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Person v. Association of Bar

decided: April 29, 1977.

CARL E. PERSON, PLAINTIFF-APPELLEE,
v.
THE ASSOCIATION OF THE BAR OF THE CITY OF NEW YORK, SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT, SUPREME COURT, APPELLATE DIVISION, SECOND DEPARTMENT, AND ATTORNEY GENERAL OF NEW YORK STATE, DEFENDANTS-APPELLANTS



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 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.

Kaufman, Chief Judge, Smith and Mulligan, Circuit Judges.

Author: Smith

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 7-109 C of the Lawyers' Code of Professional Responsibility ("DR 7-109 C"). 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.*fn1 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 outcome of the case.*fn2 We reverse.

The sole issue on appeal is the constitutionality of DR 7-109 C, Person having abandoned all claims except those specifically ruled upon by the court below.*fn3

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 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 7-109 C.

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 damages.*fn4 Person alleges, inter alia, that he is unable to prosecute the Nabcor action because neither National Auto Brokers Corp. nor any of the other plaintiffs in the suit, can afford 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 7-109 C. 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 7-109 C foreclosed a lawyer's effort to obtain 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 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 court held that

to treat contingency of payment as in and of itself improper is too irrational to survive Fourteenth Amendment analysis. The interest in access to the courts on the 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 to effective achievement of its professed goal and which exacts a sacrifice which must, in any 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, 28 L. Ed. 2d 113, 91 S. Ct. 780 (1971), and Winters v. Miller, 446 F.2d 65, 71 (2d Cir.), cert. denied, 404 U.S. 985, 30 L. Ed. 2d 369, 92 S. Ct. 450 (1971), in support of its holding, and entered summary judgment declaring Disciplinary Rule 7-109C unconstitutional.*fn5

I.

Jurisdiction below is based on 28 U.S.C. § 1343(3), 42 U.S.C. § 1983, and on 28 U.S.C. § 2201. Before proceeding to the merits, we first address appellants' 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 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 "the 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 pending 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 controversy of sufficient immediacy to warrant the issuance of a declaratory judgment.*fn6 Golden v. Zwickler, 394 U.S. 103, 108, 22 L. Ed. 2d 113, 89 S. Ct. 956 (1969).

State disciplinary and disbarment proceedings have been held comparable to criminal proceedings. In re Ruffalo, 390 U.S. 544, 551, 20 L. Ed. 2d 117, 88 S. Ct. 1222 (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, 27 L. Ed. 2d 669, 91 S. Ct. 746 (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, 46 L. Ed. 2d 92, 96 S. Ct. 122 (1975), this ...


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