744 F.2d 1564 (Fed. Cir. 1984), 84-569, Panduit Corp. v. All States Plastic Mfg. Co., Inc.

Docket Nº:Appeal No. 84-569.
Citation:744 F.2d 1564
Party Name:223 U.S.P.Q. 465 PANDUIT CORP., Appellee, v. ALL STATES PLASTIC MANUFACTURING CO., INC., Appellant.
Case Date:September 25, 1984
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit
 
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Page 1564

744 F.2d 1564 (Fed. Cir. 1984)

223 U.S.P.Q. 465

PANDUIT CORP., Appellee,

v.

ALL STATES PLASTIC MANUFACTURING CO., INC., Appellant.

Appeal No. 84-569.

United States Court of Appeals, Federal Circuit

September 25, 1984

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Charles A. Laff, Chicago, Ill., argued for appellant. With him on the brief was Martin L. Stern, Chicago, Ill.

Charles F. Pigott, Jr., Chicago, Ill., argued for appellee. Charles R. Wentzel, Tinley Park, Ill., of counsel.

Before KASHIWA, MILLER and NIES, Circuit Judges.

PER CURIAM.

This is an appeal from an order of the United States District Court for the Northern District of Illinois (No. 76 C 4012), entered by Judge Grady on September 16, 1983. The district court disqualified Robert Conte and the firm of Laff, Whitesel, Conte & Saret (the "Laff Firm") from representing appellant, All States Plastic Manufacturing Co., Inc. ("All States"). We reverse-in-part, vacate-in-part, and remand.

Background

The Laff Firm has been patent counsel for All States since prior to the inception of the instant case in late 1976. The instant suit involves the alleged infringement by All States of Panduit Corporation's ("Panduit") U.S. Patent Nos. 3,537,146 (the '146 patent) and 3,660,869 (the '869 patent). The claimed inventions relate to one-piece cable ties. These self-locking devices, molded from nylon, are designed to encircle and hold together a bundle of electrical wires or similar items.

Shortly before the filing of the instant suit, Bowthorpe-Hellermann, Ltd. ("Bowthorpe"), a British company that manufactures

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and markets one-piece cable ties, filed suit against All States, charging infringement of its U.S. Patent No. 3,486,201. 1 Since the Bowthorpe lawsuit, also filed in the Northern District of Illinois, involves similar issues, all parties involved in these two lawsuits agreed to conduct joint discovery. The joint discovery has resulted in approximately 13 depositions and All States has received over 5,000 documents in each case. The joint discovery has been stayed pending the outcome of this appeal.

In addition, All States filed a counterclaim in the instant case in mid-1978, alleging that Panduit had conspired with Bowthorpe and Bowthorpe's wholly-owned U.S. subsidiary, Tyton Corporation, to compete unfairly in violation of Sections 1 and 2 of the Sherman Act and Section 3 of the Clayton Act. Discovery on the counterclaim has been stayed pending resolution of the patent infringement issues. The Laff Firm is also representing All States in the Bowthorpe lawsuit. In addition, Judge Grady is presiding over both cases. 2

In July 1981, Panduit filed a motion to disqualify the Laff Firm. The motion is based on an alleged conflict of interest created by the merger on July 1, 1981, of the law firm of Robert F.I. Conte Ltd. with the Laff Firm, which brought Robert Conte into the firm. From 1965 to 1975, Conte was an attorney with Ladas & Parry in its Chicago office, working under an employment contract during the entire period. He became a "special partner" in 1972, which entitled him to certain perquisites, such as membership in the Union League Club of Chicago, but he did not share in the equity or management of the firm. Ladas & Parry specializes in international patent work and, at that time, also had offices in New York, Los Angeles, Paris, and London.

During 1969-1975, the Chicago office of Ladas & Parry was retained by Panduit's counsel, David Vogel of Prangley, Dithmar, Vogel, Sandler & Stotland, to handle Panduit's foreign patent work. The Panduit work amounted to several hundred thousand dollars for which Vogel was billed.

Prior to June 1, 1971, Ladas & Parry was not a law firm, but rather was a service organization for lawyers, doing business under the name Langner, Parry, Card and Langner. The firm, before and after 1971, prepared, filed, and prosecuted foreign patent applications through foreign associates. During the period 1969-1975, the firm filed approximately 170 Panduit applications, counterparts of seven U.S. applications; 29 counterparts of the '146 patent and 23 of the '869 patent.

In addition, Ladas & Parry was involved in inter partes patent proceedings between Panduit and Bowthorpe or a company related to Bowthorpe, such as patent oppositions where the validity of certain of Panduit's foreign patent applications was contested. In the period 1969-1975, Panduit and Bowthorpe were involved in 17 adversarial patent proceedings overseas, at least a few of which were patent opposition proceedings involving counterparts of the subject patents.

Mr. John Chrystal, presently the senior partner in the Ladas & Parry Chicago office, has at all times been in charge of its work for Panduit. The firm continues to maintain foreign Panduit patent registrations, work which is not considered to involve any Panduit confidences. In the critical period prior to 1975, Chrystal was assisted on the Panduit matters by two other attorneys, Thomas Peterson and Richard Streit. Since Conte's technical expertise was in chemical engineering, his work at Ladas & Parry primarily involved matters in the chemical field. While with Ladas & Parry, Conte was never assigned to or worked on any Panduit matters, never reviewed

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or studied any Panduit files or documents, and never met with any Panduit personnel. Nor is it asserted that he was ever consulted informally on any Panduit matter.

When Conte left Ladas & Parry to form the firm of Kolar & Conte in 1976, he took substantial business with him, and he sued under his employment contract for moneys due, resulting in a settlement. In 1980 he organized the firm of Robert F.I. Conte Ltd., and, in July, 1981, he merged that practice with the Laff Firm.

Though the present litigation was filed in 1976, discovery was still being carried on in 1981. On June 18, 1981, All States served a subpoena on Ladas & Parry seeking all files maintained on behalf of Panduit. On July 10, 1981, All States took the deposition of Richard Streit, a Ladas & Parry partner, in connection with these documents. Conte attended the Streit deposition with Charles Laff. No charge was made for his services because two others of the firm were attending. He attended, he states, to gain experience in such litigation techniques. Subsequently, Panduit's counsel was informed by telephone that Conte was coming over to inspect the 170 Ladas & Parry files which had been produced at the Streit deposition. Conte testified he suggested that he make the inspection because he was familiar with Ladas & Parry's filing system and could more quickly identify files that might contain more than routine matters. Having learned in the interim that Conte had been with Ladas & Parry during the period when that firm had been actively handling Panduit matters, Panduit's counsel refused to permit Conte to inspect the files. In response to this objection, Mr. Laff informed Panduit's counsel that Conte would no longer be involved in the case, and he has not been, except for preparing affidavits in connection with this motion. All States asserts he has been "screened" since that time. On July 27, 1981, Panduit filed a motion to disqualify the Laff Firm from further representation of All States.

District Court Proceeding

The district court initially determined that the matters handled by Ladas & Parry were substantially related to the present litigation. In an order dated November 16, 1982, the district court stated its preliminary impression that upon finding substantial relatedness, disqualification was required if only because of the appearance of impropriety. However, in light of the more recent Seventh Circuit decisions discussed infra, the court concluded that that ground was insufficient; that the court had to make a finding as to whether Conte had actual knowledge; that actual knowledge was presumed from the substantial relationship; and that All States had the burden of proving, clearly and effectively, that Conte had received no confidences. As a result, an evidentiary hearing was held for this purpose.

To show that Conte acquired Panduit confidences at Ladas & Parry, Chrystal testified that he, Conte, and other members of the firm regularly had lunch together at the Union League Club in Chicago. Chrystal and Conte dispute the frequency of the lunches but, at a minimum during 1972-1975, when Conte was a special partner, it would have been at least once a month.

Although he was unable to recall a specific instance or a specific topic discussed with Conte, Chrystal nonetheless testified that Panduit matters, especially the overseas patent opposition proceedings, were discussed frequently because it was unusual to have so many going on at one time. Chrystal's testimony was generally corroborated by Thomas Peterson, although he too could not recall specifically that Conte was present at any of these discussions.

The district court ruled that any specific confidences known to Mr. Chrystal could not be disclosed, recognizing that this created a dilemma to All States with respect to proving that Conte received no confidences. However, Chrystal was permitted to identify general areas of confidences. In addition to the opposition matters, he recalled two others, one in 1969 relating to

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replacing a German associate whose work was not satisfactory and one relating to a French matter which was of public record. He could not remember passing on these confidences, or any other, to Mr. Conte. His testimony essentially was that he must have shared Panduit confidences with Conte because of the frequency of the lunches and because he was like a broken record repeatedly talking about the Panduit oppositions...

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