## Facts

- NPD Research, Inc. (NPD) was a closely held market-research company; John Malec was an NPD executive and minority shareholder.
- NPD’s owners decided to transfer additional shares to Malec and directed him to obtain legal assistance to structure the transfer in a tax-efficient manner.
- Malec retained Schwartz & Freeman; attorney Richard Fine devised a plan requiring valuation of NPD stock.
- To enable valuation, NPD provided Fine confidential, nonpublic information about NPD’s financial condition, sales trends, and management.
- NPD paid Schwartz & Freeman’s bill (about $850).
- Malec later left NPD, sold his shares back to the other owners, and his wife formed Analytica, Inc. to compete with NPD.
- Analytica retained Schwartz & Freeman to sue NPD for antitrust violations; Pressman & Hartunian later joined as associated trial counsel.

## Issues

1. Whether Schwartz & Freeman had to be disqualified from representing Analytica against NPD due to its prior work involving NPD.
2. Whether Pressman & Hartunian also had to be disqualified based on its association with Schwartz & Freeman in the same litigation.
3. Whether the district court abused its discretion by ordering Schwartz & Freeman to reimburse NPD’s fees and expenses incurred in seeking disqualification, and whether the amount should be increased.

## Decision

- The Seventh Circuit affirmed disqualification of Schwartz & Freeman.
- The Seventh Circuit affirmed disqualification of Pressman & Hartunian as associated counsel.
- The Seventh Circuit affirmed the order requiring Schwartz & Freeman to pay approximately $25,000 in NPD’s fees and expenses related to the disqualification motion and rejected NPD’s request for a higher award.

## Legal Principles

- Under the substantial-relationship test, a lawyer may not represent a new client adverse to a former client in a matter that is substantially related to the prior representation.
- Once a substantial relationship is shown, courts presume that confidential information was shared in the prior engagement and may be relevant to the later adverse representation; the former client need not prove actual misuse.
- The existence and identity of an attorney-client relationship are determined by objective indicators such as who paid the lawyer and who supplied confidential information, not by post hoc characterizations of whom the lawyer “really” represented.
- Disqualification may extend to associated counsel when continued participation would risk use of confidential information or permit circumvention of the conflict rules.
- Fee and expense shifting tied to a disqualification motion is reviewed for abuse of discretion; a reasonable award may be imposed where counsel undertook conflicted representation that required the motion.

## Conclusion

The court held that a law firm that previously received a corporation’s confidential financial and operational information for a stock-valuation matter could not later sue that corporation in substantially related antitrust litigation, and it permitted disqualification to extend to closely associated co-counsel while upholding a discretionary fee award for the costs of obtaining disqualification.


Analytica, Inc. v. NPD Research, Inc., 708 F.2d 1263 (7th Cir. 1983)