Petition for Writ of Certiorari — Hall v. National Farmers Organization, Inc.

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SUPREME COURT. U0. | SEP. 22 1967

a | DAVIS, CLERK.

INTHE...

" Supreme Court of the United States

WILLIAM D: HALL, |

- Petitioner,

Vv.

NATIONAL FARMERS ORGANIZATION,

“INCORPORATED,

; Respondent.

_ PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

? : ; HALL, FRAZIER & CROKIN,

315 Lemcke Building,

. - ° Jndianapolis, Indiana,

Attorneys for Petitioner.

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: INDEX “

Page

a Opinions SEE REE P MERA Ds seal SENT APS eer 2 ‘

sanecaare awe vaesee | : caveceeeceasee aby 2

Questions Presented sideetnnens cette wedi vbostl oh a

__Sitaiates,-Reguiations, and Rules Involved. peasee “ ie @

"Statement uwtcisccekbeuadedbweeNGe eee de oes : auees 6.

- Argument: ....... Vigsctasighetees tee aae nee ates a

. (a.) On the First Question oseate Sidesdceecshens 14

(b.) On the Second Question ”. seeeeeers (steeseh ee

___fe.): On the Third Question aBabs ‘Leldl devabeness 27

Reasons For Granting The Writ of Certiorari ...... 47

Conclusion ..--.. ERE aed Bion RULE 50

Appendix TE Lccquwias coknddevas ca hate cdetabasrsarkas ‘a

PN SEPT IEE ER SE TTPO! WE 3a

Se aa dae ee ae es eee ees ae 7 Rene

_OTTaTIONS

a Page

Allen Reaity Co. ‘ws. Uhler, (Ind. ) 146 N. E. 766. (1925) 31. .

:- Allgair vs. Genmore Distilleries Co., (N.Y.), ‘91 F. S.

Be Ue ca nccccssesacesssdetes cay PE ssaaeniaann 21

Anderson vs. ry se F. 2d 9,. Certiorari dinied,

324 U. S. 861 (1 snless canes aveuubwesksadtnes 31

Annesley vs. Earl of. ‘Anglesea, Howell’s State Trials, :

Vol. 17, p. 1139 (1743) .......+..+++- pesecteceeee 42

Berger vs. Amana. Society, (Iowa), 111 N. W. 2d 753

CRD eS vivevesduseecsosy cc havetevsuesieae es oa

Body-Steffner Co. vs. Plotitl Products, Inc., (Calif. );

147 P. 2d 84 (1944) 21... cece eee ee cece cece etene 38

- Callahan vs. Wolfe, (Idaho), 400 P. 24 938 (1965) ..

ee Consolidated 5 dé: Gas, Inc. 08. Ryan, 250 F. S. 600.

ee cy mancetaaie 32

, Consolidated Theaties vs. Warner Bros. Cir. Man.

| Corp., 216 F. 2d 920 (1954) Jaseeheranserngeencst ae

Cord vs. Smith, 338 F. 2d 516 (1964) ...........-. .. 24

Croce vs. Superior Court, 21 Cal. App. 2d 18, 68 P. 2d-

869 (1937) eVetececvacesteresbavesvecs net deeeeees 41

Cuinberland Portland Cement Co. vs. R. F. C., 140

F. 8S. 739, affirmed 232 F. 2d 930 (1956) ...... Sere

Equitable Life Insurance: Co. of Iowa -vs. Halsey,

_ . Stuart & Co., 312. U. 8. 410 (1941) Peeretie jcoanede 32

' Fernandina Shipbuilding é Dry Dock - vs. Peters,

(Fla.),.283 F. 621 (1922) .........2eeeee secre enon: ...

First Nat. Co. vs. C. I. R., 289° F. 2d 861 (1961) “Ses oe

Gebhardt vs.. United Rys. Co. of St. bp (Mo. Sup.),

220 8S. W. 677 (1920) piuiusadivetuns vee ceeeeeeeees 29

a ‘ nae , we ‘ Pw Rwrs SOT IE LIE TL TILE ILS ILE: LOE IE OE EDS tT IIE I PHN

—— | .

_ Page

Gibbons vs. Brandt, 170 F. 2d. 385, Certiorari ns

_. 836.0. 8: 910, rehearing denied 336 U. S. 929 (1948) .

Gidney vs. Chapple, (Okla.), 110 P. 1099 ( 1910) Agee 31

Great Atl. & Pac. Tea. Co. vs. FTC, 106 F. 2d 667

bud EEE EE ECE TT Ee 36 |

’ Orinisinons v6. Zollinger, (Ind.), 240 F: 8. 63 (1964) .

Harris-Emery Co. vs. Pitcairn, 122 Towa 595, 98 N. aiet

Be BR ei ree hae veccecse 39

Henry 8. Deiaker: Legal Ethics, P: 137 4 ies otk OD

‘Hett vs. United States, 353 F. 2d 761, Certiorari denied. |

‘384 U.S. 905 (1966) .............005.-.. hid wo o bid? 28, 47.

' Isaacs vs. United States, 301 F. 2d 706 (1962) aie oiren 31

Jacuzzi vs. Jacuzzi Brothers, Incorporated, 218 App. .

Div. 24, 32 Cal. Rptr. 188 ( 1963) os hoes éane'e the as 26

Kentucky Rural Elec. Coop, Corp. vs. senntiiny Elec.

Co., 175 F. S. 250 (1959) pene bnees Civ ebonese somes 36

Lawson vs. Haynes, 170 F. 2d 741 (1948) ........43. 32

Lawton vs. Strong, 87 Ariz. 17, 249 F. 24999 (1957): .

McLain vs. Oklahoma Cotton Growers’ Ass’n, 258° .

DD (IGN) 651.86 eididecds ass. babel aaiet've - 39

" McMullen vs. Hoffman, 174°U. 8.639 19 S. Ct. 835, 43 -

L. Ed. 1117 (1899) .... b.ctdvice ho hanbine eds checs 14,45

. Meinhard vs. Salmon, , 249,N. Y. 458, 464, 164 N. BH. 545, :

SAG! (192B) isn ob o.ks oe cineed disc cc beeute cede Wea nes 40

a ay: Keely Inst. vs. Leslie E. . Keeley Co., 155 ”

_” Mercer vs; Elliott, 25 Cal. Rptr, 217 (1962) aes viinvws “4

Miller vs. Osterlund, (Minn.), 191, N. W. 919 (1923) .

‘ Murillo vs. panera 79 Ariz, 1, 281'P. 2d 786 965)..

FORO IOLL IE IIEL OL BEA IONE LM

OITATIONS—Oontinued

Page

Nichaolds vs. McGlothlin, 330 F. 2d 454 (1964) . cjeeenun 32

‘Oklahoma Cotton Growers’ Ass’n vs, Salyer, 114 Okla.

77, 243, P. 232 (1926) ove deecinecescesceveneccsces OO

Oliver Brothers vs. FTC, 102 F. od - 763 (1989) gains 36.

People vs. Universal Service Ass'n, 365 Ii. 542, 7N. EB.

: By Oe CEE: cn cciscedeatcnkecvsocagigcccessncens 35

People vs: VanAlstine, 57 Mich. 69, 23 N.. W. 594, 598

Seen ¢ |...) Menor eee eee Ce ere 29

People vs. “Warden of Combs, Jail, 150 _— 714,, 270 .

_ ON. Y. 8. 862 (1984) . och aath dedbiaesesectet 28

Pittman vs. Lageschulte, 45 Tl. App. 2d av? 195 N. E.

_ 2d 394, 399-400 (1964) -.... 2... eee e eee eee eee ees stece 30.

Prairie Farmer Magazine, November 17, 1962 ........ 39

Primeau vs. Gramfield, 193 F. 911 (1911) ............ 45

Pruitt vs. The Oklahoma Steam Baking Company, 39

Okla. 509, 1385 P. 780 (1918) ... cs... ce cee eeeeees 39

* Quality Bakers of America v8. Fro, 114 F. 2d 588 |

(1940). eel eee ce eee eee c econ eect ereesseeeeeeets 36

Rathke vs. Yakima Valley Grape Growers’ Ase’ n,

(8. Ct. Wash.), 192 P. 2d 349 (1948) . she bthe sane diad 38

- Read vs. Tidewater’ Coal Exchange, 13 Del. Ch. 195,

116 A. 898, 904 (1922) ...... cer ee eecseeveecocevees 35

_. Reeder -vs. Guranteed Foods, Ine., (Kan.), . 399 P. ad

B22 (1965) es seseeevencecere tC RANE IID 32

Schneider vs. Schneider, 125 Iowa 1, 98 N. W. 159 (1904) 39

} Scott vs. Burnight, 131 Towa 5 507, 107-N. W. 422 (1906) 39

Securities & ‘Exichange Commission vs. Capital ye |

Research. Bureau, Inc., (N. Y.),; 875 U. S..180 (1963). .

State ve. Amana Society, 182 Iowa 304, 109 N. W. 894 -

. 89%, (1906) niga See eeeegegeeceesorcees on a¥e Sa mer’

OFFATIONSOontinned

Page

State v8. . Hutterisch Bruder Gemeinde, 6. S.-D. 189,

191 N. W. 635 (1922)... cc cece eee laces WB de’ onned 35

State vs. A srbpatrich, 220 ae 974, 263 N. W. 52,55.

(HME Ri tan ewisdaks Verbs kudaveccetiaiice 28

Stephens vs. Collison, 249 Ill. 225, 94 N. E. 664 (1911) .

Stern vs. National City Co., 25 FS. 948, affirmed st

Co. of New York vs. Stern, 110. F. 2d. 601, reversed

312 U. S. 666, mandate conformed to 142 F. ad 449

EE seacakteséye GueveeQteaans edddebeeesceeni cn 31

Strand vs. Librascope, Inc., 197 F. 8. 743 (1961) iced. tro

_T.C. & Theatre ‘Corp. vs. dvisiaas Bros. ian AB

We Ey BO GE heodeacsimtiesede 21

Teoli vs. Nardolillo, 23 R. I. 87, 49 A. 489 (1901) ...... 45.

' Texas Tunneling Co. vs. City of Chattanooga, Fenn.,

204 F. S. 821, affirmed i in part, revs’d in part, 329 F..

2d 402 ( 1962) is ctnighidbeancdcdatewdnnenes ? bhoee 32

Trade Practice Rules “tor the Fresh Fruits pa ds

tables Industry, 30 Fed.- Reg. 5331 and 5332 ( 1965).

United States vs. Certain repay etc., (N. Y. ), 306 F.

RP CD os secs asses sarah avgandedensacdsce $2

United States vs. Hoffa, 349 F. 2d 20. (1965) euielaesaas :

Whitten vs. eatin: 171. Cal. 621, 154 P. 312 (1915) .

Federal ‘Statutes, Rules and State Statutes

Clayton Act, §6, 15 U.S.C, 14, as amended by the

Capper-Volstead Act, §1, 7 U. S.C., §291 .../.. vee 1K

- Clayton Act, §6; 15 U. 8. C., §14, as amended by ti the

Robinson-Patman Act, §2(c), 15 U.S.C., §13(¢) «

Sherman Anti-Trust Act, §§1 and 2, 15 U.S.C. 9, S81. aude 2 12

‘15 U.S.C, §§9 and 22 ...... sudeaxes ya 6N quod nba. oo ae

2 ‘

csnseaciinaunan .

‘ | : ae aes Page

Rule 56, Federal Rules of Civil iiss aca somes

- Séction 504.8 of the Iowa Cod¢......+-- eeee dese s 88,89

Section 504.10 of the Towa Code ....--..-- aye .. 84,37 La

Miscellonectss-

AT ABA 708, “The Crime or Fraud Exception to the

" Attorney-Client Privilege?’ (1961) .......-+++++-+s 30

Articles Ix and XI of UFO's Articles of Incorporation |

6 a ep pawede handed en cup renee gs eens 34, 37

Cannons 16, 32, oo 41, -Canons of Professional Ethics,

as. amended, So? PP ere ees 30, 48

| 37 C58, Fraud, 16, p. 248, notes 24 and 7 31

IN THE

| Supreme Court of the United States

eee |

WILLIAM D. HALL,

_ Petitioner,

NATIONAL FARMERS ORGANIZATION,

INCORPORATED,

Retgeuies:

PETITION FOR A WRIT OF CERTIORARI

. TO THE UNITED STATES COURT OF APPEALS

: - FOR THE SEVENTH CIRCUIT .

Petitioner, William D. Hall, respectfully : «prays that a

writ, of certiorari issue to review the judgment of the

' United States Court of Appeals for the Seventh Circuit -

entered in the above case on May 31, 1967, and upon

which a petition for‘rehearing was denied on Juné 26, 1967.

, i

OPINIONS BELOW

- The District Court for the Southern District of Indiana,

Indianapolis [ivision, did not write an opinion: on its

order. The opinion of the Court of Appeals for.the Seventh

- Cireuit, from whieh this writ of review is sought, is not

reported. A copy of said opinion is attached hereto as

Appendix I and appears at page la; a copy of the

order denying the petition-for a rehearing is attached

hereto as Appendix II and appears at page 3a.

JURISDICTION

The. judgment of the Court of Appeals for the Seventh .

Circuit was dated and ‘entered on May 31, 1967. The peti-.

tion for rehearing was filed on June 14, 1967. This petition

was denied and entered by the Court on June 26, 1967.

The jurisdiction of this Court is invoked under Title 28

U.S.C.A., §§1254(1) and 2101(c).

QUESTIONS PRESENTED FOR REVIEW

The questions presented for review are:

(1) Whether the matters embraced within the pending

suit.are closely and substantially related to the

subject matter included within an area of my

previous representation of NFO. ——

(2) If the answer to Question Number (1) is in the

_- affirmative, then. does the rationale of Consoli-

dated Theaters vs. Warner Bros. Circuit. Man-.

agement Corporation, 2 Cir., 216 F. 2d 920; Cord

vs. Smith, 9 Cir., 338 F. 2d 516; and T. C. Theatre.

Corp. vs. Warner Bros. Pictures, Inc., D.C.S.D.

N.Y., 113 F. Supp 265, support the order of the

- Circuit Court of Appeals, or was I required or —

permitted to inform the members on matters made

. /

the subject of this action and to represent them in

, an action for declaratory judgment on behalf of

_NFO to correct them? é

(3) Does the fraud, misrepresentation, and conceal-

. ment of material facts from the members by oe

management and other illegality appearing in the *

record create an exception to the ‘ attorney-

client privilege premitting me, as a former at-_

torney of NFO, to represent the membership in -

this action for declaratory judgment for and on

behalf of. NFO? econ

STATUTES, REGULATIONS, AND FEDERAL RULES

INVOLVED *- |” .

Title 15, U.S.C.A,, §13(c):

‘Payment or acceptance of commission, brokerage or

other compensation.—It shall be unlawful for any .

person engaged in commerce, in the course of such

commerce, to pay or grant, or to receive or accept,

anything of value as a commission, brokerage, or oth- © ©

er compensation, or.any allowance or discount ino

lieu thereof, except for services rendered in connec-

tion with the sale or purchase of goods, wares, or

merchandise, either to the other party to such trans-

action or to an agent, representative, or other inter-

’ mnediary therein where such intermediary is acting .

in fact for or in behalf, or is subject to the direct or

indirect control of any party to such: transaction oth-

er than the person by whom such compensation is so

granted or paid.’’

Title 28, U.8.C.A.,§1254(1)

“Courts of appeals—Certiorari—A ppeal—Certified

questions.—Cases in the courts of appeals may be re-

viewed by the Supreme Court by the following meth-

(1) By writ-of certiorari granted upon the peti-

tion of any’ party to any civil or criminal case, be- ~

fore or after rendition of judgment or detree} yy

Title 28, v. S.C.A., §1651(a) :

‘“‘Writs.—(a) The Supreme Court and all courts

established by Act of Congress may issue all writs

_. Me¢essary or appropriate in aid of their respective

jurisdictions and agreeable to the. usages and princi-

" ples of law.”’

Title 28, U.S.C.A., §2101¢¢) :

'“¢ Any other appeal or any writ of certiorari intended

to bring any judgment or decree in a civil action, suit

or proceedings. béfore the Supreme Court for review

shall be taken or applied for within ninety days after

the entry of such judgment or decree. A justice of

the Supreme Court,:for good cause shown, may ex- -

tend the time for applying for a “writ of certiorari for

“a period not exceeding sixty days.”

: Chapter. 504, Laws of the ‘State of Iowa, $504. 8: :

- “For agricultural, horticultural, and cemetery pur-

poses. Corporations organized for agricultural or hor-

ticultural purposes, and cemetery: associations, shall

not own to exceed nine sections of land, and the im-

provements and necessary personal property for the

proper management thereof; and the articles of in-

corporation shall provide a mode by. which any mem-

ber may at any time withdraw therefrom, and also

the mode of determining the amount to be received by

such member upon withdrawal, and for the payment

thereof to ‘him, subject to the right of creditors ‘of

the corporation ; and their duration shall be without

. limit, unless terminated by act of the — assem-

bly. 99

Chapter 504, Laws of the State of Iowa, $504.10:

| 5 |

‘‘Dividend. No dividend or distribution of property

among the stockholders shall be made until the dis-

. Solution of the corporation.” © :

‘“‘Any of these Articles except Article IX, may be

amended, changed or repealed at any annual meeting

of the corporation, or at any special meeting called .

for that purpose.’’

Canon 16 of the Canons of Professional Ethics, as amended, Ae

ABA: : ‘

“*A lawyer should use his best efforts to restrain

and to prevent his clients from doing those things

which the lawyer himself ought not to do, particular- :

ly ,with reference to their conduct towards Court, ju-

dicial officers, jurors, witnesses and suitors. If a

client persists in-such wrong-doing the lawyer should

terminate their relation.”’ .

Canon 32 of the Canons of Professional Ethics, as

amended, ABA: | :

‘No client, corporate or individual, however power-

ful, nor any cause, civil or political, however impor-

tant, is entitled to receive nor should any. lawyer

render any service or advice involving disloyalty to

_the law whose ministers we are, or disrespect of the

judicial office, which we are bound to uphold, or

corruption of any person or persons exercising a

public office or private trust, or deception or . be-

‘trayal of the public. When rendering any such im- |

proper service or advice, the lawyer invites and mer-

_ its stern and just condemnation. Correspondingly, he

advances the honor'of his profession and the best

interests of his clierit when he renders service or —

— gives advice tending to impress upon the client and

his’ undertaking exact compliance with the strictest

principles of moral law. He must also observe and

advise his client to observe the statute law, though

until a statute shall have been construed and inter-

preted by competent adjudication, he*is free and is en-

titled to advise as to its validity and as to what he

-. eonscientiously believes to be its just meaning and

extent. But .above all a lawyer~-will find his highest

honor in a’ deserved reputation for fidelity to pri-

vate trust and to public duty, as an honest man and

‘as a patriotic and loyal citizen.’’

Canon 41 of the Canons of Professional Ethics, as

- amended, ABA: | ; :

‘‘When a lawyer discovers that some fraud or de-

ception has been practiced, which has unjustly im-

posed upon the court or a party, he should endeavor to

rectify it; at first by advising his client, and if his

client refuses to forego the advantage thus unjustly

gained, he should promptly inform the injured person

or his counsel, so that they may take appropriate

steps.” ue oT

STATEMENT

The National Farmers Organization, Incorporated,

. (hereinafter referred to as ‘‘NFO’’), was incorporated

, . under Chapter 504 of the laws of the State of Iowa in

November, 1955. It is: entitled, ‘‘Corporations Not For

Pecuniary Profit’’, and it is not one of Iowa’s laws gov-

erning agricultural cooperatives. The prohibitions in Ar-

ee ie none AI A CMY Ne RN ee BINS ABTS

ticle x and Article 3 XI of NFO g Articles of Incorpora-

tion are\in accord with the prohibitions: set. out in Section

504.8 and Section 504.10 of the Iowa Code. On November :

18, 1958, Article III of: NFO’s Articles of Incorporation

was amended in order to permit it to enter into collective

bargaining, on a non-profit basis, for the benefit of its

” members.’ Membership agreements were prepared and

‘signed by farmers over the United States which author-

ized NFO to act as their exclusive agent in collective —

bargaining. They authorized NFO to sign master contracts

with processors for the sale of their commodities and to

activate them when 60% of the previous three years’ pro-

duction, either nation-wide or over a sufficient portion of

the market so that this percentage is the controlling factor

_in the market, had been placed under these contracts.

Until master contracts are activated, NFO receives a

minimum of $25.00 a year from each member for mem-

bership dues: After master contracts are activated, NFO

. will then receive 1% from each member’s gross sales to

defray the expenses of running the organization in place

of the $25.00 annual dues, plus an additional 2% of each

member’s gross sales‘to be used for eis maa, at

the discretion of the directors.

Under these same contracts,. NFO also agrees to. act as”

& procurement agent for the purpose of furnishing these

same processors with the various commodities covered

thereunder. For acting as said procurement agent for these ©

' processors and for performing other services under said

_ contracts, the processors agree to pay direct to NFO from

their own funds an amount equal to 5% of the gross

sales of the commodity covered undér the contract re-

ceived from NFO members. One-half of 1% of said 5%

, received from the processors is to be used, as Leer neried

| 8

by NFO’s national board of directors, to promote the

- gale of the particular product called for under these con- |

_ tracts, and the disposition of. the balance of said 5% is

to be determined at a special national convention of the

‘members of NFO, to be held prior to the ‘ratificatign of

the first master contract. [R. pp. 5-21, and attached ex-

hibits] None have been activated to date. Management

has led the entire membership to believe they can get

this 4.5% because NFO is built on a profit structure’ “

under the principle of a-free enterprise system. As a

result, this 4.5% will always guarantee NFO members a.

greater profit. over non-members for. the sale of their

production. [R. p. 94, and attached Exhibit Z| They have

‘been told that the processors could not legally pay this

4.5% direct to NFO ’s members—it had to be paid first to

| NFO, and then NFO could legally distribute this money

to its'members. [R. pp. 72-92 (Affidavit of sic F.

Apple, Exhibit P, pp. 159-161) ]

In August of 1964, I was employed on.an hourly rate,

on a case-by-case basis, to defend NFO and its members in

many injunction and damage suits that grew out of a meat

holding action. This involved about 95% of my efforts.

Counsel concedes this activity. was not substantially re-

‘lated to the subject matter herein. [p. 30 of Respondent’s

Brief in Appellate Court] An analysis of the rest of the - -

pertinent parts of the record proves all my other activi-

ties were not substantially related to this action either.

I began to suspect thefe were very serious problems in

NFO’s structure. However, I had no idea the officials of

NFO already knew this but were deliberately withholding

vital information from the membership and were keeping

it secret. Thinking I was doing our farmers and the

general public a Great service, I voluntarily on adn own

initiative, and without a stdin promise of pay, or

knowledge of NFO’s officials, researched and uncovered

all matters made the subject of this action from: public

documents. Several months later, I was still trying to get’

management to let me meet with the directors to inform

them of what I had uncovered, but all I ever got was

promises. Finally, the president and executive committee

admitted to me in September of 1965 that. they already

mew about these problems. They felt this information

was secret and confidential and the menibers did not have

a right to know about it. They criticized me severely for

uncovering them. because ‘they had not employed me to do

so. After objecting to paying an additional $1,000.00 I

submitted with other fee statements for part of my re- ©

search time and :173 pages of research material I -was

giving them, because they did not want to pay to educate

me, too, I agreed to deduct the $1, 000.00. This was about

1:30 a.m. By this time, however, the office personnel to.

whom I had given my statements several hours. earlier | )

for processing, had gone home. When I returned to NFO

headquarters at 8:30-a.m. the same day, they had changed

their mind before I had an opportunity to get my state-

ment and deduct the $1,000. 00. Therefore, the original

amount was paid. .

Once aware I was not going to be able to inform the

directors of the gigantic fraud that was being perpetrated

upon the ‘entire membership and I was convinced the of-

ficials were not going to do anything about it, I wanted

no part of it. Therefore, I resigned on. November 10,

1965. [R. p.,\93-(90-91)] My renewed request on Novem-

ber 22, 1965 (R. p. 93 (93)] to meet with the board,

free -of dines, was again refused by NFO’s president -

on November 24, 1965, [R. p. 93 (94)] who demanded that

I not communicate or contact them, their officers, di-

‘rectors, or members.

On November 19, 1965, I spent & hout. four hours i inmy .

office explaining my: findings and giving citations to Mr.

Lee Sinclair, NFO’s. chief counsel, who had_resigned from

the trial staff of the Federal Trade Commission in Oc-

tober, 1965, to represent NFO. Thereafter, Mr. Sinclair

told the plgintiff, Keith Dare, and-other’ members at

NFO’s national convention around December 3, 1965, he -

agreed with me that these problems existed, and I was

right. However, they should not concern themselves any

_ _ further with these problems; just leave them alone because

they would all be corrected within a six months’ period of

time. He promised to so notify. Mr. Dare, but he never did.

[R. p. 140 (8-9)] Some of ‘NFO’s officials from the na-

tional office ‘were also*in Indianapolis on November

, 19, 1965. They admitted to Mr. Dare and other members

they had already known about these problems and that I

had been trying to meet with the board for a long time,

but the president, being the boss, did not think it neces-

sary. They had traveled from Corning, Iowa, at the re-

_ quest of President Staley to try to persuade Mr. Dare

and other members to sign affidavits and cooperate with —

Mr. Staley to bring disbarment proceedings against me.

for telling Mr. Dare about matters set out in this suit.

{B. pp. 72-92 ( Affidavit of Keith Dare, Exhibit wade, pp.

93-95)] }

Later on, the officials held siisntlianly meetings for

the purpose of telling members everything was alright;

- that there was nothing to worry about; just leave every-

thing to them. [R. p.*(9-10)] On December 29, 1965, Mr.

_ Sinclair wrote me,-saying he had advised the officials of

NFO the 5% provision in the master contracts did not

r anaes : ee

‘violate Section 2(c) of the Robinson-Patman Act and on. .

this one point we did not need to concern ourselves fur-

ther. [R. p. 93 (139)] While he was a member. of the Fed- .

eral Trade Commission, it issued certain cease and desist ~

orders against certain members of the Fresh Fruits and..

Vegetables Industry. for charging and receiving compen-

sation from: the opposite side of the same sales transaction

for services rendered. Also, after a four-year study of the

. entire problem and a public hearing on the proposed rules © 3

_, in Washington, D.C., before the full Commission on Octo- ©

ber 1, 1964, (R. p. 141], the Federal Trade Commission’

promulgated certain trade practice rules in April, 1965, -

to advise them this could not be done because the ‘‘services

rendered”? provision was net an exception, to the prohi-

bition set forth in Section 2(c).of the Robinson-Patman

Act.

Over the months that followed my resignation, many

NFO members continued to inquire’ about. my findings.

» Some members wrote letters. [R. p. 93 (165-167)] As an

attorney, I was caught. If I spoke up, I knew NFO offi-

cials would attempt more disbarment proceedings to keep

me quiet. If I remairied-silent, I would be concealing this

- fraud. If I said anything and it was short of the facts,

it would be wilful misrepresentation. I knew that‘ NFO

‘was bound to fail under the present’ arrangement, re-

gardless of how one argued. Therefore, I asked the Indi- ©

- ana State Bar Association for guidance because the mem-

. bers suspected there were problems and wanted me to

file an action for declaratory judgment for and on behalf:

of NFO, since it could not do so and the officials refused.

[R. p. 93 (160-164)] After conferring with the Indianapolis |

Bar Association, I was advised it would be ethical for me —

to inform the membership of these problems made the

subject of this action and to repfesent them herein. [R.

- ©

_ p. 72 (167-168)] Otherwise, its’ counsel thought I would ,

be concealing what I believed to be a fraud upon the or-

. ganization. [R. p. 93 (176)] Thereupon, I made said

disclosures, and several hundred members from several

states asked me to prepare and file this suit for them,

through the plaintiffs as their representatives.. They: were

only interested in seeing that NFO was made to operate -.

within: the law and to correct the fraud being perpetrated

upon the membership. :

Thereafter, I prepared ‘ian filed the pending action as

attorney for the plaintiffs. [R. pp. 5-21] All three para-

graphs’ of the amended > complaint ‘are. proceedings for

declaratory relief under: Rule 56 of the Federal Rules of

Civil Procedure and under 15 U.S.C., §§9 and 22. Para-

graph I is to determine the validity of said master con-

tracts -and membership agreement, when viewed in terms |

of the Clayton Act, §2, amended by. the .Robinson-Patman

Aes; §2¢¢), 15 US.C., $13(c). ‘Paragraph II is to de-

ine the validity of said master contracts: and mem-

‘edie agreement, when viewed in terms of Chapter 504

of the Iowa Code, as to whether NFO, in its present

_ . status and for its intended purposes, is qualified to act

as a bargaining agent. for its members under the im-

munities of the Clayton Act, §6, 15 USC, $14, as

amended by the Capper-Volstead Act, $1, 7 U.S.C., §291.

- Paragraph III is to determine the validity of said master

contracts and membership agreement, | ‘when viewed in

terms of said Chapter 504, as to whether the immunities

of the Clayton Act, §6, 15 U.S.C. §14, as amended

by the Capper-Volstead Act, §1,:7 U.S.C., §291, exempts

NFO from ‘violating Sections 1 and 2 of the Sherman

Anti-Trust Act, 15 U. S.C., Ss nani 2, and for other

inviceaten relief.

: Counsel for NFO answered the plaintiffs’ amended com-

plaint [R. pp: 22-42] and filed a petition to disqualify

" me as plaintiffs’ counsel. [R. pp. 65-71] The grounds ‘re-

lied upon in the petition and the attached @#fidavit of -—

NFO’s president [R. pp. 68-71] were to the effect that

knowledge of the material and relevant portions of the pub-

lic. documents made the; subject of this suit were secret

and confidential and should not have been disclosed by

- me to NFO’s membership, and management had not con-

. sented thereto. Plaintiffs’ reply to NFO’s answer was

filed, [R. pp. 43-64] an answer to defendant’s motion to .

disqualify, [R. pp. 72-92) and special pleadings (R. PP. ?

98-108] thereto were filed, among other papers.

Many, many affidavits in the record from. members

_ from various states show they joined NFO, paid their -

dues, and gave of their time, efforts, and resources to

make NFO work in the belief they would get the 4.5%.

[R. p. 72 (Exhibit O, pp. 112-158)] None of them knew of

these prohibitions. They ‘feel they have been taken ad-.

vantage of ‘by ‘not being. told everything and that. the

fraud, illegality, and other wrongdoing appearing on the

face of the record creates an exception’ to any attorney-

client privilege, if one exists, which would not only require

or permit me to inform them of these problems, but to

represent them, as trustees herein, for and. on behalf

of NFO to correct these same problems.

On Maych31,. 1967, the District Court, nevertheless,

ordered my .disqualification. [R. pp. 126-127] The Court

of Appeals affirmed. on “Wednesday, May 31, 1967, [Ap-

pendix I] and on June 26, 1967, denied a peru for

rehearing. [Appendix IT]

———

ARGUMENT

_ This part concerns the first question. —

On page 30 of respondent’s brief before the Court of ~

Appeals, it is conceded that the subject matter of the vari-

ous injunction suits are not substantially related to the

pending action. Let us analyze documents in the record

on my remaining efforts, which prove they are also un-

related. See, McMullen vs. Hoffman, 174 U:S. 639, 19 S.

Ct. 835, 43 L. Ed. 1117 (1899). ;

(1) With reference ‘to the matter in Akron, Ohio. A

- comparison of what was prepared and in existence at that

time with what was prepared after this suit was filed in

Exhibit D-1 [R. p. 97] proves that case involved another

injunction suit. Exhibit A-1 [R. p. 97] proves Mr. Herman

‘was also mistaken in his affidavit [R. p. 93 (105)] as to |

what I’ had figteed to.send Mr. Rabe, the attorney; which

was Exhibit B-1. [R. p. 97] This is no authority for any-

thing, and as I indicated to Mr. Rabe, it ‘was the best I

‘hhad on the question he asked me that night in Akron.

Being an attorney, he well knew this. Had I gone over

there for that purpose, or anything other than to give

my viewpoints and my authorities on how I got injunc-

tions dissolved, does it not stand to reason I would have

gone prepared with the best I had?

(2) With regard to the Benson Cooperative Creamery

Litigation. The affidavit of rney, Richard Hilleren,

[R. p. 72 (182-183)] shows it was .the violence and other

illegal activities which caused him to threaten and almost

join NFO as a party defendant in that suit. It reveals

that after he and I had a series of meetings in Benson,

15 rte eens

‘NFO was nat aileed ‘This is in aheolite harmony with

and supported by President Staley’s letter to me ‘dated

September 11, 1965, [R. p. 93 (84)] and my. reply thereto

dated September 13, 1965. [R. p. 93 (85)]. | They show

NFO was not. legally involved or affected, and my job .

was to keep NFO from becoming involved in those two

eases. This is exactly what I did for NFO. Had there :

been a substantial relationship, copies of the pleadings

and brief I sent President Staley and Mr. Rust. in my

courtesy letter dated July 23, 1965, [R.. Pp. 93 (78- 79)]

_ would have been filed as proof.

It is asserted my courtesy letter of May 23, 1966,

[R. p.:93 (95)] amounts to an unequivocal admission of

being previously employed to represent. NFO’s best in-

terests in connection with the same master contracts which

this suit is attacking:- Every time I defended NFO in the

injunction suits, I represented NFO’s -best interests in

connection with those contracts, because the holding ac-

tions were instigated to force processors to place enough

production under contract to activate them. The defend-—

ant admits the validity of these contracts were not in- _

volved. President Staley’s own letter proves the same

to be true in the Benson case.

+ (3) With respect to the affidavit of Fred Desrdorff, « :

_ director. [R. p. 93 (114-115) ] It proves I was trying to

disclose my findings on the subject, matter of this suit to

them at least before August 9, 1965. He reveals they were

unaware of those problems. They. were either persuaded

not to listen to me or they did not think enough of what

I had to say to’ listen. Instead, they decided to learn of |

these highly complicated matters in a second-handed

fashion, and then from farmers who were. not lawyers _

or versed in the law. Furthermore, the persons who were

‘to. get thé details-from me and make the report were the

very same ones who already knew about these problems,

and who, according to President Staley’s affidavit, felt

such matters were secret and confidential and should have

_ been withheld ‘from. the members. Even though I admit

being NFO’s general counsel in charge of the injunction

suits, his affidavit proves the directors neither considered

me as NFO’s general counsel in charge of all its legal

affairs, nor did they employ me to research and uncover

these matters for them. |

(4) With regard to President Staleys letter dated Aug-

ust 21, 1965. [R. p. 93 (81-82)] It should be viewed in _

connection with Mr. Deardorff’s affidavit. It was

written about ten days after the same directors’ meet-

ing referred. to in Mr. Deardorff’s affidavit. Speak-

ing only of the grain memo, Mr. Staley said :

- **You will not need to be concerned with this matter.

any further.

““You may, " however, proceed as you have been on

the remaining cases arising from the holding , action.’’

(emphasis supplied)

Mr. Staley’s letter was totally void of even a remote ref-

erence to those matters discussed at the board meeting

only ten days previously, about which I had been trying

to meet with them. Since Mr. Deardorff’s affidavit shows

the directors decided to refer matters to Mr. Sinclair, if

either Mr. Staley or the officers had employed me to dig -

into these matters, it is certain Mr. Staley would have

included my activities concerning the subject matter of

this suit as part of those things I was instructed ‘not to .

-be concerned with further when he limited my activities to

proceed only as I had been on the remaining cases arising

from the kolding action. He has proven that matters em-

“17

| braced within the pending suit are not closely related to

any area in which I was employed by. either him or the

officers to represent NFO. _ oe

If aliy question still remains, his letter to me dated

November 19, 1965, [R. p. 93 (92)] removes even the last

doubt, when he said:

_ “. .. We accept your termination of services as an.

attorney for the NFO...

“‘I sincerely regret that you found it necessary to

terminate your employment because I ‘do feel you

could still be of some value to the organization in

some matters on which you have had experience,’’

(emphasis supplied) :

He has proven I was only. considered as an attorney for .

NFO ‘and to be of value to NFO only in the injunction

suits. ; |

(5) With regard to my resignation letter. [R. p. 93

(90-91)] It is. asserted my resignation letter- shows it

was through. specific employment on the grain.-memo

which led me to. researching the subject matter of this

suit. I will concede to an inaccurate use of words, but .

under the circumstances; ‘I was not prone to dwell in

- great detail on the strict order of all the many; many

events in my resignation letter. There was no reason to.

The very first sentence, however, actually shows the

limits of my extra employment, and other documents in

the record prove this to-be the case. First, it is completely

consistent with President Staley’s' letter of August 21,

1965. Second, Herb Goodman’s affidavit, [R. p. 93. (98:

101)] shows it was during the Second week of April, ‘at

‘least, that a copy was delivered to me. Third, Mr. Staley’s

letter of August 21, 1965, shows I had finished and made.

my report’ on that memorandum by June 5, 1965. ‘Ht would

have been physically impossible for me to have continued

with all of the remaining injunction suits arising out of

the holding .action, covering the distances involved, plus

maintaining the rest of my law practice, plus getting into

the tax matters in the grain memo, and after this was

‘done to have also researched all the questions involved

in the pending suit, selected only ‘those portions I de-

. ¢@ided were relevant, reduced them to writing and accumu-

‘lated 173 pages of research material if I had not started

" until after I got into the grain memo. Everyone of us

knows there would not have been sufficient time. I had to

start my research on the subject matter of this suit long

before that time, which I did, as I alleged in rhetorical

paragraph 14 of my answer, during the last week of Feb-

ruary, 1965. Having overlooked this crucial time factor, a

different argument was made which involved Mr. Herb

* Goodman’s ‘letter to me dated June 29, 1965. Ls p. 98 _

(77)]

(6) With regard to Mr. Geoduan’ s letter dated June

29, 1965. Counsel for NFO asserted next that Mr. Good-

man’s letter shows I was employed to render a legal

opinion as to the legality of NFO’s master contracts;

that it was not until I had examined a copy of the

opinion Mr. Goodman forwarded to me from a law firm

_ in Saginaw, Michigan, as to their illegality. that I became’

_ aware of these problems and started researching the ques-

- tions involved herein; that this resulted in a substantial

relationship to an area of previous employment, even |

though Mr. Goodman admits NFO -never received such

an opinion from me. This is almost the same language in

the Appellate Court’s opinion and appears to be the

area of my previous representation found to be substan-

tially related.

That letter could not have been sent in good faith. They

knew I had been trying to reach the directors, and they

knew I was not going to make it. They sent that letter to

eliminate me as a potential threat from disclosing all of

these facts I had uncovered to NFO’s membership, and -

there are several items in the record to prove it. First,

this crucial time element was overlooked a ain. I did not

receive Mr. Goodman’s letter until the first of J uly, ©

1965. Mr. Deardorff’s affidavit proves I had been trying

to meet with the directors on these problems at least

_ before their meeting of August 9, 1965. Consequently, I }

would have had even less time to do everything under

this argument. Second, if they were really sincere in

‘wanting an opinion, why did they wait one. and one-half

years after that opinion had been written and circulated

and almost six years after the master contracts had been

written and signed by various processors before seeking

one? Why did President Staley refuse to grant the re-

quests of Alfred Morris and the plaintiff, Roland Waters,

both of whom were helping write the master contract for

milk, when Mr. Morris wanted to seek the advice of an

attorney in its formulation? [R. p. 140 (32-33; 14-18)]

Third, if they really were sincere in wanting a legal

opinion, why did they ask me, of all people? Mr. Staley’s

letter makes it clear this was ‘not an area in which they

thought I could-be of any value to NFO. Mr. Deardorff’s

affidavit makes it crystal clear this was not an area in.

which the board would even take their time to listen to

me, let alone employing me to get into. The affidavit of

the plaintiff, Keith Dare, [R. p: 72 (93-95)] reveals this

iwas not only the same feeling of Harvey Sickels, a direc-

tor and national secretary of NFO, and of Glen Utley, —

NFO’s senior board member, but it was also the same

attitude of Herb Goodman himself Furthermore, Mr.

Pts

_ Goodman voluntarily told Mr. Dare that I had been trying

for a long time to meet with the directors to explain the

problems to them and make them aware of them, but Mr.

_ Staley said it was not necessary for me to meet with the

- board, because the directors were not the boss; that Staley

was running the organization and he was the boss. Mr.

Goodman also filed his counter-affidavit, referred to

above, in which he tried to explain or deny certain charges.

It is extremely important to observe he refused to deny

or explain these remarks attributed to him by Mr. Dare

when he surely had a duty to do so, if they were not true.

‘Since the affidavits of the members [R.:p. 72 (112-

-.158)] show the membership was wholly unaware of these

problems, I had to do it on my own. Even though I did

‘so and ‘admit it, this fact neither justifies my disqualifi- °

cation as plaintiffs’ counsel in the pending case, nor does

it support the Court of Appeals’ finding that the

subject matter of this case is substantially related to the

subject matter of my previous representation of NFO

that would warrant sustaining the District Court’s order,

which erroneously disqualified me as plaintiffs’ counsel.

herein.

| ‘This part concerns the second question.

Even though the Court of Appeals’ finding was correct

that the pending suit is substantially related ‘to my pre-

vious representation of NFO, in so doing that Court erred

‘in holding that the rationale of the three cases it relied

upon supported its order which affirmed the District

Court’s order that disqualified me as plaintiffs’ counsel. -

First, let us assume master contracts were already acti-

vated and this were a suit where I represented a proces-

sor against NFO and its members for violation of the anti-

en ae a

trust laws and for treble damages under the controlling

principles set out in Allgair vs. Glenmore Distilleries

Co., (N.Y.), 91 FS. 93 (1950). If this were the case,

then I can see where the \rationale of these three cases

fhight apply. However, a comparison of these threé cases

with our instant situation shows that the kind of organiza-

tions involved, the facts, the purposes back of the rules

and the applicable law are all-distinguishable. ;

In the case of T. C. & Theatre Corp. vs. Warner Bros.

‘ Pictures, 113 F.S. 265. ( 1953), Cooke filed the action on

behalf of the plaintiff against Universal for treble dam-

ages for violation of the anti-trust laws. He ,based the

suit against Universal upon a government anti-trust con-

spiracy suit in which Cooke had represented Universal

on appeal. (The pending case ‘is an action by the mem-

bers of NFO, who are acting as trusteés on its behalf,

for corrective declaratory relief because the officials re-

fuse to do so.) They are acting precisely as a guardian

ad litem goes into court to obtain like redress for a client

under disability: because of incompetency or nonage. See,

Whitten vs. Dabney, 171 Cal. 621, 154 P. 312 (1915).

‘The éourt said that as the present counsel for the plain-.

tiff, Cooke would necessarily be called upon to prove

against Universal, his former clients, the very charges :

against which he had earlier defended it. (Counsel admits

that the injunction and damage suits in which I defended

NFO are not even substantially related to the subject

matter of the pending case.) | :

During the preparation of the findings. on appeal, in |

which Cooke ‘represented Universal, he was in full com-

mand of all of Universal’s legal affairs. He received very

much confidential information concerning the innermost

workings of Universal in. defending them. He. was looked

2 OR RR RRO Re

22 /

upon for leadership generally and specially, and he was

consulted with as to all aspects of Universal’s : activities.

_ (The proven facts show NFO’s directors would not take

their time to hear what I had to say, and the persident

did not feel this was an.area in which I could be of any

value to NFO. Also, matters made the subject of ‘this

action involve only public ‘documents. Furthermore, I was

not on a retainer basis or permitted to advise or consult

the directors or even sit in on their board meetings.)

_ [R. pp. 72-92. (Affidavit of Roland Waters, Exhibit D,

Pp. 87-92])

_ The co-defendants in the above cited action were also

‘co-defendants in the government’s, conspiracy action.

They, likewise, asked for a disqualification of Cooke from

prosecuting the action by the plaintiff against. them. The

court, however, ruled that the conferences on appeal did.

not involve a disclosure of anything that was confidential.

Furthermore, the court ruled that since Cooke took a-po-

sition that was adverse to 4 number of said co-defendants

on appeal, his present position in representing the pres- _

ent plaintiff against them for the same kind of an action

was not inconsistent with his previous ‘position against

them on appeal. (My letter of December 20, 1965, to Mr.

Sinclair, [R. p. 93 (118-138)] shows that my present posi-

tion with regard to the subject matter of this suit is not

- inconsistent with my previous position. ) .

| Even’ though it applies to the next question, this case

also recognizes there © is an exception to the general at-

torney-client privilege. The court said at page 268 as

follows: ie

‘*He is peahraain for all time, art ¢ as We may ‘i

released by sane, id i emphasis supplied) |

“

The.casé of Consolidated Theatres vs. Warner Bros.

Cir. Man. Corp., 216 F. 2d 920° (1954), involved another _

' private action for treble damages for violation of the

-anti-trust laws. Nickerson filed this action on behalf of the

plaintiff against: a large number of motion picture pro-

ducers, which included Twentieth Century Fox Film Cor-

poration. He based the suit upon the same governinent

anti-trust conspiracy suit as was done by Cooke in the

T. C. Theatre Corp. case. _

Nickerson was employed as an attorney in a law firm,

during which time he participated in three motion picture

anti-trust suits. He admitted that in each of these cases he

had complete access to all the records and files of the

various companies ‘involved. He arranged the files for

presentation to the court: He attended the'trial and took

notes of the testimony and the general proceedings of the

trial. He interviewed employees and managers, who

were instructed to give him their fullest cooperation in

obtaining all the facts that they wanted. This included

‘details of the innermost workings of these. corporations.

He ‘analyzed, digested; and “organized files containing

documentary evidence. He was present at interviews. He

helped prepare witnesses to give testimony at the various

trials, and hetped obtain data on the facts in preparing

_ cases for trial, (I was at national headquarters only a

very few times. At no time did I have complete access

to anything. Instead of. getting the fullest cooperation,

I got just.the opposite in trying to meet with the board

on these matters. ) ;

-One of these suits involved a defense of Twentieth Cen-

tury Fox Film ; Corporation, one of the principal clients

of the law firm where Nickerson was employed. That

i?)

‘same company was a defendant in the case that he was

filing on behalf of the plaintiff. OY, a motion

for his disqualification was filed.

o«* ad

There was some concern over whether or not he was ~

considered as a law clerk, general counsel, special- coun-

sel,.or an associate, ‘and what effect, if any, this would |

«have. The cgurt said at page 927 as follows: |

‘‘We donot think that. titles have much . do with

the real problem. here. Canon 6 is devised to protect . © —

the secrets and confidences ~reposed in the attorney

by his client. It is the work done for the client and

the access to the confidential information of the cli-

ent which is crucial in determining ‘whether the ob-

_ ligation of Canon.6 arises.’’ (emphasis supplied)

(No secrets or confidences were reposed in me by ‘NEO

concerning the subject matter of this case. Instead, I was*~_

prohibited from letting the directors know what I had :

uncovered on my own initiative and only from public

documents. In fact, I was severely eriticized in doing’ so.) . |

-The court held that Nickerson’s representation in the

- former eases involved the same kind of law suit wherein

he obtained all of the secret and. confidential material

which he was now attempting to use against his former

- client im order to collect damages. (Again compare the

facts of this case with thé relevant portions of our in- -

_- stant situation.). | : ,

‘The case. of Cord. vs. Smith, 338 F. 2d 516 (1964), is *

distinguishable on several important grounds, one of which.

I will refer to in the rixt question. weer

PT 1986, Young, an attorney, brought an ian éiiaiend .

) Cord -for $250,000. attorney: fees wherein he alleged, un- _

der oath, that ‘he had acted as Cord’s. attorney in .connec-

_ tion with a matter an the Los Angeles Broadeast-

ing Company.

Prior to this tinie, however, while Young was represent- ,

ing Cord, he had prepared a contract for Cord around |

1932 wherein Cord agreed to divide equally the profits

upon the sale of certain radio stations with Mr. Smith,

the manager. When the stations were sold in 1962, Cord : °

refused to’ honor the contract. Whereupon. Smith employed

Young to bring an action for three million dollars damages

against Cord for a.breach:of that contract. During the

course of the proceedings, Cord’s attorney discovered

that Young had prepared the contract for Cord when he

was representing him years prior to that time. (Compare

this with the fact I had nothing to do with preparing

_ any of-NFO’s contracts.) He promptly filed a motion

- to disqualify Young as Smith’s attorney.

In sustaining this motion, the court said at page’ 523 as

follows:

‘*The canons that require that a lawyer whd has

represented a client in a transaction, may not there-

after represent the other party to the transaction,

in an action against his client based upon the trans-

action, are not to be so readily avoided.’’ (emphasis

supplied)

How can the salen of that rule possibly apply to

our instant case?

On J uly 22, 1967, President Staley prepared and over

his own signature circulated to NFO’s entire membership,

a four page, single-spaced document in which he said,

among othér things :

“It's. going to take the support of the members be-

' cause NFO is. the members. 7

I agree with President Staley. When I represented NFO,

. I was representing the members’ best interests. They

- were the ones that paid- my attorney fees. I never repre- .

sented NFO against its members on any subject matter.

How can it be rationalized that by representing those _

same members»in an action for declaratory relief in the

capacities as trustees for the benefit of their own or-.

ganization that they are occupying the position of the

‘‘other party’’ to the transaction within the meaning,

spirit; and. purpose of the rules set forth in Cord vs.

Smith; supra?

It is respectfully calealsen that the controlling princi-

ple of law in the case of Jacuzzi vs. Jacuzzi Brothers,

Incorporated, 218 App. Div. 24, 32 Cal. Rptr. 188 (1963),

is squarely on point and the rule to be applied herein. ©

That suit involved an appeal from an order denying the

appellant’ s motion to disqualify two attorneys who form-—

erly represented the corporation. In fact, Mr. Gray, one

of the former attorneys, had represented the corporation

‘for over twenty-five years, and during a portion of that

time he served as chairman of the board’ of directors.

After he resigned, however, he had no further - connec-

. tion with the corporation. (After I resigned, Ir had no

further connection with NFO.)

That action was filed by Mr. Gray as a stockholders’

derivative suit. It was brought for and on behalf of the

corporation by these stockholders for the purpose of re-

storing to the corporation property. and assets alleged to -

have been improperly transferred for _an inadequate

consideration.

The appellant ’s principal contention on appeal was that

Gray had previously represented the corporation. Conse-

quently, this prevented him from representing the minori-

_ ty stockholders in that action. It was held on appeal that

' the action was really brought for the benefit: of the cor-

poration, who was Gray’s former employer. Therefore,

the action was not really adverse to the corporation; to

the contrary, it was brought for and on behalf of the ©

corporation itself. (This rule would apply with added

force to a not-for-profit agricultural corporation.) —

The stockholders for whom Gray was then acting as

attorney were really, in effect, guardians ad litem and

. trustees for the benefit of the corporation. At page 192

of the 32 Cal. Rptr. the court concluded by saying:

‘Since Gray acts for the benefit of the corporation

he previously represented it is apparent he is not

representing an interest adverse to the corporation,

and the prohibition of Rule 5, Rules of Professional

Conduct, can have no application.” (emphasis sup-'

plied) 3

This part concerns the third question.

Even though it is deemed. that a substantial relation-

ship exists to my previous representation, and even though

this finding is deemed to be supported by the rationale of

the cases relied upon by the Court of Appeals, it still

committed error in holding that this was dispositive of

the controlling issue when all of the record and the law

appertaining thereto are considered. See, McMullen vs.

Hoffman, supra. Wrongdoing, fraud, misreprésentation,

proven concealment of material facts and information from

the members, and other illegality appear, even on the

very face of the record. It has been contended from the

_ beginning this creates an exception to any attorney-client —

privilege, if one existed otherwise.

The following hypothetical is submitted to point up

the question herein. Assume I was joined as a party de-

fendant in an action against NFO’s officials for failure

to make the disclosures required by law because I knew of

these ‘problems but. remained silent, too. Would my defense

of the attorney-client privilege be sustained, or would I

"suffer the’ same or worse fate than the five year prison

term a young attorney by the name of Hett received in

. Hett vs. United States, 353 F. 2d 761, Certiorari denied ~

384 U.S. 905 (1966), because he knew of his client’s plans

and intentions to commit a crime but did not report this

“to the proper authorities? The case of United States vs.

Hoffa, 349 F. 2d 20 (1965), even though on a different —

subject matter, provides the answer to this question at page

37, where the following rule appears:

‘‘the attorney-client relationship would offer no

shield to either client or attorney if the client had

been.engaged in a plan to commit a crime in the

future.’’ :

_ As between the two social policies competing for supre-

macy, the court in cf., State vs. Kirkpatrick, 220 Iowa

974, 263. N -W. 52, 55 (1935), laid down this rule:

‘‘It is a mistaken notion to think that an attorney

has the right to assist in the perpetration of a fraud,

and a mistaken notion that one having in mind the -

perpetration of a fraud or a crime can safely entrust

this knowledge to an attorney any more than to any-

body else.’’

In People vs. Warden of County Jail, 150 Mise. 714,-

270 N.Y.S. 362 (1934), the court said at page 371:

‘*A client who consults an attorney for assistance in

connection with a contemplated violation of law can

expect no help from the law. He cannot complain if

the truth is allowed to be told. A mere charge of

wrongdoing will not suffice. There must be ‘something

to give colour to the charge’.’’ (emphasis supplied)

29 °

The court said this conclusion was inevitable, if we

are to maintain the honor of the profession, and make an

officer of the court an agency to advance the ends of

justice, rather than to be used as an instrument to subvert

them. ees |

- The following rule appears in the case of People vs.

VanAlstine, 57 Mich. 69, 23 N.W. 594, 598 (1885), con- -

_ cerning attorney-client privileges:

‘‘But there are exceptions to the general rule, based

upon public policy and public security. Professional

communications are not privileged when sucii com-.

munications are for'an unlawful purpose, having for

their object the commission of a crime. They then

partake of the nature of a conspiracy, or attempted —

conspiracy, and it is not only lawful to divulge such

communications, ‘but under certain circumstances it

might become the duty of the attorney to do so.’

* (emphasis supplied) .

In Gebhardt vs. United Rys. Co. of St. ‘Louis, (Mo.

Sup.), 220 S.W. 677 (1920), an attorney went forward

voluntarily and was permitted to testify against his form- |

er client in order to prevent the consummation of a con-

templated fraud. At page 679 the court further stated:

“The testimony of the witness, Grant Gillespie was

therefore also admissible, even if he had been plain-

tiff’s attorney, which he was not.’? ( emphasis supplied)

Henry S. Drinker in his book on legal ethics at page

* 1387 says:

‘‘A lawyer representing a corporation may and

should disclose to its directors or members defalca-

tions by the managers which the lawyer learned about

in connection with his representation of the corpora-

tion.’’ .

‘The affidavit of Fred Deardorff shows this is what I

tried to do. ;

Canons 16, 32, and 41 of the Canons of Professional

Ethics, as amended, ABA, are.especially applicable. The

record shows I tried to comply with all three of them. In

fact, I tried for months to meet with the board of directors,

I provided NFO’s officials 173 pages of research ma-

terial, I wrote counsel a 21 page written opinion, and

spent four hours ‘with him so ee steps might be |

taken.

In July of 1961, Mr. James A. Gardner, a member of

the California Bar (Fresno), published an excellent. ar-

ticle entitled, “‘The Crime or Fraud Exception to the

. Attorney-Client Privilege”’, in 47 ABA 708. Even though

he is quick to recognize the attorney-client privilege and

the reasons for it, he also points out that this is only one

of the components which go to make up this more inclu-

sive whole. He states that the crime or tort exception re- ©

_ presents a healthy counter-balance to the attorney-client

privileges which. can serve, even more than it has in the

past, to protect the honor of the profession and to frus-

trate not only the person who would use the law to achieve

a particular unlawful objective but also the Pare

" “aa when acting in his capacity as such.

With regard to the question of fraud, the court in

Pittman vs. Lageschulte, 45 Ill. App. 2d 207, 195 N.E. 2d

394, 399-400 (1964), defined it as follows:

‘‘Fraud includes anything calculated to deceive,

whether it be a single act or combination of circum-

stances, whether the supression of truth or the

suggestion of what is. false; whether it be by direct

’ falsehood or by innuendo, by speech or by silence,

- by word of mouth, or by look or gesture... . If

frava be proved, it vidiates all transactions touched

by it.’?

Pisce 2,

See also, Gibbons vs. Brandt, 170 F. 2d 385, Certiorari. de-

nied 336 U.S. 910, rehearing denied 336 U.S. 929 (1948);

Isaacs vs. United States, 301 F. 2d 706 (1962). d |

Fraud can be classified as actual fraud, which amounts

to deception intentionally practiced inducing another to —

part with property or some legal right; or constructive

fraud, amounting to a breach of a legal or equitable duty

which arose irrespective of moral guilt, and is fradulent

-because of its tendency to deceive others, to violate public

or private confidence, or to injure public interests; or

implied fraud, consisting of representations implied from

conduct as distinguished from statements actually made.

Stern vs. National City Co., 25 F.S. 948, affirmed City

Co. of New York ‘vs. Stern, 110 F. 2d 601, reversed 312

US. 666, mandate conformed to 142 F. 2d 449 (1939).

Constructive fraud usually arises where a fiduciary or

confidential relationship exists. In such instances it - is

unnecessary to prove deliberate or intentional fraud.

Cumberland Portland Cement Co. vs. R.F.C., 140 FS. 739,

affirmed 232 F. 2d 930 (1956). See also, Lawton vs.

Strong, 87 Ariz. 17, 249 F.2d 299 (1957).

Furthermore, cupable ignorance furnishes no immunity

for false representations or concealment. Anderson vs.

Tway, 143 F. 2d 95, Certiorari denied, 324 U.S. 861 (1945).

There is always an affirmative duty of . the utmost

* good faith to disclose all material facts, and a_ failure

to do so constitutes fraud. Allen Realty Co. vs. Uhler,

(Ind.), 146 N.E. 766 (1925); Gidney vs. Chapple, (Okla.),

110 P. 1099 (1910). See also, 37 C.J.S., Fraud, §16, p. 248,

notes 24 and 25. - __

A: fiduciary has an affirmative obligation to employ

. reasonable care to avoid misleading those who depend

: upon him for guidance: See, Securities & Exchange Com-

mission vs. Capital Gains Research Bureau, Inc., (N.Y. )

375 U.S. 180° (1963). This is espécially true where one

has superior knowledge or knowledge which is not usually

within the fair and reasonable reach of the other party.

When a person remains silent with regard to an impor-

tant matter which he knows the person relying upon

him is depending upon, believing he is getting the true

state of facts in which to enable him to judge the ex-

pediency of his bargain for himself, and the fiduciary

has not made a full and complete disclosure, or there

has been only a partial disclosure, which misleads and.

conveys false impressions and such half-truths or non-

disclosure constitutes a concealment of all the facts, then —

the cases uniformly have held this constitutes fraud wheth-

er it be actual, constructive, or imphed. Berger vs.

Amana Society, (Iowa), 111 N.W. 2d 753 (1962). See_

also, Equitable Life Insurance Co. of Iowa vs. Halsey, .

Stuart & Co., 312 U.S. 410 (1941); Strand vs. Libra-

scope, Inc., 197 F.S. 743 (1961); Consolidated Oil & Gas,

Inc. vs. Ryan, 250 F.S. 600 (1966) ; Nichaolds vs. McGloth-

lin, 330 F. 2d 454 (1964); United States vs. Certain

Property, etc., (N.Y.), 306 F. 2d 439 (1962); Texas Tun-

neling Co. vs. City of Chattanooga, Tenn., 204 FS. 821,

affirmed in part, revs’d in part, 329 F. 2d 402 (1962);

Lawson vs. Haynes, 170 F. 2d 741 (1948); Fernandina

Shipbuilding & Dry Dock Co. vs. Peters, (Fla.), 283

F. 621 (1922); Murillo-vs. Hernandez, 79 Ariz. 1, 281 P.

2d 786 (1955); Callahan vs. Wolfe, (Idaho), 400 P. 2d

938 (1965); Reeder vs. Guaranteed Foods, Inc., om

399 P. 2d 822 (1965). ae

The case of Berger vs. Amana Society, supra, was a

stockholders’ derivative action to nullify an amendment

to the articles of incorporation, based on the violation of

Le Ce cea at pean nace

contract rights, fraud, misrepresentation, and deceit of

the stockholders by the officers of the Amana Society. -

. The lower court dismissed the action. However, on appeal

it was held the officers had taken advantage of the faith

and. confidence that had been placed in. them by the

great majority of class A stockholders so as to procure

_ the adoption of an amendment to the articles of incorpora-

_ tion destroying certain rights and which required- certain

shares of stock to be redeemed for cash. The a pellate

. . ‘

_ court said this went to the very vitals of the Society. |

The court found that at stockholders’ meetings there

was an attempt to explain the nature of the proposed

_ amendment. In fact, a prepared statement had been cir- »

culated, but in each of these instances there was wholly

lacking any information on the vital-question of the future

control of the Society and what: effect the amendment

would have upon 300,000 shares of class B stock. The

. court found there had not been a full’ and complete dis-

closure to them of the full impact of what the amend-

- ment would do or was designed to do. The appellate court

ruled that once the officers undertook such a duty to.

explain the nature of what the amendment proposed

to do, it was incumbent upon them to do this wholly,

specifically, and completely. The court said it could not

help but recognize the fact that many members of the

Society had no more than an eighth grade education,

and therefore they depended upon their leaders for prop-

er guidance. However, they did have the intellect and in-

telligence to vote independently on matters if they were

properly explained to them. The court ruled this ‘consti-

tuted-a case of fraud that had been perpetrated upon

_ the membership because equity and good conscience de-

_Manded that when the matter was attempted to be’ ex-

' plained to them, particularly when it went to the vitals of

—

the organization,. that a full, fair, and complete disclosure

‘had to. be made. Consequently, the lower court erred in

holding there had been no fraud or deceit perpetrated

upon the membership, even though there was no evidence

in the record that the acts of the officers were done in-

tentionally. ‘The case’ was reversed, and full attorney

fees were awarded for the plaintiffs’ attorney, because ©

this was an action that was brought for and: on behalf of .

_ the corporation itself and not just the plaintiffs as certain

individuals. | | | a

The president’s affidavit attached to the motion as

grounds ‘for my disqualification is positive proof [R.

pp. 68-71] that the official position of management is and

has beer intentionally: opposed to and in direct violation

of the fiduciary responsibilities imposed upon them by

law, which demands that a full,, complete,’ and fair dis-

closure of all the material facts and applicable law con-

cerning NFO. must be made to its membership.- This in

‘and of itself constitutes fraud and deception as a matter

of law, without any consideration of the merits.

‘The membership had every right to be informed of the

language appearing in Section 504.10 of the ‘Iowa Code

_ and in Articles IX and XI of NFO’s Articles of Incor-

poration. ,

_ They had every right to know about the interpreta-

tions placed on this section by the highest court in Iowa

in making up their own minds as to the benefit of their

bargain in joining NFO. See, State vs. Amana Society, 132

Iowa 304, 109 N.W. 894, 895 (1906). In construing the mean- _-

' ing of that statute, the court said: o

4¢,°, .. By the third section, [referring to Section 1645

and now 504.10] distribution of the property, by

dividend or otherwise, prior to dissolution, is not.

allowed.’’ |

The ¢ourt went’ on to make. a: distinction between cor-

porations organized under that law and those for - pe-

- cuniary profit when it said: .

‘The distinction between corporations: organized un-

der this chapter and those for pecuniary profit has

relation, not to whether one or the other shall earn

or receive an income, though this may be important

as evidence, but to the design had in: organizing and

objects sought to be obtained; not to. methods pur-

sued so much as the things to be accomplished. If

the purpose is to earn money or property, if finan-

cial gain is the ‘main’ or controlling, object for which

the corporation is created then, regardless of other

circumstances, it is within the class designated as

corporations for pecuniary profit.’’ ( emphasis sup-

plied) * a

See also, People vs. Universal Bervice Ass’n, 365 Til.

542, 7 N.E. 24/310 (1937), where a similar statute was

involved. In ousting the defendant as‘a non-profit ¢or-

poration, the court said at-page 312 that: ;

‘*The scheme, when reduced to its essentials, is a busi-

ness arrangement designed to produce a profit.’’

In State vs. Hutterische Bruder Gemeinde, 46 S.D. 189, 191

N.W. 635 (1922), the court vacated the articles of incor-

poration, and it was dissolved as a non-profit corporation -

because the principal business of the corporation was

farming for purposes of sustaining its colonies.

The case of Read vs. Tidewater Coal Exchange, 13

Del. Ch. 195, 116 A. 898, 904 (1922), sheds further light

upon this particular subject, when it said: | .

ie ee

- whether dividends are intended to be declared or’ not,

to make a profit on the business it does which in

. reason belongs ‘to it and which if its affairs are ad-

dends.*Subterfuges by which a corporatiqn -allowed

its profits to be diverted to those owning it, though

“not. in. the form of. dividends would manifestly not

remove from the corporation its feature of profit .

making. Nor would a mere declaration ‘in. its certifi-

* eate of incorporation that it was organized not for

profit, be ‘sufficient to stamp upon it a non-profit

- character .... The term ‘profit’ as employed in the

‘section under discussion means gains or earnings

that are expected to come into the possession of a

corporation.’’ — .

A profit of at least 1.5% over the non-member is the

stated goal of NFO. . [*

With regard to the 5%. provision in the master con-

tracts, [R. pp. 5-21 (Exhibit F)] the members had every

right to know that Congress has passed laws with severe

' penalties to violators, which our courts have unanimously

interpreted for over thirty years, which will not allow

both.a selling and a buying service to opposite sides of

the same sales transaction to be combined in one person

sion, in making up their own minds ‘as to the benefit of

their bargain in joining NFO. See, Great Atl.-¢ Pac. Tea

Co. vs. FTC, 106 F. 2d 667 (1939); Quality Bakers of

America vs. FTC, 114 F. 2d 393 (1940); Oliver Brothers

vs. FTC, 102 F. 2d 763 (1939); Kentucky Rural Elec.

Coop. Corp. vs. Maloney Elec. Co., 175. FS. 250 (1959).

See also, Trade Practice Rules for the Fresh Fruits and

Vegetables Industry, 30 Fed. Reg. 5331 & 5332 (1965).

— >) “

a."

Some might feel I should not have included the fore-

going on the 5% provision, because this falls within the

class of justiciable issues. I would be the first to agree if

it, were truly a valid justiciable issue of first impres-

sion and a favorable ‘decision could resolve NFO’s prob-

lems. Even though we assume for the moment there is

no violation of the anti-trust laws, and NFO can get, and

keep the 5% it will be. receiving from processors, NFO

is: still doomed to fail. This fund must belong either to —

NFO or its members. If NFO proves the fund belongs ‘to

its members, and therefore does not fall within the pro-

“hibitions. of either Section 504.10 of the Iowa Code or

. Article IX of NFO’s Articles of Incorporation, in so

doing it will have proven it is on a for profit basis and

subject to having its corporate charter revoked. State

vs. Hutterische, supra; People vs. Universal Service -

Ass’n, supra; Réad vs. Tidewater Coal Exchange, supra.

If-it proves: the fund belongs to NFO it will have proven

the fund falls within the prohibitions of Section 504.10 and

Article IX. State vs. Amana Society, supra; People vs.

Universal Service Ass ’n, supra. If the- funds cannot be

distributed until dissolutién, then its members will be

receiving 3%. less cash than non-members for their prod- |

ucts. There are no farmers joining NFO today with that

_ thought in mind. Hence, the fraud still exists, but the

general membership is wholly unaware of it. The officials

know this, and are trying to hide this fact and mislead

thousands, and ultimately millions, of farmers. This is to

say nothing about the tragedy that would exist if every-

thing had continued just as it has in the past, and everyone -

waited until after master contracts were activated when

vast sums of money had been accumulated, and*then this

suit were filed, either by the plaintiffs, or by processors.

to recover damages. ~ . heya

a ee ee ee ea

Section 504.8 of the Iowa Code requires that corpora-—

tions organized for agricultural purposes shall have their

articles of_ incorporation providé a mode by which any

member may at any time withdraw therefrom, subject to

the rights of creditors of the corporation. However,

NFO’s articles of incorporation make no provision for

this requirement. [R. pp. 5-21 (Exhibit B)] Instead, the

membership agreement [R. pp. 5-21 (Exhibit. E)] states.

it is irrevocable for a period of three years, and unless

notice of cancellation is given in accordance with the

terms of the membership agreement, it. is: automatically \

rénewed for like periods of time. ;

Now, let us assume that when these future suits were

filed, the decision at that time went against NFO as to

the validity of its master contracts. The members. prompt-

ly take steps to see that the corporation’s existence is

terminated so they can share upon final dissolution. Who

gould share therein when claims are filed? The member-

ship agreement and master contracts are intricately con-

nected with each other. If one is deemed to be illegal,

then so is’ the other. See, Rathke vs. Yakima Valley

Grape Growers’ Ass’n, (S. Ct. Wash.), 192 P. 2d 349

(1948); Body-Steffner Co. vs. Flotill Products, Inc.,

(Calif.), 147 P. 2d 84 (1944). ;

Any claim for a distributive share would have to be

_ based upon both an illegal master contract and an illegal

membership agreement. As we all know, no court will

entertain any kind of an action for either party to the

transaction when it is. | predicated upon an illegal docu-

ment. |

Even if the contracts were deemed to be valid, the re-

sult would. be the same, because NF‘O’s articles of. incor-

poration do not provide for the requirement set. out in

Section 504.8 for a mémber ’s right to withdraw at any

time. See, Oklahoma Cotton Growers’ Ass’n vs. Salyer,

114 Okla. -77, 248 P. 239 (1926); McLain vs. Oklahoma

Cotton Growers’ Ass’n, 258 P. 269 (1927); Pruitt vs.

The. Oklahoma Steam Baking Company, 39 Okla. 509, 135

P. 730 ( 1913). Who else is left to receive the whole fund

except the State of Iowa? :

In answer to the claim that these questions constitute

matters of law or opinion, upon which ‘no action can be

predicated for -having perpetrated a fraud upon the mem-

bership, it is submitted that such an assertion does not

apply where it involves a fiduciary relationship such as”

in the instant. situation. See, Scott vs. Burnight, 131.

Towa 507, 107 N.W. 422 (1906); Schneider vs. Schneider,

125 Iowa 1, 98 N.W. 159 (1904); Harris-Emery Co.

vs. Pitcairn, 122 Iowa 595, 98 N.W. 476 (1904) ; Stephens

vs. Collison, 249 Il. 225, 94.N.E. 664 (1911); Miller vs.

Osterlund,.(Minn.), 191 N.W. 919 (1923). This is especial-

_ ly. true where the opinions or statements of the. fiduciary

are made under circumstances such that: they may be re-

garded as amounting to positive affirmations of fact. See

the statements of NFO’s president in the November 17,

1962, issue of Prairie Farmer Magazine. [R. p. 94 and

_ attached Exhibit Z] In such cases, they will be treated as

representations of fact for purposes of deceit. Mercer vs.

Elliott, 25 Cal. Rptr. 217 (1962). Once again, fraud ap-

pears on the face of the record, as set out in my brief to

the Court of Appeals. A comparison of the principles set

forth in Harris-Emery Co. vs. Pitcairn, supra, with the

instant situation shows they are especially applicable to

this question.

Now, let us go back to Cord vs. Smith, supra, a case

relied on by the defendant and the Court of Appeals. L

tog, would like to quote the famous words of Judge Car-

doza in Meinhard vs. Salmon, 249 N.Y. 458, 464, 164 N.E.

545, 546 (1928), in defining the duties of fiduciaries and’

trustees : ;

‘‘Many forms of conduct permissible in a workaday

world for those acting at arm’s length, are forbidden

to those bound by fiduciary ties. A trustee is held to

-gomething stricter than the morals of the market

place. Not honesty alone, but the punctilio of ‘an

honor the most sensitive, is then the standard of be-

havior. As to,this- there has developed a tradition

that is unbending and inveterate. Uncompromising ~

rigidity has been the attitude of courts of equity

when petitioned to undermine the rule of undivi ed

loyalty by the ‘disintegrating erosion’ of particular

exceptions. . . : Only thus has the level of conduct for

fiduciaries been kept ata level higher than that

trodden by the crowd. It will not consciously be |

lowered by any judgment of thiscourt.’””« -

Since the record shows the officials have violated the _

very authority upon which they rely,.and these viola-

tions have been set up as the grounds for my disqualifi-

cation, is it not clear there has been a lowering and un-

dermining of the rule of undivided loyalty by the ‘‘dis- .

integrating erosion’’ of making them a particular excep-

tion?

The very nature of farming and the fact that farmers

must deal cooperatively with one another for the good of

all, necessarily involves a greater and higher degree of

trust and confidence in management than that required

- of regular for-profit corporations where stockholders may

- or may not receive a dividend on their investment in the

company. ey a

Consequently, the extreme and vital importance of re-

quiring management to make a full, fair, and complete

Pel tn ESAs at RO eae oy

disclosure of all material facts and applicable law to mem-

bers about their own farm organizations cannot be over-

looked or ignored.

Now, let us return to the hypothetical set out at the

very first of this question: Since I have already in-

formed the membership of this fraud, the question as to

whether I should have done so is now moot. However,

the question that is now before the’ Court as to whether .

I have a duty, or the right, to continue representing the

plaintiffs in this case stems from exactly the same prin-

ciple this Court would have.had to apply if my original . .

hypothetical question, where I knew but remained silent,

. were before it for decision. Hett vs. United States, supra;

United States vs. Hoffa, supra.

Counsel contends that even though I might have had a

duty to inform the membership, this does not mean that

I can represent them in this suit. This argument pro-

ceeds upon a wrong premise. It is correct to say that if I

in this particular case, then I had a’ corresponding duty

or right to represent -them in seeking timely, corrective

declaratory relief on these identical problems..

The controlling principle in.Croce vs. Superior Court,

21 Cal. App. 2d 18, 68 P. 2d 369 (1937), is on all fours

with this proposition: The petitioner sought to disqualify

the attornéy who was representing the adverse party in

a law suit. The court said at p. 19 of 21 Cal. App. 2d as

follows: ee ‘ ; |

‘‘And while no cases precisely in point have been

cited by either side it -would seem to follow necessarily

that if under the circumstances stated an attorney is

. not disqualified from serving as an adverse witness,

it.cannot be held that. under the same circumstances

he ‘is disqualified from serving as an adverse at-

torney.’’ (emphasis, supplied)

| When you analyze the District Court’s order, [R. pp. |

Croce vs. Superior Court, supra, except on the other side

of the matter. By enjoining me from taking any further

action, directly or indirectly, it follows -necessarily from

the District Court’s order that I should never have dis-.

closed this fraud and illégality to the membership. How-

ever, let us assume ‘some’ other attorney filed this suit

and subpoented me as a witness. In addition to the cases

heretofore cited which show beyond a doubt I would have —

. been: permitted to testify, I would refer to the old

English classic of Annesley vs. Earl of Anglesea, Howell’s

State Trials, Vol. 17, p. 1139 (1743), the controlling prin-

ciple of which would apply to this hypothetical.

This was a suit for ejectment where a nephew claimed

vast estates held by his uncle as the supposed heir of his

deceased brother, who was the father of the plaintiff.

The young nephew claimed to have been kidnapped in his

youth: by ‘contrivance of the uncle and shipped to the

colonies. Returning from his servitude, he filed this suit.

Meanwhile, however, while hunting with friends, he killed —

a game keeper. The uncle then employed an attorney to

start a prosecution for murder, saying, ‘‘I would give

10,000 pounds to see him hang.” This particular state-.

ment was sought to be proved from that attorney’s testi-

mony against the uncle in the ejectment suit. An objec-

tion was made that this statement was not made in con-

nection with a defense in that suit. Furthermore, it was

confidential and could not be disclosed:

Sergeant Tisdall, attorney for the plaintiff, ‘iietae that

if he was employed as an attorney in an unlawful or

43 q

wicked act his duty to the pwblic obliged him to disclose it.

He said that no private obligations could dispense _ with

that universal one which lies on every member of the socie-

, to discover every design which may be formed, con- -

trary to the laws of the society, to- destroy the public

. welfare. For this reason he apprehended. that if a secret

that is contrary to the public good, such as a design to

commit treason, murder, or perhaps perjury, comes to

the knowledge of an attorney, even in a cause wherein

he is concerned, the obligation to the public must dis-

pense with the obligation to the client. .

- The defendant ’s lawyer, Mr. Harward, argued just the

opposite.- Judge Mounteney, B. said at page 1241 as fol-

lows: . 7 | 7

‘“‘For God’s sake then let us consider, what will be

the consequence of the doctrine now laid ‘down, (by

the defendant) and so earnestly contended for, that

such a declaration made by any person to his at-

torney, ought not by that attorney te be proved? A

man (without any natural call to it) promotes a

prosecution against another for a capital offense; he

is desirous and. determined, at all events, to get him

' hanged; he retains an attorney to carry on the

prosecution, and makes such a declaration to him as

I have before mentioned, (the meaning and intention

of which, if the attorney hath common understand-

ing about him, it is impossible he should mistake) ;

he happens ‘to be too honest 4 man to engage in such

an affair; he declines the prosecution; but he must

never discover this declaration, because he was ‘Te-

tained as attorney. This prosecutor applies in the

At last,-he finds an attorney wicked enough to carry

this iniquitous scheme into execution. And after all,

_ hone of these persons are to be admitted to prove

this, in order either to bring the guilty party to

. condign punishment, or to prevent the evil conse-

quences of his crime with regard to ‘civil property.

‘Is this law? Is this reason? I think it is: absolutely

_ contrary to both. ,.. The declaration now offered to

be proved, is of that nature, and so highly criminal,

- that, in my opinion, mankind is interested in the dis-

covery; and whoever it was made to, attorney or not

attorney, lies under an obligation to society im

general, prior and superior to any obligation he can

lie under to a particular individual, to make it known.”’

(emphasis supplied)

Mankind is’ interested in what I uncovered. It is diffi-

— eult to imagine an attorney having a much greater obliga-

~ tion to society in general, prior and superior to any obli-

gation I could lie under to the officials of NFO, to make

this: fraud known and of the plans and ever-increasing

likelihood of placing from: 60% to 100% of our nation’s ~

- food supply under illegal arrangements, which are bound

to end up wrong, regardless of which way one argues.

~ When the District Court’s order is extended to its ul-

timate conclusion, it necessarily holds that no attorney

who ever represented NFO could be admitted to prove this

‘ in order to prevent these consequences. Otherwise, I would

not have been disqualified. Therefore, it would be abso-

-Jutely contrary to both law and reason, that when I was

subpoenaed as a witness by the other attorney, for the

District Court to rule I was not permitted to testify.

Now, let us further assume that instead of this other

attorney calling me as a witness I was either employed

- to take over the case for the plaintiffs or file it original-

supra, directly on poimt and proves that error was com-

E malted when the Court of Appeals affirmed the District _

a ee ee eo

' ly, as I have done. This throws Groce vs. Superior Court, -: |

45 ¢d

Court’s* order disqualifying me as plaintiffs’ counsel in

this parti¢ular case. This error was compounded when

the Court of Appeals denied my petition for rehearing, I

have contended from the beginning, and emphasized this

in my oral argument, that the fraud in the record created

an exception to any existing attorney-client privilege, |

- Counsel for NFO also recognized on oral argument that

the Court would have to decide if this created such an ex-

ception. However, it cannot be determined from the Court

of Appeals’ original opinion whether it considered

this fraud as such exception and decided against it.

Therefore, the petition for a rehearing was filed, which

specifically pointed out, among other things, that this

question had either been overlooked or ignored and the

‘ ‘ |

consequences of so doing.

The Court of Appeals should have granted a rehearing,

even though we assume this was the first time the fraud

or illegality was disclosed or pointed out. This proposition

is supporteal by the rationale of the line of cases repre-

sented by McMullen vs. Hoffman, 174 U.S. 639 (1899) ;

cf., Primeau vs. Granfield, 193 F. 911 (1911); Memphis

, Keely Inst. -vs. Leslie E. Keeley Co., 155 F. 964 (1907) ;

Teoli vs. Nardolillo, 23 R.I. 87, 49 A. 489 (1901).

thing to do with this case: in any way so the plaintiffs

could employ other counsel of their own choice [R. pp.

of all concerned. [R. pp. 121-122] However, when counsel —

still insisted upon an order disqualifying me notwith.

‘

al hie athe natal

standing, [R. pp. 119-120] ond it became apparent that

oné would be entered, I had to re-enter my appearance .

[R. p. 125] in order to be able to appeal that order. If it

were left to stand, it would overturn the whole doctrine that

fraud constitutes the exception to an attorney-client priv-

“ilege, and it would open the door to. similar kinds of

- fraudulent activity across the country against farmers..

I knew that a decision on the merits-should Be expe-

dited, and the Court of Appeals agréed when it granted

my petition to expedite on its calendar. Even so, before

I appealed, I could not escape the fact: that unless I did

appeal from the District Court’s order, its effect . would

- remain ‘with all of us as a by-product of the case in

chief, long after it has been disposed of and regardless

of its final result.

-I have no desire to fight the way this case has gone.

However, from the time I uncovered this, there has been

no way for me to dispose of it. This fact still remains,

’ but now for a different reason. If the District Court’s

order becomes the law, then not only is my predicament

typical of the general condition in which other members

of’ our ‘profession will find themselves, but it will en-

courage similar or possibly worse activity by. others who

are so inclined. Furthermore, this will be done under

_ gtich conditions that members of our profession will be.

the only ones likely to’ detect it.: Herein lies the great

harm that will: be done as a result of this order, unless -

. it is reversed and my reinstatement as plaintiffs’ counsel -

is ordered by this Court. As an officer of this Court, I

- could not let this happen on oy, own initiative.

ee ee eee

47 :

“REASONS FOR GRANTING THE WRIT OF CER.

This Court should grant the Petition for Review . be-

- Cause the Court-of Appeals has rendered a decision con-

- trary to the rationale in Hett vs. United States, supra.

This Court denied certiorari, 384 U.S. 905 (1966), because

| Hett did not tell what he knew about @ crime that was ;

to be committed in the future. It would be in direct conflict

with that decision to deny this petition for a writ of cer-

tiordri, because I did tell the members about a fraud to be

committed when. master contracts are activated. The ef. |

fects of the order ef the Court. of Appeals, when viewed:

in terms of Hett vs.. United States, supra, ‘and United »

States‘ vs. Hoffa, supra, will make it impossible ‘for an

attorney to do the right thing, since the attorney-client

. relationship. offers no shield to either the client or the *.

attorney if the client has been engaged in a fraudulent:.

scheme to be committed in the future. See also, Grum-

mons vs. Zollinger, (Ind.), 240 FS. 63 (1964), which

held that the sanctity of communications, between an

attorney and client is not r

situation where it is made in furtherance of crime or-

fraudulent scheme or activity yet to be performed. _.

Pn Pa RN ee

equired to be maintained in a

_— ete

* Granfield, supra. That court said it hada duty to examine

into charges of fraud and illegality. When they were

disclosed in a case, the law is required to refuse its aid, re-

gardless of the fact that with the fraud and illegality ab-

~ sent, the plaintiff might appear, entitled to relief.-In the

instant situation, the Court of Appeals either refused to

’ examine into or it ignored the fraud which is disclosed

on the face of the record. This is especially true since

these facts were again. pointed out in the petition for a

Y rehearing, which was denied. ‘

The decision of the Court .of. Appeals is in direct con-

flict with the line of cases represented by Memphis Keely

Inst. vs. Leslie E, K eeley Co., supra, which held that the

court had to recognize the fraud in order to discourage

fraud ,and wrongdoing upon: the public. The order sought

_ courage’ such activity, but it will silence members of our

" profession from doing what Canons 16, 32, &nd 41 and .

the. law require of them. under the peniilties of Hett

vs. United States, supra, = United States vs. H mOrre,

supra.

_ he decision of the eait of Appeals confines and lim-

its the defmition of what constitutes fraud as set out in

Isaacs vs. United States, supra; Gibbons vs. Brandt, supra; _

Pittman vs. Lageschulte, supra; Allen Realty Co. vs.

Uhler, supra; Securitiés & Exchange Commission vs. Capi-

tal Gains Research Bureau, Inc., supra; and capeneny :

| Berger vs. Amana Society, supra.

The decision of the Court of Ap eals is in direc con-.

flict with the rationale of the liné of cases represented

by Jacuzzi vs. Jacuezt Brothers, Incorporated, supra. Un-

less this order is- reversed, there will be no way for:

. corporate ‘comme! to represent his client in such circum: _

pt a lt lh hcl ach hiace iti en

yet sir ts

stances as these. The corporation cannot do it alone. If -

the officers will not act, and counsel cannot reach its gov-

erning body to inform them, then the only ones left are

_the members, and as was said in First Nat. Co. vs.

| CLR. 289 F. 2d 861 ( 1961), the ones to whom fiduciary -

duties are owed are, the only ones that have a right to

set a breach of these duties straight. If, wnder these cir-

cumstances, counsel cannot tell its members, who Teally

' make up the organization, then there will be no way for

them to know about matters until after the damage is

done. This will place farmers at the complete mercy of

those in positions of trust and confidence to whom they

must look for guidance in sustaining their very exis-

tence. The offer of proof contains typical examples of

_ what can be expected. | | :

This case is analogous to ‘prosecuting a man for mur- °°

der. The defendant admits killing the person involved, but

_ he says, and the record proves, he did it in self-defense.

Nevertheless, the court orders his execution without so

‘much ag commenting on the question of self-defense.

Theréupon,. the defendant asks the court, ‘“What about my

defense of self-defense ??’, and the court. merely says,

‘*Hang him!?’’ on

Every lawyer and every bar association across our

land, even though they ‘may not yet know about: this case,

are vitally interested in knowing whether fraud now con-

stitutes the exception to the attorney-client privilege.

Every farm organization wants to know what its duties

are.to their members.. Every farm corporation’s counsel

wants to know what they must do and what they cannot

do in representing their corporate client’s best_ interests

when they discover its officers, are perpetrating a fraud —

upon its membership, and their corporate client’s’ struc-

‘50.

ture, when viewed in terms of its stated plans, reveals it is ,

bound to fail, regardless of which way it goes.

It is clear to see that the order of the Court of Appeals

has uprooted and overturned some of the most basic and

fundamental principles which govern our whole society. |

The law cannot permit, much less require, the abandon-

ment of the controlling legal precedents herein cited,

which‘hold that in the final analysis, fraud must constitute.

"an exception to the attorney-client privilege if there is to

be any semblance of maintaining the honor of our pro-

’ fession and making an officer of the Court an agency to

- advance the ends of justice, rather than to be used as an

instrument to subvert them.

The order of the Circuit Court of Appeals for the

‘Seventh Circuit has so far departed from the accepted

and usual course of judicial proceedings, and has so far

satictioned such a departure by the’ District’ Court, as to

call for an exercise of this Court’s power of supervision.

3 CONCLUSION

For the reasons set forth above, it is respectfully sub- -

mitted that this. petition for writ of certiorari should be

granted.

| FRAZIER & CROKIN,

315 Lemcke Building,

Indianapolis, Indiana,

Athorneys for Petitioner.

SAMI AA PEET EEE TY IOIMIELL AI ITE AO a I LO

“United States Court of Appeals

_ FOR THE SEVENTH CIRCUIT

CHICAGO, ILLINOIS, 60604.

May 31, 1967

Before

| Hon. John 8. Hastings, Chief Judge _

ie mo _ Hon. Win G. Knoch, Circuit Judge

| Hon. Latham Castle, Cireuit J udge .

- No. 16232

ROLAND WATERS, et al, na

Plaintiffe,

vs. -

NATIONAL FARMERS ORGANIZATION,

INCORPORATED,

Defendant. Appeal from the United

WILLIAM D. HALL, ; | -teiet of Indiana, In-

. Petitioner, diangpolis Division.

va.

| NATIONAL FARMERS ORGANIZATION,

“INCORPORATED,

APPENDIX I .

This appeal from an order of the District Oesirt ‘dis-

qualifying and enjoining the _ William D. Hall,

Rap

" andthe laW firm with which he is associated, from par-

ticipating directly or indirectly as counsel for. the plain-

’ tiffs in Civil Action No. IP-66-C-440 (Roland Waters, et al.,

v. National Farniers’ Organization; Incorporated) pending

in the District Court comes before this Court pursuant to

- leave granted under the provisions of 28. U.8.C.A. §1292 (b).

This Court having considered the petition for leave to

appeal and attached documents, respondent’s answer there-

to, and the record certified ‘to this Court by the District

Court as well as the memorandum-briefs filed: by the

“respective parties, and having heard oral arguments in |

open court by counsel for the parties, and having taken

_ the-matter under advisement for decision, the Court has

conferred thereon and is now of the opinion and ac-

| cordingly holds and adjudges that’ the order from which:

this appeal was allowed is supported by the record here-

in and the law appertaining a a, ee meee

~ And,. in this connection, the Court is of the opinion »

that the rationale of Consolidated Theatres: v. Warner

Bros. Circuit Management Corporation, 2 Cir, 216 F.

—T-€.'Theatre Corp. v. Warner Bros. Pictures, Inc., D.C.

S.D.N.Y., 113 F.°Supp. 265 is dispositive of the con-

trolling issue presented for determination herein, the rec-

ord before the District Court having disclosed that the

matters embrace within the pending suit are closely and

substantially related to a subject matter included within,

the petitioner’s previous representation of National Farm-

ers Organization, Incorporated.

’ WHEREFORE the order from which this cuseek was

’ allowed is affirmed and the clerk of thjs Court is directed

to enter the judgment of the Court: accordingly.

fe R os PEGS AOARE IEEE ABET AOD IO APOW IS A RENNES NE .

United States Court of Appeals

FOR THE SEVENTH CIRCUIT

‘CHICAGO, ILLINOIS, 60604

Monday, J une 26, 1967

oe”

Before |

Hon, John S. Hastings, Chief Judge

Hon. Win G. Knocli, Cireuit Judge

Hon. Latham Castle, Circuit Judge

No. 16232...

———

ROLAND WATERS, et al,

Plaintiffs,

_ NATIONAL FARMERS ORGANIZATION, States District Court

INC., ane

Defendant-Appellee, | _ trict of Indiana, In-.

APPEAL OF WILLIAM D. HALL, |

7 ae

IT IS ORDERED by the Court’ that the petition for a

rehearing of this cause filed by the appellant herein, be,

and the same is hereby, DENIED. ; ‘

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.