Doe v. A Corp.

• Decision Date: 22 July 1983
• Docket Number: No. 82-2224,82-2224
• Citation: 709 F.2d 1043
• Parties: John DOE, etc., Plaintiff-Appellant, v. A CORPORATION, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1043

709 F.2d 1043

John DOE, etc., Plaintiff-Appellant, v. A CORPORATION, et al., Defendants-Appellees.

No. 82-2224.

United States Court of Appeals,

Fifth Circuit.

July 22, 1983.

Rehearing and Rehearing En Banc Denied Sept. 28, 1983.

Anthony P. Griffin, Galveston, Tex., Elwyn C. Lee, Houston, Tex., for plaintiff-appellant.

Mark C. Rosenblum, Roy H. Steyer, D. Stuart Meiklejohn, New York City, Baker & Botts, Rafael H. Berk, Houston, Tex., for defendants-appellees.

Appeal from the United States District Court for the Southern District of Texas.

Before RUBIN and TATE, Circuit Judges, and HUNTER,(fn*) District Judge.

ALVIN B. RUBIN, Circuit Judge:

A lawyer employed as house counsel for a corporation rendered legal advice concerning employee benefits to the corporation and to the administrators of its benefit plan. After he resigned from employment with the corporation, he sued for benefits allegedly due him under the corporation's pension and life insurance plans. He also sought to represent a class of other employees allegedly entitled to those benefits. We affirm the district court's judgment holding that he is barred by his ethical obligations as a lawyer from prosecuting such litigation as the class representative of other employees. However, we hold that he may prosecute an action in his own behalf and reverse that part of the judgment dismissing his personal claims.

I.

The plaintiff, who is identified as John Doe, ¹ was employed in the legal department of A Corporation from 1975 to 1980. In his professional capacity as a lawyer, he consulted with and advised both A Corporation and the administrators of its Benefit Plan concerning legal questions about employee benefits, including those arising in the course of the administration of the Benefit Plan and those involving A Corporation's group life insurance policy and other benefits. He made daily decisions concerning the rights of individual employees and the acceptability of their beneficiary designations, gave the plan administrators legal advice, and worked with other lawyers in drafting plan provisions. These duties continued until Doe was transferred to A Corporation's litigation section in April 1979. He resigned in March 1980.

Eleven months later Doe filed suit against A Corporation and X Insurance Company, asserting a claim arising under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Secs. 1001-1453 (1976 & Supp. V 1981), as well as pendent claims arising under state law. Doe alleged that X Insurance Company had issued a group policy insuring the lives of A Corporation's employees. He alleged that premiums were paid on a contributory basis, partly by A Corporation and partly by its employees. As a result of its favorable experience, Doe claimed, X Insurance Company had paid dividends to A Corporation, which A Corporation retained without disclosing their receipt to its employees or to "the appropriate federal and state agencies." Doe also contended that he was improperly denied conversion of his policy to a "comparable term life" policy upon termination of his employment and was offered only the right to convert to whole life insurance. Doe conceded that, as part of his legal duties for A Corporation, he had advised the corporation whether it had a duty to disclose its receipt of dividends to plan participants.

In a separate suit against A Corporation and its Benefit Plan, Doe contended that his pension benefits should have been vested when he resigned. This claim was based on a provision in the plan, required by ERISA, vesting plan benefits in an employee who has been employed for five years. Doe had completed four years and 1600 hours of employment and argued that this was legally sufficient for vesting under the plan and the applicable federal statute. Id. Sec. 1053.

Doe signed the pleadings in each suit as co-counsel. In each he sought, in addition to prosecuting his own claim, to appear as representative of a class of employees having like claims. In each he sought broad relief for the members of the class, including equitable relief and damages, a "special award" for himself of one-third of any recovery, and an attorney's fee for himself and his co-counsel based on a percentage of the class recovery.

A Corporation filed a motion to dismiss, to enjoin Doe and his co-counsel from prosecuting the suit, and to seal the record on the ground that Doe was barred from initiating a lawsuit because its prosecution would result in his violating the attorney-client privilege and in his disclosing confidential information. Benefit Plan, represented by the same counsel as A Corporation, joined in the motion. Doe withdrew as co-counsel for the class but continued to assert his right to appear both as an individual plaintiff and as a representative of the plaintiff class.

The district court treated the motion as one for summary judgment. It granted the motion, holding that Doe was disqualified to sue either A Corporation or Benefit Plan because they were his former clients. Relying on an irrebuttable presumption that the substantial relationship between Doe's duties for A Corporation and the issues in the suit would lead Doe to use his former clients' confidential information to their detriment in prosecuting the action, ² the court dismissed both suits with prejudice to Doe but without prejudice to a suit by any present or future employee of A Corporation.

A client is usually entitled to counsel of his choice. But the lawyer may be forbidden by ethical strictures to accept tendered employment. Because Doe has now withdrawn as counsel, we must go beyond the question whether he would be barred from acting as a lawyer for others whose interests conflict with those of his former client and consider how those ethical standards constrain his conduct in representing others as class representative, albeit not lawyer, and in asserting his own claims.

II.

The attorney-client privilege is evidentiary. A client may invoke it to prevent his lawyer from revealing communications made in confidence to the lawyer while acting in the capacity of professional legal adviser for the purpose of obtaining legal advice. ³ However, during the course of representing a client, a lawyer may receive information that is not shielded by the privilege but is considered confidential by the client. He may, for example, receive information from some source other than the client or information imparted for a purpose other than obtaining legal advice.

Some of the information Doe acquired about A Corporation's affairs was protected by the attorney-client privilege. However, he apparently gained other information that was not privileged. For example, he apparently saw letters and other documents that originated with X Insurance Company and received and answered questions from other A Corporation employees about their rights.

The Code of Professional Responsibility seeks to safeguard both the attorney-client privilege and other confidential information by restricting a lawyer's ability to accept employment that would threaten disclosure of either. Canon 4 deals directly with the matter: "A Lawyer Should Preserve the Confidences and Secrets of a Client." But other principles are also applicable, for Canon 9 states, "A Lawyer Should Avoid Even the Appearance of Professional Impropriety." These provisions protect not only against disclosure of privileged communications but also against the revelation of confidential information that is not privileged. ⁴

Ethical Consideration 4-4 states: "The attorney-client privilege is more limited than the ethical obligation of a lawyer to guard the confidences and secrets of his client. This ethical precept, unlike the evidentiary privilege, exists without regard to the nature or source of information or the fact that others share the knowledge." The ethical duty extends to shielding the confidentiality of all information acquired in the course of representing a client, preventing the use of any such knowledge to the client's disadvantage. "The use of the word 'information' in these Ethical Considerations as opposed to 'confidence' or 'secret' is particularly revealing of the drafters' intent to protect all knowledge acquired from a client ... without regard to whether someone else may be privy to it." Brennan's, Inc. v. Brennan's Restaurants, Inc., 590 F.2d 168, 172 (5th Cir.1979).

Adherence to Canon 4 requires that a lawyer be disqualified from representing a party to litigation if the adversary party can show that matters in the pending suit are substantially related to matters in which the attorney previously represented the adversary. ⁵ A substantial relationship between issues in a lawsuit and a lawyer's earlier work for an adversary may also serve as the basis for disqualification under Canon 9.

If a lawyer seeks to act adversely to his former client in a matter that might involve disclosure of information acquired during the prior employment, the former client need not prove that the lawyer has used or is likely to use such information in order to disqualify the lawyer representing the party suing him. In In re Corrugated Container Antitrust Litigation, 659 F.2d 1341 (5th Cir.1981), we held that there is a conclusive and irrebuttable presumption that permitting the lawyer who has switched loyalties to represent the adversary of a former client in substantially related litigation will lead to disclosure and misuse of confidential information obtained during the previous representation. ⁶

In Duncan v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 646 F.2d 1020, 1032 (5th Cir.), cert. denied, 454 U.S. 895, 102 S.Ct. 394, 70 L.Ed.2d 211 (1981), we recognized that a violation of Canon 4 may also be the premise of a Canon 9 disqualification. More recently, in Corrugated Container, we used Canon 4 "to inform our Canon 9 analysis [to] avoid[ ] any possible harshness that might come from applying Canon 9 in...