First Wisconsin Mortg. Trust v. First Wisconsin Corp.

• Decision Date: 20 April 1978
• Docket Number: No. 77-1786,77-1786
• Citation: 571 F.2d 390
• Parties: FIRST WISCONSIN MORTGAGE TRUST, a Massachusetts Business Trust, Plaintiff- Appellee, v. FIRST WISCONSIN CORPORATION, a Wisconsin Corporation, First Wisconsin Mortgage Company, a Wisconsin Corporation, and First Wisconsin National Bank of Milwaukee, a National Banking Association, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 390

571 F.2d 390

FIRST WISCONSIN MORTGAGE TRUST, a Massachusetts Business

Trust, Plaintiff- Appellee, v. FIRST WISCONSIN CORPORATION, a Wisconsin Corporation, First

Wisconsin Mortgage Company, a Wisconsin Corporation, and

First Wisconsin National Bank of Milwaukee, a National

Banking Association, Defendants-Appellants.

No. 77-1786.

United States Court of Appeals, Seventh Circuit.

Argued Oct. 25, 1977.

Decided Feb. 24, 1978.

Rehearing In Banc Granted April 20, 1978.

H. Templeton Brown, Chicago, Ill., for defendants-appellants.

Bernard J. Nussbaum, Linda C. Harris, Chicago, Ill., Laurence C. Hammond, Jr., Milwaukee, Wis., for plaintiff-appellee.

Before CASTLE, Senior Circuit Judge, COWEN, Senior Judge, ^* and PELL, Circuit Judge.

CASTLE, Senior Circuit Judge.

This appeal presents two novel issues involving the effect of an order disqualifying counsel: whether substitute counsel is entitled to have access to the predisqualification work product of prior counsel; and, in the first instance, whether this court has jurisdiction to hear an appeal from the district court's order denying such access. Finding that this court has jurisdiction to consider this appeal, we affirm.

I.

Plaintiff First Wisconsin Mortgage Trust (Trust) was established in 1971 under the sponsorship of defendant First Wisconsin Corporation (FWC). Trust is a real estate investment trust whose purpose is to provide investors with an opportunity to invest in a portfolio of mortgage and real estate investments. Trust was advised on the investments by defendant First Wisconsin Mortgage Company, a wholly-owned subsidiary of FWC, and was jointly involved in various loan transactions with defendant First Wisconsin National Bank, also a subsidiary of FWC.

From the time it was established until September, 1974, the law firm of Foley & Lardner was general counsel to Trust as well as general counsel to FWC and its subsidiaries. During 1973 and 1974 certain of the loan transactions became troubled when the borrowers experienced financial difficulty. Trust hired its present attorneys as special counsel regarding the problem loans in February, 1974. The present suit was filed in March, 1975 with Trust claiming that the defendants violated certain sections of the federal securities laws and regulations. Trust refused to consent to Foley & Lardner's continuing representation of the defendants and on August 4, 1975 moved to disqualify Foley & Lardner as defendants' counsel. That motion was granted on November 16, 1976. First Wisconsin Mortgage Trust v. First Wisconsin Corporation, 422 F.Supp. 493 (E.D.Wis.1976) (disqualification order).

On December 15, 1976, defendants' substitute counsel entered an appearance and filed a notice of appeal of the disqualification order. On January 7, 1977, substitute counsel requested the district court to hold a pretrial conference to discuss defendants' access to the "work product" generated by Foley & Lardner prior to their disqualification. The work product sought consists of Foley & Lardner's analysis and review of several hundred real estate investment transactions which were prepared by 15 lawyers over a one year period and an explanation thereof. The district court declined to hold the conference reasoning that it had been deprived of jurisdiction upon the filing of the notice of appeal. The defendants moved for voluntary dismissal of the appeal of the disqualification order January 20, 1977 and entered into negotiations regarding the work product with the plaintiff.

On February 7, 1977, defendants moved the district court "For Authorization To Request Access To Certain Foley & Lardner Work Product." This motion was denied on June 14, 1977. First Wisconsin Mortgage Trust v. First Wisconsin Corporation, 74 F.R.D. 625 (E.D.Wis.1977) (work product order). Defendants filed a timely notice of appeal of the work product order and also requested the district court to certify the order for interlocutory appeal under 28 U.S.C. § 1292(b). The certification request was denied on September 15, 1977. Plaintiff's August 17, 1977 motion to dismiss the appeal for lack of jurisdiction was taken under advisement together with the merits at oral argument.

II.

We consider first plaintiff's motion to dismiss this appeal for lack of jurisdiction. Plaintiff argues that defendants' appeal from the work product order is improper since that order is not a final judgment under 28 U.S.C. § 1291. ¹ Moreover, plaintiff claims the defendants have failed to meet the requirements of the "collateral order" doctrine which tempers the rigidity of the final judgment rule. Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). First, plaintiff argues that denial of access to the work product of prior counsel is not the type of irreparable harm which is needed to invoke the collateral order doctrine. Second, it is contended that Cohen does not allow appellate review of the district court's exercise of discretion in denying the work product motion. Third, plaintiff claims that the work product order merely construed the prior disqualification order and that an order construing an otherwise appealable order is not by itself appealable. ² While the work product order is obviously not a final disposition of the entire suit under the strict terms of § 1291, we find that we have jurisdiction to hear this appeal under the collateral order doctrine.

The Cohen case recognized an exception to the general rule that an order must dispose of the entire controversy between the parties before that order is appealable as a final judgment under § 1291. ³ This court has interpreted Cohen and its progeny as establishing four requirements all of which must be satisfied before an interlocutory decision can be considered "final" within the meaning of the collateral order doctrine:

(1) the order must present an important and unsettled question of law;

(2) the order could not be reviewed effectively on appeal from the final judgment of the entire action since the right claimed in the order would have been lost;

(3) the subject of the order must be separate and independent from the subject of the main cause of action; and

(4) on balance, the danger of denying justice by delay outweighs the inconvenience and costs of piecemeal review.

E. g., Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 171, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974); Weit v. Continental Illinois National Bank and Trust Co., 535 F.2d 1010, 1014-15 (7th Cir. 1976); Rosenfeldt v. Comprehensive Accounting Service Corp., 514 F.2d 607, 610 n. 3 (7th Cir. 1975); Allegheny Airlines, Inc. v. LeMay, 448 F.2d 1341, 1345 (7th Cir.), cert. denied, 404 U.S. 1001, 92 S.Ct. 565, 30 L.Ed.2d 553 (1971); 9 J. Moore, Federal Practice P 110.13(5), at 170 (2d ed. 1975). Applying these requirements has obtained different results with different orders. See United States ex rel. Hi-Way Electric Co. v. Home Indemnity Co., 549 F.2d 10 (7th Cir. 1977) (order denying stay of enforcement of judgment is appealable); Anschul v. Sitmar Cruises, Inc., 544 F.2d 1364 (7th Cir.), cert. denied, 429 U.S. 907, 97 S.Ct. 272, 50 L.Ed.2d 189 (1976) (order denying class action status is not appealable). Schloetter v. Railoc of Indiana, Inc., 546 F.2d 706 (7th Cir. 1976), which held an order disqualifying counsel to be appealable, is the decision most similar to the present action. However, the current order denying a party access to the work product of its disqualified counsel raises different considerations and thus the Cohen requirements must be separately analyzed.

Turning to the first requirement, we find that the order denying the defendant access to the work product of his disqualified counsel presents an important and unsettled question of law. As noted above, the issue is one of first impression in this circuit and to our knowledge, has not been addressed by any other circuit court of appeals. Also, as suggested in oral argument, increasing business and legal complexities as well as heightened sensitivity to ethical standards potentially will result in more disqualifications of counsel and, presumably, more questions regarding the status of predisqualification work.

Plaintiff's second argument is apparently directed at this "importance" requirement. Plaintiff contends that the work product order is discretionary and thus the district court's decision in other cases involving similar orders would depend upon "factual variations (that) are so numerous that a judgment on appeal can do little to establish meaningful standards." Donlon Industries v. Forte, 402 F.2d 935, 937 (2d Cir. 1968). In our view, however, once the disqualification decision has been made, the factual differences surrounding the issue of access to work product are few. Questions of content presumably have been resolved in the district court's finding that the prior representation was substantially related to the subject of the present suit. See Schloetter v. Railoc of Indiana, Inc., supra, at 710. Questions of when the disqualification possibility arose and the effect of that timing are not so numerous as to preclude appeal on "discretion" grounds. Nor do we accept plaintiff's similar argument that the defendants seek only pretrial discovery and that discovery orders are never within the collateral order doctrine. While we question the flat assertion that discovery orders never fall under the Cohen exception, see Carter Products, Inc. v. Eversharp, Inc., 360 F.2d 868 (7th Cir. 1966), we do not view the work product request here as "discovery" of an adversary's case. Rather, defendants here are requesting the work of prior counsel; access to which has been made uncertain by the disqualification order.

The second requirement of the collateral order doctrine is also satisfied since the right not to be required to duplicate the work of counsel will be lost if postponed until final judgment. Even if the defendant were to prevail in...