Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.


United States District Court, Northern District of Illinois, E.D

August 23, 1982


The opinion of the court was delivered by: Shadur, District Judge.


Richard A. Bobbitt ("Bobbitt") sues Victorian House, Inc. ("Victorian House") and its President Albert Morlock ("Morlock"), primarily seeking dissolution of Victorian House and an accounting of corporate funds allegedly misapplied by Morlock. Bobbitt has moved to disqualify defendants' attorney John C. Stiefel ("Stiefel") and his law firm (Solomon, Rosenfeld, Elliott, Stiefel & Abrams, Ltd.) from representing defendants. For the reasons stated in this memorandum opinion and order that motion is denied.

Bobbitt has owned one-half of Victorian House's outstanding shares since its inception and has been a member of its board of directors since at least July 27, 1978. Stiefel has represented Victorian House since about December 1976. Although not articulated in precisely these terms, Bobbitt's claim is dual in nature:

    1. Stiefel assertedly represented the Victorian
  House incorporators (including Bobbitt) before the
  corporation was formed.

    2. Bobbitt contends he later gave confidential
  information to Stiefel in his capacity as counsel to
  Victorian House.

As a result Stiefel's presence in this action allegedly constitutes a conflict of interest.

During the past several years our Court of Appeals has dealt with a number of variations on the theme of lawyer disqualification. In doing so it has stated this test for determining if a conflict of interest exists in the face of prior representation, Novo Terapeutisk Laboratorium A/S v. Baxter Travenol Laboratories, Inc., 607 F.2d 186, 195 (7th Cir. 1979) (quoting Westinghouse Electric Corp. v. Gulf Oil Corp., 588 F.2d 221, 225 (7th Cir. 1976)):

  Initially, the trial judge must make a factual
  reconstruction of the scope of the prior legal
  representation. Second, it must be determined whether
  it is reasonable to infer that the confidential
  information allegedly given would have been given to
  a lawyer representing a client in those matters.
  Finally, it must be determined whether that
  information is relevant to the issues raised in the
  litigation pending against the former client.

First, however, it must be decided whether "prior legal representation" of Bobbitt was present at all.

As to the undisputed Stiefel representation — that involving Victorian House itself — the problem is relatively straightforward. Normally a corporate director talking to corporate counsel should understand anything he told that attorney was "known by the corporation." Thus there should normally be no conflict of interest when a director sues a corporation represented by its general corporate counsel, because anything the director would previously have told that attorney would ordinarily have been communicated to him as lawyer for the corporation. In other words, no conflict exists simply because there was no prior representation of the individual. As EC 5-18 of the Code of Professional Responsibility states:

  A lawyer employed or retained by a corporation or
  similar entity owes his allegiance to the entity and
  not to a stockholder, director, officer, employee,
  representative, or other person connected with the
  entity. In advising the entity, a lawyer should keep
  paramount its interests and his professional judgment
  should not be influenced by the personal desires of
  any person or organization. Occasionally a lawyer for
  an entity is requested by a stockholder, director,
  officer, employee, representative, or other person
  connected with the entity to represent him in an
  individual capacity; in such case the lawyer may
  serve the individual only if the lawyer is convinced
  that differing interests are not present.

Analysis is somewhat more complex as to a small close corporation with only a few shareholders and directors. There it may be more difficult to draw the line between individual and corporate representation. But representing such a corporation does not inherently mean also acting as counsel to the individual director-shareholders. Rather the question must be determined on the individual facts of each case.

This Court has found only a single case dealing with closely parallel facts. In Wayland v. Shore Lobster & Shrimp Corp., 537 F. Supp. 1220, 1223 (S.D.N.Y. 1982) the court rejected a like disqualification claim in these terms:

  However, Wayland has presented no support, and we
  have found none, for the proposition that a law firm
  which acts as counsel to a close corporation acts as
  counsel to individual shareholders simply by
  suggesting amendments to a shareholder agreement or
  by drafting and negotiating on behalf of the
  corporation severance agreement with departing
  shareholders. To the contrary, it appears that the
  Proskauer firm has always represented the
  shareholders as a group, as an alter-ego of the
  corporation. Wayland has pointed to no instance where
  the firm has represented any shareholder as an
  individual. Furthermore, Wayland's argument that the
  firm must be disqualified because it may have been
  exposed to confidential information from Wayland
  while he was employed at Shore is unpersuasive since,
  in the circumstances of Proskauer's representation,
  it is clear that the firm was representing the
  corporation and thus Wayland could not have
  reasonably believed or expected that any information
  given to the firm would be kept confidential from the
  shareholders or from the corporation as an entity.
  See Allegaert v. Perot, 434 F. Supp. 790 (S.D.N.Y.),
  aff'd, 565 F.2d 246 (2d Cir. 1977). It is undisputed
  that the firm was retained to represent Shore as a
  corporation, that services were billed to and paid by
  the corporation, and that the firm was only consulted
  on corporate matters. In fact, Wayland presents no
  evidence that he ever consulted the firm in any
  capacity other than as an officer and a shareholder
  of Shore.

At least after Victorian House was formed the situation was substantively the same as in Wayland, for Bobbitt looked to Stiefel as his personal counsel in only three minor instances (two of them trivial indeed), none of which was in any way related to this action:

    1. They had a single meeting in 1977 involving
  Bobbitt's general estate tax considerations (for a
  $40 fee).

    2. Stiefel handled a medical insurance claim in
  July 1977, which was settled in May 1978 with
  Prudential Insurance.

    3. About April 1979 Stiefel reviewed an apartment
  lease for Bobbitt (one telephone call to the lessor
  may have been involved).

To that extent Stiefel represented Bobbitt as an individual and Bobbitt could have expected any communications were confidential. But under Novo Terapeutisk an attorney should be disqualified only if matters he might have discussed with his former client would in some way be relevant to the current action. That is clearly not so here.

That leaves the claim in Bobbitt's initial affidavit that Stiefel represented the incorporators (including Bobbitt) before Victorian House's incorporation.*fn2 At his deposition (Tr. 39) Bobbitt shifted to the position that Stiefel was "consulted" before incorporation and another attorney actually took care of the incorporation. More importantly Stiefel's claimed consultation was only as to corporate matters.

Bobbitt's original affidavit also said:

  In the course of this aforementioned representation,
  during late 1974 and 1975, Stiefel and the plaintiff
  met privately and during those meetings, Stiefel
  received confidential information covering the
  finances and economic goals of Bobbitt and had access
  to his confidential records and Stiefel participated
  in and was party to, various decisions concerning
  this confidential information.

Bobbitt was questioned about this too at his deposition (Tr. 127):

  Q. Was there anything that you showed John [Stiefel]
  of the documents we have talked about? Was there
  anything in those documents that was unique, special,
  secret to you that was not something that Al
  [Morlock] knew or Nadine [Stiefel] knew?

A. My personal financial statement for one.

Shortly after that Bobbitt clarified what he meant by "secret" (Tr. 130, 131):

  Q. What I am asking is were any of those papers that
  you gave John things that you treated as secret to

  A. Well, they were strictly for the restaurant's
  business and the people who had to have them at the
  Bank of Ravenswood.

  Q. And you are saying there are things on your
  personal financial statement that you considered
  secret that Al [Morlock] didn't know?

A. No, that is not — Al saw them.

  A. There is nothing that I submitted to John Stiefel
  that I considered that was confidential other than
  that was our own business.

Q. Other than as related to Victorian House business?

A. Yes.

Thus Bobbitt's deposition makes plain his use of the term "confidential" was in the sense of non-public. There is no evidence whatever he discussed confidential matters with Stiefel that he expected would not be revealed to Morlock or Victorian House (in fact his testimony was precisely the opposite). Both Bobbitt's motion and his original affidavit seriously overstated the situation to Stiefel's detriment (or more accurately to defendants, for it is their right to representation of their choice that would have been impaired by a successful disqualification motion). This Court concurs in the Wayland analysis and finds it fully applicable here.


Well before appointment to the bench this Court had occasion to note the use of the meritless disqualification motion as a litigation tactic.*fn3 That trend has not abated, and in this case it has had the usual effect of diverting the litigation from attention to the merits. Bobbitt's motion to disqualify attorney Stiefel and his law firm is denied.

Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.