Empire Linotype School v. United States

• Decision Date: 29 June 1956
• Citation: 143 F. Supp. 627
• Parties: EMPIRE LINOTYPE SCHOOL, Inc., Plaintiff, v. The UNITED STATES of America, Defendant.
• Court: U.S. District Court — Southern District of New York

143 F. Supp. 627

EMPIRE LINOTYPE SCHOOL, Inc., Plaintiff, v. The UNITED STATES of America, Defendant.

United States District Court S. D. New York.

June 29, 1956.

Philip Strauss, New York City, for plaintiff.

Paul W. Williams, U. S. Atty., New York City, for the Southern District of New York for the United States. Arthur B. Kramer, Asst. U. S. Atty., New York City, of counsel.

HERLANDS, District Judge.

A civil suit has been brought by the Empire Linotype School, Inc.¹ (referred to in this opinion as "Empire") against the United States of America² for the sum of $6,705.35, allegedly due and owing Empire for services performed by it pursuant to a series of contracts between it and the Veterans Administration (referred to in this opinion as the "VA").³

The Government, invoking Canons Nos. 6, 36 and 37 of the Canons of Professional Ethics of the American Bar Association,⁴ has moved to disqualify Empire's attorney, Philip Strauss on the ground that he was formerly a Government attorney and, in that capacity, actually passed upon a number of matters involved in the present suit.⁵

The premises upon which the Government's motion is based will become apparent from the following statement of facts detailing (1) the attorney's professional activities prior to the commencement of the present action and (2) the background out of which the present action arose.

Mr. Strauss worked for the Federal Government in various capacities from July 10, 1940 to May 7, 1954, when he resigned to enter the private practice of law. During the period from October 1, 1950 to the date of his resignation on May 7, 1954, Strauss was employed in the Vocational Rehabilitation and Education Division of the New York Regional Office of the VA as a "contract officer" and, for a period of time, as a "contract supervisor." Strauss commenced private practice on May 10, 1954.

On August 23, 1954, Rudolph Kay, Finance Officer of the New York Regional Office of the VA, received a telephone call from Strauss. The telephone conversation is summarized in a contemporaneous memorandum made by Mr. Kay. According to the memorandum, Strauss spoke of the alleged overpayment charged to Empire; and Strauss said that he had been retained by Edwin Jenkins, president of Empire, for the purpose of discussing the VA's claim of overpayment.

On May 2, 1955, Empire caused to be filed by its attorney, Strauss, a complaint alleging nine causes of action against the VA. The proper disposition of the motion at bar requires some detailed description of these claims, as pleaded. Eight of the nine alleged causes of action⁶ arise out of a series of contracts between Empire and the VA whereby, in return for payments from the VA, Empire was to, and allegedly did, furnish and provide certain instruction, books, supplies and equipment to veterans. These causes of action, as pleaded, vary only in respect of the periods of time involved, the various separate contracts covering these respective periods, and the different sums of money due and owing.

The first and second causes of action are based upon Contract No. V3006V1796 (covering the period from December 1, 1952 to November 30, 1953), under which Empire claims the sum of $1,081.36.

The third and fourth causes of action are based upon Contract No. V3006V1970 (covering the period from December 1, 1954 to November 30, 1955), under which Empire claims the sum of $1,960.65.⁷

The fifth and sixth causes of action are based on an "interim letter" of September 21, 1951, supplemented by an "interim letter" of June 24, 1954, and further supplemented by an "interim letter" of October 14, 1954. The "interim letters" cover a period beginning July 16, 1951 and continuing to the date of the filing of the complaint. Empire claims that $2,459.94 is due and owing, pursuant to the "interim letter" agreements.

The seventh and eighth causes of action are based upon a "memorandum agreement" (covering a period from July 17, 1955 to the date of the filing of the complaint) under which Empire claims the sum of $246.40 as due and owing.

In its answer, the Government has asserted three counterclaims (totaling $11,060.20), covering periods antecedent to the time covered by the contracts upon which Empire's claims are based. The first counterclaim is based upon Contract No. V3006V917 and Supplement No. 1 thereto (covering the period from July 28, 1950 to November 30, 1950), under which the Government asserts it made an overpayment of $1,899.00.

The second counterclaim is based upon Contract No. V3006V981 and Supplement No. 1 thereto (covering the period from December 1, 1950 to November 30, 1951), under which the Government asserts it made an overpayment of $6,957.75.

The Government's third counterclaim is based upon Contract No. V3006V1370 (covering the period from December 1, 1951 to November 30, 1952), under which the Government asserts it made an over-payment of $2,203.45.

From the arguments presented to the Court, it appears that the pivotal issue in this litigation is whether overpayments were made by the Government under the three contracts upon which the counterclaims are based. The Government's position concerning the alleged overpayments may be stated as follows: (1) that in the latter part of 1952, the VA learned that veterans attending classes at Empire's school were regularly permitted to take one-half hour "breaks" for meals in the morning and afternoon, and that the VA was being billed for these "breaks" as regular hours of instruction, contrary to the provisions of the applicable contracts; (2) that thereafter, a series of investigations confirmed the fact that Empire had sanctioned these recesses; (3) that the VA ascertained that it had overpaid Empire $11,060.20 for the hours of instruction actually provided in the period between July 28, 1950 and November 30, 1952; and (4) that, in order to recoup this amount, the VA withheld payments due under the contracts which it had with Empire for periods subsequent to November 30, 1952, which latter contracts form the basis for Empire's action.

The gist of Empire's position is that no half-hour recesses were in fact ever permitted, and that Empire is entitled to the withheld moneys.

A preliminary point raised by the affidavit in opposition to the motion criticizes the Government's delay in making the motion to disqualify. This attack is predicated upon the fact that, whereas Empire's complaint was filed on May 22, 1955 and the Government's answer on August 10, 1955, it was not until April 2, 1956—seven days after the case had been answered ready for trial by plaintiff on the calendar call—that the Government first raised the question of Strauss' eligibility to appear as attorney for Empire.

Assuming arguendo that the Government had delayed making the motion to disqualify, the Court would not be precluded or estopped from adjudicating the question now before it. The Court's duty and power to regulate the conduct of attorneys practicing before it, in accordance with the Canons, cannot be defeated by the laches of a private party or complainant. Thus, the Court, on its own motion, may disqualify an attorney for violation of the Canons of Ethics. Porter v. Huber, D.C.W.D.Wash.1946, 68 F. Supp. 132. And, by a parity of reason, it is the responsibility of the Court to ascertain whether there is any merit to the accusation when once an alleged violation of the Canons has been called to the Court's attention. United States v. Standard Oil Co., D.C.S.D.N.Y.1955, 136 F.Supp. 345, 351, note 6.

The relevant contracts cover the period from July 28, 1950 to May 2, 1955, the date of the filing of Empire's complaint. That period was encompassed within the period of Strauss' employment in the Vocational Rehabilitation and Education Division of the New York Regional Office of the VA (October 1, 1950 to May 7, 1954), which office handled the very contracts involved in the litigation in chief. Were this the only evidence submitted by the Government, extreme doubt would be cast upon the propriety of Strauss' representation of Empire in the present action.⁸

But the Government's case is much stronger. In support of its motion, the Government has submitted the affidavit of Harry E. Rosenthal (contract officer in the Vocational Rehabilitation and Education Division of the New York Regional Office of the VA), establishing:

(1) that Strauss passed upon the interim letter of September 21, 1951, upon which plaintiff's fifth and sixth causes of action are based, and that Strauss' signature is on the file copy of that letter;

(2) that Strauss reviewed Contract No. V3006V1370, upon which the Government's third counterclaim is based, and that Strauss subscribed his name on the contract after the words "reviewed by" (3) that Strauss prepared Supplement No. 1 to Contract No. V3006V722 between Empire and the VA;

(4) that Empire sent a letter, dated October 17, 1950, to the VA, addressed to Strauss' attention, concerning tuition payments to Empire;

(5) that a letter, dated October 19, 1950, sent to Empire, concerning notification of termination of contract, had been prepared by Strauss;

(6) that Strauss reviewed and signed the file copy of a letter to Empire, dated August 11, 1952, fixing the fair and reasonable tuition rate for certain of the training provided by Empire subsequent to July 16, 1951.

The above facts are not disputed by Strauss. His contention is that the Canons cited by the Government are not applicable⁹ because the only issue in the litigation in chief is whether or not Empire gave its students half-hour recesses. With this contention the Court does not agree.

In the Court's opinion, Strauss is disqualified from representing plaintiff in the present action by virtue of Canons 6, 36 and 37.

Canons 6 and 37 impose dual duties: (1) a duty of nondisclosure of confidential information obtained by the attorney; and (2) a duty of fidelity, regardless of the fact whether confidential...