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Consolidated Theatres Inc. v. Warner Bros. Circuit Management Corp.

decided: September 28, 1954.


Author: Hincks

Before: CHASE, Chief Judge, and FRANK and HINCKS, Circuit Judges.

HINCKS, Circuit Judge:

This appeal arises from a proceeding to disqualify Robert E. Nickerson and the law firm of Robert E. Nickerson and William Gold from acting as attorneys in a private motion-picture anti-trust suit. The facts of the case are as follows: Philip Loew and Consolidated Theatres, Inc., retained the law firm of Nickerson and Gold to institute an anti-trust action against a large number of motion picture producers. Messrs. Nickerson and Gold drafted a complaint alleging that the defendants had seriously damaged a theatre owned by Loew and leased and operated by Consolidated Theatres, Inc., which was located in Worcester, Mass., by denying it first run quality films. The complaint charged a nation-wide conspiracy in violation of Sections 1 and 2 of the Sherman Act. The complaint charged that each of the named defendants have engaged in unlawful practices pursuant to the nation-wide conspiracy, and that such practices were found against each of them in the judgment in the famous United States v. Paramount case, 334 U.S. 131. The complaint prayed for treble damages in the amount of ten million dollars in favor of Consolidated Theatres, Inc. and four million dollars in favor of Philip Loew.

The defendants objected to participation by plaintiff's counsel in the case and moved that they be disqualified as attorneys. This aspect of the case was referred to a Special Master whose report recommended that the challenged attorneys be so disqualified. The report was adopted by the District Judge and from his order Mr. Nickerson has taken this appeal.

The law firm of Nickerson and Gold is challenged in this case because of the former activities and associations of Mr. Nickerson. Stated broadly, the essence of the claim is that Mr. Nickerson had formerly served as an attorney in a large law firm which represented the defendants herein. The charge is that, in his capacity as plaintiff's counsel in the instant case, he represents an interest which is adverse to that of clients of this former firm, and that such conduct is a breach of professional ethics.

In order to decide the questions of law presented, it is necessary that we set out some of the findings of fact made by the Special Master. The findings which we include are those supported by the evidence and not materially disputed by the parties.

In 1942 Mr. Nickerson was employed as an attorney in the law firm of Dwight, Royal, Harris, Koegel and Caskey (hereinafter called the Dwight firm). He remained as an employee of the firm for a period of eight years and in 1950 formed a partnership with Mr. Gold. About eighty percent of his work in the Dwight firm involved motion picture anti-trust matters. One of the principal clients of the Dwight firm is the Twentieth-Century Fox Film Corporation (hereinafter called Fox) which is a defendant here.

The charge against Mr. Nickerson is principally based on his participation in three motion picture anti-trust suits while in the employ of the Dwight firm. One such case is United States v. Griffith Amusement Co., 334 U.S. 100. This case was instituted by the Government in 1938 and the complaint therein, as appears from the Supreme Court opinion, charged that, "... certain exclusive privileges which these agreements granted the appellee exhibitors over their competitors unreasonably restrained competition by preventing their competitors from obtaining enough first or second-run films from the distributors to operate successfully. The exclusive privileges charged as violations were pre-emption in the selection of films and the receipt of clearances over competing theatres. It is also charged that the use of the buying power of the entire circuit in acquiring those exclusive privileges violated the Act." 334 U.S. 100.

Originally, Fox had been a defendant in the Griffith case. Pursuant to a consent decree, it and several other motion picture companies were dismissed as defendants, but in the amended complaint they had been named as co-conspirators. In that case, in addition to representing Fox, the Dwight firm was retained by Paramount Pictures, Inc., Warner Brothers Pictures, Inc., R.K.O. Radio Pictures, Inc., and Loews, Inc. (hereinafter these four companies are designated as the "group"). Each member of the "group" is a defendant in the instant case.

Fox and the group were, upon subpoena, required to produce thousands of documents at the Griffith trial. The dwight firm was retained to aid in this process and generally to advise the Griffith attorneys. The Special Master found that Mr. Nickerson's primary responsibility in the Griffith case was "largely in arranging the files of these companies for presentation to the Court, attending the trial, making notes of the testimony, and the general proceedings of the trial ..." Nickerson admitted that he had complete access to all the records and files of Fox and the group. He interviewed employees of some of the group companies, and with another lawyer conducted an interview with Paramount's branch manager, who was instructed to "give them your co-operation in obtaining all the facts which they seek." The Special Master also found that "... one of the main purposes of his endeavors was to get findings which would make it difficult for private litigation to be instituted" against Fox and the group. The Master found that some files entrusted to Nickerson included policy statements on the selling, releasing and withholding of pictures.

Another case in which Nickerson participated is United States v. Schine Chain Theatres, 334 U.S. 110. Fox and the group were originally named as defendants in this case also but under the consent decree they were dismissed as such. But as in the Griffith case, they were still charged as co-conspirators. They were required to respond to a subpoena duces tecum calling for huge quantities of documentary and other evidence. The retained the Dwight firm which put Nickerson on the "team" that worked on the case. The issues in the Schine case, were substantially similar to those in the Griffith case, a key question being, in the words of the Special Master, whether "... the Schine defendants had conspired with the distributor defendants ... by obtaining first and preferred runs over competing theatres." Nickerson's activities in the Schine trial were quite similar to those assigned to him in the Griffith case - analyzing, digesting, and organizing files containing documentary evidence. He was present at interviews of sales and branch managers of Fox and the group companies. He also helped witnesses prepare to give testimony at the trial. Also, in McLendon v. Loews, Incorporated, D.C. Texas, 76 F.Supp. 390, a suit involving Fox and the group, Nickerson helped in obtaining data on the facts in preparing the case for trial. The Special Master discussed other matters on which Nickerson worked while associated with the Dwight firm involving Fox especially, and in some instances members of the group. He never was the attorney of record in any of these cases, and always was assigned as an assistant to one of the senior partners in the Dwight firm.

Mr. Nickerson, whose good faith and moral character was in no way challenged in this proceeding, realized that he was under certain ethical obligations to the Dwight clients. Before leaving the Dwight firm he discussed the matter quite extensively with a partner of the firm. From these discussions emerged what Nickerson calls the "Caskey-Nickerson Agreement."

This was an informal understanding between Mr. Caskey, a member of the Dwight firm, and Nickerson which had been reached, on the eve of Nickerson's separation from the firm, as to the extent to which in the future Nickerson would be free to represent interests adverse to those who had been clients of the firm while Nickerson had been associated therewith. Under this "Agreement," Nickerson in the words of the Special Master, was to refrain "from accepting work in areas and in periods of time in which Nickerson was employed by Dwight, Royall, Harris, Koegel and Caskey against clients from whom such work was performed."*fn1

Further, in the hearing before the Special Master, the appellant testified that in the instant case he voluntarily accepted certain limitations upon his conduct in prosecuting the case against Fox and that it was his intent not to press ...

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