Meat Price Investigators Ass'n v. Spencer Foods, Inc.

• Decision Date: 03 March 1978
• Docket Number: No. 77-1605,77-1605
• Parties: 1978-1 Trade Cases 61,903 MEAT PRICE INVESTIGATORS ASSOCIATION et al., Appellees, v. SPENCER FOODS, INC., a Delaware Corporation, Appellant, and Iowa Beef Processors, Inc., a Delaware Corporation, MBPXL Corporation, a Delaware Corporation, and Flavorland Industries, Inc., a Delaware Corporation.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 163

572 F.2d 163

1978-1 Trade Cases 61,903

MEAT PRICE INVESTIGATORS ASSOCIATION et al., Appellees, v. SPENCER FOODS, INC., a Delaware Corporation, Appellant and Iowa Beef Processors, Inc., a Delaware Corporation, MBPXL Corporation, a Delaware Corporation, and Flavorland Industries, Inc., a Delaware Corporation.

No. 77-1605.

United States Court of Appeals Eighth Circuit.

Submitted Jan. 11, 1978.

Decided March 3, 1978.

Gordon G. Busdicker (on brief), Faegre & Benson, Minneapolis, Minn., argued, for appellant; James B. Loken, Minneapolis, Minn., and Stephen F. Avery of Cornwall & Avery, Spencer, Iowa, on brief.

Lex Hawkins (argued), and Glenn L. Norris, Des Moines, Iowa, and John A. Cochrane (argued), St. Paul, Minn., on brief, for appellees.

Before GIBSON, Chief Judge, VAN OOSTERHOUT, Senior Circuit Judge, and ROSS, Circuit Judge.

ROSS, Circuit Judge.

This is an appeal from the district court's order denying a motion for severance of defendant Spencer Foods, Inc., from this antitrust action and to disqualify Meat Price Investigators Association's (MPIA) attorneys, Lex Hawkins and John A. Cochrane, their law firms and associates, from prosecuting this or any similar action against Spencer Foods. We affirm.

I.

On August 10, 1976, MPIA and others filed the underlying action against Iowa Beef Processors, Inc., MBPXL Corporation, Flavorland Industries, Inc., and Spencer Foods, Inc., in the United States District Court for the Southern District of Iowa for alleged violations of §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2. On April 11, 1977, Spencer Foods filed its motion for severance and disqualification based on an ex parte interrogation of Hughes A. Bagley, one of Spencer Foods' corporate officers, by MPIA's counsel, allegedly in violation of DR 7-104(A)(1) of the Iowa Code of Professional Responsibility for Lawyers. ¹ The district court conducted evidentiary hearings on April 29 and May 10, 1977, and took the matter under advisement.

On June 7, 1977, prior to a ruling on Spencer Foods' motion, the Judicial Panel on Multidistrict Litigation transferred the antitrust action to the United States District Court for the Northern District of Texas. See In re Beef Industry Antitrust Litigation, 432 F.Supp. 211 (Jud.Pan.Mult.Lit.1977). Subsequently the Iowa court denied Spencer Foods' motion. See Meat Price Investigators Association v. Spencer Foods, Inc., Civ.No. 76-252-2 (S.D.Iowa, filed June 24, 1977). Because there was a question of the proper venue for appeal, Spencer Foods docketed appeals in both this court and the United States Court of Appeals for the Fifth Circuit. Spencer Foods also filed a motion in this court to stay or to transfer the appeal to the Fifth Circuit to resolve the venue question. MPIA filed a cross-motion to dismiss on the ground that the order denying severance and disqualification was not appealable.

On September 19, 1977, this court entered an order (attached to this opinion as Appendix A) denying both Spencer Foods' motion to stay or to transfer and MPIA's motion to dismiss. We held that physical transfer of the original papers to a permissible transferee forum in another circuit did not deprive this court of jurisdiction to review an order entered subsequent to the transfer. Assuming that an appeal could properly be brought in either circuit, this court decided to assert jurisdiction, first because the order appealed from involves allegedly unethical conduct of attorneys in this circuit a matter of considerable concern to this court; and also because it was determined that the ultimate decision would not materially impede the progress of pretrial proceedings in Texas. The parties were directed to brief the issue of the "finality" of the order denying severance and disqualification along with the merits of the appeal, and those issues are presently before this court.

II.

MPIA argues that the order denying severance and disqualification is interlocutory and, under 28 U.S.C. § 1291, is not properly reviewable at this stage of the proceedings. We cannot agree. Subsequent to the order denying without prejudice MPIA's motion to dismiss, this court addressed the issue of whether an interlocutory appeal may be taken from an order denying disqualification of counsel. See Weber, Inc. v. Shell Oil Co., 566 F.2d 602 (8th Cir. 1977). We adopted the rule, followed in the Second, ² Third, ³ Fifth, ⁴ Sixth, ⁵ Seventh, ⁶ and Tenth ⁷ Circuits, that an order denying a motion to disqualify meets the requirements of Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949), and is appealable. The merits are properly before us.

III.

Spencer Foods' motion for severance and disqualification was based on a meeting held on January 30, 1977, between Bagley and two attorneys for MPIA, Hawkins and Cochrane. Spencer Foods contends that the attorneys' extensive questioning of Bagley without Spencer Foods' authorization or the presence of Spencer Foods' counsel violated DR 7-104 and prejudiced the company's ability to defend itself in the antitrust action.

After two evidentiary hearings wherein Bagley was the chief witness, the district court denied Spencer Foods' motion. The district court expressed serious reservations as to Bagley's credibility and, although not encouraging such practices, declined to condemn the conduct of MPIA's attorneys based on Bagley's testimony.

Even assuming that the conduct in question did violate DR 7-104, the district court held that severance and disqualification would not follow as a matter of course. It found that the issue before the court was whether the alleged misconduct tainted the lawsuit to the extent that Spencer Foods' motion need be granted. Finding an insufficient showing of prejudice, the court denied the motion. Furthermore, the district court held that to grant the motion, on the basis of the record before it, would be highly prejudicial to the plaintiffs, who would be burdened with expensive delays until other attorneys could familiarize themselves with the facts and law of the case.

Although the state bar association has the primary responsibility of adjudicating matters of professional ethics, the district court "bears the responsibility for supervision of the members of its bar." See Hull v. Celanese Corp., 513 F.2d 568, 571 (2d Cir. 1975). The issue before this court is whether the district court's denial of Spencer Foods' motion was an abuse of discretion. See W. T. Grant Co. v. Haines, 531 F.2d 671, 676 (2d Cir. 1976); NCK Organization Ltd. v. Bregman, 542 F.2d 128, 131 (2d Cir. 1976); Hull v. Celanese Corp., supra, 513 F.2d at 571; Allied Realty v. Exchange National Bank, 408 F.2d 1099, 1103 (8th Cir.), cert. denied, 396 U.S. 823, 90 S.Ct. 64, 24 L.Ed.2d 73 (1969). We do not believe it was.

In determining whether an attorney should be disqualified from participating in a lawsuit because of an alleged violation of DR 7-104, three competing interests must be balanced: 1) the client's interest in being represented by counsel of its choice; 2) the opposing party's interest in a trial free from prejudice due to disclosures of confidential information; and 3) the public's interest in the scrupulous administration of justice. Cf. Hull v. Celanese Corp., supra, 513 F.2d at 570. The competing interests here presented a close question to the district court.

Although this court would be inclined to conclude that MPIA's counsel overstepped the bounds of responsible professional conduct, we agree with the district court's conclusion that there was not a sufficient showing of prejudice to warrant the denial to MPIA of representation by their chosen attorneys. Furthermore, we find that this result best serves the administration of justice.

The order denying Spencer Foods' motion is affirmed.

APPENDIX A

Before BRIGHT, WEBSTER and HENLEY, Circuit Judges.

ORDER

This case is currently before us for decision on appellant's motion to stay or transfer the appeal and on appellees' motion to dismiss for lack of jurisdiction pursuant to Eighth Circuit Rule 9(b).

Appellees began this action on August 10, 1976 by filing a complaint in the District Court for the Southern District of Iowa. The complaint alleged that appellant and three other meat packers violated §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2, by conspiring to restrain trade in the fat cattle industry.

On September 2, 1976 the Judicial Panel on Multidistrict Litigation (the Panel) issued an order transferring several other pending actions brought by cattle producers against supermarket chains to the Northern District of Texas for coordinated or consolidated pretrial proceedings pursuant to 28 U.S.C. § 1407. In re Beef Industry Antitrust Litigation, 419 F.Supp. 720 (Jud.Pan.Mult.Lit.1976). On September 20, 1976 the Panel issued an order to show cause why the instant action should not also be transferred to the Northern District of Texas. A hearing on the show cause order was held on December 3, 1976, at which all parties to this litigation appeared and opposed the transfer.

On April 11, 1977 appellant filed a motion in the Southern District of Iowa to disqualify appellees' attorneys. ¹ Evidentiary hearings on the motion were held on April 29 and May 10. Appellant's post-hearing brief was filed on June 7 and appellees' post-hearing brief was filed on June 8.

On June 7 the Panel issued an order directing that the instant case be transferred to the Northern District of Texas. On June 13 the Clerk of the Southern District of Iowa transmitted the files in this case to the Northern District of Texas. On June 20, 1977 appellant filed a post-hearing reply brief in the Northern District of Texas.

On June 24 Chief Judge Hanson of the Southern District of Iowa issued an order denying appellant's motion to disqualify. On June 30 a certified copy of this order was filed in the Northern District of Texas. Appellant filed a notice of appeal in the Northern...