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LaSalle National Bank v. Lake County

United States Court of Appeals, Seventh Circuit
703 F.2d 252 (1983)
ELI5:

Rule of Law:

When an attorney has a conflict of interest due to a substantial relationship between their prior government work and a current case against that government entity, their entire new firm will also be disqualified unless it implements timely and specific institutional screening mechanisms at the moment the conflict arises, not after a motion to disqualify has been filed.


Facts:

  • Marc Seidler served as an Assistant State's Attorney for Lake County from 1976 to January 31, 1981, eventually becoming Chief of the Civil Division and First Assistant State's Attorney.
  • In his government role, Seidler supervised all civil cases and was privy to discussions and legal strategies concerning sewage disposal agreements between Lake County and various municipalities.
  • While Seidler was not directly involved with the specific Lake County-Grayslake Sewage Disposal Agreement as it applied to the 'Heartland' property, he was assigned to prepare a legal opinion on it (which was later withdrawn) and reviewed relevant documents.
  • LaSalle National Bank and Lake Properties Venture ('plaintiffs'), owners of the Heartland property, had been represented by the law firm Rudnick & Wolfe since 1976 in their efforts to develop the land.
  • After being denied annexation to one village, the plaintiffs successfully had their property annexed to another village, Round Lake Park, on January 9, 1981.
  • On February 2, 1981, Marc Seidler left his position with Lake County and joined the law firm Rudnick & Wolfe as an associate.

Procedural Posture:

  • On June 5, 1981, Rudnick & Wolfe, on behalf of LaSalle National Bank and Lake Properties, filed suit against the County of Lake and the Village of Grayslake in federal district court.
  • Lake County filed a motion to disqualify both attorney Marc Seidler and the entire Rudnick & Wolfe law firm.
  • In August 1981, after the motion was filed, Rudnick & Wolfe established screening arrangements for Seidler.
  • The district court (the court of first instance) granted the motion, disqualifying both Seidler and the firm.
  • The plaintiffs-appellants (LaSalle National Bank and Lake Properties) appealed the disqualification order to the U.S. Court of Appeals for the Seventh Circuit.

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Issue:

Is a law firm's implementation of an ethical screen, only after a motion to disqualify is filed, sufficient to avoid imputed disqualification when the firm hired a former government attorney whose prior work had a substantial relationship to the subject matter of the current litigation against his former government employer?


Opinions:

Majority - Cudahy, Circuit Judge

No. The law firm's implementation of an ethical screen is insufficient to avoid imputed disqualification because it was not timely. First, the court determines that attorney Marc Seidler must be personally disqualified. Applying the three-part 'substantial relationship' test, the court finds that the subject matter of Seidler's prior government work (the county's sewage agreements) is substantially related to the current litigation challenging one of those agreements. Given Seidler's high-ranking position as chief of the civil division, it is reasonable to presume he received confidential information relevant to the current case, a presumption he failed to rebut. Second, the court addresses whether Seidler's disqualification must be imputed to his entire firm, Rudnick & Wolfe. The court acknowledges that timely and effective screening can rebut the presumption that confidential knowledge is shared throughout a firm, particularly to avoid making former government attorneys 'Typhoid Marys.' However, such screening arrangements must be established when the conflict arises. Rudnick & Wolfe hired Seidler in February but did not implement any specific institutional mechanisms to screen him until August, after the County filed its motion to disqualify. This six-month delay was fatal, as there was no safeguard against inadvertent disclosure during that period. Therefore, the firm failed to rebut the presumption of shared knowledge, and the disqualification of the entire firm was not an abuse of discretion.



Analysis:

This case establishes a critical timing requirement for the use of ethical screens (or 'Chinese Walls') to prevent imputed disqualification. By rejecting a screen implemented six months after the conflict arose and only in response to a motion, the court signaled that such measures must be proactive, not reactive. The decision solidifies the principle that law firms must have formal, institutional mechanisms in place from the very beginning of an attorney's employment to isolate them from conflicting matters. This holding places a significant burden on firms to conduct thorough conflict checks during hiring and to immediately implement specific, verifiable screening procedures to avoid the harsh penalty of firm-wide disqualification.

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