American Can Company v. Citrus Feed Co.
| Decision Date | 04 March 1971 |
| Docket Number | No. 29651.,29651. |
| Citation | 436 F.2d 1125 |
| Parties | AMERICAN CAN COMPANY, Plaintiff-Appellant, v. CITRUS FEED CO. et al., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Thomas C. MacDonald, Jr., Tampa, Fla., for plaintiff-appellant.
Robert S. Pittman, Bartow, Fla., Rom W. Powell, Winter Park, Fla., Donald E. Wilkes, Daytona Beach, Fla., James M. McEwen of Gibbons, Tucker, McEwen, Smith, Cofer & Taub, Tampa, Fla., for defendant-appellee Citrus Feed Co., A. R. Carver, Lakeland, Fla., of counsel.
Before TUTTLE, DYER and SIMPSON, Circuit Judges.
From the District Court's order of disqualification of Covington & Burling, a law firm acting as American Can Company's trial counsel in a judgment creditor's suit against Citrus Feed Company and others, American appeals. The disqualification resulted solely because of the Covington firm's relationship with John Allison, an attorney whom American had retained as local counsel in Tampa, Florida. The District Judge applied a "double imputation" of knowledge theory — i. e., the judge initially imputed to Allison the knowledge of his partner in the firm of MacFarlane, Ferguson, Allison & Kelly who had handled a tax matter for some of the defendants in the instant case, and then imputed Allison's imputed knowledge to a member of the Covington firm who had consulted with Allison in regard to this controversy — to disqualify the Covington firm. We reverse.
The District Judge found the following pertinent facts, which are not seriously disputed. On January 17, 1966, Allison filed suit on behalf of American Can Company, which he had represented locally since 1942, against Sunshine Packers, Inc. American Can secured a monetary judgment, affirmed by this Court on appeal.1 Thereafter, American Can made continuous efforts to collect the judgment by levy, garnishment, and legal proceedings supplementary to and in aid of execution. In connection with these efforts, Allison and Miller, a member of the Covington firm who had also served as counsel for American Can and whom American Can employed in the action against Sunshine in 1967, took the deposition of David Prosser, Jr., a defendant in the present case. Through counsel Prosser objected to certain questions; he noted that Allison was, and is, a partner of an attorney who was acting as tax counsel for the Prossers.
As the District Judge stated, the problems involved in such representation can best be understood by considering the thrust of the present suit, filed by Allison and Miller on April 25, 1969, on behalf of American Can against Citrus Feed and the Prossers. In this suit, American Can contends that the Prossers (David, Jr., and his father), or one of them, were the real parties in interest in Sunshine Packers, Inc., and related corporations, that Sunshine's assets were dissipated, that preferential payments and other fraudulent transfers of corporate assets were made, and that the affairs of the several corporations were intentionally mismanaged to the detriment of their creditors. Thus American Can seeks judgment against the Prossers and others.
In August 1969, six months after the possibility of conflicting interests had first been asserted at the deposition and four months after the complaint in the present suit had been filed, the Prossers moved to disqualify Allison and Miller, as well as all members of their respective firms, from further representation of American Can in this case. The Prossers averred that Ericksen, Allison's partner in the MacFarlane firm, had represented them during an Internal Revenue Service investigation that involved "the same line of endeavor" as the present case and that therefore a conflict of interest between Ericksen and Allison existed. As to the Covington firm, the motion alleged "that Miller has benefited from any knowledge acquired by Allison."
Regarding Ericksen's relationship with the Prossers, the District Judge found that in December 1965 the latter were undergoing audit by the Internal Revenue Service. At the suggestion of their local counsel, the Prossers employed Ericksen, a tax expert, to represent them in the investigation. Subsequently they delivered tax records to Ericksen's office, where they remained until returned, at the Prossers' request, after this suit was filed. While he recognized that the pertinence of these records to American Can's suit was disputed, the District Judge stressed the importance of the Prossers' contentions. The court found "that the records were of such nature that they could have been of benefit to Allison" in pressing American Can's claim against the Prossers. However, the judge made no finding as to the substantiality of the relationship between these tax records and the American Can case. Moreover, he concluded that there was no evidence of an exchange of information between Ericksen and Allison regarding their endeavors. He commented that the Prossers had not suggested, and the court had not found, a lack of good faith on the part of Ericksen, Allison, or Miller. Each had made every effort to comply with the Canons of Ethics "as they were considered and honestly interpreted." In fact, Ericksen discontinued representation of the Prossers soon after the conflict of interest question was first raised. Following the District Court's hearing concerning the Motion for Disqualification, Allison and the MacFarlane firm withdrew from the present case.
Nevertheless, the District Judge determined that the Prossers' motion to disqualify Miller and all members of the firm with which he is associated from further participation in this controversy should be granted. Relying in part on W. E. Bassett Co. v. H. C. Cook Co., 2 Cir. 1962, 302 F.2d 268, the judge reasoned: Thus, he intimated, public policy demands that the knowledge imputed to Allison be imputed to Miller, and thence to the entire Covington firm.
Having accepted the District Judge's findings of fact, we must reject his conclusions. Neither decisional precedents nor ethical precepts support his rationale. Initially, it is important to characterize the issue here: whether the order disqualifying Miller and the Covington firm from representing American Can in this action was proper involves ethical, not legal considerations. Furthermore, the question is one of appearances rather than substance, for the District Judge specifically absolved Ericksen, Allison and Miller of complicity with respect to the Prosser records.
When the Prossers' Motion for Disqualification was filed, the American Bar Association Canons of Ethics were still effective. In their preamble the Canons admonish members of the Bar that their conduct should merit the approval of all good men; they must "abstain from all appearance of evil." United States v. Trafficante, 5 Cir. 1964, 328 F.2d 117, 120, citing 1 Thessalonians 5:22. Specifically pertinent to this controversy are Canon 6 and its corollary Canon 37. In part, Canon 6 reminds attorneys:
(emphasis added.) Canon 37 provides in part:
It is the duty of a lawyer to preserve his client\'s confidences. This duty outlasts the lawyer\'s employment, and extends as well to his employees; and neither of them should accept employment which involves or may involve the disclosure or use of these confidences, either for the private advantage of the lawyer or his employees or to the disadvantage of the client, without his knowledge and consent, and even though there are other available sources of such information. A lawyer should not continue employment when he discovers that this obligation prevents the performance of his full duty to his former or to his new client. * * *
(emphasis added.)
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