American Airlines, Inc., In re

• Citation: 972 F.2d 605
• Decision Date: 04 September 1992
• Docket Number: No. 92-7493,92-7493
• Parties: , 1992-2 Trade Cases P 69,971 In re AMERICAN AIRLINES, INC., AMR Corporation, Petitioners.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 605

972 F.2d 605

61 USLW 2218, 1992-2 Trade Cases P 69,971

In re AMERICAN AIRLINES, INC., AMR Corporation, Petitioners.

No. 92-7493.

United States Court of Appeals Fifth Circuit.

Sept. 4, 1992.

Rehearing and Rehearing En Banc Denied Sept. 29, 1992.

Thomas Gibbs Gee, G. Irvin Terrell, Finis E. Cowan, Baker & Botts, David J. Beck, Beck, Redden & Secrest, Houston, Tex., Ross Citti, Mills, Shirley, Eckel & Bassett, Galveston, Tex., Ira M. Millstein, Weil, Gotshal & Manges, New York City, for petitioners.

Harry Reasoner, Vinson & Elkins, Houston, Tex., for Northwest Airlines, Inc.

Petition for Writ of Mandamus to the United States District Court for the Southern District of Texas.

Before POLITZ, Chief Judge, HIGGINBOTHAM, and BARKSDALE, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

American Airlines, Inc. petitions for a writ of mandamus directing the district court to disqualify its former counsel Vinson & Elkins from representing plaintiff Northwest Airlines, Inc. We hold that the district court erred in denying American's motion and issue the requested writ.

I

Continental Airlines filed a complaint against American in the United States District Court for the Southern District of Texas on June 8, 1992, charging American with attempted monopolization by predatory pricing in violation of the Sherman Act. American filed a declaratory judgment action against Continental and Northwest in the United States District Court for the Northern District of Illinois the following day. Three days later, Northwest sued American in the Southern District of Texas. The Continental and Northwest suits have been consolidated by order of the district court.

On June 9, 1992, the day after Continental filed its complaint, David Schwarte, American's in-house counsel, asked Alison Smith, a VE partner, if VE would represent American in this case. Smith accepted the American representation on June 10, unaware that four days earlier Harry Reasoner, another VE partner, had promised Joe Jamail, Northwest's counsel, that VE would not consider representing another airline until Jamail and Reasoner had discussed joining forces. When Smith informed Reasoner of her acceptance of the American representation, Reasoner directed her to inform Schwarte that "there might be a problem with Northwest" and that Reasoner would make the final decision the next day. On June 11 Reasoner accepted the Northwest representation.

American asserted that VE's prior representation of American and its agreement to do so in this case made its representation of Northwest improper. It requested that VE withdraw from the case in letters sent on June 12 and June 19. Northwest refused and on July 1 American moved to disqualify VE. The parties at this time became aware that Weil, Gotshal & Manges, American's lead counsel, had previously represented Northwest and Continental. An exchange of "conflicts" was briefly considered. When American indicated that it would not withdraw its motion to disqualify VE, Northwest moved to disqualify Weil, Gotshal on July 13.

American rests its motion to disqualify Vinson & Elkins on VE's representation of American in prior antitrust matters and its alleged agreement to represent it in this case. According to American, Vinson & Elkins has served as its "Houston antitrust counsel since 1987." In this role VE defended American in suits by Continental and a Continental affiliate. VE also provided antitrust advice in connection with American's possible acquisition of Continental.

On July 24, after extensive briefing and the submission of numerous affidavits, the district court denied both motions to disqualify counsel. The court held that VE's initial acceptance of the American representation was a "mixup," that the past matters in which VE had represented American were only "tangentially related to this litigation," and that any confidential information possessed by VE was "not sufficient to cause any material prejudice to [American]." The court directed the parties to submit a plan for a Chinese Wall to safeguard against adverse use of confidential information in the case. American then filed the petition for writ of mandamus now before us.

II

We must first determine our jurisdiction. Orders denying motions to disqualify counsel are not appealable before final judgment under 28 U.S.C. § 1291. Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 375, 101 S.Ct. 669, 674, 66 L.Ed.2d 571 (1981); see also Richardson-Merrell, Inc. v. Koller, 472 U.S. 424, 105 S.Ct. 2757, 86 L.Ed.2d 340 (1985) (extending rule to orders granting motions to disqualify). While holding that disqualification orders are not immediately appealable as a matter of course, the Firestone Court indicated that a writ of mandamus might be available "in the exceptional circumstances for which it was designed." Firestone, 449 U.S. at 378 n. 13, 101 S.Ct. at 676 n. 13; Koller, 472 U.S. at 435, 105 S.Ct. at 2763. American contends that this case presents the requisite "exceptional circumstances."

The standards are well established: "[P]etitioners must show that they lack adequate alternative means to obtain the relief they seek ... and carry the 'burden of showing that [their] right to issuance of the writ is "clear and indisputable." ' " Mallard v. United States Dist. Ct. for the S. Dist. of Iowa, 490 U.S. 296, 309, 109 S.Ct. 1814, 1822, 104 L.Ed.2d 318 (1989) (citations omitted); In re Fibreboard Corp., 893 F.2d 706, 707 (5th Cir.1990); In re Willy, 831 F.2d 545, 549 (5th Cir.1987). The test contains two prongs, one procedural and one substantive, and unless American demonstrates that it lacks an adequate alternative means to obtain relief, we need not consider whether its right to a writ of mandamus is "clear and indisputable."

Courts confronting this question have suggested that "[d]enial of a motion to disqualify counsel will rarely justify the issuance of a writ of mandamus." In re Ford Motor Co., 751 F.2d 274, 275 (8th Cir.1984); see also In re Mechem, 880 F.2d 872, 873 (6th Cir.1989); In re Bushkin Assocs., Inc., 864 F.2d 241, 243-44 (1st Cir.1989). We agree that frequent use of the writ would " 'undermine[ ] the policy against piecemeal appellate review,' " Mechem, 880 F.2d at 875 (quoting Allied Chemical Corp. v. Daiflon, Inc., 449 U.S. 33, 36, 101 S.Ct. 188, 191, 66 L.Ed.2d 193 (1980) (per curiam)), and thus we have stressed that "mandamus may not serve as a substitute for appeal." Warren v. Bergeron, 831 F.2d 101, 103 (5th Cir.1987). We also have recognized, however, that the standard governing the availability of mandamus is not "never," but "hardly ever." Allied Chemical, 101 S.Ct. at 190. Thus, this court has recently held that a writ of mandamus will be available in certain cases to obtain immediate review of a district court's denial of a disqualification motion. In re Dresser Industries, 972 F.2d 540 (5th Cir.1992). See also In re American Cable Publications, Inc., 768 F.2d 1194 (10th Cir.1985) (issuing writ on petition to review a grant of disqualification motion); Merle Norman Cosmetics, Inc. v. United States Dist. Ct., Central Dist. of Cal., 856 F.2d 98, 101 (9th Cir.1988) (recognizing that "if petitioners' claims were wellfounded [sic], the damage would be irremediable," but denying writ on other grounds). As in Dresser, we find the special circumstances of the present dispute sufficient to place it within that narrow class of cases warranting mandamus review.

American claims that immediate review of its disqualification motion is appropriate because it will otherwise suffer "irreparable harm" and also because "attorneys and clients throughout Texas need the benefit of this Court's guidance on this issue of grave importance." We agree. First, the nature and size of this litigation would seem to preclude effective appellate review upon final judgment. In addition, this case raises several questions pertaining to the proper interpretation and application of ethical standards in disqualification cases. As illustrated by our recent Dresser opinion, it is relevant to mandamus review that the "district court's order was not a mere discretionary one but rather turns on legal questions appropriate for appellate review." In re Burlington N., Inc., 822 F.2d 518, 523 (5th Cir.1987). It is also relevant that, as in Dresser and Burlington, "[t]he issues here also have importance beyond the immediate lawsuit." Id. at 523; In re EEOC, 709 F.2d 392, 394-95 (5th Cir.1983). For these reasons, we hold that American has demonstrated the absence of an adequate alternative to mandamus review.

Having met the "procedural" requirement for a writ of mandamus, American must also demonstrate that its right to the issuance of the writ is "clear and indisputable." This test goes to the merits, and we pause only to set out the standard of review. The Supreme Court has indicated that "[w]here a matter is committed to discretion, it cannot be said that a litigant's right to a particular result is 'clear and indisputable.' " Allied Chemical, 101 S.Ct. at 191. In accord with these dictates, this court has held that a writ of mandamus should not issue merely because we believe that "we might have exercised the discretion vested in that court differently than the district court exercised it." Matter of Hester, 899 F.2d 361, 367 (5th Cir.1990).

In this circuit, however, a district court's ruling upon a disqualification motion is not a matter of discretion. Rather, the appellate court "review[s] findings of fact for clear error 'while carefully examining the district court's application of relevant ethical standards.' " Johnston v. Harris County Flood Control Dist., 869 F.2d 1565, 1569 (5th Cir.1989) (quoting Cossette v. Country Style Donuts, Inc., 647 F.2d 526, 531 (5th Cir.1981)). Conceding that abuse of discretion review is not appropriate, Northwest asserts that this case centers on disputed factual matters and that the district court's findings deserve...