Pennwalt Corp. v. Plough, Inc.

85 F.R.D. 264, 208 U.S.P.Q. (BNA) 561, 1980 U.S. Dist. LEXIS 9851
CourtDistrict Court, D. Delaware
DecidedJanuary 18, 1980
DocketCiv. A. No. 79-226
StatusPublished
Cited by20 cases

This text of 85 F.R.D. 264 (Pennwalt Corp. v. Plough, Inc.) is published on Counsel Stack Legal Research, covering District Court, D. Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Pennwalt Corp. v. Plough, Inc., 85 F.R.D. 264, 208 U.S.P.Q. (BNA) 561, 1980 U.S. Dist. LEXIS 9851 (D. Del. 1980).

Opinion

OPINION

MURRAY M. SCHWARTZ, District Judge.

The issue presented is whether plaintiff’s counsel should be disqualified from further participation in this Lanham Act, 15 U.S.C. § 1125(a), action by reason of its representation of defendant’s sister corporation, Scholl, Inc. (“Scholl”), in an anti-trust suit. A chronological statement of largely uncontested facts is essential to an understanding of the conclusion that defendant’s motion to disqualify should be denied.

The Philadelphia law firm1 of Dechert, Price & Rhoads (“DP&R”) has been plaintiff Pennwalt Corporation’s (“Pennwalt”) primary and lead outside litigation counsel continuously since 1956. (Doc. 51, at ¶ 1). In 1977, Pennwalt, a manufacturer of an athlete’s foot remedy, DESENEX, became unhappy with the comparative advertising claims made by defendant Plough, Inc. (“Plough”) with respect to its athlete’s foot remedy, “AFTATE.” The parties, with in-house and outside legal counsel including DP&R attorneys Matthew Broderick and Aaron Finkbiner, met on June 16, 1977. (Doc. 51, ¶ 5). At that meeting, Pennwalt reiterated its intention first stated on May 18, 1977 (Doc. 51, ¶ 3) to institute suit against Plough if the challenged advertisements were not stopped. Michael Pietran-gelo, house counsel and Vice-President of Plough and Associate General Counsel of Schering-Plough Corporation (“Schering-Plough”), also attended the June 16, 1977 meeting. By letter dated July 5,1977, over the signature of Pietrangelo, Plough, after stating its advertising claims were proper, undertook to terminate certain offending commercials, reserving the right to engage in comparative advertising in the future. (Doc. 76, Exh. J).

Plough did not run the offending advertisements in 1978. (Doc. 73, ¶ 7). Instead, it took the offensive by filing challenges with the three national television networks to Pennwalt’s “nothing is better than DE-SENEX” advertisement. Pennwalt did not use the services of DP&R, instead opting to retain a specialist in network television advertising challenge procedures in defending against Plough’s network challenge to Pennwalt’s advertising.

A then unrelated event, but nonetheless one of considerable portent to the present motion, took place in 1978. In June of that year, DP&R undertook in the Eastern District of Pennsylvania to defend Scholl, along with four other shoe manufacturers and an employee of one of them, in a matter styled The Shoe Barn Ltd. v. Acme Boot Co., Inc., et a1., C.A.No. 78-1666. (Doc. 52, ¶ 1). Shoe Barn is an anti-trust case filed by a plaintiff who alleges a conspiracy to refuse to deal and to fix resale prices of shoes by roughly 100 named defendants. (Doc. 52, 57¶ 1 and 2). At that time Scholl was headquartered in Chicago operating two divisions, footwear and footcare, with one legal department servicing both divisions. (Doc. 62, ¶ 10). But for follow-up billing reminders by the accounting department of DP&R, all DP&R communications with Scholl have been by two attorneys of [266]*266DP&R, Henry Kolowrat and Jean Weyman Burns. (Doc. 52, ¶ 6). All of the Kolowrat and Burns communications with Scholl until their withdrawal as counsel for Scholl in the Shoe Barn case have been limited to the operating personnel of Scholl’s footwear division, Scholl’s accountants, Scholl’s inside counsel still located in Chicago, and Scholl’s outside referral counsel, Henry L. Mason of the Chicago law firm of Sidley & Austin. (Doc. 52, ¶ 6). Mr. Kolowrat and Ms. Burns during the course of their representation of Scholl never obtained any information concerning Schering-Plough or Plough or any of their activities and in fact never had any communications of any kind with either Schering-Plough or Plough. Id.

On April 2, 1979, Schering-Plough acquired Scholl as a wholly owned subsidiary. (Doc. 62, ¶ 2). Since Plough was already a wholly-owned subsidiary of Schering-Plough, Scholl and Plough became sister corporations as of that date with some overlap of boards of directors and officers.2 On May 11, 1979, DP&R filed this lawsuit on behalf of Pennwalt against Plough charging it with false, misleading and deceptive advertising claims with respect to its athlete’s foot remedy AFTATE vis-a-vis Penn-walt’s DESENEX, all in violation of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), as well as pendent state-law violations. While DP&R did not know Scholl, the corporation it had been defending in the anti-trust litigation since June 1978, and Plough, the corporation it sued on May 11, 1979, were sister corporations on that date, it became aware that Scholl had been purchased by Schering-Plough around the end of May, 1979. (Doc. 79, p. 50).

DP&R never informed either Scholl or Pennwalt that it was acting on behalf of one sister corporation and against the other. Instead, Pietrangelo, who undoubtedly knew of DP&R’s representation of Penn-wált against Plough in the instant litigation in May 1979, learned of DP&R’s representation of Scholl in October 1979 when a statement for legal services from DP&R to Scholl came to his attention as the individual having principal legal responsibility for Schering-Plough’s U. S. Consumer Operations Division. Scholl was placed in that division on the date of its acquisition by Schering-Plough. Plough was already a member of that division. (Doc. 62, ¶2).

Pietrangelo’s late acquisition of knowledge of DP&R’s representation of Scholl is explained by the fact that in June 1979 he began preliminary steps to consolidate the Scholl legal services and staff into the legal department of the division in Memphis, Tennessee, which included among other things institution of a new reporting system requiring all Scholl legal matters to be reported directly to him. (Doc. 62, ¶¶5 and 6). Scholl, while still headquartered in Chicago, will, by the end of 1980, complete a move to the Memphis facility where the division and Plough are located. (Doc. 62, ¶3). According to Pietrangelo, “[tjhere is and will continue to be one legal department with six attorneys handling the legal problems of the Schering-Plough U. S. Consumer Operations Division. Communications with counsel representing Scholl in the Shoe Barn case, and with counsel representing Plough in the present case, have been and will continue to be made through the Division’s legal department, all under my general authority and supervision. Inside counsel at Scholl headquarters in Chicago, who had previously worked exclusively on Scholl matters, including the Shoe Barn case, will now be working on a variety of Schering-Plough U. S. Consumer Operations Division matters and will soon relocate to the Division’s headquarters in Memphis, . . . .” (Doc. 62, ¶ 9). Further, “[ujnder the current organization of legal services for the Schering-Plough U. S. Consumer Operations Division of which Scholl [267]*267is part, there is still no separation made between foot care and foot wear legal matters.” (Doc. 62, ¶ 10). Finally, there is accepted for purposes of this disqualification motion the fact that “[t]he U. S. Consumer Operations Division of Schering-Plough is currently considering the marketing through Scholl of a new non-prescription athlete’s foot product line.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

The Finley Group v. Roselli
W.D. North Carolina, 2019
Goodrich v. Goodrich
158 N.H. 130 (Supreme Court of New Hampshire, 2008)
Elonex I.P. Holdings, Ltd. v. Apple Computer, Inc.
142 F. Supp. 2d 579 (D. Delaware, 2001)
Manufacturers Hanover v. Stamford Hotl., No. Cv91 0116971s (Nov. 4, 1992)
1992 Conn. Super. Ct. 11122 (Connecticut Superior Court, 1992)
Gould, Inc. v. Mitsui Mining & Smelting Co.
738 F. Supp. 1121 (N.D. Ohio, 1990)
Picker International, Inc. v. Varian Associates, Inc.
869 F.2d 578 (Federal Circuit, 1989)
United States v. Cooper
672 F. Supp. 155 (D. Delaware, 1987)
Warpar Manufacturing Corp. v. Ashland Oil, Inc.
606 F. Supp. 852 (N.D. Ohio, 1984)
INA Underwriters Insurance v. Nalibotsky
594 F. Supp. 1199 (E.D. Pennsylvania, 1984)
Glover v. Libman
578 F. Supp. 748 (N.D. Georgia, 1983)
McCourt Co., Inc. v. FPC Properties, Inc.
434 N.E.2d 1234 (Massachusetts Supreme Judicial Court, 1982)
Matter of King Resources Co.
20 B.R. 191 (D. Colorado, 1982)
United Nuclear Corp. v. General Atomic Co.
629 P.2d 231 (New Mexico Supreme Court, 1980)

Cite This Page — Counsel Stack

Bluebook (online)
85 F.R.D. 264, 208 U.S.P.Q. (BNA) 561, 1980 U.S. Dist. LEXIS 9851, Counsel Stack Legal Research, https://law.counselstack.com/opinion/pennwalt-corp-v-plough-inc-ded-1980.