Wisconsin Clarifies SCR 20:3.4(b): Witness Payments Must Reflect Actual Losses and May Not Be Contingent on Case Outcome

1. Introduction

This attorney disciplinary appeal arose from a construction-dispute arbitration in which Attorney Gary W. Thompson, representing a subcontractor, sought assistance and testimony from J.T., the former project manager and the most knowledgeable fact witness regarding the project. Thompson offered J.T. (1) a contingent $25,000 payment if Thompson’s client prevailed, and (2) additional payments of $2,000 and then $5,000 for J.T.’s time in preparation and testimony.

The Office of Lawyer Regulation (OLR) charged a single count: violation of SCR 20:3.4(b), which prohibits offering “an inducement to a witness that is prohibited by law.” After an evidentiary hearing, a referee found the violation proven and recommended a public reprimand and full costs.

Thompson appealed, arguing (i) the rule is unconstitutionally vague as applied, (ii) his conduct did not violate the rule, and (iii) discipline should be private with reduced costs. The Wisconsin Supreme Court rejected all three arguments, affirmed the violation, imposed a public reprimand, and assessed full costs.

2. Summary of the Opinion

The court adopted the referee’s factual findings (not clearly erroneous) and agreed that Thompson violated SCR 20:3.4(b) by offering prohibited financial inducements to a fact witness. The court held:

• A less stringent vagueness standard applies to ethics rules than to criminal statutes, evaluated from the perspective of a reasonable lawyer with professional training.
• A contingent payment to a fact witness tied to case success is long condemned as against public policy and plainly prohibited.
• Payments to fact witnesses must be tied to particular losses (reasonable expenses and reasonable compensation for time actually lost preparing/testifying); forward-looking lump sums not anchored to actual losses are improper inducements.
• Good faith or claimed misunderstanding is not a defense; there is no “good-faith exception” to the prohibition on witness-influencing payments.
• A public reprimand is warranted due to potential/actual injury (including dismissal of the client’s arbitration claims) and the need for deterrence; suspension is unnecessary given mitigation.
• Full costs are appropriate where the respondent vigorously litigated and ultimately was found guilty of misconduct.

3. Analysis

3.1 Precedents Cited

A. Standards of review and the court’s role in discipline

• In re Disciplinary Proceedings Against Eisenberg, 2004 WI 14, ¶5: The court reaffirmed that referee fact findings are upheld unless clearly erroneous, while legal conclusions are reviewed de novo. Thompson’s appeal failed to identify clear error in findings, so the court adopted them.
• In re Disciplinary Proceedings Against Widule, 2003 WI 34, ¶44: The court reiterated it may impose whatever sanction it sees fit regardless of the referee’s recommendation. Here, the court agreed with the recommendation but emphasized its independent sanctioning authority.

B. Vagueness, due process, and why ethics rules are treated differently

• State ex rel. Hennekens v. City of River Falls Police & Fire Comm'n, 124 Wis. 2d 413, 420 (1985): Provided the foundational statement that vagueness doctrine is rooted in due process—fair notice and proper adjudicatory standards.
• In re Disciplinary Proceedings Against Gamino, 2005 WI 168, ¶48: Confirmed that respondent lawyers are entitled to due process in disciplinary proceedings, setting the stage for as-applied vagueness review of SCRs.
• In re Disciplinary Proceedings Against Hupy, 2011 WI 38, ¶91: Supported the proposition that disciplinary rules are subject to due process vagueness scrutiny, while also endorsing a less stringent vagueness standard than for criminal laws.
• Matter of Rabideau, 102 Wis. 2d 16 (1981): Used by the court to justify why ethics rules cannot be reduced to a “fixed list” of prohibited conduct and to stress attorneys’ “heightened awareness” and responsibility to tailor conduct to the rules; also invoked for rejecting vagueness challenges when professionals can understand the standard.
• Matter of Seraphim, 97 Wis. 2d 485, 497 (1980): Cited for the long-recognized constitutionality of broad professional conduct standards.
• State v. Grandberry, 2018 WI 29, ¶33: Provided the “ordinary people” criminal-statute vagueness yardstick, which the court distinguished from the lawyer-ethics context.
• In re Disciplinary Proceedings Against Beaver, 181 Wis. 2d 12, 24 (1994): Anchored the “reasonable lawyer” perspective—an ethics rule is sufficiently definite if understandable to a licensed officer of the court, in context and as applied in cases.
• Out-of-state authorities supporting the “lawyer audience” lens: People v. Morley, 725 P.2d 510 (Colo. 1986); In re Crossen, 880 N.E.2d 352 (Mass. 2008); State ex rel. Nebraska State Bar Ass'n v. Kirshen, 441 N.W.2d 161 (Neb. 1989); In re Holtzman, 577 N.E.2d 30 (N.Y. 1991); Comm'n for Law. Discipline v. Benton, 980 S.W.2d 425 (Tex. 1998). The Wisconsin Supreme Court used these citations to demonstrate that its approach is mainstream: vagueness is assessed by whether licensed lawyers can understand and comply.

C. Contingent payments to witnesses are contrary to public policy

• Miller v. Anderson, 183 Wis. 163, 168 (1924): The court relied on Miller’s statement that contingent compensation for collecting/procuring testimony, depending on the character of testimony or the litigation result, is “uniformly condemned” because it induces fraud or perjury. This precedent directly framed Thompson’s $25,000 “if we win” offer as prohibited.
• Manufacturers' & Merchants' Inspection Bureau v. Everwear Hosiery Co., 152 Wis. 73 (1912): Cited through Miller as part of Wisconsin’s longstanding public-policy condemnation of contingent witness-payment arrangements.

D. Interpreting SCR 20:3.4(b) through ethics opinions

• State Bar of Wis. Comm. on Pro. Ethics, Formal Op. No. E-88-9 (1988): Cited for the principle that inducements exceeding actual out-of-pocket losses can support findings of an SCR 20:3.4(b) violation.
• Wis. Ethics, Formal Op. E-89-17 (1989): Recognized that fact witnesses may be compensated for time lost preparing to testify and testifying, if reasonable and not otherwise prohibited by law.
• ABA Comm. on Ethics & Pro. Resp., Formal Op. 96-402 (1996): Reinforced that compensation must be reasonable and structured to avoid affecting—even unintentionally—the content of testimony. The court used this to underscore the “risk of influence” rationale that makes untethered payments impermissible.

E. No “ignorance” or “good faith” escape hatch

• In re Disciplinary Proceedings Against Siderits, 2013 WI 2, ¶29: Deployed to reject Thompson’s claim that he should avoid discipline because he did not believe his conduct was unethical. The court emphasized that allowing an ignorance-of-ethics excuse would encourage indifference to the rules and their interpretation.

F. Costs follow responsibility for burdening the system

• In re Disciplinary Proceedings Against Ritland, 2021 WI 36, ¶43: Cited for the proposition that under SCR 22.24(1m), lawyers found guilty should expect to pay costs they imposed on the disciplinary system, especially after extensive litigation choices.

3.2 Legal Reasoning

A. The controlling rule and the “reasonable lawyer” notice framework

The court centered its analysis on the text of SCR 20:3.4(b) (no prohibited-by-law inducements to witnesses) and Comment [3], which recognizes that while paying witness expenses is not improper, the common-law rule generally forbids paying an occurrence (fact) witness a fee for testifying.

Against Thompson’s as-applied vagueness challenge, the court applied (i) a less stringent vagueness standard than criminal law and (ii) a lawyer-specific lens: the question is whether a reasonable lawyer, with professional training and awareness of case law and ethics guidance, would understand the prohibition. The court also emphasized that the language mirrors ABA Model Rule 3.4(b) and is widely adopted; the court found no persuasive authority deeming it unconstitutionally vague.

B. The $25,000 offer: contingency + outcome dependence is categorically suspect

The court treated Thompson’s text—“Should [his client] prevail in litigation, you would be entitled to $25,000”—as the paradigm of an impermissible inducement: a payment conditioned on the success of the case in which the witness would assist and testify. Relying on Miller v. Anderson, the court held that any reasonable lawyer would understand such a contingent arrangement to be prohibited because it creates an inducement to shade testimony toward victory.

Thompson’s attempt to recharacterize the $25,000 as a “bonus” owed under a prior employment agreement did not carry the day. The referee had found the triggering bonus conditions were not met (“within schedule and budget”), the agreement had ended, and the calculation was speculative. The supreme court deferred to the referee’s credibility and factual determinations and found no basis to disturb the conclusion that the offer was “most inappropriate.”

C. The $2,000 and $5,000 offers: not tied to particular losses, and therefore improper

The court drew a practical compliance line for attorneys: compensation to fact witnesses is permissible only when it is tied to actual, itemized, or otherwise demonstrable losses—reasonable expenses and reasonable payment for time actually lost in preparation and testimony—so the payment does not function as an “incentive” to influence content.

Here, the $2,000 and $5,000 offers were not grounded in J.T.’s actual lost income, actual time lost, or actual expenses incurred. Instead, they were forward-looking, lump-sum estimates devised by the client’s owner, transmitted by Thompson without serving as a professional check on reasonableness. That structure, the court reasoned, carries the “unacceptable risk” of influencing testimony and therefore falls within SCR 20:3.4(b)’s prohibition.

D. Good faith does not negate the violation

Even accepting Thompson’s claim that he acted sincerely and without intent to influence testimony, the court held those assertions do not constitute a defense. The rule’s function is prophylactic: to prevent witness-influencing incentives and protect the integrity of adjudication. Under In re Disciplinary Proceedings Against Siderits, misunderstanding or ignorance does not excuse ethical violations.

E. Sanction selection: public reprimand as the “middle ground”

The court reasoned that a private reprimand would be reserved for cases with little or no injury/potential injury; that threshold was not met, especially given Thompson’s testimony that the arbitrator dismissed his client’s claims after learning of the payment offers. The court also emphasized deterrence and the public-education value of a public reprimand, particularly because Thompson claimed uncertainty about the rule’s meaning.

On the other hand, the court found suspension unnecessary: there was only one count, no prior discipline across a long career, and cooperation with the disciplinary process (mitigating factors referenced generally through ABA Standards 9.32). The court concluded a public reprimand “will suffice.”

F. Costs: full assessment when the respondent chooses extensive litigation

Addressing the sizeable cost bill ($23,209.42), the court attributed the figure to Thompson’s litigation choices—unsuccessful motion practice, extensive discovery, and full appellate litigation through argument. Citing In re Disciplinary Proceedings Against Ritland and SCR 22.24(1m), the court held that once misconduct is found, the lawyer should expect to pay costs imposed on the system. Thompson’s claim that he would have accepted a private reprimand by consent did not justify reducing costs.

3.3 Impact

• Concrete compliance guidance on witness compensation: The decision effectively instructs Wisconsin lawyers that fact-witness payments must be demonstrably tied to particular losses (reasonable expenses and reasonable time lost) and that lump-sum, speculative, or “market-rate” estimates—especially when not validated by counsel—risk discipline.
• Reinforced bright line against contingent witness payments: By grounding the analysis in Miller v. Anderson, the court reaffirmed that outcome-contingent witness payments are not merely “risky” but fundamentally incompatible with public policy and the integrity of evidence.
• Vagueness challenges to SCRs face a high bar: The opinion consolidates Wisconsin’s approach—less stringent than criminal vagueness and judged from the perspective of a reasonable lawyer—making future as-applied vagueness attacks on ethics rules harder to sustain, particularly where comments, case law, and ethics opinions provide context.
• Discipline and costs as deterrence: The public reprimand and full costs send a signal that “litigating to the hilt” may be a right, but it does not insulate a lawyer from paying the system’s costs if misconduct is ultimately established.

4. Complex Concepts Simplified

• “Inducement to a witness” (SCR 20:3.4(b)): A benefit offered to a witness that could motivate the witness to testify, cooperate, or shape testimony. The concern is not only explicit quid pro quo bribery; it is also any payment structure that creates an incentive affecting testimony.
• Fact (occurrence) witness vs. expert witness: A fact witness testifies about what they saw, did, or experienced. Experts are typically paid professional fees for opinions. This case deals with a fact witness, for whom “fees for testifying” are traditionally disallowed beyond reimbursement/compensation for actual losses.
• Contingent payment: Payment conditioned on winning the case or achieving a favorable result. Courts treat this as especially problematic with witnesses because it aligns the witness’s financial interest with a particular outcome.
• Vagueness “as applied”: A claim that a rule might be clear in many situations but was too unclear to give fair notice when applied to the respondent’s particular conduct. Here, the court held the rule was clear to a reasonable lawyer given text, comment, precedent, and ethics opinions.
• “Reasonable lawyer” standard: Unlike criminal law’s “ordinary person” test, disciplinary rules are assessed based on what a trained, licensed lawyer should understand, including professional norms (“the lore of the profession”) and interpretive guidance.

5. Conclusion

Office of Lawyer Regulation v. Gary W. Thompson strengthens and clarifies Wisconsin’s enforcement of SCR 20:3.4(b) in three durable ways: (1) it reaffirms that witness-inducement prohibitions are sufficiently definite when viewed through the lens of a reasonable lawyer and contextual guidance; (2) it underscores that contingent, outcome-based payments to fact witnesses are categorically condemned as contrary to public policy; and (3) it emphasizes that even non-contingent payments must be tethered to particular, reasonable losses to avoid functioning as improper incentives. The public reprimand and full costs reflect the court’s dual aims of protecting the integrity of testimony and deterring practices that can distort adjudicative truth-finding.