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Westinghouse Elec. Corp. v. Kerr-McGee Corp. - 580 F.2d 1311 (7th Cir. 1978)

Rule:

The fiduciary relationship between lawyer and client extends (1) to preliminary consultation by a prospective client with a view to retention of the lawyer, although actual employment does not result; (2) when information is exchanged between co-defendants and their attorneys in a criminal case, an attorney who is the recipient of such information breaches his fiduciary duty if the later, in his representation of another client, is able to use this information to the detriment of one of the co-defendants, even though that co-defendant is not the one which he represented in the criminal case. (3) when an insurer retains an attorney to investigate the circumstances of a claim and the insured, pursuant to a cooperation clause in the policy, cooperates with the attorney, the attorney may not thereafter represent a third party suing the insured nor indeed continue to represent the insurer once a conflict of interest surfaces. (4) where an auditor's regional counsel is instrumental in hiring a second law firm to represent some plaintiffs suing the auditor and where the second firm through such relationship is in a position to receive privileged information, the second law firm, although having no direct attorney-client relationship with the auditor, is disqualified from representing the plaintiffs.

Facts:

Defendants Kerr-McGee, Noranda Mines Limited, Gul Oil Corporation, Gulf Minerals Canada Limited, and Getty Oil Company (Companies), were defendants in an antitrust suit filed by plaintiff Westinghouse Electric Corporation (Westinghouse). Westinghouse's attorney's firm had represented three of the defendant Companies on similar matters and another defendant Company in previous, unrelated matters. The Companies' motions to disqualify plaintiff Westinghouse's attorney were denied. According to the district court, an attorney-client relationship was one of agency to which the general rules of agency applied, and would arise only when the parties have given their consent, either express or implied, to its formation. Thereafter, the Companies sought appellate review.

Issue:

Was an attorney-client relationship one of agency, and would only arise when the parties have given their consent to its formation; thereby justifying the district court’s dismissal of the Companies' motion to disqualify Westinghouse's attorney?

Answer:

No.

Conclusion:

On appeal, the court reversed in part, holding that the court abused its discretion in applying narrow, formal agency rules to determine whether an attorney-client relationship existed with three of the defendants and in not imputing knowledge on plaintiff's attorney. Two contrary undertakings by appellee's attorney occurred contemporaneously. Each involved substantial stakes and was substantially related to the other, thus, outbalancing plaintiff's interest in continuing with its chosen attorney. The court did not abuse its discretion in denying another defendant's motion because the past representations, more than 10 years ago, for two specific matters unrelated to the present case did not warrant disqualification.

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