City of Cleveland v. Cleveland Elec. Illuminating Co.

• Decision Date: 12 December 1977
• Docket Number: Civ. A. No. C75-560.
• Citation: 440 F. Supp. 193
• Parties: CITY OF CLEVELAND, Plaintiff, v. The CLEVELAND ELECTRIC ILLUMINATING COMPANY et al., Defendants.
• Court: U.S. District Court — Northern District of Ohio

440 F. Supp. 193

CITY OF CLEVELAND, Plaintiff, v. The CLEVELAND ELECTRIC ILLUMINATING COMPANY et al., Defendants.

Civ. A. No. C75-560.

United States District Court, N. D. Ohio, E. D.

August 3, 1976.

Affirmed December 12, 1977.

COPYRIGHT MATERIAL OMITTED

Malcolm Douglas, Law Director, Cleveland, Ohio, for City of Cleveland.

John Lansdale, Squire, Sanders & Dempsey, Cleveland, Ohio, for The Cleveland Elec. Illuminating Co.

John D. Leech, Calfee, Halter & Griswold, Cleveland, Ohio, David McNeil Olds, Edmund K. Trent, John T. Tierney, Pittsburgh, Pa., Joseph A. Rieser, Reed, Smith, Shaw & McClay, Washington, D.C., for Duquesne Light Co.

Carl L. Steinhouse, Joseph L. McEntee, Jones, Day, Reavis & Pogue, Cleveland, Ohio, for Ohio Edison Co. and Pennsylvania Power Co.

Leslie Henry, Fuller, Henry, Hodge & Snyder, Toledo, Ohio, for The Toledo Edison Co.

Michael R. Gallagher, Gallagher, Sharp, Fulton, Norman & Mollison, Cleveland, Ohio, for Squire, Sanders & Dempsey.

ORDER

KRUPANSKY, District Judge.

This is an action instituted by the plaintiff City of Cleveland (City) against defendants Cleveland Electric Illuminating Company (CEI), Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company, and Toledo Edison Company charging a conspiracy to violate Sections 1 and 2 of the Sherman Antitrust Act, 15 U.S.C. §§ 1 and 2. Jurisdiction is properly invoked pursuant to Sections 4 and 16 of the Clayton Act, as amended, 15 U.S.C. §§ 15 and 26.

The Complaint, alleging certain acts of conspiracy to monopolize and restrain trade, was filed on July 1, 1975. Collateral to the substantive counts of the Complaint, the City, on December 15, 1975, filed its Motion to Disqualify the Cleveland law firm of Squire, Sanders and Dempsey (SS&D), legal counsel for defendant CEI. This Motion, charging a conflict of interest arising as a result of earlier legal retainers between SS&D and the City, seeks to foreclose SS&D from further participation in these proceedings.

The pending action before this District Court climaxes protracted litigation initiated by the City against CEI and others as early as May 13, 1971, before the Federal Power Commission (FPC) in a proceeding styled City of Cleveland v. CEI, Docket No. E7631. Litigation was thereafter pursued by the City with its Petition to Intervene before the Nuclear Regulatory Commission (NRC) filed on July 6, 1971, wherein the City pressed its antitrust charges against CEI and others.¹

By order dated July 12, 1972, the FPC concluded that the City's allegations of anti-competitive practices by CEI were unsupported by the facts. This conclusion was subsequently affirmed on January 9, 1976, by the United States Court of Appeals for the District of Columbia Circuit. The proceeding before the NRC is still pending.

Issues of disqualification of counsel for conflicts arising as a result of former representation present the acutely sensitive dilemma of protecting the confidentiality of the client-attorney relationship without needlessly interfering with a litigant's freedom to proceed with legal counsel of choice. See, Note, Attorney's Conflict of Interests: Representation of Interest Adverse to That of Former Client, 55 B.U.L.Rev. 61, 65 (1975). An equitable balance of these competing interests is essential if the public's trust in the integrity of the Bar is to preserved. Redd v. Shell Oil Co., 518 F.2d 311 (10th Cir. 1975). Assignment of this delicate factual and policy-making decision is delegated with increasing exclusivity to the district court. As recognized in Hull v. Celanese Corporation, 513 F.2d 568, 571 (2d Cir. 1975):

The district court bears the responsibility for the supervision of the members of its bar . . .. The dispatch of this duty is discretionary in nature and the finding of the district court will be upset only upon a showing that an abuse of discretion has taken place.

See also, Richardson v. Hamilton International Corporation, 469 F.2d 1382 (3d Cir. 1972), cert. denied, 411 U.S. 986, 93 S.Ct. 2271, 36 L.Ed.2d 964 (1973); Greene v. Singer, 461 F.2d 242 (3d Cir.), cert. denied, 409 U.S. 848, 93 S.Ct. 54, 34 L.Ed.2d 89 (1972).

In approaching the issues of disqualification, the Court is mindful of its paramount obligation of "maintaining the highest standards of professional conduct and the scrupulous administration of justice." Hull, supra at 569; Silver Chrysler Plymouth, Inc. v. Chrysler Motor Corp., 518 F.2d 751, 757 (2d Cir. 1975). This obligation stands in contrast to the secondary consideration of ensuring the right of the public to legal counsel of its own choice. Ethical problems, however, cannot be resolved in the abstract. Rather the Court must rely upon a thorough consideration of the facts. "Nor can judges exclude from their minds realities of which fair decision could call for judicial notice." Silver Chrysler, 518 F.2d at 753.

Thus, when dealing with ethical principles it is apparent that a court, in the words of Judge Irving R. Kaufman in United States v. Standard Oil Company, 136 F.Supp. 345, 367 (S.D.N.Y.1955),

cannot paint with broad strokes. The lines are fine and must be so marked. Guide-posts can be established when virgin ground is being explored, and the conclusion in a particular case can be reached only after painstaking analysis of the facts and precise application of precedent.

Accordingly, the dynamics of time have resulted in evolving modification of the practitioner's ethical, social and political roles in society. Patterson and Cheatham, The Profession of Law 19-23, 65-67 (1973). Rules appropriate in guiding lawyers of several decades ago must be applied in light of current realities. As one commentator perceptively points out, the rigid rule of total disqualification

is premised in the day when firms, when they existed, were very small — also a day when attorneys most frequently could think of their activities in terms of discreet "matters." Increasingly, neither condition maintains. Note, Unchanging Rules in Changing Times: The Canons of Ethics and Intra-firm Conflicts of Interest, 73 Yale L.J. 1058 (1964), quoted in Silver Chrysler Plymouth Inc. v. Chrysler Motors Corp., 370 F.Supp. 581, 589 (D.C. 1973).

Since the largest legal firms represent the largest corporations within all sectors of the economy, it is practically impossible for a firm to ensure against some form of legal relationship between its clients at some time. The pragmatics of modern day legal practice assume greater significance and magnitude when a firm such as SS&D, a prominent authority in a highly specialized area of the law, is pursued to provide expert services for the economic benefit of the public interest.

THE PARTIES

Since 1905, the City has owned and operated the Municipal Electric Light Plant (MELP) which has generated and distributed electric energy in keen competition with CEI for residential, commercial and industrial consumers within Cleveland, Ohio. MELP is a proprietary interest of City and is financed by the issuance of revenue bonds payable from the revenues of the system. MELP, as all other city departments, both governmental and proprietary, is represented legally by the City's Law Department. The City Law Department is administered by the Law Director assisted by a Chief Counsel and staffed by innumerable Assistant Law Directors.

John Lansdale, Jr. (Lansdale), against whom the Motion to Disqualify is primarily lodged, is a partner in the law firm of Squire, Sanders & Dempsey (SS&D) which practices in Washington, D. C. under the name of Cox, Langford & Brown. Martindale-Hubbell Law Directory (1975) identifies SS&D as having 79 partners and 80 associates. Cox, Langford & Brown is listed as having an additional seven partners and five associates. SS&D is the largest and one of the most prestigious law firms in Ohio.

SS&D is structured into five sections, i. e., Litigation, Public Law, Estate & Taxes, Labor and Corporate. Incorporated into its Public Law Section is SS&D's municipal bond department, perhaps the largest in the entire United States and nationally recognized as the most reputable and prestigious legal authority in this highly specialized area of consultation. Its unique expertise in municipal bond law is unquestioned in the bond market: the firm's imprimatur assures the bond market that a proposed issue has underlying legal validity, thereby affording it greater public acceptability and more favorable marketability.

In Ohio, SS&D performs virtually all state, county and municipal bond work. The firms of Peck, Shaffer & Williams (Peck) and Bricker, Evatt, Barton & Eckler (Bricker) of Cincinnati and Columbus, Ohio, respectively, also offer reputable bond consultation and services nationally on a lesser scale than SS&D.

SS&D has represented CEI since the company's incorporation in 1890, and has openly, notoriously and without interruption, served CEI as outside general counsel for 65 years.

In accordance with the pronouncement of the Sixth Circuit Court of Appeals in Melaned v. I. T. T. Continental Baking Co., 534 F.2d 82 (6th Cir. 1976), an evidentiary hearing was accorded the parties to this proceeding, in which the following facts were disclosed.

FACTS

It is conceded that CEI is and has been one of SS&D's major corporate clients. The total commitment of SS&D to the legal and business affairs of CEI is further reflected by the service of Ralph M. Besse, a partner in SS&D who left the firm in 1948 to become Vice President and General Counsel and later President and Chief Executive of CEI; upon his retirement in 1970 he rejoined SS&D as a partner but continued as a Director of CEI.

Lansdale also has been a Director of CEI since 1964 and has, since at least 1948, been the partner of the firm who advised and counseled the Company in rate and service matters as its chief legal counsel, not only before the Public Utilities Commission of Ohio (PUCO), but in all other litigation save those proceedings before the...