Cinema 5, Ltd. v. Cinerama, Inc.
528 F.2d 1384 (1976)
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Rule of Law:
Adverse representation against a current client is prima facie improper, and the attorney must show there will be no actual or apparent conflict in loyalties. The 'substantial relationship' test for conflicts of interest applies to former clients, not to situations where a firm sues a current client.
Facts:
- Attorney Manly Fleischmann was a partner in two distinct law firms simultaneously: Jaeckle, Fleischmann and Mugel in Buffalo, and Webster, Sheffield, Fleischmann, Hitchcock and Brookfield in New York City.
- The Jaeckle firm was retained in 1972 and 1974 to represent Cinerama, Inc. in two separate antitrust lawsuits in the Western District of New York.
- These upstate lawsuits involved allegations of discriminatory and monopolistic licensing and distribution of motion pictures.
- In August 1974, the Webster firm undertook representation of Cinema 5, Ltd. in a lawsuit against Cinerama, Inc. in the Southern District of New York.
- The Webster firm's lawsuit alleged that Cinerama, Inc. was conspiring to acquire control of Cinema 5, Ltd. through stock acquisitions to create a monopoly in New York City's first-run theater market.
Procedural Posture:
- Cinema 5, Ltd. sued Cinerama, Inc. in the U.S. District Court for the Southern District of New York (trial court).
- Defendant Cinerama, Inc. filed a motion to disqualify plaintiff's counsel, the Webster firm.
- The district court granted the motion to disqualify.
- Plaintiff Cinema 5, Ltd. appealed the disqualification order to the U.S. Court of Appeals for the Second Circuit.
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Issue:
Is a law firm's representation of a plaintiff against a defendant improper when a partner in the firm is also a partner in another firm currently representing that same defendant in separate, unrelated litigation?
Opinions:
Majority - Van Graafeiland
Yes. A law firm's representation is improper under these circumstances because an attorney owes a duty of undivided loyalty to a current client, which is breached when an affiliated firm undertakes adverse representation, regardless of the relationship between the two legal matters. The court reasoned that the 'substantial relationship' test, which is used for conflicts involving former clients, does not set a sufficiently high standard for cases involving current clients. With a current client, the duty of loyalty is paramount. Adverse representation against a current client is considered 'prima facie improper.' The burden then falls on the attorney to demonstrate that there will be no actual or apparent conflict in loyalties or any reduction in the vigor of their representation—a very high burden that was not met here. The court emphasized that the need to avoid even the 'appearance of professional impropriety' requires disqualification, and because Fleischmann is disqualified, his entire firm is disqualified through imputed disqualification.
Analysis:
This case establishes a critical distinction in conflict of interest analysis between former and current clients. It effectively creates a nearly per se rule against suing a current client, even on a wholly unrelated matter, without obtaining informed consent. The decision prioritizes the attorney's duty of undivided loyalty over other considerations, such as a client's right to choose their counsel. This ruling significantly impacts large law firms with multiple offices or affiliations, requiring them to implement robust conflict-checking systems to avoid inadvertently creating such 'concurrent client' conflicts.
