LaSalle Nat. Bank v. Lake County

• Decision Date: 24 March 1983
• Docket Number: No. 82-1601,82-1601
• Citation: 703 F.2d 252
• Parties: LaSALLE NATIONAL BANK and Lake Properties Venture, Plaintiffs-Appellants, v. COUNTY OF LAKE and the Village of Grayslake, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 252

703 F.2d 252

68 A.L.R.Fed. 674

LaSALLE NATIONAL BANK and Lake Properties Venture Plaintiffs-Appellants, v. COUNTY OF LAKE and the Village of Grayslake, Defendants-Appellees.

No. 82-1601.

United States Court of Appeals, Seventh Circuit.

Argued Nov. 3, 1982.

Decided March 24, 1983.

Don E. Glickman, Rudnick & Wolfe, Chicago, Ill., for plaintiffs-appellants.

Clifford L. Weaver, Chicago, Ill., for defendants-appellees.

Before PELL and CUDAHY, Circuit Judges, and BONSAL, Senior District Judge. ^*

CUDAHY, Circuit Judge.

This case confronts us with some of the ethical problems involved when a former government attorney takes up the practice of law with a large law firm. Lake County, Illinois, one of the parties to this appeal, is the former employer of an attorney now practicing law with the firm representing the plaintiffs-appellants. Lake County moved to disqualify the plaintiffs' law firm because of the County's former relationship with one of the firm's associates. The district court granted the motion, finding that the past association gave rise to an appearance of impropriety and holding that both the attorney and the entire law firm must be disqualified. Plaintiffs are here appealing the disqualification as a collateral order appealable under the doctrine set forth in Cohen v. Beneficial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). We affirm the order of the district court.

I.

Marc Seidler, the attorney upon whose career our attention must focus in this case, served as an Assistant State's Attorney in Lake County from 1976 until January 31, 1981. On December 1, 1976, Mr. Seidler was appointed Chief of the Civil Division of the Lake County State's Attorney's office, and in September 1979, he was appointed First Assistant State's Attorney. As such, he had general supervisory responsibility with respect to all civil cases handled by the State's Attorney's office. On February 2, 1981, Mr. Seidler joined the Chicago law firm of Rudnick & Wolfe as an associate, working in the firm's Northbrook, Illinois office.

On June 5, 1981, Rudnick & Wolfe filed suit against the County of Lake and the Village of Grayslake, on behalf of its clients, the LaSalle National Bank as Trustee ("LaSalle National") and Lake Properties Venture ("Lake Properties"). LaSalle National and Lake Properties are the owners of a tract of land, known as Heartland, located in the Village of Round Lake Park, an Illinois municipal corporation situated in Lake County. Rudnick & Wolfe has represented these two clients since January 1976 ¹ in connection with plans to develop the Heartland property as a mixed-use, low-density development. This representation has included all legal work necessary for implementing the development, including the assembling of parcels of land, annexation, zoning, land planning and obtaining utility services. After failing in a 1979 attempt to secure annexation of the Heartland property to the Village of Grayslake, the plaintiffs negotiated annexation of the property by the Village of Round Lake Park, a process which was completed on January 9, 1981. The plaintiffs allege that on the date of the annexation, they were already planning a law suit to challenge the probable denial by the Village of Grayslake of their request for access to the County's interceptor sewer system. The complaint filed on June 5, 1981 charged that the defendants' refusal to permit access to a federally funded sewer system was arbitrary and capricious and violated plaintiffs' rights to substantive and procedural due process, equal protection and just compensation. It also alleged that the Sewage Disposal Agreement or "sphere of influence agreement" ("the Agreement") under which Lake county permitted the Village of Grayslake to determine whether plaintiffs' property, located in Round Lake Park, would receive sewer services from the Lake County sewer system was an unlawful delegation of authority to Grayslake, an unlawful exercise of extraterritorial jurisdiction by Grayslake and a violation of the terms of the sphere of influence agreement itself.

The Lake County-Grayslake Sewage Disposal Agreement was signed prior to Mr. Seidler's association with the State's Attorney's office, and he was not involved in consideration of the validity or impact of the Agreement upon the Heartland property in particular. However, the Lake County-Grayslake Agreement was one of several similar agreements executed between the County and various municipalities. Mr. Seidler was, moreover, in charge of the Civil Division in a relatively small legal department ² during the period when the Grayslake Agreement was in effect and was privy to discussions about the validity of such sewage agreements in general. Specifically, it is alleged that Mr. Seidler had access to various documents and memoranda, in particular an opinion letter about the validity of the Agreement prepared by bond counsel for the County and a memorandum expressing the views of one County Board member on the Agreement. Some of these documents were subsequently made public. When County officials requested that the State's Attorney's office prepare a formal legal opinion about the Agreement, Seidler was assigned responsibility for its preparation. The request was subsequently withdrawn and the opinion never written, but Seidler did review the relevant documents in preparation for writing it. He was also involved in consideration of the validity of similar agreements in relation to sewer service for property other than Heartland and participated in discussion about, and the formulation of legal strategies concerning, those agreements. On the basis of Seidler's involvement in these matters, the County moved to disqualify both Seidler and the entire Rudnick & Wolfe firm.

Mr. Seidler has submitted a sworn affidavit stating that he has not disclosed to his law firm or any of its personnel any information about the Agreement, about the County's legal strategy or about any other matter relevant to the present litigation. In addition, Theodore J. Novak, a partner at Rudnick & Wolfe involved in the representation of Lake Properties, has filed an affidavit swearing that Mr. Seidler had been screened from all involvement in the litigation since the motion to disqualify was filed.

II.

Appellees have brought a threshold challenge to our jurisdiction, arguing, in reliance upon Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 101 S.Ct. 669, 66 L.Ed.2d 571 (1981), which held that an order denying a motion to disqualify was not a final judgment appealable under the collateral order doctrine of Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949), that an order granting a motion to disqualify is similarly not appealable. In a recent decision, however, this court held that an order granting a motion to disqualify counsel is covered by the Cohen exception to the final judgment rule. Freeman v. Chicago Musical Instrument Co., 689 F.2d 715, 720 (7th Cir.1982). The Freeman case is dispositive of this challenge, and we properly assert jurisdiction to reach the merits of this case. We will therefore consider, first, whether the district court abused its discretion in holding that Mr. Seidler must be disqualified, and second, whether, if he was properly disqualified, the law firm of Rudnick & Wolfe must also be disqualified from representing the plaintiffs in its suit against Mr. Seidler's former employer.

III.

The standard for disqualification of an attorney who undertakes litigation against a former client is the so-called "substantial relationship" test adopted by this circuit when it affirmed the relevant portion of the district court decision in Cannon v. U.S. Acoustics Corp., 398 F.Supp. 209, 223, aff'd in part and rev'd in part, 532 F.2d 1118 (1976). In Cannon, the district court adopted the substantial relationship test developed in T.C. Theatre Corp. v. Warner Bros. Pictures, 113 F.Supp. 265 (S.D.N.Y.1953), to give judicial content to the obligations imposed upon attorneys by the professional canons governing their conduct. The test has been described by this circuit as embodying the substance of Canon 4 of the A.B.A. Code of Professional Responsibility, which protects the confidences of a client against disclosure and possible use against him, and of Canon 9, which provides that an attorney must avoid even the appearance of impropriety. Thus, the question before a district court considering a motion for disqualification is "whether it could reasonably be said that during the former representation the attorney might have acquired information related to the subject matter of the subsequent representation." Cannon, 398 F.Supp. at 223. If a substantial relationship is found, it is unnecessary for the movant to prove that the attorney in question actually received during the course of his former employment confidential information relevant to matters involved in the subsequent representation. Schloetter v. Railoc of Indiana, Inc., 546 F.2d 706, 710 (7th Cir.1976). The question before us in this case, therefore, is not whether Marc Seidler received any specific information relevant to the present litigation during his tenure at the Lake County State's Attorney's office, but solely whether there is a substantial relationship between the subject matter of the prior and present representation.

Our most recent cases direct that a three-level inquiry be undertaken in order to determine if such a substantial relationship exists. First, the trial judge must make a factual reconstruction of the scope of the prior legal representation. Second, it must be determined whether it is reasonable to infer that the confidential information allegedly given would have been given to a lawyer representing a client in those matters. Third, it must be determined whether that information is relevant to the issues raised in the litigation pending against the former...