GRAHAM v. WYETH LABORATORIES DIVISION OF AMERICAN HOME PRODUCTS CORP.

SEYMOUR, Circuit Judge.

Defendant Wyeth Laboratories moved pending appeal to disqualify plaintiff Michelle Graham's counsel from further representing her in this products liability litigation because of a purported conflict of interest. We disqualified counsel at oral argument and announced our intention to state our analysis in a published opinion. Upon further study, we now hold that dispositive factual issues remain unresolved on the disqualification issue, necessitating an evidentiary hearing. Because we have reversed on the merits of the appeal in a separate opinion,1 we remand the disqualification motion to the district court for further proceedings in conjunction with the new trial we have ordered on the merits.

I.

The underlying dispute arose from Michelle Graham's innoculation with Wyeth's DPT vaccine, which allegedly caused her severe injuries. Graham retained the law firm of Michaud, Hutton & Bradshaw (Michaud), along with co-counsel Warshafsky, Rotter, Tarnoff, Gesler, Reinhardt & Bloch (Warshafsky), to represent her. Wyeth retained the law firm of McDonald, Tinker, Skaer, Quinn & Herrington, P.A. (McDonald, Tinker), along with Baker & Hostetler, to defend it.

In April 1985, Graham filed a diversity action against Wyeth in the Kansas federal district court alleging negligence and strict liability. The case proceeded to trial, and the jury entered its verdict in favor of Graham. Wyeth appealed on various grounds. While the appeal was pending, Randall Fisher, previously a litigation partner with Wyeth's counsel McDonald, Tinker, joined the Michaud firm as an associate. Wyeth refused to waive any potential conflict created by Fisher's association with the Michaud firm. Instead, Wyeth filed the instant motion under Fed.R.App.P. 28 to disqualify the entire Michaud firm from any future representation of Michelle Graham in her DPT case against Wyeth.

Wyeth argued in its motion that Randall Fisher's involvement in various matters for Wyeth while he was at McDonald, Tinker not only requires Fisher's disqualification, but that Fisher's conflict should be imputed to the entire Michaud firm. In support of this argument Wyeth referred us to the district court's conclusions of fact in Geisler ex rel. Geisler v. Wyeth Labs., 716 F.Supp. 520 (D.Kan.1989), a similar DPT case involving a different plaintiff in which Michaud and McDonald, Tinker are again on opposite sides of the counsel table. As in the instant motion, Wyeth sought disqualification of Michaud in Geisler because of Fisher's prior involvement while at McDonald, Tinker. Indeed, both parties agree that the facts of both cases are in all pertinent respects identical.

The court in Geisler suggested to the lawyers that they agree on the basic facts in an effort to avoid an evidentiary hearing. The parties did so, and the court made findings based on those facts. In lieu of repeating the somewhat lengthy conclusions of fact in Geisler, we refer the reader to 716 F.Supp at 521-23 and incorporate the factual conclusions set out there into this opinion. On the basis of those facts, the district court in Geisler ruled that Randall Fisher is disqualified from representing the plaintiff against Wyeth. See id. at 521. In so holding, the court found that the Geisler DPT litigation was "substantially related" to matters Fisher had worked on for Wyeth while at McDonald, Tinker. The court then concluded that "[o]nce a substantial relationship has been found, a[n irrebuttable] presumption arises that a client has revealed facts to the attorney which require his disqualification."2 Id. at 525 (citing Smith v. Whatcott, 757 F.2d 1098, 1100 (10th Cir.1985)).

In determining whether Fisher's disqualification should extend to the entire Michaud firm, the court invoked Model Rule of Professional Conduct 1.10(a), see infra at 1421, applicable to lawyers in the same firm, which operates to disqualify the entire firm from representing a client if any one lawyer practicing alone would be so disqualified. Because Fisher individually was disqualified, the court held that the entire Michaud firm was also disqualified unless it could show that it had adequately screened Fisher from involvement in the Geisler DPT case. The court then found that Fisher had been adequately screened, and concluded that Michaud could continue representing Geisler. See Geisler, 716 F.Supp. at 527.

After the instant motion had been fully briefed and just prior to oral argument on Wyeth's appeal, the Kansas Supreme Court decided Parker v. Volkswagenwerk Aktiengesellschaft, 245 Kan. 580, 781 P.2d 1099 (1989), another case concerning Randall Fisher's move from McDonald, Tinker to Michaud. In Parker, the court held that Rule 1.10(b), see infra at 1421, rather than Rule 1.10(a) as applied in Geisler, provides the correct analysis when a lawyer changes firms and disqualification of the lawyer's newly adopted firm is sought. See 781 P.2d at 1106. The court held further that before the lawyer's new firm is disqualified, the court must determine as a factual matter whether the moving lawyer acquired actual knowledge of client confidences. See id. Finally, the Kansas court rejected screening as a means by which an otherwise disqualified firm may continue with its representation. See id. 781 P.2d at 1106-07.

At oral argument, we asked counsel for both sides to address the impact of Parker on the instant motion and to state why the facts in Geisler should not be adopted for purposes of deciding the identical issue in the instant motion. After hearing argument on the disqualification issues, we recessed temporarily to consider how to proceed with oral argument on the merits of the appeal. We noted that in addition to being represented at oral argument by the Michaud firm, Graham was also represented by co-counsel Ted Warshafsky, who informed us that he was prepared to argue the merits of the appeal. On the basis of the Geisler conclusions of fact, but without briefing on the impact of Parker, we determined that the most prudent course under the circumstances would be to issue a bench ruling disqualifying Michaud from representing Graham in oral argument, pending issuance of a formal explanatory ruling after further study of the newly-issued Parker decision.

II.

We start our analysis with the Model Rules of Professional Conduct adopted by the Kansas Supreme Court as "general standards of conduct and practice required of the legal profession in Kansas." Kan.S.Ct. Rule 226, Prefatory Rule, Kan. Court Rules & Proc. (West 1990); see also Rule 407 of the Local Rules of the District of Kansas, Kan. Court Rules & Proc. (West 1990) (adopting Kansas Supreme Court version of Model Rules as standards of professional conduct in Kansas federal district court). The Kansas Supreme Court has also adopted a modified form of the comments accompanying the Model Rules to the extent that they are not inconsistent with the Rules themselves or the statutory or case law of Kansas. See Kan.S.Ct.Rule 226, Prefatory Rule.

Rule 1.10, concerning the disqualification of an entire firm, provides in part as follows:

Kan.S.Ct.Rule 226, Rule 1.10 (emphasis added). The emphasized language suggests that the analysis differs according to whether the conflicted lawyer remains with the same firm throughout the prior and current representations, or changes firms. The comment to Rule 1.10 states that "[p]aragraph (a) operates only among the lawyers currently associated in a firm. When a lawyer moves from one firm to another, the situation is governed by paragraphs (b) and (c)." Id., comment to Rule 1.10. The emphasized language also indicates that paragraph (b) applies when disqualification of the moving lawyer's new firm is sought, while disqualification of the lawyer's old firm after his departure is controlled by the principles of paragraph (c). Since Wyeth seeks to disqualify Randall Fisher's new firm, Rule 1.10(b) governs our analysis. See Parker, 781 P.2d at 1106 (motion to disqualify Michaud because of Randall Fisher's involvement in adverse party's matter while at McDonald, Tinker "clearly falls under MRPC 1.10(b)").

When parsed into its elements, Rule 1.10(b) will disqualify a lawyer's new firm when: (1) the moving lawyer, or his or her prior firm, had represented a client whose interests are materially adverse to the client at the new firm; (2) the matter in the new firm is the same or substantially related to the previous representation; (3) the lawyer had acquired information protected by Rules 1.6 and 1.9(b) that is material to the matter in the new firm; and (4) the new firm knows of the conflict arising from its representation. The satisfaction of elements (1) and (4) is not in dispute. Michelle Graham's interests are clearly adverse to Wyeth's and Michaud is fully aware of any potential conflict. Elements (2) and (3) call for more analysis.

Element (2) requires that the prior and current representations concern the same or substantially related matters. While Fisher's work for Wyeth at McDonald, Tinker was not on the same matter involved in Michelle Graham's case, Wyeth argues that the matters are "substantially related."3 Although the term "substantially related" is not defined in either the Rules, the comment, or the Kansas case law, it has acquired the status of a term of art in the general law of attorney conflicts of interest. See, e.g., Smith, 757 F.2d at 1100. We have defined this term previously to mean that the "`factual contexts of the two representations are similar or related.'" Id. (quoting Trust Corp. v. Piper Aircraft Corp., 701 F.2d 85, 87 (9th Cir.1983)).

Applying this test to basically identical facts, the court in the Geisler DPT case concluded that:

Geisler, 716 F.Supp. at 525. We agree with this analysis, and we believe it is equally applicable to the DPT litigation here in the context of firm-wide disqualification under Rule 1.10(b).5 Element (2) is therefore satisfied.

Element (3) mandates an inquiry into whether the lawyer acquired information at the old firm protected by Rules 1.6 and 1.9(b) that is material to the matter. Rule 1.6 prohibits revelation without consent of "information relating to representation of a client," while Rule 1.9(b) prohibits its use to a former client's disadvantage. See Kan.S.Ct.Rule 226, Rules 1.6 & 1.9(b). The Kansas Supreme Court in Parker quoted with approval that portion of the comment explaining the operation of this requirement:

Parker, 781 P.2d at 1105 (emphasis added) (quoting comment to Rule 1.10).

Parker, like Geisler and the instant litigation, involved a potential conflict created by Randall Fisher's move from McDonald, Tinker to the Michaud firm. While at McDonald, Tinker, Fisher had performed some legal research for the defendant, Volkswagen, which was to be used in the Parker case. See id. 781 P.2d at 1103. As in the present case, moreover, Fisher had attended weekly litigation meetings where information relating to representation of Volkswagen could have been discussed. See id. 781 P.2d at 1102. Finally, Fisher's wife was the legal assistant who maintained the Parker files at McDonald, Tinker and worked on the case daily. Fisher would visit her often in her office and, occasionally, she would take some of the files to the Fisher home to work on them. Id. 781 P.2d at 1102.

On the basis of the above, the trial judge in Parker disqualified the Michaud firm, and the plaintiff brought an interlocutory appeal to the Kansas Supreme Court. The Kansas Supreme Court noted that while both Randall Fisher and his wife testified in the disqualification proceedings in Parker, the trial judge made no findings as to whether Randall Fisher actually acquired protected information. The court remanded the disqualification issue to the district court for a "full hearing," reasoning as follows:

Id. 781 P.2d at 1106 (emphasis added).

The motion in the instant case presents us with a nearly identical situation. The fact-findings we have adopted from the Geisler opinion lack a finding that Randall Fisher acquired material and confidential information while at McDonald, Tinker. Indeed, the court in Geisler specifically found it "unnecessary" to resolve the issue of actual knowledge because it erroneously applied the analysis in Rule 1.10(a) covering prior and current representations occurring in the same firm. See Geisler, 716 F.Supp. at 526. While the facts do present some circumstantial evidence from which actual knowledge could be inferred, inferences of fact should be made in the first instance by the fact-finder after the benefit of a full hearing in which the presence or absence of actual knowledge is in controversy. The court in Parker had comparable circumstantial evidence before it, but remanded the issue in lieu of making an inference of actual knowledge. We do so as well.

III.

Although we disqualified the Michaud firm from oral argument on appeal, we now realize that we did so based on insufficient fact-findings. Given our reversal on the merits of Graham's appeal and our remand for new trial, we also remand Wyeth's disqualification motion to the district court for further proceedings in accordance with this opinion.