SK Handtool Corp. v. Dresser Industries, Inc.

• Decision Date: 19 April 1993
• Docket Number: No. 1-91-1403,1-91-1403
• Citation: 619 N.E.2d 1282,189 Ill.Dec. 233,246 Ill.App.3d 979
• Parties: , 189 Ill.Dec. 233 SK HANDTOOL CORPORATION and Corcoran Partners, Ltd., Plaintiffs-Appellees, v. DRESSER INDUSTRIES, INC., Defendant-Appellant (Stephen C. Bruner, Appellant).
• Court: United States Appellate Court of Illinois

Page 1282

619 N.E.2d 1282

246 Ill.App.3d 979, 189 Ill.Dec. 233

SK HANDTOOL CORPORATION and Corcoran Partners, Ltd. Plaintiffs-Appellees, v. DRESSER INDUSTRIES, INC., Defendant-Appellant (Stephen C Bruner, Appellant).

No. 1-91-1403.

Appellate Court of Illinois First District, First Division.

April 19, 1993.

Rehearing Denied June 23, 1993.

As Modified June 28, 1993.

Kevin M. Forde and Winston & Strawn, Chicago (Stephen C. Bruner, Richard Wm. Austin and Catherine W. Joyce, of counsel), for appellants.

Law Offices of Frederic F. Brace, Jr., Chicago (David L. Lee, of counsel), for plaintiffs-appellees.

MODIFIED ON DENIAL OF REHEARING

Justice CAMPBELL delivered the opinion of the court:

Defendant Dresser Industries, Inc. ("Dresser") and contemnor Stephen C. Bruner appeal an order of the circuit court of Cook County finding Bruner in contempt of court for failing to comply with a prior order disqualifying Bruner's firm, Winston & Strawn, from representing defendant in a suit brought by plaintiffs SK Handtool Corporation ("SK Handtool") and Corcoran Partners, Ltd. ("Corcoran Partners"). This underlying suit arises out of defendant Dresser's sale of its handtool division to Corcoran Partners.

The record on appeal indicates the following facts. Corcoran Partners has two general partners, Thomas Corcoran and Daniel Czuba. In 1982, Corcoran and Czuba chose Stephen P. Durchslag and his firm, Sidley & Austin, as general counsel for the partnership. At that time, Corcoran had known Durchslag for about nine years and considered Durchslag to be his personal attorney. Durchslag's practice is concentrated in the area of intellectual property.

While at Sidley & Austin, Durchslag advised Corcoran Partners regarding promotion, advertising and intellectual property matters. According to Corcoran and Czuba, Durchslag was their primary contact at Sidley & Austin; they would call him for advice and Durchslag would either handle the matter himself or find another attorney to handle the matter. According to the partners, Durchslag would also attend, stop by or discuss meetings they had with other attorneys at the firm. The partners also maintain that they both heard Durchslag state that Corcoran Partners was his largest account.

In the fall of 1983, Sidley & Austin represented Corcoran Partners in negotiations for the purchase of Dresser's handtool division. Sidley & Austin had previously represented Dresser in litigation, but Dresser gave specific and limited consent to Sidley & Austin's representation of Corcoran Partners in this transaction.

The transaction was consummated in October 1983. According to Durchslag, he was not actively involved in the transaction, but did have cursory general knowledge of it. According to Corcoran, Durchslag attended several meetings they had with Sidley & Austin regarding the purchase of the SK Handtool Corporation. Corcoran states that the value of the assets and liabilities of SK Handtool, the accuracy and completeness of SK Handtool's books, records and Ending Date Balance Sheet, and proposed marketing strategies were discussed at these meetings.

Later, disputes arose between Corcoran Partners and Dresser concerning the transaction. Dresser refused to grant consent for Sidley & Austin to represent Corcoran Partners in these disputes. According to the partners, Durchslag recommended that they retain Frederic F. Brace, Jr., as litigation counsel. The partners maintain that Corcoran encouraged communications between Durchslag and Brace regarding the matter. According to Brace, Durchslag and other Sidley & Austin attorneys contacted him; they did not render advice, but discussed the matter and received progress reports.

The partners also state that Durchslag frequently discussed this litigation with them. They also state that they provided Durchslag with documents and court papers and received his opinion both on the legal strategy and the merits of the litigation. Corcoran further states that the partnership was billed for these discussions and that the bills were paid.

On August 1, 1989, Durchslag joined the firm of Winston & Strawn, which was representing Dresser in the litigation brought by Corcoran Partners. According to contemnor Bruner, Winston & Strawn had been representing Dresser since the inception of the litigation in May 1984. Suit had originally been filed in the circuit court of Cook County; Dresser had the case removed to federal court. Following a court-supervised arbitration, the federal case was dismissed on the eve of trial in July 1987. Plaintiffs refiled the suit in the circuit court of Kane County. Following a dismissal in that venue, plaintiffs refiled in the circuit court of Cook County. According to a legal assistant employed at Winston & Strawn, the firm has devoted over 10,000 hours to the litigation, including over 85 days spent deposing over 44 persons. More than 70,000 pages of documents have been produced in the litigation.

A letter from Brace to Bruner dated August 7, 1989, and marked "VIA HAND DELIVERY" appears in the record. The letter notes Durchslag's relationship with Corcoran Partners and requests that Winston & Strawn immediately withdraw as counsel for Dresser. The letter concludes by indicating that if Brace did not hear from Bruner by the close of business the following day, Brace would assume that Bruner intended to continue to represent Dresser and would proceed accordingly.

A letter from Bruner to Brace dated August 8, 1989, and marked "BY MESSENGER" appears in the record. In the letter, Bruner indicates that he did not know of a relationship between Corcoran Partners and Durchslag. Bruner also indicates that he had not spoken to Durchslag about the substance of litigation and did not intend to do so in the future. The letter does not indicate that Bruner or his firm planned to withdraw from representing Dresser.

According to Durchslag, he and Bruner discussed Brace's letter on August 8, 1989. Durchslag also approved a copy of Bruner's proposed reply. Durchslag states that he and Bruner did not discuss the substance of the litigation and would not do so in the future.

The record indicates that in addition to contemnor, Winston & Strawn attorneys directly representing Dresser in the litigation were Jane McCullough and Kimball Anderson. An affidavit by Ms. McCullough states that she also received a copy of Brace's letter and has not discussed the case with Durchslag. An affidavit by Mr. Anderson states that he has not discussed the case with Durchslag, but does not indicate whether he received a copy of Brace's letter.

According to Corcoran and Czuba, Durchslag attempted to solicit the legal business of Corcoran Partners for Winston & Strawn during August 1989. In particular, the partners maintain that on August 29, 1989, while at a golf outing, Durchslag and several other Winston & Strawn attorneys attempted to solicit Corcoran Partners' business with respect to a transaction that Sidley & Austin could not handle due to a conflict of interest. The partners stated that they wished to consult with Brace before retaining Winston & Strawn due to the firm's representation of Dresser. Brace advised the partners against retaining Winston & Strawn.

On September 7, 1989, Corcoran Partners filed a motion to disqualify Winston & Strawn from further representing Dresser in the litigation. The motion claims that Winston & Strawn's continued representation would constitute a conflict of interest in violation of Canons 4, 5, and 9 of the Illinois Code of Professional Responsibility (Ill.Rev.Stat.1987, ch. 110A, Canons 4, 5 and 9).

The record contains a memorandum dated September 7, 1989, that appears to be directed to all personnel of Winston & Strawn. The memorandum is from Gary Fairchild, who was the managing partner at Winston & Strawn, according to Bruner. The memorandum notes that Durchslag and two other Sidley & Austin attorneys had recently joined Winston & Strawn. The memorandum also notes Durchslag's prior representation of Corcoran Partners and Winston & Strawn's representation of Dresser in the litigation brought by Corcoran Partners. The memorandum indicates that it had been determined that the firm's professional judgment on behalf of Dresser would not be impaired by the involvement of the three newly associated attorneys from Sidley & Austin and had notified Dresser to this effect.

The memorandum then sets forth rules regarding the litigation, to wit: (1) none of the newly associated attorneys could discuss the litigation with any Winston & Strawn personnel other than one of the other newly associated attorneys; (2) No Winston & Strawn personnel could discuss the litigation with any of the newly associated attorneys; (3) All files relating to Dresser's defense of the litigation would be secured by those having custody or control of them and could not be examined by or made available to any of the newly associated attorneys; (4) All Winston & Strawn attorneys, including the newly associated attorneys, would not represent any of the adverse parties in the litigation.

On January 18, 1990, the trial court held a hearing on the disqualification motion. On March 13, 1990, the trial court entered an order and issued a written opinion granting the motion and disqualifying Bruner and Winston & Strawn from further representation of Dresser in the litigation. The trial court subsequently denied Dresser's motion to reconsider. However, on May 1, 1990, the trial court certified the matter for an immediate appeal to this court, pursuant to Illinois Supreme Court Rule 308 (Ill.Rev.Stat.1989, ch. 110A, par. 308). This court denied Dresser's May 15, 1990, application for leave to appeal on September 8, 1990. Dresser then filed a petition for leave to appeal to the Illinois Supreme Court on October 22, 1990, which was denied on February 6, 1991.

On April 16, 1991, Bruner returned to the trial court. Counsel for both sides of the...