration of 20

days from the commencement of the action

or after service of a motion for summary

judgment by the adverse party, move with or

without supporting affidavits for a summary

judgment in his favor upon all or any part

thereof."

Rule 704 of the Federal Rules of Evidence,

permitting opinion testimony on ultimate issues,

reads: }

"Opinion on Ultimate Issue.

"Testimony in the form of an

opinion or inference otherwise admissible

is not objectionable because it embraces

an ultimate issue to be decided by the

trier of fact."

Disciplinary Rule DR 7-109C of the Code of

Professional Responsibility of the ABA adopted

by the New York State Bar Association ("DR

-J=109C") , published in McKinney's Consolidated

Laws of New York, Book 29, Judiciary Law,

Appendix at 351, 499, reads:

"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:

"1. 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 profes-

sional services of an expert

witness."

or deviate from the truth, or in any degree

to affect his free and wntramelled conduct

when appearing at the trial of in the

witness stand."

ABA Canon 39, originally adopted on July 26,

1928 and a predecessor to DR 7-109C, stated:

"Compensation demanded or received by

any witness in excess of statutory alla

ances should be disclosed to the court and

adverse counsel. If the ascertainment of

truth requires that a lawyer should seek

information from one connected with or

reputed to be biased in favor of an adverse

party, he is not thereby deterred fron

€ seeking to ascertain the truth from such

person in the interests of his client."

The court rule which makes a violation of

DR 7=109C professional misconduct, § 603.2 of

the Rules of the First Department of the

Appellate Division of the Supreme Court of the

State of New York, reads in relevant part:

: “Any attorney who ... violates ...

any Disciplinary Rule of the Code of

Professional Responsibility, as adopted by

the New York State Bar Association, effective

ABA Canon 39 was amended in 1937 to read:

"A lawyer may properly interview any

witness or prospective witness for the

opposing side in any civil or criminal

action without the consent of opposing

counsel or party. In doing so, however, he

should scrupulously avoid any suggestion

calculated to induce the witness to suppress

Jan. 1, 1970, as amended, or any Canon of the

Canons of Professional Ethics, as adopted by

such bar association and effective until Dec.

31, 1969 ... shall be deemed to be quilty of

professional misconduct within the meaning

"ef subdivision 2 of section 90 of the

22 23

Judiciary Law. ..." } STATEMENT OF FACTS

1, ‘Procedural Background

The court rule which makes a violation of The case originated upon the filing of a

DR 7-109C professional misconduct (in the complaint in the United States District Court for

Eastern District of New York), § 691.2 of the the Eastern District of New York to enjoin

Rules of the Second Department of the Appellate enforcement of DR 7=109C, which prohibits

Division of the Supreme Court of the State of attomeys fran using or acquiescing in the use of

New York, reads in relevant part: expert witnesses on a contingent-fee basis, how

"Professional Misconduct Defined ever reasonable. Petitioner alleged a violation

"Any attomey who ... violates ... of his civil rights under 42 U.S.C. § 1983

£ any disciplinary rule of the Code of @ —s_ ai alleged that the basis for jurisdiction

Professional Responsibility, as adopted by was 28 U.S.C. § 1343(3). After denial of

the New York State Bar Association, or any petitioner's motion for a preliminary injunction,

canon of the Canons of Professional petitioner moved to amend his complaint to allege

Ethics, as adopted by such bar association an action for declaratory judgment under 28

eee Shall be deemed to be guilty of U.S.C. § 2201, which motion was granted by

professional misconduct within the meaning Memorandum and Order dated June 25, 1976 (Appen-

of subdivision (2) of section 90 of the dix B hereto). Petitioner then moved for a

Judiciary Law." summary declaratory judgment under Rule 56(f),

F.R.Civ.P., to declare DR 7-109C unconstitutional,

and the motion was granted by Memorandum and

Order dated August 10, 1977 (Appendix C hereto),

and judgment was entered on August 12, 1976

(Appendix D hereto).

Respondents other than The Association of

the Bar of the City of New York appealed from the

judgment of the District Court, and the Second

Circuit reversed the judgment and dismissed the

action on April 29, 1977 (see Opinion of Second

Circuit at Appendix E hereto), and denied

petitioner's petition for a rehearing en banc at

the same time (see Appendices F and G hereto).

2. ‘Nabcor Antitrust Action

Petitioner, an antitrust attomey, repre-

sents 10 plaintiffs in a major antitrust action

against General Motors Corporation ("Gi"),

General Motors Acceptance Corporation, Ford Motor

Company, Chrysler Corporation, American Motors

Corporation and various other defendants. This

action, the "Nabcor action", was commenced in

the Southern District of New York during

December, 1970 under the name National Auto

‘Brokers Corp. v. General ‘Motors Corp., index

mmber 70 Civ. 5421, and was subsequently

severed into 4 separate actions. The plaintiffs

in the Nabcor action have charged Gi and the

other defendants with a conspiracy (i) to

boyoott Nabcor by cutting off Nabcor's sources

of supply of new cars and (ii) to fix retail

prices. The Naboor plaintiffs seek $100,000,000

in damages (before trebling) for themselves,

not as a class action, for the total destruction

of their unique new businesses of distributing

any make and model of new automobile through an

automobile “brokerage” system in competition

with the franchised distribution system of Gi and

the other auto manufacturers. Also, the Nabcor

plaintiffs seek a permanent injunction to stop

the illegal activities alleged.

It was essential for the Naboor plaintiffs

to retain expert witnesses to prepare to testify

and then to testify during a 1973 evidentiary

hearing on plaintiffs’ preliminary injunction

motion to enjoin Gi from interfering with

Naboor's purchasing of new cars from willing Gi

dealers on a "fleet" (i.e., lowcost) basis.

However, Nabcor and the other plaintiffs were

unable to afford needed expert witnesses, and

lost the critical motion, which caused Nabcor

and its 200 franchisees to go aut of business.

G4, on the other hand, submitted extensive

reports prepared by a major accomting firm

(Price, Waterhouse & Co.) retained by G's

attorneys, the New York firm of Paul, Weiss,

Rifkind, Wharton & Garrison. A partner of Price,

Waterhouse testified at the evidentiary hearing.

Also, the accounting firm or its partners

were retained to testify at trial as exert

witnesses on behalf of Gi and other defendants.

Price, Waterhouse & Co. had substantial business

selationshins of a contimzing nature with

GM, Gi's attomeys and other defendants which

made their compensation contingent to the

extent the firm risked the loss of further

business from such defendants and attorneys in

subsequent litigated or non-litigated matters,

including the 4 or more trials expected to be

held in the Naboor action, if the accounting

firm's “expert” testimony failed to meet the

requirements or satisfaction of Gi or Gi's

attorneys. During the evidentiary hearing, the

firm partner admitted that the firm's preparation

and his related testimony for Gi was done

contrary to generally accepted accounting

principles.

Because of the prohibition of DR 7-109C,

petitioney was wnable to retain any expert

witnesses to perform preparation work prior to

trial, in the areas of accomting, econanics,

marketing, franchising and automobile distribu-

28 29

tion, and therefore had no expert witnesses The use of expert witnesses in both of

prepared to testify at trial, ‘The needed expert such areas could have prevented the court's

witnesses requested non-contingent compensation determination of insufficiency. See Rule

of about $100,000 or more, which petitioner's 704 of the Federal Rules of Evidence which

clients could not afford. This financial permits opinion testimony on the ultimate

inability was allegedly caused by the violations issue to be decided by the trier of fact.

of federal antitrust law alleged in their

antitrust complaint. 3. Antitrust Law Enforcement

Petitioner has proven that enforcement of

the antitrust laws by the Department of Justice

; The first of the 4 severed Naboor actions d

@ —s_ the @& action) was dismissed after the plaintiffs’ CJ

case by the District Court in December, 1976,

after 6 weeks of trial, the judge determining

that the plaintiffs had insufficient evidence

to submit to the jury as to liability or damages.

An appeal is pending in the Court of Appeals for action against Gi or any of the other defendants

the Second Circuit under Docket No. 77-7037. tn On tehene eatin en ated © @ @

National ‘Auto Brokers ‘Corp. v. General Motors the Nabcor plaintiffs and petitioner. Because of

Corp., 70 Civ. 5421A (USDC SDNY), appeal

pending in 2nd Cir. under Docket No. 77-7037.

and New York Attorney General is done on a

discretionary basis, with major reliance upon

private actions to enforce the federal and

state antitrust lays. The Justice Department

and New York Attormmey General refused to take

this refusal to assist, petitimer and his Nabcor

Clients are performing a political activity of

government, enfcxcing the entitrust las, and axe

recognized as “private attorneys general" under

decisions of this Court.

In his complaint, petitioner alleged that

he and his Nabcor clients have assembled in the

Naboor action as a political association to

enforce the antitrust laws against G4 and the

other defendants.

Petitioner has proven that the concentration

of wealth in this country is at a dangerously

high level, and our form of govermment depends

on how effective the nation's antitrust laws are

enforced. Enforcement of the antitrust laws has

substantial political ramification in this

country.

Petitioner has proven that antitrust

litigation is very costly in most cases, with

the plaintiffs in an antitrust action often

having insufficient funds available to adequately

present their case in court, even if they

are able to retain an attorney cm a contingent-

fee basis, unless the plaintiffs can use a

portion of their claim to finance the suit.

Also, existence of the rule inhibits attempts to

find counsel willing to take the action on a

contingent-fee basis for himself,

4. DR 7-109C Prevented Substantial

‘Justice for the Nabcor Plaintiffs

Because of the high cost of retaining needed

expert witnesses in the Nabcor acti, and the

existence of DR 7-109C (prohibiting attomeys

from using expert witnesses on any kind of

contingent-fee basis, however reasonable),

petitioner and his 10 Naboor clients were

unable, in petitioner's professional opinion as

an attorney, to obtain substantial justice in

the Naboor private antitrust action, which denial

continues to this day.

5. New York's Automatic

Adoption of DR _7-109C

DR 7-109C was promilgated by the ABA during

1969, Its inmediate predecessor, Canon 39 (1937

version) did not prohibit the use of expert

witnesses on a contingent-fee basis; nor did the

prior version of Canon 39, adopted in 1908.

DR 7-109C of the ABA was adopted in 1970 by

the New York State Bar Association, violation

of which Rule is professional misconduct under

§ 90(2) of the New York Judiciary Law and

Rules § 603.2 and § 691.2 of the First and

Second Departments of Appellate Division of the

New York Supreme Court.

New York's adoption of the ABA Code,

including DR 7-109C, occurred automatically and

without any prior legislative or judicial

review and without any attempt to balance

the interests at stake. The ABA, New

York State Bar Association and defendant,

The Association of the Bar of the City of New

York are dominated or controlled by partners in

law firms representing major business interests

which benefit from the adoption and enforcement

of DR 7-109C. The rule inhibits persons such

as petitioner and his antitrust clients from

proving meritorious claims against these

same major companies. Furthermore, these

business interests have combined on a political-

action basis to prevent effective antitrust law

enforcement (through The Business Roundtable,

consisting of the chief executive of the top 158

corporations, including G1, Ford and Chrysler,

and was founded by a top partner in the law

firm representing The Association of the Bar

of the City of New York). The Business Roundtable

is even financing the defense of liticatim for

companies not members of The Business Roundtable.

6. No Issues of Fact

Petitioer's facts are wmrefuted. Respon-

dents filed no affidavits in opposition to the

petitioner's affidavits (other than attorneys"

affidavits), and respondents did not seek any

discovery. The judgment of the District Court

“was based exclusively on the affidavits of

plaintiff and the pleadings".

REASONS FOR GRANTING THE WRIT

Petitioner submits that this Court should

grant this petition for the following reasons:

The Court of Appeals has decided an important

question of federal law which has not been,

but should be, settled by this Court.

DR 7=109C, prohibiting the use of expert

witnesses on a contingent-fee basis, is

irrational and in violation of the Equal

Protection clause of the fourteenth amendment

because the rule:

(a) makes directly conflicting assumptions

about whether~ a reasonable fee for

(c)

(d)

(e)

‘testifying could induce an expert

witness to commit perjury;

makes directly conflicting assumptions

about the need for contingent fees to

attorneys and expert witnesses and

whether the use of either of such types

of contingent fees would induce the

attomey to suborn perjury;

prohibits all types of contingent fees

to expert witnesses, whether or not

the fees are small or reascnable;

does not regulate expert witnesses or

parties to litigation, only the attorney,

thereby permitting the attorney's client

or unrepresented parties to use expert

witnesses on a contingent-fee basis,

reasonable or ureasonable (if the

attorney is not involved);

does not prohibit an expert witness from

owning shares of stock in the client or

from buying a percentage of the claim

. 36 | 37

itself; to existing case law in New York permitting pay-

(£) does not prohibit an attorney from using ment of contingent fees to certain types of

expert witnesses who have nore substan- expert witnesses. See Marine Midland ‘Trust Co.

tial contingencies in the form of ongoing ' Of ‘New York v. Forty Wall Street Corp., 13 A.D.2d

business relationships and expectations; 118, 213 N.¥.S.2d 689 (1st Dept. 1961), aff'd,

and ; 11 N.Y¥.2d 679 (1962).

(g) does not prohibit a party or its

employees and shareholders from Paragraph "(a)" of the above-listed

testifying as an expert witness. irrationalities is discussed by Judge Dooling

at 29a-32a. The rule is irrational as well

co Irrationality is one basis for declaring a * because of the other 6 reasons (b-g). The rule

rule unconstitutional, .. a denial of equal j would be rational, possibly, only if “contingency”

protection under the fourteenth amendment. referred to a percentage of the recovery, rather

‘Massachusetts Board of ‘Retirement v. Murgia, than to include a reasonable fee paid only in

427 U.S. 307, 312 (1976) ard ‘San ‘Antonio the event of success of the litigation.

‘ Independent ‘School District v. Rodriguez, 411

U.S. 1, 44-53 (1973). _ Also, the rule prevents an attorney from

advising his client on how to proceed himself

DR 7=109C, as adopted by the New York State to use an expert witness on a contingent~fee

Bar Association effective in 1970, was contrary basis. This would seem to be a basis itself for

declaration of unconstitutionality, through

its denial of counsel to a client, particularly

because it would be professional misconduct to

inform the client what the attorney is not

permitted to participate in.

Judige Dooling held that New York did not

prevent all types of transfers of interests in

lawsuits, and that petitioner should request a

ruling from the ethics conmittee of the defendant

bar association on the ethical propriety (as

distinguished from the legality) of selling

shares in lawsuits. Thereafter, during Jime,

1976, the Securities and Exchange Conmission

permitted a client of petitioner to make a

public offering of shares in a lawsuit under

Regulation A. New York law does not prohibit

an expert witness from owing shares in the

leeematt tn vidch be is to testify os a epent.

In fact, under New York law, petitioner's clients

could have sold shares in the lawsuit to

expert witnesses, then return the cash to then as

a “non-contingent” fee permissible under DR 7-109C,

umier the decision of the Second Circuit, because

only literal contingent fees (and not variations

thereon) are prohibited by the rule. See 58a.

II.

DR 7-109C, prohibiting the use of expert

witnesses on a contingent-fee basis, impermis-

sibly interferes with substantial rights of

petitioner and his clients, and is a denial

of equal protection under the fourteenth

amendment because the rule:

(a) prevents them fron having the access

to the courts they need to obtain an

injunction to stop, and to recover for,

the illegal activities of major

corporations which are destroying the

business and property of the clients;

(b) does not permit petitioner or his clients

to make any showing of need to use

unt Geum @ s cite

basis; and

Opinion testimony on the ultimate

facts in issue under Rule 704, Federal

Rules of Evidence, thereby giving

wealthy defendants a substantial,

unfair and unnecessary advantage.

The rule prevents petitioner and his

clients from protecting their property and

from recovering damages for injury already

suffered, ‘United States v. Kras, 409 U.S.

434 (1973) is clearly inapplicable. ‘See

Judge Dooling's opinion at 26a and ‘The Suprem=

‘Court, 1972 Term, 1973, 87 Harv.L.Rev. 1, 57-67.

Kras had other alternatives and he was looking

to obtain a benefit granted by statute.

Petitioner and his clients are seeking to

obtain an injunction, wiich only the courts can

grant, and they are looking to protect property

from being destroyed by illegal activity, which

the federal and state regulatory authorities have

refused to stop themselves. Accordingly, the

courts are the only effective remedy, and the

case falls squarely within Boddie v. Connecticut,

401 U.S. 371 (1971) and Winters v. ‘Miller,

446 F.2d 65, 71 (2nd Cir. 1971); ‘cert, ‘denied,

404 U.S. 985 (1971). Ortwein v. ‘Sctuab,

410 U.S. 656, 658-59 (1973) is not applicable

because of the availability of another remedy

amd interests of less constitutional significance,

involving reduced welfare payments. ‘The interest

of the Nabcor plaintiffs was their om business

and property, protected by the fourteenth

amendment.

Ir.

DR 7-109C, prohibiting the use of expert

witnesses cn a contingent-fee basis, is a denial

of quntend exh, @ ented, substantive

@ue process under the fourteenth amendment

because the rule:

(a) was adopted by persons having a substan-

tial interest in the prohibition without

independent review by the New York

legislature or judiciary;

(>) impermissibly interferes with the

fundamental property rights of

petitioner's clients to obtain a court

injunction against, and damages from,

persons who, through violations of

federal antitrust laws, are destroying

business and property interests of

petitioner's clients;

of the use of their am property (the

Claim in litigation) to finance the

litigation without permitting them an

Opportumity to show need to hire

expert witnesses cn a contingent-fee

The substantial financial interest of

the persons controlling the various bar associa~

tions which adopted DR 7-109C and their major

corporate clients should disqualify these

bar associations from adopting DR 7-109C on

the grounds of self interest, which is a denial

of procedural due process. ‘Hortonville Joint

“School Dist. No. 1 v. Hortomville Ed. Ass'n,

96 S.Ct. 2308 (1976).

The rule is absolute even thowh the need

for expert witnesses in litigation is increasing,

because of the increased complexity of our society,

and the need for experts ranges widely, depending

on the type of case, the type of eqert testimony

needed, the anount of money involved, and other

factors too complex to sweep away with a total

prohibition.

The rule does not permit any opportunity

needy parties or their attorneys to show to the

court their particularized need to use expert

witnesses on a reasonable contingent-fee basis.

Thus, persons are deprived, without due

process, of the use of their own property

(the litigated claim) to finance pursuit of

the claim.

Justice is slowed down by the need in

such instances for m inpecumecus plaintiff to

prove his case using a more tedicus route,

contributing to courtroom congestion, assuming

in som instances there may be this alternative.

The rule itself prevents persons from ascertaining

whether an expert could develop information based

on which he could give his opinion testimony on

the ultimate or other facts in issue. By

permitting plaintiffs to use expert testimony

(and most plaintiffs cannot now afford to),

mach of the work would be done before trial,

not involving the courts, by the respective

experts, which would tend to identify and

simplify the issues more quickly, and result in

shorter trials and possibly more out of court

settlements of meritorious clains.

For a discussion of Judge Dooling's decision

in this action see Casenote, “Professional

Responsibility - A Constitutional Challenge to

Disciplinary Rule 7-109(C)", 55 N.C.L.Rev.

709-21 (Apr. 1977); and Casenote, “Legal Ethics -

Contingent Fees to Expert Witnesses - Is

Disciplinary Rule 7-109(C) Dead?", 81 Dick. L.

Rev. 655-661 (Spr. 1977). Also, see Michelman,

“The ‘Supreme Court ‘and Litigation Access ‘Fees: ‘The

“Right to Protect One's Rights (pt. 1), 1973 Duke

LJ. 1153, 1154-1169,

IV.

DR 7-109C, prohibiting the use of expert

witnesses on a contingent-fee basis, violates

the first amendment, through the fourteenth

amendment, by the overbreadth doctrine and

by unconstitutional application of the rule,

because of its substantial and unjustified

interference with first amendment freedoms:

(a) to petition the courts for a redress

of grievances as to antitrust claims

for injunctive and monetary relief; and

(b) to engage as a private attomey general

in peaceable assembly and political

“(antitrust) litigation in association

between petit-ioner and his clients

without any opportmity to make a showing

of economic need to use expert witnesses om

a (reasonable) contingent-fee basis.

Private enforcement activities in connection

with the antitrust lavs make the enforcers

“private attorneys general" under decisions

of this Court. Alyeska Pipeline Service Co.

v. Wilderness Society, 95 S.Ct. 1612, 1624

(1975). Also, some litigation is political,

protected by the Ist Amendment. ‘NAACP v. Button,

371 U.S. 415 (1963).

Because the Justice Department and New York

Attorney General enforce the federal and New

York State antitrust laws on a discretionary

basis, their decision to enforce or not is

political; and the enforcement of such laws

a private basis by private attorneys general

—— —

48 . 49

such as petitioner and his clients is also doctrine. Dandridge v. Williams, 397 U.S. 471,

associational political activity of the 484 (1970).

‘ NAACP v. Button type.

CONCLUSION

Petitioner argues that DR 7-109C interferes For the foregoing reasons, this petition

impermissibly with his associational (political) for a writ of certiorari should be granted.

freedom under the first amendment to engage

in political litigation enforcing the nation's ’

ence of DR 7-109C. Carl > Se 7 aaa ——

e e 132 Haseena Street

. New York, N.Y. 10038

The State has performed no balancing of

September 12, 1977

interests under Bigelow v. Commonwealth of

‘Virginia, 421 U.S. 809 (1975).

Also, because of the involvement of

petitioer's first amendment rights to petitim

and to peaceably assemble for political purposes,

DR 7=-109C is unconstitutional as applied, or

it is unconstitutional under the overbreadth

APPENDIX A — MEMORANDUM AND ORDER DATED MARCH 24,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

CARL E. PERSON,

Plaintiff, :

: 75 C 1473

THE ASSOCIATION OF THE BAR MEMORANDUM

OF THE CITY OF NEW YORK, $ and

SUPREME COURT, APPELLATE ORDER

eeaeanwanweweveaeaeaenecaeracaeee @ X

Appearances :

CARL E. PERSON, Esde, plaintiff ‘pro se

HALIBURTON FALES, 2d Esq. (Messrs. WHITE &

CASE and ROBERT H. HAILE, Esq. of Counsel)

for The Association

“ Se tye Pe gy

e, Attomey

Gelahdants other than the Bar Association,

and for the Attorney General under

Executive Law, § 71

DOCGLING, D.J.

Plaintiff has applied for the convening of a

APPENDIX A - MEMORANDUM AND ORDER DATED MARCH 24,

1976 OF THE UNITED ST?iE5 DISTRICT COURT FOR

THE FASTERN DISTRICT OF NEW YORK

three judge court (28 U.S.C. § 2281) on the basis

that the second count of the complaint challenges

on constitutional grounds the validity of

certain sections of the Judiciary Law of New

York as implemented through the rules of the

Appellate Divisions and the Lawyer's Code of

Professional Responsibility. Broadly, plaintiff,

a lawyer, contends that, as implemented and

threatened to be applied, the statutes, rules

and code stifle the prosecutim and fair trial

of litigation (such as antitrust triple damage

cases) by making impossible the financing of

such costly litigatio. Plaintiff particularly

points to the canons of professional conduct

that, in substance, forbid the transfer for value

of shares in the rights of action, and forbid

(he mutsntien of eyess Waseem tame exeer

ectden wuld he cantiugent on en cussess of Un

suit and would be measured upon the amount of

APPENDIX A - MEMORANDUM AND ORDER DATED MARCH 24,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

Clients of such members as coconspirators to the

extent that they have joined in adopting or

enforcing laws and rules

"ee Which prohibit clients pursuing

antitrust claims and/or their attorneys

working on a contingent-fee basis from

obtaining the momey to pay the liti-

ee eee

their respective interests in the

<ceicaas aiiite te aaiiie an sete

investors and from employing expert

witnesses to testify at the trial om

a contingent-fee basis;"

Plaintiff as counsel is prosecuting a particular

antitrust case which, it is alleged, has become

so expensive that the plaintiffs in it cannct

bear the expense of bringing it to trial and

retaining experts to testify and to prepare

necessary accounting, survey, statistical and

economic studies. Plaintiff alleges that he

—————

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

plans to and would, but for the statutes, miles

and canons which appear to forbid it, seek

investors, by private or public offering, whose

investments would finance the pending litigation

in exchange for the investors' receiving in-

terests in the claim that in the aggregate wuld

not exceed 50% of the final recovery; it is

contemplated that the investors would not acquire

any right to control the litigation, render legal

advice about it, or engage in the practice of

law in connection with the case.

Plaintiff alleges that defendants in such

cases as antitrust cases usually can afford to

and do retain experts to aid in their defense,

that such experts are often drawn from firms of

experts who have regularly served the defendants

in the past, expect to serve them in the future,

and may, therefore, be supposed to be influenced

APPENDIX A - MEMORANDUM AND ORDER DATED MARCH 24,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

as expert witnesses by those factors; plaintiff

complains that, in contrast, plaintiffs are not

free to retain experts whose compensation will

be based on the amount of the recovery if there

is any; this, plaintiff complains, is a legally

enforced disparity in treatment that transgresses

constitutional rights.

Hence, plaintiff argues that the Court

should declare invalid the laws that, as im-

plemented and applied, impose these radical and

discriminatory disparities in rights of access

to the courts of justice and in the ability of

the less affluent litigants to vindicate their

rights of property, and, further, that the

court should enjoin their enforcement by

defendants.

The parties have argued, in the min, the

quality of the constituticnal arguments

APPENDIX A - MEMORANDUM AND ORDER DATED MARCH 24,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE

and that the case is, rather, one in which plain-

tiff's plans are frustrated by legal uncertain-

ties that require resolution by ruling, or

if need be, by judicial declaratim.

While the briefs discuss champerty,

maintenance and barratry, the discussion is wide

of the mark and assumes rather than ill:minates

the points in issue. What is principally

involved is the application of Judiciary Law

§ 90(2), vesting the state supreme court with

“power and control" over lawyers and the practice

Of the law and authorizing the appellate

divisions to censure, suspend from practice or

APPENDIX A - MEMORANDUM AND ORDER DATED MARCH 24,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

@isbar lawyers who are guilty of professional

misconduct or conduct prejudicial to the admin-

istration of justice and of the rules of several

appellate divisions that define professional

misconduct. The Appellate Division, First

Department, defines such misconduct in its Rules

§ 603.2 as including violatio of any Disci-

plinary Rule of the Code of Professional Respon-

sibility as adopted by the State Bar Association

effective January 1, 1970. Section 691.2 of the

Second Department Rules is in the same language.

Section 1022.17 of the Fourth Department rules

similarly incorporates the Code of Professional

Responsibility. Plaintiff emphasizes the in-

corporation from the Code, in this manner, of

DR 2-103 (D) (a lawyer may not help a persmm or

organization that furnishes legal services to

others to promote use of the lawyer's services);

"DR 2-106) (a lawyer may not contract for or

APPENDIX A - MEMORANDUM AND ORDER DATED MARCH 24,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

receive excessive fees); DR 2-107(A) (a lawyer

may not divide fees with ancther lawyer unless

done so with the client's assent and in propor-

tion to services rendered and responsibility

assumed); DR 3-101(A) (a .awyer is not to help

a layman practice law); DR 3-102 (a lawyer is not

to divide fees with a layman); DR 5-103(B) (a

lawyer is not to advance or guarantee financial

assistance to a litigant except to the extent of

direct litigation expenses, and the client mst

remain liable for the expenses); DR 5-107 (C)

(a lawyer may not practice in corporate or

association form if nmlawyers ow an interest in

or are directors or officers of the entity or

have the right to direct or cotrol the lawyer's

professional judgment); DR 7-109(C) (a lawyer

may not pay, or acquiesce in the paying of,

compensation to a witness contingent upon the

APPENDIX A - MEMORANDUM AND ORDER DATED MARCH 24,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

content of his testimony or the outcome of the

case, but may advance, guarantee, or acquiesce in

the payment of a reasonable fee for the pro-

fessional services of an expert witness). DR

5-103 provides that a lawyer shall not acquire

a proprietary interest in the cause of action or

subject matter of a litigation he is conducting

for a client, but may acquire his lien for

services under applicable law, and may contract

for a reasonable contingent fee.

The disciplinary rules in part lead back to

First Department Rules § 603.18 (Champerty and

Maintenance) and an identical Second Department

rule provision (Section 691.15). These rules in

substance forbid (1) the lawyer's giving in his

: own or in anothers name, before or after suit, a

promise of anything of value to anyone to induce

the placing of a claim in his hands or in the

hands of another for the purpose of suing on it

10a

APPENDIX A - MEMORANDUM AND ORDER DATED MARCH 24,

1976 OF THE UNITED STATES DISTRICT (CURT FOR

THE EASTERN DISTRICT OF NEW YORK

or defending against it, and forbid (2) the

lawyer's paying any expense of prosecuting or

defending against the claim as a cmsideration

for such retainer.

The Judiciary Law covers some of the same

ground. Sections 479, 481, and 482 make it

wlawful for anyone to solicit or procure through

solicitation a retainer for an attorney or to

make a business of doing so, and make it wmlavful

for hospital employees, policemen, court per~

sommel, or bailbondsmen to communicate with an

attorney to aid or abet him in soliciting legal

business or in procuring through solicitation a

retainer or other agreement to perform legal

services, and make it wmlawvful for the attorney

to employ anyone to solicit, or to aid or abet in

auliciting legel tasiness or 0 setainer. These

acts are made misdemeanors by Section 485.

lla

APPENDIX A = MEMORANDUM AND ORDER DATED MARCH 24,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

Section 488 is closer to the classic defi-

nition of champerty: the section forbids lawyers’

buying or taking any interest by assignment in

any sort of thing in action “with the intent and

for the purpose of bringing an actim theremn,"

and forbids lawyers’ promising or giving a

valuable consideration to anyone as an inducement

to or in consideration for the placing in his

hands (or another's) of a claim for the purpose

of suing m it. Section 489 enacts that persons

and partnerships engaged in the claim adjustment

or collection business and corporations generally

shall not buy or take any interest by assignment

in any thing in action, claim or demand “with the

intent and for the purpose of bringing an action

««thereon."

| It is not at once apparent that any trans-

gression of statute or rule mst occur if plain-

12a

APPENDIX A = MEMORANDUM AND ORDER DATED MARCH 24,

THE EASTERN DISTRICT OF NEN YOR ee

tiff's client transfers interests in the claim in

suit as a means of obtaining mmey to continue

the suit to completion, The client has already

put the claim in suit and engaged counsel of its

own Choosing. There is no suggestion that any

voice in controlling the litigation would be

given to the transferees of interests, Plaintiff

alleges (as in paragraphs 14 and 17) that the

transfer would embrace a corresponding share in

plaintiff's contingent fee, but that, in sub-

stance, means only that plaintiff's original

clients will pay plaintiff out of their share in

the final recovery, and, presumably, that circum

stance will enter into the client's calculations

of what share of the claim he will sell and at

what price.

At this juncture, leaving aside Disciplinary

Rule DR 7-109C, there does not appear to be any

13a

APPENDIX A - MEMORANDUM AND ORDER DATED MARCH 24,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

threat of action to prevent partial assignments

of the rights of action sued on, and there is no

basis, simply for that reason, for seeking to

enjoin state officers from enforcing statutes

and rules of, at best, doubtful applicability

and in advance of their infraction. Rather, the

case is cone in which no threat of interference

could easily arise wless plaintiff had sought

from the Committee on Ethics of the Bar Associa-

tion and been denied a favorable opinion mm the

ethical propriety of his project. If that

occurs, then consideration of the issues tendered

here will have to be resumed, although it seems

questionable that, quite apart from any consti-

tutional issues and the question of the sub-

stantiality of any such issues, the threat of

enforcement by state officers will be such as to

bring the case within Section 2281.

14a

APPENDIX A = MEMORANDUM AND ORDER DATED MARCH 24,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

The questions circling around Disciplinary

Rule DR 7-109C stand in a different light. To

quote it in full - it is subsumed under Canm 7

which provides that "A Lawyer Should Represent a

Client Zealously Within the Bounds of the Lay" -

"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

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 language of the rule literally means that the

fee arrangement of an expert for his services in

a litigation may not be contingent on the outcome

of the case no matter how reasonable in amount

and how probable the outcome and whether or not

counsel in the same case are authorized (under

Disciplinary Rule DR 5~103A.2.) to receive a

15a

APPENDIX A - MEMORANDUM AND ORDER DATED MARCH 24,

mm EASIENN DISTRICT OF ME YOK

fee contingent on the outcome of the case. The

rule must be related to a risk of false swearing,

the fear of which may be enhanced by a recog-

nition that much expert testimony is difficult,

often inscrutable and, therefore, especially

open to calculated distortion. A fairly ald -

and difficult - New York case, Wellington ‘v.

‘Kelly, 1881, 84 N.Y. 543, 548-549, dealing with

an agreement to compensate a witness for the

production of critical testimony, approved con

tingent payment on the ground that the witness

had an interest in the outcome of the case in

But generally the New York cases enunciate the

16a

APPENDIX A - MEMORANDUM AND ORDER DATED MARCH 24,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

rule of DR 7-109C very clearly. Matter of

‘ ‘Schapiro, ist Dept. 1911, 144 App.Div. 1, 128 N.Y.

Supp. 852;° Laffin v. Billington, App. Term ist,

1904, 86 N.Y.Supp. 267. The Restatement of the

Law, Contracts, § 552(2) is precisely to the

same effect, as are 14 Williston, Contracts (3rd

ed. 1972) 879 (§ 1716) and 6A Corbin, Contracts

379 (§ 1430). And the same rule is followed in

N.Y.City Bar Assoc. Opinions No. 213 (1932) and

76 (1927-28). Only Barnes v. Boatmen's Nat'l

‘Bank of St. Louis, 1941, 348 Mo. 1032, 156 S.W.2d

597 has been turned up as a case locking the

other way. See also the language in Alexander

Ve Watson, 4th Cir, 1942, 128 F.2d 627, 630;

‘ ‘Ferroline Corp. v. General Airline & Film Corp.,

N.D. Ill. 1952, 107 F.Supp. 326, 344; aff'd.,

7th Cir. 1953, 207 F.2d 912, 916, ‘The Barnes

Court's holding sufficiently appears from the

17a

APPENDIX A - MEMORANDUM AND ORDER DATED MARCH 24,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

In this state of the law it would appear ur

likely in the extreme that plaintiff could hope

expert on a contingent fee basis, and, even if he

Could do so, and went forward, he would risk

disciplinary proceedings. Plaintiff is, then, so

far as concerns DR 7-109C, in the classic de-

Claratory judgment plaintiff's posture (28 U.S.C.

22013 ‘cf. Aetna Life Ins; Co, Vv. Haworth, 1937,

300 U.S. 227; Willing v. Chicago Auditorium

“Ass'n, 1927, 277 U.S. 274, 288-289, 291) unless

his contentions are so insubstantial that they

can be characterized as frivolous. The conten-

tion in essence is that the disciplinary rule,

whether or not it expresses a tradition in the

law of contracts, is irrational and operates in

Such a manner as to discriminate against those

who cannot afford expert testimony, and may tend

19a

APPENDIX A - MEMORANDUM AND ORDER DATED MARCH 24,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

to deny to the less affluent litigant (typically

but not necessarily a plaintiff) access to the

courts in cases which, if fairly and fully tried,

might be shown to be meritorious. The pungent

comment of the Missouri court could well be

thought to answer the claim of frivolity, and it

might well be suggested that DR 7-109C ignores

the idea that an expert in ordinary expectatio

would not engage to misrepresent his opinion for

a fee measured on the outcome of the case rather

than decline to act in a case in which he did not

in fact form an opinion favorable to the con

tention of the party seeking to engage his

expertise. It is difficult to understand the

basis on which a compensated expert could ever

be heard as a witness if the ordinary expectation

were that experts generally will distort or mis-

represent their opinions for a fee. Contin-

APPENDIX A - MEMORANDUM AND ORDER DATED MARCH 24,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

But again it is clear that the case is not

one for an injunction within Section 2281, and

is not a case for convening a three judge court,

ORDERED that plaintiff's moti to convene

a three judge court under 28 U.S.C. 2281 is in

all respects denied.

Brooklyn, New York

March 24, 1976.. - /s/ JOHN F, DOOLING, JR...

U. Ss. D. J.

EASTERN DISTRICT OF NEW YORK

CARL E. PERSON,

mony or the outcome of the case. Plaintiff asks

further, if that relief is granted, for a sev-

erance of the part of the case dealing with the

Disciplinary Rule (to be denominated 75 C 1473 A),

dispensing with the need for an answer to the

severed case, and granting other relief as appro-

priate, Plaintiff's motion, in substance, relies

on what was said in the earlier Memorandum and

Order (March 24-25, 1976) at pages 10-15.

The defendant Association argues that there

is not a constitutimally sufficient controversy

to authorize federal judicial intervention since

it is not plainly shown that an expert would be

available if the Rule were inoperative, or,

as it contends is the case here, no evidentiary

demonstration of irrational or discriminatory

Operation of the Rule has been made.

The posture of a case as this is, inevitably,

unusual. The rule, wiless ignored, mst of

itself foreclose a lawyer's effort to cbtain

expert testimony and go so far to deny to the

lawyer the opportunity to demonstrate the avail-

ability of such testimony and its specific place

in particular cases. But plaintiff has shown

without contradiction that in his prosecution of

the ‘Naboor case he is disadvantaged in being

unable to retain needed accounting and economic

24a

APPENDIX B - MEMORANDUM AND ORDER DATED JUNE 25,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

testimony because of his client's lack of funds

and the inhibition of the Rule. The plaintiff

has shown, without contradiction, that in his

type of practice the predicament is recurrent

from case to case. It is the plaintiff who is

the one directly restricted by the Rule and

rendered less effective than, in his reasonable

judgment, he would be if able to seek out expert

testimony uninhibited by the constraint of the

Rule so far as it outlaws compensation contingent

upon the outcome of the case. However, although

the constraint directly affects plaintiff, in-

dividually, in his practice of his professio

the consequence is no less directly experienced

by the grievant of limited or nil means who ap-

peals for judicial relief and cannot obtain it in

the measure in which it is available to those

who can afford to retain experts in the kinds of

_ 25a

APPENDIX B = MEMORANDUM AND ORDER DATED JUNE 25,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

of cases in which expert testimony is either

essential or necessary to the best and most

effective presentation of the litigant's case.

The interests involved are, first, the in-

terest of plaintiff and every other lawyer in

being able freely to seek out and, on his

Clients’ behalf, contract on a contingent fee

basis with qualified experts where that is the

only way in which the client can afford to en

gage the expert's services or the way which is

otherwise appropriate, and, second, the client

litigant's interest in having genuine access to

the courts. The first interest is derivative

from the second, but while the disciplinary

rule, of necessity, directly affects the lawyer,

it affects the client's underlying interest

more drastically. In comforting theory the

lawyer can turn his back on such clients and

26a

APPENDIX B - MEMORANDUM AND ORDER DATED JUNE 25,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

seek other work. But the client has no altema-

tive to seeking justice except the courts estab-

lished to dispense it.

The case, then, falls in the area consid-

ered in Boddie v. Connecticut, 1971, 401 U.S. 371;

‘ ‘Lindsey v. Normet, 1972, 405 U.S. 56, 77-79, and

“United States v. Kras, 1973, 409 U.S. 434, but

raises other considerations as well. Kras

should, perhaps, be put aside at once: it

rested on the announced constitutional permis-

sibility of denying to the indigent the benefits

of the bankruptcy law available to those whose

need of those benefits was a little less exigent

- on the assumption that altermatives to bank-

" ruptey appeared to be available. (As to Kras,

See The Supreme Court, 1972 Term, 1973, 87 Harv.

L.Rev. 1, 57-67).

The Rule in its present form authorizes

27a

APPENDIX B = MEMORANDUM AND ORDER DATED JUNE 25,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

lawyers to advance, guarantee, or acquiesce in

the payment of a reasonable fee for the profes-

sional services of an expert. The Rule further

forbids the lawyer to offer to pay, or acquiesce

in the payment of compensation to a witness

"contingent upon the content of his testimony."

So much seems plain; at least no ground of

criticism of it appears. The difficulty is with

the rule so far as it forbids payment “contingent

upon...the outcome of the case.” The Rule neces-

sarily means that even if the fee agreed upon is

reasonable and is not linked to the content of

the testimony, the fee arrangement is improper.

It must be doubted that there is total com

pliance with the Rule in its present form, The

case in which the unsuccessful personal injury

plaintiff's lawyer goes unpaid mist not infre-

quently be also the case in which the expert

medical witness does not press either the

28a

APPENDIX B - MEMORANDUM AND ORDER DATED

JUNE 25, 1976 OF THE UNITED STATES DISTRICT

COURT FOR THE EASTERN DISTRICT OF NEW YORK

plaintiff or his lawyer for payment. Apart

- from that, however, litigation today calls

for the use of many kinds of experts in

many kinds of cases. The most obvious are the

personal injury cases requiring medical testimony,

malpractice cases against practitioners in vari~-

ous professional fields, product liability cases

involving questions of design, malfunction and

defect, patent and copyright cases, desegrega-

tion cases, obscenity control cases and other

kinds of cases in addition to anti-trust cases.

Disparity in means between litigants is not

always present, nor is total inability to pay a

needed expert the common situation. But dis-

parity and need are frequent, and, although con

tingent fee arrangements, if licit in principle,

would not be available only to the indigent, it

is inherent in the Rule that it must particularly

29a

ie ne UD Stes basta come Ton

THE EASTERN DISTRICT OF NEW YORK

forbid to the less affluent and to the indigent

a means of obtaining an equal hearing to that

accorded to a more affluent adversary in the

same case. In the case where one party is of

limited means the “discrimination” in treatment

is individual, pointed and specific as well as

general in its tendency to handicap the less

affluent and the indigent classes of litigants

in their efforts to vindicate their rights. Yet

a litigant, although without means, can obtain

any lawyer whom the merits of his claim will

attract to his case. But he may not obtain any

expert whom the merits of his case can attract

to study it and testify to his opinion.

The purpose of the prohibition, to remove

an incentive to untruthful testimony, is not

likely to be achieved by the Rule, and, to the

extent achieved, would be gained at too great

a loss in fundamental fairness. An incentive to

30a

APPENDIX B - MEMORANDUM AND ORDER DATED JUNE 25,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

witruthful testimony is implicit in any payment

to a witness “for” his testimony. The Rule recop-

nizes the risk in requiring that payments to

expert witnesses be reasonable in amount. That,

it mast be inferred, means an amount related to

time spent, difficulty of the problem, inconven-

ience imposed because of the nature of judicial

proceedings, and such factors, but must never

be such ‘an amount that the inference is that the

expert has been paid to give testimony of a

certain content and not simply an appropriate

fee for his time, effort and court attendance,

But the Rule makes an unreasoned transition in

outlawing the retainer of an expert on a com

tingent basis no matter how reasonable his fee

would be if success attended his client and he

was paid his agreed fee. No basis in reason

exists for rejecting a reasonable fee arrange-

3la

APPENDIX B = MEMORANDUM AND ORDER DATED JUNE 25,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

ment simply because the fee is not to be paid if

the client does not prevail in the case. And

there is no fair ground for excluding from the

Getermination of reasonableness a consider=

ation of the circumstance that the fee is cn-

tingent and not payable in all events. It is

not meant to suggest that in the case of the

expert a fee measured as a percentage of the re-

covery might not generally or in particular cases

be regarded as ‘per se unreasonable, But it is

concluded that to treat contingency of payment

as in and of itself improper is too irratimal

to survive Fourteenth Amendment analysis. The

interest in access to the courts om a basis of

equality may not exact redress of every imbalance

that disparity of means can produce, but it is of

such fundamental importance that it cannot be

subjected to a constraint that is not adapted

32a

APPENDIX B = MEMORANDUM AND ORDER DATED JUNE 25,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

to effective achievement of its professed qoal

and which exacts a sacrifice which must, in any

case, be disproportionate to the merely

conjectured probability of cocurrence of the

wrong aimed at. Cf. Boddie v. Connecticut,

‘supra, 401 U.S. at 377, 379-380; Winters v.

“Miller, 2d Cir. 1971, 446 F.2d 65, 71.

” It follows that plaintiff's motion for

leave to amend and for a summary declaratory

judgment that Disciplinary Rule DR 7-109C,

and that rule as incorporated in Rule 603.2 of

the Rules of the Appellate Division, First

Department, and Rule 691.2 of the Rules of the

Appellate Divisicm, Second Department, so far as

the rule proscribes the payment of reasonable

fees for the professional services of expert

witnesses if payment of the fees is contingent

upon the outcome of the case is invalid, mst

33a

APPENDIX B - MEMORANDUM AND ORDER DATED JUNE 25,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

be and it is granted, Since the issue is plainly

involved with the remaining anti-trust issues,

however, it would not be appropriate to sever

the issue or enter a separate judgment cm the

issue before the entry of final judgment in the

case.

Brooklyn, New York

June 25, 1976. — /s/ JOHN F. DOOLING, JR.

U. S. D. J.

34a

APPENDIX C =- MEMORANDUM AND ORDER DATED AUGUST 10,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

“se ewe weeeweaenwnnennenannecnae = X

CARL E. PERSON,

Plaintiff, :

- against - : 75 C 1473

THE ASSOCIATION OF THE BAR OCF :

THE CITY OF NEW YORK; SUPREME MEMORANDUM

COURT, APPELLATE DIVISION, FIRST

DEPARIMENT; SUPREME COURT,

and ORDER

APPELLATE DIVISION, SECOND :

DEPARIMENT; and ATTORNEY GENERAL

OF NEW YORK STATE, :

Defendants.

ase ene eeeweenewrennwnnennnnan = X

Plaintiff has moved for an order dismissing

counts one and two of his amended complaint with-

out prejudice and entering final jmioment in

accordance with this Court's Memorandum and

Order of June 25, 1976. The defendants contest

the need for a declaratory judgment under 28 USC

2201. However, the Memorandum and Order of June

25, 1976, state fally the wessene for such a

judgment. Defendants also assert that dismissal

of counts one and two should be with prejudice.

35a

APPENDIX C = MEMORANDUM AND ORDER DATED AUGUST 10,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

But, as plaintiff points out, no discovery has

been sought or obtained on these claims, and there

have been no proceedings of substance on those

Claims; therefore, no real reason appears to

deny plaintiff's request for dismissal without

prejudice of his causes of action against the

defendants. Accordingly, it is,

ORDERED that counts one and two of

plaintiff's amended complaint are dismissed

without prejudice under F.R.C.P. 41(a) (2), and

it is further,

ORDERED that the Clerk prepare a final

judgment for the approval of the Court, that,

1) it is adjudged that Disciplinary Rule

7-109C of the Lawyers’ Code of Professional

Responsibility as adopted by the New York State

Bar Association, and that rule as incorporated

in Rule 603.2 of the Rules of the Appellate

36a

APPENDIX C = MEMORANDUM AND ORDER DATED AUGUST 10,

1976 OF THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF NEW YORK

Division, First Department, and Rule 691.2 of the

.Rules of the Appellate Division, Second Depart-

ment, so far as the rule proscribes the payment

of reasonable fees for the professional services

of expert witnesses if payment of the fees is

contingent upon the outcome of the case, is

unconstitutional; and that

2) plaintiff take nothing om counts ome and

two, and that those counts are dismissed against

all defendants, with costs as taxed by the Clerk.

Brooklyn, New York,

August 10, 1976. .-/8/ JOHN -F, -DOOLING, -JR.

U. S. D. J.

37a

APPENDIX D — JUDGMENT DATED AND ENTERED

AUGUST 12, 1976

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

CARL E, PERSON,

THE ASSOCIATION OF THE BAR OF

THE CITY OF NEW YORK; SUPREME 75=0=1473

COURT, APPELLATE DIVISION, FIRST

DEPARIMENT; SUPREME COURT,

APPELLATE DIVISION, SECOND

DEPARIMENT; and ATTORNEY GENERAL

OF NEW YORK STATE,

Defendants.

A memorandim and order of Honorable John F.

Dooling, United States District Judge, having

been filed on August 11, 1976, dismissing counts

one and two of plaintiff's amended compla’>*

without prejudice pursuant to F.R.C.P. 41 (a) (2)

and directing the Clerk to enter judgment that

1) Disciplinary Rule 7-109C of the Lawyers'

Code of Professional Responsibility, as adopted

38a

APPENDIX D = JUDGMENT DATED AND ENTERED

AUGUST 12, 1976

by the New York State Bar Association, and that

rule as incorporated in Rule 603.2 of the Rules

of the Appellate Division, First Department, and

Rule 691.2 of the Rules of the Appellate Division,

Second Department, so far as the rule proscribes

the payment of reasonable fees for the profes-

sional services of expert witnesses if payment

of the fees is contingent upon the outcome of

the case, is unconstitutional; and that

2) plaintiff take nothing on counts ome and

two, and that those counts are dismissed against

all defendants, with costs as taxed by the Clerk,

it is

ORDERED and ADJUDGED that

1) Disciplinary Rule 7-109C of the Lawyers

Code of Professional Responsibility, as adopted

by the New York State Bar Association, and that

sulle as inncepcented in Rule 603.2 cf the Rules

of the Appellate Division, First Department, and

39a

APPENDIX D = JUDGMENT DATED AND ENTERED

AUGUST 12, 1976

Rule 691.2 of the Rules of the Appellate

Division, Second Department, so far as the rule

proscribes the payment of reasonable fees for the

professional services of expert witnesses if

payment of the fees is contingent upon the out-

come of the case, is unconstitutional; and that

2) plaintiff take nothing on counts one and

two, and that those comts are dismissed against

all defendants with costs as taxed by the Clerk.

Dated: Brooklyn, New York

August 12, 1976

‘LEWIS ‘ORGEL

fs/

By? is/ ‘THOMAS ‘BLASTELLO

Approved: August 12, 1976

_/8/ JOHN F, -DOOLING, JR.

40a

APPENDIX E = OPINION OF CIRCUIT JUDGE SMITH OF

THE SECOND CIRCUIT, DATED APRIL 29, 1977

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

No. 590 = September Term, 1976

(Argued March 8, 1977 Decided April 29, 1977.)

Docket No. 76-7457

CARL E, PERSON

Plaintiff-Appellee,

THE ASSOCIATION OF THE BAR OF THE CITY

Appeal from a summary declaratory judgment

in the United States District Court for the

Eastern District of New York, John F. Dooling,

Jr., Judge, declaring unconstitutional

Disciplinary Rule 7-109C of the Lawyers’ Code of

4la

APPENDIX E = OPINION OF CIRCUIT JUDGE SMITH OF

THE SECOND CIRCUIT, DATED APRIL 29, 1977

Professional Responsibility as incorporated in

the Rules of the Appellate Division of the First

Department and the Second Department of the

Supreme Court of New York, Reversed,

CARL E. PERSON, New York, N.Y.,

Appellee Pro Se.

SMITH, Circuit Judge:

The Supreme Court, Appellate Division, First

Department, Supreme Court, Appellate Division,

Second Department, and the Attorney General of

the State of New York, defendants below, appeal

from a summary declaratory judgment in the United

States District Court for the Eastern District of

New York, John F. Dooling, Jr.; Judge, which

declared unconstitutional Disciplinary Rule

7-109C of the Lawyers’ Code of Professional

42a

APPENDIX E = OPINION OF CIRQUIT JUDGE SMITH OF

THE SECOND CIRCUIT, DATED APRIL 29, 1977

Responsibility ("DR 7-109C"). ‘This rule has been

adopted by the New York State Bar Association and

incorporated in Rule 603.2 of the Rules of the

Appellate Division, First Department, and Rule

691.2 of the Rules of the Appellate Division,

Second Department The rule was declared

unconstitutional insofar as it proscribes the

payment by attorneys of reasonable fees for the

professional services of expert witnesses if

payment of the fees is contingent upon the

quteane of the conn.” We reverse.

The sole issue on appeal is the constitution-

ality of DR 7-109C, Person having abandoned all

Claims except those specifically ruled upon by

the court below.”

New York Judiciary Law § 90(2) vests the

state supreme court with “power and control” over

lawyers and the practice of the law and authorizes

the appellate divisions to censure, suspend from

43a

APPENDIX E = OPINION OF CIRCUIT JUDGE SMITH OF

THE SECOND CIRCUIT, DATED APRIL 29, 1977

practice, or to disbar lawyers who are guilty of

professional misconduct or conduct prejudicial to

the administration of justice. Such misconduct

is defined by § 603.2 of the Rules of the First

Department and § 691.2 of the Rules of the

Second Department to include violations of any

disciplinary rule of the Code of Professional

Responsibility as adopted by the State Bar

Association, including DR 7-109C,

Plaintiff-appellee, Carl E. Person, is the

attorney for ten plaintiffs in an antitrust

action in the Southern District of New York,

‘National Auto Brokers Corp, v. General Motors

‘Corp, (70 Civ, 5421), the "Nabcor action," in

which plaintiffs are seeking $300,000,000 in

denages.” vececn alleges; inter ‘alia, that he is

unable to prosecute the Naboor action because

neither National Auto Brokers Corp. nor any of

the other plaintiffs in the suit, can afford

44a

APPENDIX E =~ OPINICN OF CIRCUIT JUDGE SMITH OF

THE SECOND CIRCUIT, DATED APRIL 29, 1977

adequate expert testimony in the fields of

accounting, franchising, financing and economics,

unless he is permitted to retain experts on a

contingent fee basis, a practice not permitted

under DR 7-109C, His specific allegations have

been set out by the court below, Person ‘v.

Association of the Bar of the City of New York,

414 F. Supp. 139, 140 (E.D.N.Y. 1976).

The district court granted summary judgment

because it found that DR 7-109C foreclosed a

lawyer's effort to cbtain expert testimony. The

court agreed that in the Nabcor action, Person

had demonstrated that he was unable to obtain

needed accounting and economic testimony because

of his clients’ lack of funds and the inhibition

of the disciplinary rule, and that he was

therefore rendered less effective than, in his

judgment, he would have been if he were able to

seek out expert testimony on a contingent fee

45a

APPENDIX E = OPINION OF CIRCUIT JUDGE SMITH OF

THE SECOND CIRCUIT, DATED APRIL 29, 1977

basis. In addition to a litigant's interest in

having genuine access to the court, the attorney,

the court held, had an interest in being able

freely to seek out and contract on a contingent

fee basis with qualified experts where that is

the only or most appropriate way in which a client

can afford to retain expert services, It found

that no basis in reason exists for rejecting a

reasonable fee arrangement simply because the

fee will not be paid if the client does not

prevail in the case. Person 'v, ‘Association of

the Bar, 414 F, Supp. 144 (E.D.N.Y, 1976). ‘The

46a

APPENDIX E = OPINION OF CIRCUIT JUDGE SMITH OF

THE SECOND CIRCUIT, DATED APRIL 29, 1977

case, be disproportionate to the merely

conjectured probability of occurrence of

the wrong aimed at. (414 F. Supp. at 146).

The court cited Boddie v. Connecticut, 401 U.S.

371, 377, 379-380 (1971), and Winters v, Miller,

446 F.2d 65, 71 (24 Cir.), cart. denied, 404

U.S. 985 (1971), in support of its holding, and

entered summary judgment declaring

Rule 7-109C ctieestiiabtens

Jurisdiction below is based on 28 U.S.C. §

1342(3), 42 U.S.C. § 1983, and on 28 U.S.C. §

2201. Before proceeding to the merits, we first

address" Eppellants' claims that the court lacks

subject matter jurisdiction because no case or

controversy exists, and that the Appellate

Division defendants are not “persons” within the

meaning of the Civil Rights Act.

The disciplinary rule at issue has been

47a

APPENDIX E =~ OPINION OF CIRCUIT JUDGE SMITH OF

THE SECOND CIRCUIT, DATED APRIL 29, 1977

incorporated into the laws of the State of New

York. Payment by an attorney of contingent fees

for expert testimony, offers to pay, or

acquiescence in the payment of contingent fees,

are all forbidden under DR 7-109C, The district

court concluded that "(t)he Rule, unless ignored,

must of itself foreclose a lawyer's effort to

obtain expert testimony and go far to deny to

the lawyer the opportunity to demonstrate the

availability of such testimony. ..." 414

F. Supp. at 145, The underlying action is still

permding and the present claim may well determine

the plaintiff's ability to pursue it. Since

there is no reason to assume that the rule will

not be enforced, we find a substantial contro-

versy of sufficient immediacy to warrant the

lasuance of a declaratory judgment. ° golden

‘‘v, Dwickler, 394 U.S. 103, 108 (1969).

State disciplinary and disbarment pro-

48a

APPENDIX E = OPINION OF CIRCUIT JUDGE SMITH OF

THE SECOND CIRCUIT, DATED APRIL 29, 1977

ceedings have been held comparable to criminal

proceedings. In re Ruffalo, 390 U.S. 544, 551

(1968). Because the threat of disciplinary

action is real but state proceedings have not

yet been instituted which would prevent federal

review under Younger v. Harris, 401 U.S. 37

(1971), and Anonymous ‘v. Association of the Bar

of the City of New York, 515 F.2d 427, 430 (2d

Cir.), cert. denied, 423 U.S. 863 (1975), this

is an appropriate time for a declaratory

judgment. Doran 'v. Salem Im, Inc., 422 U.S.

922, 930-31 (1975).

We hold further that this suit for declara-

tory relief is maintainable against defendants-

appellants under 42 U.S.C. § 1983, Although a

judge exercising his judicial function is not

liable for damages under 42 U.S.C. § 1983,

Pierson v. Ray, 386 U.S, 547, 553-55 (1967), the

immmity of judges has been held in a mmber of

49a

APPENDIX E = OPINION OF CIRCUIT JUDGE SMITH OF

THE SECOND CIRCUIT, DATED APRIL 29, 1977

cases not to extend to actions for injunctive

relief. - Littleton v. Berbling, 468 F.2d 389,

406-07 (7th Cir. 1972), rev'd ‘on ‘other grounds

- ‘gub ‘nom, ‘O'Shea ‘v. ‘Littleton, 414 U.S. 488

(1974); Exdmann‘v. Stevens, 458 F.2d 1205, 1210

(2a Cir.) ; ‘cert. ‘denied, 409 U.S. 889 (1972);

Law Students Civil Rights Research ‘Council; ‘Inc.

ye Wadmond, 299 F. Supp. 117, 123 (S.D.N.¥. 1969)

(three-judge court), aff'd on other ‘grounds,

401 U.S. 154 (1971)

It.

The district court held that an attorney has

a right to retain experts on a contingent fee

basis whenever this is appropriate for the most

effective prosecution of a civil action. It.

held further that an attormey's clients have a

fundamental right of access to the courts, citing

‘ Boddie and Winters, and found that appellee's

$i..£.

50a

APPENDIX E = OPINION OF CIRCUIT JUDGE SMITH OF

THE S_OOND CIRCUIT, DATED APRIL 29, 1977

clients were deprived of this right of access

through the operation of DR 7-109C, ‘The rule,

the court held, had no rational justification and

was therefore unconstitutional under the

fourteenth amendment.

We find the court's reliance on Roddie and

Winters misplaced. The fundamental nature of

the marriage relationship and the exclusiveness

of the courts as a means for dissolving that

relationship were central to the Court's

decision in Boddie. Justice Harlan, writing for

the Court, painted out that the Court went “no

further than necessary to dispose of the case

before us" and did not decide that access for

all individuals to the courts is a right that is,

in all circumstances, guaranteed by the due

process Clause of the fourteenth amendment,

401 U.S. at 382-83, The Supreme Court has

Upheld a filing fee for indigents seeking a

5ia

APPENDIX E - OPINION OF CIRCUIT JUDGE SMITH OF

THE SECOND CIRCUIT, DATED APRIL 29, 1977

discharge in bankruptcy. * ‘United ‘States ‘v. ‘Kras,

409 U.S. 434 (1973). It held that since

bankruptcy was a legislatively created benefit,

no constitutional right of access to bankruptcy

proceedings existed. In contrast to the fimda-

mental rights at stake in Boddie, bankruptcy

involves economic rights which the court held

were not fundamental. The Court also based its

decision in Kras on the availability of alter-

nate means for the adjustment of legal relations

with creditors. Since it found no fundamental

interest at stake in bankruptcy, it held that

the proper standard for reviewing applicable

legislation was the existence of a “ratimal

justification." 401 U.S. 444-47.

’ Winters v. Miller, ‘supra, was decided two

years before Kras. Winters upheld the right of

access to a court by a plaintiff seeking damages

for the infringement of rights guaranteed under

52a

APPENDIX E — OPINION OF CIRCUIT JUDGE SMITH OF

THE SECOND CIRCUIT, DATED APRIL 29, 1977

the first amendment.

Here we have no denial of access—plaintiffs

are in court and have already engaged in exten-

sive litigation. Seite Willin in hak ee when

place an insuperable obstacle in the way of

successful presentation of their position on

trial. It may be conceded that litigatio of

difficult and complex matters by persons with

small individual stakes in the outcome may be

aided and encouraged by elimination of the

prohibition against the hiring of experts whose

fees may be contingent upon the results. We are

not convinced, however, that there is no

danger of the inducement of false expert

testimony by such contingency arrangements.

The legislature has made a judgment that

the need for discouragement of contingent fee

arrangements outweighs the obstacle to financing

litigation which a ban on contingent fees may

53a 54a

APPENDIX E = OPINION OF CIRCUIT JUDGE SMITH OF | APPENDIX E = OPINION OF CIRCUIT JUDGE SMITH OF

THE SECOND CIRCQUIT, DATED APRIL 29, 1977 | THE SECOND CIRCUIT, DATED APRIL 29, 1977

create. We cannot say that this legislative pee legal business which the Supreme Court struck

judgment is irrational. The extent of the | down in NAACP v. Button, 371 U.S. 415 (1963),

“obstacle and the weight to be given its existence cited by appellee. In contrast to the Virginia

when balanced against the likelihood of false statute invalidated in NAACP v. ‘Button, the New

testimony and unfair results from permitting the York disciplinary rule is specific, not subject

procurement of expert testimony by the offer of to selective enforcement because of vagueness,

a stake in the outcome are matters of judgment and its effect on first amendment rights, if

best conficed to legislative and juiicial any, is remote, DR 7=-109C does not deny

bodies of the state. | attorneys or their clients access to the courts

antitrust claims of persons with little at stake finance the payment of experts in a manne: not

individually is more closely akin to the related to the outcome of the litigation. Courts

legislatively created interest in the shedding | have for centuries possessed disciplinary powers

of debt obligations through bankruptcy of Kras | incident to the administration of justice.

than to the fundamental interest of an individual | ‘NAACP v. Button, supra, 371 U.S. at 456 (Justice

in the marriage relationship which was before | Harlan dissenting). DR 7-109C is a proper

the Court in Boddie. ¢ exercise of such a power.

The New York rule is not analogous to a We also reject appellee's argument that the

Virginia statute regulating the solicitation of incidental economic burden placed on same

55a

APPENDIX E = OPINIOGN OF CIRCUIT JUDGE SMITH OF

THE SECOND CIRCUIT, DATED APRIL 29, 1977

litigants by DR 7-109C constitutes a violation

of the equal protection clause of the fourteenth

anendment. Strict scrutiny of a legislative

Classification is required for equal protection

determination only when the classification

impermissibly interferes with the exercise of a

fundamental right or operates to the peculiar

disadvantage of a suspect class, Massachusetts

Board of Retirement v. Mirgia, 427 U.S. 307

(1976); San Antonio School ‘District ‘v. ‘Rodriquez,

411 U.S. 1, 17 (1973). Classifications in the

area of economics and social welfare have been

held not to constitute such suspect classifica-

tions. Ortwein'v. Schwab, 410 U.S. 656, 659

(1973); Dandridge v. Williams, 397 U.S. 471,

485-86 (1970). In the absence of interference

with a fundamental right of access or a suspect

classification, the relevant standard of review

is the rationality of the New York rule,

56a

APPENDIX E = OPINION OF CIRCUIT JUDGE SMITH OF

THE SEOOND CIRCUIT, DATED APRIL 29, 1977

Massachusetts Board of Retirement ‘v. ‘Murgia,

‘supra, 427 U.S. at 312; McGowan v, Maryland, 366

U.S. 420, 425 (1961).

States have a compelling interest in

regulating the conduct of professionals who

practice within their borders, The interest in

regulating lawyers is especially great because

lawyers are essential for the functioning of the

administration of justice. Goldfarb v. Virginia

‘State Bar, 421 U.S. 773, 792 (1975). In New

York the legislature has expressly provided that

the judiciary has the power to regulate attorneys,

People ex rel, Karlin v, Culkin, 248 N.Y. 465,

472-77 (1928); Judiciary Law § 90(2). Disciplin-

ary Rule 7-109C was promilgated to insure that

judicial proceedings in New York were free of

false testimony which might result if expert

witnesses were paid on a contingent fee basis.

Expert testimony, by its very nature, concerns

57a

APPENDIX E = OPINIOCN OF CIRCUIT JUDGE SMITH CF

THE SECOND CIRCUIT, DATED APRIL 29, 1977

areas of knowledge with which the ordinary juror

and the court are unfamiliar, and perjured expert

testimony is particularly difficult for a juror

to detect. New York has adopted DR 7=109C to

lessen the likelihood of false expert testimony.

The rule is not invalid because it cannct pre-

vent all perjured expert testimony. New York

may tackle a problem one step at a time.

‘ Williamson v. Lee Optical Co., 348 U.S. 483,

489 (1955). "(A court’s) procedure does not nm

afoul of the Fourteenth Amendment because

another method may seem to our thinking to be

fairer or wiser. . . ."' Snyder 'v, Massachusetts,

291 U.S. 97, 105 (1934).

Person has advanced arguments why it might

be desirable to alter the present rule in order

to facilitate litigation by less affluent

litigants. He points out that cross-examination

would reveal whatever financial stake a witness

58a

APPENDIX E = OPINION OF CIRCUIT JUDGE SMITH OF

THE SECOND CIRQUIT, DATED APRIL 29, 1977

has in the outcome of litigation. He notes that

experts often have ongoing business relationships

with the parties who retain them and therefore,

in an indirect sense, frequently have a stake in

the outcome of litigation although their fee is

not contingent and thus not covered by DR 7-109,

Other experts, although retained on a "fixed fee"

basis, often do not expect to receive payment

unless the party for whom they testify is success-

ful. ‘These are factors which may indicate the

Gesirability of legislative change, but they do

not constitute sufficient grounds for invalidat-

tog the curzent canon ox mule.”

New York Disciplinary Rule 7-109C does not

affect a fundamental right nor create a suspect

Classification. We hold that it has a sufficient

rational basis to withstand a constitutional

challenge under the equal protection and due

process clauses of the fourteenth amendment.2/

59a ! 60a

APPENDIX E = OPINION OF CIRCUIT JUDGE SMITH OF APPENDIX E = OPINION OF CIRCUIT JUDGE SMITH OF

THE SECOND CIRCUIT, DATED APRIL 29, 1977 THE SECOND CIRCUIT, DATED APRIL 29, 1977

The judgment is reversed and the complaint ‘2/ The Code of Professional Responsibility

dismissed, was adopted by the American Bar Association on

August 12, 1969 and became effective January 1,

‘Footnotes 1970, McKinney's Consol. Laws of N.Y., Book

‘1/ Disciplinary Rule 7-109C states: 29, Judiciary Law, Appendix at 351, 499. The

A lawyer shall not pay, offer to pay, or Association of the Bar of the City of New York,

acquiesce in the payment of campensation a defendant below, has not taken a separate

to a witness contingent upon the content appeal, It views itself as an investigative

of his testimony or the outcome of the . and prosecutorial agency of the First

case, But a lawyer may advance, guarantee, ; Department, (First Department Rules, § 603.4).

or acquiesce in the payment of: Appellants’ Brief at 2.

1, Expenses reasonably incurred by a

witness in attending or testifying. ‘3 Person moved to convene a three-judge

2. Reasonable compensaticn to a witness district court below to declare unconstit.-

for his loss of time in attending or tional those sections of the New York

testifying. Judiciary Law which forbid the transfer for

3. A reasonable fee for the professional - value of shares in rights in action and the

services of an expert witness. retention of expert witnesses whose fee is

contingent on the outcome of the suit. This

61a

APPENDIX E = OPINION OF CIRCUIT JUDGE SMITH OF

THE SECOND CIRCUIT, DATED APRIL 29, 1977

motion was denied below, Person ‘vy. ‘Associa-

' tion ‘of ‘the Bar of ‘the City of New York, 414

F, Supp. 139 (£.D.N.Y. 1976). Person then

moved for a summary declaratory judgment

solely on the issue of the validity of

DR 7-109C,

‘ 4/ See published opinions in Nabcor action:

332 F. Supp. 280 (S.D.N.Y. 1971); 60 F.R.D.

' 5/ Person has moved pursuant to Fed, R,

Civ. P. 41(a) (2) to dismiss all claims not

adjudicated by grant of the summary judgment.

The court granted his motion and entered

summary judsment declaring DR 7=109C

unconstitutional on August 12, 1976 in

accord with its Memorandum and Order of June

25, 1976, Joint Appendix 177-79.

62a

APPENDIX E = OPINION OF CIRCUIT JUDGE SMITH OF

THE SECOND CIRCUIT, DATED APRIL 29, 1977

' 6/ Appellants argue that "DR 7-109C does

not and did not prevent plaintiff from

arranging with an expert to testify am a

contingent fee basis provided DR 7-109C was

declared unconstitutional." Appellants'

Brief at 8. This argument is circular and

without merit. It is the costitutionality

of the rule which is at issue in this case.

a In Wadmond, the Supreme Court of New

York and two of its Appellate Divisions were

named as defendants and were held to be

suable for injunctive relief. (Opinion by

Judge Friendly.)

* 8/ See Recent Developments ‘in Attorneys'

* Fees, 29 Vand. L.R. 685, 710-16 (1976); F.

Michelman, Litigation ‘Access ‘Fees, 1973

Duke L.J. 1153, 1160.

63a

APPENDIX E = OPINION OF CIRCUIT JUDGE SMITH OF

THE SEOOND CIRCUIT, DATED APRIL 29, 1977

' 9/ We do not reach any questicn which

might be raised were the state rules

arguably in conflict with the federal rules.

64a

APPENDIX F = ORDER OF SECOND CIRCUIT DATED JUNE

14, 1977, DENYING PETITION FOR REHEARING

UNITED STATES COURT OF APPEALS

“ene or eae

At a Stated Term of the United States Court

of Appeals, in and for the Second Circuit, held

at the United States Court House, in the City of

HON, J. JOSEPH SMITH,

HON, WILLIAM H. MILLIGAN,

| Circuit Judges.

Carl E. Person,

Plaintiff-Appellee,

The Association of the Bar of the City of

sion, First Department, Supreme Court, 76=7457

Appellate Division, Second Department,

and Attorney General of New York State,

Defendants-Appellants.

65a 66a

APPENDIX F - ORDER OF SECOND CIRCUIT DATED JUNE APPENDIX G = ORDER OF SECOND CIRCUIT DATED JUNE

14, 1977, DENYING PETITION FOR REHEARING 14, 1977, DENYING PETITION FOR REHEARING EN BANC

A petition for a rehearing having been filed UNITED STATES COURT OF APPEALS

herein by counsel for the appellee, SECOND CIRCUIT

Upon consideration thereof, it is

Ordered that said petition be and it hereby At a stated term of the United States Court

Of Appeals, in and for the Second Circuit, held

Vv.

The Association of the Bar of the City of

is DENIED.

at the United States Court House, in the City of

/s/ A DANIEL FUSARO New York, on the fourteenth day of June, one

A. DANIEL FUSARO thousand nine hundred and seventy-seven.

Clerk -

Carl E, Person,

Division, Second Department, 76-7457

and Attorney General of New York State,

Defendants~Appellants.

A petition for rehearing containing a

suggestion that the action be reheard en banc

having been filed herein by counsel for the

appellee, and no active judge or judge who was

67a

APPENDIX G = ORDER OF SECOND CIRCUIT DATED JUNE

14, 1977, DENYING PETITION FOR REHEARING EN BANC

a member of the panel having requested that a

vote be taken on said suggestion,

Upon consideration thereof, it is

Ordered that said petition be and it

hereby is DENIED.

_.Jg/ IRVING -R. -KAUFMAN

IRVING R, KAUFMAN, Chief Judge

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