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November 30, 1979


The opinion of the court was delivered by: MOTLEY


R-T Leasing Corp., (R-T Leasing) has moved pursuant to Canons 4 and 9 of the ABA Code of Professional Responsibility to disqualify the law firm of Cahill, Gordon & Reindel (Cahill) as counsel for Ethyl Corporation (Ethyl) in an action currently pending before this court. In the alternative, R-T Leasing has requested additional discovery, to culminate in a hearing, on the issue of disqualification. This motion stems from R-T Leasing's pending suit against Ethyl for alleged breaches of leases for railroad transport cars.

 The grounds for Cahill's disqualification as advanced by R-T Leasing are that Cahill's previous legal representation of The Overmeyer Co., Inc., (TOC), a minority shareholder in R-T Systems, Inc., (R-T Systems) (the parent corporation of R-T Leasing) in a series of transactions from 1970 to 1973 was tantamount to legal representation of R-T Systems and R-T Leasing, its subsidiary. As a result of Cahill's alleged role as counsel to R-T Systems, R-T Leasing contends that Cahill's representation of Ethyl in the present action, in opposition to the interests of its purported former client, violates Canon 4, which mandates preservation of the secrets and confidences of present and former clients, or, at minimum, contravenes Canon 9, which forbids even the appearance of impropriety. Pointing to the standard remedy of disqualification of attorneys whose conduct falls below those strictures set forth in Canons 4 and 9, R-T Leasing has demanded disqualification of Cahill to obviate the possibility, no matter how remote, of disclosure of or unconscious reliance upon (to R-T Leasing's ultimate detriment) confidences imparted to Cahill during the course of the alleged prior representation of R-T Systems.

 In opposition to the motion, Cahill unequivocally disclaims any prior legal representation of R-T Systems and stresses with some vehemence that its representation of TOC in scattered arms-length transactions with R-T Systems may not by any stretch of the imagination be construed as actual or even a de facto representation of R-T Systems. Since proof of a prior attorney-client relationship is necessary for a party to invoke the directives of Canon 4, Cahill contends, a relationship that Cahill claims does not exist on the facts of the instant case, Canon 4 cannot be used as a basis for Cahill's disqualification. Furthermore, Cahill argues that not a scintilla of evidence exists to support a finding that Cahill's relationship with Ethyl exhibits a miasma of impropriety even assuming the absence of a bona fide attorney-client relationship. As a coup de grace to R-T Leasing's insinuations of the existence of a web of impropriety associated with Cahill's present representation of Ethyl in the action before this court, Cahill argues that even if it is assumed arguendo that an attorney-client relationship existed between Cahill and R-T Systems, R-T Leasing has neglected to establish the necessary element in all disqualification motions that a substantial relationship existed between the subject matter of the prior representation and the present proceedings.

 For the reasons stated below, this court is persuaded by the evidence presented in the briefs, affidavits and also by the argument at the hearing on this motion that the directives of Canons 4 and 9 are inapplicable to the facts of the case at hand, thus furnishing no basis for Cahill's disqualification as counsel for Ethyl. Once the smoke has cleared, it is patently obvious to the court that no attorney-client relationship existed between R-T Leasing and Cahill to permit R-T Leasing to assume the position of an aggrieved former client in the present action, gravely concerned with the possibility of Cahill's reliance on or disclosure of confidential communications shared in the course of the prior attorney-client relationship, a possibility to be foreclosed only by Cahill's disqualification. The motion to disqualify is hereby denied.

 Canon 4

 Canon 4 of the ABA Code of Professional Responsibility provides that "(A) lawyer should preserve the confidences and secrets of a client." Canon 4, applying, of course, to the relationship between an attorney and a present client, has been construed by the courts to prevent disclosures of confidential communications of former clients, particularly if the attorney is so inclined to undertake representation of a party in an action adverse to the interests of a former client, who is also a party in the same action. Emle Industries, Inc. v. Patentex, Inc., 478 F.2d 562 (2d Cir. 1973), following T. C. Theatre Corp. v. Warner Bros. Pictures, Inc., 113 F. Supp. 265 (S.D.N.Y.1953). In other words, an attorney may be disqualified from appearing on behalf of an adversary to a former client in subsequent legal proceedings.

 Respectful of the sanctity of an attorney's duty of loyalty to a client for all matters and confidences disclosed during the course of their professional relationship, a relationship that carries with it a presumption of confidentiality, the T. C. Theatre court first formulated a test for disqualification of attorneys who violate the directives of Canon 4 (formerly Canon 6).

He (the attorney) is enjoined for all time, except as he may be released by law, from disclosing matters revealed to him by reason of the confidential relationship. Related to this principle is the rule that where any substantial relationship can be shown between the subject matter of former representation and that of subsequent adverse representation, the latter will be prohibited. 113 F. Supp. at 268.

 Thus, the test for disqualification of an attorney is two-fold: first, an attorney-client relationship must have existed between the attorney and the adverse party in the present suit and, second, and most important, a substantial relationship must exist between the issues involved in the prior representation and those of the action in which disqualification is sought. See NCK Organization Ltd. v. Bregman, 542 F.2d 128 (2d Cir. 1976).

 The Emle court, elucidating the two-pronged test of T. C. Theatre, supra, dispensed with any notion that a court, in disqualification actions, must affirmatively inquire as to whether the attorney had actual access to any confidential matters during the prior representation. The court observed that a presumption of the existence of confidential communications arises from the very fact of the attorney-client relationship.

(T)he court need not, indeed cannot, inquire whether the lawyer did, in fact, receive confidential information during his previous employment which might be used to the client's disadvantage . . . . Thus, where "it can reasonably be said that in the course of the former representation the attorney might have acquired information related to the subject matter of his subsequent representation," (citation omitted) it is the court's duty to order the attorney disqualified. 478 F.2d at 571.

 Accord, Fund of Funds, Ltd. v. Arthur Andersen & Co., 567 F.2d 225 (2d Cir. 1977).

 Applying the standard for disqualification articulated in the Second Circuit, the court is persuaded that R-T Leasing has failed to sustain its burden of proof as to the first prong of the test, that of the existence of a prior attorney-client relationship among R-T Systems, R-T Leasing and Cahill. As R-T Leasing has not satisfied this threshold requirement, the court need not consider whether a substantial relationship existed between the ...

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