Haagen-Dazs Co., Inc. v. Perche No! Gelato, Inc.
639 F. Supp. 282 (1986)
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Rule of Law:
When an attorney formerly represented a client in a matter, that attorney and their entire new firm are disqualified from representing an adverse party in the same or a substantially related matter if there is a reasonable probability the attorney received confidential information. A belatedly-implemented ethical screen, or "Chinese Wall," is insufficient to prevent the firm's imputed disqualification.
Facts:
- From 1974 to October 1984, Franklin C. Jesse, Esq., was an in-house attorney in The Pillsbury Company's legal department.
- In 1983, Pillsbury acquired Haagen-Dazs Company, Inc., a competitor of Double Rainbow Gourmet Ice Cream, Inc.
- While at Pillsbury, Jesse performed legal work for Haagen-Dazs, including on an international joint venture that required knowledge of its franchise and distribution policies.
- Jesse was also employed in Pillsbury's legal department when it defended Haagen-Dazs against a lawsuit brought by Ben & Jerry’s Homemade, Inc., which involved issues similar to the current litigation.
- In November 1984, Jesse left Pillsbury and became an associate at the Minneapolis law firm Gray, Plant, Mooty, Mooty & Bennett ('the Gray firm').
- The Gray firm was subsequently retained by the Alioto & Alioto firm ('Alioto') to assist in representing Double Rainbow in an antitrust lawsuit against Pillsbury and Haagen-Dazs concerning Haagen-Dazs's distribution policies.
- The Gray firm and Alioto had a longstanding professional affiliation, working together on approximately ten cases, with Alioto compensating Gray for its work.
Procedural Posture:
- Double Rainbow Gourmet Ice Creams, Inc. initiated antitrust litigation against The Pillsbury Company and Haagen-Dazs Company, Inc. in the U.S. District Court for the Northern District of California.
- Pillsbury and Haagen-Dazs, as defendants, filed a motion in the District Court to disqualify Double Rainbow's counsel, which included the law firm of Gray, Plant, Mooty, Mooty & Bennett and the affiliated law firm of Alioto & Alioto.
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Issue:
Does an attorney's prior employment as in-house counsel for a corporation, where they worked on substantially related matters, require the disqualification of the attorney, their new law firm, and an affiliated co-counsel firm from representing an adverse party in a subsequent lawsuit?
Opinions:
Majority - Legge, District Judge
Yes, as to the attorney and his new firm; No, as to the affiliated co-counsel. An attorney who worked on substantially related matters for a former client must be disqualified, and that disqualification is imputed to the attorney's entire new firm. However, the disqualification is not extended to an affiliated but separate law firm. The court applies the Ninth Circuit's 'substantial relationship' test, which presumes a conflict if there is a 'reasonable probability that confidences were disclosed which could be used against the client.' Here, Jesse's senior role at Pillsbury, his work on Haagen-Dazs's international distribution, and his presence during the similar Ben & Jerry's litigation make it reasonably probable that he was exposed to confidential information about distribution and business strategies relevant to this antitrust case. This creates a presumption of a substantial relationship, which was not rebutted. Because Jesse is disqualified, his disqualification is imputed to his entire new firm, the Gray firm, under rules of professional conduct. The Gray firm's attempt to create a 'Chinese Wall' to screen Jesse from the litigation fails because it was not implemented until a year after Jesse joined the firm and well after the lawsuit was filed. Such a belated screen is ineffective. However, the court declines to extend this 'vicarious disqualification to another level' by disqualifying the Alioto firm, as the risk of disclosure is sufficiently contained by disqualifying the Gray firm, provided Alioto returns all materials obtained from Gray.
Analysis:
This decision reinforces the stringency of the 'substantial relationship' test for attorney disqualification and the automatic nature of imputed disqualification within a law firm. It serves as a significant precedent on the use of ethical screens, establishing that a 'Chinese Wall' must be implemented proactively and immediately upon a conflicted lawyer's arrival to be considered effective, not reactively after litigation has begun. The opinion also sets a practical limit on imputed disqualification, showing a court's reluctance to disqualify a second, affiliated firm where the connection to the conflicted attorney is indirect, thus preventing a chain reaction of disqualifications.
