Schaefer v. San-Con, Inc.
878 F.2d 285 (1989), 898 F.Supp. 356 (1995)
Roberts & Schaefer hired
San-Con to build a coal silo. After they finished construction, he silo
collapsed. Schaefer sued for damages and breach of contract.
San-Con's insurance company,
Hawley, hired a lawyer named Watson from the law firm of Steptoe &
Johnson to evaluate the dispute.
Turned out, Steptoe &
Johnson were representing Robert & Schaefer in an unrelated legal
Roberts & Schaefer
conducted a conflict of interest
determination (as required by Rule 1.7), but didn't
noticed because they ha Steptoe listed by their parent company's name
Robert & Schaefer
contacted Steptoe & Johnson about representing them in the lawsuit
Steptoe & Johnson realized
that they had a conflict of interest
and told Robert & Schaefer they couldn't represent them. They also
withdrew representation from San-Con and Hawley.
Robert & Schaefer hired
another law firm, Ruley & Everett.
Soon after, Ruley &
Everett merged with Robert & Schaefer. The new law firm sent a
request to San-Con asking for a waiver of conflict of interest.
San-Con declined to provide
Ruley filed a motion to
determine if the law firm should withdraw representation from Robert &
Schaefer, or if it was ok to proceed absent a waiver from San-Con.
The Trial Court refused to
hear the issue unless San-Con made a motion to disqualify the law firm,
which conveniently enough they did.
The Trial Court determined
that there was a conflict of interest
and that the law firm should be disqualified (under Rule 1.16)
from representing Robert & Schaefer.
The Trial Court found that
there was a conflict of interest
even though the representation was for an unrelated matter.
Basically, you can't
'fraternize with the enemy', even if the representation of the two
clients isn't adverse.
San-Con argued that based on
the plain language of Rule 1.9
and Rule 1.10, there was a
clear conflict of interest.
Ruley argued that they had
properly screened Watson from this legal matter.
Under Rule 1.10, screening is not allowed.
In this case, the problem
wasn't that the law firm might share confidential information between
the two cases, it was that there was a general appearance of impropriety
and representing the two clients could lead to a loss of confidence by
Ruley further argued that he
was just an "of counsel" in the new Steptoe & Johnston, not
technically an employee, so there shouldn't be a problem.
However, conflict of
interest rules talk about
"associations," and Ruley was clearly "associated"
with Steptoe & Johnson, so he was covered under the rule.