Unified Sewerage Agency of Washington County, Oregon v. Jelco Inc.

• Decision Date: 01 June 1981
• Docket Number: No. 78-1920,78-1920
• Citation: 646 F.2d 1339
• Parties: UNIFIED SEWERAGE AGENCY OF WASHINGTON COUNTY, OREGON, a municipal corporation and County Service District, on behalf of and for the use and benefit of Teeples & Thatcher Inc., a corporation, Plaintiffs-Appellees, v. JELCO INCORPORATED, a corporation, and Seaboard Surety Company, a corporation, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1339

646 F.2d 1339

UNIFIED SEWERAGE AGENCY OF WASHINGTON COUNTY, OREGON, a

municipal corporation and County Service District, on behalf

of and for the use and benefit of Teeples & Thatcher Inc., a

corporation, Plaintiffs-Appellees, v. JELCO INCORPORATED, a corporation, and Seaboard Surety

Company, a corporation, Defendants-Appellants.

No. 78-1920.

United States Court of Appeals,

Ninth Circuit.

Argued and Submitted May 15, 1980.

Decided June 1, 1981.

Robert D. Maack, Salt Lake City, Utah, argued for defendants-appellants; Wayne Wadsworth, Watkiss & Campbell, Salt Lake City, Utah, Lindsay, Hart, Neil & Weigler, Portland, Or., on brief.

Dwight L. Schwab, Schwab, Burdick & Hilton, Daniel J. Seifer, Portland, Or., for plaintiffs-appellees.

Appeal from the United States District Court for the District of Oregon.

Before GOODWIN, FLETCHER and PREGERSON, Circuit Judges.

GOODWIN, Circuit Judge.

Jelco moved to disqualify the plaintiff's law firm on the theory that the attorneys were suing their own client in violation of Canons 4, 5 and 9 of the Code of Professional Responsibility of the State of Oregon (1980). ¹ The trial judge denied the disqualification motion and Jelco appealed.

We treat the appeal as a petition for mandamus.

Jelco, based in Salt Lake City, was the prime contractor on a sewer plant project in Oregon. Teeples & Thatcher was the subcontractor for concrete work, and Ace Electric Co. was an electrical subcontractor. Kobin & Meyer is a Portland law firm experienced in representing construction companies. Kobin & Meyer had represented Teeples & Thatcher for ten years prior to this litigation.

In 1975, a dispute arose between Ace Electric and Jelco over Ace's claim for additional compensation under its subcontract. Ace contended that a change Jelco made in suppliers constituted a change in the terms of the subcontract. Jelco's Salt Lake City counsel, one Beesley, and another Jelco agent contacted Paul Meyer of Kobin &amp Meyer in mid-1975, and asked that firm to join in Jelco's representation in the Ace Electric controversy.

Meyer told Beesley that Kobin & Meyer represented Teeples & Thatcher in what was then an embryonic dispute between Teeples & Thatcher and Jelco. Teeples & Thatcher's expressions of dissatisfaction with Jelco's scheduling and sequence of concrete work had reached the stage of lawyer discussions. Beesley nonetheless recommended to Jelco management that Kobin & Meyer be retained to assist in the Ace Electric litigation. Jelco's management, with full knowledge of Jelco's potential conflict with Teeples & Thatcher on the same project, and with full knowledge of Kobin & Meyer's long-standing relationship with Teeples & Thatcher, retained Kobin & Meyer.

In mid-1976, after a proposed settlement of the Teeples-Jelco dispute collapsed, Meyer told Beesley that the Teeples-Jelco dispute could ripen into a lawsuit. Meyer asked Beesley, and through him, Jelco's management, to re-evaluate whether Jelco wished Kobin & Meyer to continue to represent Jelco in the Ace Electric litigation. Meyer made it clear that if it came to a choice, Kobin & Meyer preferred to keep Teeples as a client. Jelco, through Beesley, replied unequivocally that it desired Kobin & Meyer to continue as counsel in the Ace litigation regardless of what happened in the Jelco dispute with Teeples & Thatcher.

The liability issues in the Ace litigation were tried in July 1976, and were determined adversely to Jelco. In December 1976, Kobin & Meyer filed an action for Teeples & Thatcher against Jelco.

In March 1977, with the damages issue in the Ace litigation still to be tried, Meyer again asked Beesley and Jelco's house counsel if Jelco desired to have Kobin & Meyer continue to represent Jelco against Ace. Meyer repeated his firm's expressed desire to avoid prejudicing Kobin & Meyer's representation of Teeples. Jelco again decided to continue with Kobin & Meyer in the Ace litigation.

In May 1977, Jelco discharged Beesley, obtained new Salt Lake City counsel, and discharged Kobin & Meyer from the Ace Electric litigation as soon as a substitute attorney could take over that case. In December 1977, Jelco filed this motion to disqualify Kobin & Meyer from further representation of Teeples & Thatcher in the action against Jelco.

I. JURISDICTION

Denial of a motion to disqualify counsel is not an appealable order under the test set forth in Cohen v. Beneficial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). Firestone Tire & Rubber Co. v. Risjord, 449 U.S. --, 101 S.Ct. 669, 66 L.Ed.2d 571 (1981); Chugach Elec. Ass'n v. United States D. C. for Dist. of Alaska, 370 F.2d 441 (9th Cir. 1966), cert. denied, 389 U.S. 820, 88 S.Ct. 40, 19 L.Ed.2d 71 (1967); Cord v. Smith, 338 F.2d 516, 521 (9th Cir. 1964), clarified, 370 F.2d 418 (1966). See also, United States v. State of Wash., 573 F.2d 1121, 1122 (9th Cir. 1978) (order denying motion to disqualify a judge is not appealable).

From time to time, however, this circuit has treated an appeal from a nonappealable order as a petition for a writ of mandamus and has undertaken discretionary review under the All Writs Act, 28 U.S.C. § 1651 (1976). Whether we will do so in a particular case depends upon whether the order qualifies for extraordinary relief under the guidelines set forth in Bauman v. United States Dist. Court, 557 F.2d 650 (9th Cir. 1977). Those guidelines are:

" (1) The party seeking the writ has no other adequate means, such as a direct appeal, to attain the relief he or she desires (2) The petitioner will be damaged or prejudiced in a way not correctable on appeal (3) The district court's order is clearly erroneous as a matter of law (4) The district court's order is an oft-repeated error, or manifests a persistent disregard of the federal rules (5) The district court's order raises new and important problems, or issues of law of first impression " (Citations omitted) 557 F.2d at 654-55.

The Bauman court emphasized that all factors would not be relevant in every case, and that the factors might point in different directions in any one case.

Mandamus relief is appropriate here. ² First, Jelco has no other adequate means of seeking relief. A denial of a motion to disqualify is not an appealable order, and this court has held that certification under 28 U.S.C. § 1292(b) is not available. Trone v. Smith, 553 F.2d 1207 (9th Cir. 1977). Second, Jelco could suffer irremediable damage if forced to wait until after trial to appeal. Any advantage Kobin & Meyer possesses as a result of its representation of Jelco could be put to use at trial. Information once used or exposed would not be forgotten and could be used against Jelco on retrial. More important, the public perception of the profession could be damaged.

If the district court's refusal to disqualify Kobin & Meyer is an error, it comes under the purview of review for errors of law. ³ Finally, we note that this circuit has not heretofore addressed the issues raised in this case. They are important. The profession and the public will benefit by clear direction from this court. This case is, therefore, appropriate for mandamus relief.

II. THE MERITS

The trial court viewed the case as one involving an attorney's acceptance of employment adverse to a former client, and therefore tested Kobin & Meyer's actions against the standards set forth in Canon 4. In general Canon 4 prohibits an attorney from divulging confidences and secrets of a client. Under Canon 4 an attorney may not represent interests adverse to a former client if the factual context of the later representation is similar or related to that of the former representation. Trone v. Smith, 621 F.2d 994, 998 (9th Cir. 1980). See generally, Pennwalt Corp. v. Plough, Inc., 85 F.R.D. 264, 270-71 (D.Del.1980).

The case, however, is one in which the attorney undertook representation adverse to a present client. The questions thus raised are more appropriately treated under Canon 5. ⁴ In contrast to representation undertaken adverse to a former client, representation adverse to a present client must be measured not so much against the similarities in litigation, as against the duty of undivided loyalty which an attorney owes to each of his clients. See American Bar Foundation, Annotated Code of Professional Responsibility 229 (1979); Cinema 5, Ltd. v. Cinerama, Inc., 528 F.2d 1384, 1386 (2nd Cir. 1976). See also, Pennwalt Corp. v. Plough, Inc., 85 F.R.D. 264, 271 (D.Del.1980).

Disciplinary Rule 5-105(B) provides that:

"A lawyer shall not continue multiple employment if the exercise of his independent professional judgment in behalf of a client will be or is likely to be adversely affected by his representation of another client, except to the extent permitted under DR 5-105(C)." Code of Professional Responsibility of the State of Oregon (1980).

In International Business Machines Corp. v. Levin, 579 F.2d 271 (3rd Cir. 1978), the Third Circuit did not require that "adverse effect" be specifically demonstrated. It presumed that adverse effect resulted when an attorney took an adverse position to a present client. We agree that a specific adverse effect need not be demonstrated to trigger DR5-105(B) if an attorney undertakes to represent a client whose position is adverse to that of a present client. See also In re Hedrick, 258 Or. 70, 481 P.2d 71, 73-74 (1971) (attorney's legal relationship with client provided him with information which would adversely affect client in action brought against client by the attorney). Accordingly, Kobin & Meyer's dual representation of Teeples & Thatcher and Jelco triggers DR5-105(B) because the representation is presumed to affect adversely Kobin & Meyer's representation of each.

Teeples & Thatcher argues, however, that Kobin & Meyer should not be disqualified under DR5-105(B) because of the exception set forth in DR5-105(C). To avoid disqualification under DR5-105(B), an attorney must satisfy DR5-105(C)'s two...