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DOE v. A CORP.

June 7, 1971

John DOE, Plaintiff,
v.
A CORP. et al., Defendants


Metzner, District Judge.


The opinion of the court was delivered by: METZNER

METZNER, District Judge:

The defendants move, inter alia, to dismiss the complaint without prejudice to A Corp. and its shareholders and to disqualify plaintiff and his co-counsel from acting as counsel in any related action. The defendants also request an order enjoining plaintiff and his co-counsel from contacting A Corp. shareholders for the purpose of inducing them to commence another action, enjoining plaintiff and his co-counsel from further disclosure of confidential information obtained by plaintiff during his association with the law firm of X, Y and Z (the X firm), and directing that the clerk of the court seal the file in this case.

 The corporate defendants in this case are the primary clients of the X firm. These companies are all controlled by the individual defendants, and some of them have their offices in the same building which houses the X firm.

 A Corp. is a publicly held corporation. The individual defendants are the controlling shareholders of A Corp., owning approximately 16% of the company's outstanding common stock.

 B Corp. is incorporated under the laws of New York. It is a wholly-owned subsidiary of C Corp. The individual defendants own all the stock of C Corp.

 D Corp. is a foreign corporation engaged in business outside the United States. The individual defendants hold approximately 67% of the equity of D Corp.

 The remaining defendants include officers, directors and shareholders of these companies.

 The complaint charges the defendants with fraud, breach of fiduciary duty, and violations of the federal securities laws.

 The plaintiff Doe sues derivatively on behalf of A Corp. and as the representative of the class of holders of A Corp. common stock. Doe is an attorney who was employed by the X firm from April 29, 1968 until July 29, 1969. He was hired by the firm as a tax specialist and during the time of his employment worked closely with all of the corporate defendants and had access to their confidential files.

 The association between Doe and the X firm soon proved mutually unsatisfactory, and in early 1969 Doe was informed that his employment was to be terminated. On July 15, 1969, just two weeks before he left the X firm, Doe purchased one share of A Corp. common stock. He concedes that he bought this share of stock with the express purpose of either ousting the current management of A Corp. or initiating a stockholders' derivative suit. Furthermore, Doe does not dispute the defendants' representation that every fact alleged in the complaint and upon which this suit is based was acquired by him while associated with the X firm and engaged in legal work for the defendants as clients of the firm.

 The defendants contend that by bringing the present action the plaintiff has violated Canon 4 of the Code of Professional Responsibility of the American Bar Association. This canon provides that "A lawyer should preserve the confidences and secrets of a client." The Disciplinary Rules relating to Canon 4 state in pertinent part:

 
"DR 4-101 Preservation of Confidences and Secrets of a Client
 
"(A) 'Confidence' refers to information protected by the attorney-client privilege under applicable law, and 'secret' refers to other information gained in the professional relationship that the client has requested be held inviolate or the disclosure of which ...

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