Witness Fees – Crossing the Line

Tricham Hous. Assoc., L.P. v Klein,

113 A.D.3d 432, 978 N.Y.S.2d 162 [1st Dept., 2014]

Where is the line in compensating a fact witness?

“In an attempt to settle the claims and counterclaims between them, plaintiff and defendant Emanuel Panitz entered into a Memorandum of Understanding (MOU) pursuant to which Panitz’s legal fees would be paid, provided that the claims of defendants Allan Klein, Lobby Design Group, and Steeltech SA (the LDG defendants, collectively) failed. In exchange for this, Panitz assigned plaintiff his remaining cross claims against the LDG defendants. This agreement is void and unenforceable as against public policy. Although his claims against plaintiff have been settled, Panitz is still a witness in this action. Permitting the MOU to stand as it is, with the payment of Panitz’s legal fees conditioned on the failure of his former co-defendants’ claims, creates an incentive for Panitz to falsify his testimony, an incentive that has long been disfavored.”

In 2013, we saw Caldwell v Cablevision Sys. Corp., where the Court of Appeals allowed a fact witness, who happened to be a physician, to demand and collect a fee of $10,000 for one hour of testimony. The physician, testifying purely as a fact witness, testified concerning the notes he had taken of the history given by the plaintiff in the emergency room, serving as the authenticating witness for the admission of the note as a business record. His note indicated that she had said she tripped over her dog, while walking in the rain. He had no present recollection of her statement, and testified only that he wrote down what she said. He gave no other testimony concerning the facts, and gave no opinion.
While stating that it found the outsized fee to be “troubling,” the Court did not disallow the testimony. Rather, it held that the trial court should have given the jury an instruction that if they found the fee to be “disproportionate,” they should then consider whether it influenced the witness’ testimony. The statutory $15 fee is a minimum, and a party is not prohibited from paying a witness’ actual expenses and compensation for lost time. Noting that it is not permissible to pay a fact witness whatever exorbitant fee may be demanded, the Court did not set forth where the line might be drawn. Clearly, however, a fee may not be paid for favorable testimony, or where the fee is contingent on the outcome of the lawsuit.

Here, we have the case where a potential witness’ fee depended on the outcome of the case. That goes too far, and the agreement was held to be void and unenforceable as against public policy. Note that the objectionable element was that the payment was conditioned on the outcome of the case, and not merely on his testifying on behalf of plaintiff. Had the parties limited their agreement to merely testifying for the fee, they would have come within the rule of Caldwell, and the agreement probably would have survived.

Consider, also, a case such as Thomas v. City of New York, 293 F.R.D. 498 [S.D.N.Y., 2013], where the police response to a domestic violence case led to a § 1983 action and a sizeable judgment against the police. The plaintiff’s domestic partner, the alleged victim in the domestic dispute, testified in favor of the plaintiff. Only after the judgment was entered was it revealed that the plaintiff and the witness had entered into an agreement that gave her a percentage of any recovery, and made her liable if the defendants prevailed and sought legal fees. The judgment was vacated and a new trial ordered.

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