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GOLDSMITH v. PYRAMID COMMUNS.

August 6, 1973

Herbert GOLDSMITH et al., Plaintiffs,
v.
PYRAMID COMMUNICATIONS, INC., et al., Defendants


Brieant, District Judge.


The opinion of the court was delivered by: BRIEANT

MEMORANDUM AND ORDER

Brieant, District Judge.

 In this complex consolidated action for damages arising out of alleged violations of the Securities Act of 1933, the Securities Exchange Act of 1934 and the rules promulgated thereunder, some forty-four defendants, united in interest and pleading together, appeared by a single law firm. Counsel served and filed an answer for these clients, consisting of a general denial and certain affirmative defenses only, and proceeded to conduct discovery proceedings and to prepare for trial.

 Counsel effected an agreement among their defendant clients, later reduced to writing, to the effect that all potential cross-claims between defendants, and all claims to indemnification or contribution should be withheld, and that the statute of limitations be tolled with respect thereto.

 So long as all defendants were united in interest and defending together in accordance with a common strategy, after having laid aside or "tolled" their differences among themselves, selection of a single attorney was a perfectly satisfactory arrangement. It resulted in economy of effort and avoided proliferation of the litigation consequent on multiple representation.

 As might be anticipated, this united front among defendants was disturbed, when, in early June of this year, counsel worked out a proposed settlement and solicited client approval. Counsel advised all of its clients to "enter into the settlement." Terms of the complex and innovative proposal to end the litigation included waiver and release by defendants of "all of their cross-claims, including indemnification for legal fees and expenses."

 Defendants Van Alstyne, Noel & Co. (a partnership, hereinafter "Van Alstyne") and a general partner of Van Alstyne, one Sellas, sued individually, sought separate legal advice as to whether the settlement would be in their best interests. Van Alstyne and Sellas concluded, based at least in part on such separate legal advice, that they had a substantial cross-claim against another co-defendant which should not be waived. Counsel of record for Van Alstyne did not agree, and so advised Van Alstyne.

 The Court is informed without contradiction that no settlement may be effected by the other defendants without participation by Van Alstyne.

 Against this factual background, counsel of record for Van Alstyne and Sellas moved for "leave to withdraw as attorneys of record for Defendants Van Alstyne and Sellas [only]." Such motion is made pursuant to Rule 4(c) of the General Rules of this Court. *fn1"

 As a basis for the application, counsel assert:

 
"In view of the fact that Van Alstyne and Sellas have received contrary advice from competent counsel . . . and in view of the further fact that a conflict of interest exists with our representation of Van Alstyne and Sellas on one hand, and the other [defendants] on the other hand, with a potentially greater confict of interest in prospect"

 they are entitled to be relieved.

 Although intensive discovery has been conducted in this action, which has been pending since March 17, 1972, pretrial proceedings are not complete and the case is not presently scheduled for trial on a day certain.

 Van Alstyne and Sellas oppose the relief requested, claiming prejudice in that they would be required to engage new counsel, lacking intimate knowledge of the evidence. They assert "there is at this point nothing more ...


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