Harmar Drive-in Theatre, Inc. v. Warner Bros. Pictures, Inc. , 239 F.2d 555 ( 1956 )

SWAN, Circuit Judge.

These appeals bring up an order which denied, without opinion, a motion by defendants to disqualify the firm of Malkan & Ellner and the two lawyers constituting the firm, from appearing for or representing the plaintiffs in two actions each of which claimed treble damages for alleged violation of the anti-trust laws. In three prior appeals similar motions in other anti-trust suits have come before this court.¹

Before reaching the merits it is necessary to consider whether the order is appealable. This question was not raised in the original briefs of the parties, but at the request of the court supplemental briefs have been filed discussing it. In each of the four appeals mentioned in note 1, supra, the court assumed jurisdiction without discussion, other than the brief statement in the Fisher case, 232 F.2d 199, at page 204, that “these orders of disqualification are collateral to the main case.” In three of the prior appeals the court affirmed orders which granted motions to disqualify ; in the Austin case it affirmed an order which, as in the case now before us, denied the motion. A majority of the court are of opinion that with respect to appealability no. distinction exists between orders granting disqualification and those refusing to do so. We think they fall within the class of orders described in Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546, 69 S.Ct. 1221, 1225, 93 L.Ed. 1528, as “that small class which finally determine claims of right separable from, and collateral to, rights asserted in the action, too important to be denied review and too independent of the cause itself to require that appellate consideration be deferred until the whole case is adjudicated.” Also closely analogous is Collins v. Miller, 91 U.S.App.D.C. 143,198 F.2d 948, 37 A.L.R.2d 746, which held appealable an order denying a motion to remove an administrator because of dilatory and improper administration.

Having concluded that appellate jurisdiction exists, we pass to a consideration of the merits of the appeal. The question is whether the principle of the Laskey case, 224 F.2d 824 or that of the Austin ease, decided in the same opinion, should be applied to the facts of the present case. In Laskey the plaintiff had employed the firm of Malkan & Isaeson to bring an anti-trust action in the Western District of Pennsylvania. “After the dissolution of that firm, Malkan joined with one Ellner to form the firm of Malkan & Ellner and this firm was employed by Laskey.to bring a new.anti-trust suit not differing in any material respect, in the Southern District.of New York. It was .held that because of Isacson’s disqualification, his partner Malkan was vicariously disqualified for the particular case, and that the subsequent dissolution of the partnership did not cure his ineligibility to act in that case. In Austin it was held that the case came to the new firm of Malkan & Ellner “through channels having nothing whatsoever to do with Malkan’s prior association with Isaeson” and “in the absence of any showing that Malkan had received confidential information from Isaeson.” 224 F.2d 824, 827. Consequently Malkan & Ellner were not disqualified to represent Fisher.

In the case at bar it appears that prior to the dissolution of the firm of Malkan & isaeson that firm was engaged by members of the Stern family to bring antitrust suits in the Western District of Pennsylvania on behalf of three drive-in theatre corporations referred to as “South Park,” “Community” and “Blue Dell.” The Stern family owned all the stock of these three companies. This family also owned all the stock in “Colonial Drive-In Theatre” and 50 per cent, of the stock in “Harmar Drive-In Thea-tre,” the other 50 per cent, being held by the Rodnok family. Mr. Ernest Stern was an officer of all five of these corporations, and all of them were included in the Associated Drive-In Theatre chain. Shortly after the dissolution of the firm of Malkan & Isacson in July 1954, Mal-kan & Ellner filed new complaints in the same court on behalf of “South Park,” “Community” and “Blue Dell,” adding new defendants and increasing the damage claims. Had these new actions been filed in the Southern District of New York it seems clear that the attorneys would be disqualified under the Laskey decision. In May or early June 1955, George and Ernest Stern engaged Mal-kan & Ellner to bring the instant actions on behalf of “Colonial” and “Harmar,” respectively. The claims are substantially the same as those in the cases of the other three members of the chain of drive-in theatres. The instant actions were commenced June 30, 1955, and the defendants’ motion to disqualify counsel Was filed November 15th. It was denied without opinion on December 24, 1955.

This court’s decision in the Laskey appeal, as we understand it, rested upon the possibility that the partner (Isacson), Who had formerly represented Warner Bros. Pictures, had passed on to his partner (Malkan) confidential information that he got from the defendant while representing it. True, the court spoke of an “irrebuttable inference”; but we take it that what was meant was that a court should not pass upon that issue, just as it will not pass upon the question whether an express trustee who buys the trust res for himself has in fact gotten any advantage in the sale from being a trustee. Thus we think it clear that Malkan was disqualified as an attorney for “South Park,” “Community” and “Blue Dell” because he was Isacson’s partner, and that fact prevented Malkan from showing that he had learned nothing from Isacson. Moreover, if the two plaintiffs at bar were identical in interest with the three just mentioned, we cannot believe that it makes any difference that they are separate corporations. If the beneficial ownership of all the corporations is the same, and the disqualification, imputed to the innocent partner, lasts after the dissolution of his partnership with Isacson, there is just as much reason to suppose that the defendants at bar will suffer in the defense of the instant actions as in the defense of the other three actions. Therefore, as to “Colonial,” which is completely controlled by the Sterns, Malkan is disqualified. As to “Harmar,” the situation is not quite so clear. The Sterns owned only half the stock but it was they who engaged Mal-kan. Under these circumstances we think that the situation called on him to show that the Sterns did not control “Harmar,” and this he did not do. We hold him disqualified also in the “Har-mar” action.

It is stated in the appellees’ brief, without contradiction by the appellants, that the firm of Malkan & Ellner has been dissolved and stipulations have been filed in each of the instant cases substituting Arnold Malkan individually as attorney for the plaintiff. Consequently the defendants’ appeals are moot as to the firm.

The order is reversed and the cause remanded with directions to grant the motion in so far as it seeks the disqualification of Arnold Malkan.

1 . Laskey Bros. of W. Va., Inc., v. Warner Bros. Pictures (Austin Theatre, Inc., v. Warner Bros. Pictures), 224 F.2d 824, certiorari denied 350 U.S. 932, 76 S.Ct. 300; Fisher Studio v. Loew’s Incorporated, 2 Cir., 232 F.2d 199. See also Consolidated Theatres v. Warner Bros. Circuit Management Corp., 2 Cir., 216 F. 2d 920, which established the controlling principles.