## Facts

- In 1972, Edward Welter founded Fabwel, Inc. (Fabwel), and the law firm Warrick & Boyn (W&B) served as counsel for Fabwel on corporate matters.
- Cynthia Gillard, a W&B attorney, represented Fabwel in its acquisition of a company owned by Larry Farver and prepared transaction documents, including non-competition and non-disclosure agreements involving Farver and Welter.
- Fabwel adopted an executive benefit plan in 1985; Gillard later drafted a fully amended benefit plan that replaced the earlier plan.
- Gillard continued to perform legal work for Fabwel on other business matters, including securities and acquisition-related work.
- In 1997, Welter sold Fabwel to Fibreboard Corporation. As part of that transaction, Fabwel and Welter executed an amendment affecting the benefit plan, and Gillard represented Welter in connection with the sale.
- After later corporate transactions, Fabwel was merged into Exterior Systems, Inc. (ESI), which became Fabwel’s successor.
- In 2000, Farver left ESI and formed Noble Composites, Inc. with several former Fabwel employees, including Welter.
- ESI terminated the executive benefit plan and stopped paying Welter, and ESI then sued Noble, Farver, Welter, and others, alleging breaches of non-competition and non-disclosure agreements.
- Defendants asserted counterclaims alleging that ESI breached obligations owed to them under the same set of agreements and related arrangements.
- Gillard and W&B appeared as counsel for Welter in the litigation, and ESI moved to disqualify them based on their prior work for Fabwel/ESI’s predecessor.

## Issues

1. Whether, under the forum’s attorney-conduct rules governing former-client conflicts, Gillard and W&B had a disqualifying conflict because their prior representation of Fabwel (and related work involving Welter) was substantially related to the current litigation.
2. Whether ESI, as successor to Fabwel, could invoke Fabwel’s former-client rights to seek disqualification.
3. Whether the attorney’s prior work for the corporation (and for Welter in related transactions) created a risk that confidential information from the earlier representation could be used against the former corporate client in this lawsuit.

## Decision

- The court granted ESI’s motion to disqualify Gillard and W&B from representing Welter in the case.
- The court found that the prior representation and the present dispute were substantially related because Gillard had drafted and advised on agreements and plan documents that were directly in dispute, including noncompete/nondisclosure instruments and the executive benefit plan and amendments.
- Because of that substantial relationship, the court applied the usual presumption that counsel had access to confidential information from the former representation that could be relevant in the present litigation.
- The court treated ESI as entitled to assert the former-client protections associated with Fabwel, given ESI’s status as Fabwel’s successor following the merger and related transactions.
- The court concluded that disqualification was the appropriate remedy to protect the former client’s confidentiality and the fairness of the proceeding.

## Legal Principles

- In a federal diversity case, attorney disqualification is governed by the forum court’s standards and the professional-conduct rules applied in that forum.
- A lawyer may be disqualified in a former-client conflict when (a) an attorney-client relationship existed with the moving party (or its predecessor/successor for conflict purposes) and (b) the current matter is the same as, or substantially related to, the prior representation.
- When matters are substantially related, courts generally presume the lawyer received confidential information during the earlier representation; the former client need not prove actual disclosure or use of confidences.
- A corporate successor may, in appropriate circumstances, assert the predecessor corporation’s former-client protections when the earlier legal work and confidential information would have belonged to the predecessor entity.
- Work that includes drafting and advising on the very contracts and benefit-plan documents later placed at issue strongly supports a finding of a substantial relationship and the resulting presumption of access to relevant confidences.

## Conclusion

The court disqualified Welter’s counsel because the law firm’s earlier representation of Fabwel—now succeeded by ESI—was substantially related to the litigation over noncompete, nondisclosure, and benefit-plan obligations that the same attorney had helped prepare, creating a presumed risk that confidential information from the former representation could be used against the former corporate client in the current case.


Exterior Systems, Inc. v. Noble Composites, Inc., 175 F. Supp. 2d 1112 (2001)