State of Ark. v. Dean Foods Products Co., Inc.
| Decision Date | 16 August 1979 |
| Docket Number | Nos. 79-1350,79-1357,s. 79-1350 |
| Citation | 605 F.2d 380 |
| Parties | 1979-2 Trade Cases 62,801 STATE OF ARKANSAS, Plaintiff-Appellee, Cross-Appellant, v. DEAN FOODS PRODUCTS COMPANY, INC., Defendant-Appellant, Cross-Appellee. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Richard P. Campbell, of McConnell & Campbell, Chicago, Ill., for Dean Foods Products Co.; Mark F. Leopold, Chicago, Ill., of counsel.
Philip E. Kaplan, of Kaplan, Brewer, Bilheimer & Marks, Little Rock, Ark., for State of Ark.
Before HEANEY and STEPHENSON, Circuit Judges, and MARKEY, * Chief Judge, United States Court of Customs and Patent Appeals.
Antitrust action by the State of Arkansas (State) against Dean Foods Products Company, Inc. (Dean). The parties appeal and cross-appeal from an order of the United States District Court for the Eastern District of Arkansas, granting Dean's motion to disqualify the State's counsel, and denying Dean's motion to disqualify the State's co-counsel and the staff of the State's counsel. We affirm as to the State's counsel and co-counsel, and reverse as to the staff.
Royce O. Griffin, Jr. (Griffin) joined Owens, McHaney & McHaney (McHaney firm) in May 1974. At that time, Dean, a processor and seller of dairy products, was a client of the McHaney firm.
During the Spring of 1975, the McHaney firm represented Dean in Bankruptcy proceedings involving Buckingham & Schutt, Inc. (Buckingham), Dean's distributor in eastern Arkansas. That representation involved a study of Dean's and Buckingham's marketing information. Following a November 1975, investigation by McConnell & Campbell (Dean's Chicago counsel) of Buckingham's price-fixing allegation against Dean, Dean decided not to sue Buckingham. Thereafter, the McHaney firm did no work on the Buckingham matter until the Summer of 1976.
Griffin left the McHaney firm at the end of November 1975. In January 1977, he became Assistant Attorney General for the State. Federal indictments issued in April, 1977, alleging dairy company price-fixing in central Arkansas. In May the present antitrust class action suit was filed by the State. The complaint, alleging statewide dairy company price-fixing and including Dean among the defendants, was signed by Griffin.
The State retained Mandell & Wright (the Susman firm) and Litman, Litman, Harris & Specter (the Specter firm) as special antitrust co-counsel.
The McHaney firm has been local counsel for Dean throughout this suit. Dean also retained McConnell & Campbell.
On January 29, 1977, Buckingham's name arose during a deposition. McConnell & Campbell examined Dean's records relating to Buckingham, including the bankruptcy file, and discovered Griffin's name on the McHaney firm's letterhead. On March 19, 1979, Dean moved for disqualification of the State's Attorney General and his Deputies and Assistants (including Griffin), and the Susman and Specter firms, their partners and associates.
The district court found the Buckingham bankruptcy matter and the present suit substantially related.
The court held that the State's reliance on a laches theory must fail "because of the important role of Mr. Griffin, the fact that the case is still in the discovery phase, the shortness of the delay (when compared to other cases), and the importance of the ethical issue involved . . . ."
Having found that Griffin did a title search and filed papers in the Buckingham case, but had never looked at the McHaney firm's Buckingham file and had no knowledge of its contents, the district court nonetheless concluded that Griffin had to be disqualified because of the imputation to him of confidential information imported to the partners in the McHaney firm. The court considered the "peripheral representation" exception articulated in Silver Chrysler Plymouth, Inc. v. Chrysler Motor Corp., 518 F.2d 751 (2d Cir. 1975), inapplicable here because "Mr. Griffin's association with the McHaney firm was such that restricted and limited roles for Mr. Griffin in the firm's business were not the norm and that most matters were the subject of general discussion in the typical, relatively informal atmosphere of most small law firms."
By letter subsequent to its memorandum and order, the court informed the parties that the disqualification order applied to Griffin only, and not to his staff.
The district court denied the motion to disqualify the co-counsel Susman and Specter firms, holding that "a second tier irrebuttable presumption" was improper because co-counsel had never been involved in an attorney-client relationship with Dean.
The issues are whether the district court: (1) erred in finding a substantial relationship between the Buckingham matter and the present action, and whether the district court abused its discretion 1 in: (2) refusing
to dismiss Dean's motion for laches, (3) granting the motion to disqualify Griffin, (4) denying the motion to disqualify Griffin's staff, and (5) denying the motion to disqualify the Susman and Specter firms.
OPINIONDisqualification of counsel, like other reaches for perfection, is tempered by a need to balance a variety of competing considerations and complex concepts. Disqualification in spasm reaction to every situation capable of appearing improper to the jaundiced cynic is as goal-defeating as failure to disqualify in blind disregard of flagrant conflicts of interest. Between those ethical extremes lie less obvious influences on the interest of society in the orderly administration of justice, on the interest of clients in candid consultation and choice of counsel, and on the interest of the legal profession in its reputational soul.
So too, the judicial effort to light a disqualification path is unlikely to result in an early formulation of rules universally applicable to the Canons of the Code of Professional Responsibility. Rigid rules can be sterile and lacking in universal application. At the same time, an "every case on its own facts" approach can be facile and unhelpful. Ethical experience is the key. Until more is gained, rigidity may be feasible at the far ends of the ethics spectrum, while flexibility governed by facts must reign in a gradually diminishing area between those extremes.
After a threshold "related matter" question, the present case requires that balances be struck between: (a) the interest of litigants in early resolution of a disqualification question and the continuing public interest in even a delayed dissipation of a conflict of interest; (b) the interest of a defendant in freedom from adverse advocacy by a lawyer formerly employed by defendant's counseling law firm and a state's interest in continuing with its counsel; (c) the interest of a defendant in freedom from adverse advocacy by lawyers who had served on the staff of, and as co-counsel with, the lawyer involved in (b) and the same interest of the state in continuing with its counsel.
A balance may be struck between the interests involved in (a) and (b) with the aid of fairly rigid considerations. In the current posture of disqualification ethics, balancing the interests involved in (c) must be influenced by the facts and their presumed effect in the light of human experience.
The rule was well described in T. C. Theatre Corp. v. Warner Bros. Pictures, Inc., 113 F.Supp. 265, 268-69 (S.D.N.Y.1953):
(T)he former client need show no more than that the matters embraced within the pending suit wherein his former attorney appears on behalf of his adversary are substantially related to the matters or cause of action (where) the attorney previously represented him, the former client. The Court will assume that during the course of the former representation confidences were disclosed to the attorney bearing on the subject matter of the representation. It will not inquire into their nature and extent. Only in this manner can the lawyer's duty of absolute fidelity be enforced and the spirit of the rule relating to privileged communications be maintained.
To compel the client to show, in addition to establishing that the subject of the present adverse representation is related to the former, the actual confidential matters previously entrusted to the attorney and their possible value to the present client would tear aside the protective cloak drawn about the lawyer-client relationship. For the Court to probe further and sift the confidences in fact revealed would require the disclosure of the very matters intended to be protected by the rule (protecting client confidences).
See Silver Chrysler, Inc., 518 F.2d at 754.
The Buckingham matter, in which the McHaney firm represented Dean, involved considerations of sales structure, customer lists, and purchases. An integral element in that matter was Buckingham's accusation that Dean engaged in price-fixing. The Buckingham matter is thus on its face substantially related to the present State allegation that Dean engaged in price-fixing.
Because we assume the disclosure of confidences and "will not inquire into their nature and extent," the State's argument that it must have an opportunity to show that no confidences bearing on related subject matter were disclosed, and to cross-examine the McHaney firm principals about the contents of the Buckingham file in support of that proposition, is without merit.
The State contends that Dean's motion is barred by laches because: (1) there is no evidence that McConnell & Campbell moved promptly on discovery of the potential conflict, and (2) the McHaney firm should have moved for disqualification when the complaint was filed, citing Central Milk Producers Cooperative v. Sentry Food Stores, Inc., 573 F.2d 988 (8th Cir. 1978) and Redd v. Shell Oil Company, 518 F.2d 311 (10th Cir. 1975...
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