ASI, Inc. v. Aquawood, LLC

Background

The Aquawood Defendants—Aquawood, LLC, Brian Dubinsky, and Peter Magalhaes—asked the court to disqualify ASI’s lawyers Stephen Weisbrod and Keith Sorge, revoke the permission allowing ASI’s out-of-state lawyers to appear in the case, or impose other limits or sanctions. The motion relied on Minnesota Rule of Professional Conduct 3.7, which generally prevents a lawyer who is likely to be a necessary witness from acting as an advocate at trial.

Stephen Weisbrod

ASI alleged that Dubinsky told Weisbrod in a private 2017 conversation that the defendants would remain “one step ahead” by moving assets and business relationships so their companies could continue selling products without assets being seized. Dubinsky denied making the statements attributed to him. Because Weisbrod was the only other participant in the private conversation, the court found that his testimony could not effectively be replaced by other evidence. The court therefore found that he was likely to be a necessary witness.

The court rejected the argument that Weisbrod had to withdraw from the entire case. It ruled that he could continue participating in many pretrial activities, including written discovery, settlement conferences, case-management conferences, and pretrial conferences. He could also take or defend depositions involving other witnesses if specified safeguards were followed and he did not refer to the conversation with Dubinsky. He could attend proceedings from which he was barred as an advocate, represent ASI, and advise the trial team.

The court nevertheless imposed these limits on Weisbrod’s role: he could not defend his own deposition; he could not participate in Dubinsky’s deposition; he could not argue pretrial motions concerning his or Dubinsky’s deposition or trial testimony, or matters involving the alleged conversation; and he could not act as ASI’s advocate at trial unless it was established beyond question that he would not testify at trial, either live or by deposition.

Keith Sorge

Sorge was ASI’s local counsel, CEO, and apparently its only current employee or officer. The Aquawood Defendants argued that he was the only plausible witness regarding ASI’s judgment-enforcement efforts, related decisions, damages, participation in a bankruptcy case, and other matters. ASI pointed to George Koeck as a possible alternative witness, but Koeck had retired in 2017 and could not testify about later events.

The court found that Sorge was likely to be a necessary witness because of his unique knowledge of ASI’s decision-making and because Koeck did not eliminate the need for testimony about events after his retirement. The court also found that disqualifying Sorge would not cause ASI substantial hardship because ASI would remain represented by other experienced lawyers.

The court barred Sorge from acting as an advocate at trial, taking or defending any depositions, and arguing pretrial evidentiary motions. He could still argue discovery motions that did not involve his role as a witness, conduct written discovery, and participate in settlement, case-management, and pretrial conferences. He could also attend proceedings in which he could not act as an advocate, represent ASI, and advise the trial team.

Out-of-state counsel and disposition

The Aquawood Defendants also argued that Sorge’s inability to act as a trial advocate meant that ASI’s out-of-state lawyers could no longer retain their permission to appear in the case. The court rejected that interpretation of the local rule. It held that Sorge could still participate in preparing and presenting the case within the limits imposed by the order, so the court denied the request to revoke the out-of-state lawyers’ permission to appear.

Judge Bowbeer ordered that the Aquawood Defendants’ motion was granted in part and denied in part. The order disqualified Weisbrod and Sorge from acting as advocates at trial and from specified pretrial activities, but it did not revoke ASI’s out-of-state lawyers’ permission to appear.