Freeman v. Chicago Musical Instrument Co.

• Decision Date: 30 July 1982
• Docket Number: No. 82-1372,82-1372
• Citation: 689 F.2d 715
• Parties: Alfred B. FREEMAN, Plaintiff-Appellee, v. CHICAGO MUSICAL INSTRUMENT CO., Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 715

689 F.2d 715

Alfred B. FREEMAN, Plaintiff-Appellee, v. CHICAGO MUSICAL INSTRUMENT CO., Defendant-Appellant.

No. 82-1372.

United States Court of Appeals Seventh Circuit.

Submitted July 30, 1982. ^*

Decided Sept. 27, 1982.

Rehearing and Rehearing In Banc Denied Nov. 9, 1982.

John F. Flannery, Fitch, Even, Tabin, Flannery & Welsh, Roger D. Greer, Chicago, Ill., for defendant-appellant.

John P. Milnamow, Talivaldis Cepuritis, Dressler, Goldsmith, Shore, Sutker & Milnamow Ltd., Arne M. Olson, Chicago, Ill., for plaintiff-appellee.

Before CUMMINGS, Chief Judge, POSNER and COFFEY, Circuit Judges.

COFFEY, Circuit Judge.

The Chicago Musical Instrument Company (CMI) appeals an order of the United States District Court for the Northern District of Illinois, Eastern Division, the Honorable Stanley J. Roszkowski presiding, disqualifying CMI's co-counsel, the law firm of Fitch, Even, Tabin, Flannery & Welsh (Fitch or the Fitch firm), in this patent infringement action. Two questions are presented for our review. We must first decide in light of the Supreme Court's recent pronouncement in Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 101 S.Ct. 669, 66 L.Ed.2d 571 (1981), whether an order granting a disqualification motion continues to be a collateral order immediately appealable to this Court under 28 U.S.C. § 1291. Because we find that such an order remains appealable under the collateral order doctrine, we have jurisdiction to consider the second question of whether the district court properly concluded that the disqualification of the Fitch law firm was required in this case. For the reasons discussed below, we reverse the order of the district court and remand for proceedings consistent with this opinion.

I.

Alfred B. Freeman brought this action in July of 1973 against the Chicago Musical Instrument Company, alleging that CMI had infringed upon several patents owned by Freeman. The patents involve chord organs having an electronic system for sounding bass notes. CMI denied both infringement of the patents and actual ownership of them by Freeman.

On October 16, 1978, Freeman retained the law firm of Dressler, Goldsmith, Shore, Sutker & Milnamow, Ltd. (Dressler) to represent him in this action. ¹ Prior to this, since 1975, the Dressler law firm had represented Freeman in other electronic organ matters but did not directly represent Freeman in this case. Throughout the entire course of this action, CMI has been represented by the Chicago law firm of Hill, Van Santen, Steadman, Chiara & Simpson, P.C. (Hill).

The ownership aspect of the lawsuit was tried before the district court in November of 1978 and was resolved in Freeman's favor. Shortly thereafter, CMI engaged the services of the Chicago law firm of attorneys of Fitch, Even, Tabin, Flannery & Welsh to act as co-counsel with the Hill law firm. ² Appearances were entered in district court by John Flannery and Roger Greer on behalf of the Fitch law firm. Apparently when the new litigation was made known to the members of the Fitch firm Eric C. Cohen, an associate in Fitch since May 1979, notified Flannery that he had previously been employed as an associate lawyer in the Dressler law firm from July 1976 until April 1979. Cohen told Flannery that he had neither worked on nor had he any knowledge of the subject matter of the present litigation. Flannery then notified opposing counsel at Dressler of these facts and was informed that Dressler objected to the further representation of CMI by the Fitch law firm. Dressler claimed that Cohen had access to the confidences and secrets of their client, Freeman, in that it was a Dressler firm policy to distribute various legal opinions and memoranda to all lawyers of the firm. The Dressler law firm also claimed that cases were often discussed by members of the firm among each other, implying that Cohen was privy to Freeman's secrets and confidences.

CMI then filed a motion with the district court requesting a declaration that the Fitch law firm be allowed to continue to represent CMI in this action. In support of their motion, an affidavit by Cohen was submitted. In it Cohen averred that while he was an associate at Dressler he never performed work on behalf of Freeman and that he, Cohen, had no knowledge of the subject matter of the present lawsuit. He also averred that although various legal memoranda and opinions circulated at Dressler, he typically had been too busy to read them.

The Dressler firm in response filed an affidavit executed by Talivaldis Cepuritis, a member of Dressler and counsel for Freeman, in which Cepuritis averred that the Freeman litigation files were stored in cabinets immediately outside of Cohen's former office and also that it was the practice of the firm to circulate and discuss among the members of the law firm correspondence, opinions, memoranda, etc. generated from the firm's cases. In a supplemental affidavit, Cohen responded that he had never met Mr. Freeman and that he recalled neither reading nor discussing any memoranda or files related to the Freeman case.

The district court, without making any findings of fact, concluded that "there can be little doubt that permitting the Fitch firm to represent defendant in the instant case would result in an appearance of impropriety." Relying upon Westinghouse Electric Corp. v. Gulf Oil Corp., 588 F.2d 221 (7th Cir. 1978), the district court went on to state that "it is not appropriate for the court to inquire into whether actual confidences were disclosed." Concluding that Cohen was tainted by his prior association with the Dressler law firm, the district court imputed the taint to the Fitch law firm and accordingly disqualified it. It is from this order that CMI appeals.

II.

Before addressing the merits of CMI's appeal, we must first determine whether, in light of Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 101 S.Ct. 669, 66 L.Ed.2d 571 (1981), an order disqualifying counsel is appealable prior to the entry of a final judgment in the underlying action.

Pursuant to 28 U.S.C. § 1291, the Courts of Appeals have jurisdiction over "all final decisions of the district courts ... except where a direct review may be had in the Supreme Court." This language has generally been construed to mean that an appeal may not be taken under this section until there has been "a decision by the district court that ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Randle v. Victor Welding Supply Co., 664 F.2d 1064, 1065 (7th Cir. 1981), quoting Coopers & Lybrand v. Livesay, 437 U.S. 463, 476, 98 S.Ct. 2454, 2462, 57 L.Ed.2d 351 (1978). In Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949), however, the Supreme Court recognized that certain "collateral orders" which do not terminate the action on the merits are nevertheless appealable "final decisions" under § 1291. To fall within the Cohen exception to the final judgment rule, three requirements must be met. First, the order must conclusively determine the disputed question. Second, it must resolve an important issue completely separate from the merits of the action. Finally, the order must be effectively unreviewable on appeal from a final judgment. Coopers & Lybrand v. Livesay, supra, 437 U.S. at 468, 98 S.Ct. at 2457. See also Firestone Tire & Rubber Co. v. Risjord, supra, 449 U.S. at 375, 101 S.Ct. at 674.

This Court has previously held that both orders granting and denying motions to disqualify counsel satisfy the Cohen criteria and thus are appealable. Schloetter v. Railoc of Indiana, Inc., 546 F.2d 706, 709 (7th Cir. 1976). In Schloetter, we declined to distinguish the appealability of orders denying disqualification from those granting disqualification. Id. at 709 n.5. Now, however, in light of the Supreme Court's recent decision in Firestone Tire & Rubber Co. v. Risjord, supra, we must make this distinction. The Supreme Court held in Firestone that an order denying a motion to disqualify the opposing party's counsel in a civil case is not appealable under § 1291. ³ In so holding, the Supreme Court declined to express any view on the question of appealability of orders granting disqualification motions. Firestone Tire & Rubber Co. v. Risjord, supra, 449 U.S. at 372 n.8, 101 S.Ct. at 672 n.8. It remains our view that such orders are appealable. ⁴

The first prong of the "collateral order" test is clearly met by an order granting a disqualification motion. Such an order "conclusively determine(s) the disputed question" because the only issue to be determined is whether challenged counsel will be permitted to continue his representation. This position is consistent with Firestone, in which the Court, with two justices in disagreement as to this point, found that even orders denying disqualification motions conclusively determine the disputed question. Id. 449 U.S. at 375, 101 S.Ct. at 674. Moreover, an order granting a motion to disqualify counsel is not, as is, according to the two concurring justices in Firestone, the case with an order denying a disqualification motion, "subject to reconsideration from time to time," because once a person's chosen attorney has been barred from representing that client, the client must then change his position in retaining another attorney or choosing to forego representation. Cf. Firestone Tire & Rubber Co. v. Risjord, supra, 449 U.S. at 380, 101 S.Ct. at 677 (Rehnquist, J., concurring in result only) (denial of disqualification motion does not conclusively determine disputed question where court may reconsider issue as trial progresses). The effect here is immediate and conclusive. See In re Coordinated Pretrial Proceedings, Etc., 658 F.2d 1355, 1357 (9th Cir. 1981), cert. denied, 455 U.S. 990, 102 S.Ct. 1615, 71 L.Ed.2d 850 (1982). For all practical purposes, once a court disqualifies an attorney, it is not likely that a court will even have...