ML19329A851
| ML19329A851 | |
| Person / Time | |
|---|---|
| Site: | Davis Besse, Perry  |
| Issue date: | 08/11/1976 |
| From: | Gallagher M SQUIRE, SANDERS & DEMPSEY |
| To: | Atomic Safety and Licensing Board Panel |
| References | |
| NUDOCS 8001150749 | |
| Download: ML19329A851 (51) | |
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NUCLEAR REGULATORY CCMMISSION 9, Before the Atomic Safety and Licensing Board t FM \
In The Matter Of )
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THE TOLEDO EDISON COMPANY and ) Docket Nos 6 -_346[
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY ) 50-500A (Davis-Besse Nuclear Power Station, ) 50-501A Units 1, 2 and 3) )
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THE CLEVELAND ELECTRIC ILLUMINATING ) Docket Nos. 50-440A COMPANY, et al. ) 50-441A (Perry Nuclear Power Plant, Units 1 and 2) )
MOTION OF SQUIRE, SANDERS AND DEMPSEY TO STAY TEMPORARILY FURTHER DISCOVERY Now co , Squire, Sanders and Dempsey, through its counsel, Michael R.
Ca))agher, and respectfully moves the Special Board to stay further dis-covery in the disqualification proceedings until the Special Board has had an opportunity to consider and act upon a motion of Squire, Sanders and Dempsey to dismiss the disqualification proceedings which Squire. Sanders and Dempsey will file expeditiously.
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MICHAEL R. GALLAGHER ll' 64 k_
Attorney for Squire, Sand / s & Dempsey 630 Bulkley Buildin;;
Cleveland, Ohio 44115 (216)241-5310 8 001150 7py m
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, MEMORANDUM On August 3, 1976 Judge Robert B. Krupansky entered an Order denying
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a motion of ,the City of Cleveland (City) to disqualify Squire, Sanders
, and Dempsey (SS&D) in a case filed in the United States District Court for
- the Northern District of Ohio, Eastern Division, entitled City of Cleveland vs. The Cleveland Electric Illuminating Company, et al., Civil Action Iso.
C75-560.
The United States District Court case is one for treble damages brought by the City against the Cleveland Electric Illuminating Company (CEI) charg-ing violation of the antitrust laws. It arises out of the same facts and presents essentially the same antitrust liability issues as the instant pro-ceeding before the NRC Antitrust Licensing Board.
A Motion to Disqualify SS&D as counsel was filed in it just as one was filed in the instant proceeding. The motion was identical to the one filed herein and the briefs, together with supporting exhibits, were sub-stantially identicil.
The issues raised by the motions to disqualify are the same.
It is the position of SS&D that the principles of the doctrine of collateral estoppel require this Specici Roard to deny the City's Motion to
- Disqualify SS&D before the NRC. To this end, it contemplates filing and is commencing preparation of a Motion to Dismiss the disqualification proceedings.
SS&D's Motion to Dismiss will not be filed for the purpine of delaying these proceedings, but rather to avoid unnecessary expense and wasted ef fort.
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Such a goal is a desirabic one, for there has already been a hearing be-fore the Licensing Board, one before the original Special Board, one be-fore the Appeal Board, and a prehearing conference before the reconstituted Special Board.
SS&D intends promptly to prepare and file its Motion to Dismiss those disqualification proceedings. The Motion will be premised on the argument that the City is collaterally estopped to raise an issue as to the facts upon which Judge Krupansky made specific findings; namely:*I .
- 1. The City is estopped froa asserting alleged conflict of interest against SS&D.
- 2. The City waived any right to assert alleged conflict of interest against SS&D.
- 3. Brueckel's services for the City in preparing the 1972 Bond Ordinance were not adverse to Lansdale's repre-sentation of CEI in the antitrust proceeding.
- 4. SS&D's role as special bond counsel is not a repre-sentation adverse to Lansdale's representation of CEI in the antitrust proceedings.
- 5. Lansdale received no confidential information con-cerning MELP from Brueckel actually or by operation of law.
- 6. O'Loughlin's employment with SS&D presents no basis for disqualification.
- 7. There exists no substantial relationship between the pending antitrust matter and SS&D's services as special bond counsel.
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- Attached hereto is a copy of Judge Krupansky's Order of August 3, 1976.
Six of the foregoing findings appear on page 40 of the Order and the seventh may be found on pages 31, 32.
s 9 In addition to the principles of collateral estoppel, the binding character of Judge Krupansky's findings is confirmed by reference to the language of Rule 2.713(b) und 2.713(c). The Licensing Board's opinion and the Appeal Board's opinion both refer to these paragraphs as the basis for disqualification; that is, that the standard of conduct imposed on an at-torney practicing before the NRC is to " conform to the standards of con-duct required in the courts of the United States."
The United States District Court has now spoken directly to this point, holding that SS&D's conduct does conform to the required standards. Whether or not this Special Board agrees, the question has been put to rest by the NRC's own rules.
It is not the intention of this Motion to argue the merits of the Motion to Dismiss the disqualification proceedings. SS&D only wishes to demonstrate preliminarily that there is sufficient merit to the position it argues to warrant the stay it requests.
SS&D assures the Special Board that it will move expeditiously in filing its Motion to Dismiss the disqualification proceedings.
Respectfully submitted, l /
d'4%dx/L bi6M MICHAEL R. GALLAGHER M._ ,
Attorney for Squire, Sanders & Dempsey 0
630 Bulkley Building Cleveland, Ohio 44115 (216)241-5310
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- a SERVICE s g ,
Copies of the foregoing Motion and Memorandum have been mailed regular United States Mail, First Class, to Vincent C. Campanella, Director of Law, City of Cleveland, 213 City Hall, Cleveland, Ohio; Robert D. Hart, First Assistant, Director of Law, City of Cleveland, 213 City Hall, Cleveland, Ohio; James B. Davis, Esq., Special Counsel, Hahn, Loeser, Freedheim, Daan & Wellman, National City - East Sixth Building, Cleveland, _
Ohio 44114; 1n addition, the original and twenty (20) copies of the fore-going were mailed to the Secretary, Nuclear Regulatory Commission, Washington, D.C. 20555, Attn: Chief, Docketing and Service Section; and one et.uy tu each of the persons listed on the attached service list this 6th day ot August 19/6.
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t SERVICE LIST Vincent C. Campanella, Esq.
Director of Law City of Cleveland 213 City Hall eleveland, Ohio 44114 Robert D. Hart, Esq.
First Assistant. Director of Law City of Cleveland 213 City Hall Cleveland, Ohio 44114 James B. Davis,.Esq.
Special Counsel Hahn. Loesser, Freedheim, Dean & Wellman -
.;ational City - E. 6th Building Cleveland, Ohio 44114 -
William J. Kerner, Esq.
Office of the General Attorney The Cleveland Electric Illuminating Co.
P. O. Box 5000 Cleveland, Ohio 44101 Douglas V. Rigler, F .t.
Chairman Atomic Safety & Licensing Board Panel Foley, Lardner, Hollabaugh & Jacobs 815 Connecticut Avenue, N.W.
Washington, D.C.
Ivan W. Smith, Esq.
Atomic Safety & Licensing Board Panel U.S. Nuclear Regulatory Commission Washington, D.C. 20555
- John M. Fryslak, Esq. .
Atomic Safety & Licensing Board Panel U.S. Nuclear Regulatory Commission Washington, D.C. 20555 Cerald Charnof f, Esq.
Wm. Bradford Reynolds, Esq.
. Shaw, Pittman,. Potts & Trowbridge 1800 M. Street, N.W.
Washington, D.C. 20036
-Mr. Chase R. Stephens Docketing & Service Section U.S. Nuclear Regulatory Commission 1717 H Street, N.W.
Washington, D.C. 20555
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Donald H. Itauser, Esq.
Corporate Solicitor
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The Cleveland Electric Illuminating Company Post Office Box 5000 Cleveland, Ohio 44101 John Lansdale, Jr., Esq.
Cox, Langford & Brown 21 Dupont Circle, N.U. ' '
Washington, D. C. 20036 Reuben Goldberg, Esq.
David C. Hjelmfelt, Esq.
1700 Penpejlvania Avenue, M.U. - "
Suite LO Washington, D. C. 20006 Alan S. Rosenthal, Chairman .
Atomic Safety and Licensing Appeals Board j
U.S. Nucicar Regulatory Commission Washington, D. C. 20555 q Dr. John H. Buck Dr. Lawrence K. Quarles Atomic Safety and Licensing Appealt Board U.S. Nucicar Regulatory Commission a: :=" >
Washington, D. C. 20555 Howard K. Shapar, Esq.
Executive Legal Director U.S. Nucicar Regulatory Con:21ssion Washington, D. C. 20555 Mr. Frank U. Karas, Chief Public Proceedings Branch l Office of the Secretary l U.S. Nucicar Regulatory Co=aission
- Unshington, D. C. 20555 Abraham Draitman, Esq.
Office of Antitrust & Indemnity U.S.1:ucicar Regulatory Cornission Washington, D. C. 20555 Jerome E. Sharfman, Esq.
. Atomic Safety & Licensing Appeals Board U.S. Nuclear Regulatory Commission Washington, D.C. 20555 1
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Frank R. Clokey, 'Esq. .
Special Assistant Attorney General
- Towne House Apartments, Room 219 .
Harrisburg, Pennsylvania 17105 .
Edward A. Matto, Esq.
Assistant Attorney General Chief, Antitrust Section v i 30 East Broad Street, 15th Floor .
Columbus, Ohio 43215 Richard S. Saltman, Chairman Atomic Safety and Licensing Appeals Board U.S. Nuclear Regulatory Connicsion
.- Uashington,'D. C. 20555 .
Dr. W. Reed Johnson Atomic Safety and Licensing Appeals Board U.S. Nuc1 car Regulatory Cocmission Washington, D. C. 20555 -r =,. t . - .
Andreu F. Popper, Esq.
, office of the Executive Legal Director
, U.S. Nuclear Regulatory Commission
- Washington, D. C. 20555 Benjamin H. Vogler, Esq. "
Joseph Rutberg, Esq.
Robert J. Verdisco, Esq.
Roy P. Lessy, Jr., Esq.
Office of the General Counsel Regulation - -
U.S. Nuc1 car Regulatory Commission Unshington, D. C. 20555 liclvin C. Ecrger, Esq..
Joseph J. Saunders, Esq.
Steven II. Charno, Esq.
l David A. Lechic, Esq.
Janet R. Urban, Esq. 3 Ruth Greenspan Bell, Esq.
Antitrust Division l Departncnt of Justice t
,. Post Office Bo:: 7513 j Washington, D. C. 20044 I
1 Christopher R. S'chraff, Ecq.
A::sintant ' Attorneys Cercral Environ:uental Law Section 361 East Broad Street, 8th Floor Columbus, Ohio 43215 Thomas J. Munsch, Jr., Esq.
Cencral Attorney Duquesne Light Company 435 Sixth Avenue Pittsburgh, Pennsylvania 15219 4 Joseph Rieser, Esq.
Reed, Smith, Shaw & McClay Suite 440 1155 Fifteenth Street, N. U.
Washington, D. C. 20005 Terrance H. Benbau, Esq.
Winthrop, Stimson, Putnam & Roberts 40 ifall Street New York, IIcu York 10005 Ua11 ace L. Duncan, Esq.
Jon T. Brown, Esq.
Duncan, Brotm, Weinberg & Palner 1700 Pennsylvania Avenue, N.II.
Washincten, D. C. 20006 Robert P. Mone, Esq.
Ccorge, Greek, King, McMahon & McConnaughey Columbus Center 100 East Broad Street Columbus, Chio 43215 David McIcill Cids, Esq. .
John Mcs. Cramer, Esq.
Uilliam S. Lerach, Esq.
Reed, Smith, Shau & UcClay Post Office Don 2009 Pittsburgh , . Pennsylvania' 15230 Oe
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t John C. Engle, President .
AMP-0 Inc.
,ltunicipal Building , ,
20 liigh Street Hamilton, Ohio 45012 -
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Victor F. Greenslade, Jr., Esq.
Principal Staff Counsel The C,levpland Electric Illuainating Co=pany . . ._ .
Post offico Box 5000 Cleveland, Ohio 44101 Lee A. Rau, Esq.
Joseph A. Rieser, Jr., Esq.
need,' Smith, Shaw & McClay . . . . . .
Suite 404 .
Madison Building - - -
Washington, D. C. 20005' Leslie IIenry, Esq. *
. -. liichael M. Briley, Esq. ....m. . . . ,s .
. u.s. . m . n. .,.. .. ..
Roger P. Klee, Esq.
- Fuller, Henry, Hodge & Snyder 300 Madison Avenue -
Toledo, Chio 43604
. Pennsylvania Power Company ...,. .4.. .. . . , .u . a ,. , . u . . n. . . . . . ..
One East Washinston Street -
New Castle, Pennsylvania 15103 ElizaIbeth S. Bokerr., Esq.
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Chairman Atomic Safety & Licensing Board '
U.S. Nuc1 car Regulatory, Commission Washington, D. C. 20555 Eduard Luton, Esq., Member .
Atomic Safety & Licensing Board .
U.S. Nuclear Regulatory Commissio'n -
- Uashington, D. C. 20555 '
I Thoman W. Reilly, Esq. , Me:aber Atomic Safety & Licensing Board U.S. Nuclear Regulatory Comninsion Unchington, D. C. 20555 Secretary .
U. S. Nucicar Regulatory Commission Washington, D. C. 20355 Attn: Chief, Docketing and Service Section
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- Robert M. Lazo, Esq.
Chairman Atomic Safety & Licensing Board
.U.S. Nuclear Regulatory Commission
, Washington, D.C. 20555 Andrew C. Goodhope, Esq.
Membe r Atomic Safety & Licensing Board i
3320 Estelle Terrace Wheaton, Maryland 20906 Daniel M. Head, Esq.
Member Atomic Safety 7 iLicensing Board U.S. Nuclear Regulatory Commission Washington, D.C. 20555
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8Gi:ui.i.'!l CITY OF CLEVELAND, ) CIVIL ACTION NO. C75-560
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. Plaintiff )
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l TI!F. .'I.EVELAND ELECTRIC l
ILLUM11'ATING Coi4PANY, et al. , )
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I ORDER Defendants )
KRUPANSKY, J.
This is an ac' tion instituted by the plaintiff City of Cleveland (City) against d' .ndants Cleveland Electric .
Illuminating Company (CEI), Duquesne Light Cer:pany, Ohio i
. ; Edison Company, Penne.ylvania Power Company, and Toledo
. ,1 Edison Company charging a conspiracy ;o violate Sections 1 t
l, and 2 of the Sherman Antitrust Act, 15 U.S.C. $$1 and 2.
I Jurisdiction in properly invoked pursunut to Sections Il and
$$15 and 26.
16 of the Clayton Act, as c.r.cnded, 15 U.S.C.
,' The Complaint, aller,ing certain acts of conspirac'y to monopoli:c and restrsin trado, was filed on July 1, 1975.
Collateral to the substantive counts of the Complaint, the
,p City, on December 15, 1975,- riled its Motion to-Disqualify
- , the Cleveland law firm of Squire, Sanders and Dempsey 1
(SS&D), legal counsel for defendant CEI. This Motion,
[ . charging a conflict 'of interest arisin; an a result of I
j earlier legal retainers between SSID and the City, seeks to ;
foreclose SS&D from further participation in these pro- .
.. ; ceedings.
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The pending action before this District Court ,
climaxes protracted litigation initiated.by,the City aCainst 4 CEI and others as car]y .ts May 13, 1971, before the Federal Power Commission (FPC) in a proceeding styled City of Cleveland v. CEI, Dockes No. E7631. Litigation was thereafter
< pursued by the City with its Petition to Intervene before l the Nuclear Regulatory Commission (NRC) filed on July 6, 1971, wherein the City pressed its antitrust charges against i CEI and others.
By order dated July 12, 1972, the FPC concluded i that the City's allegations of anti-ccmpetitive pract ices by
, j CEI were unsupported by the facts. This conclusion was
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subsequently affirmed on January 9, 1976, by the United States Court of Appeals for the District of Columbia Circuit.
The proceeding before the NRC is still pending.
t > Issues of disqualification of counsel for conflicts arising as a result of former representation present the acutely sensitive dilemma of protecting-the confidentiality of the client-attorney relationship without needlessly interfering with a litigant's freeliom to proceed with legal counsel of choice. See, Note, Attorney's Conflict of Interesta*
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Representation of Interest Adverse to That of Former Client,
. 55 B.U. L. Rev. 61, 65 (1975). An equitable balance of these competing intercats is, essential if the public's trust ;l in the integrity.of the'Bar is to be preserved. Rodd v. Shell Oil Co. , 518 F. 2d 311 (10tn Cir.1975). Aosignment of this j i
A In the Matter of the Toledo Edison Company and The Cleve-l land E1cetriff11u iinatinr- Comnany (I)avlu-3cose Suclear ~
i' h Power Station, Units 1, 2 and 3) Docket Nos. 50-346.4, 50-i.- 1 500A and 50-501A; In tne Matter of the Cleveland Electric p l> -
Illuminatint- Company, et al. (Perry Nuc1 car Power Plant, .
Units 1 and 2), Docket Hos. 50-4'iOA and 50-441A.
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. f delicate factual and policy-making decision is delegated
, with increasing exclusivity to the district court. As e recognized in Hull v. Celanese Corporation, 513 F. 2d 568, -
Syl (2d Cir. 1975):
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The district court bears the responsibility for the supervision of the members of its bar . i
. . . The dispatch of this duty is '
discretionary in nature and a finding of '
' the district court will be upcot only upon !
a showing that an abuse of dincretion has taken place.
See also, Richardson v. Ilamilton International Corporation, 469 F. 2d 1382 (3d Cir. 1972), cert. denied, 411 U.S. 986, (1973); Creen v. Sincer, 461 F. 2d 242 (3d cir.), cort.
denied, 409 U.S. 848 (1972)-.
In approaching the issues of disqualification, the -
Court is rindful of its paramount obligation of " maintaining i the highest standards of professional conduct and the scrupulcus administration of justice." Hull, supra at 569; Silver Chrysler Plymouth, Inc. v. Chrysler Motor,foro., 518 F. 2d 751, 757 (2d Cir. 1975). This obligation stands in contrant to the accondary consideration of ensuring the right of the public to legal counsel of its own choice.
Ethical problems, however, cannot be resolved in the abstract.
. Rather the Court must rely upon a thorough consideration of the facts. "Nor can judges exclude from their minds realitics of which fair decision could call for judicial notice."
Silser Chrysler, 518 F. 2d at 753.
, Thus, when dealing with ethical principles it is apparent that a court, in the words of Judge Irving R. i I Kaufman in United States v. Standard Oil Company, 136 F.
Supp. 345, 367 (S.D.N.Y. 1955), -
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_a-cannot paint with broad stroken.
The lines are rinc and must be no marked.
Guide-posts can te established when virgin ground is being explored, and the conclusion in a particular cace can be reached ortly after painstaking analysis of the facts and precise application of precedent.
Accordingly, the dynamics of time have resulted in evolvirT modification of the practitioncr's ethical, social and political rolcs in society. Patterson and Cheatham, The Profession of Law 19-23, 65-67 (1973). Rules appropriate in l guiding lawyers of several decades ago munt be applied in
. light of current realities. As one commentator perceptively points out, the rigid rule of total disqualification is premised in the day when firms, when I
they existed, were very small -- also a day when attorneys most frequently could think of their activities in terms of discrect " matters." Increasingly, neither condition maintains. Note, Unchanc,ing Rules g g in Chanring Times: The Canone ot' Ethics and i
Intra-fi : Conflict,s of Int.evest , 73 Yale L.J.
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1056 (16?), cuoted in Silv .r Cnrysler Plymouth Inc. v. Cnrysler X:> tors Corp.
j~Q 370 F. Supp. 501, 5d9 (1973). '
gj U _ _ _ -) Since the largest legal firms represent the largest corporations within all sectors of the economy, it is practically impossible for a firm to ensure against some form of legal relationship between its clients at some time.
The pragmatics'of modern day legal practico assume creater significance and magnitudc when a firm such 'as SS&D, a prominent authority in a highly specialir.ed area of the law, is pursued to provide expert services for the economic i
benefit of .the public interest. ,
- Tile PARTIES Since 1905, the City has owned a*id operated the l Municipal Electric Light Plant (MELP) which has generated and distributed electric energy in keen competition with CEI for residential, commercial and industrial concumers within I I I.
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Cleveland, Ohio. MELP is a proprietary interest of City and is firunced by the issutnce of revenue bonds paynble from the revenuou of the systrm. !!ELP, as all other cILy depart.-
, monts, both governmental and propr!ctary, is repre::ented legally by the City's law Department. The City Law Depart-
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ment is administered by the Law Director assisted by a Chief Counspl and staffed by innumerable Assistant- Law Directors.
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i John Lansdale, Jr. (Lansdale), against whom the Motion to Disqualify is primarily lodged, is a partner in j the law firm of Squire, Sanders & Dempocy (SS&D) which i
practices in Vashington, D. C. under the name of Cox, Lang-ford & Brown. Martindale-Hubbell Law Directory (1975)
. l identifica SS&D as having 79 partners and 80 associates.
Cox, Langford & Brown is listed as having an additional ~
seven partners and five associates. SS&D is the largest and one of the most prestigious law firms in Ohio.
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, D'J SS&D is structured into five sections, i.e.,
'# ' A' . Litigation, Public Law, Estate & Taxes, Labor and Corporate.
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- 0) 1 Incorporated into'its Public Law Secticn is SS&D's municipal 0
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- L a bond department, perhaps the largest in the entire United States and nationally recognized as the most reputable and prestigious legal puthority in this highly specialized area of consultation. 'ts unique expertise in municipal bond law is unquestioned in the bond market: the firm's imprimatur assures the bond market that a proposed issue has underlying o
legal validity, thereby affording it greater public accepta.
bility and more favorable narketability.
In Ohio, SS&D performs virtually all state, county a'd n municipal bond work. The firms of Peck,Shaffer & Wil- I t
4 llams (Peck) and Bricker, Evatt, Barton & Eckler (Bricker) of Cincinnati and Columbus, Ohio, respr ctively, also offer .
l I reputable bond consultation and services nationally on a *
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lesser scale than SS&D.
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SS&D has represented CEI since the company's incorporation in 1890, and has openly, notoriously and ,
without interruption, served CEI as outside general counsel .
for 65 years.
In accordance with the pronouncement of the Sixth ;
Circuit Court of Appeals in Melamid v. I.T.T. Continental Baking Co., No. 75-1970 (6th Cir. April 27, 1976), an l
evidentiary hearing was accorded the parties to this pro-
, ceeding, in which the following facts were disclosed.
FACTS It is conceded that CEI is and has been one of SS&D's major corporate clients. The total commitment of SS&D to the legal and business affairs of CEI is further reflected by the service of Ralph M. Besse, a partner in SS&D wh s left the firm in 1948 to become Vice President and General Counsel and later President and Chief Executive of CEI; upon his retirement in 1970 he rejoined SS&D as a I
partner but continued'as a Director of CEI.
'Lansdale also has been a Director of CEI since
,- 1964 and has, since at least 1948, been the partner of the firm who advised and counseled the Company in rate and service matters as its chief legal counsel, not only before the Public Ut111 tics Com:nission of Chio (PUCO), but in all
, . other litigation save those proceedings before the FPC.
I During the intervening 29 years between 1947 and
, the present, SS&D hhs, without exception, represented CEI in
- IoppositiontotheCityineachinstancewheretheinterest of CEI and the City were in conflict. lioreover, during this , ,
! , sane period SS&D represented CEI in adversary prococdings I
! against the City involvine the Company's rate and service l OM y D 9)
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practices before the PUCO in 1947, 1961, 1964, 1965 an t 1974 (Deft.'s Exh. 29). For the City to now reign jgnorance of '
+ i the complete and intimate Icgal commitment of SS&D to CEI, its client for 65, years, as against all adverse interests including those of the City, and to disclaim knowledge of the scope and depth of the continuing legal relationship in i total ~ disregard of the innumerabic direct adversary con- I i.
frontations experienced by the City during at Icast the 30
. years reflected by the evidence herein.(Deft.'s Exh. 29),
presents a naive absurdity.
MELP, CEI's chief competitor for the electric consumer market within Cleveland, is one of the utilities owned and operated by the City. The other is the Water Division (llater). MELP and Water are self-supporting and financed by revenue bonds. These utilities theoretically generate funds from their own separate operations similar to profit-oriented, privately owned business ventures, in contrast to non-reimbursable governmental functions (police, fire, courts, etc.) and service functions (garbage col-lection, parks, building ir.spection, etc. ) which are supported I
g' by general fund tax receipts.
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In all general respects, MELP is considered to be f
3 similar to a privately owned and regulated electric utility, LU g( JJ ) -O v except that as a city owned enterprise, it pays no federal, state or local income, real estate or personal property taxes.2 It is structured as an independently operating, I
self-contained proprietary entity, and maintain an independenc ~
system of audits and accounts. '
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2 Cleveland Little Hoover Conmission Project flo. 12 -Division
.i of Light and Power - The h*hite - Becher - Pjevach Report en '
'[ Light and Power City of Clcycland commissioned by the Mayor .
and President of Cleveland City Council.to conduct an in-
. depth study of all City of Cleveland operations commenced in
! December 1965 and concluded on February 1, 1967.
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- Pursuant to the Charter of the City of Cleveland, ,
i Ch. 15, 583 et seo., nELP is legally represented and coun-1 scled by the City's Law Department. Indeed, the Law Depart-i ment's representation of MELP is analogous to SS&D's repro-sentation of CEI.
A number of Cleveland's major law firms including l SS&D have, during the lant 30 years or more, nerved the City l
on an ad hoc baniu as npecial counnel representing the City's IcGal interests in sclected controvernics.
The selective arrangement provides the City access, as its requirements demand, to the services of the area's, and in many instancos the nation's, most respected and _
talented Icgal practitioners generally not available within the City's relatively limited salary-structured Law Depart-ment. In most instances retainers are accepted as a public e
service, albeit upon a fce basis generally more moderate
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than the expertise commands in the private sector.
It is conceded that apart from the services per-t formed by its bond department, SS&D's ad hoc 1ccal repro-sentation of the City had no substantial relationship to the caso at hand although the City urges that by some undefined process of local osmosis, unsupported by evidence, SS&D acquired an insight into the City's affairs which is in itself an impermissible conflict, a charge of the type prompting J,udge Moore to comment in Silver Chrysler, supra ;
I at 754: "The mere recital of such a proposition should be self-refuting."
MELP's limited relationship with SS&D since 1963 l-j has been with John Erueckel (Brueckel), a partner assigned ,
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[ to the bond department of the Public Law Section. It is
! noteworthy, however, that although SS&D accepted r.d hoc OOm D D)
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I I retainers from the City,it scrupuleuuly avoided any relation-.
ship with MELP, apart from its bond consultations, except to
.i openly oppose it as advocate for its client CEI in rate and service controversies and other adversary proceedings before the PUC0 and the courts, f Accordingly, if the City is to prev'.tl upon its Motion to Disqualify it must do so upon the relationship that existed between the parties as a result of SS&D's role as bond counsel for the City 6enerally and, more particular-ly, in the. financing of MELP.
It is in this context of dual reprenentation that the alleged conflict must be considered. Absent evidence to the contrary, SS&D's capacity as bond counsel for City departments other than MELP, lacks, in the Court's view, the requisite adverse interest implicit in controversies of this nature. Vague and general assertions by the City that
, SS&D's relationship with City departments in general is
. comparabic to SS&D's general representation of CEI is clearly a distortion of its ad hoc relationship with the City as special counsel and ignores the diverse structurc inherent in municipal government.
In this context an exploration of the function of bond counsel is helpful. The record,'however, is limited in
~
defining the work product of this commissiori. The only evidence directed to the subject in the testimony of Brucckel I
, gy r3 who frequently characterized his role in the following D D,J . I terms: ,
Cs LLs '
Ue address [ourselves to 1cgality to make
_[3)_ sure that the proceedings are Iccal so A.f-.3 l Q l l
(7,j, t that people can have faith in their [the ;
,_, , JL bond issue] legality.
So we are not in the advocacy position.
We are not selling warcs; we are selling legality . . . . I think that a bond attorney, ,
this is his or her lot. ~ thinl: you can f destroy your credibility and the trust q in you if you take an advocate's position and depart from the strJct legal aspects.
(.Mecord at 305-307).
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In substance the primary responsibility of this eciployment is to certify that the transcript of proceedings relating to any given bond offering has been examined in
'~# ~ } } _
conjunction with the law under authority of which said bonds are issued and executed and such examination supports a legal opinion that the bonds constitute valid and legal obligations of the issuing covernmental political subdivi-sion. (Pltr.'s Exh. AA at B-1).
As closely as the Court can determinc from the fragmented testimony clicited at the hearing, the genesis of a bond issue is' enabling legislation, in thib case, an ordinance which fixes the amount and defines the purposes and the manner in which the issue is to be amortized. It is supported by a transcript or manuscript which emphasizes B
various factors and charteteristics significant to the security; an analysis of the political subdivisions' dubt structure; various financial factors; governmental opera-tions and economic characteristics of the issuing entity.
Included in the documentation of any bond issue is the Bond Certificate, Notice of Sale and Bid Forns.
From time to time bond counsel may be called upon*
to draft, exclusive of financial statements, one or more of these documents, somewhat as a scrivencr draftn instruments.
I I
1 Initially the information is, jn uhole or in part, e
documented by the appropriate governmental agency and present- ,
l ed to bond counsel for examination and certification es to .
accuracy, authcaticity and locality. Moticulous attention I
- i to detail, exactness and veracity coupled with sagacious ,
pedantic legal acumen are the hallmark of successful bond i
counsel in an astutely discriminating financial com. unity.
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, Eminence is not achieved by accepting, at face value, the presentments of the subscriber, nor does perfunctory appro-I b.ation effectuate'and maintain probity.
Accordingly, primary and secondary source reference:
" bottomed on public knowled$ e and what is in the public domain" (Record at 310) are the tools of verification and the keystone of legal opinion attesting any offering.
Integral to such comparative analysis is examination of state and local law, bcth constitutional and legislative; the reports of the Ohio Municipal Advisory Council incorpo-rating a compen( . am of indebtedness of every political subdivision in the stato, debt payment record, operating cxpenses, tax collections, ascensed valuations, millage limitations, and debt limitations, median family income, largest employers (Deft.'s Exhs. 23-27); primary records of*
the state and county auditors; reports of various bond e
rating agencies su:h as Moody's and Standard & Poor, a'nd other information bottomed in the public domain and utilized by the financial community in evaluating fiscal responsi-bility of a political subdivision. (Record at 310 - 334).
, Historically the competitive relationship between MELP and CEI is demarcated by two p'eriods, with 1971 bsing the watershed year. Prior to that time, the relationship, although competitive, was one in which the City sought, and CEI offered, advice on the MELP operation. Moreover, thr; y*,h-out the 1960's the parties without success negotiated at various levels the sale of HELP to CEI.
In the pre-1971 or1, the record discloses that SS&D served as bond counsel for MELP-related bond issues on 1 five separate occasions: 1954, 1960, 1963, 1966 and 1968. -
l l OQ' 0 H D f 0cw m"o ~ W T q . . , _ , , , , . . . . . . . .
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. The inweer two, in 1966 and 1968, were general ob11 ation C bonde for street lighting rather than,MELP mortgage revenue bonds. As such, their relationship to MELP is so attchunted as to render them irrelevant to this proceeding.
As to the three earlier issuances, the record reveals little beyond their mere existence. It does appear, however, that the manuscript for the 1948 MELP issuance was r
prepared by the Cleveland law firm of Jones, Day, Cockley and Reavis (now Jones, Day, Reavis & Pogue) in conjunction with the New York firm of Wood, Dawson, Love & Sabatine' (Wood, Dawson), and was the progenitor of the 1954, 1960 and 1963 parity issuances. The City Finance Department prepared the latter issuancos, while SS&D merely certified the proceedings. The City has failed to present probative natorial evidence as to the role assumed by SS&D in these i issuances, detailing neither the identity of the SS&D attorney serving as bond counsel, nor the nature or extent of information conveyed to the firm in the course of this ad E
hoc relationship. The paucity of evidence in this regard compels the Court to conclude that these issuances are simply too remote in point of time and relevance to be of any legal significance to the present inquiry.
. The City's conclusory assertion of confidential disclosure, arising from the Lansdale-Hauser memorandum dated October 26, 1966, (Pitf.'s Exh. E), is equally remote and, I more importantly, unsupported by evidence and completely I
l misconceived.3 .
l m
DJ 3I n December of 1965, the Cleveland Little Hoover Commicsion
__3 D 1'mJL is n 1 d was activated,by the Mayor and Pecaident of Clevciand City fCouncilbytheappointmentof24businessandcommunity I
- ~'
g l 5)- ! Icader- to conduct a 12-pirt, in depth study of all City i
d
{ , operations. The Cor. mission uns char cd "to analyze the
(_s jkf .( . JL. _Z3' above operations, detorcine their adequacy, and nake specific
- reconmendations for improvements and/or financial cavings."
-i 4a). Projcet Ho. 12 of the study project bs(Deft.'sExh.
tylod Municipal Licht - Tne White-Becher-Pjcvach Report -
g Financial Aspects of the Utilities - Division of Light and i Pouer was under the directorship of Carl White (White) of
=1
($ .
P 04 3-5 see aw, e es ess e .ses
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Mounting equipment breakdowns resulting in wide-spread servict failures and an increasing self-realization by MELP of its incapability to provide reliable service to 8
9 its customers prompted the City to file a Complaint against i
CEI before the FPC cn May 13, 1971. Pursuant to this action, ,
and a Motion to Consolidate filed December 6, 1971, the City demar.ded of CEI a permanent synchronous interconnection between their respective transmission systems and an investi-gation of CEI's alleged anti-competitive practicos. CEI was t
represented before the FPC by the law firm of Reid and Priest of New York.
Ernst & Ernst and G. George Becher (Becher). White was appointed by the Mayor and President of Council and, at all times in question, was acting in his representative capacity for the City. He voluntarily consulted CEI to discuss the .
Ic6ality of his memorandum styled "Tnoughts on the Use of l
Electric Light and Power Plant Utility (MELP) Funds for Alleviation of Critical Situation in General Fund of the City of Cleveland" dated February 21, 1966, incorporating his thoughts on the use of NELP funds as they impacted the City's concral fund. Presumably, he was referred to CEl's legal counsel Lansdale (Pltr.'s Exh. F). Lanndale, pursuant
__3 to the instructions of his client CEI, agreed to meet with 0 D'I Whit " ct ber 26, 1966. White appeared at the desiensied time with his associate Becher, also of Ernst & Ernst, and q_, (( duly identified themselves to Lansdale and Brueckel, who was also present. The tabulations and calculations included in 0 F53 ~l th White mem randum had be n d vel ped by White from sources known only to himself. During the course of the E# " (] , _ (. _;D conference White also produced a legal opinion that Lansdale Ii had prepared for CEI concerning the validity of relieving the City's general fund in which he recommended a reduction
' of charges by MELP for street lichting. Although not developed by the evidence it appears that Lansdale's legal opinion to CEI predated the White memorendum. White's possession of Lansdale's CEI menorandum is unexplained, except to the extent that it had not been supplied by either Lansdale or Bruecke3. All data and information, financial e and otherwise, concerning MELP which was discussed durinc
.l the course of the meeting was produced by White, as a j representative of the City. It in quite clear that ncither
- O Lansdale, Brucckel nor any other member of SSLD produced any I evidence whatsoever'concerning MELP or CEI. The subsequent letter and memorandum styled the Lansdale memorandum (Pltr.'s ;
j Exh. E), cddressed to Donald llauser (Nauscr), house counsel l for CEI, is a sequential report of the nectJ n3 with White and a reaffirmation of Lanedale's Iccal opinion to CCI.
Taken in proper context, it is obvious that there is no substance to the City's charge of confidential disclosure by
, members of SS&D arising from this Incident. Disclosure, if Ll any tive in fact occurred, was by the City throuth its representa-White.
s I
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O In the 1971 time frame, the City engaged Weod, Dr.u pa, as bond counsel in conjunction with a $$ million second uortgage revenue bond issue for NdLP. Wood, Daunon authored Ordinance No. 1187,-71 (the 1971 ordinanec), adopted by ;
Cleveland City Council on June 28, 1971, which authorized the City to issue and sell to its sini:Ing fund $5 million in .
anticipatory notes to be liquidated from proceeds of future public bond sales. Da or about June 6, 1972, Howard Holton (Holton), Assistant Secretary of the C,ity's Sinking Fund Commission and the public official primarily responsible for the City's bond work, approached Brueckel with a rcquest to review and approve the issuance of $3 million available for sale pursuant to the 1971 ordinance. Brueckel, aware of the action before the FPC and the potential for the con-comitant charge of conflict of interest arisin6 as a result thereof, declined the offer pending a review of the request with his partners at SS&D. Thereafter, SS&D internally decided to forego the tendered retainer pending consultation and approval by its client, CEI, upon full disclosure of the possible consequences arising as a result of the under-
. taking. Carl Rudolph, President of CEI, subsequently authorized SS&D to act upon tae City's request.
Concurrently, the incumbent Law Director for ,the City, Richard Hollington, Jr. (Hollington), was discussing with Danic1.0'Iaughlin (O'Laur,hlin), a partner of SSAD and former Chief Counscl for the City, the name potential for j conflict arising from the FPC action. It should also be
~
noted that, on July 6,1971, the City moved to intervone in l the URC action to which CEI was already a party.
Before SS&D communicated to Holton the approval of I c) a $
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CEI to S!!D's review of the City tend issue, Hollington -
telephonically advised O'Laughlin of the' City's decision to seek other bond counsel for the pending proposed issue.
Hollington advised O'Laughlin that the decision was prompted by the intense competition between the City and SS&D's client, CEI, the auversary posture of the parties resulting therefrom, and opposit1(n voiced by City Director of Utilities
- ' Raymond Kudukis (Kudukis) in consultation with administrativa and operational personne) of NELP. Upon flollington's direct request O'Laughlin suggested the names GT two reputablo Chio 1
law firms that offered bond servicca analogous to those performed by SS&D, i.e. , William Chadeaync of the Dricker , ,
firm in Columbus, and the Peck firm in Cincinnati.
The City thercupon tendered its retainer to the Bricker firm. By letter dated July 18, 1972, (Deft.'s Exh.
l I
10), Chadeayne declined the proffered employment, noting certain complications and implying a questionable interpre-tatic.4 of Ohio law by Wood, Dawson as it applied to the initial bond proceedings. For reasons kr.own only to itself .
and not disclosed by the evidence, the City, upon Bricker's refusn3 of its retaince, failed to approach the Peck firm of Cincinnati for employment on this particular issue.
Citing the critical press of time, the City impor-tuned SS&D, literally as a public service, to undertake the I assignment. , However, before a reluctant acceptance of the retainer,,SS&D insisted upon the written assent (in llolling- ,
l l ton's request' to SS3D) of Kudukis. That concurrence was l
I provided by the Hollin6 ton letter of July 24, 1972 (Deft.'s Exh. 11). The Court is here constrained to interject that, ,. l t
l
- from the evidence taken in its entirety, reasonable minds -
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i-l can arrive at but one conclusion:
from the open, notorioun and continuous legal representation provided by SS&D au I. '
9 '
j
, general outside legal counsel to CEI, adversary to the i
'# * ., . b C entire world including the City for 65 years, viz., that the I
City was fully cognizant of the scope and depth of any potential conflict of interest that could attach to SS&D's ;
services to the City as a bond consultant.
The classic attorney-client relationship between j laymen and lawyer is here significantly absent. Confronting the Court in the case at bar is a relationship between an attorney seeking consultation services for a client from another attorney. The Charter of the City of Cleveland, Ch.
15, 583, mandates that the Director of Law nhall be -
a the legal advisor of and attorney and counsel for the City, and for all ,
officers and departments thereof, in matters relating to their official duties.
He shall . . . prepare all contracts, bonds, and other instruments in writing in which the City is concerned and endorse on each his ap-proval of the form and correctness thereof.
No such bond, contract or instrument shall become effective without such endorsement by the Director of Law thereon.
In accordance with the requirements of the foregoing concise language, the Law Director has historically, in his official capacity, cither reviewed the legality of all proposed bond issues or, in the alternative, delegated the duties to j private lawycrs or law firms as special counsel for the City. Accordingly, in instanccc when the Law Director elected to delegate these duties, he has, within his dis-cretion, assigned these duties to private bond counse]. .
Aware of the potential for conflict implicit in SS&D's l.
! simultaneous representation of CEI and the City and having l .
! openly discussed the subject with Kudukis and O'Laughlin it 1
0 ~
is presumed that the decision of the Lau Director to persist p in his demands upon SS&D to act as bond counsel was, i
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. 4
- 17 _ j A
under the prevailing circumstances, knowledgeably rendered with a full. understanding of the impact that such insistence could have upon the ethical issues evolving from the under-taking.
Brueckel's cervices, as they related to the 1972 F4ELP bond innue, were limited to drarLing Ordinance No.
2104-72, authorizing purchase of the issue by the City's sinking fund. Thercarter City Council enacted an amended t
version of the ordinance directing the issue to be sold publicly or, in the alternative, to be purchased by the sinking fund only upon enactment of an authorizing resolu-tion by City Council. SS&D did not prepare the amended form of the ordinance (Deft. 's Exh. ld). Brueckel did, however, at the insistence of the City, continue his consultations on -
a number of other bond issues, including the 1974 note to provide concral obligation financing for strect lighting improvements.
During September of 1974, before the NRC, the City for the firnt time interjected the issue of conflict of interest arising as a result of dual reprecentation. Therc-after, on July 1, 1975, the City initiated the instant antitrust action against CEI and others in this Court.
Commencing on August 5, 1975, the City, under the direction of James B. Davis (Davis), incumbent Director of Law, embarked upon an unusual, and perhaps questionable, campaign. On the one hand, the City was demanding that SS&D
- I continue as bond counsel for the City under penalty of l
l violating DR 2-110, Code of Professional Responsibility, N 8
ti 4 DH 2-110 Withdrawal recm Employment. .
d (A) In general.
(1) If permission for withdrawal from employment is required by the rules of a tribunal, a lawyer
- shall not withdraw from enploynant in a pro-cceding before that tribunal without its per-
- mission.
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. while on the other hand demanding that SS&D withdraw as ,
i legal counsel for CEI both before the NRC and this Court, under penalty of violating Canons 4, 5, and 9 of the Code of j_
e Pro essional Hesponsibility. Notwithstanding its charges of .
l conflict levoled against SS&D, the City again retained SSAD as bond counsel in mid-November of 1975, at which time Davis assured Ralph Gibbon (Gibbon), the SS&D partner in charge of the Public Law Section, that the bond work currently under-taken would be considered as a matter sersrate and apart from the instant litigation. 1:owever, on December 5, 1975, mounting tension between the parties prompted Gibbon to notify Davis of SS&D's decision to withdraw as the City's bond counsel. (Pltr.'s Exh. M). On December 15, 1975, the City filed the instant Motion to Disqualify. As late as December 15, 1975, when its formal Motion to Disqualify and enjoin SSED from further participation in the pending action
. before this Court was filed, the City, in 'its Brief uupport-ing said motion, continued to press SS&D to continue as bond counsel for the- City:
SS&D ia the largest law firm in the State of Ohio, with approximately 180 lawyers in
. 1975. It has one of the largest sections specializing in public law and public finance of any major law firm in the United States.
SS&D has a virtual monopoly on public finance law in Northern Ohio. Only two other firms in Ohio, one in Columbus and one in. Cincinnati, I.
(2) In any event, a lawyer shall not withdraw from .
l employment until he has taken reasonable steps ,
to avoid foreseeabic prejudice to the rights of a his client, including giving due notice to his
! client, allowing time for employment of other
! counsel, delivering to the client all papers and i property to which the client is entitled, and
, l complying with applicable laun and rulca.
I (3) A lawyer who withdraws from employment
- shall refund promptly any part of a fee paid -
in advance that has not been carned.
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- do any significant amount of public bond Icgal i work. Neither has ever worked for the City.
Cleveland has four othar firms with in excess of i 80 lawyers cach and a number of other firms of substantial size, but none has ever attempted a I
any si6nificant amount of bond work in the public sector. The opinion of SS&D is widely 4 4
accepted by financial institutions in Ohio i*
- and elsewhere as authoritative for the sale of public notes and bonds.
- I The City of Cleveland, in order to conduct its business and survive financially, must each year issue millions of dollars of notes and bonds. Over the last several decades, virtually all of such notes and bonds have been prepared by SS&D and sold because of its i [ opinion letters. No other 14w firm in Ohio or elsewhere has the great and 40 tailed familiar-ity with the City's affairs, the legal skills in t
dealing with Ohio municipal law, and the staff necessary to prepare the City's bonds and notes and give the necessary opinions for their sale as does SSAD. For the City to arrange to transfer a part of its bond business to other firms would be very difficult and time consuming. It is much -
more cumbersome and expensive to deal with law firms not located 1.'. Cleveland. The other large firms in Cleveland are reluctant, for a variety of reasons to even enter the field. Of the five
' large law firms in Cleveland, only Jones, Day, Reavis & Pogae has done any bond tork for the City in recent, years, having prepared an issue of Sewer Bond Anticipation Notes in 1974 a d again in 1975. This firm is not currencly available as a source of bond work for the City because it now seeks to represent the Ohio Edison Company in this present case.
The City Law Department, with a constant problem of low pay and heavy turnover, has not managed to develop lawyers with the skills necessary to
- handle its own bond work. It is totally incapable of doing such work at the present time.
The practical consequence of the virtual monopoly of skills possessed by SS&D in the field of public finance is that the City must and does totally rely upon it for the daily conduct of its financial -
affairs.
l V
With the recent financial crisis in How York City, '
it is common knowledge that purchasers of municipal obligations,across the country have become extremely cautious. With regard to the purchase of 1 e '
current obligations of tne City of Cleveland, it is now more necessary than ever to have authorits-
, tive opinion letters from a law firm on its bonds ,,
l and notes. At present, only SS&D is readily avail- -
- ab]c to provide such opinions. (Pltf.'s Br. at l 2 ee). --
- D P@D
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=
ESTOPPEL The alleged conflict of interest, if any in fact .
cxists, arises as a result of actions induced by the party '
socking dinqualification. SS&D's anserted defense of
, equitabic estoppel is therefore appropriately urged.
In defining the doctrine of equitable estoppel in
- State v. Dayton Power & Light Co., 170 F. Supp. 722, 725 i (S.D. Ohio 1957), arf'd,263 F.2d 909 (6th Cir. ), rev'd on other grounds, 359 U.S. 552 (1959), the court stated:
Equitable estoppel or estoppel in pais is the principal [ sic] by which a party who knows or should knou the truth is absolutely pre-cluded, both at law and in equity, from denying, or asserting the contrary of, any
, material fact which, by his words er con-duct, affirmative or negative, intentionally or through culpable negligence, he has induced another, who was excucably ignorant of the true facts and who had a right to rely upon such words or conduct, to believe and act upon them thereby, as a conscquence reason-ably to be anticipated, changing his position
' in such a way that he would suffer injury if such denial or contrary assertion were allowed.
Generally speaking, however, equitable '
estoppel is a rule of justice which in its proper fieJd prevails over all other rules.
e e e The doctrine of estoppel in pais is founded upon prin:iples of morality and fair dealing and is intended to suocerve the ends of justice. (Citations omitted).
While the doctrine is sparing?y invoked against municipal corporations, there is no doubt that a municipality can be estopped to provent a nanifest injustice, where .
?
positive action or representation by the municipal corpo-i ration, acting withi,n the scope of its authority, has inesced
- another to act in good faith, and it (ould be incquitable to permit the retraction of su:h acts. Haba v. Cuff, 28 Ohio Op. 2d 266, 201 N.E 2d 3fl3 (1963), appeal dismisced, 176
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Ohio St. 374, 199 N.E. 2d 736 (1964), eert._ denied, 380 U.S.
964 (1965). The application of the estoppel doctrine to attorney disqualification proceedings wa's recognized in Con-
! solidated Theatres. Inc. v. Warner Bros. Circuit Figt. Corp., l 1
216 F. 2d 920 (2d Cie. 1954), as.well as in Informal opinion 1121, (April 21, 1975), wherein the American Bar Association Committee on Ethics and Professional Responsibility stated: 1
[G31ving credence to the statement by Lawyer X that when he was engaged by counsel for Company B to represent the g
latter in its dispute with Company C, he
- was advised by the lawyer for Company B that there would be no conflict in his
, continued representation of Company A, then it would be improper for Company B to urge disqualification of Lawyer X now that Com-pany A and Company B have beccme embroiled in separate litigation. Id. at 3.
The criteria for invoking the doctrine were suc- .
cinctly delineated in Unit.d States v. Georgia-Pacific Corp.,
421 F. 2d 92, 96 (9th Cir. 1970) wherein it was stated:
Four elements must be present to establish the defense of estoppel: (1)
The party to be estoppea must know the ,
facts; (2) he must intend that his con-duct shall be acted on or must so &ct that the party asserting the estoppel has a right to believe it is so intended; (3) the latter must be ignorant of the true facts; and (4) he r.ust rely on the former's conduct to his in*ury. (citation omitted).
From the evidence educed at the hearing, the City cannot, in good conscience, deny a full understanding of the scope and depth of SS&D's long standing general representa-tion of CEI, if only from a review of the 4? legal actions
- e
- in which SS&D represented CEl as an adversary to she City's !
interests (Deft.'s Exh. 29); the'Hollington-O'Laughlin telc-phone conversations on July 24, 1972; the Holton-0'Laughlin t
disc'ussions of 1972 and the open, noterious and continuous legal representation afforded CEI by SS&D for a period of 65 ' '
years.
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The Hollington letter of July 24, 1972 (Deft.'s i
. Exh. 11), communicating the Kudukis concurrence in tho
, appointment of SS&D as special bond counsel for the 1972 MELP issue, with Hollington acting within the scope of his ;
authority as Law Director, certainly satisfies the second l
criteria. The Hollington-0'Laughlin discussion, coupled ,'
A with the Hollington-Kudukis letter of July 24, 1972, convey-ed with explicit clarity the City's intention to waive any ethical objections that could arise as a result of SSAD's performance as bond counsel, and SS&D had every right to believe from the facts that the City so intended. Moreover, it is apparent from the facts that SS&D was, at that time, completcly ignorant of any intention on the part of the City _.
to press the ethical issues at a future da .e; and, in satisfaction of the fourth criteria set for th by United States v. Georgia-Pacific Corp. , supra, SS&D, did in fact rely upon the City's conduct to its own detriment by reluctant -
ly undertaking the City's induced retainer.
Accordingly, the Court concludes that the facts hercin catalogued warrant the imposition of the doctrinc of equitable estoppel against the City, thereby foreclosing the City from prosecuting its Motion for Disqualification, and it is on this account denied.
The Court's inquiry does . tot, however, cnd here,
,Further analysis of the disqualification issue is promptca
,, by a number of other asserted chargos and defences.
g WAIVER :
As a corollary to the doctrine of equitable l I
estoppel, SS&D argues that in the event of an affirmative l finding by the Court of ethical conflict as alleged by the I .
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City, the City has knowingly and voluntarily consented to !
3S&D's role as bond counsel for the City, thereby waiving ,
e -
any right to pursue its Motion for Disqualification.
I '
It is axiomatic that the client's right to object ,
to an attorney's alleccdly adverse representation may be ;
waived. E.g., Marketti v. Fitzsimmons, 373 F. Supp. 637 ,
, e (W.D.Wisc. 19'/4); Note, Attorney's Conflict of Interests,
, supra at 81. Sco also In re Yarn Processing Patent Validity Lit $ cation, 530 F. 2d 83, 89 (5th Cir. 1976). The defense of consent and waiver is predicated, in large part, upon the
, same evidence supportin$ ;he Court's invocation of the doctrine of, estoppel. As noted in Matsuo Yashida v. Liberty Mutual Insurance Co., 240 F. 2d 824, 829 (9th Cir. 1957):
a Waiver and estoppel are legal terms which are frequently used interchangeably. Al-though the legal consequences of each are
- often the same, the requisite elements
- are different. Waiver refers to the voluntary or intentional relinquishment of a known right. It emphasizes the .
mental attitude of the actor. On tne other hand, estoppel is any conduct, express or implied, which reasonably misicada another to his prejudice so that a repudiation of such conduct would be unjust in the eyes of the law. It ir grounded not on subjective intent rather on the objective impression , cat-j ed by the actor's conduct. It is in the
- arca cf implied waiver that the two doc-trines are closely akin. (footnotes omitted).
The Court, accordingly, fo:uses upon those facts evidencing t,he City's subjective intent manifested by the events sur-rounding the 1972 bond ordinance representatien.
i 4, Again the Hollington-Kudukis letter of July 24,
- 1972,-when taken in context with the Hollings n O'Laughlin }
, telephone conversations that preceded it, leaves no room for s
doubt that the City did indeed waive any and all objection .
to SS&D's continued representation of CEI:
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I would greatly appreciate SS&D assist-ing the City as bond counsel in connection with this matter. I have discussed this l with Ray'Kudukis who concurs with my refer-ral of this matter to you" firm.
Accordingly, on this account the City's Motion to Disqualify is dismissed. '
I SUBSTANTIAL RF.LATIONSHIP TEST Analogous to the City's broad brush treatment of j
the facts is the cavalier manner of its treatment of the law governing the issue of disqualification. Interchangeably, and without recognition of the distinct and definitive nature of each of the relevant Canons, the City charges SS&D with violating Canons 4, 5 and 9 of the Code of Professional -
Responsibility. Although case authority does recognize a certain interrelationship between Canons 4 and 5, recent legal precedent distinguishes Canon 9 from the others and proscribes its indiscriminate application to issues of .
disqualification. Silver Chrsyler Plymouth Inc., 518 F. 2d at 757. See genera 11g, Note, The Second Circuit and Dis-qualification - Silver Chrysler Steers in a How Direction, 44 Fordham L. Rev. 130 (1975). That the " appearance of I impropriety" doctrine of Canon 9 should not be given an overbroad application u3s recently reaffirmed in International Electronics Corn. v. Planter, 527 F. 2d 1288, 1295 (2d Cir.
1975) wherein the court stated:
o We caution, as the Connecticut Bar Asso- l ciation urges us to do, that Canon 9, :
though there are occasions when it should '
be applied, should not be used promiscuously as A convenient-tool for disqualification when the facts simply do not fit within the f rubric of other specific ethical and disci- :
plinary rules. 5 , ,
t L
Canon 9 as applied to Daniel O'Laughlin's former employ-( ment as Chief Counsel for the City Law Department will be discussed nore 7Q O c fter. '
! U o o 11
~
- Tl '~D T vk .
. .l -I
O - s
. +
Judicial notice is taken of the standards of profeculonal conduct proclained in the Code of Professional "
Hosponsibill*. Canon 4, "A hauyer Should Preserve the '
Confidences and Secrets of - Client,O promoten the sound j .poliwy of coilfidentiality of communication inherent in the
{
attorney-client relationship by insuring, in the first ,
+
instance, fundamental fairness in the judicial process by 6
DR4-101 Preservation of Confidences and secrets of a Client. .
4 I
(A) " Confidence" refers to information protected by the at*torney-client privilege under abplicable law, and " secret" refers to other information gained in the professional relationship that the client has requested be held inviolate or the dis-closure of which would be embarrassing or woald be
. likely to be detrimental to the client.
(B) Except when permitted under DR4-101 (C), a lawyer '
shall not knowingly:
(1) Reveal a confidence or secret of his client.
(2) Use a confidence or secret of his client to the disadvantacc of the client. .
(3) Use a confidence or secret of his client for the advantage of himself or of a third person, unless closure.
the clionL consents after full dis-(C) A lawyer .tay reveal:
(1) Confidences or secrets with the consent of the client or clients affceted, but only after a full disclosure to them.
(2) Confidences or secrets when permitted under Disciplinary Rules or required by law or 1
court order.
i (3) The intention of his client to sommit a crime I and the information necessary to prevent the crime.
j, '
(4) Confidences or secrets necenrary to establish i-or collect his fee or to defend himself or l i his employees or associaton acaltmt an accu- ,
sation of wrongful conduct.
(D) .A lawyor shall exercise rea'sonab]c carc to prevent
.l his employees, associates, and others whose services are utilized by him from disclnsing or using l
t confidences or secrets of a client, except that a lawyer may reveal the information allowed by Di:4-
- 101-(C)-through an employce.
j D DJ l." .. ,
,a v1 ..--............
n kyg 7g-1_ .1 IAL, S
t shielding the client from his attorney's use of confidential information against him. Secondly, it encourages fall ,
disclosure by a client, thereby enabling the attorney to
- function more effectively on the client's behalf. Note, Attorney's Conflic$ of Interests, supra at 64. Canon 5.
"A Lawyer Should Exercise Independent Professional Judgment
, on Behn 1r of a Client," also provides guidance for attorneys in confl'.ct situations arising from multiple client representa' tion.I
. In determining the c;. stence of a conflict of interest herein, the Court's attention is directed to the i test first advanced in T. C. Theatres Corp. v. Warner Bros. Pictures, Inc., 113 F. Supp. 265, 268 (S.D.N.Y. 1953),
I DRS-105 (A) - (D) Refusing to Accept or Continue Employment'
. if the Interests of Another Client May t
Impair the Independent Profsssional Judg-ment of the Lawyer. -
(A) A lawyer shall decline proffered employment, except to the extent permitted under DRS-105 (C).
(B) A lawyer shall not continue multiple employment if the exercisc of his independent profensionni judg-ment in behalf of a client will te or is likely to be adversely affected by his representation of another client, except to the extent permitted
. under D35-105(C).
~
(C} In the situations covered by DR5-305 (A) and (B),
a lawyer may represent multiple clients if it is obvious that he can adequately repeccent the interest of each and if cach consents to the
, representation after full disclosure of the .
possible effect of such representation on the j exercise of his independent p.rofessional judgment
- on behalf of each. l (D) If a lawyer is required to decline enployment or to withdraw from employment under DR5-105, no partner or associate of his or his firm may accept
- such employnant.
! -~
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eu l
1D:E
. . . . j .
l subsequently adopted by the Second Circuit Court of Appeals,
- in Consolidated Theatres, Inc. v. Warner Bros. Circuit Management Corp., supra, and now generally applied in ,
I nearly all ciccuits, to wit: the " substantial relationsh?.p" j test.0 Redd v. Shell Oil Co., supra: Richardson v. Ilamilter Internat'l Corp., supra; Uniweld Products, Inc. v. Union '
1 Carbide Corp., 385 F. 2d 992 (5th Cir. 1967), cert. denied, 390 U.S. 921 (1968); Chugach Elec. Ass'n. v. United _ States District Court, 370 F. 2d 441 (9th Cig. 1966), cert.
denied, 389 U.S. 820 (1967); Cannon v. U.S. Acoustics, 398 F. Supp. 209 (N.D.Ill. 1975); Marketti v. Fitzsimmons, supr.3. As Judge Weinfeld initially formulated tne test in T.C. Theatres Corp., supra 12t 268, disqualification should be .
ordered where any substantial relationship can be shown between the subject matter of a former representation and that of a subsequent adverse representation . . . .
Since the party moving for an order of cisqudli-fication of an opponent's counsel charging alleged conflict of intercst must overcome the burden imposed by several interrelated evidentiary hurdles, the City is thus required to prove that:
- 1. A past attorney-client relationship existed D l betwcon the City and Brucckel which was adverse ta
(_s ss Liasdale's concurrent and subsequent representa-
~
g '3 ! tion of CEI; JL.d.1 a
). l 0
'; The City asserts that the " substantial relationship" test 1
is not applicable herein, relying on the recent case of .
T.td. v.
( Cir.
Cinema 19765,T, wherein the Second Circuit held thatCinerama, said test Inc., 528 F. Pd 313 f "did not set a sufficiently high standard" for disqualifi- , ,
[: cation where theThe representation." "rolationship la a continuing, Court concludes adversecase that the instant is diatJncuishable therefrom, as detailed i n f ra . Unlike l Cinciga_q, 3rueckel's ad hoc relationships with the City had fixed parar cters, were non-llticioua and Inherently non-i l-
' , adverae, 6nd, with the exception or the 1972 ordinance, were unrelated to MEI.? natter.0.
-a
[ ,,......,,,u.....
1
?
. 2. The subject matter of those relationships was/is substantially related; and
- 3. Lansdale, as attorney for CEI, acquired knowled 5e of confidential information from or concerning the City, actually or by operation of law. (
{
Initially, within the context of the Code of Pro- '
fessional Responsibility, the existence of any attorney-client relationship, arisins as a result of SSiD's rolo as t
bond consultant for the City, is questionable. The role of bond counsel is not that of an " advocate." Bond counsel nerely examines and attests to the legal validity of pro-
' posed bond issues. Indeed, Brueckel's services in 1972 in -
drafting an ordinance for the $9.8 million bond issue are-analogous to that of a scrivener, a role that does not Create the relationship. W. McCormick, Law of Evidence $88 j
at 180 (2d ed. 1972). However, viewing the relationship,in a light most favorable to the City, the Court concludes that
, an attorney-client relationship did exist between the City and SS&D as its bond counsel. The existence of an attorney-client relationship betueen CEI and Lansdale is conceded.
llaving acknowledged the ex2stence of an attorney-client relationship, the Court must ',lso affirmatively find it to have been an adversary relationship. In this context 1.t should be noted that Canon 5, construed in conjunction with ethical consideration EC 5-15 and 5-19, approves cer- i tain limited multipl,e-client representations. ,
EC 5-15: 8 A lawyer should never represent in litigation ciultiple clients with differing
- interests; and there are few situation: in ~
which he would be justified in representing in litigation nultiple clients with potential-ly differing interests. If a lawyer accepted t such ersploymgityy)he D 0 interests did become I
3 wo1 '
y
~.
9 9-- Y . ................
1 JL S - k a
t actually differing, he would have to with-draw from employcent with likel.thood of
, resulting hardship on the clients; and for j this reason it is preferabic that he refuse Cr. cha c;ber hand, i
C.: 2;.rlsinct.; ir.'..; 11 y .
(
there are many instances in which c lawy,or /
i nay erocarly serve multiple clients having ggcenciaily differing interests in matters not involving litiration. If the interests vary only slightly, it is generally likely that the lawyer will not be subjected to an adverse influence and that he can retain his independent judg .ent on behalf of each client; and if the interests beco:a differing, with-drawal is less likely to have a disruptive
' effect upon the causes of his clients.
(emphasis added).
EC 5-19:
A lawycr may represent several clients s
whose interests are not actually or potential-ly differing. Nevertheless, he should explain
- any circumstances that might cause a client to question his undivided loyalty. Regardless of the belief of a lawyer that he may properly represent multiple clients, he must defer to a client who holds the contrary belief and withdraw from representation of that client.
(emphasis added).
. Representations are sufficiently adverse to" warrant a disqualification when, in behalf of one client, it 'is
[the cttorney's] duty to contend for that which duty to another c]iont
- requireu him to oppose. Canon 6, ARA Canons of Ethics (now Canon 5, CPR).
Notwithstanding the intense competition existing between CEI and MELP, the Court, in vicuing the nature of the legal representation afforded cach of the parties hereto
- j by SS&D, finds that in this posture SSiD's role as the l
City's special bond counsel in each ad hoc instance reflected l f '
by the record heroin, and more particularly for the 1972
$9.8 million KELP issue, did not give rise to potentially j differing interests between the City and CEI. SS&D's repre- i l
J sentation of the City as bond counsel wan not litigious. *
( SS$D's representation of the City 'n bond c:atterr. was not I,
D u
O]D o Ju n
L o ry -
I'
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as advocate. Each retainer was arranged by the City's legal counsel, namely the Law Director, acting with full realiza-i tion of SS&D's relationship as advocate for CEI in its capacity of general counsel, all in keeping 'fith the objec-tivos of EC 5-15 and 5-19.
In view of the foregoing, the Court is unable to find the required adversity of representation necessary to
, support disqualification.
In the event that the City had carried its burden of proof by initially demonstrating the requisite adversity between these two representations, it would have been confronted next with the burden of affirmatively showing, as -
the second element of the test, that the former attorney-client relationship involved matters sutstantially related to the latter. Absent such affirmative showing, it is axiomatic that no ethical problem results. Cannon v. U.S.
Acoustics, supra at 222.
In confronting the conflicts issue, this element is "not one whose dimensions are delineated with mathemati-cal precision," Silver Chrysler, 518 F. 2d at 758 (Adams, J.
concurring), and "[u]nfortur.ately, the cases furnish no
- applicable guide as to what creates a ' substantial' relation-ship." United States v. Standard Oil Co., 136 F. Supp. 345,
, 355 (S.D.N.Y. 1955). A survey of cases cited in. silver I
Chrysler disclosed that disqualification was ordered only !
rm rs
' under circurstances where the relationship between subse-i 0 D d
d h; quent and former representhelons was " patently clear." 518 r
gravamen of the City's antitrust action r.
reflected by the pleadings is that of anti-colpctitive i
I } practices,encacedinbytheparticeinther.r:ncration, transniss'on and sale of electric encrcy In Lt.c C1cycland, i l
N L . . . . .
4 i
Ohio area, no demonstrated by the City's charCes that the i f f!
}
i defendants combined and conspired: to refuuo to whool or to '
- allow the transmission of electric power and energy to f4ELP fi from other power and energy suppliera , or from !4ELP to any other electric utility system which is an actual or potential e-competitor of any of the defendants, over trans' mission lines
owned or controlled by the defendants or any of them; to boycott and refuse to deal with plaintiff and others in the j
power exchange market, except on terms that would maintain 4
domination and exclusive control by the defendants over electric bulk power supply in the area served by cach, and upon conditions that would be harmful to the interest of the -
plaintiff and other actual and potential competitors at wholesale or seta11; to refuse to admit plaintiff to member-ship .in the Central Area Power Coordinating Group (CAPCO) or to otherwise permit plaintiff to have access to the benefits of coordinated operations and development or any other benefit of power pooling or power exchange services; and to a
3 a
engage in other activities for the purpose and wi'l:h the effect of restraining and climinatin5 compctition in the e
2 sale of electric power and energy.
The Court concludes that there exists no substan-tial relationship between the pending antitrust action and SS&D's services to the City.on an ad hcc basis as special l
l bond counsel attesting the veracity.of proposed bond offer-i ings.
]
i
'No " patent'ly clear" relationship exists between Brueckel's bond representation in 1972 and Lansdale's .
representation of CEI in this pending antitrust action. The *
, l l Court is unable to discern any commonality of issues, see -
D D I, v V I)
. .u.
l .
Pleincher v. A. A.P. , z2 Ir e ,163 F. Supp. 548 (S.D.N.Y.
l
, 1958), gppeal dfnnlnned, 264 P. 2d 515 (2d Cir.) cert.
donted, 359 U.S. 1002 (1959), particularly in view of the '
I l 4 non-litigious nature of Brucekel's bond consultations. Thus, the instant case is distinguishable from precedent such as I
Emle Industries. Inc. v. Patentox, 478 F. 2d 562 (2d Cir.
1973), where the matters in controversy were identical, and 4 Motor Mart. Inc. v. Saab Motors, 359 F, Supp. 156, 157 (S.D.
N.Y. 1973), where the suit was " essentially the same type of suit."
Moreover, the Court finds the City's reference to Chugach Elec. Ass'n. v. United States District Cot rt, -
supra, does not support its contention of substantial relationship. In Chucach, substantial relationship was patently clear and the disqualification was predicated upon the challenged attorney's former position, for 14 years, as General Counsel for the movant. That the City would compare Brucekel's limited, ad hoc representation to that of a general counsel relationship reflects the City's failure to perceive the subtleties, or the " fine lines" to which Judge Kaufman referred in United States v. Standard Oil Co. , su6ra at 367, that must be carefully considered in applying e.thi-cal principles.
Furthermore, it is inconceivable that Brucckcl's authorship of Urdinance No. 2104-72 would provide him*with 8 confidential knowledge disclosing the City's antitrust strategies or motives such as those available to the dis-qualified attorney in Chugsch.
The Court necessarily concludes that the City has .
failed to meet its burden of proving a substantial relation-lshipbetweentheinstantrepresentations.
g ny gkoAl m T 2~ " - -
1;o JD A L
e The cencral rule in disqualification cases has i, been that, upon proof of a forace attorney-c1jent relation-
- g a ship concerning cubstantially reinted matters, disclosure of confideneca is presumed. T.C. Theatres corp., sy ra at 268. !
This Court concludo.s that equity demand's, and tho :
pragmatjes of emerginC specializatiot. inherent in contem-porary 1ccal practice dictates, that this presumption bc l rebuttable. Thus, upon proof of the attorney-client relation-ship arising from Brueckel's employment as special bond counsel, and of an adverse and substantial relationship between that employment and SSSD's representation of CEI (which the City failed to provide), the disclosure of '
confidential information would have been initially presumed in favoc of the City.
, However, the record in the instant case reflects that SS&D successful'ly and conclusively produced substantial
, probative, material evidence affirmatively showing that no confidential disclo:;ure in fact occurred and that the very mechanical procedure-inteCrant to the services of bond counsel for the CJty forcelosed such manifestation. In the
- first instance, the doc. ment composite of any proposed City bond issue is, by law, a matter of public record. Secondly, preliminary to any attestation of legality by City's bond
, counscl, verification of such documentation is premised upon public record, and information within the public domain, f i
e.g., legislative enactments of state and local political '
subdivisions, record's_of the State and County Auditors, and Municipal fiscal officers, Ohio Municipal Advisory Council
. Reports, Hoody's Heports, Standard & Poor. .
In instances whcre courts have found disclosure of l
information by the client to one member of a Inw firm, such D 77 0 1
"* > n ,
oaI ,
-}
D ...-.............
.s _ JL .nj s ~
knowledge has traditionelly been imputed to all mert.bors of his firm. ConsoJidated Theatres, Inc. v. Warner P.ros.
Circuit Management Corp., supra at 928. The Court, having found no disclosure of confidential information in the c i
proceeding at bar, is'not confronted with resolving this
, issue. It should, however, be noted that recent prevailing a legal precedent has re,jceted the harsh, hard-linc approach i of irrebuttably imputing confidential disclosurcs, actual or presumed.. received by one member of a law firm to all members of that law firm in fa'vor of the taore realistically equitable logic, attuned to contemporary Iccal practices
. common to emerging law firms of substantial size. This more
, intellettually sound treatment is demonstrated in Silver ~
Chrysler:
Only where an attorney himself represented
- a client in matters substantially related to those embraced by a subscquent case hc wishes to bring against the former client ,
is hc irrebuttably presumed to have benefitted .
from confidential information relevant to the.
current casc. In such limited situations there is no necessity to demonstrate actual exposure to specific confidences which would benefit the present client. But, as Judge flerlands noted in Fleischer, [ sus at 552),
in a case "where the attorney raay be ' vicariously disqualified' (as by virtue of his former membership in a law partnership), the inference is treated as rebuttable." 370 F. Supp. at 587. (citations omitted).
I In affirming the lower court's departure from precedent, the Second Circuit, citing Laskey Bros. of H. Va., Inc. v. Warner Bros. Pictures, 2218 F. 2d 82f, i 827 (2d Cir. 1955), cert.
1 l denied, 350 U.S. 932 (1956), has cautioned:
It will not do to make the presumption l of confidential information rebuttable !
i and then to make the standard of proof for rebuttal unattainctly high. Tnis is i
particularly trae where, as here, the .
attorney must prove a negative, which is '
k always a diffjeult burden to meet.
l Silver Chrysler, 518 F. 2d at 7518 Il F
0**%
w o JL
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~
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f _ 2_ JL _,
6
\
As Judco Weinstein had noted in the lower court decision in .
i 1 l Silver Chrysler, 370 F. Supp. at 588: '
Since the larger firms r . asent the largest corporations with interests in ,
all sectors of the economy, it is almost '
imponsibic to have an important client or !
its subsidiary avoid somo kind of 1ccal e rc]ationship with another client at somo time. Cf. F,. O. Smigel, The WalJ Street [
t Lawyer ~734 (1964). "Where a firm re- '
presents concurrently conflicting inter-esta, the practico is sometimen followed l
of 'splittin5 up' the firm 1,nto separato teams of Jawyers, each of which repro-sents one of the antagonistic clients."
- Note, Unchancing Rules in Chancing Times:
The Canons of Ethics and Intra-firm Con-flicts of Interest, 73 Yale L.J. 1058, 1071 (1964). Cf. J.C. Coulden, The Super-lawyers 53 (1972) (Covinaton and nurling "isn't really a' law firm. ... Actually, it's a conglomeration of fifty law practices.").
The fact that atterneys within the firm are effectively insulated from cxposure to
' the confidences of other clients where necessary demont erates the inappropriate-ness of an invariable mechanical imputa-
, tion of knowledge.
, Nor doce this departure from traditional inter-protation of Canons 4 and 5 diminish the force of existing decisions g
l which hold that the richt of the public to counsel of its choice or the
possibility of a reduction of "both the cconomic mobility of employces and their
[ personal freedom to follow their own j interests" must be secondary considerations y
to the paramount importance of " maintaining i the highest standards of professional conduct i
and the scrupulous cdninistration of justice."
d Silver Chrysler, $18 F. 2d at 757. (citations I
, g_ 'omitted). .
e
- l Thus, it is appropriate to reject a mechanistic ;
h approach herein. Alttrnatively, the doctrine of vertical k
p responsibility, classically invoked for disqualifying former
+
k' . govern 7ent attorneys upon termination of government service Q was, and is,-limited in application to imputing confidential * -
l
' di.tclosures, presumed or actual, of subordinaten serving
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P
- J '
1 _g-11 _, .....-............
. within the same subdivision or section of service of the ;
i former goverr. ment attorney. See, United Stater. v. Standard I Oil, sunra at 362.
. This doctrine of vertical responsibility is rele- .
i vant to the private sector of legal practice in view of the increasing numbers of law firms that equal the size of many
, legal subdivisions of government. Imputing to an attorney in the private practice all confidential information obtained, or presumed to have been obtained, by other members of his law firm may severely limit the scope of the private attor-ney's future career and the effective operation of his firm, as well as the individual's right to Iccal counsel of choice. The analogous rule in the private practice of law should therefore limit the imputation of confidential dis-i closures, actual or presumed, to only those lawyers practic-I e ing in the attorney's area of concentration. Absent direct proof to the concrary, the attorney would not be deemed to have shared confidential information relating to matters and services exclusively within the sphere of representation of another department or section of his firm. This vertical
. responsibility rule is more acutely dranatized in the larc9, departmentalized law firms characteristically more prov,alent in an era of evolving legal specialization. See also
,Kaufman, The Former Government Attorney and the Canons of
, Professional Ethics, 70 Harv. L. Rev. 657, 666-67 (1957); j i
Note, Attorney's Conflict of Interests, supra at 77-78. 8' Without qu'stion e SS&D is the largest law firm in t
Ohio and perhaps one of the larger law firms in the natian,
. with approx!,ately 180 partners and associates. It is * '
p departmentalized into five sections as horcinbefore described.
m j 0 (n DJ d a i em 0 q) e-o 4 s- = - ,,,.....n......
( .I -
. v J( A.
11ruecke) tu, and has been durjng his ler,a1 career with SS&D, i anninned to the hir.hly npecialtzed bonr1 divinjon of the i Pubitc inw Section of that fj en; Lansdale is, and hau been during his le al carcer with SS1D, assif,ned to the I.1 Liga- ,
{
tion Section of the firm. Each is a separate and distinct
{
t section of thd firm pursuing specialized arcas of endeavor.
,1 The Litigati'on Section has, without exception, pursued in adversary prococdings the interests of CEI. In no instance has it represented MELP, and under cirpumstances of cross-interest between the parties the litigation section has been i
i the advocate for CEI.
. The record is barron of evidence of actual confi-deatjal disclosure between Drueckc1 of the Public law Section
) and I,an, dale of the Litigation Section. The lansdaJc-Ilauser 2
memorandum resulting from the White-Littic Hoover Commission meeting attended by Lansdale and Brucckel does not support a conclusion of actual disclosure for the reasons heretofore 4
4 discussed in the statement of the facts herein.
Apart from the doctrine of vertical responsibility, the City was equally unsuccessful in supporting imputed dis-closure of confidential information by Brueckel to Lansdale in lichs of affirmative evidence rebutting such presumption.
J See, Standard 011 Co., supra at 304.
The City having failed to carry its burden of proof as to the three elements of the "nutistantial relation-i ship" tent, it is manifest that disqual t rication of SS&D Ja lf 1
, not warranted under this traditional analysin. 'i l
}_ Lastly, the Court directs its attention to the i .
t j alleged conflict of interest arising from O'Laughlin's
, service with the City Law Department betueen 1952 and 1968 ,
~, -
when he became associated with SS&D.
C5 r75 ic
^
P043 3 D ] ~
y,, ,, ., , y , n g , e . . ,
- v. . ]- -l
) i i
h 'llurific hin l"nure tilth t he Ul ty I.au IOpartment , ,
- E
,j O'Laur,hlin served as Chief Councel for the C1ty under Law
/ Director lirontis Klwentotilcz (KJomentowicz) bet.woon 19614 u- 1 1 M.S . T' ?Ms cer city he had ovr.pn11 rensnonsibility i for the City's civil litication, monitorinc in varyinc f decrees local services required by all City departments. .
(
- The evidenco demonstrates that MELP affairs <*aring this
.?
J ll period were directly under the supervision of Klcmentowicz,
acting on behaAf of the incumbent Mayor Italph J. Lochor.
O'I.auchl.in was, ho.icyce, as Secrc tary to the liayor's Board I
of Control privy to varlous discttacions coteerntnc I4ELP h
j cxpansjon. Since af f*1);atinc wit h S .&D, O'Lauchlin has been l.
asuicned to the Public Ltw Section, ilhcre he hnu served in a il consultinc capacity with various political subdivisions of
] covernment, school boards anr' stat; universitics.
( The City's charge of conflict arisinc from O'Lauctild n's 4
i' enployment by SS&D is founded upon Canon 9, " A Lawyer Should d'
j Avoid Even the Appearance of Prcressional Impropriety."
1
/ DR 9-101 (B) states:
- A lawyer shall not accept private i employnent in a a tter in which he
, E had substantial respons.*bility while
! he tias a public caployec.
As noted in ABA Connittoc on Professional Ethics Formal 4
Opinion I:o. 37 (i'ay 4,1931), the rule evolvad to protect 18 acainst
, : the man 11'ent poasibility that hJs g action as a public let:al official mi,ht f i be jnfluenced (or open to the charce that it hrd been Influenced) by the hope of '
bcInc c:nployed privately either to up- i hold or upset what he had done.
l e
Concidering the issue presented, the Court is calded by Judco Kaufnan's admonition articulated in his '
se:ninal a ticle, "ihe Forner Covern ent Attornev and the C
3 nans of Prorpssional 1 thich 70 liarv. L. Mv. 657, 668 g (1957), wherein he stated:
(D p qg y . , . . . . . . . . . . . . . .
O !
Uu1 b
- o If the Government service will tend to e sterilize an attorney in too larco an area of law for too long a tine, or will
~
provent him from engaging in the practice of a technical specialty which he had .
devoted years in acquiring, and if that -
sterilization will spread to the firm with
- which he becomes associated, the sacrifice *
. of entering government service will be T too great for most men to make. ,
Obvious are the' distinctions between legal precedent i and the present case under which Canon 9 sanctions are sought. In those instances wherein disqualification was ordered pursuant to Canon 9, the challenced attorney had performed extensive services in specific matters, or liticatio t in the same proceeding from which he was subsequently being disqualified. E.g., coneral Motors Corp. v. City of New York.
501 F. 2d 639 (2d Cir. 1974); Allied Realty of St. Paul, Inc. v. Exchange Nat'l Bank of Chicago, 408 F. 2d 1099 (8th Cir.), cert, denf ed 396 U.S. 823 (1969); Hilo Metal Company. Ltd. v. Learnce Co., 258 F. Supp. 23 (p. Haw.
1966).
Manifest from the record is the City's failure to factually interconnect O'Laughlin's present employment with his previous public employment. Indeed, the record is con-spicuously silent as to any specific claims or matters involving O'Laughlin's participation in MELP affairs, either substantially or remotcJy related to the antitrust action presently before this Court. Accordingly, in the words of a
Judge Kaufman in United States v. Standard 011 co., supra at '
365 (S.D.N.Y.1955), the failure of proof is fatal: ;
[Ilt is hardly reasonable to hold that an appearance of evil can be found in
[an attorney's] undertaking a case against the government where there is not some closer factual relationship between his . .
former job and the case at hand other than ,
that the same vast agency is involved. _a.
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Absent the vital links required to support a Canon 9 violation, the City's Motion for Disqualification is overruled on this account.
SUMMARY
OF CONCLUSIONS Por the rcasons here1nbcforc set forth, the Court concludes:
- 1. The City is estopped from asserting alleged conflict of interest agains't SS?.D;
- 2. The City, with fi.12 .(nowledge of SS&D's legal 4
representation of CEI over the years, waived any rights to assert alleged conflict of interest against SS&D; '
- 3. Brueckcl's services for the City in preparation of the 1972 $9.8 million MELP related bond ordinance
- were not adverse to Lansdale's adversary reproson-tation of CEI in this antitrust action; *
- 4. SS&D's role as special bond counsel for the City on an ad hoc basis thrcachout the years docs not
{ constitute an adverse representation to Lansdale's representation of CEI in the instant antitrust action within the intent and meaning of the a
Canons,
- 5. Lansdale received no confidential information e concerning MELP as a result of Brucekel's rervices as special bond counsel to the City either actual- I ly or by opcration of law; !
- 6. O'Laughlin's present employment with SS&D presents e no basis for disqualification of SS&D as counsel '
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- for CEI in the pending antitrust action. '
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ce n Accordingly, the City's Motion to Disqualify the law firm of SS&D fran continued representation of defendant l CEI in this antitrust action is hereby denied.
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