TJOFLAT, Circuit Judge:
This is an action for trademark infringement and unfair competition. This appeal, however, concerns the disqualification of attorneys. The district court barred the appellants' attorneys from further representing them on grounds of conflict of interest. The correctness of this order is the only issue before us.
The underlying dispute in this case arises out of the business affairs of the Brennan family of New Orleans, Louisiana, who have been in the restaurant business for many years. All of the corporate parties are owned and closely held by various members of the Brennan family. Appellee Brennan's, Inc., the plaintiff below, owns and operates Brennan's restaurant at 417 Royal Street in New Orleans. The corporate appellants own and operate other restaurants in Louisiana, Texas, and Georgia. There has been no trial as yet, but a review of the facts leading to the present suit, as disclosed by the pleadings and affidavits, is necessary to a decision of this appeal. For convenience, the parties will be referred to in the capacities in which they appear in the court below.
Prior to 1974, all the members of the Brennan family were stockholders and directors of plaintiff, and some of them were stockholders and directors of the corporate defendants.
As part of his services, Mr. Wegmann, in close cooperation with trademark counsel in Washington, D.C., prosecuted applications for the federal registration of three service marks: "Brennan's," "Breakfast at Brennan's," and a distinctive rooster design. A registration for the rooster design was issued in February 1972, but the applications for the other two marks were initially denied on the ground that they were primarily a surname. On the advice of Washington trademark counsel, Mr. Wegmann collected data supporting a demonstration that the marks had acquired a secondary meaning,
Later in 1973 a dispute developed within the Brennan family over the operation and management of the family businesses. This dispute was resolved in November 1974 by dividing the corporations' stock between the two opposing family groups. Plaintiff became 100% owned by one group and the corporate defendants became 100% owned by the second group, composed of the individual defendants. Mr. Wegmann elected to continue to represent defendants and severed his connections with plaintiff and its shareholders.
At no time during the negotiations which culminated in the November 1974 settlement was there any discussion of who would have the right to use the registered
Upon the filing of this suit, Mr. Wegmann, on behalf of the defendants, retained the services of Arnold Sprung, a New York patent and trademark attorney, to assist him in the defense of the case. On October 22, 1976, plaintiff moved for the disqualification of both attorneys: Mr. Wegmann on the ground that his present representation was at odds with the interests of plaintiff, his former client, and Mr. Sprung by imputation of Mr. Wegmann's conflict. After a hearing, the district court granted the motion. It found that the subject matter of the present suit is substantially related to matters in which Mr. Wegmann formerly represented plaintiff, and to allow him now to represent an interest adverse to his former client creates the appearance of impropriety. It also found that "the close working relationship which has been shown to exist between Mr. Wegmann and Mr. Sprung creates a significant likelihood that Mr. Sprung would have had access to or been informed of confidential disclosures made to Mr. Wegmann by his former client." Record, vol. 3, at 1045.
We have jurisdiction of this appeal under 28 U.S.C. § 1291 (1976). Wilson P. Abraham Construction Corp. v. Armco Steel Corp., 559 F.2d 250, 251 (5th Cir. 1977); Woods v. Covington County Bank, 537 F.2d 804, 809-10 (5th Cir. 1976). Our standard of review is to apply the "clearly erroneous" test to findings of fact while carefully examining the district court's application of relevant ethical standards. Woods v. Covington County Bank, 537 F.2d at 810.
Defendants argue that the district court failed to consider that in his prior representation of plaintiff, Mr. Wegmann also represented defendants. This fact of joint representation is crucial, they assert, since no confidences can arise as between joint clients. Hence, the argument goes, Mr. Wegmann violates no ethical duty in his present representation.
We have not addressed this precise question before. In Wilson P. Abraham Construction Corp. v. Armco Steel Corp., we reaffirmed the standard that "a former client seeking to disqualify an attorney who appears on behalf of his adversary, need only to show that the matters embraced within the pending suit are substantially related to the matters or cause of action wherein the attorney previously represented him," 559 F.2d at 252 (emphasis in original),
Whether Mr. Sprung should be disqualified presents a more difficult case. He has never had an attorney-client relationship with plaintiff; the district court disqualified him by imputation of Mr. Wegmann's conflict. Up to this point we have accepted, for the sake of argument, defendants' assertion that they were formerly joint clients with plaintiff of Mr. Wegmann. There is no dispute that plaintiff and defendants were previously represented by Mr. Wegmann simultaneously, but plaintiff maintains that, at least with respect to the registration of the service marks, Mr. Wegmann was representing plaintiff alone. The district court made no findings on the issue. Because we think that the disqualification of Mr. Sprung may turn on this fact and others not found by the court below, we vacate that part of the court's order relating to Mr. Sprung and remand the cause for further proceedings. For the guidance of the court on remand, we set forth our view of the applicable ethical standards.
If the court finds that Mr. Wegmann previously represented plaintiff and defendants jointly, we can see no reason why Mr. Sprung should be disqualified. As between joint clients there can be no "confidences" or "secrets" unless one client manifests a contrary intent. See Garner v. Wolfinbarger, 430 F.2d 1093, 1103 (5th Cir. 1970), cert. denied, sub nom. Garner v. First American Life Insurance Co., 401 U.S. 974, 91 S.Ct. 1191, 28 L.Ed.2d 323 (1971); ABA Code of Professional Responsibility, DR 4-101 (1970). Thus, Mr. Sprung could not have learned anything from Mr. Wegmann that defendants did not already know or have a right to know. Plaintiff argues that this permits the defendants indirectly to gain the benefit of Mr. Wegmann's services when they could not do so directly. If the representation was joint, however, defendants possess no information as to which plaintiff could have had any expectation of privacy in relation to the defendants. The only remaining ground for disqualification then would be an appearance of impropriety. In Part II of this opinion, we decided there is such an appearance when an attorney represents an interest adverse to that of a former client in a matter substantially related to the subject of the prior representation. Mr. Sprung has never been plaintiff's counsel, however; he is only the cocounsel of one who was. We are enjoined not to give Canon 9 an overly broad application and to maintain "a reasonable balance between the need to ensure ethical conduct on the part of lawyers . . . and other social interests, which include the litigant's right to freely chosen counsel." Woods v. Covington County Bank, 537 F.2d 804, 810, (5th Cir. 1976). In the case of Mr. Sprung, we think the balance weighs against disqualification. Assuming that Mr. Wegmann's prior retainer was joint, plaintiff has suffered no actual prejudice from communications between Mr. Wegmann and Mr. Sprung. There is a possibility that Mr. Sprung has obtained informally information that he would otherwise have had to seek through discovery.
Id. (quoting United States v. Standard Oil Co., 136 F.Supp. 345, 367 (S.D.N.Y.1955)). Under the peculiar facts of this case, we do not think there would be such an appearance of impropriety in Mr. Sprung's continued representation of defendants as to warrant his disqualification.
If the district court finds that Mr. Wegmann did not previously represent these parties jointly, it does not necessarily follow that Mr. Sprung should be disqualified. The courts have abjured a per se approach to the disqualification of cocounsel of disqualified counsel. Akerly v. Red Barn System, Inc., 551 F.2d 539 (3d Cir. 1977); American Can Co. v. Citrus Feed Co., 436 F.2d 1125 (5th Cir. 1971). In the absence of an attorney-client relationship between Mr. Sprung and plaintiff, a presumption of disclosure of confidences is inappropriate. Wilson P. Abraham Construction Corp. v. Armco Steel Corp., 559 F.2d 250, 253 (5th Cir. 1977). Mr. Sprung should not be disqualified unless he has learned from Mr. Wegmann information the plaintiff had intended not be disclosed to the defendants. See id.
For the reasons we have set forth, the order of the district court is AFFIRMED IN PART and VACATED IN PART and the case remanded for further proceedings.