The opinion of the court was delivered by: DAWSON
This matter presents the issues as to whether (1) a law firm and both the members thereof are disqualified from representing a plaintiff in an action where one of the members in the firm had previously represented the adverse parties in similar litigation and had, as a result of such litigation, been in a position to receive confidential information from such former clients; and (2) if, by reason of such facts, the firm, and both the members thereof, are disqualified from representing the plaintiff, does the disqualification continue as to additional new cases as to an individual partner when the partner who has previously been in the adverse position severs his connection with the firm.
The matter comes on for determination as a result of a motion made by plaintiffs for an order that the law firm of Malkan & Ellner, and the members thereof, Arnold G. Malkan and J. Robert Ellner, may properly represent and are not barred or disqualified from representing the plaintiffs in these actions.
The defendants have cross-moved for an order disqualifying Arnold G. Malkan and J. Robert Ellner, both individually and as a firm, from representing the plaintiffs in the above-entitled actions or, in the alternative, staying all further proceedings in the above-entitled actions, in accordance with the provisions of a stipulation, dated February 3, 1953, in an action now pending in the United States District Court for the Eastern District of New York entitled Fisher Studios, Inc., et ano. v. Loew's, Inc., et al., Civil Action No. 12920, and staying all further proceedings in these actions pending the final determination of the matters raised in this motion.
This is a triple damage and injunction action under the anti-trust laws. The complaints were filed on November 8, 1954. Within fifteen days thereafter, plaintiffs' attorneys brought on this motion for an order declaring that the present attorneys are not disqualified from representing the plaintiffs in the action.
The fact that the plaintiffs' attorneys found it necessary to apply for an order that they were not disqualified from representing plaintiffs is unusual. It appears that on November 7, 1952, Judge Abruzzo, in the Eastern, District of New York, in an action entitled Fisher Studios, Inc., et ano. v. Loew's, Inc., et al., Civil Action No. 12920, signed an order directing plaintiffs in that action and Arnold G. Malkan and David H. Isacson, practicing law as the firm of Malkan & Isacson, to show cause why the said firm and each member thereof should not be disqualified from acting as attorneys for the plaintiffs in that action. The matter was referred to a Special Master.
In the hearings before the Master, defendants sought to show, among other things, that Mr. Isacson, while employed as an attorney by the firm of Sargoy & Stein, a law firm which represented, and still represents, the principal defendants in certain matters, had access to and did, in fact, obtain confidential information concerning the business of the defendants which he and the firm of Malkan & Isacson would be able to use against them in the anti-trust action. Defendants asserted not only that Mr. Isacson's retainer would involve disclosure of confidences, but also that he had unethically solicited clients to bring anti-trust suits against the motion picture companies. Long hearings were held before the Special Master and on August 19, 1953, Harold F. McNiece, Esq., as Special Master, rendered a Report in which he held that the defendants had clearly shown both solicitation and abuse of confidential relationship and that, accordingly, the interests of justice required that Mr. Isacson and the firm of Malkan & Isacson be disqualified from representing the plaintiffs in that action.
In the course of the hearings before the Master, and on February 3, 1953, the defendants, the plaintiffs, Mr. Isacson, and Malkan & Isacson stipulated to stay all other actions involving the defendants in which Malkan & Isacson were opposing counsel. In order to avoid a multiplicity of motions, this stipulation further provided:
'11. If it shall be finally determined in this action that David H. Isacson and Malkan & Isacson are qualified or disqualified, and if such determination in this proceeding is that such qualification or disqualification embraces 35 mm. anti-trust actions, 16 mm. anti-trust actions and under-reporting actions, such determination shall be binding upon David H. Isacson, Malkan & Isacson and the defendants herein, in all cases involving 35 mm. anti-trust actions, 16 mm. anti-trust actions and under-reporting actions, including those hereinabove mentioned.'
On April 14, 1954, Judge Abruzzo entered an order confirming the Special Master's Report and authorizing the entry of an order directing the disqualification of David H. Isacson and the firm of Malkan & Isacson from representing the plaintiffs in the Fisher action.
Some of the defendants in that action are also defendants in the present action.
It appears from testimony taken before me that the firm of Malkan & Isacson was established in or about July of 1952 and was dissolved on or about July 1, 1954; that on or about August 1, 1954, the firm of Malkan & Ellner was formed.
Thereafter, the present two actions were instituted by this firm of Malkan & Ellner. The Arnold G. Malkan in that firm was the Malkan who had been a member of the firm of Malkan & Isacson.
On November 9, 1954, Judge Abruzzo signed an order to show cause in the Fisher Studios matter directing the plaintiffs and Arnold G. Malkan and J. Robert Ellner, individually, and the firm of Malkan & Ellner to show cause why the aforesaid stipulation should not be deemed binding upon the said Arnold G. Malkan, his present law firm of Malkan & Ellner, and the members thereof, and why such firm should not be disqualified from acting as attorneys for the plaintiffs in all 35 mm. anti-trust actions, 16 mm. anti-trust actions, and percentage under-reporting actions in which the parties plaintiff or defendant include motion picture producing or distributing companies represented by the law firm of Sargoy & Stein during the employment by such firm of said David H. Isacson as an attorney on the firm's staff.
On March 22, 1955, Judge Abruzzo handed down an order which provided, in part:
'And It Is Further Ordered And Adjudged that the said stipulation dated February 3, 1953 is binding upon the firm of Malkan & Isacson, David H. Isacson and Arnold G. Malkan, as a member of the firm of Malkan & Isacson and upon any firm with which they or any of them may now or hereafter be associated in all cases now pending in all courts as well as the cases which might hereafter be brought involving 35 mm. anti-trust cases, 16 mm. ...