Novo Terapeutisk Laboratorium A/s v. Baxter Travenol Laboratories, Inc., Gist-Brocades Fermentation Industries, Inc., and Gist-Brocades N. V.

607 F.2d 186, 201 U.S.P.Q. (BNA) 642, 1979 U.S. App. LEXIS 12460
CourtCourt of Appeals for the Seventh Circuit
DecidedAugust 16, 1979
Docket78-1180
StatusPublished
Cited by104 cases

This text of 607 F.2d 186 (Novo Terapeutisk Laboratorium A/s v. Baxter Travenol Laboratories, Inc., Gist-Brocades Fermentation Industries, Inc., and Gist-Brocades N. V.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Novo Terapeutisk Laboratorium A/s v. Baxter Travenol Laboratories, Inc., Gist-Brocades Fermentation Industries, Inc., and Gist-Brocades N. V., 607 F.2d 186, 201 U.S.P.Q. (BNA) 642, 1979 U.S. App. LEXIS 12460 (7th Cir. 1979).

Opinions

GRANT, Senior District Judge.

The questions presented in this appeal arise from the district court’s denial of the defendant’s motion to disqualify plaintiff’s counsel.

A clarification of the counsel in this action is essential. The opposing attorneys in this present appeal were, at one time, members of the same firm, known as Hume, Clements, Brinks, Willian, Olds & Cook, Ltd., (the Hume firm). On 31 December 1976, Granger Cook, Jr., left the Hume firm, and Mr. Cook is presently representing the defendants-appellants while, at the same time, attorneys from the Hume firm are presently representing the plaintiff-appellee.

The corporations listed as defendants-appellants have the following relationship: The original corporation involved was Baxter Laboratories (Baxter). Baxter Travenol Laboratories is its successor in interest and Travenol Laboratories is a wholly-owned subsidiary. Baxter Travenol Laboratories had an operation called the Wallerstein Division. On 11 July 1977, Gist-Brocades Fermentation, Inc., and Gist-Brocades, N.V., acquired V/allerstein from Baxter and agreed to indemnify Baxter with respect to this patent litigation, because it was allegedly the Wallerstein Division that was infringing the patent owned by plaintiffappellee (Novo).

The original dispute stems from two competing patent applications. Plaintiff (Novo) filed its patent application for a milk-coagulating enzyme on 21 November 1966, while defendants filed a similar patent application on 6 December 1967. In 1971 the U.S. Patent Office declared an interference proceeding between the parties, which was finally resolved in favor of the plaintiff on 23 February 1976 when the Supreme Court denied certiorari. The parties apparently agree that the old Hume firm did not represent Baxter in this interference litigation, although contemporaneously during 1975, the Hume firm was retained by Baxter for what the plaintiff characterizes as unrelated matters. Defendants claim that Attorney Granger Cook, Jr., was in charge of the Baxter account while he was with the Hume firm and that other present members of the Hume firm (including Mr. Ropski, who is now listed as counsel for plaintiff) rendered services to defendants. The key contention of defendants is that during 1976, Baxter anticipated a patent infringement action against them by Novo; and that during July of 1976, Cook, then a partner in the Hume firm, spent several hours reviewing legal authorities and conferring with Baxter attorneys in connection with a matter identified as “Microbial Rennet”. It is suggested that the 2Vi hours were spent in consideration of initiating a declaratory judgment action against Novo (plaintiff in the present action), rather than wait for the patentee to bring an infringement action. However, no declaratory judgment action was brought and in December, 1976, Cook left the Hume firm, taking the Baxter account with him.

In February 1977, plaintiff filed the present patent infringement action against Baxter in the U.S. District Court for the District of South Carolina. On 1 August 1977, this case was transferred from South Carolina to the Northern District of Illinois. On 30 August 1977, the Hume firm filed motions to appear for plaintiff which were granted despite defendants’ objections. Defendants thereafter filed motions to disqualify the Hume firm, but the district court' denied the motions, holding that the “Canons of Ethics” have not been violated. The district court stated in part:

Assuming, arguendo that the services rendered by Hume were related to the patents here in issue, these services con[188]*188stituted approximately two percent of the total representation of Travenol. Furthermore, those services were rendered primarily under the direction of Granger Cook. Travenol’s current counsel who left Hume in 1976. Under these circumstances, this Court does not find that legal services by Hume were substantially related to the subject matter of this suit.

The defendants have perfected this interlocutory appéal from the district court’s denial of the disqualification motions.

The issues presented are: (1) What is the proper standard for appellate review of orders on disqualification motions; (2) whether the subject matters in the two representations in the case at bar are substantially related; and (3) whether the presumptions of access to confidential information should be given conclusive status.

I — STANDARD FOR APPELLATE REVIEW

Plaintiff asserts that the proper standard for appellate review of a district court’s decision on attorney disqualification is whether the appellant can establish an abuse of discretion by the trial court. Defendants argue that a strict abuse of discretion standard is inappropriate where the district court has applied the wrong rule of law.

The ends of the spectrum between a strict or liberal standard are represented by two cases — the most stringent viewpoint is exemplified in Gas-A-Tron of Arizona v. Union Oil Company of California, 534 F.2d 1322, 1325 (9th Cir. 1976), where the court stated that it would not disturb the district court’s exercise of its discretion in fulfilling the responsibility of controlling the conduct of lawyers practicing before it, if the record reveals any sound basis for its discretion in disqualifying or refusing to disqualify a lawyer.1

In Aetna Casualty and Surety Company et al. v. United States, 570 F.2d 1197 (4th Cir. 1978), the Fourth Circuit took a more lenient view of an appellate court’s scope of review:

Turning to the merits of the appeal, the plaintiffs contend that the scope of our review is limited to a determination of whether the district court abused its permissible discretion. While some of the cases support the position of the plaintiffs on this point, more recently the courts have expressed serious reservations about whether the limited abuse of discretion standard is appropriate in disqualification cases where only a purely legal question is at issue. Woods v. Covington Cty. Bank, 537 F.2d 804 (5 Cir. 1976); Kroungold v. Triester, 521 F.2d 763, 765, n.2 (3 Cir. 1975); American Roller Company v. Budinger, 513 F.2d 982, 985, n.3 (3 Cir. 1975). We are inclined to agree with the Fifth Circuit that “[i]n disqualification cases such as this, where the facts are not in dispute, District Courts enjoy no particular functional advantage over appellate courts in their formulation and application of ethical norms,” and that it is appropriate for us “to determine whether the District Court’s disqualification order was predicated upon a proper understanding of applicable ethical principles.” (Footnotes omitted.)

570 F.2d 1197, 1200.

In our own Circuit, there are four recent cases that have involved the disqualification question, Cannon v. U. S.

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Bluebook (online)
607 F.2d 186, 201 U.S.P.Q. (BNA) 642, 1979 U.S. App. LEXIS 12460, Counsel Stack Legal Research, https://law.counselstack.com/opinion/novo-terapeutisk-laboratorium-as-v-baxter-travenol-laboratories-inc-ca7-1979.