The opinion of the court was delivered by: LEISURE
Plaintiff in this action
have moved to disqualify counsel for the defendants,
Paul, Weise, Rifkind, Wharton & Garrison ("Paul, Weiss"). The sheer number
and volume of the submissions on this motion are indicative of the complexity and importance of the issues the motion raises. A disqualification motion calls into question the ethics of attorneys, who are after all officers of the Court; reflects the movant's concern with safeguarding the confidentiality of information imparted to its former counsel; and raises the possibility that a litigant will be denied representation by counsel of its choice. Thus, such a motion implicates interests of the Court and the Bar as well as the litigants, and to decide it, a sensitive balance is required.
The Second Circuit has mandated that district courts deciding disqualification motions consider the factual record in detail.
Although I have followed the Second Circuit's instructions, this opinion may not reflect all the details of my consideration of this question. The parties have agreed that all papers relating to this motion are confidential and to be filed under seal, and I have issued an order to that effect. My review of the parties' submissions has been in camera. So as not to do violence to my order and the wishes of the parties, this opinion will discuss the facts in terms as general as necessary to maintain whatever confidences this motion seeks to protect.
The complaint in this action seeks monetary and injunctive relief under sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2 (1982). In Count One, the plaintiffs (hereinafter collectively referred to as "USFL") allege a number of acts and practices engaged in by defendants ("NFL") calculated to cripple competition in the business of organized major league professional football, in violation of § 2. These alleged monopolistic practices, according to the complaint, have inhibited the USFL from competing with the NFL for access to television network contracts, players, adequate stadium facilities, referees, investors and public interest and patronage. Count Two alleges a § 1 violation arising from a conspiracy among the NFL, its member clubs and Commissioner Rozelle with the involuntary cooperation of the three major television networks. The methods and objectives of the conspiracy described in Court Two are substantially similar to the monopolistic acts and practices alleged in Count One.
This motion arises from Paul, Weiss's representation of the prenatal USFL in 1981. The representation fell into three broad categories of activity: (1) nonlegal services, consisting of efforts to locate potential USFL franchise owners; (2) the services of one particular attorney, especially his antitrust advice relating to exclusivity clauses in stadium leases; and (3) corporate and tax work. The USFL contends that in the course of that representation Paul, Weiss was at least in a position to receive, and did actually receive, information from USFL organizers that would give an unfair advantage to Paul, Weiss in its representation of the NFL in this action. The USFL has urged that I apply the "substantial relationship" test formulated by Judge Weinfeld in T.C. Theatre Corp. v. Warner Bros. Pictures, Inc., 113 F. Supp. 265, 268 (S.D.N.Y. 1953) to disqualify Paul, Weiss from representing the NFL in this action.
[T]he former client need show no more than that the matters embraced within the pending suit wherein his former attorney appears on behalf of his adversary are substantially related to the matters or cause of action wherein the attorney previously represented him, the former client. The Court will assume that during the course of the former representation confidences were disclosed to the attorney bearing on the subject of the representation.
Accord Emle Indus., Inc. v. Patentex, Inc., 478 F.2d 562 (2d Cir. 1973). The USFL contends that this presumption is irrebuttable.
Paul, Weiss, for its part, argues that the representations are not "substantially related" under that test as it has been refined in the years since T.C. Theatre. Further, Paul Weiss asserts that the presumption, if it applies here at all, is rebuttable, and has been amply rebutted by the papers Paul, Weiss has submitted to show that no relevant confidences were imparted to Paul, Weiss in the course of the former representation. Finally, Paul Weiss points to a "Chinese Wall" or "screen" erected within the firm to insulate those attorneys who worked on the USFL matter from those who are now representing the NFL, and argues that the screen should allay any unfounded fears the USFL may have that confidential information pertinent to this suit may be transmitted improperly within the Paul, Weiss firm.
The Second Circuit has directed that courts faced with disqualification motions take a "restrained approach that focuses primarily on preserving the integrity of the trial process." Armstrong v. McAlpin, 625 F.2d 433, 444 (2d Cir. 1980), vacated on other grounds and remanded, 449 U.S. 1106, 101 S. Ct. 911, 66 L. Ed. 2d 835 (1981). Mere appearance of impropriety will not alone serve as a sufficient basis for granting a disqualification motion. Rather, the motion will be granted only if the facts present a real risk that the trial will be tainted.
See Board of Educ. v. Nyquist, 590 F.2d 1241, 1246 (2d Cir. 1979). Only two readily identifiable situations raise the specter that the litigation will be tainted if one side's counsel is permitted to remain in the case: when the challenged attorney is concurrently representing adverse interests so that his vigor in pursuing the interests of one of them is questionable, see, e.g., Fund of Funds, Ltd. v. Arthur Andersen & Co., 567 F.2d 225 (2d Cir. 1977); or when the attorney's successive representation of adverse interests raises the possibility that in the present matter he will improperly use confidences gained in the prior representation to the detriment of his former client, see, e.g., Cheng v. GAF Corp., 631 F.2d 1052 (2d Cir. 1980), vacated on other grounds and remanded, 450 U.S. 903, 101 S. Ct. 1338, 67 L. Ed. 2d 327 (1981). The USFL's motion in this case falls into the second category, that of safeguarding client confidences in a successive representation situation.
Where a disqualification motion is bottomed on the need to preserve client confidences,
an attorney may be disqualified from representing a client in a particular case if
(1) the moving party is a former client of the adverse party's counsel;
(2) there is a substantial relationship between the subject matter of the counsel's prior representation of the moving party and the issues in the present lawsuit; and
(3) the attorney whose disqualification is sought has access to, or was likely to have had access to, relevant privileged information in the course of his prior representation of the client.
Evans v. Artek Sys. Corp., 715 F.2d 788, 791 (2d Cir. 1983).
The Second Circuit places "a high standard of proof on . . . one who seeks to disqualify his former counsel. . . ." Government of India v. Cook, 569 F.2d 737, 739 (2d Cir. 1978).
In this case, both sides agree that the "substantial relationship" test governs this motion, and both agree as to what are the elements of the test. They further agree that the first element of the test -- that the movant be a former client of its adversary's attorney -- is met in this case. They part company when it comes to the other two elements, substantial relationship and receipt of confidences. Defining these terms and characterizing the facts of this case in light of them is the hard core point here. It is to those facts that I now turn.
The USFL's relationship with Paul, Weiss began in February, 1981, when Robert H. Montgomery, Jr., a partner in Paul, Weiss, received a phone call from Shea Dixon ("Shea Dixon"), son of David Dixon ("Dixon"), a New Orleans attorney who had originated the concept of the USFL. In the first conversations, Shea Dixon described his father's idea of summer football league, and mentioned that the league was still in a formative stage (Montgomery afft. P2).
His main interest at the time was in finding persons interested in becoming USFL franchise owners (id. P3), and he believed Paul, Weiss could help in that endeavor. Mongtomery states that Dixon had decided to come to him because of his position as chairman of the Entertainment and Sports Law committee of the New York City Bar Association (id.).
Among Paul, Weiss's clients at the time was NFL Commissioner Rozelle.
Troubled by the possibility of an ethical problem if Paul, Weiss were to take on another football league as a client, Montgomery approached Arthur Liman, the Paul, Weiss partner who handles Rozelle's affairs, to discuss the matter. Montgomery outlined the proposal for the new league in general terms and noted that most of the early work for the USFL would probably be handled by the firm's corporate and entertainment departments. Liman and Montgomery concluded that Paul, Weiss could take on the USFL as a client, but only if both the USFL and Rozelle were informed of the concurrent representation and each consented (id. P4, Liman afft. PP3, 4). Each client did so consent (Montgomery afft. P5, Liman afft. PP3, 4).
Early in March 1981, Montgomery arranged to meet with David Dixon. Before the meeting, he contacted another Paul, Weiss partner, John C. Taylor, III, and asked Taylor to join him at the meeting with Dixon. Montgomery thought Taylor might be able to aid in finding potential franchises. The meeting took place on March 11, and lasted about two hours. At the meeting, Dixon told Montgomery and Taylor of his plans for the league. While it is unclear whether Dixon asked them at the meeting to have Paul, Weiss serve as counsel to the new league (compare Montgomery afft. P6 with Taylor afft. P3), Taylor and Montgomery did agree to help find persons interested in investing in the USFL (Montgomery afft. P6, Taylor afft. P3). Some days later, Montgomery and Taylor received from Dixon a letter dated March 12 that generally outlined the discussion at their meeting and named some of the possible owners they had discussed (Montgomery afft. P7 and Exhibit A).
In the weeks that followed, Montgomery and Taylor explored for prospective USFL franchisees. They made inquiries of a number of their partners regarding clients who might be contacted (Montgomery afft. P7, Taylor afft. P4). Certain Paul, Weiss clients were contacted through Paul, Weiss partners and some were put into direct contact with David Dixon.Other Montgomery and Taylor contacted directly. In one case, Taylor met with a client for about half an hour to discuss the proposed investment in the league.
The efforts of Montgomery and Taylor ultimately proved to be unsuccessful. None of the Paul, Weiss clients approached decided to pursue the matter further, and none told anyone at Paul, Weiss of their reasons for declining to participate (Montgomery supp. afft. PP5, 6; Taylor supp. afft. PP4, 5; Abram afft. PP4, 5).
On June 2, 1981, Dixon telephoned Taylor to inform him that a meeting of potential investors would be held the following Sunday, June 7. Dixon indicated he might want Paul, Weiss attorneys to be there, including someone familiar with antitrust law (Taylor afft. P5). Thereupon Taylor called Jay Topkis, a Paul, Weiss partner specializing in antitrust law, and asked him if he would be available to come to the meeting. Topkis said he was available (id., Topkis afft. P3).
Montgomery phoned Shea Dixon the next day to find out if Paul, Weiss attorneys would be needed at the meeting. Shea promised to find out and to notify Montgomery (Montgomery afft. P8). The following day, June 4, David Dixon informed Mongtomery by telephone that Paul, Weiss attorneys were invited to attend Sunday's meeting (id.). Montgomery then contacted Taylor and ...