Schaefer v. San-Con, Inc.
878 F.2d 285 (1989), 898 F.Supp. 356 (1995)

  • Roberts & Schaefer hired San-Con to build a coal silo. After they finished construction, he silo collapsed. Schaefer sued for damages and breach of contract.
  • San-Con’s insurance company, Hawley, hired a lawyer named Watson from the law firm of Steptoe & Johnson to evaluate the dispute.
    • Turned out, Steptoe & Johnson were representing Robert & Schaefer in an unrelated legal matter.
      • Roberts & Schaefer conducted a conflict of interest determination (as required by Rule 1.7), but didn’t noticed because they ha Steptoe listed by their parent company’s name (Jupiter Industries).
  • Robert & Schaefer contacted Steptoe & Johnson about representing them in the lawsuit against San-Con.
    • Steptoe & Johnson realized that they had a conflict of interest and told Robert & Schaefer they couldn’t represent them. They also withdrew representation from San-Con and Hawley.
  • Robert & Schaefer hired another law firm, Ruley & Everett.
  • Soon after, Ruley & Everett merged with Robert & Schaefer. The new law firm sent a request to San-Con asking for a waiver of conflict of interest.
    • San-Con declined to provide a waiver.
  • Ruley filed a motion to determine if the law firm should withdraw representation from Robert & Schaefer, or if it was ok to proceed absent a waiver from San-Con.
    • The Trial Court refused to hear the issue unless San-Con made a motion to disqualify the law firm, which conveniently enough they did.
  • The Trial Court determined that there was a conflict of interest and that the law firm should be disqualified (under Rule 1.16) from representing Robert & Schaefer.
    • The Trial Court found that there was a conflict of interest even though the representation was for an unrelated matter.
      • Basically, you can’t ‘fraternize with the enemy’, even if the representation of the two clients isn’t adverse.
    • San-Con argued that based on the plain language of Rule 1.9 and Rule 1.10, there was a clear conflict of interest.
    • Ruley argued that they had properly screened Watson from this legal matter.
      • Under Rule 1.10, screening is not allowed.
      • In this case, the problem wasn’t that the law firm might share confidential information between the two cases, it was that there was a general appearance of impropriety and representing the two clients could lead to a loss of confidence by the clients.
    • Ruley further argued that he was just an “of counsel” in the new Steptoe & Johnston, not technically an employee, so there shouldn’t be a problem.
      • However, conflict of interest rules talk about “associations,” and Ruley was clearly “associated” with Steptoe & Johnson, so he was covered under the rule.