Petition — City of Cleveland v. Cleveland Electric Illuminating Co.
Supreme Court brief1978
Ask Donna
What actually matters in this document.
Text
-~ Supreme Court, U. &
{ FILED
MAR 3 1978
}
A
—_— MICHAEL RODAK, JR., CLERK |
Supreme Court of the United States
OCTOBER TERM, 1977
N. @7-123]
CITY OF CLEVELAND,
Petitioner,
Vv.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
and SQUIRE, SANDERS & DEMPSEY,
Respondents.
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
JACK MITCHEL SCHULMAN
Director of Law
City of Cleveland
213 City Hall
Cleveland, Ohio 44114
JAMES VANR. SPRINGER
ARTHUR J. GALLIGAN
DICKSTEIN, SHAPIRO & MORIN
2101 L Street, N.W.
Washington, D.C. 20037
Attorneys for Petitioner
SET ET PYRE
WILSON - EPES PRINTING Co.. INC. - RE 7-6002 - WASHINGTON. D.C. 20001
AZo 00
TABLE OF CONTENTS
re FF DL ee saan
RR RE ARE Rn RR Bi A SIT IIT Ae EN
II 9 PT i elseaeinieens
ET NSE SIE oe Dee RR re aE
A. The Law Firm’s Prior Service As Counsel For
5 ERTIES Ie NETO ALT gh rae Se ane ee:
| B. The Present Litigation In Which The Law Firm
Represents The City’s Adversary —......................
C. The Law Firm’s Past Representation Of CEI
And Facts Relating To Asserted Relinquishment
fg 8 RRA eR cae avn rece
D. The Decisions Below ......... AD Rtn tgovee © NV sc
REASONS FOR GRANTING THE WRIT. .... .....
I. There Is A Conflict Among The Circuits On The
Standards For Disqualification Of Counsel ....
II. The Importance Of The Question ..........00000000....
I a
II
TABLE OF CITATIONS
CASES
Page
Akerly v. Red Barn System, Inc., 551 F.2d 539 (3
iS se EPO RE is Rem, eo re Pe ne AV eC 2
American Roller Co. Vv. Budinger, 518 F.2d 982
I a Se 17
Bisso V. Inland Waterways Corp., 349 U.S. 85 —.... 16
Brooklyn Savings Bank v. O’Neil, 324 U.S. 697... 16
Cinema 5, Ltd. v. Cinerama, Inc., 528 F.2d 1384
fh RE ER cere ee 12
Cohen V. Beneficial Industrial Loan Corp., 337 U.S.
At ee kee SS MO oe Ade A Bae I AR 2
Communist Party Vv. Subv ersive Activities Control
Board, 351 U.S. 115 . 17
Community Broadcasting of Boston, Fue.’ Vv. . Federal
Communications Commission, 546 F.2d 1022
I = a SO Ss AN 2
Consolidated Theatres, Inc. V. Warner Bros. Circuit
Management Corp., 216 F.2d 920 (2 Cir. 1954) .. 16
Cord Vv. Smith, 338 F.2d 516 (9 Cir. 1964) 00. 2
Emle Industries, Inc. v. Patentex, Inc., 478 F.2d
I 15, 16,17
Fuentes V. Shevin, 407 U.S. 67 (1972) PER EES 16
Fullmer V. Harper, 517 F.2d 20 (10 Cir. 1975) —.... 2
Fund of Funds, Ltd. v. Arthur Andersen & Co., 567
if - Gas © |; -_wweaone =
Gas-A-Tron of Arizona Vv. Union Oil Co., 534 F.2d
1322 (9 Cir. 1976), cert. denied, 429 U.S. 861.. 2
Melamed Vv. ITT Continental Baking Co., 534 F.2d
82 (6 Cir. 1976) . ead CISPR 2
Mesarvosh Vv. United States, 352 U. Ss. 1. OPE rn Reed cee 17
NCK Organization Ltd. v. Bregman, 542 F.2d 128
(2 Cir. 1976) -....... 15
Redd V. Shell Oil Co., 518 F. 2d 311 (10 Cir. 1975 2. 12
Richardson V. Hamilton International Corp., 469
F.2d 1382 (3 Cir. 1972), cert. denied, 411 U.S.
986 sdalteaal ere
Schloetter Vv. Railoc of Tadiana, tne. 546 F.2d 706
i I, MIDE ictecncsiebiciaasniccchtciniehinenioiionn Acoudidleadbeanineemaseia 2,12, 15
III
TABLE OF CITATIONS—Continued
Silver Chrysler Plymouth, Inc. v. Chrysler Motors
Corp., 496 F.2d 800 (2 Cir. 1974) (en banc) ......
T.C. Theatre Corp. Vv. Warner Bros. Pictures, Inc.,
113 F. Supp. 265 (S.D.N.Y. 1958) -...........22..
Tomlinson V. Florida Iron & Metal, Inc., 291 F. 2d
a es cunmnidbineions
Weber Vv. Shell Oil Co., 566 F.2d 602 (8 Cir. 1977) ..
Wilson P. Abraham Construction Corp. V. Armco
Steel Corp., 559 F.2d 250 (5 Cir. 1977) —...........
Woods v. Covington County Bank, 537 F.2d 804
al iateennnmianiin
MISCELLANEOUS
American Bar Association Code of Professional
Responsibility
In the Matter of Jo M. Ferguson, Securities Act of
1933 Release No. 5528, Aug. 21, 1974 —.....00000...
H. Drinker, Legal Ethics (1953) —_........02002200200000.
Page
IN THE
Supreue Cunt of the United States
OCTOBER TERM, 1977
No.
CITY OF CLEVELAND,
Petitioner,
Ve
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
and SQUIRE, SANDERS & DEMPSEY,
Respondents.
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
The City of Cleveland petitions for a writ of certiorari
to review the judgment of the United States Court of
Appeals for the Sixth Circuit, entered on December 12,
1977, affirming an order denying petitioner’s motion to
disqualify respondent Squire, Sanders & Dempsey as
counsel for respondent The Cleveland Electric [lluminat-
ing Company in major antitrust litigation between peti-
tioner and the latter respondent.
OPINIONS BELOW
The order of the court of appeals (App. la) endorsing
the district court’s opinion and the further order denying
2
rehearing (App. 3a) are not yet reported. The district
court’s lengthy opinion (App. 5a) is also not reported.’
JURISDICTION
The judgment of the court of appeals (App. la) was
entered on December 12, 1977. A timely petition for re-
hearing with suggestion fer rehearing en banc was denied
on January 24, 1978 (App. 3a). This Court’s jurisdiction
is invoked under 28 U.S.C. § 1254(1).
The district court had jurisdiction over the underlying
private antitrust litigation under 15 U.S.C. § 15 and 28
U.S.C. § 1337. The court of appeals held the order appeal- _
able (without challenge by respondents) under 28 U.S.C.
$ 1291, applying the doctrine of Cohen v. Beneficial In-
dustrial Loan Corp., 337 U.S. 541; this followed a rule
that it and most of the courts of appeals had previously
adopted in disqualification-of-counsel cases.’
1 We refer to the appendix included with this petition as “App.”.
The Statement includes a number of citations to the joint appendix
in the court of appeals, to which we refer as “C.A. App.”.
2 Orders denying disqualification motions had previously been held
immediately appealable in Melamed v. ITT Continental Baking Co.,
534 F.2d 82 (6 Cir. 1976), as well as in Silver Chrysler Plymouth,
Inc. v. Chrysler Motors Corp., 496 F.2d 800 (2 Cir. 1974) (en bance) ;
Akerly v. Red Barn System, Inc., 551 F.2d 539 (3 Cir. 1977);
Tomlinson V. Florida Iron & Metal, Inc., 291 F.2d 333 (5 Cir. 1961) ;
Schloetter Vv. Railoc of Indiana, Inc., 546 F.2d 706 (7 Cir. 1976);
Weber v. Shell Oil Co., 566 F.2d 602 (& Cir. 1977); Fullmer v.
Harper, 517 F.2d 20 (10 Cir. 1975). The 9th and District of Colum-
bia Circuits have held to the contrary, but have expressed the view
that denials of disqualification may be reviewed on mandamus. Cord
v. Smith, 338 F.2d 516, 521-522 (9 Cir. 1964); Community Broad-
casting of Boston, Inc. v. Federal Communications Commission, 546
F.2d 1022 (D.C. Cir. 1976) (dismissing petition for review of
agency order denying disqualification). Moreover, the 9th Circuit
has recently entertained an appeal from a disqualification order
without discussing the appealability question. Gas-A-Tron of Arizona
v. Union Oil Co., 534 F.2d 1322 (9 Cir. 1976), cert. denied, 429 U.S.
861.
3
QUESTION PRESENTED
Whether the principles governing disqualification of at-
torneys in federal court proceedings permit an attorney to
represent an adversary of his former client in subse-
quently arising litigation where information disclosed in
the prior representation could be used to the disadvantage
of the former client.
STATEMENT
This petition arises from the denial of a motion to dis-
qualify a law firm as counsel for an antitrust defendant
(respondent Cleveland Electric Illuminating Company) be-
cause of that law firm’s prior service as counsel for the
plaintiff (petitioner City of Cleveland) in “substantially
related” matters.” As we detail infra, these matters in-
volved the workings and internal business affairs of the
Municipal Electric Light Plant (“Municipal Light”)
owned and operated by the City for many years as a
self-supporting proprietary utility in competition with
respondent Cleveland Electric Illuminating, a privately
owned utility. The law firm had served, inter alia, as
paid counsel on Municipal Light financial matters.
Following the filing of the disqualification motion at
the commencement of the litigation, the district court held
an evidentiary hearing and thereafter denied the motion.
Unless otherwise indicated, the facts set forth in this
8’ The disqualification motion was based primarily upon Canon 4
of the Code of Professional Responsibility, the strictures of which
have been universally accepted as the law governing such motions in
the federal courts. Canon EC 4-5 provides that “A lawyer shall not
use information acquired in the course of the representation of a
client to the disadvantage of the client. * * * [N]o employment
should be accepted that might require such disclosure.” The courts
have agreed that the basic rule arising from Canon 4 prohibits a sub-
sequent adversary representation with respect to matters “substan-
tially related” to matters involved in the previous representation.
See p. 12, infra.
4
Statement are based upon testimony that was neither dis-
puted at the hearing nor questioned in the district court’s
findings.
A. The Law Firm’s Prior Service As Counsel For The
City
Squire, Sanders & Dempsey (“the law firm”) is a large
Cleveland firm with a substantial “public law” practice
which includes representation of issuers of municipal
bonds (D.C. Op., App. 9a).* The law firm had, with rare
exceptions, served as the City of Cleveland’s bond counsel
over many decades; as such, it had “rendered the opinions
on virtually all of the city’s financial matters” between
the early 1960’s and 1975, when the present antitrust liti-
gation began (C.A. App. 371, 114-17, 178-79, 211, 286-88,
446). These matters included a number of special bond
issues secured by the assets and revenues of the City’s
Municipal Electric Light Plant and issued for the specific
purpose of raising capital for the Municipal Light enter-
prise (C.A. App. 365-70).
While the district court’s conclusory findings were
strongly adverse to the City’s position, its general de-
scription of the kind of investigation underlying bond
counsel’s services will serve for present purposes:
“(The genesis of a bond issue is enabling legislation,
in this case, an ordinance which fixes the amount and
defines the purposes and the manner in which the
issue is to be amortized. It is supported by a tran-
script or manuscript which emphasizes various fac-
tors and characteristics significant to the security;
an analysis of the political subdivisions’ debt struc-
ture; various financial factors; governmental opera-
tions and economic characteristics of the issuing
entity.
* + >
* The reference is to the opinion of the district court, which is set
forth at App. 5a-44a, infra.
PN PP are Sapernex re ee OTT
ee ee ee re
5
“Initially the information is, in whole or in part, doc-
umented by the appropriate governmental agency and
presented to bond counsel for examination and certi-
fication as to accuracy, authenticity and legality.
Meticulous attention to detail, exactness and veracity
coupled with sagacious pedantic legal acumen are the
hallmark of successful bond counsel in an astutely
discriminating financial community. Eminence is not
achieved by accepting, at face value, the presentments
of the subscriber, nor does perfunctory approbation
effectuate and maintain probity.” (D.C. Op., App.
13a-14a; emphasis added.) °
There was no contradiction of testimony by the City’s
Finance Directors, Budget Director and Director of Public
Utilities in office during the 1971-75 period that the law
firm’s access to and knowledge of Municipal Light’s finan-
cial and business affairs was both intimate and compre-
hensive, as befitted its role as bond counsel (e.g., C.A.
App. 121-26, 133-34, 193, 203-06, 213-14, 292, 298). One
of the Finance Directors testified that the law firm was
“constantly working for the City whether they were ac-
tually working on a particular bond issue or not” (C.A.
App. 117) and that “[t]here was a free flow of all types
of information” and “constant communication” between
the finance department and the law firm (C.A. App. 123-
26). In particular, the firm had extensive dealings with
Municipal Light in working on its 1972 revenue bond
issue, including at least two meetings between the Director
of Public Utilities and the partner in charge of the bond
work at which “we tried to give him, and he wanted to
know, the total picture, if you will, of Muny Light, in
other words, what the condition was, what the financial
* Like any securities counsel, counsel providing opinions in sup-
port of municipal bond issues have an obligation to familiarize
themselves with the facts relevant to bond issues for which they have
legal responsibility. Jn the Matter of Jo M. Ferguson, Securities
Act of 1933 Release No. 5523, Aug. 21, 1974 (censure of bond
counsel) .
6
condition was, what the physical condition was, what our
plans are for the present, short-term, long-term, and in
short th. total picture of Muny Light” (C.A. App. 224-25;
see generally C.A. App. 222-39).°
Respondents did not contradict this evidence, and the
district court did not reject it. The only responsive evi-
dence was testimony by the law firm’s bond partner that
he could not “recall anything” that he received from the
City which was “not available publicly” (C.A. App. 364) ;
he had not, however, reviewed his files in order to refresh
his recollection (C.A. App. 369-70, 373-74). On the
strength of his testimony, the district court found that the
law firm “successfully and conclusively produced substan-
tial probative, material evidence affirmatively showing that
no confidential disclosure in fact occurred” in the course
of its years of service as counsel for the City (D.C. Op.,
App. 36a).’
B. The Present Litigation In Which The Law Firm
Represents The City’s Adversary
As we have noted, the City’s Municipal Electric Light
Plant and respondent Cleveland Electric Illuminating
Company (CEI) are competitors in the retail sale of
electricity in the Cleveland area. In addition, since CEI
6 In addition, another partner of the law firm had served as Chief
Counsel in the City’s law department until 1968, and as such had
some involvement in the affairs of Municipal Light and full access
to the City’s files (C.A. App. 274-78, 280, 281-85, 292, 298). The dis-
trict court found this relationship irrelevant (App. 40a-43a).
* The City was hampered in attempting to contradict the bond
partner’s testimony in view of the district court’s denials of its
requests for discovery into the law firm’s files relating to its prior
representation of the City (C.A. App. 95-99, 259-70, 369-70). It was
uncontested that the law firm had comprehensive files on those mat-
ters (C.A. App. 299-300, 371-72) and that the City’s relationship
with the law firm was such that the City had no records of most of
the attorney-client communications, many of which were oral (C.A.
App. 128, 205-06).
PS Sw Eres omer ets toe
7
is a much larger utility whose facilities completely sur-
round Municipal Light, Municipal Light is dependent
upon CEI for transmission of the power it needs to
obtain from other utilities to supplement its own genera-
tion capacity. The City’s complaint alleges that CEI has
used this monopoly power to strangle Municipal Light,
that CEI and the other defendants (nearby private utili-
ties) have unlawfully excluded Municipal Light from
power pooling arrangements, and that the Sherman Act
has otherwise been violated in an effort to destroy Munici-
pal Light or cause its takeover by CEI. CEI’s answer
denied any violation or damage and alleged that Munici-
pal Light’s problems have been “due to the incompetence
and mismanagement of the plaintiff City’s operating per-
sonnel”; in addition, CEI counterclaimed against the City
for “unfair methods of competition” by Municipal Light
and for payments allegedly due from Municipal Light
to CEI.
Some of the issues in the present litigation involving the
financial and business affairs of Municipal Light are
exemplified in the proposed findings of fact filed by CEI
on February 23, 1976:
“14, For a substantial number of years, MELP has
operated at a deficit. It sustains such a deficit be-
cause, among other things, its rate schedule is estab-
lished such that the revenues received from the retail
sale of electric energy are insufficient to cover all of
the costs of producing such electric energy. * * *
“29. The problems of the City in providing reliable
service to its customers, and the outages sustained by
MELP have been due primarily to the City’s ineffi-
cient and wasteful managemeiit practices, and to the
City’s refusal of CEI’s offers to provide a reliable
source of bulk power. * * * [I)|f the City had accepted
those offers, and if its management practices had
been efficient, the City would have been able and
8
would be able today to provide reliable service to its
customers and to compete effectively with CEI for
survival in the natural monopoly retail market in the
City of Cleveland.”
The law firm represents CEI in this litigation, which
began on July 1, 1975. While some of the issues in the
litigation were also raised in a proceeding before the
Nuclear Regulatory Commission (where the City’s 1971
motion to intervene was granted in 1974) and to a lesser
extent in a Federal Power Commission proceeding com-
menced in 1971, CEI was represented in those proceed-
ings solely by other counsel until the law firm filed a
notice of appearance in the Nuclear Regulatory Commis-
sion proceeding in February 1974.* Thus, the earliest date
when the City had any reason to know that the law firm
was representing an adversary in any aspect of the pres-
ent controversy was February 1974.
C. The Law Firm’s Past Representation Of CEI And
Facts Relating To Asserted Relinquishment Of The
City’s Rights
Since the courts below held that the City had waived in
advance (or was estopped to assert) any objection to the
law firm’s subsequent adversary representation of CEI
(see pp. 10-11, infra), we now discuss the undisputed
facts relevant to that point.
1. CEI, like the City, has been a client of the law firm
for many years, having employed the law firm (among
* The City has also sought to disqualify the law firm before the
Nuclear Regulatory Commission. Following a series of proceedings
on the motion, the Commission’s Atomic Safety and Licensing Ap-
peal Board decided that it was bound by the disqualification decision
in the present litigation under principles of collateral estoppel. In
the meantime, the Commission’s Atomic Safety and Licensing Board
has rendered an Initial Decision under Section 105(c) of the Atomic
Energy Act of 1954, as amended, 42 U.S.C. § 2135(c), that CEI and
others created and maintained “a situation inconsistent with the
antitrust laws” by violating the Sherman Act.
9
numerous other attorneys) for a succession of particular
matters without any continuing retainer arrangement
(C.A. App. 399-400; Plaintiff's Ex. Y). Between 1947
and 1974, there were eight instances in which the law firm
represented CEI as the City’s adversary, only one of which
involved a case commenced after 1965 (SS&D Ex. 29; see
C.A. App. 396-97).° Of these cases, two were property
damage cases, two were suits to require removal of cer-
tain CEI facilities and four were challenges to CEI rates
(ibid.). There is no suggestion that the subject matter
of any of these eight controversies touched upon Municipal
Light business affairs or any other matter with respect
to which the City employed the law firm. During the
period after 1971, the law firm never discussed with the
City’s Finance Directors, Law Directors or Director of
Public Utilities the nature of its representation of CEI or
any possibility of conflict between that representation and
the law firm’s representation of the City (C.A. App. 219,
135-37, 434-35, 195, 310, 381-85, 401-02, 257); there is
no evidence of any such discussion with any City official
at any time.
2. In 1972, the City had initially sought out other
bond counsel for the Municipal Light bond issue since
Municipal Light officials expressed an objection to the law
firm because of its relationship with CEI (C.A. App. 421).
Being unable to locate another satisfactory Ohio bond
attorney within the time available, the City’s Law Direc-
tor returned to the law firm, which agreed to undertake
the assignment contingent on specific concurrence by the
Director of Utilities, which was given in writing (C.A.
App. 430-31, SS&D Ex. 11). In connection with this
matter there was no discussion of any present or future
ethical conflict, either among City officials or between the
® There were 40 other instances in which the law firm represented
CEI as a codefendant with the City (all but one of which were per-
sonal injury or property damage cases) (ibid.).
10
City and the law firm (C.A. App. 423, 426-27, 432, 251-
52). The present litigation was not then contemplated
(C.A, App. 433) and, to all appearances at least, the law
firm then had no involvement in the incipient administra-
tive controversies (or any other active controversy) be-
tween Municipal Light and CEI (see p. 9, supra).
D. The Decisions Below
The court of appeals’ short order of affirmance held
that ‘{t}he District Judge’s conclusions of law are cor-
rect” (App. 2a), and its slightly lnger order denying
reconsideration contained no further legal discussion
(App. 3a-4a)."° Accordingly, we set forth in some detail
the district court’s pertinent conclusions of law, which
state the law of attorney disqualification now governing
the Sixth Circuit. (The court of appeals has not other-
wise spoken on these points. )
The district court denied the City’s motion to disqualify
(and the court of appeals affirmed) on three principal
legal grounds, as to which the facts are not in dispute:
1. The court held that the City’s 1972 engagement of
the law firm, formalized in a letter from the Law Director
noting only that the Director of Utilities “concurs with
my referral of this matter to your firm” (SS&D Ex. 11),
“conveyed with explicit clarity the City’s intention to
waive any ethical objections that could arise as a result
of [the law firm’s] performance as bond counsel, and [the
law firm] had every right to believe from the facts that
the City so intended” (App. 25a-26a). It held that the
simple fact of engagement, without more, amounted to a
waiver of any future conflict, and an estoppel to assert
any future conflict, because “the City cannot, in good
1° The order denying reconsideration merely reiterated some of
the factual conclusions stated in the district court’s opinion without
relating them to any legal principles.
nn CRS OI II Sas. wr
11
conscience, deny a full understanding of the scope and
depth of [the law firm’s] long standing genera! repre-
sentation of CEI” (App. 25a).
2. The court acknowledged the established principle
that “disqualification should be ordered ‘where any sub-
stantial relationship can be shown between the subject
matter of a former representation and that of a subse-
quent adverse representation’ ” (App. 30a-3la)." It held,
however, that “[n]jo ‘patently clear relationship’ exists
between [the law firm’s] bond representation in 1972 and
[its] representation of CEI in this pending antitrust
action. The Court is unable to discern any commonality
of issues * * * particularly in view of the non-litigious
nature of [the law firm’s] bond consultations. * * * [I]t
is inconceivable that [the bond partner’s] authorship of
the [1972 bond ordinance] would provide him with confi-
dential knowledge disclosing the City’s antitrust strategies
or motives” (App. 35a).
3. The court further acknowledged that “[t]he gen-
eral rule in disqualification cases has been that, upon
proof of a former attorney-client relationship concerning
substantially related matters, disclosure of confidences is
presumed.” But it went on, without citation of authority
or statement of reasons, to “conclude that equity demands,
and the pragmatics of emerging specialization inherent in
contemporary legal practice dictates, that this presump-
tion be rebuttable” and found it rebutted in this case by
“substantial probative, material evidence affirmatively
showing that no confidential disclosure in fact occurred”
in the course of the law firm’s service as counsel to the
City on Municipal Light matters (App. 36a).”
11 The internal quotation is from Judge Weinfeld’s classic formula-
tion in T.C. Theatre Corp. v. Warner Bros. Pictures, Inc., 113
F. Supp. 265, 268 (S.D.N.Y. 1953).
12 While “not confronted with resolving this issue” (App. 37a),
the district court further expressed the view that information in
12
REASONS FOR GRANTING THE WRIT
In endorsing the district court’s conclusions of law as
“correct”, the court of appeals adopted principles govern-
ing disqualification of counsel that directly conflict with
the principles articulated and applied in other courts of
appeals. Moreover, the standards for disqualification of
counsel in the federal courts on the basis of conflicting
representations raise an important question that has not
been, but should be, settled by this Court in the exercise of
its supervisory power over the lower courts, where such
questions arise with frequency.
I. THERE IS A CONFLICT AMONG THE CIRCUITS
ON THE STANDARDS FOR DISQUALIFICATION
OF COUNSEL
The decision adopted below begins by reciting the uni-
versally accepted “ basic principle that disqualification is
required “where any substantial relationship can be shown
between the subject matter of a former representation and
that of a subsequent adverse representation” (see pp. 10-
11, supra). It conflicts with the decisions of other courts
of appeals, however, as to the legal standards for deter-
the possession of one partner in a large law firm should not be
imputed to another partner if he belongs to “another department or
section of his firm” (App. 39a). This view directly contradicts Dis-
ciplinary Rule 5-105(D) of the Code of Professional Responsibility,
which provides that “If a lawyer is required to decline employment
or withdraw from employment under a Disciplinary Rule, no partner
* * * may accept or continue such employment.” It also directly
contradicts the decisions of other courts of appeals on imputation
among partners. E.g., Cinema 5, Lid. v. Cinerama, Inc., 528 F.2d
1384, 1387 (2 Cir. 1976); Schloetter v. Railoc of Indiana, Inc., 546
F.2d 706, 710 (7 Cir. 1976).
13 F.g., Fund of Funds, Ltd. v. Arthur Andersen & Co., 567 F.2d
225, 235 (2 Cir. 1977); Wilson P. Abraham Construction Corp. Vv.
Armco Steel Corp., 559 F.2d 250, 252 (5 Cir. 1977); Schloetter v.
Railoc of Indiana, Inc., 546 F.2d 706, 710 (7 Cir. 1976); Redd vy.
Shell Oil Co., 518 F.2d 311, 315 (10 Cir. 1975); Richardson v.
Hamilton International Corp., 469 F.2d 1382, 1385 (3 Cir. 1972),
cert. denied, 411 U.S. 986.
A Om = ewer
13
mining when these is a substantial relationship between
subject matters and as to the legal standards for deter-
mining when—if ever—an attorney may be excused from
disqualification notwithstanding such a substantial rela-
tionship between the adverse representations.
A. The decision below rejected the rule followed in
other circuits in holding that there is no “substantial
relationship” between the subject matter of the present
Municipal Light antitrust litigation and the subject mat-
ter of Squire, Sanders & Dempsey’s prior service as coun-
sel in Municipal Light financing. This conclusion of law
was based upon a perceived lack of “commonality of is-
sues * * * particularly in view of the non-litigious nature”
of the prior representation and upon a determination that
the law firm had not received “knowledge disclosing the
City’s antitrust strategies or motives” (p. 11, supra).
Thus, the court held it an insufficient basis for disqualifi-
cation that the prior representation exposed the attorneys
to inside information whose use could be detrimental to
the former client in a different legal context.
This holding conflicts directly with the recent decision
of the Court of Appeals for the Second Circuit—which
has developed much of the law in this area—in Fund of
Funds, Ltd. v. Arthur Andersen & Co., 567 F.2d 225 (2
Cir. 1977). In that case, an attorney was disqualified,
under the Canon 4 principle, because of his close relation-
ship with another firm that had been “regional counsel”
for Andersen, notwithstanding a district court finding that
“the firm never represented Andersen with respect to
any matters concerning the defendants in [a com-
panion case] or any of the persons, entities or trans-
actions involved * * * in this case. However, [the
firm} did acquire through its representation, knowl-
edge of Andersen’s trade practices and procedures,
and had at least some access to Andersen’s files and
internal memoranda.” 435 F. Supp. 84, 88 (S.D.N.Y.
1977).
14
The Second Circuit held this prior representation sub-
stantially related to the subject matter of the litigation
because it had given the firm (and through it the dis-
qualified attorney) a general familiarity with Andersen’s
affairs upon which they could draw in the litigation (567
F.2d at 236).
As the Statement details (pp. 4-6, supra), Squire,
Sanders & Dempsey as bond counsel for the City had full
access to internal information about Municipal Light’s
financial and business affairs and had numerous discus-
sions with knowledgeable City officials about those affairs.
As the district court’s opinion acknowledged, discharge of
its duty as counsel with respect to the 1972 and earlier
revenue bond issues required no less, for bond counsel is
called upon to examine and certify the “accuracy” and
“authenticity” of data concerning the issuing entity’s
financial condition as well as the use to which the bond
proceeds will be put. Thus, the law firm had at least as
much familiarity with Municipal Light’s internal affairs
as the attorneys disqualified in Fund of Funds; that
familiarity is particularly pertinent to the current major
litigation between its present and former clients, where
Cleveland Electric Iluminating’s defense specifically at-
tacks the manner in which Municipal Light’s internal
affairs have been conducted.
The standard adopted below ignores the ethical purpose
of the “substantial relationship” rule, which is designed to
assure that “[{a] lawyer should not use information ac-
quired in the course of the representation of a client to
the disadvantage of the client” (Code of Professional
Responsibility EC 4-5). It also conflicts directly with
Richardson Vv. Hamilton International Corp., 469 F.2d
1382, 1385 (3 Cir. 1972), cert. denied, 411 U.S. 986,
where the Third Circuit held that
“(The movants] need not show by direct evidence
that Mr. Richardson acquired information in the
15
course of the previous litigation which is to be used
in the pending action. They only need to show that
Mr. Richardson might have acquired substantially re-
lated material. * * * Although the exact nature of
the information he received is unknown, it is known
that he had access to confidential information about
Hamilton Life’s finances, corporate structure and
operations, which he would not have received had he
not been its attorney.”
B. Prior to the decision below, the courts of appeals
had uniformly held that the former client seeking disquali-
fication need not prove actual disclosure of confidences and
the former attorney will not be heard to contend that
confidences were not actually received. NCK Organiza-
tion Ltd. v. Bregman, 542 F.2d 128, 133-134 (2 Cir.
1976); Wilson P. Abraham Construction Corp. v. Armco
Steel Corp., 559 F.2d 250, 252 (5 Cir. 1977) ; Schloetter
v. Railoc of Indiana, Inc., 546 F.2d 706, 710 (7 Cir.
1976).* The holding below that Squire, Sanders &
Dempsey could be excused from disqualification by a
“showing that no confidential disclosure in fact occurred”
(p. 11, supra) is thus in express conflict with the law of
the other circuits.
14 This principle precludes the former attorney from contending
that the information he received from his former client was public
information. In Emle Industries, Inc. v. Patentex, Inc., 478
F.2d 562, 572-73 (2 Cir. 1973), the court agreed with “Henry
Drinker, a leading authority in the field of legal ethics, * * * that
the client’s privilege in confidential information disclosed to his
attorney ‘is not nullified by the fact that the circumstances to be
disclosed are part of a public record, or that there are other avail-
able sources for such information, or by the fact that the lawyer
received the same information from other sources.’ H. Drinker,
Legal Ethics 135 (1953).” The Code of Professional Responsibility
expressly provides that the “ethical precept, unlike the evidentiary
privilege, exists without regard to the nature or source of informa-
tion or the fact that others share the knowledge” (EC 4-4). /nter
alia, the rule is designed to obviate the kind of unseemly “swearing
match” between attorney and client that occurred at the hearing
below.
16
C. The waiver ‘estoppel holding below depends, at best,
upon the proposition that one who hires an attorney with
knowledge that the attorney also generally represents
another client tpso facto relinquishes any right to prevent
the attorney’s use of his confidences on behalf of the other
client in any future controversy. This proposition is in-
consistent in principle with the Second Circuit’s rejections
of analogous waiver arguments,’’ with the fundamental
purpose of Canon 4 and with the general principle that
“{ijn the civil no less than the criminal area, ‘courts in-
dulge every reasonable presumption against waiver.’ ”’
Fuentes Vv. Shevin, 407 U.S. 67, 94 n.31. Indeed, it can be
questioned whether public policy would permit even an
express waiver of unknown future ethical conflicts, let
alone such a tacit waiver. Cf., e.g., Brooklyn Savings Bank
v. O'Neil, 324 U.S. 697, 704; Bisso v. Inland Waterways
Corp., 349 U.S. 85.
Il. THE IMPORTANCE OF THE QUESTION
The district court opinion adopted by the court of ap-
peals deals sweepingly with questions of law fundamental
to the administration of justice in the federal courts.
The issue is not one of attorney discipline, which is nor-
mally entrusted to the States, for the conflicting repre-
sentations that result in disqualification do not ordinarily
involve misconduct warranting disciplinary proceedings.
Rather, it is a matter of assuring that federal court
In Consolidated Theatres, Inc. vy. Warner Bros. Circuit Manage-
ment Corp., 216 F.2d 920, 927-28 (2 Cir. 1954), the court strictly
construed, against waiver, conversations between the attorney and
officials of the movant, as well as finding no estoppel in the fact that
the movant had not objected to the attorney’s representation of the
same adversary in a related settlement negotiation. In Emle Indus-
tries, Inc. V. Patentex, Inc., 478 F.2d 562, 573-574 (2 Cir. 1973), the
court held that even an express waiver of conflict with respect to
certain pending litigation could not reasonably be interpreted “as a
blanket waiver * * * covering all possible future claims in which
[the attorney] might be involved in a posture adverse to [the former
client}.”
17
litigation is conducted in a manner manifestly free of any
avoidable impediment to fair procedure and enforcing
ethical standards in a context where only the federal
courts can do so.
The Court of Appeals for the Second Circuit has ex-
plained the importance of appellate leadership in this area:
“Without firm judicial support, the Canons of Ethics
would be only reverberating generalities. * * * We
have said that our duty in this case is owed not only
to the parties * * * but to the public as well. These
interests require this court to exercise its leadership
to insure that nothing, not even the appearance of
impropriety, is permitted to tarnish our judicial
process.” Emle Industries, Inc. v. Patentex, Inc.,
supra, 478 F.2d at 575.
Other courts of appeals have similarly noted the im-
portance of the appellate role, expressing “‘ ‘serious reser-
vations’ about whether the scope of appellate review is
limited to finding an abuse of discretion in disqualifica-
tion cases where only a purely legal question is at issue.”
Woods v. Covington County Bank, 537 F.2d 804, 810
(5 Cir. 1976) ; American Roller Co. v. Budinger, 513 F.2d
982, 985 n.3 (3 Cir. 1975).
This Court has previously exercised its “supervisory
jurisdiction over the proceedings of the federal courts” in
the recognition that “fastidious regard for the honor of
the administration of justice requires the Court to make
certain that the doing of justice be made so manifest that
only irrational or perverse claims of its disregard can be
asserted.” Mesarosh v. United States, 352 U.S. 1, 8,
quoting from Communist Party v. Subversive Activities
Control Board, 351 U.S. 115, 124. We urge the Court to
exercise that same jurisdiction here, so as to rectify the
conflict among the circuits and preserve the ethical pro-
tections embodied in Canon 4 from erosion in the federal
courts.
18
CONCLUSION
For the foregoing reasons, this petition for a writ of
certiorari should be granted.
Respectfully submitted,
JACK MITCHEL SCHULMAN
Director of Law
City of Cleveland
213 City Hall
Cleveland, Ohio 44114
JAMES VANR. SPRINGER
ARTHUR J. GALLIGAN
DICKSTEIN, SHAPIRO & MORIN
2101 L Street, N.W.
Washington, D.C. 20037
Attorneys for Petitioner
March 3, 1978
-
0
;
APPENDIX
la
Filed December 12, 1977
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
No. 77-3016
CITY OF CLEVELAND,
Plaintiff-Appellant
vs.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY,
Defendant-A ppellee
ORDER
Before PHILLIPS, Chief Judge, WEICK and PECK,
Circuit Judges.
The City of Cleveland (City) has appealed from an
order of the District Court denying its motion to dis-
qualify and enjoin the law firm of Squire, Sanders and
Dempsey from further participation in the case which is
the subject of appeals in cases Nos. 77-3017 and 77-3310
in this Court.
The District Court, prior to ruling on the motion for
disqualification, allowed extensive discovery to the City,
which included interrogatories, production of records,
depositions, and an evidentiary hearing where witnesses
were interrogated at length, briefs were submitted, and
oral arguments were made.
The District Court entered a 4l-page order in which
it adopted findings of fact and conclusions of law, and
carefully considered and determined all of the issues, and
denied the motion to disqualify and enjoin.
We are of the opinion that the order of the District
Court is supported by substantial evidence and it is not
2a
clearly erroneous. The District Judge’s conclusions of law
are correct. We find no abuse of discretion.
We are also of the opinion that the District Judge’s
protective order was justified.
We have jurisdiction to review the order on appeal.
Melamed v. ITT Continental Baking Co., 534 F.2d 82 (6th
Cir. 1976).
It is therefore ORDERED that the order of the Dis-
triet Court denying the motion of the City to disqualify
and enjoin be and it is hereby AFFIRMED.
ENTERED By ORDER OF THE COURT.
/s/ John P. Hehman
Clerk
3a
Filed January 24, 1978
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
No. 77-3016
CITY OF CLEVELAND,
Plaintiff-Appellant
Vs.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY,
Defendant-A ppellee
ORDER
Before PHILLIPS, Chief Judge, WEICK and PECK,
Circuit Judges.
No active Judge of this Court having requested that a
vote be taken on the City’s suggestion that the petition
for rehearing be heard en banc, said petition for rehear-
ing was referred to the panel for determination.
We are of the opinion that there was no merit in the
City’s motion to disqualify the law firm of Squire, Sanders
and Dempsey (SSD), and that this issue was adequately
treated in our previous order.
In this Court the City based its claim for disqualifica-
tion on the ground that the bond department of SSD had
in the past acted for the City in preparing legislation for
and certification of municipal bonds issued by the City.
Without such handling and certification by SSD the City’s
bonds could not have been marketed and sold. In the bond
department of SSD there were specialists in the field of
Municipal Bonds.
As recent as 1972, when the City was having difficulty
with an issue of its bonds, which issue had been handled
4a
by other counsel, it was necessary for the City to impor-
tune SSD to take over the mess and straighten it out.
With this type of conduct, the District Judge was of the
view that the City should be estopped from making such
a claim of disqualification.
Furthermore, the action, in which the City invokes the
claim of disqualification, does not relate to municipal bonds
of the City. It is an action in which the City has sued a
client of SSD, namely, The Cleveland Electric Illuminat-
ing Company (CEI), for damages for alleged violation
of Sections 1 and 2 of the Sherman Act. In that action
CEI has filed a counterclaim against the City to recover
the price of electric current sold by CEI to the City for
the operation of the City’s plant. CEI also sought to
recover damages against the City for the City’s alleged
violation of the antitrust laws.
This is not a case where the City had no knowledge of
the intimate relationship between SSD and CEI. SSD
handled the legal work in incorporating CEI many years
ago. Two of SSD’s partners have served on the Board
of Directors of CEI. One of SSD’s partners is a past
president of CEI. This relationship was a matter of
public knowledge in Cleveland and certainly was well
known to the City and to its legal department, which
consists of a Director of Law and thirty assistants.
The petition for rehearing is denied.
ENTERED BY ORDER OF THE COURT.
/s/ John P. Hehman
Clerk
5a
Filed August 3, 1976
THE UNITED STATES DISTRICT COURT
THE NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
Civil Action No. C75-560
CITY OF CLEVELAND,
Plaintiff
V.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY, et al.,
Defendants
ORDER
KRUPANSKY, J.
This is an action instituted by the plaintiff City of
Cleveland (City) against defendants Cleveland Electric
Illuminating Company (CEI), Duquesne Light Company,
Ohio Edison Company, Pennsylvania Power Company, and
Toledo Edison Company charging a conspiracy to violate
Sections 1 and 2 of the Sherman Antitrust Act, 15 U.S.C.
$$ 1 and 2. Jurisdiction is properly invoked pursuant to
Sections 4 and 16 of the Clayton Act, as amended, 15
U.S.C. §§ 15 and 26.
The Complaint, alleging certain acts of conspiracy to
monopolize and restrain trade, was filed on July 1, 1975.
Collateral to the substantive counts of the Complaint, the
City, on December 15, 1975, filed its Motion to Disqualify
the Cleveland law firm of Squire, Sanders and Dempsey
(SS&D), legal counsel for defendant CEI. This Motion,
charging a conflict of interest arising as a result of earlier
legal retainers between SS&D and the City, seeks to fore-
close SS&D from further participation in these pro-
ceedings.
The pending action before this District Court climaxes
protracted litigation initiated by the City against CEI and
6a
others as early as May 13, 1971, before the Federal Power
Commission (FPC) in a proceeding styled City of Cleve-
land v. CEI, Docket No. E7631. Litigation was thereafter
pursued by the City with its Petition to Intervene before
the Nuclear Regulatory Commission (NRC) filed on
July 6, 1971, wherein the City pressed its antitrust
charges against CEI and others.’
By order dated July 12, 1972, the FPC concluded that
the City’s allegations of anti-competitive practices by CEI
were unsupported by the facts. This conclusion was sub-
sequently affirmed on January 9, 1976, by the United
States Court of Appeals for the District of Columbia
Circuit. The proceeding before the NRC is still pending.
Issues of disqualification of counsel for conflicts arising
as a result of former representation present the acutely
sensitive dilemma of protecting the confidentiality of the
client-attorney relationship without needlessly interfering
with a litigant’s freedom to proceed with iegal counsel of
choice. See, Note, Attorney’s Conflict of Interests: Repre-
sentation of Interest Adverse to That of Former Client,
55 B.U. L. Rev. 61, 65 (1975). An equitable balance of
these competing interests is essential if the public’s trust
in the integrity of the Bar is to be preserved. Redd v.
Shell Oil Co., 518 F. 2d 311 (10th Cir. 1975). Assignment
of this delicate factual and policy-making decision is dele-
gated with increasing exclusivity to the district court. As
recognized in Hull v. Celanese Corporation, 513 F. 2d 568,
571 (2d Cir. 1975):
The district court bears the responsibility for the
supervision of the members of its bar .... The dis-
‘In the Matter of the Toledo Edison Company and The Cleve-
land Electric Illuminating Company (Davis-Besse Nuclear Power
Station, Units 1, 2 and 3) Docket Nos. 50-346A, 50-500A and 50-
501A; In the Matter of the Cleveland Electric Illuminating Com-
pany et al. (Perry Nuclear Power Plant, Units 1 and 2), Docket
Nos. 50-440A and 50-441A.
Ta
patch of this duty is discretionary in nature and a
finding of the district court will be upset only upon
a showing that an abuse of discretion has taken
place.
See also, Richardson v. Hamilton International Corpora-
tion, 469 F. 2d 1382 (3d Cir. 1972), cert. denied, 411 U.S.
986, (1973); Green v. Singer, 461 F. 2d 242 (3d Cir.),
cert. denied, 409 U.S. 848 (1972).
In approaching the issues of disqualification, the Court
is mindful of its paramount obligation of “maintaining
the highest standards of professional conduct and the
scrupulous administration of justice.” Hull, supra at 569;
Silver Chrysler Plymouth, Inc. v. Chrysler Motor Corp.,
518 F. 2d 751, 757 (2d Cir. 1975). This obligation stands
in contrast to the secondary consideration of ensuring the
right of the public to legal counsel of its own choice.
Ethical problems, however, cannot be resolved in the ab-
stract. Rather the Court must, rely upon a thorough con-
sideration of the facts. “Nor can judges exclude from
their minds realities of which fair decision could call for
judicial notice.” Silver Chrysler, 518 F. 2d at 753.
Thus, when dealing with ethical principles it is appar-
ent that a court, in the words of Judge Irving R. Kauf-
man in United States v. Standard Oil Company, 136
F. Supp. 345, 367 (S.D.N.Y. 1955),
cannot paint with broad strokes. The lines are fine.
and must be so marked. Guide-posts can be estab-
lished when virgin ground is being explored, and the
conclusion in a particular case can be reached only
after painstaking analysis of the facts and precise
application of precedent.
Accordingly, the dynamics of time have resulted in
evolving modification of the practitioner’s ethical, social
and political roles in society. Patterson and Cheatham,
The Profession of Law 19-23, 65-67 (1973). Rules ap-
8a
propriate in guiding lawyers of several decades ago must
be applied in light of current realities. As one commenta-
tor perceptively points out, the rigid rule of total disquali-
fication
is premised in the day when firms, when they existed,
were very small—also a day when attorneys most
frequently could think of their activities in terms of
discreet “matters.” Increasingly, neither condition
maintains. Note, Unchanging Rules in Changing
Times: The Canons of Ethics and Intra-firm Con-
flicts of Interest, 73 Yale L.J. 1058 (1964), quoted
in Silver Chrysler Plymouth Inc. v. Chrysler Motors
Corp., 370 F. Supp. 581, 589 (1973).
Since the largest legal firms represent the largest cor-
porations within all sectors of the economy, it is practi-
cally impossible for a firm to ensure against some form
of legal relationship between its clients at some time. The
pragmatics of modern day legal practice assume greater
significance and magnitude when a firm such as SS&D, a
prominent authority in a highly specialized area of the
law, is pursued to provide expert services for the economic
benefit of the public interest.
THE PARTIES
Since 1905, the City has owned and operated the Munici-
pal Electric Light Plant (MELP) which has generated
and distributed electric energy in keen competition with
CEI for residential, commercial and industrial consumers
within Cleveland, Ohio. MELP is a proprietary interest
of City and is financed by the issuance of revenue bonds
payable from the revenues of the system. MELP, as all
other city departments, both governmental and proprie-
tary, is represented legally by the City’s Law Depart-
ment. The City Law Department is administered by the
Law Director assisted by a Chief Counsel and staffed by
innumerable Assistant Law Directors.
9a
John Lansdale, Jr. (Lansdale), against whom the Mo-
tion to Disqualify is primarily lodged, is a partner in
the law firm of Squire, Sanders & Dempsey (SS&D)
which practices in Washington, D.C. under the name of
Cox, Langford & Brown. Martindale-Hubbell Law Direc-
tory (1975) identifies SS&D as having 79 partners and
80 associates. Cox, Langford & Brown is listed as having
an additional seven partners and five associates. SS&D is
the largest and one of the most prestigious law firms in
Ohio.
SS&D is structured into five sections, i.e., Litigation,
Public Law, Estate & Taxes, Labor and Corporate. In-
corporated into its Public Law Section is SS&D’s munici-
pal bond department, perhaps the largest in the entire
United States and nationally recognized as the most
reputable and prestigious legal authority in this highly
specialized area of consultation. Its unique expertise in
municipal bond law is unquestioned in the bond market:
the firm’s imprimatur assures the bond market that a
proposed issue has underlying legal validity, thereby af-
fording it greater public acceptability and more favorable
marketability.
In Ohio, SS&D performs virtually all state, county and
municipal bond work. The firms of Peck, Shaffer &
Williams (Peck) and Bricker, Evatt, “arton & Eckler
(Bricker) of Cincinnati and Columbus, Ohio, respectively,
also offer reputable bond consultation and services na-
tionally on a lesser scale than SS&D.
SS&D has represented CEI since the company’s incor-
poration in 1890, and has openly, notoriously and with-
out interruption, served CEI as outside general counsel
for 65 years.
In accordance with the pronouncement of the Sixth Cir-
cuit Court of Appeals in Melamid v. 1.T.T. Continental
Baking Co., No. 75-1970 (6th Cir. April 27, 1976), an
evidentiary hearing was accorded the parties to this pro-
ceeding, in which the following facts were disclosed.
10a
FACTS
It is conceded that CEI is and has been one of SS&D’s
major corporate clients. The total commitment of SS&D
to the legal and business affairs of CEI is further re-
flected by the service of Ralph M. Besse, a partner in
SS&D who left the firm in 1948 to become Vice President
and General Counsel and later President and Chief Ex-
ecutive of CEI; upon his retirement in 1970 he rejoined
SS&D as a partner but continued as a Director of CEI.
Lansdale also has been a Director of CEI since 1964
and has, since at least 1948, been the partner of the firm
who advised and counseled the Company in rate and
service matters as its chief legal counsel, not only before
the Public Utilities Commission of Ohio (PUCO), but in
all other litigation save those proceedings before the FPC.
During the intervening 29 years between 1947 and
the present, SS&D has, without exception, represented
CEI in opposition to the City in each instance where the
interest of CEI and the City were in conflict. Moreover,
during this same period SS&D represented CEI in ad-
versary proceedings against the City involving the Com-
pany’s rate and service practices before the PUCO in
1947, 1961, 1964, 1965 and 1974 (Deft.’s Exh. 29). For
the City to now feign ignorance of the complete and
intimate legal commitment of SS&D to CEI, its client for
65 years, as against all adverse interests including those
of the City, and to disclaim knowledge of the scope and
depth of the continuing legal relationship in total disre-
gard of the innumerable direct adversary confrontations
experienced by the City during at least the 30 years re-
flected by the evidence herein (Deft.’s Exh. 29), presents
a naive absurdity.
MELP, CEI’s chief competitor for the electric consumer
market within Cleveland, is one of the utilities owned and
operated by the City. The other is the Water Division
lla
(Water). MELP and Water are self-supporting and
financed by revenue bonds. These utilities theoretically
generate funds from their own separate operations similar
to profit-oriented, privately owned business ventures, in
contrast to non-reimbursable governmental functions
(police, fire, courts, ete.) and service functions (garbage
collection, parks, building inspection, etc.) which are sup-
ported by general fund tax receipts.
In all general respects, MELP is considered to be
similar to a privately owned and regulated electric utility,
except that as a city owned enterprise, it pays no federal,
state or local income, real estate or persona! property
taxes.* It is structured as an independently operating,
self-contained proprietary entity, and maintains an inde-
pendent system of audits and accounts.
Pursuant to the Charter of the City of Cleveland,
Ch. 15, § 83 et seg., MELP is legally represented and
counseled by the City’s Law Department. Indeed, the
Law Department’s representation of MELP is analogous
to SS&D’s representation of CEI.
A number of Cleveland’s major law firms including
SS&D have, during the last 30 years or more, served the
City on an ad hoc basis as special counsel representing
the City’s legal interests in selected controversies.
The selective arrangement provides the City access, as
its requirements demand, to the services of the area’s, and
in many instances the nation’s, most respected and tal-
ented legal practitioners generally not available within
the City’s relatively limited salary-structured Law De-
partment. In most instances retainers are accepted as a
2 Cleveland Little Hoover Commission Project No. 12—Division
of Light and Power—The White—Becher—-Pjevach Report on Light
and Power City of Cleveland commissioned by the Mayor and Presi-
dent of Cleveland City Counsel to conduct an indepth study of all
City of Cleveland operations commenced in December 1965 and con-
cluded on February 1, 1967.
12a
public service, albeit upon a fee basis generally more
moderate than the expertise commands in the private
sector.
It is conceded that apart from the services performed
by its bond department, SS&D’s ad hoc legal representa-
tion of the City had no substantial relationship to the
case at hand although the City urges that by some unde-
fined process of legal osmosis, unsupported by evidence,
SS&D acquired an insight into the City’s affairs which is
in itself an impermissible conflict, a charge of the type
prompting Judge Moore to comment in Silver Chrysler,
supra at 754: “The mere recital of such a proposition
should be self-refuting.”’
MELP’s limited relationship with SS&D since 1963
has been with John Brueckel (Brueckel), a partner as-
signed to the bond department of the Public Law Section.
It is noteworthy, however, that although SS&D accepted
ad hoe retainers from the City, it scrupulously avoided
any relationship with MELP, apart from its bond con-
sultations, except to openly oppose it as advocate for its
client CEI in rate and service controversies and other
adversary proceedings before the PUCO and the courts.
Accordingly, if the City is to prevail upon its Motion
to Disqualify it must do so upon the relationship that
existed between the parties as a result of SS&D’s role as
bond counsel for the City generally and, more particularly,
in the financing of MELP.
It is in this context of dual representation that the
alleged conflict must be considered. Absent evidence to
the contrary, SS&D’s capacity as bond counsel for City
departments other than MELP, lacks, in the Court’s view,
the requisite adverse interest implicit in controversies of
this nature. Vague and general assertions by the City
that SS&D’s relationship with City departments in gen-
eral is comparable to SS&D’s general representation of
13a
CEI is clearly a distortion of its ad hoc relationship with
the City as special counsel and ignores the diverse struc-
ture inherent in municipal government.
In this context an exploration of the function of bond
counsel is helpful. The record, however, is limited in
defining the work product of this commission. The only
evidence directed to the subject is the testimony of
Brueckel who frequently characterized his role in the fol-
lowing terms:
We address ourselves to legality to make sure that
the proceedings are legal so that people can have faith
in their [the bond issue] legality.
So we are not in the advocacy position. We are not
selling wares; we are selling legality .... I think
that a bond attorney, this is his or her lot. I think
you can destroy your credibility and the trust in you
if you take an advocate’s position and depart from
the strict legal aspects. (Record at 305-307).
In substance the primary responsibility of this employ-
ment is to certify that the transcript of proceedings relat-
ing to any given bond offering has been examined in con-
junction with the law under authority of which said bonds
are issued and executed and such examination supports a
legal opinion that the bonds constitute valid and legal
obligations of the issuing governmental political subdivi-
sion. (Pltf.’s Exh. AA at B-1).
As closely as the Court can determine from the frag-
mented testimony elicited at the hearing, the genesis of a
bond issue is enabling legislation, in this case, an ordi-
nance which fixes the amount and defines the purposes
and the manner in which the issue is to be amortized. It
is supported by a transcript or manuscript which em-
phasizes various factors and characteristics significant to
the security; an analysis of the political subdivisions’ debt
l4a
structure; various financial factors; governmental opera-
tions and economic characteristics of the issuing entity.
Included in the documentation of any bond issue is the
Bond Certificate, Notice of Sale and Bid Forms.
From time to time bond counsel may be called upon to
draft, exclusive of financial statements, one or more of
these documents, somewhat as a scrivener drafts instru-
ments.
Initially the information is, in whole or in part, docu-
mented by the appropriate governmental agency and pre-
sented to bond counsel for examination and certification
as to accuracy, authenticity and legality. Meticulous at-
tention to detail, exactness and veracity coupled with
sagacious pedantic legal acumen are the hallmark of suc-
cessful bond counsel in an astutely discriminating finan-
cial community. Eminence is not achieved by accepting,
at face value, the presentments of the subscriber, nor does
perfunctory approbation effectuate and maintain probity.
Accordingly, primary and secondary source references
“bottomed on public knowledge and what is in the public
domain” (Record at 310) are the tools of verification and
the keystone of legal opinion attesting any offering. In-
tegral to such comparative analysis is examination of
state and local law, both constitutional and legislative; the
reports of the Ohio Municipal Advisory Council incor-
porating a compendium of indebtedness of every political
subdivision in the state, debt payment record, operating
expenses, tax collections, assessed valuations, millage limi-
tations, and debt limitations, median family income, larg-
est employers (Deft.’s Exhs. 23-27); primary records of
the state and county auditors; reports of various bond
rating agencies such as Moody’s and Standard & Poor, and
other information bottomed in the public domain and
utilized by the financial community in evaluating fiscal
responsibility of a political subdivision. (Record at 310-
334).
15a
Historically the competitive relationship between MELP
and CEI is demarcated by two periods, with 1971 being
the watershed year. Prior to that time, the relationship,
although competitive, was one in which the City sought,
and CEI offered advice on the MELP operation. More-
over, throughout the 1960’s the parties without success
negotiated at various levels the sale of MELP to CEI.
In the pre-1971 era, the record discloses that SS&D
served as bond counsel for MELP-related bond issues on
five separate occasions: 1954, 1960, 1963, 1966 and 1968.
The latter two, in 1966 and 1968, were general obligation
bonds for street lighting rather than MELP mortgage
revenue bonds. As such, their relationship to MELP is so
attenuated as to render them irrelevant to this pro-
ceeding.
As to the three earlier issuances, the record reveals
little beyond their mere existence. It does appear, how-
ever, that the manuscript for the 1948 MELP issuance
was prepared by the Cleveland law firm of Jones, Day,
Cockley and Reavis (now Jones, Day, Reavis & Pogue) in
conjunction with the New York firm of Wood, Dawson,
Love & Sabatine (Wood, Dawson), and was the progenitor
of the 1954, 1960 and 1963 parity issuances. The City
Finance Department prepared the latter issuances, while
SS&D merely certified the proceedings. The City has
failed to present probative material evidence as to the
role assumed by SS&D in these issuances, detailing neither
the identity of the SS&D attorney serving as bond coun-
sel, nor the nature or extent o* information conveyed to
the firm in the course of this ad hoc relationship. The
paucity of evidence in this regard compels the Court to
conclude that these issuances are simply too remote in
point of time and relevance to be of any legal significance
to the present inquiry.
The City’s conclusory assertion of confidential dis-
closure arising from the Lansdale-Hauser memorandum
l6a
dated October 26, 1966, (Pltf.’s Exh. E), is equally re-
mote and, more importantly, unsupported by evidence and
completely misconceived.*
’In December of 1965; the Cleveland Little Hoover Commission
was activated by the Mayor and President of Cleveland City Council
by the appointment of 24 business and community leaders to con-
duct a 12-part, in depth study of all City operations. The Commis-
sion was charged “to analyze the above operations, determine their
adequacy, and make specific recommendations for improvements
and/or financial savings.” (Deft.’s Exh. 4a). Project No. 12 of the
study project styled Municipal Light—The White-Becher-Pjevach
Report—Financial Aspects of the Utilities—Division of Light and
Power was under the directorship of Carl White (White) of Ernst
& Ernst and G. George Becher (Becher). White was appointed
by the Mayor and President of Council and, at all times in ques-
tion, was acting in his representative capacity for the City. He
voluntarily consulted CEI to discuss the legality of his memorandum
styled “Thoughts on the Use of Electric Light and Power Plant
Utility (MELP) Funds for Alleviation of Critical Situation in
General Fund of the City of Cleveland” dated February 21, 1966,
incorporating his thoughts on the use of MELP funds as they im-
pacted the City’s general fund. Presumably, he was referred to
CEI’s legal counsel Lansdale (Plitf.’s Exh. F). Lansdale, pursuant
to the instructions of his client CEI, agreed to meet with White on
October 26, 1966. White appeared at the designated time with his
associate Becher, also of Ernst & Ernst, and duly identified them-
selves to Lansdale and Brueckel, who was also present. The tabula-
tions and calculations included in the White memorandum had
been developed by White from sources known only to himself. Dur-
ing the course of the confe:ence White also produced a legal opinion
that Lansdale had prepared for CEI concerning the validity of
relieving the City’s general fund in which he recommended a reduc-
tion of charges by MELP fer street lighting. Although not developed
by the evidence it aprcars that Lansdale’s legal opinion to CEI
predated the White inemorandum. White’s possession of Lansdale’s
CEI memorandum is unexplained, except to the extent that it had not
been supplied by either Lansdale or Brueckel. All data and infor-
mation, financial and otherwise, concerning MELP which was dis-
cussed during the course of the meeting was produced by White, as a
representative of the City. It is quite clear that neither Lansdale,
Brueckel nor any other member of SS&D produced any evidence
whatsoever concerning MELP or CEI. The subsequent letter and
memorandum styled the Lansdale memorandum (PItf.’s Exh. E),
addressed to Donald Hauser (Hauser), house counsel for CEI, is
17a
Mounting equipment breakdowns resulting in wide-
spread service failures and an increasing self-realization
by MELP of its incapability to provide reliable service to
its customers prompted the City to file a Complaint
against CEI before the FPC on May 13, 1971. Pursuant
to this action, and a Motion to Consolidate filed Decem-
ber 6, 1971, the City demanded of CEI a permanent
synchronous interconnection between their respective
transmission systems and an investigation of CEI’s alleged
anti-competitive practices. CEI was represented before
the FPC by the law firm of Reid and Priest of New York.
In the 1971 time frame, the City engaged Wood, Daw-
son, as bond counsel in conjunction with a $5 million
second mortgage revenue bond issue for MELP. Wood,
Dawson authored Ordinance No. 1187-71 (the 1971 ordi-
nance), adopted by Cleveland City Council on June 28,
1971, which authorized the City to issue and sell to its
sinking fund $5 million in anticipatory notes to be liqui-
dated from proceeds of future public bond sales. On or
about June 6, 1972, Howard Holton (Holton), Assistant
Secretary of the City’s Sinking Fund Commission and
the public official primarily responsible for the City’s bond
work, approached Brueckel with a request to review and
approve the issuance of $3 million available for sale pur-
suant to the 1971 ordinance. Brueckel, aware of the
action before the FPC and the potential for the con-
comitant charge of conflict of interest arising as a result
thereof, declined the offer pending a review of the request
with his partners at SS&D. Thereafter, SS&D internally
decided to forego the tendered retainer pending consulta-
tion and approval by its client, CEI, upon full disclosure
a sequential report of the meeting with White and a reaffirmation
of Lansdale’s legal opinion to CEI.
Taken in proper context, it is obvious that there is no sub-
stance to the City’s charge of confidential disclosure by members of
SS&D arising from this incident. Disclosure, if any in fact occurred,
was by the City through its representative White.
18a
of the possible consequences arising as a result of the
undertaking. Carl Rudolph, President of CEI, subse-
quently authorized SS&D to act upon the City’s request.
Concurrently, the incumbent Law Director for the City,
Richard Hollington, Jr. (Hollington), was discussing with
Daniel O’Laughlin (O’Laughlin), a partner of SS&D and
former Chief Counsel for the City, the same potential for
conflict arising from the FPC action. It should also be
noted that, on July 6, 1971, the City moved to intervene
in the NRC action to which CEI was already a party.
Before SS&D communicated to Holton the approval of
CEI to SS&D’s review of the City bond issue, Hollington
telephonically advised O’Laughlin of the City’s decision to
seek other bond counsel for the pending proposed issue.
Hollington advised O’Laughlin that the decision was
prompted by the intense competition between the City
and SS&D’s client, CEI, the adversary posture of the
parties resulting therefrom, and opposition voiced by City
Director of Utilities Raymond Kudukis (Kudukis) in con-
sultation with administrative and operational personnel of
MELP. Upon Hollington’s direct request O’Laughlin sug-
gested the names of two reputable Ohio law firms that
offered bond services analogous to those performed by
SS&D, i.e., William Chadeayne of the Bricker firm in
Columbus, and the Peck firm in Cincinnati.
The City thereupon tendered its retainer to the Bricker
firm. By letter dated July 18, 1972, (Deft.’s Exh. 10),
Chadeayne declined the proffered employment, noting cer-
tain complications and implying a questionable interpreta-
tion of Ohio law by Wood, Dawson as it applied to the
initial bond proceedings. For reasons known only to itself
and not disclosed by the evidence, the City, upon Bricker’s
refusal of its retainer, failed to approach the Peck firm
of Cincinnati for employment on this particular issue.
Citing the critical press of time, the City importuned
SS&D, literally as a public service, to undertake the as-
19a
signment. However, before a reluctant acceptance of the
retainer, SS&D insisted upon the written assent (in
Hollington’s request to SS&D) of Kudukis. That concur-
rence was provided by the Hollington letter of July 24,
1972 (Deft.’s Exh. 11}. The Court is here constrained to
interject that, from the evidence taken in its entirety,
reasonable minds can arrive at but one conclusion: from
the open, notorious and continuous legal representation
provided by SS&D as general outside legal counsel to CEI,
adversary to the entire world including the City for
65 years, viz., that the City was fully cognizant of the
scope and depth of any potential conflict of interest that
could attach to SS&D’s services to the City as a bond
consultant.
The classic attorney-client relationship between laymen
and lawyer is here significantly absent. Confronting the
Court in the case at bar is a relationship between an
attorney seeking consultation services for a client from
another attorney. The Charter of the City of Cleveland,
Ch. 15, § 83, mandates that the Director of Law shall be
the legal advisor of and attorney and counsel for the
City, and for all officers and departments thereof, in
matters relating to their official duties. He shall...
prepare all contracts, bonds, and other instruments
in writing in which the City is concerned and en-
dorse on each his approval of the form and correct-
ness thereof. No such bond, contract or instrument
shall become effective without such endorsement by
the Director of Law thereon.
In accordance with the requirements of the foregoing con-
cise language, the Law Director has historically, in his
official capacity, either reviewed the legality of all pro-
posed bond issues or, in the alternative, delegated the
duties to private lawyers or law firms as special counsel
for the City. Accordingly, in instances when the Law
————aeeeeeeeeeeeeeee aaa
20a
Director elected to delegate these duties, he has, within
his discretion, assigned these duties to private bond coun-
sel. Aware of the potential for conflict implicit in SS&D’s
simultaneous representation of CEI and the City and
having openly discussed the subject with Kudukis and
O’Laughlin it is presumed that the decision of the Law
Director to persist in his demands upon SS&D to act as
bond counsel was, under the prevailing circumstances,
knowledgeably rendered with a full understanding of the
impact that such insistence could have upon the ethical
issues evolving from the undertaking.
Brueckel’s services, as they related to the 1972 MELP
bond issue, were limited to drafting Ordinance No. 2104-
~ 72, authorizing purchase of the issue by the City’s sinking
fund. Thereafter City Council enacted an amended ver-
sion of the ordinance directing the issue to be sold pub-
licly or, in the alternative, to be purchased by the sinking
fund only upon enactment of an authorizing resolution
by City Council. SS&D did not prepare the amended
form of the ordinance (Deft.’s Exh. 1d). Brueckel did,
however, at the insistence of the City, continue his con-
sultations on a number of other bond issues, including the
1974 note to provide general obligation financing for
street lighting improvements.
During September of 1974, before the NRC, the City
for the first time interjected the issue of conflict of inter-
est arising as a result of dual representation. Thereafter,
on July 1, 1975, the City initiated the instant antitrust
action against CEI and others in this Court.
Commencing on August 5, 1975, the City, under the
direction of James B. Davis (Davis), incumbent Director
of Law, embarked upon an unusual, and perhaps ques-
tionable, campaign. On the one hand, the City was de-
manding that SS&D continue as bond counsel for the City
under penalty of violating DR 2-110, Code of Professional
2la
Responsibility,‘ while on the other hand demanding that
SS&D withdraw as legal counsel for CEI both before the
NRC and this Court, under penalty of violating Canons 4,
5, and 9 of the Code of Professional Responsibility. Not-
withstanding its charges of conflict leveled against SS&D,
the City again retained SS&D as bond counsel in mid-
November of 1975, at which time Davis assured Ralph
Gibbon (Gibbon), the SS&D partner in charge of the
Public Law Section, that the bond work currently under-
taken would be considered as a matter separate and apart
from the instant litigation. However, on Decembci 5,
1975, mounting tension between the parties prompted
Gibbon to notify Davis of SS&D’s decision to withdraw
as the City’s bond counsel. (Pltf.’s Exh. M). On Decem-
ber 15, 1975, the City filed the instant Motion to Dis-
qualify. As late as December 15, 1975, when its formal
Motion to Disqualify and enjoin SS&D from further par-
ticipation in the pending action before this Court was
filed, the City, in its Brief supporting said motion, con-
tinued to press SS&D to continue as bond counsel for
the City:
SS&D is the largest law firm in the State of Ohio,
with approximately 180 lawyers in 1975. It has one
*DR 2-110 Withdrawal from Employment.
(A) In general.
(1) If permission for withdrawal from employment is
required by the rules of a tribunal, a lawyer shall not
withdraw from employment in a proceeding before that
tribunal without its permission.
(2) In any event, a lawyer shall not withdraw from em-
ployment until he has taken reasonable steps to avoid
foreseeable prejudice to the rights of his client, includ-
ing giving due notice to his client, allowing time for em-
ployment of other counsel, delivering to the client all
papers and property to which the client is entitled, and
complying with applicable laws and rules.
(3) A lawyer who withdraws from employment shall refund
promptly any part of a fee paid in advance that has not
been earned.
1}
22a
of the largest sections specializing in public law and
public finance of any major law firm in the United
States. SS&D has a virtual monopoly on public
finance law in Northern Ohio. Only two other firms
in Ohio, one in Columbus and one in Cincinnati, do
any significant amount of public bond legal work.
Neither has ever worked for the City. Cleveland has
four other firms with in excess of 80 lawyers each
and a number of other firms of substantial size, but
none has ever attempted any significant amount of
bond work in the public sector. The opinion of SS&D
is widely accepted by financial institutions in Ohio
and elsewhere as authoritative for the sale of public
notes and bonds.
The City of Cleveland, in order to conduct its busi-
ness and survive financially, must each year issue
millions of dollars of notes and bonds. Over the last
several decades, virtually all of such notes and bonds
have been prepared by SS&D and sold because of its
opinion letters. No other law firm in Ohio or else-
where has the great and detailed familiarity with the
City’s affairs, the legal skills in dealing with Ohio
municipal law, and the staff necessary to prepare the
City’s bonds and notes and give the necessary opin-
28a
work for the City because it now seeks to represent
the Ohio Edison Company in this present case.
The City Law Department, with a constant prob-
lem of low pay and heavy turnover, has not managed
to develop lawyers with the skills necessary to handle
its own bond work. It is totally incapable of doing
such work at the present time.
The practical consequence of the virtual monopoly
of skills possessed by SS&D in the field of public
finance is that the City must and does totally rely
upon it for the daily conduct of its financial affairs.
With the recent financial crisis in New York City,
it is common knowledge that purchasers of municipal
obligations across the country have become extremely
cautious. With regard to the purchase of the current
obligations of the City of Cleveland, it is now more
necessary than ever to have authoritative opinion
letters from a law firm on its bonds and notes. At
present, only SS&D is readily available to provide
such opinions. (Pltf.’s Br. at 2-4).
ESTOPPEL
The alleged conflict of interest, if any in fact exists,
arises as a result of actions induced by the party seeking
disqualification. SS&D’s asserted defense of equitable
estoppel is therefore appropriately urged.
ions for their sale as does SS&D. For the City to
arrange to transfer a part of its bond business to
other firms would be very difficult and time consum-
ing. It is much more cumbersome and expensive to
deal with law firms not located in Cleveland. The
other large firms in Cleveland are reluctant, for a
variety of reasons to even enter the field. Of the five
large law firms in Cleveland, only Jones, Day, Reavis
& Pogue has done any bond work for the City in
recent years, having prepared an issue of Sewer Bond
Anticipation Notes in 1974 and again in 1975. This
firm is not currently available as a source of bond
In defining the doctrine of equitable estoppel in State
v. Dayton Power & Light Co., 170 F. Supp. 722, 725
(S.D. Ohio 1957), affd, 263 F.2d 909 (6th Cir.), rev’d
on other grounds, 359 U.S. 552 (1959), the court stated:
Equitable estoppel or estoppel in pais is the princi-
pal [sic] by which a party who knows or should know
the truth is absolutely precluded, both at law and in
equity, from denying, or asserting the contrary of,
ee...
24a
any material fact which, by his words or conduct,
affirmative or negative, intentionally or through cul-
pable negligence, he has induced another, who was
excusably ignorant of the true facts and who had a
right to rely upon such words or conduct, to believe
and act upon them thereby, as a consequence reason-
ably to be anticipated, changing his position in such
a way that he would suffer injury if such denial or
contrary assertion were allowed.
Generally speaking, however, equitable estoppel is
a rule of justice which in its proper field prevails
over all other rules.
The doctrine of estoppel in pais is founded upg
principles of morality and fair dealing and is in-
tended to subserve the ends of justice. (Citations
omitted).
While the doctrine is sparingly invoked against munici-
pal corporations, there is no doubt that a municipality can
be estopped to prevent a manifest injustice, where positive
action or representation by the municipal corporation,
acting within the scope of its authority, has induced
another to act in good faith, and it would be inequitable to
permit the retraction of such acts. Haba v. Cuff, 28 Ohio
Op. 2d 266, 201 N.E. 2d 343 (1963), appeal dismissed,
176 Ohio St. 374, 199 N.E. 2d 736 (1964), cert. denied,
880 U.S. 964 (1965). The application of the estoppel
doctrine to attorney disqualification proceedings was rec-
ognized in Consolidated Theatres, Inc. v. Warner Bros.
Circuit Mgt. Corp., 216 F. 2d 920 (2d Cir. 1954), as
well as in Informal Opinion 1323, (April 21, 1975),
wherein the American Bar Association Committee on
Ethics and Professional Responsibility stated:
[Gliving credence to the statement by Lawyer X
that when he was engaged by counsel for Company B
to represent the latter in its dispute with Com-
A ne) ee Re
ee eee
25a
pany C, he was advised by the lawyer for Company B
that there would be no conflict in his continued
representation of Company A, then it would be im-
proper for Company B to urge disqualification of
Lawyer X now that Company A and Company B
have become embroiled in separate litigation. Id. at 3.
The criteria for invoking the doctrine were succinctly
delineated in United States v. Georgia-Pacific Corp., 421
F. 2d 92, 96 (9th Cir. 1970) wherein it was stated:
Four elements must be present to establish the
defense of estoppel: (1) The party to be estopped
must know the facts; (2) he must intend that his
conduct shall be acted on or must so act that the
party asserting the estoppel has a right to believe it
is so intended; (3) the latter must be ignorant of the
true facts; and (4) he must rely on the former’s
conduct to his injury. (citation omitted).
From the evidence educed at the hearing, the City
cannot, in good conscience, deny a full understanding of
the scope and depth of SS&D’s long standing general
representation of CEI, if only from a review of the 49
legal actions in which SS&D represented CEI as an ad-
versary to the City’s interests (Deft.’s Exh. 29); the
Hollington-O’Laughlin telephone conversations on July 24,
1972; the Holton-O’Laughlin discussions of 1972 and the
open, notorious and continuous legal representation af-
forded CEI by SS&D for a period of 65 years.
The Hollington letter of July 24, 1972 (Deft.’s Exh.
11), communicating the Kudukis concurrence in the ap-
pointment of SS&D as special bond counsel for the 1972
MELP issue, with Hollington acting within the scope of
his authority as Law Director, certainly satisfies the
second criteria. The Hollington-O’Laughlin discussion,
coupled with the Hollington-Kudukis letter of July 24,
1972, conveyed with explicit clarity the City’s intention
to waive any ethical objections that could arise as a result
26a
of SS&D’s performance as bond counsel, and SS&D had
every right to believe from the facts that the City so in-
tended. Morever, it is apparent from the facts that SS&D
was, at that time, completely ignorant of any intention
on the part of the City to press the ethical issues at a
future date; and, in satisfaction of the fourth criteria
set forth by United States v. Georgia-Pacific Corp., supra,
SS&D, did in fact rely upon the City’s conduct to its own
detriment by reluctantly undertaking the City’s induced
retainer.
Accordingly, the Court concludes that the facts herein
catalogued warrant the imposition of the doctrine of
equitable estoppel against the City, thereby foreclosing the
City from prosecuting its Motion for Disqualification, and
it is on this account denied.
The Court’s inquiry does not, however, end here. Fur-
ther analysis of the disqualification issue is prompted by
a number of other asserted charges and defenses.
WAIVER
As a corollary to the doctrine of equitable estoppel,
SS&D argues that in the event of an affirmative finding
by the Court of ethical conflict as alleged by the City, the
City has knowingly and voluntarily consented to SS&D’s
role as bond counsel for the City, thereby waiving any
right to pursue its Motion for Disqualification.
It is axiomatic that the client’s right to object to an
attorney’s allegedly adverse representation may be waived.
E.g., Marketti v. Fitzsimmons, 373 F. Supp. 637 (W.D.
Wise. 1974) ; Note, Attorney’s Conflict of Interests, supra
at 81. See also In re Yarn Processing Patent Validity
Litigation, 530 F. 2d 83, 89 (5th Cir. 1976). The defense
of consent and waiver is predicated, in large part, upon
the same evidence supporting the Court’s invocation of
the doctrine of estoppel. As noted in Matsuo Yashida v.
Liberty Mutual Insurance Co., 240 F. 2d 824, 829 (9th
Cir. 1957):
27a
Waiver and estoppel are legal terms which are fre-
quently used interchangeably. Although the legal
consequences of each are often the same, the requisite
elements are different. Waiver refers to the volun-
tary or intentional relinquishment of a known right.
It emphasizes the mental attitude of the actor. On the
other hand, estoppel is any conduct, express or im-
plied, which reasonably misleads another to his preju-
dice so that a repudiation of such conduct would be
unjust in the eyes of the law. It is grounded not on
subjective intent but rather on the objective impres-
sion created by the actor’s conduct. It is in the area
of implied waiver that the two doctrines are closely
akin. (footnotes omitted).
The Court, accordingly, focuses upon those facts evidenc-
ing the City’s subjective intent manifested by the events
surrounding the 1972 bond ordinance representation.
Again the Hollington-Kudukis letter of July 24, 1972,
when taken in context with the Hollington-O’Laughlin
telephone conversations that preceded it, leaves no room
for doubt that the City did indeed waive any and all
objection to SS&D’s continued representation of CEI:
I would greatly appreciate SS&D assisting the City
as bond counsel in connection with this matter. I
have discussed this with Ray Kudukis who concurs
with my referral of this matter to your firm.
Accordingly, on this account the City’s Motion to Dis-
qualify is dismissed.
SUBSTANTIAL RELATIONSHIP TEST
Analogous to the City’s broad brush treatment of the
facts is the cavalier manner of its treatment of the law
governing the issue of disqualification. Interchangeably,
and without recognition of the distinct and definitive
a
28a
nature of each of the relevant Canons, the City charges
SS&D with violating Canons 4, 5 and 9 of the Code of
Professional Responsibility. Although case authority does
recognize a certain interrelationship between Canons 4
and 5, recent legal precedent distinguishes Canon 9 from
the others and proscribes its indiscriminate application to
issues of disqualification. Silver Chrysler Plymouth Inc.,
518 F. 2d at 757. See generally, Note, The Second Cir-
cuit and Disqualification—Silver Chrysler Steers im a
New Direction, 44 Fordham L. Rev. 130 (1975). That
the “appearance of impropriety” doctrine of Canon 9
should not be given an overbroad application was recently
reaffirmed in International Electronics Corp. v. Flanger,
527 F. 2d 1288, 1295 (2d Cir. 1975) wherein the court
stated:
We caution, as the Connecticut Bar Association urges
us to do, that Canon 9, though there are occasions
when it should be applied, should not be used promis-
cuously as a convenient tool for disqualification when
the facts simply do not fit within the rubric or other
specific ethical and disciplinary rules."
Judicial notice is taken of the standards of professional
conduct proclaimed in the Code of Professional Responsi-
bility. Canon 4, “A Lawyer Should Preserve the Confi-
dences and Secrets of a Client,” * promotes the sound
s Canon 9 as applied to Daniel O’Laughlin’s former employement
as Chief Counsel for the City Law Department will be discussed
more fully hereinafter.
6 DR4-101 Preservation of Confidences and Secrets of a Client.
(A) “Confidence” refers to information protected by the at-
torney-client privilege under applicable law, and “secret
refers to other information gained in the professional rela-
tionship that the client has requested be held inviolate or
the disclosure of which would be embarrasing or would be
likely to be detrimental to the client.
(B) Except when permitted under DR4-101 (C), a lawyer shall
not knowingly :
—
Pe ee ee ee ee eee
29a
policy of confidentiality of communication inierent in the
attorney-client relationship by insuring, in the first in-
stance, fundamental fairness in the judicial proess by
shielding the client from his attorney’s use of confidential
information against him. Secondly, it encourages full ds-
closure by a client, thereby enabling the attorney to func-
tion more effectively on the client’s behalf. Note, Attor-
ney’s Conflict of Interests, supra at 64. Canon 5, “A
Lawyer Should Exercise Independent Professional Judg-
ment on Behalf of a Client,” also provides guidance for
attorneys in conflict situations arising from multiple
client representation.’
(1) Reveal a confidence or secret of his client.
(2) Use a confidence or secret of his client to the disad-
vantage of the client.
(3) Use a confidence or secret of his client for the advantage
of himself or of a third person, unless the client consents
after full disclosure.
(C) A lawyer may reveal:
(1) Confidences or secrets with the consent of the client
or clients affected, but only after a full disclosure
to them.
(2) Confidences or secrets when permitted under Disei-
plinary Rules or required by law or court order.
(3) The intention of his client to commit a crime and the
information necessary to prevent the crime.
(4) Confidences or secrets necessary to establish or collect
his fee or to defend himself or his employees or associ-
ates against an accusation of wrongful conduct.
(D) A lawyer shall exercise reasonable care to prevent his em-
ployees, associates, and others whose services are utilized by
him from disclosing or using confidences or secrets of a
client, except that a lawyer may reveal the information
allowed by DR4-101 (C) through an employee.
*DR5-105 (A)-(D) Refusing to Accept or Continue Employment
if the Interests of Another Client May Impair the Independent Pro-
fessional Judgment of the Lawyer.
(A) A lawyer shall decline proffered employment, except to the
extent permitted under DR5-105 (C).
(B) A lawyer shall not continue multiple employment if the
exercise of his independent professional judgment in behalf
30a
In determining the existence of a conflict of interest
herein, the Court’s attention is directed to the test first
advanced in T. C. Theatres Corp. v. Warner Bros. Pic-
tures, Inc., 113 F. Supp. 265, 268 (S.D.N.Y. 1953), sub-
sequently adopted by the Second Circuit Court of Appeals,
in Consolidated Theatres, Inc. v. Warner Bros. Circuit
Management Corp., supra, and now generally applied in
nearly all circuits, to wit: the “substantial relationship”
test. Redd v. Shell Oil Co., supra; Richardson v. Hamil-
ton Internat’l Corp., supra; Uniweld Products, Inc. V.
Union Carbide Corp., 385 F. 2d 992 (5th Cir. 19v7), cert.
denied, 390 U.S. 921 (1968); Chugach Elec. Ass’n. V.
United States District Court, 370 F. 2d 441 (9th Cir.
1966), cert. denied, 389 U.S. 820 (1967) ; Cannon v. U.S.
Acoustics, 398 F. Supp. 209 (N.D.IIl. 1975); Marketti v.
Fitzsimmons, supra. As Judge Weinfeld initially formu-
lated the test in 7.C. Theatres Corp., supra at 268, dis-
qualification should be ordered
of a client will be or is likely to be adversely affected by
his representation of another client, except to the extent
permitted under DR5-105 (C).
(C) Inthe situations covered by DR5-105 (A) and (B), a lawyer
may represent multiple clients if it is obvious that he can
adequately represent the interest of each and if each con-
sents to the representation after full disclosure of the possi-
ble effect of such representation on the exercise of his in-
dependent professional judgment on behalf of each.
(D) If a layer is required to decline employment or to withdraw
from employment under DR5-105, no partner or associate of
his or his firm may accept such employment.
8 The City asserts that the “substantial relationship” test is not
applicable herein, relying on the recent case of Cinema 5, Ltd. V.
Cinerama, Inc., 528 F.2d 1384, 1387 (2d Cir. 1976), wherein the
Second Circuit held that said test “did not set a sufficiently high
standard” for disqualification where the “relationship is a continu-
ing, adverse representation.” The Court concludes that the instant
case is distinguishable therefrom, as detailed infra. Unlike Cinema
5, Brueckel’s ad hoc relationships with the City had fixed parameters,
were non-litigious and inherently non-adverse, and, with the excep-
tion of the 1972 ordinance, were unrelated to MELP matters.
i ee ee ee ee ee ee a0 ue 9 tod
ee ee
Sin
3la
where any substantial relationship can be shown be-
tween the subject matter of a former representation
and that of a subsequent adverse representation .. . .
Since the party moving for an order of disqualification
of an opponent’s counsel charging alleged conflict of inter-
est must overcome the burden imposed by several interre-
lated evidentiary hurdles, the City is thus required to
prove that:
1 A past attorney-client relationship existed between
the City and Brueckel which was adverse to Lans-
— concurrent and subsequent representation of
2. The subject matter of those relationships was/is
substantially related; and
3. Lansdale, as attorney for CEI, acquired knowledge
of confidential information from or concerning the
City, actually or by operation of law.
Initially, within the context of the Code of Professional
Responsibility, the existence of any attorney-client rela-
tionship, arising as a result of SS&D’s role as bond con-
sultant for the City, is questionable. The role of bond
counsel is not that of an “advocate.” Bond counsel merely
examines and attests to the legal validity of proposed
bond issues. Indeed, Brueckel’s services in 1972 in draft-
ing an ordinance for the $9.8 million bond issue are
analogous to that of a scrivener, a role that does not
create the relationship. W. McCormick, Law of Evidence
$ 88 at 180 (2d ed. 1972). However, viewing the rela-
tionship in a light most favorable to the City, the Court
concludes that an attorney-client relationship did exist be-
tween the City and SS&D as its bond counsel. The ex-
istence of an attorney-client relationship between CEI and
Lansdale is conceded.
Having acknowledged the existence of an attorney-client
relationship, the Court must also affirmatively find it to
32a
have been an adversary relationship. In this context it
should be noted that Canon 5, construed in conjunction
with ethical consideration EC 5-15 and 5-19, approves
certain limited multiple-client representations.
EC 5-15:
A lawyer should never represent in litigation multiple
clients with differing interests; and there are few
situations in which he would be justified in repre-
senting in litigation multiple clients with potentially
differing interests. If a lawyer accepted such em-
ployment and the interests did become actually differ-
ing, he would have to withdraw from employment
with likelihood of resulting hardship on the clients;
and for this reason it is preferable that he refuse the
employment initially. On the other hand, there are
many instances in which a lawyer may properly serve
multiple clients having potentially differing interests
in matters not involving litigation. If the interests
vary only slightly, it is generally likely that the
lawyer will not be subjected to an adverse influence
and that he can retain his independent judgment on
behalf of each client; and if the interests become
differing, withdrawal is less likely to have a disrup-
tive effect upon the causes of his clients. (emphasis
added).
EC 5-19:
A lawyer may represent several clients whose in-
terests are not actually or potentially differing.
Nevertheless, he should explain any circumstances
that might cause a client to question his undivided
loyalty. Regardless of the belief of a lawyer that
he may properly represent multiple clients, he must
defer to a client who holds the contrary belief and
withdraw from representation of that client. (em-
phasis added).
LD be AAT al are i COOOL NT acts a IG
tS hte A noe
le Re ee eR ee ek Ee
Ba wt et RE ee ihe ER BEI ree, nh 8 >
'
4
;
|
:
33a
_ Representations are sufficiently adverse to warrant a
disqualification
when, in behalf of one client, it is [the attorney’s]
duty to contend for that which duty to another client
requires him to oppose. Canon 6, ABA Canons of
Ethics (now Canon 5, CPR).
Notwithstanding the intense competition existing be-
tween CEI and MELP, the Court, in viewing the nature
of the legal representation afforded each of the parties
hereto by SS&D, finds that in this posture SS&D’s role
as the City’s special bond counsel in each ad hoc instance
reflected by the record herein, and more particularly for
the 1972 $9.8 million MELP issue, did not give rise to
potentially differing interests between the City and CEI.
SS&D’s representation of the City as bond counsel was
not litigious. SS&D’s representation of the City in bond
matters was not as advocate. Each retainer was arranged
by the City’s legal counsel, namely the Law Director, act-
ing with full realization of SS&D’s relationship as advo-
cate for CEI in its capacity of general counsel, all in
keeping with the objectives of EC 5-15 and 5-19.
In view of the foregoing, the Court is unable to find
the required adversity of representation necessary to sup-
port disqualification.
In the event that the City had carried its burden of
proof by initially demonstrating the requisite adversity
between these two representations, it would have been
confronted next with the burden of affirmatively showing,
as the second element of the test, that the former attorney-
client relationship involved matters substantially related
to the latter. Absent such affirmative showing, it is axio-
matic that no ethical probiem results. Cannon v. U.S.
Acoustics, supra at 222.
In confronting the conflicts issue, this element is “not
one whose dimensions are delineated with mathematical
34a
precision,” Silver Chrysler, 518 F. 2d at 758 (Adams, J.
concurring), and “[{u]nfortunately, the cases furnish no
applicable guide as to what creates a ‘substantial’ relation-
ship.” United States v. Standard Oil Co., 136 F. Supp.
345, 355 (S.D.N.Y. 1955). A survey of cases cited in
Silver Chrysler disclosed that disqualification was ordered
only under circumstances where the reiationship between
subsequent and former representations was “patently
clear.” 518 F. 2d at 754.
The gravamen of the City’s antitrust action reflected
by the pleadings is that of anti-competitive practices, en-
gaged in by the parties in the generation, transmission
and sale of electric energy in the Cleveland, Ohio area, as
demonstrated by the City’s charges that the defendants
combined and conspired: to refuse to wheel or to allow the
transmission of electric power and energy to MELP from
other power and energy suppliers, or from MELP to any
other electric utility system which is an actual or potential
competitor of any of the defendants, over transmission
lines owned or controlled by the defendants or any of
them; to boycott and refuse to deal with plaintiff and
others in the power exchange market, except on terms that
would maintain domination and exclusive control by the
defendants over electric bulk power supply in the area
served by each, and upon conditions that would be harmful
to the interest of the plaintiff and other actual and poten-
tial competitors at wholesale or retail; to refuse to admit
plaintiff to membership in the Central Area Power Coordi-
nating Group (CAPCO) or to otherwise permit plaintiff
to have access to the benefits of coordinated operations and
development or any other benefit of power pooling or
power exchange services; and to engage in other activities
for the purpose and with the effect of restraining and
eliminating competition in the sale of electric power and
energy.
The Court concludes that there exists no substantial
relationship between the pending antitrust action and
8 hn 00 rE OD eet eres &
ee ee ee See ee
Sacety falh tee ae ancien te aD iss SR a eet SON Ol Be tte 4 EA Del
“ “a sr
35a
SS&D’s services to the City on an ad hoc basis as special
bond counsel attesting the veracity of proposed bond
offerings.
No “patently clear” relationship exists between
Brueckel’s bond representation in 1972 and Lansdale’s
representation of CEI in this pending antitrust action.
The Court is unable to discern any commonality of issues,
see Fleischer v. A.A.P., Inc., 168 F. Supp. 548 (S.D.N.Y.
1958), appeal dismissed, 264 F. 2d 515 (2d Cir.) cert.
denied, 359 U.S. 1002 (1959), particularly in view of the
non-litigious nature of Brueckel’s bond consultations.
Thus, the instant case is distinguishable from precedent
such as Emle Industries, Inc. v. Patentex, 478 F. 2d 562
(2d Cir. 1973), where the matters in controversy were
identical, and Motor Mart, Inc. v. Saab Motors, 359
F. Supp. 156, 157 (S.D.N.Y. 1973), where the suit was
“essentially the same type of suit.”
Moreover, the Court finds the City’s reference to
Chugach Elec. Ass’n. v. United States District Court,
supra, does not support its contention of substantial rela-
tionship. In Chugach, substantial relationship was pat-
ently clear and the disqualification was predicated upon
the challenged attorney’s former position, for 14 years, as
General Counsel for the movant. That the City would
compare Brueckel’s limited, ad hoc representation to that
of a general counsel relationship reflects the City’s failure
to perceive the subtleties, or the “fine lines” to which
Judge Kaufman referred in United States v. Standard
Ou Co., supra at 367, that must be carefully considered in
applying ethical principles.
Furthermore, it is inconceivable that Brueckel’s author-
ship of Ordinance No. 2104-72 would provide him with
confidential knowledge disclosing the City’s antitrust
strategies or motives such as those available to the dis-
qualified attorney in Chugach.
36a
The Court necessarily concludes that the City has
failed to meet its burden of proving a substantial relation-
ship between the instant representations.
The general rule in disqualification cases has been that,
upon proof of a former attorney-client relationship con-
cerning substantially related matters, disclosure of confi-
dences is presumed. 7.C. Theatres Corn., supra at 268.
This Court concludes that equity “emands, and the
pragmatics of emerging specialization inherent in con-
temporary legal practice dictates, that this presumption be
rebuttable. Thus, upon proof of the attorney-client rela-
tionship arising from Brueckel’s employment as special
bond counsel, and of an adverse and substantial relation-
ship between that employment and SS&D’s representation
of CEI (which the City failed to provide), the disclosure
of confidential information would have been initially pre-
sumed in favor of the City.
However, the record in the instant case reflects that
SS&D successfully and conclusively produced substantial
probative, material evidence affirmatively showing that no
confidential disclosure in fact occurred and that the very
mechanical procedure integrant to the services of bond
counsel for the City foreclosed such manifestation. In the
first instance, the document composite of any proposed
City bond issue is, by law, a matter of public record.
Secondly, preliminary to any attestation of legality by
City’s bond counsel, verification of such documentation is
premised upon public record, and information within the
public domain, e.g., legislative enactments of state and
local political subdivisions, records of the State and
County Auditors, and Municipal fiscal officers, Ohio
Municipal Advisory Council Reports, Moody’s Reports,
Standard & Poor.
In instances where courts have found disclosure of
information by the client to one member of a law firm,
such knowledge has traditionally been imputed to all
xd * tr etek a eeeie athe +s ama
ee
ee
a 6 te ee ot alg. ol
AR AAS Be ate etn) es ep Ad lm
— eae Cee een
37a
members of his firm. Consolidated Theatres, Inc. Vv.
Warner Bros. Circuit Management Corp., supra at 928.
The court, having found no disclosure of confidential in-
formation in the proceeding at bar, is not confronted with
resolving this issue. It should, however, be noted that
recent prevailing legal precedent has rejected the harsh,
hard-line approach of irrebuttably imputing confidential
disclosures, actual or presumed, received by one member
of a law firm to all members of that law firm in favor of
the more realistically equitable logic, attuned to con-
temporary legal practices common to emerging law firms
of substantial size. This more intellectually sound treat-
ment is demonstrated in Silver Chrysler:
Only where an attorney himself represented a client
in matters substantially related to those embraced by
a subsequent case he wishes to bring against the
former client, is he irrebuttably presumed to have
benefitted from confidential information relevant to
the current case. In such limited situations there is
no necessity to demonstrate actual exposure to spe-
cific confidences which would benefit the present
client. But, as Judge Herlands noted in Fleischer
[supra at 552], in a case “where the attorney may be
‘vicariously disqualified’ (as by virtue of his former
membership in a law partnership), the inference is
treated as rebuttable.” 370 F. Supp. at 587. (cita-
tions omitted).
In affirming the lower court’s departure from precedent,
the Second Circuit, citing Laskey Bros. of W. Va., Inc. v.
Warner Bros. Pictures, 224 F. 2d 824, 827 (2d Cir. 1955),
cert. denied, 350 U.S. 932 (1956), has cautioned:
It will not do to make the presumption of confidential
information rebuttable and then to make the standard
of proof for rebuttal unattainably high. This is par-
ticularly true where, as here, the attorney must prove
38a
a negative, which is always a difficult burden to meet.
Silver Chrysler, 518 F. 2d at 754.
As Judge Weinstein had noted in the lower court decision
in Silver Chrysler, 370 F. Supp. at 588:
Since the larger firms represent the largest cor-
porations with interests in all sectors of the economy,
it is almost impossible to have an important client or
its subsidiary avoid some kind of legal relationship
with another client at some time. Cf. E. O. Smigel,
The Wall Street Lawyer 234 (1964). “Where a firm
represents concurrently conflicting interests, the prac-
tice is sometimes followed of ‘splitting up’ the firm
into separate teams of lawyers, each of which repre-
sents one of the antagonistic clients.” Note, Un-
changing Rules in Changing Times: The Canons of
Ethics and Intra-firm Conflicts of Interest, 73 Yale
L.J. 1058, 1071 (1964). Cf. J. C. Goulden, The
Superlawyers 53 (1972) (Covington and Burling
“isn’t really a law firm. . . . Actually, it’s a con-
glomeration of fifty law practices.”). The fact that
attorneys within the firm are effectively insulated
from exposure to the confidences of other clients
where necessary demonstrates the inappropriateness
of an invariable mechanical imputation of knowledge.
Nor does this departure from traditional interpreta-
tion of Canons 4 and 5 diminish the force of existing
decisions
which hold that the right of the public to counsel of
its choice or the possibility of a reduction of “‘both the
economic mobility of employees and their personal
freedom to follow their own interests” must be sec-
ondary considerations to the paramount importance of
“maintaining the highest standards of professional
conduct and the scrupulous administration of jus-
tice.” Silver Chrysler, 518 F. 2d at 757. (citations
omitted).
etl wr ee
ee ee eee a ee
ee,
Oe Ree De Se ee ee eee ed ese ener ate
39a
Thus, it is appropriate to reject a mechanistic ap-
proach herein. Alternatively, the doctrine of vertical
responsibility, classically invoked for disqualifying former
government attorneys upon termination of government
service was, and is, limited in application to imputing con-
fidential disclosures, presumed or actual, of subordinates
serving within the same subdivision or section of service
of the former government attorney. See, United States
v. Standard Oil, supra at 362.
This doctrine of vertical responsibility is relevant to the
private sector of legal practice in view of the increasing
numbers of law firms that equal the size of many legal
subdivisions of government. Imputing to an attorney in
the private practice all confidential information obtained,
or presumed to have been obtained, by other members of
his law firm may severely limit the scope of the private
attorney’s future career and the effective operation of
his firm, as well as the individual’s right to legal counsel
of choice. The analogous rule in the private practice of
law should therefore limit the imputation of confidential
disclosures, actual or presumed, to only those lawyers
practicing in the attorney’s area of concentration. Absent
direct proof to the contrary, the attorney would not be
deemed to have shared confidential information relating to
matters and services exclusively within the sphere of
representation of another department or section of his
firm. This vertical responsibility rule is more acutely
dramatized in the large, departmentalized law firms char-
acteristically more prevalent in an era of evolving legal
specialization. See also Kaufman, The Former Govern-
ment Attorney and the Canons of Professional Ethics, 70
Harv. L. Rev. 657, 666-67 (1957) ; Note, Attorney’s Con-
flict of Interests, supra at 77-78.
Without question SS&D is the largest law firm in Ohio
and perhaps one of the larger law firms in the nation,
with approximately 180 partners and associates. It is
40a
departmentalized into five sections as hereinbefore de-
scribed. Brueckel is, and has been during his legal career
with SS&D, assigned to the highly specialized bond divi-
sion of the Public Law Section of that firm; Lansdale is,
and has been during his legal career with SS&D, assigned
to the Litigation Section of the firm. Each is a separate
and distinct section of the firm pursuing specialized areas
of endeavor. The Litigation Section has, without excep-
tion, pursued in adversary proceedings the interests of
CEI. In no instance has it represented MELP, and under
circumstances of cross-interest between the parties the
litigation section has been the advocate for CEI.
The record is barren of evidence of actual confidential
disclosure between Brueckel of the Public Law Section
and Lansdale of the Litigation Section. The Lansdale-
Hauser memorandum resuiting from the White-Little
Hoover Commission meeting attended by Lansdale and
Brueckel does not support a conclusion of actual dis-
closure for the reasons heretofore discussed in the state-
ment of the facts herein.
Apart from the doctrine of vertical responsibility, the
City was equally unsuccessful in supporting imputed dis-
closure of confidential information by Brueckel to Lans-
dale in light of affirmative evidence rebutting such pre-
sumption. See, Standard Oil Co., supra at 304.
The City having failed to carry its burden of proof as
to the three elements of the “substantial relationship” test,
it is manifest that disqualification of SS&D is not war-
ranted under this traditional analysis.
Lastly, the Court directs its attention to the alleged
conflict of interest arising from O’Laughlin’s service with
the City Law Department between 1952 and 1968 when
he became associated with SS&D.
During his tenure with the City Law Department,
O’Laughlin served as Chief Counsel for the City under
ee
PN teed et eee. wd Gat bad wk
4la
Law Director Brontis Klementowicz (Klementowicz) be-
tween 1964 and 1968. In this capacity he had overall
responsibility for the City’s civil litigation, monitoring in
varying degrees legal services required by all City de-
partments. The evidence demonstrates that MELP affairs
during this period were directly under the supervision of
Klementowicz, acting on behalf of the incumbent Mayor
Ralph J. Locher. O’Laughlin was, however, as Secretary
to the Mayor’s Board of Control privy to various discus-
sions concerning MELP expansion. Since affiliating with
SSD, O’Laughlin has been assigned to the Public Law
Section, where he has served in a consulting capacity with
various political subdivisions of government, school boards
and state universities.
The City’s charge of conflict arising from O’Laughlin’s
employment by SS&D is founded upon Canon 9, “A
Lawyer Should Avoid Even the Appearance of Profes-
sional Impropriety.” DR 9-101 (B) states:
A lawyer shall not accept private employment in a
matter in which he had substantial responsibility
while he was a public employee.
As noted in ABA Committee on Professional Ethics For-
mal Opinion No. 37 (May 4, 1931), the rule evolved to
protect against
the manifest possibility that his action as a public
legal official might be influenced (or open to the
charge that it had been influenced) by the hove of
being employed privately either to uphold or upset
what he had done.
Considering the issue presented, the Court is guided
by Judge Kaufman’s admonition articulated in his seminal
article, The Former Government Attorney and the Canons
of Professional Ethics, 70 Harv. L. Rev. 657, 668 (1957),
wherein he stated:
42a
If the Government service will tend to sterilize an
attorney in too large an area of law for too long a
time, or will prevent him from engaging in the prac-
tice of a technical specialty which he had devoted
years in acquiring, and if that sterilization will
spread to the firm with which he becomes associated,
the sacrifice of entering government service will be
too great for most men to make.
Obvious are the distinctions between legal precedent
and the present case under which Canon 9 sanctions are
sought. In those instances wherein disqualification was
ordered pursuant to Canon 9, the challenged attorney had
performed extensive services in specific matters, or litiga-
tion in the same proceeding from which he was subse-
quently being disqualified. E.g., General Motors Corp. V.
City of New York, 501 F. 2d 639 (2d Cir. 1974) ; Allied
Realty of St. Paul Inc. v. Exchange Nat’l Bank of Chicago,
408 F. 2d 1099 (8th Cir.), cert. denied, 396 U.S. 823
(1969); Hilo Metal Company, Ltd. v. Learner Co., 258
F. Supp. 23 (D. Haw 1966).
Manifest from the record is the City’s failure to fac-
tually interconnect O’Laughlin’s present employment with
his previous public employment. Indeed, the record is
conspicuously silent as to any specific ciaims or matters
involving O’Laughlin’s participation in MELP affairs,
either substantially or remotely related to the antitrust
action presently before this Court. Accordingly, in the
words of Judge Kaufman in United States v. Standard
Oil Co., supra at 365 (S.D.N.Y. 1955), the failure of
proof is fatal:
(I]t is hardly reasonable to hold that an appearance
of evil can be found in [an attorney’s] undertaking
a case against the government where there is not some
closer factual relationship between his former job
and the case at hand other than that the same vast
agency is involved.
OT. TOC WS a the) Fe
ne SRR. Ol MO tee Seal
ee ete Re ae ee tee
Cy a. — ee CO
43a
_Absent the vital links required to support a Canon 9
violation, the City’s Motion for Disqualification is over-
ruled on this account.
SUMMARY OF CONCLUSIONS
For the reasons hereinbefore set forth, the Court con-
cludes:
1. The City is estopped from asserting alleged conflict
of interest against SS&D;
2. The City, with full knowledge of SS&D’s legal rep-
resentation of CEI over the years, waived any rights
to assert alleged conflict of interest against SS&D;
3. Brueckel’s services for the City in preparation of
the 1972 $9.8 million MELP related bond ordinance
were not adverse to Lansdale’s adversary repre-
sentation of CEI in this antitrust action;
4. SS&D’s role as special bond counsel for the City on
an ad hoc basis throughout the years does not consti-
tute an adverse representation to Lansdale’s repre-
sentation of CEI in the instant antitrust action
within the intent and meaning of the Canons.
5. Lansdale received no confidential information con-
cerning MELP as a result of Brueckel’s services as
special bond counsel to the City either actually or by
operation of law;
6. O’Laughlin’s present employment with SS&D pre-
sents no basis for disqualification of SS&D as coun-
sel for CEI in the pending antitrust action.
Accordingly, the City’s Motion to Disqualify the law
firm of SS&D from continued representation of defend-
ant CEI in this antitrust action is hereby denied.
44a
IT IS SO ORDERED.
/s/ Robert B. Krupansky
ROBERT B. KRUPANSKY
United States District Judge
45a
Filed February 3, 1978
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
No. 77-3016
CITY OF CLEVELAND,
Plaintiff-Appellant,
V.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY,
Defendant-A ppellee.
BEFORE: PHILLIPS, WEICK and PECK, Circuit
Judges.
ORDER STAYING MANDATE
ORDERED, That motion to stay mandate herein pend-
ing application to the Supreme Court for writ of certiorari
is hereby granted and the mandate is stayed for thirty
days from this date; provided that, if within such thirty
days, the applicant shall file with the Clerk of this Court
the certificate of the Clerk of the Supreme Court that the
certiorari petition, record, and brief have been filed, the
stay shall continue until the final disposition of the case
by the Supreme Court. Unless this condition is complied
with within such thirty days or any extension thereof
made by the Court or any judge thereof, or if the condi-
tion is complied with, then upon the filing of copy of an
order denying the writ applied for, the mandate shall
issue.
ENTERED BY ORDER OF THE COURT.
/s/ John P. Hehman
JOHN P. HEHMAN
Clerk
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.