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PHILLIPS v. INVESTORS DIVERSIFIED SERVS.

December 15, 1976

Randolph PHILLIPS, Plaintiff,
v.
INVESTORS DIVERSIFIED SERVICES, INC., Defendant



The opinion of the court was delivered by: TENNEY

MEMORANDUM

 TENNEY, District Judge.

 In this action by plaintiff Randolph Phillips ("Phillips") to recover the "reasonable value" of his services as successful attorney pro se in an earlier suit, a number of motions are currently pending. Defendant Investors Diversified Services, Inc. ("IDS") has moved for a dismissal of the amended complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure ("Rules") or, in the alternative, for summary judgment under Rule 56. Plaintiff has moved under Rule 11 for an order striking the answer to the amended complaint as a "sham" and "false." *fn1" In addition, Phillips has produced a customary flurry of motions aimed at opposing counsel rather than at the issues of this protracted litigation: in particular, he has moved to disqualify IDS's counsel, Richard L. Bond, to stay all other actions until such disqualification motion is determined, and to declare Bond in contempt for making a false affidavit. For the reasons stated below, all of plaintiff's motions are denied, and defendant's motion for summary judgment is granted in its favor.

 History of the Action

 The origins of this case reach back several decades. At an earlier stage of the controversy, over 12 years ago, the United States Court of Appeals for the Second Circuit prefaced an opinion, "For some ten years, the subject matter of the lawsuit now on appeal has been before the New York State and federal courts." Alleghany Corp. v. Kirby, 333 F.2d 327 (2d Cir. 1964), aff'd on rehearing en banc, 340 F.2d 311 (2d Cir. 1965), cert. dismissed, 384 U.S. 28, 86 S. Ct. 1250, 16 L. Ed. 2d 335 (1966). Judicial involvement with this matter began in the Spring of 1954, when eight shareholders' derivative actions were filed in New York state court on behalf of Alleghany Corporation ("Alleghany") against various of its officers and directors challenging the propriety of an exchange of securities, including shares of IDS, between the corporation and certain shareholders. Further actions were subsequently filed in the Southern District of New York. See Alleghany Corp. v. Kirby, 218 F. Supp. 164, 173-79 (S.D.N.Y. 1963), aff'd, 333 F.2d 327 (2d Cir. 1964), aff'd on rehearing en banc, 340 F.2d 311 (2d Cir. 1965), cert. dismissed, 384 U.S. 28, 86 S. Ct. 1250, 16 L. Ed. 2d 335 (1966). The state court actions were settled with court approval in late December of 1959, and a judgment dismissing the actions on the merits as to all parties was entered on June 21, 1960. Id. at 179; cf. Zenn v. Anzalone, 17 Misc.2d 897, 191 N.Y.S.2d 840 (Sup.Ct. 1959). Phillips, plaintiff in the instant case, had not been a party but acted as a consultant to several of the parties defendant in the settled actions and ultimately received a substantial fee award for those services. Amended Complaint para. 22; see Zenn v. Anzalone, 46 Misc.2d 378, 259 N.Y.S.2d 747 (Sup.Ct.1965). On April 19, 1960, following the conclusion of the state court litigation, Phillips was elected to the Board of IDS. Alleghany Corp. v. Kirby, supra, 218 F. Supp. at 181.

 The second round of litigation, and the one with which this case is directly concerned, involved another shareholders' derivative action commenced in federal court on September 8, 1960. The original complaint contained two counts. The first alleged that Allan P. Kirby, Charles T. Ireland, Jr. and Phillips had reached a secret agreement to give Phillips a "position of status and compensation in return for assisting in securing a settlement" of the state court actions, which agreement acted as a fraud upon the court. Complaint, Alleghany Corp. v. Kirby PP 1-49, appended as Exhibit C to Affidavit of Richard Bond, sworn to December 20, 1974. The second contended that the election of Phillips as an IDS Director and his service in this position and as Chairman of IDS's Finance and Law Committee harmed the corporation and its shareholders in a variety of ways. Id. PP 50-69. Phillips's directorship ended on April 25, 1961, and his position as Chairman of the Finance and Law Committee was terminated as of May 31, 1961. Affidavit of Joseph F. Grinnell paras. 2-3, sworn to November 4, 1974, appended as Exhibit E to Affidavit of Richard Bond, sworn to December 20, 1974. Thereafter, on December 18, 1962, an amended and supplemental complaint was filed, dropping the allegations of the second count and adding allegations which did not concern Phillips. Alleghany Corp. v. Kirby, supra, 218 F. Supp. at 167. On May 28, 1963 Judge Dawson of this court dismissed the complaint, finding, inter alia, that Alleghany had "failed completely" to establish the existence of any secret agreement between Phillips, Kirby and Ireland. Id. at 181-82. The dismissal as to Phillips was not appealed by Alleghany, although a long protracted appeal was pursued as to Kirby and Ireland. Amended Complaint para. 15; see Alleghany Corp. v. Kirby, 333 F.2d 327 (2d Cir. 1964), aff'd on rehearing en banc, 340 F.2d 311 (2d Cir. 1965), cert. dismissed, 384 U.S. 28, 86 S. Ct. 1250, 16 L. Ed. 2d 335 (1966).

 Plaintiff commenced this action in April 1972, asking for attorney's fees for his successful pro se defense in Alleghany Corp. v. Kirby. The case developed quickly and confusedly due to a less-than-fortuitous combination of the Master Calendar System and the overly aggressive quality of Phillip's active pro se practice. *fn2" This Court, after receiving this case "for all purposes," entered an order allowing defendant IDS to amend its motion to dismiss and staying plaintiff Phillips from conducting any discovery pending resolution of IDS's motion. Phillips v. Investors Diversified Services, Inc., 72 Civ. 1544 (CHT) at 9-10 (S.D.N.Y. Aug. 28, 1974). On December 10, 1974, the Court, upon stipulation of the parties, permitted the filing of an amended complaint. A subsequent order, dated February 18, 1975 affirmed the earlier order that Phillips refrain from pretrial discovery pending resolution of IDS's motion to dismiss and/or for summary judgment and Phillips's motion under Rule 11. Following Phillips's unsuccessful appeal of the section of the interlocutory order which prohibited him from communicating directly with IDS or Alleghany the case was restored to the docket of this Court for further proceedings.

 Disqualification Motion

 Before ruling on plaintiff's substantive motions, the Court must briefly consider Phillips's motion for disqualification of IDS's attorney Richard L. Bond ("Bond"). Phillips bases his motion largely on the fact that Bond was an associate in the firm of Donovan Leisure Newton & Irvine ("Donovan Leisure") at the same time that Phillips served as Chairman of the Finance and Law Committee of IDS and that Donovan Leisure served as special counsel to IDS and worked with the committee. The standard in this circuit for disqualification of counsel because of prior legal representation of a now-adverse client is well established: "'[Where] any substantial relationship can be shown between the subject matter of a former representation and that of a subsequent adverse representation, the latter will be prohibited.'" Silver Chrysler Plymouth, Inc. v. Chrysler Motors Corp., 518 F.2d 751, 754 (2d Cir. 1975), quoting T. C. Theatre Corp. v. Warner Brothers Pictures, Inc., 113 F. Supp. 265, 268 (S.D.N.Y.1953). This prohibition fulfills the purpose of enforcing the lawyer's duty of absolute fidelity and guarding against the danger of inadvertent use of confidential information. Id. This Court has substantial doubt as to whether the subject matter of the instant action is substantially related to any representation of IDS by Donovan Leisure. That issue need not be reached, however, for Phillips's motion may be denied on the ground that there is no relationship between Bond's current representation of IDS and Donovan Leisure's representation of IDS in 1960-61. In Silver Chrysler Plymouth, the court of appeals stated the rule governing this particular situation: "While this Circuit has recognized that an inference may arise that an attorney formerly associated with a firm himself received confidential information transmitted by a client to the firm, that inference is a rebuttable one." Id. In Silver Chrysler Plymouth, the court of appeals found that the former associate had rebutted the inference by his denial that he had been entrusted with any such confidences which was supported by the affidavits of two colleagues from his former law firm. Id. at 756-57.

 The rebuttal of the inference in the instant case is at least as strong as that in Silver Chrysler Plymouth. Bond has made the following statement under oath: "I am as certain as one can be after the passage of fifteen years that I had no participation of any kind in Donovan Leisure's 1960-1961 IDS representation to which Phillips points." Bond Affidavit P7, sworn to February 13, 1975. Furthermore, it would seem that Phillips himself recognizes this fact. In a hearing before this Court on February 14, 1975, the following colloquy transpired:

 
"THE COURT: [Bond] wasn't there? I thought one of your problems was that he was there and he was participating.
 
"MR. PHILLIPS: No, sir. He was an associate of Donovan, Leisure, Newton & Irvine.
 
"THE COURT: But he didn't know in what way you were represented or anything else?
 
"MR. PHILLIPS: He was not part of the team that went out to ...

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