Hilo Metals Company, Ltd. v. Learner Company
| Decision Date | 12 September 1966 |
| Docket Number | Civ. No. 2456. |
| Citation | 258 F. Supp. 23 |
| Parties | HILO METALS COMPANY, LTD., a Corporation of Hawaii, Plaintiff, v. The LEARNER COMPANY and Flynn-Learner, Corporations of California, Hawaiian Western Steel Limited, a Corporation of Delaware, Defendants. |
| Court | U.S. District Court — District of Hawaii |
Don H. Banks, Fairfax, Cal., for plaintiff.
Joseph L. Alioto and Frederick P. Furth, San Francisco, Cal., for Learner Company and Flynn-Learner.
Smith, Wild, Beebe & Cades, Honolulu, Hawaii, for Hawaiian Western Steel Ltd.
Plaintiff seeks an injunction and treble damages for alleged violations by defendants of Sections 1, 2 and 3 of the Sherman Act (15 U.S.C. §§ 1, 2 and 3) and Section 3 of the Clayton Act (15 U.S.C. § 14).1 Defendants have filed a motion to disqualify Don H. Banks from further participation as counsel for plaintiff by reason of alleged violation of Canon 36 of the Canons of Professional Ethics of the American Bar Association, which reads in pertinent part:
"A lawyer, having once held public office or having been in the public employ, should not after his retirement accept employment in connection with any matter which he has investigated or passed upon while in such office or employ."
It is conceded that the Canons of Ethics of the American Bar Association are applicable in this proceeding by reason of their adoption for the State of Hawaii by Rule 16(a) of its rules of court.2
Plaintiff, Hilo Metals Co., Ltd., is a Hawaii corporation engaged in the business of buying, selling, and exporting scrap metal. Defendants The Learner Company and Flynn-Learner are California corporations engaged in the same business. Defendant Hawaiian Western Steel Ltd. is a Delaware corporation which operates a steel mill in the State of Hawaii.
In 1962, the United States filed three actions naming The Learner Company and Flynn-Learner, () as defendants. Two of the actions were criminal, brought under the Sherman Act.3 The third was a civil action for damages under the Clayton Act.4 The present action was instituted in 1965, Don H. Banks appearing as one of the counsel for plaintiff.
One of the criminal actions and the civil action instituted by the United States, both involving price fixing and fraud were tried. The other criminal action, involving monopolization, was dismissed. It is conceded that this criminal action involved the same issues of fact as the present action.5
Prior to his retirement for disability in April, 1964, Don H. Banks had been employed for more than 14 years by the Antitrust Division of the Department of Justice in its San Francisco Office, and during the latter part of the period "would be classified as at least Assistant Chief Trial Attorney of the San Francisco Office". (Banks' dep., p. 4.). With commendable candor Mr. Banks has admitted that he "participated in the subject matter of this action while holding public office as an attorney for the Antitrust Division of the Department of Justice".6
There is no suggestion that any interest of the present plaintiff is adverse to that of Mr. Banks' former employer, the Department of Justice. Accordingly neither 18 U.S.C. § 2847 nor Canon 68 of the American Bar Association Canons of Ethics is applicable. Nor was there any breach of Canon 37, since Mr. Banks obtained the permission of the Department of Justice before agreeing to represent plaintiff in this action.9
The facts relating to Mr. Banks' participation in the investigation by the Antitrust Division of the Department of Justice of the scrap metal industry in Hawaii are not in dispute, although the parties disagree with respect to the inferences which may be drawn therefrom. His participation included the preparation of a request for an investigation by the Federal Bureau of Investigation of alleged antitrust violations in the Hawaii scrap metal industry; the examination of copies of documents taken by the F.B.I. from the files of the defendants Learner and Flynn-Learner; interviewing Norman Kronick and Louis Dulien in connection with a complaint received from Harry Kronick concerning alleged monopolization of the scrap metal business in Hawaii; examination of the files of the Dulien Steel Products, Inc. in Seattle, Washington, including correspondence between Dulien and The Learner Company; and the removal for the purpose of making copies of numerous documents which he considered "relevant to the investigation of monopolization by The Learner Company and its subsidiary, Flynn-Learner". (Aff. attached to Banks' deposition as Ex. 4.)
The foregoing represents direct participation by Mr. Banks in the investigation of alleged violations of the antitrust laws in the scrap metal industry in Hawaii. In September, 1962, Mr. Banks attended a conference in Washington, D. C. to discuss the possibility of an investigation of the scrap metal industry in continental United States, but according to Mr. Banks the investigation of the scrape metal industry in Hawaii had been completed and indictments filed. Mr. Banks "manned" the Honolulu Antitrust Office of the Department of Justice during the trial of the criminal action involving price fixing in which The Learner Company and Flynn-Learner and others were defendants. He did not participate in the conduct of the trial, although he was present in court during portions of the trial as a spectator, and the trial attorneys would tell him "what happened" when thy returned to the office. (Banks' dep., p. 26.) As an attorney in the San Francisco office of the Department of Justice, Antitrust Division, Mr. Banks, with other attorneys, had access to the files of the office.
The defendants contend that these facts are sufficient to require Mr. Banks' disqualification from further participation in this action. Mr. Banks argues that the defendants have failed to show that his participation in the investigation would result in injury to the public, the Government, or any parties to this action, and that Canon 36 accordingly is not applicable.
Most of the decided cases have involved questions of conflict of interest, not here present, or to the extent to which knowledge of the matter under investigation may be imputed to an attorney for a government agency by reason of access to files and other information. Here the alleged violation of Canon 36 involves "actual" knowledge and participation on the part of Mr. Banks.
In an article on "The Former Government Attorney and Canons of Professional Ethics", 70 Harv.L.Rev. 657, 661 (1956-7), Judge Irving R. Kaufman considers the "boundaries of imputation" of attorneys for government agencies and recognizes the distinction between actual participation and the "likelihood" that information was accessible to the attorney. He wrote in pertinent part:
Both parties rely upon United States v. Standard Oil Company, S.D.N.Y.1955, 136 F.Supp. 345, in which the Government sought to disqualify a law firm appearing for the defendants in an action to recover for alleged overcharges in transactions financed by the Economic Cooperation Administration. A member of the firm had been government counsel for the Paris office of the Economic Cooperation Administration. There was no evidence that the attorney had any personal knowledge of the transactions in dispute or that any of his work related to the subject of the case. The court specifically found that the Government had failed to prove (1) that the attorney "had access to documents substantially related to the subject matter of the instant case; (2) that he ever had access to and/or actually saw or worked on any relevant confidential material; (3) that he ever investigated or passed upon the subject matter of the instant case; (4) that he ever rendered any legal advice or opinion in relation to the regulations which are the subject matter of the instant case"; and (5) that his present position did not create "an appearance of evil requiring disqualification". (136 F.Supp. at 365-366).
In a well-considered opinion, Judge Kaufman discusses at length Canons 6, 36 and 37. With particular reference to Canon 36 he says in part:
(136 F.Supp. at 361).
Judge Kaufman then considers the "appearance of evil" tests in the absence of actual personal knowledge or action. He continues in part:
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