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

December 7, 1982


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


Lloyd Kadish ("Kadish") and Peter Berman ("Berman") sue Commodity Futures Trading Commission ("CFTC") for a declaratory judgment authorizing the law firm of Silets & Martin, Ltd. ("Silets & Martin") to represent Kadish and Berman in a separate subpoena enforcement action (No. 82 C 3387) brought by CFTC against them. For the reasons and upon the conditions stated in this memorandum opinion and order, judgment is granted authorizing such representation.

This Court has issued three memorandum opinions and orders in this action:

    1. Opinion I (548 F. Supp. 1030 (Sept. 23,
  1982)) denied CFTC's summary judgment motion,
  holding the Silets & Martin firm was not
  disqualified as a matter of law.

    2. Opinion II (548 F. Supp. 1036 (Oct. 13,
  1982)) was issued sua sponte because of the
  intervening opinion by our Court of Appeals in
  Freeman v. Chicago Musical Instrument Co.,
  689 F.2d 715 (7th Cir. Sept. 27, 1982), addressing the issue
  of vicarious law firm disqualification.

    3. Opinion III (slip opinion, Nov. 15, 1982)
  dealt with the hearing procedure to be followed
  on the ultimate merits, at the same time again
  explicating the related substantive analysis.

  After some intermediate procedural skirmishes (dealt with in part by Opinion III) this Court scheduled a December 3 evidentiary hearing to permit a decision on the ultimate merits. However the parties filed a November 29 stipulation agreeing to waive the evidentiary hearing and asking this Court to rule instead on the basis of the evidence (affidavits and supporting documents) presented earlier on CFTC's summary judgment motion. Opinion III at 4 has already expressed the Court's willingness so to rule on a stipulated record.

In accordance with Fed.R.Civ.P. ("Rule") 52(a), this Court finds the following facts and states the following conclusions of law:

Findings of Fact ("Findings")*fn1

1.  On Sunday, October 26, 1980 John Dolkart ("Dolkart"), a
senior trial attorney with CFTC, was working in its Chicago
offices, preparing for a business trip the following day. CFTC
Regional Counsel Constantine Gekas ("Gekas") came in and asked
Dolkart to join him in his office to discuss something over
the telephone with other CFTC personnel in Washington. Dolkart
did so. Gekas explained Chicago Discount Commodity Brokers
("CDCB") was in financial difficulty and that he and the other
CFTC people had been talking about the situation for a
considerable amount of time before Dolkart was brought in to
join the telephone conversation. Gekas introduced Dolkart, via
speaker phone, to John Cotton and an unidentified staff
attorney at CFTC's Washington, D.C. Division of Enforcement.

2.  During the ensuing four-sided conversation Gekas asked
what Dolkart knew about Kadish. Dolkart responded Kadish was
"sharp" and CFTC would need to proceed cautiously with Kadish
representing CDCB. All four then engaged in a discussion in
principle as to the advisability of moving against CDCB by
federal court injunctive action rather than through
administrative proceedings. Dolkart opined that from the
public's perception neither posed any particular advantage
when a registrant like CDCB becomes insolvent. Then Dolkart
excused himself from the discussion. Dolkart had spent only a
few minutes in the telephone conversation, spending not over
ten minutes in Gekas' office overall. At no time during the
conversation while Dolkart was on the line did the
participants discuss CDCB's factual situation. Dolkart was not
told anything of the nature of the extended discussion that
had taken place before Gekas called him into the telephone

3.  Later the same day Gekas again visited Dolkart's office,
this time to ask that Dolkart prepare an injunctive complaint
for use by CFTC against CDCB. Dolkart prepared a "boilerplate"
complaint by "cutting and pasting" portions of pleadings in
prior CFTC cases. Although his draft Complaint contained no
factual information as to CDCB, Dolkart told Gekas the
relevant facts could be gleaned from public filings in CFTC's
office and then aided Gekas in obtaining those files (though
Dolkart did not review them before giving them to Gekas).

4.  CFTC subsequently issued an order of investigation in
the CDCB matter. That order included Dolkart's name as one of
the three regional CFTC employees empowered to issue subpoenas
and take testimony in the CDCB investigation. However, Dolkart
(who was unaware of that designation) had no further
involvement in the CDCB investigation. Nor was Dolkart kept
abreast of substantive matters in the CDCB injunctive action
and ensuing investigation. Occasionally CFTC lawyers made
general remarks to Dolkart as to the status of the
proceedings, but the only information imparted in those
remarks was publicly available in any event.

5.  In April 1981 Dolkart was asked to and did provide
minimal assistance to CFTC staff attorney Adrianne Harvitt
("Harvitt") in CFTC's subpoena enforcement action against
CDCB's accountant David B. Dahl. Dolkart's "involvement"
consisted of two items:

    (a) Dolkart briefly discussed with Harvitt the
  federally recognized accountant-client

  privilege in general, not in relation to specific
  facts regarding Dahl and CDCB.

    (b) Dolkart accompanied Harvitt to court for
  her April 29, 1981 argument of a motion in the
  CDCB matter. Dolkart did not participate in
  Harvitt's preparation or argument. Instead he was
  with Harvitt solely to "hold her hand," because
  she was both new to the Division of Enforcement
  and generally inexperienced.

6.  On June 12, 1981 Dolkart left CFTC to join Silets &
Martin as an associate three days later. In December 1981
Kadish and Berman, who had received CFTC administrative
subpoena duces tecum in its CDCB investigation, retained that
law firm to represent them.

7.  As a matter of law firm policy, Silets & Martin (all of
whose lawyers are former government attorneys) screens each
case coming into the office to determine whether and the
extent to which any firm attorney had been involved in the
case while in the government's employ. If any attorney had
been substantially involved in a case, the firm would refuse
to handle it. If an attorney had been only tangentially
involved, the firm would accept the case but insulate that
attorney from further exposure to the matter.

8.  Silets & Martin adhered to the policy stated in Finding
7 in the CDCB matter. Before meeting with Kadish and Berman,
Royal Martin, Jr. ("Martin") asked Dolkart to work on the
matter. Dolkart described his earlier "peripheral exposure" to
Martin. Martin then decided Silets & Martin could represent
Kadish and Berman but "pursuant to our general firm policy,
Dolkart should not be involved in the matter." Martin invited
another associate, Shelly Kulwin ("Kulwin"), into his office
(with Dolkart still present) and said (a) Martin and Kulwin
would work on the Kadish and Berman matter and (b) Dolkart "was
to be completely excluded from participation in the case."

9.  In accordance with the firm's exclusion policy and the
principle established by Martin as described in Finding 8,
Dolkart has not been even peripherally involved in the CDCB
matter, but has been completely excluded from all
participation. Dolkart has had no interaction whatever with
Silets & Martin's partners, or with its associates involved in
the Kadish and Berman matter, relating to that matter.

10. Dolkart, as an associate, does not share in fees the firm receives from representing Kadish and Berman.

Conclusions of Law ("Conclusions")

1. This Court has jurisdiction over this declaratory action under 28 U.S.C. § 1331 and 1337 and 5 U.S.C. § 702.

2. As this Court held in Opinion I (548 F. Supp. at 1032-34), Code of Professional Responsibility ("Code") Disciplinary Rule ("DR") 9-101(B) bars Dolkart from representing Kadish and Berman. Such disqualification does not stem from Dolkart's having been the repository of CFTC "confidences and secrets" (as the Findings and Conclusion 4 make plain, he was not), but rather because his status was such as to have vested "substantial responsibility" (as distinct from actual knowledge) in him (548 F. Supp. at 1033).

3. Dolkart's personal disqualification does not extend vicariously to Silets & Martin unless:

    (a) Dolkart was the recipient of CFTC
  "confidences and secrets" within the meaning of
  Canon 4 and its DR 4-101*fn2 and

    (b) Dolkart communicated such potentially
  disqualifying information to Silets &

  As Opinion II (548 F. Supp. at 1036) recognizes, there is a rebuttable presumption that both propositions are true. Furthermore, in the absence of dispositive evidence of actual communication, the second proposition can be disproved upon a showing that Silets & Martin adopted effective and timely screening procedures to safeguard against contaminating disclosure. See Opinion I (548 F. Supp. at 1034-35).

4. While employed at CFTC Dolkart clearly did not receive any confidences or secrets that might warrant Silets & Martin's disqualification. As confirmed by the clear and convincing weight of the evidence, Dolkart was never privy to factual information concerning CDCB or to CFTC's strategies in prosecuting the injunction suit against CDCB. Indeed the only arguably confidential information ever imparted to Dolkart was the initial disclosure that CFTC planned to bring an injunctive action (and to investigate CDCB's affairs). And once those proceedings were in fact instituted (as occurred long before Dolkart left CFTC and joined Silets & Martin), by definition such limited knowledge ceased to be capable of being labeled a confidence or secret. Accordingly, Silets & Martin's evidentiary showing has successfully (and conclusively) rebutted the first presumption referred to in Conclusion 3.

5. Even if, contrary to the clear and convincing weight of the evidence, Dolkart were somehow viewed as tainted with CFTC confidences and secrets, Silets & Martin has not been similarly infected. It is uncontradicted (see Findings 7-9) the law firm took effective steps at the very outset to insulate its other members from any potentially disqualifying information acquired by Dolkart. Accordingly, the second presumption in the vicarious disqualification inquiry is also rebutted.

For the reasons stated in the Findings and Conclusions, this Court finds, concludes and declares the Silets & Martin firm is entitled to represent Kadish and Berman in the separate subpoena enforcement action brought by CFTC against Kadish and Berman (82 C 3387). Because the other relief sought in the Complaint (a declaratory judgment as to the Kadish-Berman attorney-client privilege vis-a-vis CDCB) may more appropriately be dealt with directly in the context of the subpoena enforcement action, the prayer for such relief is simply dismissed without prejudice.*fn4 Accordingly this memorandum opinion and order is a final order in this action.


At several points the factual versions presented by the two principal evidentiary sources (affidavits of Dolkart and Gekas) diverge. In resolving conflicts this Court has credited Dolkart's detailed sworn statements in his affidavit, both because they are so much more particularized than Gekas' conclusory statements and because they are consistent with the undeniably limited scope of Dolkart's involvement in the matters at issue.

This Court recognizes the parties' different motivations for deciding to proceed solely on the initial affidavits, as stated in their joint motion to rule on a stipulated record:

  1. This Court ruled that Plaintiffs produced
  sufficient evidence to defeat the Defendant's
  Motion for Summary Judgment on the
  disqualification issue. Following the scheduling
  of an evidentiary hearing on this issue,
  Plaintiffs became concerned that their counsel,
  Silets and Martin, Ltd., may be disqualified
  solely by virtue of its participation in such a
  hearing and without regard to the nature of the
  proof presented at the hearing, i.e., Plaintiffs
  fear that their counsel may learn privileged
  confidences and secrets regarding the Chicago
  Discount Commodity Brokers investigation simply by
  listening to the evidence produced by Defendant in
  its efforts to prove its case.

  2. Defendants are similarly concerned that should
  the scheduled evidentiary hearing go forward, it
  may be required to produce evidence that it deems
  to be privileged confidences and secrets
  regarding its investigation into the Chicago
  Discount Commodity Brokers matter.

But because CFTC has opted for that procedure, as Opinion III at 4 said, it "will not be heard to say . . . that it had more to offer but did not do so." And as Opinion III at 6 went on to say:

This is not, as CFTC urges, a Hobson's choice.

Analysis in those terms — essentially based on CFTC's failure of proof — would lead to the same result this Court has arrived at independently. In sum, Gekas' summary suggestions of possibly confidential communications — for that is all they amount to — cannot override the specific denials by Dolkart that any disqualifying information was imparted to him. One other factor is important, indeed compelling, in that respect. Dolkart's affidavit makes plain that Gekas called him into a long distance telephone conversation that had been going on for a considerable period of time before Dolkart was brought in. Gekas himself was in on the entire extended conversation, much of which likely had to do with substantive matters, from the beginning. It is entirely understandable (and not a reflection on Gekas' credibility) that he might not have an accurate recollection of what was said or not said during the few minutes Dolkart was in on the telephone conversation. On the other hand, Dolkart's vivid recollection and detailed account of the initial episode (Aff. ¶¶ 19-20) and of all subsequent aspects (Aff. ¶¶ 22-25) of his involvement are highly credible, are credited by this Court, and are incorporated by reference as detailed findings in amplification of the Findings in this memorandum opinion and order.

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