Laskey Bros. of W. Va., Inc. v. Warner Bros. Pictures, 338

• Decision Date: 13 July 1955
• Docket Number: Docket 23610,23672.,No. 338,343,338
• Citation: 224 F.2d 824
• Parties: LASKEY BROS. OF W. VA., Inc., et al., Plaintiffs-Appellants, v. WARNER BROS. PICTURES, Inc. (In Dissolution) et al., Defendants-Appellees. AUSTIN THEATRE, Inc., et al., Plaintiffs-Appellees, v. WARNER BROS. PICTURES, Inc. (In Dissolution) et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Second Circuit

224 F.2d 824 (1955)

LASKEY BROS. OF W. VA., Inc., et al., Plaintiffs-Appellants, v.WARNER BROS. PICTURES, Inc. (In Dissolution) et al., Defendants-Appellees.

AUSTIN THEATRE, Inc., et al., Plaintiffs-Appellees, v.WARNER BROS. PICTURES, Inc. (In Dissolution) et al., Defendants-Appellants.

Nos. 338, 343, Docket 23610, 23672.

United States Court of Appeals Second Circuit.

Argued June 6, 7, 1955.

Decided July 13, 1955.

Bruno Schachner, New York City(Malkan & Ellner and Arnold Malkan, New York City, on the brief), for plaintiffs-appellants in Laskey action and plaintiffs-appellees in Austin action.

Bruce Bromley, New York City(John Logan O'Donnell and Leo P. Arnaboldi, Jr., New York City, on the brief), for defendants-appellees in Laskey action and defendants-appellants in Austin action.

Louis Phillips, New York City, for defendantsParamount Film Distributing Corp., Paramount Pictures, Inc.(In Dissolution), and Paramount Pictures Corp.

R. W. Perkins, New York City, for defendantsWarner Bros. Pictures, Inc.(In Dissolution), Warner Bros. Pictures, Inc.(Delaware), and Warner Bros. Distributing Corp.

Dwight, Royall, Harris, Koegel & Caskey, New York City, for defendantsTwentieth Century-Fox Film Corp.(In Dissolution), Twentieth Century-Fox Film Corp.(Delaware).

Benjamin Melniker, New York City, for defendantLoew's Incorporated.

J. Miller Walker, New York City, for defendantsRKO Radio Pictures, Inc., and RKO Pictures Corp.

Milton Handler, New York City, for defendantsComerford Theatres, Inc., and Comerford Publix Theatres Corp.

Phillips, Nizer, Benjamin & Krim, New York City, for defendantUnited Artists Corp. in Laskey action only.

O'Brien, Driscoll & Raftery, New York City, for defendantsRKO Keith-Orpheum Theatres, Inc., and RKO Theatres Corp.

Schwartz & Frolich, New York City, for defendantsStanley Warner Management Corp., Stanley Warner Corp., Fabian Theatres Corp., and Columbia Pictures Corp.

Leopold Friedman, New York City, for defendantsLoew's Theatre and Realty Corp., sued herein as Loew's Theatre and Realty, Inc.

Before CLARK, Chief Judge, CHASE, Circuit Judge, and RYAN, District Judge.

CLARK, Chief Judge.

These appeals involve the qualification of the firm of Malkan & Ellner to serve as attorneys for plaintiffs in private anti-trust actions involving the motion picture industry.Disqualification was sought by the defendants on the basis of Malkan's prior partnership with one Isacson.In proceedings independent of those here under review, Isacson has been found to have obtained confidential information about the defendants in the course of his former employment by the firm of Sargoy & Stein.The history of this litigation is set forth in detail in the opinion of the district court in this proceeding, so that we need not repeat it here.D.C.S.D.N.Y., 130 F.Supp. 514.Judge Dawson concluded that Malkan & Ellner should be disqualified in the Laskey case, which had originally come to the firm of Malkan & Isacson.The plaintiffs and the attorneys appeal from this determination.In the Austin case — the second of these two actions heard and decided together below — Judge Dawson decided that the new firm was not disqualified, since this client had come to it by channels completely apart from Malkan's former association with Isacson.Here the defendants appeal.

The defendants rely heavily in both cases on a stipulation which they read as barring, as a matter of contract law, any representation of motion-picture anti-trust-action plaintiffs by these attorneys.The stipulation in question was entered into before the formation of the firm of Malkan & Ellner, in the course of the litigation in Fisher Studios, Inc. v. Loew's Inc. then pending in the District Court for the Eastern District of New York.In that case the qualification of Isacson and the firm of Malkan & Isacson was first raised; and, in view of the pendency of similar suits elsewhere, the parties stipulated that: "If it shall be finally determined in this action that David H. Isacson and Malkan & Isacson are qualified or disqualified, and if such determination in this proceeding is that such qualification or disqualification embraces 35 mm. anti-trust actions, 16 mm. anti-trust actions and under-reporting actions, such determination shall be binding upon David H. Isacson, Malkan & Isacson, and the defendants herein, in all cases involving 35 mm. anti-trust actions, 16 mm. anti-trust actions and under-reporting actions, including those hereinabove mentioned."Since the Fisher proceedings resulted in the disqualification of Isacson and the firm of Malkan & Isacson by Judge Abruzzo, defendants urge us to enforce this stipulation against Malkan and Malkan & Ellner in these cases.

The decision in the Fisher case has been appealed, but not yet argued.For present purposes, therefore, we accept the actual disqualifications entered there.But beyond this we cannot agree that the stipulation should affect any cases other than those which came to Malkan & Isacson or to Isacson individually.The wording of the stipulation seems unambiguously to exclude disqualification of Malkan as an individual.There is no reason to invoke complicated theories of partnership law to construe so clear a document which on its face evidences no intent to bind Malkan except in his role as a partner to Isacson.

Defendants also contend that the stipulation is binding on Malkan because Judge Abruzzo so held in a decision which should be held res judicata here.Judge Abruzzo was repeatedly asked by the defendants to bar Malkan individually from this litigation, and repeatedly refused to do so, until his attention was focused on the stipulation.This caused him to issue an amended order of disqualification to cover "Malkan & Isacson, David H. Isacson and Arnold G. Malkan, as a member of the firm of Malkan & Isacson and * * * any firm with which they or any of them may now or hereafter be associated."In the same order he refused, however, to pass upon the qualification of the firm of Malkan & Ellner.Furthermore, the photostatic copy of the order in the record discloses that it originally purported to cover "Arnold G. Malkan individually and any firm with which the said Arnold G. Malkan may be associated," and that this version was changed to substitute therefor "Arnold G. Malkan as a member of the firm of Malkan & Isacson."The stress which Judge Abruzzo placed on this correction is shown by the fact that he wrote and initialled it in three separate places.It seems fairly clear, therefore, that the judge did not intend to exclude Malkan individually.Even if his order can be so read, we think, as did Judge Dawson, that it cannot be res judicata in these cases affecting two completely independent plaintiffs and involving the qualification of a new law firm, Malkan & Ellner, as to which Judge Abruzzo specifically refused to rule.

Even thus limited, the stipulation does, however, support Judge Dawson's ruling in the Laskey case.That plaintiff first came to the firm of Malkan & Isacson to initiate an anti-trust action in the Western District of Pennsylvania.Subsequently a new suit was begun for this plaintiff by Malkan & Ellner in the Southern District of New York, but it is not contended that these suits differ in any material respect.It seems clear that under the stipulation the firm of Malkan & Isacson was barred from prosecuting this case.We would come to the same conclusion without the stipulation, since all authorities agree that all members of a partnership are barred from participating in a case from which one partner is disqualified.Consolidated Theatres v. Warner Bros. Circuit Management Corp., 2 Cir., 216 F.2d 920;Note, Disqualification of Attorneys for Representing Interests Adverse to Former Clients, 64 YaleL.J. 917, 920;Drinker, Legal Ethics 106(1953).And once a partner is thus vicariously disqualified for a particular case, the subsequent dissolution of the partnership cannot cure his ineligibility to act as counsel in that case.The decision in Laskey is therefore affirmed.

This brings us to the more difficult question of legal ethics posed by the Austin case.This case came to the new firm of Malkan & Ellner through channels having nothing whatsoever to do with Malkan's prior association with Isacson.Judge Dawson decided that disqualification of the firm of Malkan & Isacson should not carry over to Malkan & Ellner in the absence of any showing that Malkan had received confidential information from Isacson.

Defendants contend that either receipt of confidential information should be conclusively presumed from the fact of partnership or alternatively Malkan should at least have the burden of rebutting such an inference.Within the framework of the original partnership the fact of access to confidential information through the person of the partner with such specialized knowledge is sufficient to bar the other partners, whether or not they actually profit from such access.Such a result, although an extension of the literal wording of Canons 6 and 37 of the Canons of Professional Ethics of the American Bar Association, is necessary to facilitate maximum disclosure of relevant facts on the part of clients.Once the partnership is dissolved, however, the inference from access to receipt of information, in a new case having no relationship to the old partnership, becomes logically less compelling and should therefore become rebuttable legally, lest the chain of disqualification become endless.

Thus an irrebuttable inference that confidential information had been received would result in Malkan's disqualification for partnership with Isacson, and Ellner's disqualification for partnership with Malkan.Since the degree of association to effect disqualification need not necessarily be that of a partner, young lawyers might seriously jeopardize their careers by temporary affiliation with large law firms.But even more important is the...