Analytica, Incorporated v. Npd Research, Inc., Defendant-Cross-Appellant-Cross-Appellee. Appeals of Schwartz & Freeman and Pressman and Hartunian Chtd

Two law firms, Schwartz & Freeman and Pressman and Hartunian, appeal from orders disqualifying them from representing Analytica, Inc. in an antitrust suit against NPD, Inc. Schwartz & Freeman also appeals from an order directing it to pay NPD some $25,000 in fees and expenses incurred in prosecuting the disqualification motion; and NPD cross-appeals from this order, contending it should have got more.

John Malec went to work for NPD, a closely held corporation engaged in market research, in 1972. His employment agreement allowed him to, and he did, buy two shares of NPD stock, which made him a 10 percent owner. It also gave him an option to buy two more shares. He allowed the option to expire in 1975, but his two co-owners, in recognition of Malec's substantial contributions to the firm (as executive vice-president and manager of the firm's Chicago office), decided to give him the two additional shares--another 10 percent of the company--anyway and they told Malec to find a lawyer who would structure the transaction in the least costly way. He turned to Richard Fine, a partner in Schwartz & Freeman. Fine devised a plan whereby the other co-owners would each transfer one share of stock back to the corporation, which would then issue the stock to Malec together with a cash bonus. Because the stock and the cash bonus were to be deemed compensation for Malec's services to the corporation, the value of the stock, plus the cash, would be taxable income to Malec (the purpose of the cash bonus was to help him pay the income tax that would be due on the value of the stock), and a deductible business expense to the corporation. A value had therefore to be put on the stock. NPD gave Fine the information he needed to estimate that value--information on NPD's financial condition, sales trends, and management--and Fine fixed a value which the corporation adopted. Fine billed NPD for his services and NPD paid the bill, which came to about $850, for 11 1/2 hours of Fine's time plus minor expenses.

While the negotiations over the stock transfer were proceeding, relations between Malec and his co-owners were deteriorating, and in May 1977 he left the company and sold his stock to them. His wife, who also had been working for NPD since 1972, left NPD at the same time and within a month had incorporated Analytica to compete with NPD in the market-research business. She has since left Analytica; Mr. Malec apparently never had a position with it.

In October 1977, several months after the Malecs had left NPD and Analytica had been formed, Analytica retained Schwartz & Freeman as its counsel. Schwartz & Freeman forthwith complained on Analytica's behalf to the Federal Trade Commission, charging that NPD was engaged in anticompetitive behavior that was preventing Analytica from establishing itself in the market. When the FTC would do nothing, Analytica decided to bring its own suit against NPD, and it authorized Schwartz & Freeman to engage Pressman and Hartunian as trial counsel. The suit was filed in June 1979 and charges NPD with various antitrust offenses, including abuse of a monopoly position that NPD is alleged to have obtained before June 1977.

In January 1980 NPD moved to disqualify both of Analytica's law firms. Evidentiary hearings on the motion were held intermittently between April 1980 and May 1981. At one stage the law firms voluntarily withdrew, but when the judge told them that he was minded to make them pay the fees and expenses that NPD had incurred in prosecuting the motion they moved to vacate the order granting their motion to withdraw. The motion to vacate was granted and the hearings resumed. In June 1981 the judge disqualified both firms and ordered Schwartz & Freeman to pay NPD's fees and expenses. Analytica has not appealed the orders of disqualification, having retained substitute counsel to prosecute its suit against NPD.

We first consider, on our own initiative as we must, whether Pressman and Hartunian has standing to appeal the order disqualifying it. Orders disqualifying counsel usually are appealed by clients upset by the prospect of losing the services of the lawyer of their choice and by the added expense of bringing substitute counsel up to speed. The client's standing to appeal is plain enough and an order disqualifying counsel, though interlocutory, is appealable, at least in this circuit. Freeman v. Chicago Musical Instrument Co., 689 F.2d 715, 717-20 (7th Cir.1982). If the client wants to keep the lawyer, the lawyer's standing also seems plain, since if the disqualification order stands he will lose the fees he would have made from the case. But in this case the client has not appealed. Analytica appears content with whatever substitute counsel it has procured. We therefore cannot see what tangible object Pressman and Hartunian has in seeking reversal of the order disqualifying it. It has presented no evidence that it will be rehired and we have no reason to assume it will be, since that would require Analytica to replace the trial counsel it has hired in place of Pressman and Hartunian.

Nor need we decide whether an interest in reputation alone could give a lawyer standing to appeal a disqualification. Pressman and Hartunian was disqualified not for anything it did or failed to do but simply because as Schwartz & Freeman's co-counsel it had access, actual or potential, to whatever confidential information Schwartz & Freeman had obtained while representing NPD. It appears that Pressman and Hartunian did not even know about that prior representation and so was innocent in thought as well as deed. That is why the district judge did not require it to pay any of the fees or expenses incurred by NPD in prosecuting the motion to disqualify. The judge thought Pressman and Hartunian had to be disqualified to protect NPD but since the firm's conduct was not blameworthy it need not fear for its reputation.

Although Schwartz & Freeman has a stronger argument that it has an interest in reputation at stake in this appeal, we need not decide whether that interest is enough to confer standing either. Since Schwartz & Freeman has standing to appeal from the order directing it to pay $25,000 to NPD for resisting the order of disqualification, and since the order to pay is invalid if Schwartz & Freeman should not have been disqualified, the appeal from that order requires us to consider the validity of the disqualification order in any event.

For rather obvious reasons a lawyer is prohibited from using confidential information that he has obtained from a client against that client on behalf of another one. But this prohibition has not seemed enough by itself to make clients feel secure about reposing confidences in lawyers, so a further prohibition has evolved: a lawyer may not represent an adversary of his former client if the subject matter of the two representations is "substantially related," which means: if the lawyer could have obtained confidential information in the first representation that would have been relevant in the second. It is irrelevant whether he actually obtained such information and used it against his former client, or whether--if the lawyer is a firm rather than an individual practitioner--different people in the firm handled the two matters and scrupulously avoided discussing them. See, e.g., Emle Industries, Inc. v. Patentex, Inc., 478 F.2d 562, 570-71 (2d Cir.1973); Cinema 5, Ltd. v. Cinerama, Inc., 528 F.2d 1384, 1386 (2d Cir.1976); Trone v. Smith, 621 F.2d 994, 998 (9th Cir.1980); Duncan v. Merrill Lynch, Pierce, Fenner & Smith, 646 F.2d 1020, 1028 (5th Cir.1981), and in this circuit Cannon v. U.S. Acoustics Corp., 532 F.2d 1118, 1119 (7th Cir.1976) (per curiam), aff'g 398 F.Supp. 209, 223-24 (N.D.Ill.1975); Schloetter v. Railoc of Indiana, Inc., 546 F.2d 706, 710 (7th Cir.1976); Westinghouse Elec. Corp. v. Gulf Oil Corp., 588 F.2d 221, 223-25 (7th Cir.1978).

There is an exception for the case where a member or associate of a law firm (or government legal department) changes jobs, and later he or his new firm is retained by an adversary of a client of his former firm. In such a case, even if there is a substantial relationship between the two matters, the lawyer can avoid disqualification by showing that effective measures were taken to prevent confidences from being received by whichever lawyers in the new firm are handling the new matter. See Novo Terapeutisk Laboratorium A/S v. Baxter Travenol Laboratories, Inc., 607 F.2d 186, 197 (7th Cir.1979) (en banc); Freeman v. Chicago Musical Instrument Co., supra, 689 F.2d at 722-23; LaSalle Nat'l Bank v. County of Lake, 703 F.2d 252 (7th Cir.1983). The exception is inapplicable here; the firm itself changed sides.

Schwartz & Freeman's Mr. Fine not only had access to but received confidential financial and operating data of NPD in 1976 and early 1977 when he was putting together the deal to transfer stock to Mr. Malec. Within a few months, Schwartz & Freeman popped up as counsel to an adversary of NPD's before the FTC, and in that proceeding and later in the antitrust lawsuit advanced contentions to which the data Fine received might have been relevant. Those data concerned NPD's profitability, sales prospects, and general market strength--all matters potentially germane to both the liability and damage phases of an antitrust suit charging NPD with monopolization. The two representations are thus substantially related, even though we do not know whether any of the information Fine received would be useful in Analytica's lawsuit (it might just duplicate information in Malec's possession, but we do not know his role in Analytica's suit), or if so whether he conveyed any of it to his partners and associates who were actually handling the suit. If the "substantial relationship" test applies, however, "it is not appropriate for the court to inquire into whether actual confidences were disclosed," Westinghouse Elec. Corp. v. Gulf Oil Corp., supra, 588 F.2d at 224, unless the exception noted above for cases where the law firm itself did not switch sides is applicable, as it is not here. LaSalle Nat'l Bank v. County of Lake, supra, 703 F.2d at 257-58.

Consistently with this distinction, Westinghouse Elec. Corp. v. Kerr-McGee Corp., 580 F.2d 1311, 1321 (7th Cir.1978)--like this a case where the same law firm represented adversaries in substantially related matters--states that it would have made no difference whether "actual confidences were disclosed" even if the law firm had set up a "Chinese wall" between the teams of lawyers working on substantially related matters, though the two teams were in different offices of the firm, located hundreds of miles apart. Now Schwartz & Freeman has never, in this litigation, contended that it created a "Chinese wall" between Fine and the lawyers working for Analytica against NPD. The offer of proof that it made in the district court was an offer to prove that the individuals in Schwartz & Freeman who were handling Analytica's case against NPD had not received any relevant confidential information about NPD from Fine. This proof would not have established the existence of a "Chinese wall." In LaSalle Nat'l Bank, where this court just the other day upheld the disqualification of a law firm that hired a former county lawyer and later was retained to bring a suit against the county, it was not enough that the lawyer "did not disclose to any person associated with the firm any information ... on any matter relevant to this litigation," for "no specific institutional mechanisms were in place to insure that that information was not shared, even if inadvertently," until the disqualification motion was filed--months after the lawyer had joined the firm. 703 F.2d at 259. We contrasted the absence of such mechanisms with a case in which the lawyer "was denied access to relevant files and did not share in the profits or fees derived from the representation in question; discussion of the suit was prohibited in his presence and no members of the firm were permitted to show him any documents relating to the case; and both the disqualified attorney and others in his firm affirmed these facts under oath," and with another case where "all other attorneys in the firm were forbidden to discuss the case with the disqualified attorney and instructed to prevent any documents from reaching him; the files were kept in a locked file cabinet, with the keys controlled by two partners and issued to others only on a 'need to know' basis." Id. at 258-59. Schwartz & Freeman has never offered to prove--has never so much as intimated--that any "institutional mechanisms" were in place in this case. But we emphasize that even if they were, this would not help Schwartz & Freeman; a law firm is not permitted to switch sides if its former representation was substantially related to its new representation, no matter what screens it sets up.

Schwartz & Freeman argues, it is true, that Malec rather than NPD retained it to structure the stock transfer, but this is both erroneous and irrelevant. NPD's three co-owners retained Schwartz & Freeman to work out a deal beneficial to all of them. All agreed that Mr. Malec should be given two more shares of the stock; the only question was the cheapest way of doing it; the right answer would benefit them all. Cf. Coase, The Problem of Social Cost, 3 J. Law & Econ. 1 (1960). The principals saw no need to be represented by separate lawyers, each pushing for a bigger slice of a fixed pie and a fee for getting it. Not only did NPD rather than Malec pay Schwartz & Freeman's bills (and there is no proof that it had a practice of paying its officers' legal expenses), but neither NPD nor the co-owners were represented by counsel other than Schwartz & Freeman. Though Millman, an accountant for NPD, did have a law degree and did do some work on the stock-transfer plan, he was not acting as the co-owners' or NPD's lawyer in a negotiation in which Fine was acting as Malec's lawyer. As is common in closely held corporations, Fine was counsel to the firm, as well as to all of its principals, for the transaction. If the position taken by Schwartz & Freeman prevailed, a corporation that used only one lawyer to counsel it on matters of shareholder compensation would run the risk of the lawyer's later being deemed to have represented a single shareholder rather than the whole firm, and the corporation would lose the protection of the lawyer-client relationship. Schwartz & Freeman's position thus could force up the legal expenses of owners of closely held corporations.

But it does not even matter whether NPD or Malec was the client. In Westinghouse's antitrust suit against Kerr-McGee and other uranium producers, Kerr-McGee moved to disqualify Westinghouse's counsel, Kirkland & Ellis, because of a project that the law firm had done for the American Petroleum Institute, of which Kerr-McGee was a member, on competition in the energy industries. Kirkland & Ellis's client had been the Institute rather than Kerr-McGee but we held that this did not matter; what mattered was that Kerr-McGee had furnished confidential information to Kirkland & Ellis in connection with the law firm's work for the Institute. Westinghouse Elec. Corp. v. Kerr-McGee Corp., supra. As in this case, it was not shown that the information had actually been used in the antitrust litigation. The work for the Institute had been done almost entirely by Kirkland & Ellis's Washington office, the antitrust litigation was being handled in the Chicago office, and Kirkland & Ellis is a big firm. The connection between the representation of a trade association of which Kerr-McGee happened to be a member and the representation of its adversary thus was rather tenuous; one may doubt whether Kerr-McGee really thought its confidences had been abused by Kirkland & Ellis. If there is any aspect of the Kerr-McGee decision that is subject to criticism, it is this. The present case is a much stronger one for disqualification. If NPD did not retain Schwartz & Freeman--though we think it did--still it supplied Schwartz & Freeman with just the kind of confidential data that it would have furnished a lawyer that it had retained; and it had a right not to see Schwartz & Freeman reappear within months on the opposite side of a litigation to which that data might be highly pertinent.

We acknowledge the growing dissatisfaction, illustrated by Lindgren, Toward a New Standard of Attorney Disqualification, 1982 Am. Bar Foundation Research J. 419, with the use of disqualification as a remedy for unethical conduct by lawyers. The dissatisfaction is based partly on the effect of disqualification proceedings in delaying the underlying litigation and partly on a sense that current conflict of interest standards, in legal representation as in government employment, are too stringent, particularly as applied to large law firms--though there is no indication that Schwartz & Freeman is a large firm. But we cannot find any authority for withholding the remedy in a case like this, even if we assume contrary to fact that Schwartz & Freeman is as large as Kirkland & Ellis. NPD thought Schwartz & Freeman was its counsel and supplied it without reserve with the sort of data--data about profits and sales and marketing plans--that play a key role in a monopolization suit--and lo and behold, within months Schwartz & Freeman had been hired by a competitor of NPD's to try to get the Federal Trade Commission to sue NPD; and later that competitor, still represented by Schwartz & Freeman, brought its own suit against NPD. We doubt that anyone would argue that Schwartz & Freeman could resist disqualification if it were still representing NPD, even if no confidences were revealed, and we do not think that an interval of a few months ought to make a critical difference.

The "substantial relationship" test has its problems, but conducting a factual inquiry in every case into whether confidences had actually been revealed would not be a satisfactory alternative, particularly in a case such as this where the issue is not just whether they have been revealed but also whether they will be revealed during a pending litigation. Apart from the difficulty of taking evidence on the question without compromising the confidences themselves, the only witnesses would be the very lawyers whose firm was sought to be disqualified (unlike a case where the issue is what confidences a lawyer received while at a former law firm), and their interest not only in retaining a client but in denying a serious breach of professional ethics might outweigh any felt obligation to "come clean." While "appearance of impropriety" as a principle of professional ethics invites and maybe has undergone uncritical expansion because of its vague and open-ended character, in this case it has meaning and weight. For a law firm to represent one client today, and the client's adversary tomorrow in a closely related matter, creates an unsavory appearance of conflict of interest that is difficult to dispel in the eyes of the lay public--or for that matter the bench and bar--by the filing of affidavits, difficult to verify objectively, denying that improper communication has taken place or will take place between the lawyers in the firm handling the two sides. Clients will not repose confidences in lawyers whom they distrust and will not trust firms that switch sides as nimbly as Schwartz & Freeman.

Since the order disqualifying Schwartz & Freeman was correct, we must decide whether Schwartz & Freeman's insistence on litigating the question rather than bowing out gracefully was so unreasonable that the district judge could properly find it to be in bad faith; otherwise the order to reimburse NPD's legal fees and expenses was improper. Browning Debenture Holders' Comm. v. DASA Corp., 560 F.2d 1078, 1087-88 (2d Cir.1977). By bad faith in this context we mean without at least a colorable basis in law--what in a malicious prosecution case would be called "probable cause." This court had decided the two Westinghouse cases two years before the motion for disqualification was filed in this case, and they were controlling precedents. In its appeal brief Schwartz & Freeman makes a perfunctory effort to distinguish them and then moves on to argue that later decisions in this and other circuits suggest a movement away from those decisions. One would have to move awfully far away to give any solace to Schwartz & Freeman, and we have not found any case that questions the validity of the Westinghouse cases on a point relevant to this case. We disagree that the Westinghouse cases were overruled by Novo or Freeman. Novo and Freeman do not involve a law firm's changing sides--a distinction also implicit in Judge Mansfield's concurring opinion in Government of India v. Cook Industries, Inc., 569 F.2d 737, 740-41 (2d Cir.1978), on which Schwartz & Freeman relies, and in Judge Fairchild's dissent from the panel decision (which was reversed en banc) in Novo, where he said, "This is not a case where a party's former attorney is now representing the adverse party," 607 F.2d at 193 (emphasis added). And Novo and Freeman cite the Westinghouse cases approvingly, see 607 F.2d at 196-97; 689 F.2d at 722 and n. 10, as does our even more recent decision in LaSalle Nat'l Bank, see 703 F.2d at 255-57.

The fact that Schwartz & Freeman is a law firm makes its stubbornness in resisting disqualification less forgivable than if it were a lay client. Cf. McCandless v. Great Atlantic & Pac. Tea Co., 697 F.2d 198, 201 (7th Cir.1983). The district judge was entitled to find that Schwartz & Freeman had acted in bad faith in opposing the motion to disqualify, and therefore to award NPD its fees and expenses.

NPD's cross-appeal challenging the level of the award has no merit. The district judge found that NPD's counsel had put in excessive, and excessively remunerated, time on the case and he therefore refused to award the full amount sought. His finding was not clearly erroneous and his determination of the reasonable fee was not an abuse of his broad discretion. Muscare v. Quinn, 680 F.2d 42, 45 (7th Cir.1982), in fee matters.

Pressman and Hartunian's appeal from the order disqualifying it is dismissed for lack of jurisdiction. The order assessing fees and expenses against Schwartz & Freeman is affirmed. No costs will be awarded in this court.

SO ORDERED.

COFFEY, Circuit Judge, dissenting.

I am compelled to write separately and dissent as I believe the majority inexplicably refuses to accept or follow the mandates of the court's three most recent decisions on the subject of attorney disqualification. The majority's decision casts aside, without a valid legal basis, this court's reasoning set forth in the recent cases of LaSalle National Bank v. County of Lake, 703 F.2d 252 (7th Cir.1983), Freeman v. Chicago Musical Instrument Co., 689 F.2d 715 (7th Cir.1982), and Novo Terapeutisk, etc. v. Baxter Travenol Lab, 607 F.2d 186 (7th Cir.1979), in which this court took a more enlightened perspective, contemporaneous with the modern practice of law, on the law of attorney disqualification, rejecting the irrebuttable presumption that the knowledge of one attorney in a law firm is shared with the entire firm, and holding that the presumption of intra-firm sharing of confidences is rebuttable. The majority has incorrectly distinguished the holdings of LaSalle National Bank, Freeman and Novo and instead has reverted to the same over-simplified analysis that existed prior to our three most recent decisions in the area of attorney disqualification. By attempting to distinguish rather than applying the thoughtful rationale of LaSalle National Bank, Freeman and Novo, the majority's analysis in this case unnecessarily creates a conflict with our prior precedent and therefore can only generate problems and confusion for our district courts and for law firms as they attempt to deal with and reconcile our most recent pronouncements.

Prior to LaSalle National Bank, Novo and Freeman, the accepted analysis in attorney disqualification matters was summary in nature, and thus if a substantial relationship existed between the prior representation and the present litigation, disqualification would and must automatically follow. See Westinghouse Elec. Corp. v. Kerr-McGee Corp., 580 F.2d 1311 (7th Cir.1978). This harsh iron-clad rule, however, was modified in Novo and Freeman. In Novo, this court agreed that the presumption that every attorney in the law firm has knowledge of the confidences and secrets of the firm's clients is rebuttable. Novo, 607 F.2d at 197. This conclusion is necessary, as we noted in Freeman, just four and a half months ago, because "the possible appearance of impropriety ... is simply too weak and too slender a reed on which to rest a disqualification order ...." 689 F.2d at 723. We went on in Freeman to address the question of the quality of proof required to rebut the presumption and held that "if an attorney can clearly and effectively show that he had no knowledge of the confidences and secrets of the client, disqualification is unnecessary ...." Disqualification motions, as we noted, are drastic measures which courts should hesitate to impose except when absolutely necessary. 689 F.2d at 721.

A review of the facts and holding of this court's most recent decision on attorney disqualification, LaSalle National Bank, clearly demonstrates, contrary to the majority's interpretation, that that case does not support an irrebuttable presumption of shared confidences. In LaSalle National Bank, the defendant County of Lake brought a motion seeking disqualification of the plaintiff's law firm, on the grounds that one of the firm's associates had formerly been employed as a State's Attorney in Lake County. After determining that there was a "substantial relationship" between the present litigation and the associate's previous work for the County, this court properly determined that the individual associate was precluded from representing the plaintiff according to the guidelines reaffirmed in this opinion. The court then turned to the question of whether the disqualification of one associate automatically required the disqualification of the whole firm,

"Having found that Mr. Seidler was properly disqualified from representation of the plaintiffs in this case, we must now address whether this disqualification should be extended to the entire law firm of Rudnick & Wolfe. Although the knowledge possessed by one attorney in a law firm is presumed to be shared with the other attorneys in the firm, Schloetter, 546 F.2d at 710-11, this court has held that this presumption may be rebutted. Novo Terapeutisk, 607 F.2d at 197. The question arises here whether this presumption may be effectively rebutted by establishing that the 'infected' attorney was 'screened', or insulated, from all participation in and information about a case, thus avoiding disqualification of an entire law firm based on the prior employment of one member."

Id. at 257 (emphasis added). The court went on to hold that a law firm defending against a disqualification motion may rebut the presumption of intra-firm sharing of confidences by demonstrating that a timely and effective "Chinese Wall" has been established to insulate against the flow of confidences from the tainted lawyer to his colleagues in the law firm,

"The screening arrangements which courts and commentators have approved, ... contain certain common characteristics. The attorney involved in the Armstrong v. McAlpin [625 F.2d 433 (2d Cir.1980) ] case, for example, was denied access to relevant files and did not share in the profits or fees derived from the representation in question; discussion of the suit was prohibited in his presence and no members of the firm were permitted to show him any documents relating to the case; and both the disqualified attorney and others in his firm affirmed these facts under oath. 625 F.2d at 442-43. The screening approved in the Kesselhaut [v. United States, 555 F.2d 791 (Ct.Cl.1977) ] case was similarly specific: all other attorneys in the firm were forbidden to discuss the case with the disqualified attorney and instructed to prevent any documents from reaching him; the files were kept in a locked cabinet, with the keys controlled by two partners and issued to others only on a 'need to know' basis. 555 F.2d at 793. In both cases, moreover, as well as in Greitzer & Locks, the screening arrangement was set up at the time when the potentially disqualifying event occurred, either when the attorney first joined the firm or when the firm accepted a case presenting an ethical problem."

Id. at 259.

The court in LaSalle National Bank concluded that the law firm had failed to rebut the presumption of shared confidences under the facts of that case since "no specific institutional mechanisms were in place to insure that that information was not shared, even if inadvertently," prior to filing of the disqualification motion.

Contrary to the majority's assertion, LaSalle National Bank does not support the majority's reliance on an irrebuttable presumption of shared confidences. Rather, the court in LaSalle National Bank expressly held that the presumption of shared confidences is rebuttable, and that the presumption may be rebutted if the law firm is able to demonstrate that a timely and effective "Chinese Wall" has been established to prevent disclosure of confidences. The LaSalle National Bank decision, like Freeman and Novo, mandates that Schwartz & Freeman be afforded the same opportunity to rebut the presumption of shared confidences.

The majority seeks to ignore the clear import of the LaSalle National Bank case in two ways, both of which are entirely without merit. First, the majority claims that the LaSalle National Bank holding is inapplicable to this case because in LaSalle National Bank a lawyer switched employment from one firm (or government agency) to another law firm, while in this case a law firm switched sides by representing interests adverse to a former client. However, the LaSalle National Bank opinion fails to make a distinction between a lawyer changing employment and a law firm switching sides, nor does it limit its holding to fact situations involving individual attorneys changing employment, but the majority in this case reads these distinctions into the LaSalle National Bank opinion, in a manner which strains the limits of logical legal reasoning. Significantly, both Freeman and the en banc opinion in Novo also fail to allude to the factual distinction which the majority argues is so critical.

Second, the majority contends that Schwartz & Freeman must be disqualified since LaSalle National Bank held that, in order to avoid disqualification, a firm must demonstrate that an effective "Chinese Wall" or other safeguard was established early enough to prevent even an inadvertent intra-firm disclosure of a former client's confidences. The fallacy of the majority's reliance on LaSalle National Bank is patently obvious--how is a judge supposed to determine whether or not timely and effective safeguards have been established if the law firm is afforded no opportunity to rebut the presumption of shared confidences? The critical point made in LaSalle National Bank is that there must be an opportunity to rebut the presumption of shared confidences, and thus LaSalle National Bank is diametrically opposed to the majority decision in this case. Ignoring this critical aspect of the LaSalle National Bank holding, the majority concludes that Schwartz & Freeman must be disqualified since "Schwartz & Freeman has never offered to prove--has never so much as intimated--that any institutional mechanisms were in place in this case." It is obvious why the record is silent on whether in fact Schwartz & Freeman had established, or even attempted to establish, effective safeguards, such as a "Chinese Wall"--the district court based its disqualification order on an irrebuttable presumption of intra-firm sharing of confidences and emphatically blocked Schwartz & Freeman from presenting their full case to rebut the presumption, much less to even address the question of whether or not a "Chinese Wall" was in effect at that time or, whether any safeguards were in effect or even contemplated. In fact, the court at one point even went so far as to threaten to strike on its own motion the sparse rebuttal evidence it did allow Schwartz & Freeman to present, and frustrated Schwartz & Freeman's attempt to preserve their attorney-client relationship and their professional reputation, by imperiously stating: "The point is we are dealing with an irrebuttable presumption...." The facts in the record should not be misconstrued to achieve the desired result. The case law of this circuit mandates that Schwartz & Freeman must be afforded an opportunity to rebut the presumption of shared confidences by demonstrating, if possible, that (1) none of the confidences of NPD (the former clients) have been shared with the Schwartz & Freeman attorneys handling the monopolization suit and (2) that effective safeguards, such as a "Chinese Wall," were instituted as soon as the attorney or law firm became aware, or as soon as a reasonable attorney should have been aware, of the possible conflict of interest. The crucial point is that they should at least be given an opportunity to rebut the presumption of shared confidences.

Furthermore, the majority's extensive reliance on Westinghouse Electric Corp. v. Kerr-McGee Corp., 580 F.2d 1311, 1321 (7th Cir.1978) is clearly unfounded. As we recently recognized in LaSalle National Bank, the Kerr-McGee case involved "simultaneous representation of adverse interests" by the Washington and Chicago offices of a large law firm, and disqualification of the law firm was required since no firm, no matter how large, can represent two sides in a controversy at the same time. (emphasis added). Thus, Kerr-McGee is inapposite to this case involving subsequent representation of adverse interests. The time elapsed since the prior adverse representation should be one factor to consider in deciding whether the presumption of shared confidences has been rebutted. See Liebman, The Changing Law of Disqualification: The Role of Presumption and Policy, 73 Nw.U.L.Rev. 996, 1016 (1979). By analogy, a judge who formerly was a member or associate of a law firm is not barred for life from hearing cases involving his former firm; rather the length of time elapsed since his former employment is one factor the judge must reflect upon and consider in determining if and when to recuse himself.

Applying the LaSalle National Bank, Freeman and Novo analysis to the facts of this case, I agree with the majority that Attorney Fine (the Schwartz & Freeman attorney acting as ostensible counsel for NPD in the stock transfer matter) had access to confidential financial and operating data which would be vital information in the monopolization suit. I disagree, however, with the majority's conclusion that since Attorney Fine had confidential financial information, the entire Schwartz & Freeman law firm should automatically be disqualified because of an irrebuttable presumption that the confidences acquired in the prior representation were necessarily shared with Page, and with other Schwartz & Freeman attorneys involved in the monopolization suit. Rather, the case law of this circuit mandates that the Schwartz & Freeman firm be afforded the opportunity to rebut the questio