Fleischer v. AAP, INC.

• Decision Date: 25 April 1958
• Citation: 163 F. Supp. 548
• Parties: Dave FLEISCHER, individually and as trustee in dissolution of Fleischer Studios, Incorporated, a Florida corporation, Plaintiff, v. A.A.P., Inc., et al., Defendants.
• Court: U.S. District Court — Southern District of New York

163 F. Supp. 548

Dave FLEISCHER, individually and as trustee in dissolution of Fleischer Studios, Incorporated, a Florida corporation, Plaintiff, v. A.A.P., Inc., et al., Defendants.

United States District Court S. D. New York.

April 25, 1958.

COPYRIGHT MATERIAL OMITTED

Gustave B. Garfield, New York City, for plaintiff.

Phillips, Nizer, Benjamin & Krim, New York City, for defendants Paramount Pictures, Inc., Paramount Pictures Corp. and Flamingo Films, Inc. Louis Phillips, Seymour Shainswit, New York City, of counsel.

Stillman & Stillman, New York City, for defendants A.A.P. Inc. and W.P.I.X. Inc.

Robert A. Dreyer, New York City, for defendant Dumont Broadcasting Corp.

HERLANDS, District Judge.

I.

The decisive question raised by plaintiff's motion for an injunction against defendants' attorneys is: Are the issues and subject-matter of the present lawsuit "substantially related" to the issues and subjects of other and prior litigation and legal matters in which the attorneys now representing three of the defendants herein formerly represented the plaintiff and the plaintiff's interests and associates during the years 1929 to 1940?

The plaintiff, Dave Fleischer, suing individually and as trustee in dissolution of Fleischer Studios Incorporated (a Florida corporation, referred to herein as "the Florida corporation") seeks to restrain the law firm of Phillips, Nizer, Benjamin & Krim from appearing in this action as attorneys for three of the defendants: Paramount Pictures, Inc., Paramount Pictures Corporation and Flamingo Films, Inc. There are eight additional co-defendants, for whom the Phillips law firm does not appear.

The ground of the motion is that said attorneys' appearance and representation violate Canons 6 and 37 of the Canons of Professional Ethics, Judiciary Law, Appendix, McKinney's Consol.Laws N.Y. c. 30 Rules of the United States District Court for the Southern District of New York, General Rule 5(c).¹ The gist of the plaintiff's claim is that the law firm of Phillips & Nizer and Louis Phillips, a partner in that firm (which firm is the predecessor of the present law firm of Phillips, Nizer, Benjamin & Krim) represented him and his brother, Max Fleischer, and the two corporations of which they were equal shareholders (Fleischer Studios Inc., a New York corporation, referred to herein as "the New York corporation," and the previously mentioned Florida corporation, the successor to the New York corporation) from 1929 to 1940 as their lawyers in legal matters "substantially related" to the issues in the litigation at bar.

This claim of "substantial relationship" is denied by defendants' attorneys.

The parties draw sharply different inferences from the transactions and contracts mentioned in the voluminous motion papers.

A recital of the ascertainable facts should be preceded by an explicit statement of the controlling principles of law and policy in the light of which the facts must be examined and appraised.

II.

The dual duty imposed upon members of the bar by Canons 6 and 37 includes the obligation: (1) not to disclose confidential information obtained from the client by the attorneys; and (2) to represent the client with undivided fidelity by not representing conflicting interests.

In enforcing this dual duty, the courts have been confronted with the questions (a) whether confidences have been reposed in the attorney; and (b) whether the attorney represents an interest that in fact and in law conflicts with the interest he formerly represented.

Without requiring the client to reveal what he had disclosed to his former attorney (see Consolidated Theatres, Inc., v. Warner Bros. Circuit Management Corp., 2 Cir., 1954, 216 F.2d 920, 926, 52 A.L.R.2d 1231), the courts have sought the answers to the foregoing questions by examining the nature of the work performed for the former client and scrutinizing the nature of the duties presently owing to the new client. If, upon such examination and scrutiny, it appears that there are inconsistencies in position or the real possibility that confidential communications may be divulged or utilized, the attorney will be disqualified.

Where an attorney represents a litigant in a case involving the very matters concerning which he originally represented the party now on the other side, the attorney will be disqualified. Fisher Studio, Inc., v. Loew's Incorporated, 2 Cir., 1956, 232 F.2d 199; Consolidated Theatres, Inc., v. Warner Bros. Circuit Management Corp., 2 Cir., 1954, 216 F.2d 920, 52 A.L.R.2d 1231; Empire Linotype School, Inc., v. United States, D.C.S.D.N.Y.1956, 143 F.Supp. 627; Packer v. Rapoport, Sup.1949, 88 N.Y.S. 2d 118.

Although all of the information obtained by the attorney from his former client may be available to his present client through other sources or channels, the attorney will, nevertheless, be disqualified. Note, Disqualification of Attorneys for Representing Interests Adverse to Former Clients, 64 Yale L.J. 917, 919 (1955). In the latter situation, the courts are more concerned with the avoidance of the appearance of evil than with an actual unfair or unethical use of confidential information. See United States v. Standard Oil Company, D.C. S.D.N.Y.1955, 136 F.Supp. 345; Note, 64 Yale L.J., supra.

A statement of what facts a former client must submit to the court in order to have his former attorney disqualified in a particular case was formulated as follows by Judge Weinfeld in T. C. Theatre Corp. v. Warner Bros. Pictures, Inc., D.C.S.D.N.Y.1953, 113 F. Supp. 265, 268, 269:

"* * * the former client need show no more than that the matters embraced within the pending suit wherein his former attorney appears on behalf of his adversary are substantially related to the matters or cause of action wherein the attorney previously represented him, the former client. * * * In cases of this sort the Court must ask whether it can reasonably be said that in the course of the former representation the attorney might have acquired information related to the subject of his subsequent representation. If so, then the relationship between the two matters is sufficiently close to bring the later representation within the prohibition of Canon 6."

The above formulation was specifically approved by the Court of Appeals in Consolidated Theatres, Inc., v. Warner Bros. Circuit Management Corp., supra, 216 F.2d at pages 924-925, where the Court also pointed out that the statement "was not a rule of substantive law purporting to define the professional obligation. It went no further than to measure the quantum of evidence required for proof of the obligation." This rule has ben consistently applied by the courts. Fisher Studio, Inc., v. Loew's Incorporated, supra; United States v. Standard Oil Company, supra.

The courts have generally treated this so-called rule of evidence as creating an "irrebuttable inference" that confidential information, material and relevant to the instant case, was given to the attorney if the issues and subject-matter of the former case are substantially related to issues and subject-matter of the present litigation. See Laskey Bros. of West Virginia, Inc., v. Warner Bros. Pictures, Inc., 2 Cir., 1955, 224 F.2d 824, 827, certiorari denied 350 U.S. 932, 76 S.Ct. 300, 100 L.Ed. 814. In a case where the attorney may be "vicariously disqualified" (as by virtue of his former membership in a law partnership), the inference is treated as rebuttable. Harmar Drive-In Theatre, Inc., v. Warner Bros. Pictures, Inc., 2 Cir., 1956, 239 F.2d 555, rehearing denied 2 Cir., 1957, 241 F.2d 937.

Underlying the above general rule are strong reasons of policy: (1) to encourage and protect inviolate confidential communications between client and attorney; and (2) to inspire and maintain public respect for and trust in the law and lawyers. See United States v. Standard Oil Company, supra, 136 F. Supp. at 355.

In particular situations, e. g., where pre-trial discovery is sought, the courts may be confronted by policy considerations pulling in another direction. See Laskey Bros. of West Virginia, Inc., v. Warner Bros. Pictures, Inc., 2 Cir., 1955, 224 F.2d 824.

"The policy of maintaining public confidence in the inviolate nature of confidential communications to attorneys and in the fidelity of attorneys to their clients' interests highlights only one aspect of the problem. Modern discovery procedures are based on the desirability of making available to litigants all the facts necessary for a full presentation of their case. * * * A formulation of the attorney's ethical obligation which allows a former client to disqualify an attorney who has never received any confidential information useful in the present suit may unnecessarily restrict other parties from access to legal talent most familiar with the facts of their case." 64 Yale L.J., supra, at 927-928.

In accommodating the tug between inconsistent policies, the courts have given greater weight to the socially desirable objective of promoting and preserving the integrity of, and respect for, the bar.

In every case cited in this opinion, in the briefs of both parties herein, and in the bar association opinions on legal ethics—except United States v. Standard Oil Company, supra, it was clear that there was virtual identity between the issues in the former and the current litigation, or it was equally clear that there was a lack of "substantial relationship" between such issues. Consequently, decisional law construing and implementing the concept of "substantial relationship" is relatively undeveloped. In United States v. Standard Oil Company, supra, the only prior case posing a closely analogous problem, Judge Irving R. Kaufman analyzed the documentary and other evidence presented to him and concluded that a Government attorney, who had worked for ECA, Paris branch, was not disqualified from representing the defendant in a suit brought by the United States to collect for overcharges...