First Wisconsin Mortg. Trust v. First Wisconsin Corp.

• Decision Date: 07 June 1978
• Docket Number: No. 77-1786,77-1786
• Parties: FIRST WISCONSIN MORTGAGE TRUST, a Massachusetts Business Trust, Plaintiff- Appellee, v. FIRST WISCONSIN CORPORATION, a Wisconsin Corporation, First Wisconsin Mortgage Company, a Wisconsin Corporation, and First Wisconsin National Bank of Milwaukee, a National Banking Association, Defendants-Appellants. . Reheard En Banc
• Court: U.S. Court of Appeals — Seventh Circuit

Page 201

584 F.2d 201

FIRST WISCONSIN MORTGAGE TRUST, a Massachusetts Business Trust, Plaintiff- Appellee, v. FIRST WISCONSIN CORPORATION, a Wisconsin Corporation, First Wisconsin Mortgage Company, a Wisconsin Corporation, and First Wisconsin National Bank of Milwaukee, a National Banking Association, Defendants-Appellants.

No. 77-1786.

United States Court of Appeals Seventh Circuit.

Reheard En Banc June 7, 1978.

Decided Sept. 22, 1978.

H. Templeton Brown, Mayer, Brown & Platt, Chicago, Ill., for defendants-appellants.

Bernard J. Nussbaum, Chicago, Ill., for plaintiff-appellee.

Before FAIRCHILD, Chief Judge, CASTLE, Senior Circuit Judge, and SWYGERT, CUMMINGS, PELL, SPRECHER, TONE, BAUER and WOOD, Circuit Judges.

PELL, Circuit Judge.

The ultimate, and apparently first impression, issue in this appeal, stated as simply as possible is whether, when attorneys are judicially determined to have been disqualified to represent a client because of prior simultaneous representation of that client's adversary in litigation, the written product of lawyer work ¹ performed during the period of disqualification may be made available to successor counsel. The answer to this issue, in our opinion, is not a per se preclusion but must be a flexible one based upon an examination of the particular facts of the case under consideration.

I.

The plaintiff, First Wisconsin Mortgage Trust (Trust), is a real estate investment trust which was established in 1971 under the sponsorship of the defendant First Wisconsin Corporation (FWC) with a public offering following. Trust was advised on its investments by the defendant First Wisconsin Mortgage Company (Advisor), a wholly owned subsidiary of FWC. Advisor was staffed by employees of the mortgage loan division of the defendant First Wisconsin National Bank (Bank), also a subsidiary of FWC. FWC was jointly involved in various loan transactions with Bank. We ordinarily herein will refer collectively to FWC and its subsidiaries as "defendants."

From the time Trust was established the law firm of Foley & Lardner (Foley) was general counsel to Trust as well as general counsel to FWC and its subsidiaries.

Commencing in 1973 serious loan defaults occurred, a problem which increased in momentum in 1974. Apparently Foley began to represent Trust and Bank in the workout of some of the problem loans, but in early 1974 Foley recommended that Trust retain separate counsel to represent it in connection with the problem loans. At that time Trust retained Sonnenschein, Carlin, Nath & Rosenthal (Sonnenschein) as special counsel to represent the Trust with regard to the problem loans. Following retention of Sonnenschein, Trust asserted claims against the defendants, and threatened to file suit thereon. Adversary negotiations followed between the Trust represented by Sonnenschein and defendants represented by Foley. At one point in June 1974 a partial agreement was executed but it apparently did not resolve the underlying disputes. In September 1974 Foley resigned as general counsel to Trust. Indications of the filing of suit by Trust and negotiations between Foley and Sonnenschein to resolve the controversy continued through the winter months of 1974-75. These were not met by success and the present suit was filed in March 1975 with Trust claiming that the defendants violated certain sections of the Federal Securities Laws and Regulations.

Throughout most of 1974 and early 1975, 15 Foley lawyers engaged in an extensive analysis and review of some 300 real estate investment transactions, this being the work product which is the subject matter of the present dispute. There is no indication of any formal objection during the pre-suit adversary negotiations on the part of Trust or its counsel as to Foley representing the defendants. However, immediately following the filing of the suit, Foley, by letter, requested the consent of Trust to its representation of the defendants, which consent was refused by Trust. In June 1975 Sonnenschein advised Foley that if that firm did not withdraw voluntarily, Trust would move its disqualification which in fact was done on August 1, 1975. Defendants opposed the motion on the principal ground that the work done by Foley for Trust did not substantially relate to the issues in the lawsuit. The motion for disqualification was granted on November 16, 1976. First Wisconsin Mortgage Trust v. First Wisconsin Corp., 422 F.Supp. 493 (E.D.Wis.1976).

On December 15, 1976, Foley withdrew and Mayer, Brown & Platt (Mayer) entered that firm's appearance for the defendants in this action. On the same day the successor counsel filed a notice of appeal of the disqualification order. On January 7, 1977 Mayer requested the district court to hold a pre-trial conference to discuss defendants' access to the work product as generated by Foley prior to disqualification. The district court declined to hold a conference on the basis that it had been deprived of jurisdiction upon the filing of the notice of appeal. The defendants thereupon moved for voluntary dismissal of the appeal of the disqualification order and entered into negotiations regarding the work product with the plaintiff.

Shortly thereafter defendants formally moved the district court for authorization to request access to the Foley work product. This motion was denied on June 14, 1977. First Wisconsin Mortgage Trust v. First Wisconsin Corp., 74 F.R.D. 625 (E.D.Wis.1977). The defendants filed a timely notice of appeal of the work product order and also requested the district court to certify the order for interlocutory appeal under 28 U.S.C. § 1292(b), which certification request was denied on September 15, 1977, subsequent to the filing of the defendants-appellants' original brief in this court. Plaintiffs' August 17, 1977, motion to dismiss the appeal for lack of jurisdiction was taken under advisement by the court together with the merits at oral argument. By a 2-1 decision this court affirmed the district court order on February 24, 1978. First Wisconsin Mortgage Trust v. First Wisconsin Corp., 571 F.2d 390 (7th Cir. 1978). Subsequently upon the granting of the petition to that effect, the case was reheard by the court en banc.

II.

In the opinion of the three-judge panel originally hearing this case, the first issue considered was the plaintiffs' motion to dismiss the appeal for lack of jurisdiction. The entire panel was of the opinion that the appeal was properly before this court. No purpose is served by restating the previous opinion of the court on the matter of jurisdiction. That portion of the prior opinion is therefore adopted as the opinion of the court sitting en banc and part II of the court's prior opinion, 571 F.2d at 392-96, is incorporated herein by reference.

III.

Turning to the merits of this appeal, we do so with the underlying assumption that the disqualification of Foley was correct, the appeal having been dismissed. ²

That which the defendants seek to secure from the attorneys formerly representing them in the present litigation is, as described by the defendants, the "written work product, consisting essentially of summaries of loan files relating to more than 300 complex transactions, and an explanation limited to an identification of the documents reviewed."

Beginning in 1974 a number of Foley attorneys were engaged in analyzing the various claims being asserted on behalf of Trust and analyzing the loan files regarding such claims. This work continued after suit was filed. The analysis of the loan files was conducted by a team of 15 Foley lawyers for more than a year prior to the ultimate disqualification of that firm in November 1976.

Neither the district court in its opinion, nor the plaintiff in its brief or at oral argument has contradicted the defendants' contention that the loan file summaries are the result of routine lawyer work of a type which any competent lawyer, by spending the substantial time which would be required, could accomplish just as well as did Foley. The work product came into being for the benefit of the defendants. It may be safely assumed that the work was not performed gratuitously by Foley but rather on a compensated fee basis. There is no challenge to the defendants' assertion that the preparation of the loan file summaries was not aided by any confidential information acquired by the Foley lawyers through their prior relationship with Trust. Indeed, it appears that the summaries are no different than they would have been if made in their entirety by lawyers who were strangers to all of the parties.

The district court in its opinion under review here, while noting the contention that no confidential information was involved, in effect found this to be of no significance. Quoting from the case of E. F. Hutton & Company v. Brown, 305 F.Supp. 371 (S.D.Texas 1969), a case in which the lack of confidentiality was proposed as a defense to disqualification, the district court in the present case, in what we can characterize only as adopting a per se standard, stated that "(i)f any attorney's subsequent adverse representation in the form of his work product is not barred from use by substitute counsel, then there is little or no point in the initial disqualification." 74 F.R.D. at 627. The district court, addressing itself to that part of Hutton which denied an injunction against the disqualified counsel turning over its files to substitute counsel, distinguished Hutton on the basis that the requested injunction against the production of files appeared to have been based on an asserted attorney-client privilege. We shall discuss Hutton further hereinafter but at the moment note only that the district court in the present case stated that the plaintiff before it did not oppose the turnover motion on the grounds of attorney-client privilege which had been true in Hutton. There the court had found the attorney-client privilege was inapplicable to the facts of the...