ML20212F245
| ML20212F245 | |
| Person / Time | |
|---|---|
| Site: | Comanche Peak  |
| Issue date: | 03/02/1987 |
| From: | Roisman A TRIAL LAWYERS FOR PUBLIC JUSTICE, P.C. |
| To: | Bloch P, Jordan W, Mccollom K Atomic Safety and Licensing Board Panel |
| References | |
| CON-#187-2654 CPA, OL, NUDOCS 8703050050 | |
| Download: ML20212F245 (22) | |
Text
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- ' 265 f 000XET NUMDER PROD. O UTi!.. FAc.. h,8(46 dYN TRIAL. LAWYERS FOR Pusuc JUSTICE, P.C.
COUNSELLORS AT LAW D SUITE 611 2000 P STREET, NORTHWEST ANTHONY Z. Rol5 MAN WASHINGTON D.C. 20036 '87 WR -3 P5 :52 (2023 463 8600 EXECUTIVE DIRECTOR ARTHUR sRYANT STAM ATTORNEY
- s Lut cARoE DIRECTot. ENVIRONMENTAL WHISTLEstoWEA PRojtCT mow mo a escoe.smi sARsARA PRATT March 2, 1987 omCE MANAGER Peter B. Bloch Administrative Judge Atomic Safety & Licensing Board U.S. Nuclear Regulatory Commission Washington, D.C. 20555 Dr. Kenneth A. McCollom Administrative Judge 1107 West Knapp Stillwater, OK 74075 Dr. Walter H. Jordan Administrative Judge 881 West Outer Drive Oak Ridge, TN 37830 RE: . Texas Utilities Electric Co. (Comanche Peak), Docket Nos.
50-445, 446stSO-445-CPA Gentlemen:
This letter is in response to Mr. Wooldridge's letter of February 19, 1987, to the Board. In that letter Mr. Wooldridge states that "neither this firm nor any of the other counsel who have appeared in support of the license application has or ever had any attorney / client relationship with any CPSES owner other than TU Electric, nor have they undertaken, or will they undertake, to. provide legal advice or counsel other joint owners as to any matter . . . ." This statement should be contrasted to the statement which appears in Mr. Wooldridge's letter of August 28, 1986, to this Board in which he stated that " [t] hese firms
- [four are listed before this quote] have been retained by Texas Utilities Electric Company and appear in this proceeding on
, behalf of all of the Applicants pursuant to a joint ownership Agreement among them."
Are these two statements reconcilable? Mr. Wooldridge believes so and attempts in his February 19th letter to show that appearing on " behalf" of the minority owners as a result of being
- retained by TUEC pursuant to an ownership agreement is different from having an attorney / client relationship with those persons on 8703050050 8'70302 PDR ADOCK 05000445 G
PDR e& b
2 whose " behalf" an attorney appears. A fuller articulation of this claim and the rebuttal to it are included in the attachment to this_ letter, which contains the portion of the brief filed by TMPA in state court that focusses on the issue of " represent-ation" and'the portion of brief of TUEC responding to that issue.
As Mr. Wooldridge acknowledges, TUEC's view of the facts and the law did not prevail and the disqualification order was issued.
While CASE is.of the opinion that the state court decision is-clearly correct, the purpose of this letter is not to press that point. This Board has already indicated an independent interest in the resolution of this matter by the state court and-the possibility that such resolution "may require our action in the future." Memorandum and Order (Discovery of Tex-La Documents), p. 4 (11/28/86). Our concern is with two separate matters.
First, what are the implications of Mr. Wooldridge's current position that disavows any attorney / client relationship with or representation of the minority owners by counsel for Applicants in this case on the completeness of answers to discovery from CASE which have been addressed to " Applicants." The August 28, 1986, letter from Mr. Wooldridge is a direct result of CASE's concern on that point (Prehearing Conference, Aug. 19, 1986, Tr.
24,605-606) and that letter purports to put that question to rest by asserting sufficient connection between counsel in the NRC proceeding and the minority owners that the Board and the parties could reasonably assume that the counsel for " Applicants" spoke for all' Applicants even in responding to discovery. B~t u Mr.
Wooldridge and Mr. Reynolds assert in affidavits filed with the state court that:
I have never been privy to any confidential communications, written or oral, of Tev-La, Brazos or TMPA and no confidences of any of those entites have been imparted to me in any capacity whatsoever.
Affidavit of Robert A. Wooldridge 1/20/87 I have never consulted with or taken direction from any representative of those entitles [Brazos, TMPA, Tex-La]; been provided or sought any information confidential to those entities; . . . .
Affidavit of Nicholas S. Reynolds 1/20/87 What these affidavits reveal is that, at least to the extent the minority owners have in their possession information relevant to any CASE discovery and any Board or Staff inquiry that they 4
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consider: confidential, its existence has never been disclosed in this proceeding because counsel for Applicants in this proceeding
-have never sought such information. This explains in part the
-cartons of data divulged by the minority owners in the CPA proceeding after CASE pressed discovery against them individually, much of which was undeniably relevant to pricr and outstanding discovery requests in the OL proceeding. It is even-possible that none of the discovery propounded by CASE and none of the Board.and Staff inquiries have ever been presented to the minority owners much less answered by them. Since they are
-parties to whom discovery and inquiries have-been properly directed, we believe this Board should now launch an inquiry into
.I .
the ques, tion of the extent to which answers previously'given, apparently only on behalflof TUEC, now must be supplemented by answers from each of the minority owners.
4 A'second concern of CASE is the extent to which the fine --
1 perhaps nonexistent -- line which Mr. Wooldridge seeks to draw between appearing "on behalf" of a party, " representing" a party, and having an " attorney / client relationship" with a party is a perpetuation of the problems in the use of language which this Board focussed upon in its Memorandum and Order (Reconsideration of Misrepresentation Memorandum), pp. 6-8 (11/25/86). It appears to CASE that the August 28, 1986, letter.did not contain language that was " careful,-precise and trustworthy" (Id., p. 7) but 4
instead intended a very.special' meaning to the phrase " appear in this proceeding on behalf ~of all of the Applicants," not the
. meaning normally understood by the other parties and the Board.
1:
This more subtle meaning did not emerge until the pressures of the state court proceeding forced TUEC counsel to more thoroughly articulate their view that they had never
, " represented" the minority owners here, never had an i attorney / client relationship with them, and never sought or obtained confidential information from them. Had CASE known that j in August 1986 it would have promptly proceeded, as it has now in
- j. . the preceding paragraphs, to obtain this Board's assistance in assuring that CASE discovery has been thoroughly answered by~all l- the Applicants to whom it was directed.
We are deeply disturbed by the revelations contained in Mr.
- Wooldridge's recent letter and the record of the state court proceeding. We do not want this concern to be side-tracked into a debate over the correctness of the state court decision or of
, the propriety of the conduct of TUEC's counsel as such. To avoid j- -these diversions we believe it best if this Board step in now and i
with characteristic brevity get to the bottom of the problem as outlined above and fashion appropriate remedies.
t l At least one remedy that we believe essential to the
{ integrity of this process and whose immediate adoption we urge is to order the minority owners to promptly secure counsel to l
. . . . _ . . . ,.. _,_____,.,.-,.._,___.___.._____,_____...______s__,.__._.._ _._._.._ _ _ ..__._____.
4 represent them in this proceeding on all matters.. This Board has previously in this case found it necessary to assure that legal counsel was provided for unrepresented persons who appeared in need of counsel. A Board order to this effect may be required for the protection of the minority owners in light of TUEC's view of the power it possesses under the Joint Ownership Agreement.
Sincerely,
/
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. e e FI ED NO. 86-6809 TEXAS UTitr s ELECTRIC
}
COM PANY.
risintift S
S IN Tili . Di6
__ f L 1
lh' f y' n d S
o VS.
S OF DALLAS COUNTY, TEX AS S
TE A ELECTRIC COOPERATIVE S OF i EXAS, INC., et al., - S
, Defendants. S
> 14Til JUDICIAL DISTRICT BRIEF IN SUPPORT OF PLAINTIFF'S REPLY TO DEFEND ANTS' MOTION TO DISQUALIFY TO Tile IIONOR ABLE JUDGE OF SAID COURT:
NOW COMES Texas Utilities Electric Company (hereinafter referred to as "TU Dectric" or " Plaintiff"),0 Plaintiff in the above numbered and entitled cause, and files this its Brief in Sgport of Plaintiff's Reply to Defendants' Motion to Disqualify the law firm of Worsham, Forsythe, Sampels & Wooldridge (hereinafter referred to as *WFSW"),
respectfully showing this Honorable Court as follows:
INTRODUCTIO N Defendants have moved to disqualify WFSW from representing Plaintiff in this action.
'the expressed bases for Defendants' Motion to Disqualify ares (1) en allegation that WFSW currently has an attorney-etient relationship with Defendants in connection with the Comanche Peak Steam Electric Station ("CPSES") licensing proceedings pending before the Nuclear Regulatory Commission's ("NRC") Atomic Safety and Licensing Board
("ASLB") and, thus, cannot ethically represent Plaintiff adversely to Defendants in the i
litigation in this Court; and (2) en assertion that Robert A. Wooldridge of WFSW may be called as a witness in this litigation by the Defendants.
This Brief will establish that there is no basis, either in fact or in law, for the disqualification of WFSW. Indeed, it' will be established that Defendants' Motion to Disqualify is nothing more or less than an impermissible trial tactic purposed not only to deprive Plaintiff of its chosen counsel who have represented Plaintiff for several decades, but also to destroy the long-existing attorney-client relationship between Plaintiff and WFSW in order to gain access to documents and testimony that are privileged as confidential communications passing between attorney (WFSW) and client (Plaintiff).
OFor convenience, the Texas Utilities System Companies that are parties to this litigation (i.e., Texas Utilities Dectric Company, Texas Utilities Company, Texas Utilities Mining Company and Texas Utilities Services, Inc.) will be referred to herein as "TU Electric" or " Plaintiff".
Said references shall also include Texas Utilities Dectric Company % divisions (i.e., Dallas Power & Light, Texas Electric Service, Texas Power &
Light and the Texas Utilities Oenerating Company division) and those predecessors to such divisions which were formerly separate companies owned by Texas Utilities Company.
the lawyer's independent professional judgment on behalf of a client "will he or is likely to be adversely affected" by the acceptance or continuance of representation adverse to that client.
Chateau DeVille Productions, Inc. v. Tams-Whitmark Music Library, Inc., 474 F.
Supp. 223, 225 (S.D.N.Y.1979); City Council v. Saksi, 58 Ilawaii 390, 570 P.2d at 573 (1977); Cinema 5. Ltd. v. Cinerama, Inc., 528, F.2d 1384,1387 (2d Cir.1976).
As will be discussed below, WFSW's representation of Plaintiff in this action does not implicate DR 5-105 because Defendants have no attorney-client relationship with WFSW, and even if they had one, WFSW's representation of Plaintiff in this action against Defendants simply cannot " adversely affect" the exercise of WFSW's " independent professional judgment" as concerns Defendants in the NRC licensing proceedings, the only proceeding out of which the alleged attorney-client relationship arises.
- 1. WFSW has no attorney-client relationship with Defendants.
'the existence of an impermissible conflict of interest under Canon 5 and DR 5-105 rests upon the existence of an attorney-client relationship between the movant and the lawyer whose disqualification is sought. Sy Glueek v. Jonathon twan, Inc., 653 F.2d at 748; Civil Service Commission v. Superior Court,163 Cal. App. 3d at . 209 Cal.
Rptr. at 763; E. Epstein, C. Corcoran, J. Keane & R. Spencer, Conflict of Interest: A Trial Lawyers Guide 9 (1984) thereinafter cited as "Epstein, Corcoran'i. The Defendants' argument that they have an attorney-client relationship with WFSW is based upon the single premise that a lawyer's filings in an administrative proceeding indicating that such filings are on behalf of joint owners having a common interest in the proceeding creates an attorney-client relationship between the attorney and every entity who is a joint owner, irrespective of the reason for, or nature of, the filings. Defendants' Motion pp. 9-16. As Defend.vts are jolnt applicants in the CPSES licensing proceedings pending before the NRC and as WFSW has made filings in those proceedings indicating that the filings are for all the appilcants, Defe'ndants argue that they necessarily have an attorney-f client relationship with WFSW. In support of their argument, Defendants can marshall but l
l two cases, both of which were decided almost two decades ago: E. F. Hutton & Co. v.
Brown 305 F.Supp. 371 (S.D. Tex. 1969) and Bethehem Steel Corp. v. United States Metal Plastles, fr.e. 265 P.Supp. 535 (9 ;.1d.1969), affM tub nom.. Flethlehem Steel Corp.
v.
Devers,389 F.2d 44 (4th Cir.1968). Defendants' argument is a superficial one, which not only ignores the true nature of Defendants' involvement in the licensing proceedings
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4 and their relationship with WFSW, but which also ignores pertinent legal authority and relies on inapposite authority.O Under the JOA, Defendants have no right to control or even participate in the licensing, design, construction or operation of CPSES. To ~ the contrary,. pursuant to
. Paragraph 3.04 of the JOA, Defendants contracted away those rights and obligations and
~
" sole responsibility" for them lies with Plaintiff. Accordingly, under the JOA, Plaintiff -
and Plaintiff alone, is responsible for obtaining the necessary operating license for CPSES and it was Plaintiff who engaged its own law firm, WFSW, to assist it in that task.
Moreover, each formal Notice of Appearance filed by WFSW shows plainly t' hat it appeared solely on behalf of Plaintiff without any indication that it appeared on behalf of Defendants.
Perhaps even more importantly, Defendants are parties to the licensing proceedings only because the NRC requires all the owners of a proposed nuclear power plant to be named as applicants in the operating license. The NRC itself has recognized that minority owners of such plants, like the Defendants, are merely "de facto" parties to
> the license application proceedings. Public Service Co. of Indiana,7 NRC 179,201 (1978);
and, in fact, Plaintiff has been designated in the Operating License Application as the entity responsible for obtaining the operating license (Reynolds affidavit, para. 8). In 4
sum, under the JOA, Defendants have no rights or obligations whatsoever with respect to the CPSES licensing proceedings and they are parties to those proceedings only because of a teetmical requirement of the NRC that all owners of a nuclear power plant be named as >
applicants.
h similar situations, the courts have uniformly rejected claims that an attorney-client relationship exists between the lawyer and the de facto party on whose behalf the lawyer has appeared, h, Sun Studs. Inc. v. Applied Theory Associates. Inc., 772 F.2d 1557,1568-69 (Fed. Cir.1985); Levin v. Ripple Twist Mills. Inc.,416 F.Supp. 876, 883-85 (E.D. Pa.
1976). For example, In Sun Studs, Sun Studs engaged Applied Theory Associates ("ATA") to develop computer-controlled saw-mill equipment. -The parties' agreement contained an invention rights clause under which title to all patents and 4f Defendants also point to the fact that theyindirectly pey WFSW's attorneys' fees as evidence of the attorney-client relationship between them and WFSW. Not only I have the courts repeatedly held that the mere payment of attorneys' fees does not estabilsh an attorney-client relationship, g, DCA Food Industries, Inc. v. Testy Foods, Inc., 626 F.S@p. at 603 Lemetson v. Synergistics Research Corp., 504 F.Supp. 1164,1167 (S.D.N.Y. 1981); Quintel Corp. v. Citibank. N.A., 589 F.Supp.
1235,1239 (S.D.N.Y.1984); cf. E.F. Hutton & Co. v. Brown, 305 F.Supp. 371, 388 (S.D. Tex.1969)(attorney-client relationship found even though movent did not pay the lawyer's fees), but until the filing of this action, Defendants did not even know what fees were paid by Plaintiff to WFSW in the licensing proceedings and never requested information about them. It was only after this suit was filed and Defendants began threatening to file a motion to disqualify WFSW that Defendants became interested in this information.
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Inventions arising out of the engagement would be ass!gned to Sun Studs. ATA was also required to disclose such inventions to Sun Studs and to fully assist Sun Studs in obtainin patents for its exclusive benefit.
Pursuant to this agreement, employees of Sun Studs, Sohn and Holmes, and ATA, Hunter, invented equipment and a patent appileation was filed with the Patent and Trademark Offlee on behalf of the Inventors by Sun Studs' patent attorney, Chernoff. De patent was issued, and several years later Sun Studs sued ATA i
for Infringing that patent.
ATA counterclaimed asserting that the patent was invalid and moved to disqualify Chernoff from representing Sun Studs in the litigation because he allegedly had represented ATA and Hunter in the patent application proceedings before the Patent and Trademark Offlee.
In reversing the trial court's granting of the disqualification motion, the United L
States Court of Appeals for the Federal Circuit found that Chernoff's representation of ATA and Hunter in the patent appileation proceeding was a technleal one required by the patent laws and the parties' agreement and that it, therefore, did not create an attorney-s ellent relationship.
De relationship between inventor and his assignee's patent counsel who is appointed to prosecute the patent application must be~eonsidered in conjunction with the patent laws governing the acquisition and assignment of rights to inventions.
An inventor, who is hired or employed by a company, and who develops an invention in the course of his work which he has agreed to assign to the company, is required to execute whatever papers r are necessary for the company's patent counsel to prosecute a
' patent appileation on behalf of the company. his procedure is dictated by 35 U.S.C. $ 111 (and 37 C.F.R. $ l.41) which requires that the inventor must apply for the patent. Wat patent r appileation must generally contain an oath by the inventor. 37 C.F.R. $ 1.51(a)(2). De cath normally includes a power of l attorney. Manual of Patent Examining Procedure. Chap. 402 (5th ed. 1983). Even where the Invention has been assigned to the company, the Inventor must stIU be the spoucent. 37 C.F.R.
51.46. The assignee may,,however, prosecute the appliestion to the exclusion of the Inventor. 37 C.F.R. $ 1.32. He PTO.
corresponds with the persons named in the original power of attorney even after an assignment is recorded unless the assignee otherwise requests. 37 C.P.R. $ 1.33(a). Thus, it is routine for an Inventor to execute an application appointing the attorneys who prepared the application at the direction of the party to whom the application must be assigned and on whose behalf it will be prosecuted. The cholee of attorneys, like the filleg, is a deelslon by the assignee, not the inventor. It feellitates payment of filing fees by the assignee and insures that PTO correspondence from the ,
beginning is directed to the assignee's representativais.
Should the company later find it necessary to sue on the patent, it la to be expected that the co'npany would choose its regular patent counsel for representation whom the Inventor designated on its behalf. Where the former relationship between the inventor and the patent counsel was solely technical in nature, and where the patent counsel in the former relationship was chosen
>y and at all times was working on behalf of the company rather than tie inventor,it should not serve as automatie disqualification i
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that the defendant is the inventor or a company with which he is associated.
At all relevant times, from the 1971 negotiations to the prosecution of the application for the '579 patent, both flunter and ATA knew thst Chernoff was Sun Studs' patent counsel. As speelfled in the 1971 agreement, all rights in Inventions arising from ATA's consulting work were to be assigned to Sun Studs, and Sun Studs had the exclusive right to file and prosecute patent applications on the inventions "in its sole d:scretion." Along with its duty to assign the invention rights, ATA had a duty to assist Sun Studs in perfecting its patent rights by executing and delivering assignments, oaths, disclelmers, patent applications, and other instruments. '!hus, when Hunter, as a joint inventor with Sohn and Holmes, appointed the Chernoff firm to prosecute the application.
he was merely fulfilling his obligation to assist Sun Studs, who had the sole right of prosecution. An appointment of Sun Studs' attways to prosecute on his own behalf would have been contrary to the agreement.
The Chernoff firm appointment m erely evidences the unequivocal understanding of the parties that Sun Studs benefielally owned the patent application which was formally transferred two days later. Thus, Sun Studs was the party who effected Chernoff's appointment, and was the only party with an attorney-client relationship with Chernoff.
772 F.2d at 1568-69 (footnote omitted, emphasis added).
A similar result was reached in Ripple Twist Mi!Is. In that case, Levin, an investor and owner of a patent, sought to disqualify two patent lawyers, Edelson and Udell, from representing the defendant in a patent infringement suit. Levin invented the subject matter of the patent, and he entered into an exclusive license for the patent with the defendant's predecessor, Newman. Pursuant to the license, Newman had the right to prosecute the patent application in Levin's name and Levin was obligated to cooperate with the lawyers chosen by Newman to do so. Newman engaged his long-standing counsel, Edelson and Udell, and they prosecuted the patent application before the Patent and Trademark Office in Levin's name and with his cooperation. When Newman died, his business, including the exclusive patent license, was sold to the defendant. Thereafter, Levin claimed that the license had terminated by reason of the defendant's breach of it and that the defendant's continued use of the subject of the patent constituted an infringement of it. Levin then sued 'the defendant for patent Infringement and moved to disqualify Edelson and Udell from representing the defendant.
Even though the patent lawyers represented both Levin and Newman in the prosecution of the patent application before the Patent and Trademark Office, the Eastern Distrlet of Pennsylvania found the relationship between Levin and the lawyers to be technical in nature, since Levin had conveyed the right to prepare and prosecute the patent application to Newman and Levin was a party to the proceeding only because the patent laws require the inventor to be a party to the patent application proceeding. The Eastern District of Pennsylvania, therefore, held that the relationship did not constitute an attorney-client relationship.
, - . , .. - -~ . .- .- .- ._- . - .
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always was Edelson/Udell's primary client.
Edelson/Udeu acted as counsel of record on the patent application only so long as it was in Newman's interests, and it always should .
have been clear to Levin that to the extent he then was -
Edelson/Uden's client, he was their secondary ellent in this matter, and that Levin might at some future time be litigating against
, their primary ellent. Under the Arreement. Newman had the right to prosecute patents in Levin's name. and Levin was coligated to cooperate with attorneys of Newment choosing so long as Newman actively pursued the application. Newman prosecution, including Edelson/Udell's fees. Levin paid the costs offor bargained the this arrangement lawyer el . . . . We cannot presume that the technk.1 ent relationship between Levin and Newman's attorneys k'_ d Levin to share any information whleh he was not contractually +-Prated to Geelose to them in any event.
416 F.Supp. at 885 (footnote omitted, emphasis added).
- !he courts have also refused to find the existence of an attorney-client relationship for purposes of the CPR in other analogous situations. For example, where two or more -
parties join together for a common undertaking and one party knowingly agrees to use the long-standing lawyer of the other party to handle legal matters relating to the common is dertaking, the courts have uniformly refused to disqualify the lawyer from representing i his long-standing ellent in a suit against the other party arising out of the common undertaking.
\
! Blustrative of this principle is Allereert v. Perot,565 F.2d 246 (2d Cir.1977). In that case, two wall street brokerage firms, duPont Glore Forgan ("DGF"), owned by Ross i
Perot, and duPont Walston (Walston) entered into what was in effect a joint venture. DGF and Walston used two of DOF's and Perot's law firms to represent them in several matters relating to their joint activities and Walston paid a portion of the attorneys' fees incurred by that representation. Eventually Walston went into bankruptcy and the trustee in j
bankrgtey brought suit against DGF and Perot, who engaged the same two law firms to -
I defend them in that suit.
In affirming the district court's dental of the trustee's motion to disqualify, the Second Circuit relled upon the facts:that no confidential Infor' mation could have been provided to the law firms by Walston, that Walston was represented at every step by its own counsel, that Walston knew and that DGF and Perot were long-standing clients of the two law firms and that they still were representing DGF's and Perot's interests and would continue to do so in the future.
Neither Walston nor anyone connected with it could have thought I that the Well, Gotshal and Leva, Hawes firms [DGF's and Perot's l law firms) were representing Walston without appellees' knowledge
! and approval, or that any information riven to the law firms i conceivably would have been held confidentiel from the primary ellents of the firms,[DGF and Perot]. At every step Walston was i
Ked by Shearman & Sterline. Moreover, Walston knew that i Perot, DGF and the Perot Interests were at all times represented by Well, Gotshal and Leva, Howes. Any work that Well, Gotshal or
- Leva, llawes performed for Walston was pursuant to the realignment agreement. All other legal work in dispute on this i.
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j f i appeal ~was primarily performed by Well, Gotshal and Leva, Howes for their clients.
.eee Ary representation of Walston was done with Walston's knowledre that the firms were still representing the Perot interests and would continue to do so.
sides. Weil, Gotshal and Leva, Hawes never changed 565 F.2d at 250,251 (emphasis added). _ Sea also Interstate Properties .,547
- v. Pyramid Co F.Sgp.178,182 (S.D.N.Y.1982); Williamsburr Wax Museum. Inc. v. National Historica Figures. Inc. 50I F.Supp.
326, 330 (D.D.C.), aff'd sub nom., Souvenier Center v.
Historelal Figures. Inc. 728 F.2d 503 (D.C. Cir.), cert. denied,469 U.S. 825 (1984); D Stadium Hotel. Inc. v. Holiday Inns. Inc., 479 F.Supp. 465, 468-69 (E.D. La.1979); .
Meyerland Community improvement Assoelation v. Temple, 700 S.W.2d 263, 268 (T .
Civ. App. - Houston [Ist DistJ 1985, writ ref'd n.r.e.).M
'Ihe facts of this case are virtually identleal to those in Sun Studs and Ripple Twist Mills. ATA's and Levin's participation in the patent application proceedings before the Patent and 'Itademark Office in those cases is no different than Defendants' parti in the lleensing appHeation proceedings before the NRC here.
ATA and Levin were parties to the patent application proceedings because of the requirements of the pa laws and Defendants are parties to the licensing proceedings solely because of NRC requirements.
5/
can exist even without the communleation of confidences b party.
underlying DR 5-105 and other DRs la the preservation of t the lawyer and preventing inadvertent uses of those confidences on behalf of another ellent, Vivitar v. Broidy.143 Cal. App. 3d at 192 Cal. Rptr. at 283-84.
Moreover, in analogous situations, the courts have uniMmly refused to disqualify lawyer where at 250-511 W no confidences could be disclosed. gE ., Allereert v. Perot,565 F.2d liiamsbuer Wax Museum. Inc. v. Historical Figures. Inc.,501 F.Supp. at 330; Domed holding): Ebeteln.Utadium Corcoran,Hotel. Inc. v. Holiday Inns. Inc. 479 F.Supp. at 489 (alternate Association v. Temple,700 S. re at .
at 413 see Meyerland Community Improvement 268.
k i' Defendants also argue that " case authority mandates disqualification of an attorn who has owner represented against joint owners another." Motion in a joint proceeding from then representing one p.18. h support of this proposition, Defendants cite Glueek Or. 459, v. Jonathon 584 P.2d 284 (1978);toren. Inc.,653 F.2d 746 (2d Cir. 1981); in re Banks, 283 and in re 765 Assoelates,14 Bankr. 449 (D. Hawall l
1981). Neither that prinelple, nor those cases are controlling here. As pointed out 1
above, the courts have virtually uniformly refused to disqualify a lawyer who represents a common undertaking if, as'is the case here, the movant understood that i the lawyer was the long-standing lawyer of the other party and that he was representing
- v. Perot the other party's interests and would continue E to do so. A,, Allereert 6,11amsburr545 F.2dWaxatMuseum.
250-51: Interstate Inc. Properties v. Pyramid Co.,547 F.Supp. at F.Sep. at 530. v. National Historical Figures. Inc., 501 d
}
Moreover Defendants,like ATA and Levin, contracted away their rights participate and control the licensing proceedings. Just as no attorney-cli was created between ATA and Levin and the patent counsel by reason of those la appearance in the patent application proceedings on behalf of ATA and Levin, no attorney-clier.1 relationship between Defendants and WFSW has been created WPSW's appearance in the CPSES operating lleense proceedings.
'the facts of this case are also similar to those of Allereert. Like Alternert. Plaintiff has had a long-standing relationship with WFSW of which De were clearly aware when they became parties to the Jo A.
Like Walston in Allereert.
Defendants have never divulged any confidentialinformation to WFSW and, in ,
none because they play no role in the licensing, design,' or construction of C:'SES .
Moreover, unlike the parties in Alleraert, Defendants and Plaintiff have had standing advarslal relationship for many years not only with respect to CP respect to numerous other matters and, like Walston, have always used their ow in dealing with Plaintiff both In connection with CPSES and those . In fact, other matters Defendants' own attorneys regularly have monitored the license applicati and have represented Defendants in their dealing with Plaintiff concerning CPSES Defendants never reasonably believed, and could not reasonably believe, that WF represented them. _Allereert v. Perot. 585 F.2d at 250-51; Williamsburr Wax Museum llistorical Firures. Inc., 501 F.Supp, at 330-313_ Interstate Properties .,547
- v. Pyramid Co F.Supp. at 182.
Finally, neither of the cases cited by Defendants, . Bethlehem Steel U.S.
Corp. v.
Metal Plastles. Inc. nor E.P. Hutton & Co. v. Brown, suggests that a lawyer's ap in an administrative proceeding on behalf of a person who is elegally a party required to b to that proceeding, but who has contracted away his right to participate in or control proceeding irrebuttably creates an attorney-client relationship between the lawyer a that person. Bethlehem Steel did not even involve a motion to disqualify. Rather in case, the defendant sotqht to vacate a summary ju% ment on the ground that the who answered on his behalf and defended against the motion for summary judgmen
)
authority to do so.
The facts and issues in that case are not even remotely similar to those involved in this case and it simply is inapposite.
! Similarly, Brown did not involve a mere technical appearance on behalf of a p i thelawyers whose disquellfleation was sought, nor did the Southern District of Texas h that any appearance by an attorney on behalf of a person In a judicial or administrativ proceeding irrebuttably creates an attorney-client relationship.To the contrary, the facts in Brown, unlike those in this case, established an at torney-client relationsh l
i'
In Brown. E.F. Hutton sued one of its regional vice presidents, Brown, for negligently making a loan. Brown had approved and made a substantial loan to Ilurbrough, who used the proceeds to acequire the stock of Westec Corporation. Shortly af ter the loan was made, the American Stock Exchange and the SEC suspended trading in Westec stock and Westec went into bankr@tcy.
In &c course, the SEC and the trustee in bankruptcy conducted hearings for purposes of identifying persons who had criminal or civil liability in connection with Westec's demise. Brown and other Hutton employees were required to testify at those hearings. Brown was accompanied at both hearings by lawyers from Ilutton's New York and Houston law firms. Prior to the hearings, Brown conferred with those lawyers. At those hearings, Brown, without objection from the lawyers, identified them as his counsel and, during the hearings, they observed, took notes and Instructed Brown to clarify some of his answers.
After the hearings, Hutton fired Brown and Instituted suit against him. Brown then moved to disqualify the law firms of the lawyers who had accompanied him to the hearing from representing Ilutton in its sult. Based on the above facts, the Southern District of Texas concluded that the presumption, though rebuttable, had not been overcome.
'the facts in Brown are a far cry from those in this case. Unlike in Brown, Defendants have been represented by their own counselin every step of the way. Unlike In Brown, WFSW has neither appeared with Defendants nor consulted Defendants about the licensing proceedings. Rather, WFSW has filed Notices of Appearance only on behalf of Plaintiff and has merely indicated that certain filings were made on behalf of all applicants, which include Defendants, only because their client, Plaintiff, is required to handle the licensing proceedings on behalf of all of the joint owners, because of technical requirements of the NRC and because of Plaintiff's contractual responsibilities under the JOA. To the extent that any presumption may arise from WFSW's actions in the licensing
(
proceedings, that presumption is clearly and completely rebutted by the facts of this case.
Sun Studs, Inc. v. Applied Theory Assoelates, Inc.,172 F.2d at 1568-69; Levin v. Ripple Twist Mills, Inc.,416 F.Supp. at 883-85.
In sum, any action In the licensing proceeding on behalf of Defendants by WFSW is purely technicalin nature and required by NRC rules and practlee. Accordingly, it does not give rise to any attorney-client relationship for purpose of the CPR and Defendants' claim to the contrary is simply motivated to obtain a tactical advantage in this litigation.N
- 2. Even if Defendants and WFSW have en attorney-client relationship, WFSW's disqualification is not warranted because WFSW's continued representation of Plaintiff in this action will not adversely affect the exercise of WFSW4 I
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TEX-LA ELECTRIC COOPERATIVE 5 f.
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. 9. n MOTION M DISQUALIFY AT'ICANEYS FOR TUEt AND RESPONSE TO TUEC'S MOTION FOR PROTECTIVE ORDER AND OTHER RELIEP .
FULBRIGHT & JAWORSKI Blake Tartt State Bar No. 00000058 William W. Vernon State Bar No. 20552000 Tom A. Cunningham State Bar No. 05244700 1301 McKinney Houston, Texas 77010 (713) 651-5151 Hugh Hackney State Bar No. 08670000 2001 Bryan Tower, Suite 1400 Dallas, Texas 75201 (214) 969-0022 Attorneys for Texas Municipal Power Agency e'
William H. Burchette Foster De Reitzes Peter J. Plocki HERON, BURCHETTE, RUCKERT &
ROTHWELL Suite 700 1025 Thomas Jefferson, N.W.
Washington, D.C. 20007 (202) 337-7700
This incident clearly will be relevant to the issues in this case.
Again, the testimony of Worsham, Forsythe will be needed to help determine where the responsibility for the timely renewal of the permit may lie as among TUEC and the four law firms representing the Applicants before the NRC.
ARGUMENT WORSHAM, FORSYTHE IS AUTOMATICALLY DISQUALIFIED UNDER CANON $
A. An Attorney-Client Relationship Exists TUEC has taken the position that no conflict of inter-est exists *because no attorney-client relationship exists between (Worsham, Forsythe)* and Movants. (Motion For Protective Order And Other Relief,1 X.) Movants maintain that the fact that Worsham, Forsythe has represented ar.d continues to represent them may be easily demonstrated in three ways.
These three distinct arguments place that issue beyond dispute.
As a general matter, a professional relationship be-tween an attorney and client need not be a formal or even an express attorney-client relationship, but may be established by the intent of the parties. Westinghouse Elec. Corp. v.
Kerr-McGee Corp.
580 F.2d 1311,1319-20 (7th Cir.), cert.
denied, 439 U.S. 955 (1978) . Thus, an attorney-client re-Lationship may be created by the client's perception that he or she has been in contact with an attorney in the attorney's pro-fessional capacity with a manifested intent to obtain pro-fossional legal advice. C. McCormick, Law of Evidence, S 88 at 203 (3d ed. 1984). See also E. F. Hutton & Co. v. Brown ,
305 F.Supp. 371, 389 (S.D. Tex. 1969) (*In asking the Court to consider all the circumstances when determining whether Brown believed counsel to be his attorne'ys, Hutton has proposed a MOTION TO DISQUALIFY ATTORNEYS FOR TUEC AND RESPONSE TO TUEC'S MOTION FOR PROTECTIVE ORDER AND OTHER RELIEF -- Page 9
Proper inquiry. Brown's reasonable understanding of his relation with the attorneys is the controlling factor here.").
Throughout the NRC proceedings, Movants have believed that Norsham, Forsythe was representing them and have relied solely on Worsham, Forsythe for all matters concerning the licensing of Comanche Peak. No reasonable belief to the contrary is possible in view of the fact that Worsham, Forsythe and the other law firms which it directs have repeatedly represented themselves to the NRC as counsel for all applicants.I/ Movants have celled and continue to rely on Worsham, Forsythe to help secure NRC licenses for Comanche Peak. Thus, Novants rely exclusively on TUEC and the four law firms led by Worsham, Forsythe, for representation before the NRC.
Apart from Movants' reasonable understanding of their relationship with Worsham, Forsythe, objective proof that the attorney-client relationship exists between Worsham, Forsythe and Movants clearly lies in the fact that, as previouly ex-plained, Movents as part owners under the JOA paid a propor-tionate part of Worsham, Forsythe's fees in connection with the Comanche Peak licensing matter. Sge E. F. Mutton & Co. v.
gig 3gt, 305 F. Supp. at 308.
Moreover, under well-established case law, an attorney's appearance in a judicial or semi-judicial proceeding I/ Attached as-Exhibit D is a pleading in the NRC proceedings which, typically, is signed by Worsham, Forsythe as
" Counsel for Applicants." Furthermore, in the affidavit attached to the pleading, dated November 27, 1985, Robert A.
Wooldridge, of the Worsham, Forsythe firm, states under oath that "he is attorney for Appilcants." The " Applicants" at all times relevant to this motion wer9 the four Comanche Peak joint owners: TUEC, Seasos, TMPA, and Tex-La.
1 s
MOTION TO DISQUALIFY ATTORNEYS FOR TUEC AND RESPONSE TO TUEC'S MOTION FOR PROTECTIVE ORDER AND OTHER RELIEF -- Page 10
(such as NRC licensing proceedings)1/ creates a presumption that an attorney-client relationship exists between the attorney and the person on whose behalf he appears. E. F.
Mutton & Co. v. Brown, 305 F. Supp. at 387. This presumption shifts to TUEC, the party denying the existence of the relationship, the burden of persuasion. Id. See also Bethlehem Steel Coro v. United States Metal Plastics, Inc.,
265 F.supp. 535, af f'd sub nom. Bethlehem Steel Corp. v.
Oggggg, 349 F.2d 441 (4th Cir.1968) . TUEC's unsupported assertion that Norsham, Forsythe's representation of Movants before the NRC was "merely a procedural requirement by virtue of their status as ' owners'" of Comanche Peak (Motion For Protective Order And Other Relief,1 X) is insufficient to rebut the presumption that an attorney-client relationship exists. TUEC cites no rule or regulation in support of this
^
assertion, not could it, for the NRC's position on this issue is directly to the contrary.
In Public Service Co. of Indiana, 7 N.R.C. 179 (ALAB 1978), the NRC flatly rejected the claim that a " mere owner need not be an applicant or hold a Commission license" under Sections 101 and 103 of the Atomic Energy Act, 42 U.S.C.
$$ 2131 and 2133. 7 N.R.C. at 199. After observing that the company advocating that position had presented no reason why Congress would want to exempt owners of nuclear power plants from Commission regulation as licensees, the Commission stated:
DTo the contrary, it takes little to appreciate that an owner can influence the actions and attitudes of its tenants and agents without technically being in
" possession" of the premises. Given the safety con-1/ Under NRC regulations, a. partnership, corporation, or unincorporated association may be represented in a proceeding either by a duly authorised officer:or member, or by an attorney-at-law. 10 C.F.R. $ 2.713(b) (1986).
MOTION TO DISQUALIFY ATTORNEYS FOR TUEC AND RESPONSE TO TUEC'S MOTION FOR PROTECTIVE ORDER AND OTHER RELIEF == Page 11
e siderations with which Congress was primarily con-cornes in the Atomic EnerQY Acte it takes much more
~than bare assertion and imaginative statutory con-struction to convince us that those who would own a nuclear power plant do not need to apply for a license from the Commission.
7 N.R.C. at 200 (emphasis added). Additionally, the Commission noted that "significant areas of the Commission's regulatory authority could be placed under a cloud by accepting Public Service's reading of the Act." Id at 201. Thus, in Public Service Co. of Indiana, the Commission held that co-owners of nuclear power plants must be co-applicants for the operating license so as to bring them under the Commission's regulatory authority. Clearly, as joint owners of Comanche Peak, Movants are required by the NRC to be " Applicants" for the Comanche Peak operating license in the full sense of the term, and to the same estent as TURC, regardless of the fact that each Novant owns a smaller percentage of the plant than TUEC.
Moreover, despite the fact that Worsham, Forsythe's licensing efforts are directed by TURC, any representations made to the NRC are made on behalf of 311 co-owners as l ' Applicants' in an operating license proceeding. gig Cleveland Electric Illuminatine Co., 18 N.R.C. 1289 (DD 1983) (NRC held
! that one of the applicants, CEI, as agent for the other plant l'
co-owners / applicants, had made material falso statements by failing to include information concerning and on behalf of its co-ownere/ applicants during the licensing review for the Perry Nuclear Power Plant). ,
j Equally lacking in merit is TURC's assertion that the lack of an attorney-client relationship is evidenced by the l purported fact that no communication of confidential informa-i
- tion between Movants and Worsham, Forsythe has occurred or could occur under the terms of the JOA. (Motion For Protective i
MOTION TO DISQUALIFY ATTORNEYS FOR TUEC AND RESPONSE TO TUEC'S MOTION FOR PROTECTIVE ORDER AND OTHER RELIEF *- Page 12
~
(
Order And Other Relief,1 XI) . The communication of confi-dences is not a prerequisite to an attorney-client relationship and is by no means a prerequisite to attorney disqualification on the ground of' conflict of interest. Hall v. Birchfield, No. 9346 (Tex. App.--Texarkana, June 7, 1986) (writ not yet reported): E. F. Hu tton & Co. v. Brown, 305 F. Supp. 371. The argument that the receipt of confidential information is a prerequisite to disqualification was squarely addressed and rejected by the court in the Hutton case.
The issues before the, court in the Hutton case were
_ identical to those presented heres whether an attorney-client relationship existed and, if so, whether the attorney for two formerly joint clients should be disqualified from appearing in litigation between them over a matter which was the subject of the former representation. The court found that an attorney-client relationship existed by virtue of Brown's own perception and because Hutton's counsel had appeared on behalf of the defendant Brown in semi-judicial proceedings. The court addressed Nutton's argument that Brown was not entitled to move for disqualification because he had communicated no information to counsel which was confidential as to Hutton. Hutton relied upon cases citing the narrow duty not to disclose confidences, where the actual disclosure of confidences was required. The court compared these cases with the broader concept of the attorney's ethical and fiduciary duty not to represent conflicting interests. 30f r. Supp. at 393 94. The court noted that the former dJty is founded only upon the interest of encouraging and protecting confidences, and protects only the confidential information disclosed, while the latter duty encompasses both the protection of confidences and MOTION TO DISOUALIFY ATTORNEYS FOR TUEC AND RESPONSE TO TUEC'S MOTION FOR PROTECTIVE ORDER AND OTHER RELIEF -- Page 13 1
l
,+ - - - - - - .,n,,,.._,.w. , ,,,n-m.,,,, _,nn,,-,n,-. . - ,, n.--.-n-,,,,--,,__n -.n,,
4 the protection of the client's ability to repose trust and confidence in the attorney. Id 3 In resolving the issue regarding the need for demonstrating confidential communications, the court reasoned that it must both protect a client's actual disclosures and the attorney-client relationship itself--a relationship which must be one of trust and reliance. Therefore the Court held that the receipt of confidential information is not a prerequisite to disqualification on the ground of conflict of interest.
Id. at 395. Thus, an attorney-client relationship clearly may exist in the absence of the client's disclosure of confidences.. Whether Movants have communicated confidential information to Worsham, Forsythe is irrelevant to the disqualification question, and TUEC's argument against disqualification must be rejected.1S/
Additionally, the attorney-client fiduciary relation-ship also may be evidenced by examination of the nature of the 4 services performed and the circumstances under which informa-tion was exchanged between attorney and client. Westinghouse Electric Corp. v. Kerr-McGee Corp., 580 F.2d at 1319-20. In other words, the attorney-client relationship may be implied
, from the conduct of the parties. E. F. Mutton & Co. v. Brown, 2
305 F. Supp. at 388. In connection with the Comanche Peak Project, Worsham, Forsythe held itself out to third parties and judicial administrative tribunals as representing the interests 3
of all the Comanche Peak owners, not just those of TUEC (Exhibit D). TUEC belatedly contends that Movants' own conduct 12/ As a factual matter, we must point out that at the present time the only thing blocking confidential communications between Brazos, TMPA, Tex-La, and Worsham, Forsythe is Worsham, Forsythe's role as counsel for TUEC in this case.
MOTION TO DISQUALIFY ATTORNEYS FOR TUEC AND RESPONSE TO TUEC'S MOTION FOR PROTECTIVE ORDER AND OTHER RELIEF -- Page 14
-s :
demonstrates the absence of an attorney-client relationship (Motion For Protective Order And Other Relief, 1 XII) because Novants have been represented by their own counsel in connection with the negotiation and execution of the JOA and because Movants' own counsel have allegedly monitored the NRC proceedings on their behalf. This argument, to the extent that it is true, is insufficient to rebut the presumption of representation arising from Worsham, Forsythe's unmistakable conduct.
The bare fact that Movants had independent counsel i
prior to their execution of the JOA and during their respective
{ participation negotiations is entirely without significance to the issue of whether Worsham, Forsythe has a conflict of interest in this proceeding. Second, a contention that Movants' own counsel have monitored the NRC proceedings is
- equally irrelevant. Movants have never retained separate counsel to represent them as applicants in the licensing proceedings or as construction permit-holders in the various enforcement proceedings that have arisen over the years.11/
That Movants have retained separate counsel to periodically
. 11/ On November 4, 19s6, counset for arazos sought leave to specially appear before the ASLB in the operating license
~! -
proceedings in order to lodge a statement about the representation problem in that proceeding. Brazos had requested that the statement be included in a pleading being filed by the law firm of Ropes & Gray, co-counsel with Worsham, Forsythe in the licensing proceeding, but Ropes & Gray declined to do so. This pleading, and the November 7, 1986 supplement
-; thereto, are attached heret'o as Exhibit E.
l Similarly, on November 4, 1986, counsel for Tex-La l sought leave to specially appear before the ASLb in the i operating license proceedings, and filed a pleading on Tex-La's
( behalf, again because Ropes & Gray declined to file a pleading taking the position which Tex-La wished to advance.
4 l
i I
MOTION TO DISQUALIFY ATTORNEYS FOR TUEC AND RESPONSE TO TUEC'S I
MOTION FOR PROTECTIVE ORDER AND OTHER RELIEF -- Page 1$
L
monitor these proceedings certainly does nothing to abrogate the attorney-client relationship between Movants as
" Applicants" and Worsham, Forsythe as counsel in the NRC proceedings. Unquestionably, Movants have been clients of Worsham, Forsythe, together with TUEC and the other Comanche Peak co-owners ' collectively' as applicants in all proceedings before the NRC.
B. Worsham, Forsythe Is Automatically Disqualified From Representing TUEC Against Movants Because of Its Representation Of All Owners in The NRC Pro-ceeding The legal standards by which this motion should be judged are clear. Canon 5 of the Texas Code of Professional Responsibility governs the ethical conduct of all Texas lawyers who represent conflicting interests. SUPREME COURT OF TEXAS, RULES GOVERNING THE STATE BAR OF TEXAS art. X$9 (Code of Pro-fessional Responsibility) (Vernon Supp. 1986) [ hereinafter cited as TEXAS CODE OF PROFESSIONAL RESPONSIBILITY) .12/ This Canon provides that *(a) lawyer should exercise independent professional judgment on behalf of a client.* In implementing Canon 5, Disciplinary Rule 5-105 prohibits accep- tance or continuation of employment if the interests of another client may impair the independent professional judgment of the lawyer. The rule specifically provides:
12[ Forty-eight states, including Texas, have or had at one time given the Code of* Professional Responsibility the force of law by adopting it as a court rule. See Developments in the Law--Conflicts of Interest in the Legal Profession, 94 Harv. L. Rev. 1244 (1981). Because the Code as a uniform statute, Texas courts consider opinions in other jurisdictions to be persuasive authority. Texas decisions on Disciplinary Rule 5-102, for example, have relied on and are in accordance with opinions in other jurisdictions. See, e.g., United Pacific Ins. Co. v. Zardenetta, 661 S.W.2d 244 (Tex. App.--San Antonio 1983, no writ); cf. U. S. ex rel. Sheldon Electric Co.
- v. Blackhawk Heating & PTumbing, 423 F.Supp. 486 (S.D.N.Y.
1976).
NOTION TO DISQUALIFY ATTORNEYS FOR TUEC AND RESPONSE TO TUEC's NOTION FOR PROTECTIVE ORDER AND OTHER RELIEF -- Page 16