In re Airport Car Rental Antitrust, MDL 338.

Citation470 F. Supp. 495
Decision Date24 April 1979
Docket NumberNo. MDL 338.,MDL 338.
PartiesIn re AIRPORT CAR RENTAL ANTITRUST LITIGATION.
CourtU.S. District Court — Northern District of California

COPYRIGHT MATERIAL OMITTED

Ronald S. Adelman, John R. Dwyer, Jr., Curtis W. Carlsmith, Honolulu, Hawaii, for plaintiff Pacific Auto Rental Corp.

Fujiyama, Duffy, Fujiyama & Koshiba, Wallace S. Fujiyama, Rodney M. Fujiyama, Paul H. Sato, Honolulu, Hawaii, Phillips, Nizer, Benjamin, Krim & Ballon, Robert R. Salman, Martin Stein, New York City, for defendant Budget Rent A Car Systems, Inc.

RENFREW, District Judge.

Plaintiff Pacific Auto Rental Corporation, doing business as Dollar Rent A Car Systems of Hawaii, Inc. ("Pacific Auto"),1 seeks disqualification of two law firms retained by defendant Budget Rent A Car Systems, Inc. ("Budget"), to represent Budget in an antitrust suit brought by Pacific Auto against Budget and various other car rental companies. This suit is one of several antitrust cases that have been consolidated pursuant to the procedures governing multidistrict litigation. Pacific Auto's suit ("the Hawaii action") was originally filed in the United States District Court for the District of Hawaii and was transferred to this Court on November 15, 1978, by the Judicial Panel on Multidistrict Litigation, pursuant to 28 U.S.C. § 1407.

Pacific Auto has moved to disqualify the Hawaii law firm of Fujiyama, Duffy, Fujiyama & Koshiba ("the Fujiyama firm") and their co-counsel, the New York law firm of Phillips, Nizer, Benjamin, Krim & Ballon ("Philips Nizer"). Phillips Nizer was originally retained to represent Budget as plaintiff in an action against Hertz Corporation, Avis Rent A Car System, Inc. and National Rent A Car System, Inc., filed in the Northern District of California in April 1977.2 In June 1978, when the Hawaii action was filed by Pacific Auto, Budget retained Phillips Nizer to act as defense counsel in that case. Under Local Rule 1(e) of the District of Hawaii, an attorney who is not an active member of the District of Hawaii bar may be granted permission to participate in a particular case before the United States District Court for the District of Hawaii only if that attorney associates as co-counsel an active member of the bar of the District of Hawaii. In order to comply with Local Rule 1(e), in July 1978, Phillips Nizer associated the Fujiyama firm as co-counsel in the Hawaii action.

Pacific Auto's motion to disqualify the Fujiyama firm and Phillips Nizer is based upon the Fujiyama firm's prior relationship with Pacific Auto. The evidence presented at the hearing on the motion for disqualification, held February 15, 1979, demonstrated that the Fujiyama firm had received confidential information from Pacific Auto and had agreed to represent Pacific Auto on a matter substantially related to the issues presented in Pacific Auto's lawsuit against Budget. Consequently, the Fujiyama firm must be disqualified from representing Budget in the Hawaii action. Phillips Nizer, however, need not be disqualified. There is no indication in the record that Phillips Nizer directly or indirectly received any confidential information regarding Pacific Auto from the Fujiyama firm. Nor is there any evidence that Phillips Nizer knew of the Fujiyama firm's prior representation of Pacific Auto on a matter related to the Hawaii action when they associated the Fujiyama firm as co-counsel. In light of the particular facts of this case, set forth more fully below, Phillips Nizer's role as co-counsel to the disqualified Fujiyama firm does not compel Phillips Nizer's disqualification.

Factual Background

In October or November 1976, two officers of Pacific Auto, Harry Mehtarian and Alan Robin, met with attorney Wallace S. Fujiyama ("Fujiyama") of the Fujiyama firm and asked Fujiyama to represent Pacific Auto in its efforts to obtain an on-airport car rental concession at the Honolulu International Airport ("Honolulu Airport"). At the hearing on the disqualification motion, Robin, Vice-President of Pacific Auto, testified regarding this meeting with Fujiyama. According to Robin, the primary purpose of the meeting was to discuss entry at the Honolulu Airport, although some mention may also have been made of the Hilo Airport. Pacific Auto had unsuccessfully attempted to obtain a Honolulu Airport car rental concession in 1974 and believed that Budget, Pacific Auto's principal competitor in the discount car rental market in Hawaii, had been involved in blocking their entry. Robin and Mehtarian asked Fujiyama to speak with public officials involved in granting on-airport car rental concessions in order to persuade them that it would be in the public interest to have a Dollar Rent A Car concession at the Honolulu Airport. In the course of this conversation, Robin and Mehtarian discussed with Fujiyama Pacific Auto's corporate goals, financial strengths and weaknesses, use of tax loss carry-forward, pricing and marketing strategy, and fleet size, emphasizing the importance to the company of obtaining a concession at the Honolulu Airport. Robin testified that much of the information imparted to Fujiyama was information that Pacific Auto did not generally make known to the public and would not want to disclose to its competitors. In addition to providing Fujiyama with this background information on the company, Robin and Mehtarian gave Fujiyama a file containing documents related to the company's efforts to obtain on-airport car rental concessions in Hawaii. This file included documents from the legal file kept by the attorney who had represented the company in its earlier attempts to gain entry at the Honolulu Airport.

Although Fujiyama did not wish to establish a fee arrangement at this initial meeting, he explained his usual practices regarding fees and he agreed to contact public officials who might be able to assist Pacific Auto in obtaining a Honolulu Airport car rental concession. Fujiyama explained that it could take some time before he made any progress on the matter. Robin testified that the entire meeting with Fujiyama lasted 1 to 1½ hours.

The affidavit of Harry Mehtarian, submitted in support of plaintiff's motion to disqualify, corroborates Robin's testimony concerning the meeting with Fujiyama. Mehtarian, President of Pacific Auto, specifically states that Fujiyama agreed to assist Pacific Auto in its efforts to obtain a concession at the Honolulu Airport and that during the conversation with Fujiyama, Robin and Mehtarian had emphasized their belief that Budget had opposed Pacific Auto's entry at that airport. The affidavit further states that confidential matters were discussed at the meeting with Fujiyama and that a file regarding Pacific Auto's efforts to obtain an on-airport car rental concession was given to Fujiyama.

Mehtarian's affidavit also describes a later meeting with Rodney Fujiyama, the son of Wallace Fujiyama and an attorney at the Fujiyama firm. According to the affidavit, approximately two months after the initial meeting with Wallace Fujiyama, Mehtarian inquired about the progress being made on the concession application and was advised by Rodney Fujiyama that his father was working on the matter. At this meeting, Rodney Fujiyama and Mehtarian discussed the possibility of the Fujiyama firm handling all of Pacific Auto's and Mehtarian's legal business.

After that meeting, both Mehtarian and Robin repeatedly attempted to contact Wallace Fujiyama by telephone, but they were told that he was unavailable and their calls were not returned. In approximately March 1977, Robin called Dr. Richard Lam, a friend of Fujiyama's who had originally introduced Robin to Fujiyama, and asked Lam to inquire whether Fujiyama had made any progress on the concession application. Robin testified that Lam called back and reported that he had spoken to Fujiyama, who had said that he was working on the matter. Finally, Robin became concerned about the delay and decided he should consult another attorney. In June 1977 Pacific Auto retained the firm of Carlsmith, Carlsmith, Wichman & Case to assist the company in its efforts to gain entry at various Hawaii airports. Upon request, the Fujiyama firm transferred the file obtained from Robin and Mehtarian to the Carlsmith firm. The Fujiyama firm never billed Pacific Auto for its legal services.

Prior to the fall of 1976, the Fujiyama firm had done legal work for Transamerica, the parent corporation of Budget, and Fujiyama states in his affidavit that he disclosed this fact to Robin and Mehtarian at their meeting. In January 1977, after Fujiyama had agreed to represent Pacific Auto, the Fujiyama firm began to represent Budget on various matters, including an antitrust suit that, according to Fujiyama, was not related to this antitrust suit. In June 1978 the Fujiyama firm agreed to serve as co-counsel in the Hawaii action. In doing so, the firm undertook representation of Pacific Auto's adversary in a suit involving issues that are substantially related to the matter on which Fujiyama agreed to represent Pacific Auto.3

The complaint in the Hawaii action alleges that Budget and other defendant car rental companies conspired to restrain trade unreasonably and to monopolize trade in the market of car rental concessions on the premises of the Honolulu Airport, in violation of Sections 1 and 2 of the Sherman Act and in violation of antitrust laws of the State of Hawaii. Among other allegations, the complaint states that Budget and the other defendants "opposed in bad faith Dollar's Pacific Auto's efforts and applications for entry into the on-airport car rental market at Honolulu International Airport."

Plaintiff's Motion to Disqualify the Fujiyama Firm

Plaintiff's motion to disqualify the Fujiyama firm is based primarily upon Canon 4 of the ABA Code of Professional Responsibility, which states that "a lawyer should preserve the confidences and secrets of a client," and upon the Disciplinary Rules and Ethical Considerations...

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