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Eckles v. Furth

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT


decided: June 16, 1977.

R. T. ECKLES, TRUSTEE IN BANKRUPTCY FOR MOUNTAIN STATES SPORTS, INC. D/B/A UTAH STARS, CROSS-CLAIMANT-APPELLANT,
v.
FREDERICK P. FURTH, APPELLEE, AMERICAN BASKETBALL ASSOCIATION, LONG ISLAND SPORTS, DENVER NUGGETS, INC., SPURS PROFESSIONAL BASKETBALL CLUB, LTD. AND INDIANA PACERS, L.P., INTERVENOR-APPELLEES. AMERICAN BASKETBALL ASSOCIATION, ET AL., CROSS-CLAIMANTS, V. NATIONAL BASKETBALL ASSOCIATION, ET AL., CROSS-DEFENDANTS-APPELLEES. OSCAR ROBERTSON, ET AL., PLAINTIFFS, V. NATIONAL BASKETBALL ASSOCIATION, ET AL., DEFENDANTS

Appeal from order of United States District Court for the Southern District of New York, Robert L. Carter, J., granting appellant counsel's motion to withdraw. Appeal dismissed.

Waterman, Smith and Feinberg, Circuit Judges.

Author: Feinberg

FEINBERG, Circuit Judge:

In Silver Chrysler Plymouth, Inc. v. Chrysler Motors Corp., 496 F.2d 800 (2d Cir. 1974) (en banc), we held that orders granting or denying disqualification motions are directly appealable. Since then, "such motions and appeals have proliferated," W. T. Grant & Co. v. Haines, 531 F.2d 671, 678 (2d Cir. 1976), and we are now presented with an unusual variation on the Silver Chrysler line of cases. Appellant R. T. Eckles, the trustee in bankruptcy for Mountain States Sports, Inc., seeks to appeal from an order of the Southern District of New York, Robert L. Carter, J., granting a motion to withdraw as counsel, brought by Frederick P. Furth. For the reasons set forth below, we find that the Silver Chrysler rationale does not cover this situation and that the appeal must be dismissed for lack of appellate jurisdiction.

I

In 1974, Furth was retained by the Commissioner of the American Basketball Association (ABA) and its Board of Trustees to begin a lawsuit against the National Basketball Association (NBA). He filed an antitrust action on behalf of the ABA and its then member teams in the Northern District of California and subsequently asserted the same claims as cross-claims in a consolidated action in the Southern District of New York brought by certain NBA players against the NBA and its member teams.*fn1 One of the members of the ABA represented by Furth was Mountain State Sports, Inc. (the Utah Stars), which has since been adjudicated bankrupt and whose claims are now presented by appellant trustee.

In June 1976, four of the ABA teams (the Expansion teams), as well as the ABA itself, all of whom are intervenor-appellees here, reached a settlement agreement with the NBA, under which those four teams joined the NBA.*fn2 Furth did not participate in the negotiations leading to the settlement, and afterwards he was instructed by the ABA and the teams that he represented to file dismissals of their cross-claims with prejudice, which he did. Counsel for the New York Nets, Robert S. Carlson, who was also special counsel and negotiator of the settlement agreement for the Expansion teams, then advised Furth that he believed that Furth "could no longer represent" the remaining cross-claimants in the Robertson action, because "a conflict of interest had been created by the settlement of the Robertson cross-claims." According to Carlson, the conflict was created by virtue of the "Joint Venture Agreement" to which all NBA teams, including the Expansion teams, are parties and which makes the partners in the NBA jointly and severally liable for the wrongful acts of any partner acting in the course of partnership business. According to appellant trustee, the possibility of conflict was manufactured by the agreement of the settling parties indemnifying the NBA against further litigation. In any event, Furth moved under the district court local rule*fn3 to withdraw as counsel. His papers referred to both the "Joint Venture Agreement" and the indemnification clause of the settlement as creating possible conflicts of interest and also noted that some of his clients intended to challenge the settlement agreement itself as violative of the antitrust laws.*fn4 The alleged conflict, in essence, was that Furth's continued prosecution of the cross-claims in the Robertson action, if successful, would require some of his former clients (the Expansion teams) to pay the judgment obtained by his other clients (including the Utah Stars). Judge Carter granted the motion to withdraw,*fn5 and the trustee in bankruptcy for Mountain States Sports appeals from that order.

II

Appellant argues that the order granting Furth's motion to withdraw is similar to a disqualification order and is, therefore, appealable under Silver Chrysler, supra. As in that case, the trustee claims, it would be "fatuous to suppose that review of the final judgment will provide adequate relief," Silver Chrysler, supra, 496 F.2d at 805, because the bankrupt estate cannot afford the expense of hiring new counsel, who must then become familiar with the massive documentation involved in this heavily pretried antitrust litigation.

The appealability of disqualification orders has had a checkered history in this court. Prior to Silver Chrysler, orders granting motions to disqualify were generally considered, although without much discussion, to be appealable. See, e.g., W. E. Bassett Co. v. H. C. Cook Co., 302 F.2d 268 (2d Cir. 1962) (per curiam); see generally Note, Appealability of Denials of Motions to Disqualify Counsel, 1975 Wash. Univ. L.Q. 212, 220 n.17. The rationale for allowing an appeal as a matter of right was that "an order granting disqualification seriously disrupts the progress of litigation and decisively sullies the reputation of the affected attorney. . . ." Fleischer v. Phillips, 264 F.2d 515, 517 (2d Cir.), cert. denied, 359 U.S. 1002, 79 S. Ct. 1139, 3 L. Ed. 2d 1030 (1959). Orders denying disqualification motions, on the other hand, were generally viewed as non-appealable. See Fleischer, supra. Silver Chrysler reversed this latter position and held that orders denying or granting disqualification were directly appealable. In so holding, the court stressed that if collateral issues, such as the unprofessional conduct allegedly involved in that case, were left unresolved, they might taint the underlying trial and result in an unnecessary waste of judicial resources. Silver Chrysler, supra, 496 F.2d at 806; see also Lefrak v. Arabian American Oil Co., 527 F.2d 1136, 1139 (2d Cir. 1975).

Apart from these specific policies affecting appealability of disqualification orders, it must be emphasized that Silver Chrysler itself was a "narrow exception to the general non-appealability of interlocutory orders established in Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 93 L. Ed. 1528, 69 S. Ct. 1221 (1949)." W. T. Grant, supra, 531 F.2d at 678. And, recognizing the important principles embodied in the final judgment rule, "we have repeatedly said that ' Cohen may not be abused by indiscriminate expansion,' and that this exception to the usual rule of non-appealability . . . 'must be kept within narrow bounds.'" United States Tour Operators Assoc. v. Trans World Airlines, Inc., 556 F.2d 126, 128 (2d Cir. 1977) (citations omitted). See also American Express Warehousing, Ltd. v. Transamerica Insurance Co., 380 F.2d 277, 280 (2d Cir. 1967).

We turn now to apply these general considerations to the case before us. Unlike an order denying disqualification, Furth's withdrawal actually reduces the possibility of tainting the trial. We realize that if this were the only consideration, orders granting disqualification would not be appealable, as they have been in this circuit for many years. But there is a difference between an order that compels an attorney to leave a case and one that permits him to do so, at his own request. In the latter instance, the attorney's own conclusion that ethical considerations require his withdrawal does not damage his reputation. Appellant claims that Furth's motion cannot be characterized as purely voluntary in light of the "advice" of the Expansion teams' special counsel to Furth that his withdrawal was necessary. The point has only surface validity. There is not the slightest indication that Furth would not have reached the same conclusion himself had his former clients never raised the issue.

Appellant's most weighty argument is that Furth's withdrawal "seriously disrupts" the progress of the litigation. Here, too, the proposition is overstated. The trustee has obviously been able to obtain able counsel to litigate the issue now before us,*fn6 and, we are told, is even now attempting to obtain the litigation files for this case in Furth's possession.*fn7 The trustee does not claim that he will be rushed to trial before new counsel can adequately prepare himself. Finally, this is a most unusual situation: A client is disputing its own attorney's view that a conflict of interest requires his withdrawal and the attorney's decision comes not from any shift in allegiance on his part, but from a change in position by some of his former clients.*fn8 We see a general need for restraint in applying the Cohen doctrine, see United States Tour Operators, supra, and we are concerned over the great number of recent appeals involving the Silver Chrysler holding.*fn9 Under all of these circumstances, we are not inclined to extend that holding one iota to permit an appeal from an order allowing an attorney to withdraw at his own request. We therefore dismiss the appeal for lack of appellate jurisdiction.


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