The opinion of the court was delivered by: William T. Hart, District Judge.
MEMORANDUM OPINION AND ORDER
This Court is faced with deciding a difficult and sensitive
question: whether to disqualify an attorney and his law firm
from continuing to represent a litigant in this case. The
Court has very carefully reviewed the briefs and exhibits
submitted by counsel, and on November 16, 1982, conducted an
evidentiary hearing pursuant to the requirement of Freeman v.
Chicago Musical Instrument Co., 689 F.2d 715 (7th Cir. 1982).
For the reasons stated below, the motion to disqualify is
I. Background of the Instant Action
The legal principles upon which the Court must base its
decision are known. The United States Court of Appeals for the
Seventh Circuit and several other courts have addressed the
problems posed by motions for disqualification of counsel many
times in recent years. It is in the application of these legal
principles to complex fact situations that the Court sees
greatest difficulty. Therefore, it is necessary to set forth
in detail the intricacies of the allegedly conflicting
This action was initiated by the plaintiff International
Paper Company ("IP") bringing suit against Lloyd Manufacturing
Co. ("Lloyd").*fn1 IP alleges that Lloyd sold IP a product
called green nitrile. Green nitrile is a kind of rubber
sheeting which IP used as one component in its production of
food dispensers. These food dispensers were purchased by
Conway Imports, Inc. ("Conway"), which filled them with sauces
and sold them to the McDonald's Hamburger Corporation
("McDonald's"). IP claims Lloyd warranted that green nitrile
met Food and Drug Administration ("FDA") requirements and that
it had received FDA approval as suitable for contact with
However, McDonald's soon determined that the sauces had been
contaminated and that the green nitrile was at fault.
McDonald's returned to Conway the dispensers, and they and
their contents were destroyed. As a result, IP paid Conway
$449,000, and claims to have suffered harm to its business
reputation and goodwill. IP alleges that Lloyd's actions
resulted in damages to IP of $10 million.
On December 8, 1981, the defendant Lloyd brought a Third
Party Complaint against the Velsicol Chemical Corporation
("Velsicol") and Harwick Chemical Corporation ("Harwick").
Lloyd alleges that Velsicol manufactured Polyvel G-100, a
hydrocarbon resin which is a component of green nitrile, and
that Harwick distributed the Polyvel G-100 to Lloyd. Further,
Lloyd claims that Harwick and Velsicol represented that
Polyvel G-100 met FDA requirements and could be used in
contact with food.
Harwick then brought a cross claim against Velsicol on May
3, 1982, alleging that any liability found against Harwick
should be properly laid at Velsicol's doorstep. Harwick argues
that all statements it made to Lloyd about Polyvel G-100 were
made in reliance upon Velsicol's representations to Harwick.
On the same day Harwick filed its cross claim, Velsicol moved
to disqualify Harwick's counsel.
Harwick is represented by Bernard Harrold ("Harrold") of the
law firm of Wildman, Harrold, Allen & Dixon ("Wildman"). The
basis for Velsicol's disqualification motion is that Harrold
and the Wildman firm previously represented a former Velsicol
employee and agent, Bernard Lorant ("Lorant"), in a criminal
action. Velsicol argues that Harrold's representation of
Lorant is substantially related to Wildman's current
representation of Harwick, and that under applicable precedent
disqualification is warranted here.
II. Wildman's Prior Representation
In addressing disqualification questions, "[i]nitially, the
trial judge must make a factual reconstruction of the scope of
the prior legal representation." Westinghouse Elec. Corp. v.
Gulf Oil Corp., 588 F.2d 221, 225 (7th Cir. 1978). The Court
has heard testimony and examined documentary submissions and
finds the facts to be as follows. Bernard Lorant was for 24
years an attorney and chemist for Velsicol. He was consulted as
to regulatory matters pertaining to various Velsicol products.
In 1970, Lorant left the direct employ of Velsicol but
maintained a relationship with the company as outside counsel
In 1975 a federal grand jury (No. 75 GJ 1541 [N.D.Ill.
1975]) began a broad investigation into Velsicol and several
of its employees and associates. A second grand jury (No. 76
GJ 2361 [N.D.Ill. 1976]) was empanelled the next year to
continue the investigation. The investigations were broad and
far ranging, as can be demonstrated by quoting a few of the
requests in the grand jury subpoenas:
Any and all minutes, records, notes, or
documents of any kind, relating in any way to
meetings of the Board of Directors and meetings
of the Executive Committee of Velsicol Chemical
Corporation, from January 1971 to the present.
Any and all records or documents of any kind,
relating in any way to litigation or
investigations concerning Velsicol Chemical
Corporation conducted by any Agency, Bureau,
Service or Department of the United States, from
January 1, 1971 to present.
Any and all monthly reports for the Toxicology
Group and the Regulatory Division of Velsicol
from January 1, 1972 to June 30, 1975.
Any and all records concerning the Regulatory
Group and/or Regulatory Advisory Group meetings
from January 1, 1974 to December 31, 1976.
(Affidavit of Neil R. Mitchell).
Eventually it became clear that six individuals associated
with Velsicol, in addition to the Velsicol company itself,
were targets of the grand jury investigations. The Washington,
D.C. law firm of Williams & Connolly (at that time named
Williams, Connolly & Califano) was retained as outside counsel
to represent Velsicol in September, 1975. In October, 1975,
the Wildman firm was retained to represent Lorant in regard to
the same grand jury investigation. Each of the individuals
(later defendants) subsequently retained separate outside
counsel.*fn2 Velsicol completely paid for the legal fees
incurred by all the individuals both during the investigations
and subsequent prosecution. Over a six year period, Velsicol
paid the Wildman firm nearly $500,000 for its representation
On December 12, 1977, an indictment naming Velsicol,
Mitchell, Lorant, Gold and three others was handed down in the
case of United States v. Gold, et al., No. 77 CR 1073 (N.D.Ill.
1978). The indictment charged that information relating to two
pesticides produced by Velsicol, heptachlor and chlordane, had
been withheld from the Environmental Protection Agency ("EPA").
Williams & Connolly remained as Velsicol's counsel during
the prosecution of this indictment, and the Wildman firm
continued to represent Lorant. In addition, Williams &
Connolly became co-counsel with the Wildman firm in
representing Lorant. The Wildman firm never became co-counsel
with Williams & Connolly in representing Velsicol.
Counsel for Velsicol and the six individual defendants
cooperated in coordinating their defenses to the prosecution.
They attended numerous meetings, had conference telephone
calls, circulated drafts of legal pleadings prior to their
filing, and communicated as to all important aspects of the
defense. Hundreds of thousands of documents had been
subpoenaed from Velsicol during the grand jury investigations
leading to the indictment. Velsicol maintained copies of the
subpoenaed documents in its Chicago headquarters, and counsel
for Velsicol's co-defendants (including the Wildman firm) had
access to these copies. Some of the subpoenaed documents were
actually furnished to all counsel. The Wildman firm and
Williams & Connolly discussed on several occasions the
question of whether certain Velsicol documents came within the
attorney-client privilege and therefore could be withheld from
the grand jury (Velsicol Ex. 5).
During the course of the grand jury investigations, counsel
for the defendants became convinced that there had been
widespread prosecutorial misconduct. Consequently, the
defendants moved for a dismissal of the indictment on grounds
of gross prosecutorial abuse and misconduct before the grand
jury. This motion was granted by Judge Leighton on April 20,
1979, and the indictment was dismissed. United States v. Gold,
470 F. Supp. 1336 (N.D.Ill. 1979).
A third grand jury was empanelled (No. 79 GJ 1496 [N.D.Ill.
1979]) and the investigation of Velsicol and the individual
defendants was again pursued. Williams & Connolly continued to
represent Velsicol, and the Wildman firm with Williams &
Connolly as co-counsel continued to represent Lorant. This
last grand jury investigation terminated when Velsicol pleaded
nolo contendere to a one count information charging criminal
contempt. Velsicol was sentenced on January 16, 1981 to pay a
fine of $1,000. No criminal charges were brought against the
former individual defendants.
The defense of all the defendants after the indictment was
handed down in 1977 focused on three basic lines of attack:
(1) moving to dismiss the indictment on grounds of
prosecutorial misconduct; (2) if the indictment were not
dismissed, the defendants intended to argue that no criminal
violation had occurred and that all involved had acted
according to law; and (3) if the indictment were not dismissed
and a defense could not be made out that there had been no
criminal violations, some of the defendants (in attempts to
exonerate themselves) ...