which probably would have required it to withdraw completely
from the case: it would have been representing two defendants
who were accusing each other of being culpable. The Court
rejects Harwick's contention.
Ralph E. Brown, counsel to Neil Mitchell during the criminal
proceedings, did testify that Mitchell and Lorant may have
come to a point where their interests diverged and they became
adverse co-defendants. However, this point was never reached
since the indictment was dismissed because of prosecutorial
abuse. In addition, Mitchell is not the party who seeks to
disqualify the Wildman firm. Velsicol is that party. The Court
finds that Wildman on behalf of Lorant and Williams & Connolly
on behalf of Velsicol and Lorant presented a joint and common
While the indictment focused on the status of the two
pesticides heptachlor and chlordane, the testimony is in
conflict as to the actual scope of the grand jury
investigations. Lucchino testified that the central issue in
the criminal case was Velsicol's compliance with regulatory
obligations, but that the main focus of the grand jury
investigations was EPA regulation (Tr. 9-10, 18-19). He never
discussed Velsicol's hydrocarbon resins with the Wildman firm,
nor were they of particular or specific interest to Williams
& Connolly (Tr. 23-24).
Brown testified that the investigations were so broad that
it was difficult to know what facets of Velsicol's business
the grand juries were not prepared to investigate (Tr. 47-48).
The investigation focused most intensely, however, on
heptachlor and chlordane; none of the defense counsel
discussed Polyvel G-100 or hydrocarbons (Tr. 48).
Harrold testified that the grand jury investigations focused
on the two products heptachlor and chlordane, and grew out of
proceedings before the EPA (Tr. 58). He knew nothing of the
FDA status of hydrocarbon resins, and neither discussed nor
heard of Polyvel G-100 or hydrocarbon resins until he was
asked to represent Harwick in this suit (Tr. 52-54, 56-57,
It is impossible for the Court to make a finding of fact as
to the breadth or narrowness of the grand jury investigations.
First, this Court has not been made privy to the grand jury
testimony. Second, the testimony introduced before this Court
by the attorneys representing some of the criminal defendants
is so subjective that the Court finds itself unable to make a
precise finding as to the scope of three grand jury
investigations covering more than 18 months.
Nevertheless, certain things can be determined. Velsicol Ex.
1 and 2 reflect that among the Velsicol documents submitted to
the grand jury were certain documents making reference to
hydrocarbon resins.*fn4 The following statement is contained
within Velsicol's monthly reports from the "Regulatory
Division: Research and Development Department": "AD and XL
Resins: Unofficial rejection of clearance by FDA: Submitted to
FDA: 9-7-71: rejected: 2-16-72." This same notation appears in
monthly reports from April, 1972, to December, 1973.
Another document submitted to the grand jury, "1973 1976
Operational Plan" (Velsicol Ex. 3), contains a paragraph which
states: "Food additive petitions for the hydrocarbon resins
(AD and XL) have not been submitted because of the problems
previously discussed in connection with potential
carcinogens. . . ." Another Velsicol document submitted to the
grand jury, "Monthly Operating Report, February, 1972" (Ex. A,
Memorandum in Support of Motion to Disqualify), states:
"Hydrocarbon resins: FDA has refused the clearance of the AD
and XL resins as food additives, until such time as Velsicol
demonstrates the absence of poly-cyclic aromatic hydrocarbons
in these products. . . ."
Harrold was asked whether he had ever seen any of the
above-mentioned documents before. He replied that he had not
seen them or any references to hydrocarbons until Velsicol
brought this motion for disqualification
(Tr. 54 57). In addition, Harrold testified that he does not
believe anything he learned (luring his representation of
Lorant could help him in his representation of Harwick against
Velsicol (Tr. 61).
The Court finds that Harrold and the Wildman firm had access
to all of the Velsicol documents subpoenaed by the grand jury,
including those submitted to this Court which make reference
to hydrocarbon resins. However, Harrold did not see these
references to hydrocarbon resins, and learned nothing from the
documents which would aid him in the representation of Harwick
III. Legal Issues
Velsicol argues in support of its motion to disqualify that
Canons 4 and 9 of the ABA Code of Professional Responsibility
and fundamental fairness all require the Court to grant their
motion to disqualify Bernard Harrold and the Wildman firm.
The seminal case in the area of attorney disqualification is
T.C. Theatre Corp. v. Warner Bros. Pictures, 113 F. Supp. 265
(S.D.N.Y. 1953). This case established the "substantial
relationship" test for determining the circumstances under
which an attorney must be disqualified. It has been held that
disqualification questions require three levels
of inquiry. Initially, the trial judge must make
a factual reconstruction of the scope of 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.
Westinghouse Elec. Corp. v. Gulf Oil Corp., 588 F.2d 221, 225
(7th Cir. 1978). If a court finds that the substantial
relationship test has been met, it must then determine whether
disqualification is warranted. Freeman v. Chicago Musical
Instrument Co., 689 F.2d 715, 722 (7th Cir. 1982).
The Court has previously made an extensive factual
reconstruction of the scope of the Wildman firm's
representation of Lorant, and Wildman's relationship with
Velsicol. Under the circumstances presented here, the second
two steps of the Gulf Oil inquiry — whether it is reasonable
to infer that confidential information was given, and whether
such information is relevant to the issues raised in the
instant litigation — are best dealt with by telescoping them
into a single inquiry. This is so because there is no question
but that some confidential Velsicol information was conveyed to
Wildman.*fn5 The real issue is whether that confidential
information is relevant to this lawsuit.
But there exists a threshold question: what was the
relationship between Velsicol and Wildman? Velsicol concedes
that no formal attorney-client relationship existed between
Wildman and Velsicol. Instead, Velsicol argues that
Westinghouse Elec. Corp. v. Kerr-McGee Corp., 580 F.2d 1311
(7th Cir.), cert. denied, 439 U.S. 955, 99 S.Ct. 353, 58
L.Ed.2d 346 (1978), requires disqualification under the
circumstances presented here even in the absence of an express
attorney-client relationship. The wide ranging grand jury
investigations of Velsicol and the individual defendants, the
great cooperation among counsel which gave Wildman access to
all Velsicol documents, the opportunity given Wildman to learn
about Velsicol's regulatory policies, practices, procedures,
and personnel, all would give Harwick an unfair advantage in
prosecuting its cross claim against Velsicol.
Harwick answers that there was no attorney-client
relationship between Wildman and Velsicol, the
Kerr-McGee analysis does not apply, the Wildman firm was never
privy to confidences and secrets which it can now use against
Velsicol on behalf of Harwick, and the applicable cases hold
that under these circumstances Velsicol's motion
to disqualify must be denied. The Court will examine the
arguments in turn.
A. Canon 4
Velsicol argues that Canon 4 requires that the Wildman firm
be disqualified here. Canon 4 states: "A lawyer should
preserve the confidences and secrets of a client" (emphasis
added). Since Velsicol has agreed that Wildman and Velsicol
never had a formal attorney-client relationship, they seek to
come within the literal terms of Canon 4 by relying on
Westinghouse Elec. Corp. v. Kerr-McGee Corp., supra.
Three of the defendants in Kerr-McGee (Gulf, Getty, and
Kerr-McGee, hereinafter referred to as "Kerr-McGee") were
members of the American Petroleum Institute ("API"), a trade
association represented by Kirkland & Ellis ("Kirkland"). API
retained Kirkland to analyze the antitrust considerations of
legislation proposing divestiture in the oil industry.
Kirkland's mission included interviewing various members of API
(the movants among them), and in the course of this work
Kirkland became privy to much secret and confidential
information. On the same date Kirkland released its report to
API — which report contained various references to API
members' involvement in the production and marketing of uranium
— Westinghouse filed suit against Kerr-McGee and others,
alleging price-fixing in the uranium industry. Westinghouse was
represented by Kirkland.
The district court denied Kerr-McGee's motion to disqualify
Kirkland from representing Westinghouse on the grounds that
there had been no attorney-client relationship between
Kirkland and Kerr-McGee; such a relationship existed only
between Kirkland and API. 448 F. Supp. 1284 (N.D. Ill. 1978).
The court of appeals reversed. 580 F.2d 1311 (7th Cir. 1978).
The moving defendants had consulted with Kirkland while
entertaining reasonable beliefs that they were submitting
confidential information to the law firm. This information had
been solicited and given based upon the representation and
understanding that Kirkland was acting in the undivided
interest of these companies. Under such circumstances an
implied attorney-client relationship existed and Canon 4 was
applicable. Kirkland could not be permitted to represent
Westinghouse against Kerr-McGee in a lawsuit with issues
substantially similar to the issues implicated by Kirkland's
representation of its other "clients." Id. at 1321.
Velsicol has argued that Wildman's representation of Lorant
is a Kerr-McGee type situation. This argument must fail. There
is no evidence that Velsicol entertained a belief, reasonable
or otherwise, that Wildman represented Velsicol during either
the grand jury investigations or the prosecution of the
indictment. Velsicol did not consult with the Wildman firm with
the expectation of obtaining legal advice: the company was
represented by Williams & Connolly in a most effective manner.
The cooperation between Velsicol (through its attorneys) and
the Wildman firm was due to Wildman's representation of one of
Velsicol's co-defendants, Bernard Lorant.
The fact that Velsicol paid Wildman's attorney's fees for
the representation of Lorant makes no difference. What
determines whether an attorney-client relationship exists has
nothing to do with the payment of legal fees. Kerr-McGee,
supra, at 1317.
Instead, an attorney-client relationship exists "when the
lay party submits confidential information to the law party
with reasonable belief that the latter is acting as the
former's attorney . . ." Kerr-McGee, supra, at 1312, 1321.
Velsicol never had a "reasonable belief that it was submitting
confidential information" to the Wildman firm. The Kerr-McGee
"implied attorney-client relationship" is inapplicable.
Instead, this is quite clearly a "co-defendant case."
When information is exchanged between
co-defendants and their attorneys in a criminal
case, an attorney who is the recipient of such
information breaches his fiduciary duty if he
later, in his representation of another client,
is able to use this information to the detriment
of one of
the co-defendants, even though that co-defendant
is not the one which he represented in the
criminal case. Wilson P. Abraham Const. Corp. v.
Armco Steel Corp., 559 F.2d 250 (5th Cir. 1977)
[per curiam] (disqualification case).
Kerr-McGee, supra, at 1319. See also Fred Weber, Inc. v. Shell
Oil Co., 566 F.2d 602 (8th Cir. 1977), cert. denied,
436 U.S. 905, 98 S.Ct. 2235, 56 L.Ed.2d 403 (1978), overruled on
question of appealability of denial of disqualification motion,
In Re Multi-Piece Rim Products Liability, 612 F.2d 377, 378
(8th Cir. 1980), vacated and remanded sub nom. Firestone Tire &
Rubber Co. v. Risjord, 449 U.S. 368, 101 S.Ct. 669, 66 L.Ed.2d
571 (1981) (court of appeals lacked jurisdiction to hear
merits). It is clear that certain obligations arise in the
co-defendant situation which might be cause for
disqualification in a subsequent case. The parameters of these
ethical constraints are set out in Canon 9. An attorney-client
relationship — whether it be express or implied — must exist
before a motion for disqualification can be predicated upon
Canon 4. Fred Weber, supra at 608; Wilson P. Abraham, supra;
see also Development in the Law: Conflicts of Interest in the
Legal Profession, 94 Harv.L.Rev. 1244, 1321, 1331-2 (1981).
Since no such relationship existed between Velsicol and
Wildman, the Canon 4 argument must fail. Disqualification must
be granted under Canon 9 or standards of fundamental fairness,
or not at all.
B. Canons 4 and 9 Contrasted
Canon 9 states: "A lawyer should avoid even the appearance
of professional impropriety." This canon must be applied
carefully. It has been said that "Canon 9 . . . is not
intended to override the delicate balance created by Canon 4."
Schloetter v. Railoc of Indiana, Inc., 546 F.2d 706, 713 (7th
Cir. 1976), quoting Silver Chrysler Plymouth v. Chrysler Motors
Corp., 518 F.2d 751, 757 (2d Cir. 1975). Though Canon 4 is not
applicable to this co-defendant case, Fred Weber, supra, at
608, nevertheless it is important to contrast the different
approaches implied by Canons 4 and 9.
A certain irrebuttable presumption arises under Canon 4: if
it is reasonable to infer that confidential information would
have been given to a lawyer representing a client in the prior
matter, the Court presumes that such information was conveyed.
See Gulf Oil, supra, at 224, and at n. 3. The policy behind
this irrebuttable presumption is that the Court should not
inquire into the confidences and secrets passing between a
lawyer and a client.
There are two situations when a second presumption comes
into play, and the courts have held that this second
presumption must be rebuttable. The first situation is where
a particular lawyer ("L") has represented a client ("C") in a
matter. A motion for disqualification is filed when L's law
firm (former or present) represents a party adverse to C in a
related matter. The question is whether the irrebuttable
presumption that C communicated confidences and secrets to L
must be imputed to members of L's firm. Such a presumption of
the imputation of confidences to firm members does exist, but
this presumption has been held to be rebuttable. See Freeman v.
Chicago Musical Instrument Co., 689 F.2d 715, 722 (7th Cir.
1982); Novo Terapeutisk v. Baxter Travenol Lab., 607 F.2d 186,
197 (7th Cir. 1979) (en banc). If firm members come forward
with evidence that they did not receive confidences and secrets
of C, disqualification will not be ordered.
The second situation in which a presumption may be rebutted
is the one presented here. Where a former co-defendant
("co-D") has had access to the secrets and confidences of a
former fellow co-defendant, now turned adversary ("A"), a
presumption lies that co-D learned the secrets and confidences
of A. But again, this presumption is a rebuttable one. See
Wilson P. Abraham, supra, at 253; Fred Weber, supra, at 609. In
such a case there must be a showing that co-D actually obtained
confidential information in the course of the
prior representation which may be used in the present action
to the detriment of A.*fn6
So in this co-defendant case, the substantially similar
Gulf Oil test must be met by Velsicol's showing that Wildman
actually received confidential and secret information from
Velsicol during the course of Wildman's representation of
Lorant, which information may be used against Velsicol in this
C. Canon 9 Applied
Velsicol has shown that Harrold and the Wildman firm had
access to the Velsicol documents which mention hydrocarbon
resins. But the question of having access is not the same as
the question of having been privy to these secrets. A recent
statement by the Seventh Circuit shows that access alone is not
In Freeman v. Chicago Musical Instrument Co., supra, the
plaintiff retained the Dressler law firm to represent him in a
patent suit. During the pendency of the case an associate in
the Dressler law firm, Eric C. Cohen, joined the Fitch law firm
which represented the defendant. "Dressler claimed that Cohen
had access to the confidences and secrets of their client,
Freeman, in that it was a Dressler firm policy to distribute
various legal opinions and memoranda to all lawyers of the
firm. The Dressler law firm also claimed that cases were often
discussed by members of the firm among each other, implying
that Cohen was privy to Freeman's secrets and confidences."
Freeman, supra, at 717 (emphasis added). Dressler also stated
that the Freeman litigation files were stored immediately
outside Cohen's office.
Cohen submitted affidavits claiming that he never worked on
matters for Freeman and that he had no knowledge of the
subject matter of the lawsuit. He also stated that "although
various legal memoranda and opinions circulated at Dressler,
he typically had been too busy to read them." Id. at 717. Based
on the affidavits, the district court granted the motion to
disqualify Cohen's new firm (Fitch), stating that the continued
representation of the defendant by the Fitch firm "would result
in an appearance of impropriety" and that it was "not
appropriate for the court to inquire into whether actual
confidences were disclosed." Id. at 717. The court of appeals
reversed, and ordered that an evidentiary hearing be held to
determine what in fact Cohen knew about the Dressler firm's
representation of Freeman.
Freeman is applicable to the issues now before this Court.
Cohen had access to confidential information which clearly was
relevant to the litigation. (It was the same lawsuit.)
Nevertheless, the district court was directed to hold an
evidentiary hearing to determine as a matter of fact whether
Cohen was actually privy to Freeman's confidences and secrets.
Id. at 723, n. 12. Freeman stands for the proposition that a
showing of access is not enough; there must be a showing that
the lawyer was privy to the relevant secrets.
The Court finds that Wildman did have access to confidences
and secrets of Velsicol, some of which are relevant to the
issues in this litigation. But Harrold's testimony shows that
Wildman did not have actual knowledge of — and therefore was
not privy to — relevant confidences and secrets.*fn7
Therefore the presumption has been
rebutted, and under Freeman, Fred Weber, and Wilson P. Abraham,
disqualification is not in order.
Velsicol states that the Wildman firm's representation of
Harwick against Velsicol creates a clear appearance of
impropriety, and that this alone requires disqualification.
But faced with more compelling facts, the Freeman court held
that the "possible appearance of impropriety, found to be
determinative by the district court, is simply too weak and too
slender a reed on which to rest a disqualification order in
this case, particularly where the mere appearance of
impropriety is far from clear." Freeman, supra, at 723.
Two witnesses before this Court testified that their firms
would refuse to represent Harwick against Velsicol in this
case. Ralph E. Brown of the Walsh, Case firm represented Neil
R. Mitchell, general counsel of Velsicol, in the criminal
investigation and prosecution. Brown stated that his firm
would not undertake to represent a client against Velsicol
under these circumstances because it would not pass "the smell
test". He indicated that this firm policy is predicated more
on practicality than on strict adherence to the ethical
Brown's point of view is commendable and this Court respects
it. However, for two reasons it is not determinative. First,
Brown represented an employee of Velsicol who was general
counsel to that corporation. He clearly was privy to the
workings of Velsicol from the inside out. By contrast, Wildman
represented Lorant who, during the applicable period, was a
consultant and outside counsel to Velsicol. The two
representations are not equivalent.
The second (and more important) point is that the Seventh
Circuit clearly rejected the "smell test" in Freeman when it
stated that the possible appearance of impropriety there was
too weak and too slender a reed on which to rest a
disqualification order. Canon 9 requires more than a mere
appearance of impropriety. There must be a showing that the
attorney whose disqualification is sought actually received
confidences which can now be used against the former
Lawrence Lucchino of Williams & Connolly also testified that
his firm would refuse to represent a client adverse to
Velsicol in a similar matter. Williams & Connolly was the
attorney for Velsicol, so under such circumstances Canon 4
would apply. Therefore, the presumption that confidences were
exchanged — including confidences relative to hydrocarbon
resins — would be irrebuttable. Lucchino's statement of what
his law firm would do under similar circumstances is unhelpful
because the circumstances are not in fact similar. No
attorney-client relationship, express or implied, existed
between Wildman and Velsicol.
D. Fundamental Fairness
Velsicol is most concerned that Harrold's representation of
Lorant gave Wildman the opportunity to learn about the inner
workings of the Velsicol company, and that in representing its
co-defendant Wildman was provided with a "road map" of
Velsicol. Neil Mitchell, general counsel for Velsicol,
testified that in his opinion Wildman's representation of
Lorant disclosed to Wildman the personalities, strengths and
weaknesses of Velsicol people, information which would be very
difficult to obtain in civil discovery (Tr. 36, 42). According
to Mitchell, this information would give the Wildman firm (on
behalf of Harwick) an unfair advantage.
This argument must also be rejected. What Velsicol objects
to is that the Wildman firm may understand early on in this
litigation the organization and makeup of the Velsicol
corporate structure. They aptly call this a "road map." Such
a road map, however, is easily plotted through the use of
interrogatories and several initial depositions. Even assuming
Wildman starts off with such information, this does not
It has been held that the familiarity with a company's
corporate structure and personality is not enough to warrant
disqualification. In Westinghouse Elec. Corp. v. Rio Algom,
Ltd., 448 F. Supp. 1284 (N.D.Ill. 1978), one of the defendants,
Noranda, moved to disqualify Kirkland as counsel for
Westinghouse. Kirkland previously had represented Noranda for
two years.*fn8 It was argued that "Kirkland advised Noranda on
the impact of U.S. antitrust, corporation, securities, and tax
laws on [a] proposed exchange offer," and that in the course of
the previous representation, "Kirkland acquired intimate
knowledge of Noranda's corporate organization, officers,
marketing methods, [and] business philosophy . . ." Thus
"[b]ecause Kirkland has had access to confidential information
on Noranda's intercorporate connections and that information is
highly relevant to proving certain allegations of the
Westinghouse complaint, Kirkland must be disqualified to
prevent the disclosure of client confidences and the use of
those confidences against Noranda in the present action." Rio
Algom, supra, at 1306-1308.
Judge Marshall denied the motion to disqualify Kirkland vis
a vis Noranda, and the decision was affirmed. Westinghouse
Elec. Corp. v. Kerr-McGee Corp., 580 F.2d 1311, 1322 (7th
Cir.), cert. denied, 439 U.S. 955, 99 S.Ct. 353, 58 L.Ed.2d 346
(1978). General knowledge of a corporation's organization and
supporting personalities, which can quickly and easily be
learned through the civil discovery process, is not enough to
warrant disqualification. Velsicol's "road map" theory fails to
support its motion to disqualify the Wildman firm.
Velsicol also argues that Wildman learned about the
"regulatory process" at Velsicol, and that this knowledge will
greatly help Harwick in this case. In Rio Algom, Kirkland had
an understanding of Noranda's marketing methods and had
counseled the company on antitrust matters. Nevertheless,
Kirkland was not disqualified from representing Noranda's
adversary in prosecuting a price-fixing case. For the same
reasons, Wildman's familiarity with Velsicol's regulatory
process does not support the motion to disqualify.*fn9
Allegations of vague general background knowledge are not
Finally, Velsicol argues that Cannon v. U.S. Acoustics Corp.,
398 F. Supp. 209 (N.D.Ill. 1975), adopted and affirmed
532 F.2d 1118 (7th Cir. 1976), requires disqualification here because as
in Cannon, Wildman's representation of Velsicol's co-defendant
"was so lengthy and pervasive that [it] would have to be
disqualified under Canon 9." 398 F. Supp. at 228-9. Cannon,
however, is inapplicable.
Cannon was a named plaintiff suing the defendant corporation
in a shareholders derivative action. Cannon had been counsel
to the defendant for twelve years prior to his terminating the
relationship and bringing this suit. Judge Marshall
disqualified Cannon as a party plaintiff in the litigation,
and on appeal this decision was affirmed. The relationship
between Cannon and the defendant was clearly different from
the relationship between Wildman and Velsicol. Cannon might be
applicable if Neil Mitchell or possibly Bernard Lorant were the
named plaintiff in a shareholders derivative suit brought
against Velsicol. But that is not even analogous to the
situation presented here.
The evidence presented to the Court and the cases discussed
above show that disqualification is not proper.
THEREFORE, IT IS ORDERED that Velsicol's motion to
disqualify is denied.
Velsicol is ordered to answer Harwick's cross claim within
twenty (20) days of the date of this order. A status hearing
is set for February 16, 1983 at 9:30 a.m.