author: MILES, Chief Judge.

text:
    James F. DALRYMPLE, Plaintiff, v. NATIONAL BANK AND TRUST COMPANY OF TRAVERSE CITY, et al., Defendants. Joel R. GAFF, et al., Plaintiffs, v. NATIONAL BANK & TRUST COMPANY OF TRAVERSE CITY, et al., Defendants. MACCABEES MUTUAL LIFE INSURANCE COMPANY, Plaintiff, v. David E. PEARCE, et al., Defendants.
    Nos. G81-709 CA7, G81-866 CA7 and G85-103 CA7.
    United States District Court, W.D. Michigan, S.D.
    Aug. 8, 1985.

      Stuart D. Hubbel, Traverse City, Mich., J. Bruce Donaldson, Bloomfield Hills, Mich., and Dirk J. Holkeboer, Kalamazoo, Mich., for plaintiffs.
    Larry C. Willey, Grand Rapids, Mich., Stephen Novack, Chicago, Ill., for intervening plaintiff, FDIC.
    Richard Rossman, Lawrence Campbell, Detroit, Mich., John W. Allen, Kalamazoo, Mich., Gordon J. Quist, Richard J. Quist, Grand Rapids, Mich., Jeffrey J. McManus, Michael J. Lemcool, Traverse City, Mich., John C. Jones, Grand Rapids, Mich., Stephen C. Chambers, Traverse City, Mich., William S. Farr, Grand Rapids, Mich., Stanley E. Burke, Elk Rapids, Mich., Harold E. Nelson, Grand Rapids, Mich., and Lawrence G. Campbell, Detroit, Mich., for defendants.
   OPINION ON MOTIONS TO DISQUALIFY

MILES, Chief Judge.

Now before the Court are motions by the defendant directors (Purvis, Stolen, Com-stock, Kellogg, Green, Schmuckal, Lindsay, Underwood, Carlson & Bay) to disqualify counsel for the FDIC, Novak & Macey, and to disqualify co-counsel for the plaintiff-shareholders, J. Bruce Donaldson.

In 1981, plaintiff Dalrymple filed a derivative action in the Grand Traverse County Circuit Court. On September 1, 1981, the Board of Directors of the National Bank & Trust Company of Traverse City (NBT) formed a Special Litigation Committee, comprised of directors Lindsay, Stolen and Comstock, to investigate the allegations of the complaint. The Committee retained the law firm of Baxter & Hammond to act as legal counsel to the Committee. Attorney Robert Hammond advised and assisted the Committee in its investigation and helped draft the report of the Committee’s findings, which was submitted to the full Board on January 8, 1982.

The Committee was also charged with investigating the allegations of a derivative action filed in 1981 by plaintiff Gaff, also in the Grand Traverse County Circuit Court. The actions by Dalrymple and Gaff were subsequently consolidated in July, 1983 by the Hon. William Brown. The Committee, again assisted by attorney Hammond, reported its findings and conclusions in a report supplementing the report previously filed with respect to the Dalrymple action.

Both actions were found to be without merit by the Special Litigation Committee, which recommended that the full Board take action to have the cases dismissed.

On September 1, 1983, J. Bruce Donaldson became a partner in the law firm of Dykema, Gossett, Spencer, Goodnow & Trigg. At all times after his entry into the firm, until the FDIC filed its Second Amended Complaint on February 11, 1985, he has continued to represent Dalrymple in the prosecution of the present action. In August, 1984, certain partners of Baxter & Hammond—including Richard Baxter and Robert Hammond—became partners of the firm of Dykema, Gossett. At no time has Dykema, Gossett represented either NBT or any of those directors seeking disqualification of J. Bruce Donaldson as counsel for Dalrymple in the present action.

In early 1984, the Dalrymple litigation was greatly expended by the filing of the Amended and Supplemental Consolidated Complaint. In response to the new complaint, the Board of Directors of NBT appointed a second Special Litigation Committee, comprised of directors Steckley, Wagner, and Nixon, to investigate the new claims. This Committee retained the firm of Levy & Erens, of Chicago, to assist its investigation. Stephen Novack and Eric Macey were partners in that firm. On February 9, 1984 the firm sent a letter to the Board confirming its retention for purposes of investigating the claims in the newly-filed complaint. Novack and/or Macey attended at least one board meeting, on February 21, 1984. At this time, defendants allege that Novack and/or Macey stated that, on the basis of the investigation that they had theretofore conducted, there was no basis to the claims of mismanagement, and that the Dalrymple-Gaff allegations were unfounded. On March 9, 1984, the Bank failed. Thus, the association of attorneys Novack and Macey, for the firm of Levy & Erens, with the bank, lasted approximately one month, from February to March, 1984.

Later, Novack and Macey left the firm of Levy & Erens to form their own firm, “Novack & Macey”. They are now representing the FDIC in its claims on behalf of the failed bank against the former officers and directors.

Motion to Disqualify Novack & Macey

Because of the investigation undertaken by attorneys Novack and Macey during their one-month retention by the Board of Directors, and because of the alleged statement they had found no wrongdoing on the part of the directors, defendants claim that the two attorneys will be “necessary witnesses” in this case. In fact, defendants claim that Novack’s and Macey’s testimony will be “crucial” (Brief in support of Motion to Disqualify, p 6).

Alternatively, defendants claim that Novack & Macey must be disqualified because of a conflict of interest between their present representation of the FDIC against the officers & directors, and their former investigation on behalf of the Bank at the instance of the Board of Directors.

Although the parties conceive that the first of the two issues is the more critical, the Court believes that the spectre of a conflict of interest between Novack & Macey’s previous and present representation poses the greater cause for concern.

In determining whether an attorney-client relationship has been created, the focus is on the putative client’s subjective belief that he is consulting a lawyer in his professional capacity, and on his intent to seek professional legal advice. Westinghouse Electric Corp. v. Kerr-McGee Corp., 580 F.2d 1311 (7th Cir.1978). Although no Sixth Circuit case has spoken to this issue, the Westinghouse standard was adopted by Judge Gilmore in Kearns v. Fred Lavery Porsche/Audi Co., 573 F.Supp. 91 (E.D. Mich. 1983), aff’d 745 F.2d 600 (Fed.Cir. 1985), cert. denied, — U.S. — 105 S.Ct. 967, 83 L.Ed.2d 971 (1985). Novack and Macey claim that it was clear to all involved that their representation was engaged exclusively on behalf of the bank, and that they never purported to represent any director or officer in his individual capacity. However, because affidavits submitted by directors Green, Underwood, and Carlson in support of the motion to disqualify tended to establish that they believed Novack and Macey were retained, at least in part, to exonerate them from any individual wrongdoing, the Court determined that an evidentiary hearing was necessary to evaluate the conflicting factual assertions and issues of credibility. General Mill Supply Co. v. SCA Services Inc., 697 F.2d 704 (6th Cir.1982).

Rule 1.9 of the Model Rules of Professional Conduct provides, in part:

A lawyer who has formerly represented a client in a matter shall not thereafter: (a) represent another person in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless the former client consents after consultation.

Although few eases construe the recently-approved Model Rules, which, as of August 2, 1983, supplant the ABA Code of Professional Responsibility, the Court believes it not inappropriate to turn for guidance to the extant body of law.

To disqualify counsel on the basis of a conflict of interest between former and present clients, it is first necessary to show that an attorney-client relationship exists or has existed between counsel and the movant. American Can Co. v. Citrus Feed Co., 436 F.2d 1125, 1129 (5th Cir. 1971); In re Yarn Processing Patent Validity Litigation, 530 F.2d 83, 90 (5th Cir. 1976). This requirement has been questioned where, for example, in the absence of a “strict contractual attorney-client relationship”, an attorney’s current representation is adverse to parties whose liability is “inextricably intertwined” with a co-defendant and former client of the attorney whose disqualification is sought. Trone v. Smith, 621 F.2d 994, 1001-1002 (9th Cir. 1980); and, of course, where an individual reasonably believes an attorney-client relationship has been created, Westinghouse Electric Corp. v. Kerr-McGee Corp., supra; Kearns v. Fred Lavery/Porsche-Audi Co., supra. Foremost among the underlying concerns is the possibility of the attorney’s disloyalty and breach of faith towards one who had previously entrusted him with confidences.

In this case, the Court believes the essential inquiry must be how the defendant-directors perceived their relationship with attorneys Novack and Macey. In the absence of a confidential relationship between counsel and the movant-defendants, there can be no breach of faith requiring disqualification.

The documentary evidence leaves no doubt that Levy & Erens were retained to represent the Bank exclusively, indeed, the scope of Levy & Erens’ charge was to investigate potential claims against former and present directors. The directors were advised to seek their own, separate counsel. (Joint Ex. A, Items 2, 3, 4, 9). Attorney fees were paid by NBT, not by or for the directors. (Carlson Aff., ¶ 3; Green Aff. ¶ 3). It was explicitly understood by all the directors that attorneys Novack and Macey were investigating claims of wrongdoing against them individually, and that Novack and Macey were not representing them in their individual capacities. As Dr. Wagener stated in his deposition, pp. 5-6:

Okay. The directors that were present were aware of the fact that this committee was charged with investigating the possibility of claims, even against them individually, or of the finding of no claims against them individually. It was a two-way street, and they all knew that. In my opinion, they knew that.
* * * * * *
We were told by the bank’s attorney at that time that we could become adversaries, Levy & Erens could become adversaries of each of us and if we needed counsel down the road, we should hire our own counsel. That’s about as specific as you can get.

(Emphasis added).

And, as Mr. Bay stated in his deposition, p. 19,

Q. So you understood that the marching order, so to speak, of this independent committee was to literally investigate you, as well as all other sitting directors.
A. That’s right.
Q. You were what is commonly referred to as a target; is that correct?
A. Well, we were included in the investigation, yes.

Each hearing witness, without exception, testified that Levy & Erens did not represent any director in his or her individual capacity.

These facts starkly demonstrate that no attorney-client relationship has ever arisen between Messrs. Novack and Macey and the defendants, nor can a fiduciary relationship of loyalty and trust reasonably be inferred from the attorneys’ contacts with the directors. At all times, Novack and Macey were acting on behalf of their sole client, NBT, and at all time the directors understood that they were “targets” and “potential adversaries” of the attorneys. Therefore, Rule 1.9 is not violated by Novack & Macey’s present representation on behalf of NBT against its former officers and directors.

The Court further agrees with counsel that Rule 3.7 of the Model Rules does not require their disqualification. That rule prohibits an attorney from acting as an advocate in a case in which he is likely to be a “necessary witness.” First, the Court finds that the “alleged statement” was never made. (Tr. pp. 58, 68, 90, 103-04, 123) Second, even if the statement were made, it is clear that testimony from Novack and Macey regarding their brief, aborted investigation will not be “crucial” or “necessary” as the Rule contemplates.

The motion to disqualify Novack & Macey is DENIED.

Motion to Disqualify J. Bruce Donaldson

The motion to disqualify Mr. Donaldson raises considerably more difficult factual and legal issues.

The members of the first Special Litigation Committee, Lindsay, Comstock and Stulen, at all times understood that their explicit charge was to investigate Dalrymple’s allegations of wrongdoing on the part of NBT’s officers and directors. The directors knew that they were the targets of the investigation, and that facts indicating individual misconduct would be included in the report. The report itself was not intended to be confidential; if, as the principals hoped, the report exonerated them, it would provide the foundation for a motion to dismiss. Such a motion to dismiss was in fact filed in the Grand Traverse County Circuit Court, for which the Committee’s report was an exhibit.

The Court specifically finds that the members of the Committee, and the remaining directors, had no expectation of confidentiality with respect to their contacts with attorney Hammond.. The directors knew that he was representing the Bank; that he was assisting them to investigate and ferret out their own possible acts of misconduct; that any such wrongdoing, once discovered, would be disclosed to the full Board; and that their own position vis-a-vis the Bank as joint defendants or adversaries had not yet been determined, pending the outcome of the investigation.

Contrary to defendants’ assertion (Reply to Brief in Opposition to Motion to Disqualify and Enjoin Counsel, p. 5, pldg. 362), neither the members of the Special Litigation Committee nor the other directors had any belief, reasonable or otherwise, that Attorney Hammond was acting as his or her personal attorney. It was understood at all times that Hammond represented the Bank exclusively.

The report of the first Committee concluded that the allegations of Dalrymple’s complaint were meritless, and recommended that the full Board seek to have the complaint dismissed. Although a motion to dismiss was filed, it was never ruled on. Thus, the Dalrymple and Gaff actions continued.

On March 9, 1984, NBT was closed by the Comptroller of the Currency. Its assets were sold to the FDIC, which also acts as NBT’s receiver. On February 11, 1985, the FDIC on behalf of NBT, filed suit against many of NBT’s former officers and directors.

By order of this Court on February 11, 1985 the derivative counts of the Dalrymple-Gaff amended and supplemental consolidated complaint were stayed. The FDIC, as NBT’s receiver, is solely responsible, in the absence of defalcation, for the prosecution of claims owned by the corporate entity, NBT. However, the shareholders were allowed to engage in simultaneous pre-trial proceedings with the FDIC, with respect to the shareholders’ Amended Count V; this count purports to state a direct cause of action owned by the shareholders in their individual capacities. Amended Count V incorporates many of the derivative allegations of the amended and supplemental consolidated complaint.

The pertinent provisions of the Model Rules of Professional Conduct are:

Rule 1.10 Imputed Disqualification: General Rule
(a) While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rules 1.7, 1.8(c), 1.9 or 2.2.
(b) When a lawyer becomes associated with a firm, the firm may not knowingly represent a person in the same or a substantially related matter in which that lawyer, or a firm with which the lawyer was associated, had previously represented a client whose interests are materially adverse to that person and about whom the lawyer had acquired information protected by Rules 1.6 and 1.9(b) that is material to the matter.

In determining whether disqualification of counsel on grounds of conflict of interest is required, the Court must be sensitive to two overriding interests—preservation of the integrity of the adversary process; and solicitousness for a client’s right to be represented by counsel of his choice. Evans v. Artek Systems Corp., 715 F.2d 788 (2d Cir.1983). The Court must also be sensitive to tactical considerations which may impel a party to seek disqualification of a particularly competent or formidable opponent.

The crux of defendants’ argument is that Hammond, if practicing alone, would be prohibited by Rule 1.9 from suing NBT’s former directors in this case on behalf of Dalrymple, and that Donaldson is therefore imputedly disqualified by Rule 1.10(a). Donaldson, on the other hand, contends that Rule 1.10(b) controls this situation. The Court agrees.

The comment to Rule 1.10 provides:

Principles of Imputed Disqualification
The rule of imputed disqualification stated in paragraph (a) gives effect to the principle of loyalty to the client as it applies to lawyers who practice in a law firm. Such situations can be considered from the premise that a firm of lawyers is essentially one lawyer for purposes of the rules governing loyalty to the client, or from the premise that each lawyer is vicariously bound by the obligation of loyalty owed by each lawyer with whom the lawyer is associated. Paragraph (a) operates only among the lawyers currently associated in a firm. When a lawyer moves from one firm to another, the situation is governed by paragraphs (b) and (c).

(Emphasis added). As subparagraph (b) specifically treats the problem of former clients of an attorney who joins a firm, it, not subparagraph (a), governs.

The Sixth Circuit’s test for disqualification under the now-superseded Code of Professional Responsibility prohibited an attorney from representing a client against a former client if the former and current representations were both “adverse” and “substantially related.” General Electric Co. v. Valeron Corp., 608 F.2d 265, 267 (6th Cir.1979), cert. denied, 445 U.S. 930, 100 S.Ct. 1318, 63 L.Ed.2d 763 (1980); Melamed v. ITT Continental Baking Co., 592 F.2d 290, 292 (6th Cir.1979). These criteria have been incorporated into the current MRPC. There is no question that the prior representation—Hammond’s services to NBT—relates to the same matter as the current representation now at issue—Donaldson’s representation of the shareholders.

It has frequently been stated that an attorney “may not serve the corporation in a particular matter and then represent a plaintiff a suit against it or its officers in a substantially-related matter.” Evans v. Artek Systems Corp., supra at 792; Trone v. Smith, 621 F.2d 994 (9th Cir.1980); Note, Developments in the Law—Conflicts of Interest in the Legal Profession, 94 Harv.L. Rev. 1244, 1345 (1981). The rational for this rule has been enuniciated as resting upon the rather fluid, protean nature of the corporate attorney’s relationship to his “client,” which, at one time may be the corporation itself, and, at another time, may be management. Note, supra, 94 Harv.L.Rev. at 1345. In such cases, the courts have disqualified from subsequent adverse representation former corporate attorneys who have been in a position to receive confidential information about the corporation or its officers and directors, regardless of whether confidences were actually imparted. Trone v. Smith, supra; Richardson v. Hamilton, 469 F.2d 1382 (3d Cir.1972), aff’g., 333 F.Supp. 1049 (E.D.Pa.1971); Chugach v. United States District Court for the District of Alaska, 370 F.2d 441 (9th Cir.1967); Cannon v. U.S. Acoustics Corp., 398 F.Supp. 209 (N.D.Ill.1975). The inquiry in such cases is whether the attorney was in a position to acquire confidences of his client; the actual receipt of such confidential information is irrelevant. Cannon v. U.S. Acoustics Rop., supra at 223; Trone v. Smith, supra at 998.

As previously noted, it is not even necessary that a strict contractual attorney-client relationship exist. An implied attorney-client relationship exists whenever the lay party submits confidential information to an attorney whom he reasonably believes is acting to further his interests. Westinghouse Electric Corp. v. Kerr-McGee Corp., 580 F.2d 1311 (7th Cir.1978); International Paper Co. v. Lloyd Mfg. Co., 555 F.Supp. 125 (N.D.Ill.1982); Kearns v. Fred-Lavery/Porsche Audi Co., 573 F.Supp. 91 (E.D.Mich.1983), aff’d, 745 F.2d 600 (Fed.Cir.1984), cert. denied, — U.S. —, 105 S.Ct. 967, 83 L.Ed.2d 971 (1985).

It is also clear that, absent either an express or implied attorney-client relationship, the prohibitions against subsequent representation adverse to a former “client” are not implicated. There must, as a threshold matter, first be an attorney-client relationship, for the strictures to come into play. Trone v. Smith, supra, (attorney had formerly represented corporate officer personally in substantially related matter); International Paper Co. v. Lloyd Mfg. Co., supra at 132 (“no evidence that Velsicol entertained a belief, reasonable or otherwise, that Wildman represented Velsicol ...”); Westinghouse Electric Corp. v. Kerr-McGee Corp., supra at 1321 (“[the companies] each entertained a reasonable belief that it was submitting confidential information ... to a law firm which had solicited the information upon a representation that the firm was acting in the undivided interest of each company.”); Kearns v. Fred Lavery/Porsche Audi Co., supra at 95 (attorney received confidential information from prospective client during preliminary consultations); Glover v. Libman, 578 F.Supp. 748, 757 (N.D.Ga.1983) (“Our understanding ... was Joe Manning was our attorney, representing us as co-owners of the program”); Wayland v. Shore Lobster & Shrimp Corp., 537 F.Supp. 1220, 1223 (S.D.N.Y.1982) (“... Wayland could not have reasonably believed or expected that any information given to the firm would be kept confidential from the other shareholders or from the corporation as an entity.”); U.S. Industries, Inc. v. Goldman, 421 F.Supp. 7, 11 (S.D.N.Y.1976) (“... no factual allegations that PB & W has obtained or will utilize information obtained in confidence from defendant”).

The role of the Special Litigation Committee is anomalous, as it involves an ostensibly independent investigation by directors of their colleagues’ and their own, misconduct, assisted by an attorney selected precisely because he had no previous professional relationship with either the corporate entity or its directors. Problems of conflicting loyalties in connection with previous transactions and advice given to the corporation and its managers do not, therefore, arise. Contrast, Note, supra, 94 Harv.L.Rev. at 1345.

In such a case, the expectation of confidentiality or lack thereof, reposed by the directors in the attorney charged with assisting them in conducting a thorough, unbiased, complete investigation becomes paramount. Defendants’ contentions that they “had no understanding that their interests were not congruent with the Bank’s” (Reply to Brief in Opposition to Motion to Disqualify and Enjoin Counsel, p. 6) and that they believed that Hammond “was on their side of the litigation” (Brief, p. 5), are not substantiated by the evidence. Stulen testified that he “absolutely” expected any adverse information about himself or any other director to be disclosed in the report, “wherever the chips fell” (7-5-85 Hearing Tr., Tr. pp. 107-108), that he was investigating his own conduct (Tr. pp. 111-112), that he understood that he and other directors were potential defendants (Tr. p. Ill), that he and the other members of the Special Litigation Committee kept “an open mind to see whether there was anything that might trigger a [red] flag”, regardless of whether the potential misconduct had been alleged in the Dalrymple and Gaff complaints (Tr. p. 121), that he and the other committee members would “have gone back and looked to see if [they] ... missed something” (Tr. p. 122). Stulen also testified that committee members were acutely aware “that we might have to be on the stand to support our work, and so consequently we did the best job we could.” (Tr. pp. 76-97).

The documentary evidence establishes that, at the time of the creation of the Special Litigation Committee, NBT had not yet determined the position it should take with respect to the Dalrymple and Gaff matters, and that Hammond was chosen because of his “complete independence”:

WHEREAS, the Board of Directors on September 1, 1981, established the Special Litigation Committee for the purpose of investigating wrongdoings alleged to have been committed by officers and/or directors of the Bank in the matter of Dalrymple v. National Bank and Trust Company of Traverse City, et al. and to determine the position that the Bank shall take with respect to that litigation and/or with respect to officers and/or directors alleged to have committed such wrongdoings; and
WHEREAS, the Special Litigation Committee retained Baxter & Hammond of Grand Rapids, Michigan, as independent legal counsel, having determined that the law firm has had no prior affiliation or connection with the Bank, its officers or directors and is completely independent;

(Def. Exhibit C) (Emphasis added).

WHEREAS, legal counsel for the Bank has recommended that a special committee be established for an independent investigation of such alleged wrongdoings; that such special committee be authorized to retain legal counsel without prior affiliation with the Bank or its officers or directors for the purpose of advising the committee in the conduct of its investigation; that the special committee be directed to report the results of such investigation to the full Board, accompanied by such recommendations as the Special Committee deems appropriate, including the position the Bank should take in the pending litigation by Mr. Gaff and/or with respect to the officers or directors alleged to have participated in wrongdoings; and that the committee be composed of directors who are not alleged to have participated in, or benefited from, such alleged wrongdoings;

(Def. Exhibit F) (Emphasis added).

Further, NBT already had its own general corporate counsel, Mr. Rollert, a fact which tends to belie defendants’ assertions that they believed Hammond jointly represented NBT and themselves.

This evidence makes clear that the committee members, and other directors, fully understood that they were potential adversaries to NBT, and that it had not yet been decided whether their interests were congruent with those of the Bank. Hammond’s former client, NBT, has raised no objection to Donaldson’s continued appearanee in this case; this, too, supports the conclusion that there is no betrayal of a confidential attorney-client relationship by Donaldson’s continued appearance in this case.

In light of this evidence, the Court cannot find the requisite attorney-client relationship, express or implied, between the individual defendants and attorney Hammond.

In the absence of such a relationship, Rule 1.10(b) does not require Donaldson’s disqualification.

The Court recognizes defendants’ concern that Hammond’s partnership with Donaldson, as counsel for the shareholders, creates the appearance of Hammond’s having “changed sides.” See, e.g., Allegaert v. Perot, 565 F.2d 246, 251 (2d Cir.1977); Evans v. Artek Systems Corp., supra at 793. That concern does not arise, however, because of a pre-existing attorney-client relationship between Hammond and defendants, but because of the prospect that Donaldson may be required to impeach evidence favorable to the defense.

The conclusion that Donaldson is not disqualified by virtue of his partner’s former representation of NBT does not mean that there are no ethical obstacles to Donaldson’s continued appearance in this case. Rule 3.7(b) of the MRPC provides,

(b) A lawyer may act as advocate in a trial in which another lawyer in the lawyer’s firm is likely to be called as a witness unless precluded from doing so by Rule 1.7 or Rule 1.9.

Rule 1.7 provides,

Rule 1.7 Conflict of Interest: General Rule
(a) A lawyer shall not represent a client if the representation of that client will be directly adverse to another client, unless:
(1) the lawyer reasonably believes the representation will not adversely affect the relationship with the other client; and
(2) each client consents after consultation.
(b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer’s responsibilities to another client or to a third person, or by the lawyer’s own interests, unless:
(1) the lawyer reasonably believes the representation will not be adversely affected; and
(2) the client consents after consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved.

At the hearing, it became clear that the independence of those involved in the creation of the first Special Litigation Committee is questioned by the shareholders. Candidly, it is in the shareholders’ interests to impugn the findings of the committee and to demonstrate that it was no more than a sham proceeding. Defense counsel “hit the nail on the head” in decrying the prospect of one partner, Donaldson, impeaching the integrity of the work of another partner, Hammond. Such a spectacle, without more, would be abhorrent. On the other hand, it also implicates the adequacy of Donaldson’s representation of his clients, the shareholders. One can easily envision less-than-zealous advocacy by Donaldson on the part of Dalrymple in order to preserve intra-firm harmony between the two partners.

The rule permits an attorney to act as an advocate at trial where a fellow partner is likely to be a witness, except where precluded from doing so by, among other things,

... the lawyer’s responsibilities to another client, or to a third person, or by the lawyer’s own interests.

Hammond feels an obligation to uphold the report of the first committee, and recognizes that he is likely to be called as a witness for the defense. (Tr. pp. 10,15-16, 18).

Although Hammond may not be a “necessary” witness, as required by Rule 3.7(a), Rule 3.7(b) imposes no requirement that the lawyer’s testimony be “necessary,” only that he be a “likely” witness. Hammond is a “likely” witness in this case.

Although Donaldson may well be disqualified from acting as trial counsel, the rule does not require his complete disqualification at this point. Trial of the shareholders’ claims is not imminent, and is indeed speculative, in light of outstanding questions of whether there should be joint or separate trials of the respective claims of the FDIC and the shareholders.

The Court can envision the necessity of Donaldson’s disqualification at some future time; that moment has not yet arrived.

Accordingly, the motion to disqualify J. Bruce Donaldson is DENIED WITHOUT PREJUDICE.

IT IS SO ORDERED.

      . Although only Pearce and Mann were named as defendants by the Dalrymple complaint, references to "unnamed" directors and officers left no doubt in the minds of such "unnamed" directors that they were potential defendants.

      . The Court previously recognized that the shareholders might have a right to pursue derivative claims upon a showing of dereliction by the FDIC. See, Landy v. Federal Deposit Insurance Corp., 486 F.2d 139 (3d Cir.1983). (2-11-85 Hearing Tr. pp. 6-7). No such showing has been made.

      . Defendants claim that they were not specifically advised that their interests were adverse to those of NBT. (Reply to Brief in Opposition to Motion to Disqualify and Enjoin Counsel, p. 6). The Comment to Rule 1.13 provides, in part,
      Clarifying the Lawyer’s Role
      There are times when the organization’s interest may be or become adverse to those of one or more of its constituents. In such circumstances the lawyer should advise any constituent, whose interest the lawyer finds adverse to that of the organization of the conflict or potential conflict of interest, that the lawyer cannot represent such constituent, and that such person may wish to obtain independent representation. Care must be taken to assure that the individual understands that, when there is such adversity of interest, the lawyer for the organization cannot provide legal representation for that constituent individual, and that discussions between the lawyer -for the organization and the individual may not be privileged.

        Whether such a warning should be given by the lawyer for the organization to any constitu

        ent individual may turn on the facts of each case.

      The facts of this case, including the fact that NBT already had general corporate counsel, show that defendants clearly understood that Hammond was not acting “for them."

      . In exploring the logic of Hammond’s attorney-client relationship with NBT, the Court does not believe it obvious that Hammond could not actively oppose the defendants, even now, by reason of a "former, adverse” representation. Lest any party mistake comment for holding, the Court expressly does not decide the point.
      Hammond’s former client, NBT, has apparently repudiated the conclusions and recommendations of the first Special Litigation Committee. Would Hammond, as co-author of the report, be ethically prohibited from actively advancing that position, assuming arguendo that he still represented the Bank?
      Had the report concluded that individual misconduct had occurred, and recommended that NBT bring suit against its officers and directors, there would arguably be no inconsistency in Hammond himself representing the Bank in any such suit. This possibility was rendered moot by the fortuitous turn of events, but was limned most forcefully in deposition testimony with regard to the disqualification of Novack & Macey:

        We were told by the bank’s attorney at that time that we could become adversaries, Levy & Erens could become adversaries of each of us and if we needed counsel down the road, we should hire our own counsel. That’s about as specific as you can get.

      (Deposition testimony of Creighton Wagener, pp. 5-6). (Emphasis added).
      And, in describing Mr. Bay's testimony, FDIC counsel Novack brought out a very telling admission by Bay:
      Mr. Bay was also the only witness that he asked a very interesting question. He was asked—Mr. Bay, if the bank hadn’t closed, and if the independent committee concluded that there were actions to be pursued against present directors, wouldn't it have been logical and expected that Levy & Erens would represent the bank against the directors.
      Your Honor, Mr. Bay, one of the movants in this case, a defendant in this case, a director in this case, said "yes", because then, he wouldn’t have to invest any more money in the new lawyer to get smart on the case.

      (6-28-85 Hearing Tr. p. 142; Bay Dep., pp. 27-30). (emphasis added).
      A similar rationale was expressed in Evans v. Artek, supra at 792, in the context of an intracorporate dissident seeking to bring suit for mismanagement:
      However, when conflicts arise among factions within a corporation and its counsel is unable to represent all factions, since to do so would be to represent ‘differing interests,’ ABA Com. on Ethics and Professional Responsibility, Code of Professional Responsibility, Ethical Consideration 5-14; see Yablonski v. United Mine Workers, 448 F.2d 1175 (D.C.Cir.1971) (per curiam), an individual member of management or of the board of directors has the right to seek the advice of an attorney who does not represent the corporation as an entity but who can instead represent the plaintiff in an individual capacity or the faction of which the plaintiff is a member. In doing so, such individual member of management or of the board does not necessarily create an attorney-client relationship between the consulted attorney and the corporate entity itself. To so hold would be to penalize unnecessarily the intra-corporate dissident, or ‘whistleblower,’ since he/she would then be forced, if he/she were advised by his/her independent counsel that corporate management was violating the rights of stockholders and he/she then wished to take action, to hire a second attorney to bring suit.
      An alternative scenario has Hammond and the Special Litigation Committee recommending discontinuance of the Dalrymple-Gaff suits, but soon thereafter, the Bank changes its position, and requests Hammond to bring suit. Although concerns of personal integrity and independent judgment might well compel Hammond to decline, it is not at all clear that a "former adverse representation” is implicated. See, e.g., Note, Independent Representation for Corporate Defendants in Derivative Suits, 74 Yale Law J. 525, 538, n. 69 (1965), where, with respect to the reports of special litigation committees, it was remarked,
      Admittedly, an anomalous situation may arise should the board of directors reject the memorandum opinion, for the independent counsel might be asked to represent the corporation in court in a manner which is inconsistent with his recommendations. It is not uncommon, however, for lawyers to continue to represent clients who have rejected their advice.

      . The Court explicitly states that it ascribes no such meretricious motives to the principals involved with the first Special Litigation Committee (or the second, for that matter). Nonetheless, the shareholders, as interested party-litigants, would undoubtedly seek to diminish the Committee and deprecate its findings.


source: Caselaw Access Project

author: FITZGERALD, Chief Judge.

license: Public Domain

text:
    Mary OLYMPIC, Plaintiff, v. UNITED STATES of America, et al., Defendants.
    Civ. No. A82-396.
    United States District Court, D. Alaska.
    Aug. 8, 1985.

      Donald Cooper, Alaska Legal Services, Anchorage, Alaska, for plaintiff.
    Bruce Landon, Asst. U.S. Atty., Anchorage, Alaska, for defendants.
   MEMORANDUM AND ORDER

FITZGERALD, Chief Judge.

Plaintiff Mary Olympic appeals from a decision of the Interior Board of Land Appeals (IBLA) rejecting her request that the agency reinstate her father’s Native allotment application and permit her to amend the land description therein. Olympic and defendant United States filed cross motions for summary judgment. For the reasons set forth below, I grant Olympic’s motion for summary judgment and reverse the IBLA’s decision.

Background

Alexis Gregory, Olympic’s father, filed a Native allotment application in 1960 for land which he and his family had used since at least as early as 1922. The application was filed pursuant to the Alaska Native Allotment Act of 1906, 34 Stat. 197, as amended (repealed 1971). An official of the Bureau of Indian Affairs (BIA) of the Department of the Interior (DOI) assisted Gregory in plotting the location of his allotment on a map attached to his application. Gregory also submitted an Evidence of Occupancy form listing a log cabin and two log caches as improvements on the land.

The Bureau of Land Management (BLM) of the DOI conducted a field examination of Gregory’s allotment by airplane in 1961. Although the examiners found no improvements on the land described on the application, they located improvements “approximately one mile northeast” but noted the improvements “do not appear to be of the size and number as claimed by the applicant.” After speaking with two witnesses who substantiated Gregory’s use of land in the vicinity of the area plotted on the application map, the examiners concluded that Gregory “has undoubtedly complied with the regulations as to use of the land in the area” and recommended that Gregory “be requested to submit a better description that will include his improvements and not exceed 5 acres so that the improvements can be located and positively identified.”

BLM examiners conducted a second field examination in 1963 and again were unable to locate the claimed improvements. They concluded:

It appears that the applicant should be requested to submit a description for the land on which his improvements are actually located. However, if the present description actually describes the land desired by the applicant, the evidence of occupancy should be rejected as the applicant has not actually occupied and appropriated the land to his own use.

Because BLM examiners were unable to locate Gregory’s improvements on the land described in the application, the BLM sent Gregory a letter in 1964 requesting that he submit a corrected land description. Gregory signed a receipt indicating he received the letter, but he did not attempt to file a corrected land description. In 1967, the BLM twice requested that the BIA contact Gregory and assist him in filing a new description, but the BIA was not successful in contacting Gregory. Gregory died on September 7, 1967. Without knowledge of Gregory’s death, the BLM rejected Gregory’s application in a decision dated October 13, 1967. The decision, sent to Gregory, was returned to the BLM marked “Deceased.” Neither the BLM nor the BIA made any attempts to contact Gregory’s heirs regarding the allotment application.

In May 1975, Mary Olympic, Alexis Gregory’s daughter, requested that the BLM reopen Gregory’s case so that she could correct the land description. The BLM denied the request. Olympic renewed her request in 1976. The BLM again denied it. Olympic appealed to the IBLA, which upheld the BLM’s denial in 1980, and again, on reconsideration, in 1982. See Mary Olympic, 47 IBLA 58 (1980); Mary Olympic (On Reconsideration), 65 IBLA 26 (1982).

The IBLA held that because Gregory’s allotment application had been finally rejected by the BLM in 1967, there was no application “pending” on December 18, 1971, the effective date of the Alaska Native Claims Settlement Act (ANCSA). 47 IBLA at 62-63; 65 IBLA at 32-33. When Congress enacted ANCSA, it repealed the Alaska Native Allotment Act, but included a savings clause for any application “pending before the Department of the Interior on December 18, 1971.” ANCSA § 18(a), 43 U.S.C. § 1617(a) (1982). According to the IBLA, had Olympic requested, before December 18, 1971, that the BLM reopen Gregory’s application, the BLM might have been permitted to do so. The IBLA held, however, that “[b]y failing to act before the passage of ANCSA, [Olympic] allowed any right to reopen the application to lapse.” 47 IBLA at 62.

The IBLA additionally ruled that even if Olympic’s claim were not barred by the repeal of the Native Allotment Act, Olympic had no right to amend her father’s application. 47 IBLA at 63-64; 65 IBLA at 30-32. According to the IBLA, there is no vested right to an allotment until use and occupancy of a given parcel coincide with an allotment application for the same parcel. Because Gregory had not perfected his right to an allotment at the time of his death, there was no inheritable property right which survived his death to be passed on to Olympic.

Olympic then filed this action in district court seeking declaratory and injunctive relief. Olympic filed a motion for partial summary judgment to require the BLM to reinstate and adjudicate Gregory’s allotment application. The government filed a cross motion for summary judgment to declare Gregory’s original allotment application legislatively approved but to disallow any amendment to the original land description.

Discussion

Resolution of this case turns on the proper interpretation of § 905 of the Alaska National Interest Lands Conservation Act (ANILCA), 43 U.S.C. § 1634 (1982). ANILCA was enacted on December 2, 1980, almost eight months after the IBLA issued its original decision in Mary Olympic, 47 IBLA 58 (April 14, 1980). After that decision was issued, both parties petitioned for reconsideration. The IBLA granted the petitions in part “to consider ... the provisions of the Alaska National Interest Lands Conservation Act (ANILCA), Act of December 2, 1980, 94 Stat. 2371, as they relate to this appeal.” Mary Olympic (On Reconsideration), 65 IBLA 26, 27 (1982). However, the IBLA made only a single brief reference to ANILCA in its decision. See id. at 32. I now find that ANILCA § 905 is of central importance to this case, and I address it at some length.

First, subsection (a) of ANILCA § 905 provides for legislative approval of certain Native allotments. That statute states in relevant part:

(a) Approval of applications for certain lands ...
(1) Subject to valid existing rights, all Alaska Native allotment applications made pursuant to the Act of May 17, 1906 (34 Stat. 197, as amended) [the Native Allotment Act] which were pending before the Department of the Interior on or before December 18, 1971, and which describe ... land that was unreserved on December 13, 1968 ... are hereby approved on the one hundred and eightieth day following December 2, 1980, except where provided otherwise by ... this subsection____

The IBLA did not mention § 905(a) or the issue of legislative approval at all in its opinion on reconsideration. However, the government now concedes that § 905(a) provides for legislative approval of Gregory’s allotment as described in Gregory’s original application, and that Gregory’s heirs are entitled to the land therein described. I hold that § 905(a) applies here to legislatively approve Gregory’s allotment application.

The government, nevertheless, contends that Olympic has no right to amend the land description to entitle her to land other than that described by Gregory in his original application. Resolution of this dispute hinges on the correct interpretation of subsection (c) of § 905.

Section 905(c) provides in relevant part:

(c) Amendment of land description in application ...
An allotment applicant may amend the land description contained in his or her application if said description designates land other than that which the applicant intended to claim at the time of application and if the description as amended describes the land originally intended to be claimed.

In its decision on reconsideration in this case, the IBLA stated that the right to amend is limited to the applicant and is thus inapplicable where the applicant has died prior to the attempted amendment. Mary Olympic (On Reconsideration), 65 IBLA 26, 32 (1982). The government urges affirmance of the IBLA, arguing that the right to amend an allotment application to correct an erroneous land description is a personal right of the applicant alone. Olympic, on the other hand, claims that § 905(c) permits the heirs of a deceased applicant to amend an allotment application which incorrectly describes the land sought by the applicant. This is the dispute at the heart of this case.

In a case, such as this one, involving statutory interpretation, I must start with the language of the statute itself. Consumer Product Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980). In general, a court must show deference to the interpretation of a statute by an agency charged with its administration. Udall v. Tollman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965); United States v. Louisiana-Pacific Corp., 754 F.2d 1445, 1447 (9th Cir.1985). The principle of deference is not, however, without exceptions, and the court remains the final authority on important questions of statutory construction. Volkswagenwerk Aktiengesellschaft v. Federal Maritime Commission, 390 U.S. 261, 272, 88 S.Ct. 929, 935, 19 L.Ed.2d 1090 (1968); Livermore v. Heckler, 743 F.2d 1396, 1404 (9th Cir.1984); Patagonia Corp. v. Board of Governors of the Federal Reserve System, 517 F.2d 803, 812 (9th Cir.1975). “[The court] must reject administrative constructions of a statute that are inconsistent with the statutory mandate or that frustrate the policy that Congress sought to implement.” Louisiana-Pacific, 754 F.2d at 1447; see also Bob Jones University v. United States, 461 U.S. 574, 586, 103 S.Ct. 2017, 2025, 76 L.Ed.2d 157 (1983). Interpretations of a statute which lead to absurdity of result should be avoided. Pacific Mutual Life Insurance Co. v. American Guaranty Life Insurance Co., 722 F.2d 1498, 1500 (9th Cir.1984).

By its express language, ANILCA § 905(c) permits “an allotment applicant” to amend a land description. The statute does not explicitly extend this right to heirs of an applicant.. The IBLA held that the right to amend is a personal right of the applicant alone.

According to the arguments advanced by the government, Mary Olympic is entitled to the parcel of land identified on the map submitted with Gregory’s original allotment application even though this may not be the parcel used, occupied, and improved by Gregory and his family. Likewise, in other cases where an allotment applicant died without correcting an erroneous land description, the heirs would receive land, but not the land used and improved by their forebears.

Olympic contends that the government’s interpretation of § 905(c) leads to an unreasonable result inconsistent with congressional purpose in enacting this provision. I agree. The legislative approval provision in § 905(a) automatically approves pending allotment applications. To convey to an applicant’s heirs a parcel of land, but not the land which the applicant used and improved and for which the applicant intended to apply, is an absurd result.

The legislative history of ANILCA § 905 further supports Olympic’s argument. The Senate Report on ANILCA states in part:

Alaska Native Allotments
Section 905 approves specified applications for allotments under the 1906 Alaska Native Allotment Act and provides further authority for the amendment and adjustment of such applications. The Committee’s intent is to promote allotment finality by Section 905 and thereby to promote conveyance finality under the Alaska Native Claims Settlement Act.
... Under current departmental regulations, all timely allotment applications must be field-examined and adjudicated on a parcel-by-parcel basis, a process which has proved to be time-consuming and expensive.
Until shortly before the passage of the Alaska Native Claims Settlement Act, rural Alaska Natives were generally unaware of the availability of allotments. A longstanding failure to implement the 1906 Act, cultural and language barriers, and the isolation of most Alaska villages resulted in a low application rate until the late 1960’s. In 1970, an allotment assistance program jointly implemented by the Rural Alaska Community Action Program and the Bureau of Indian Affairs, began to reach Natives residing in remote villages.
The resultant increase in the application rate left over 7,400 allotment claims to be adjudicated following the passage of the Alaska Native Claims Settlement Act. Most applicants had long been qualified for allotments, but had neither the means nor the technical knowledge necessary to initiate the process earlier. The complexities of allotment adjudication, as well as uncertainty introduced by litigation, have slowed the allotment process and pose a risk that multiple re-adjudications of certain applications will be necessary.
The pendency of large numbers of allotment applications will impede timely conveyance of lands to Native village corporations, notwithstanding other statutory measures to expedite such conveyances ____
... The statutory approval implemented by Section 905 is intended to summarily approve allotments in all cases where no countervailing interest requires full adjudication. It is anticipated that final conveyance of land to village corporations will thereby be expedited and that the village reconveyance plans required by Section 14(c) of the Alaska Native Claims Settlement Act will be made less burdensome and confusing.

S.Rep. No. 413, 96th Cong., 2d Sess. 237-38, reprinted in 1980 U.S.Code Cong. & Ad.News 5070, 5181-82. As to subdivision (c) of § 905, the Report continues:

A significant percentage of Alaska Native allotment applications do not correctly describe the land for which the applicant intended to apply. Technical errors in land description, made either by the applicant or by the Department in computing a metes-and-bounds or survey description from diagrams, are subject to correction under authority of Section 905(c). In accordance with the Department’s existing procedures for the amendment of applications, subsection (c) requires that the amended application describe the land the applicant originally intended to apply for and does not provide authority for the selection of other land. The allotment application, as amended, is subject to statutory approval or adjudication under the terms of Section 905 on the basis of the corrected land description.

Id. at 286, reprinted in 1980 U.S.Code Cong. & Ad.News at 5230.

I find that Congress’ intent in enacting § 905 was to facilitate approval of the backlog of Native allotment applications by dispensing with the usual time-consuming adjudication procedures. Congress recognized the extent of the erroneous-land-description problem when it noted that “[a] significant percentage” of applications misdescribed the land sought. The Senate Report provides that “[technical errors in land descriptions ... are subject to correction ... [i]n accordance with the Department’s existing procedures for the amendment of applications.” Id. The legislative history indicates no congressional intent to limit the right to amend only to applicants themselves.

In the past, the BLM has permitted heirs of Native allotment applicants to file amended applications to correct erroneous land descriptions. See Exhibit 47 to Plaintiff’s Motion for Partial Summary Judgment (filed May 18, 1984). Congress intended in § 905(c) that corrections in land descriptions be allowed “[i]n accordance with the Department’s existing procedures for the amendment of applications.” I find that the “Department’s existing procedures” included a policy of allowing heirs to amend land descriptions.

My conclusion is further supported by the general principle that statutes passed for the benefit of Indians (including Alaska Natives) are to be liberally construed, and doubtful expressions should be resolved in the Indians’ favor. Wilson v. Omaha Indian Tribe, 442 U.S. 653, 666, 99 S.Ct. 2529, 2537, 61 L.Ed.2d 153 (1979); Pence v. Kleppe, 529 F.2d 135, 140 (9th Cir.1976) (court cites this principle in case involving Alaska Native Allotment Act); Aguilar v. United States, 474 F.Supp. 840, 846 (D.Alaska 1979) (protection of Native property rights under Alaska Native Allotment Act is an element of the federal government’s trustee relationship toward Alaska Natives). The Alaska Native Allotment Act was passed to enable Alaska Natives to protect the lands which they used and occupied from encroachment by nonNatives. See H.R.Rep. No. 3295, 59th Cong., 1st Sess. (1906), quoted in Pence, 529 F.2d at 141. ANILCA was enacted to “promote allotment finality” and to address problems caused by Natives’ lack of awareness and technical knowledge of the allotment process. Because both provisions were enacted for the Natives’ benefit, they must be liberally construed in the Natives’ favor. Allowing the heirs of applicants to amend the land description fulfills this requirement.

The government claims that reference to an allotment “applicant” in § 905(c) as contrasted to reference to allotment “applications” elsewhere in § 905 compels a contrary result. I am not persuaded. Both words appear throughout § 905, often in close proximity to each other, see, e.g., § 905(a)(5)(C), and I do not find the distinction determinative here.

The government further argues that because the test for determining the permissibility of an amendment is based on an applicant’s intent, Congress meant to limit the right to amend to applicants themselves who could competently provide evidence of their own intent. Heirs of deceased applicants, according to this argument, would frequently be unable to furnish adequate evidence of intent. I recognize, as does Olympic in her supporting papers, that an heir may face a difficult or impossible task in proving the intent of the original applicant. However, this does not warrant prohibiting all amendments by all heirs. The Department of the Interior must afford each heir an opportunity to prove the applicant’s intent.

For all these reasons, I conclude that the IBLA’s interpretation of ANILCA § 905(c) is unreasonable and leads to an unreasonable result. I find that to fulfill the congressional purposes inherent in the Alaska Native Allotment Act and ANILCA, heirs of deceased applicants should be permitted to amend applications to correct erroneous land descriptions. I accordingly reverse the decision of the IBLA.

I therefore GRANT Olympic’s motion for partial summary judgment and DENY the government’s cross-motion for summary judgment. The Department of the Interior shall allow Olympic to amend the land description in Gregory’s application to describe the land Gregory originally intended to claim. The Department shall approve or adjudicate Gregory’s application, as amended, pursuant to ANILCA § 905(a) and 905(c).

This case is REMANDED to the Department of the Interior for proceedings consistent with this decision.

ORDERED ACCORDINGLY.

      . Olympic’s Memorandum in Support of Plaintiffs Motion for Partial Summary Judgment, filed May 18, 1984, contains a thorough recitation of the facts in this case with citations to numerous supporting documents. Only a brief summary of the facts will be repeated here.


author: JOHN W. OLIVER, Senior District Judge.

text:
    Milton E. RAMPY, Plaintiff, v. SOUTHWESTERN BELL TELEPHONE COMPANY, Defendant.
    No. 85-0754-CV-W-1.
    United States District Court, W.D. Missouri, W.D.
    Aug. 8, 1985.
    On Amended Motion to Remand Aug. 28, 1985.

      Kirk Presley of Morris & Foust, Kansas City, Mo., for plaintiff.
    Deborah Sue Doud, Southwestern Bell Telephone Co., Kansas City, Mo., for defendant.
   MEMORANDUM AND ORDER DIRECTING FURTHER PROCEEDINGS

JOHN W. OLIVER, Senior District Judge.

This case pends on plaintiff’s motion to remand the above case to the Circuit Court of Jackson County, Missouri where it was filed on April 8,1985. Defendant’s petition for removal filed pursuant to 28 U.S.C. § 1441(a) was not filed in this Court until July 2, 1985. Orders directing further proceedings will be entered so that the motion may be properly ruled in accordance with applicable law.

II.

Plaintiff’s State court petition for damages expressly alleged that “this cause of action arises out of a contract of employment” and that “the governing provisions of that contract are set forth in the 1983 labor agreements between the Communication Workers of America and Southwestern Bell Telephone Company.” Specifically, plaintiff further alleged that “pursuant to Article XIX entitled Employment Terminations, plaintiff was entitled to receive a termination allowance in the sum of FORTY SIX THOUSAND EIGHT HUNDRED SEVENTY-TWO DOLLARS AND 00/100 ($46,872.00)” and that “on April 23, 1984, plaintiff was dismissed as an employee of defendant and not for reasons of misconduct.”

Count I of plaintiff’s State court petition purports to allege a cause of action for breach of the collective bargaining agreement with a prayer for $46,872.00 actual damages. Counts II, III and IV of plaintiff’s State court petition each incorporates and realleges all other allegations of plaintiff’s State court petition and purports to allege separate State law causes of action, each of which allegedly sound in tort, and each of which pray for $100,000.00 actual damages and for $1,000,000.00 punitive damages.

Plaintiff’s suggestions in support of his remand motion, concede, however, as plaintiff must, that all of his alleged “rights arise out of a collective bargaining agreement.” Plaintiff’s argument in support of remand based on Westinghouse Salaried Employees v. Westinghouse Electric Corp., 348 U.S. 437, 75 S.Ct. 489, 99 L.Ed. 510 (1955), is obviously untenable. In Smith v. Evening News Assn., 371 U.S. 195, 199 and 200, 83 S.Ct. 267, 269 and 270, 9 L.Ed.2d 246 (1962), the Court stated that “subsequent decisions here have removed the underpinnings of Westinghouse and its holding is no longer authoritative as a precedent" and that the “concept that all suits to vindicate individual employee rights arising from a collective bargaining contract should be excluded from the cover of § 301 has thus not survived.” See also Auto Workers v. Hoosier Corp., 383 U.S. 696, 700, 86 S.Ct. 1107, 1110, 16 L.Ed.2d 192 (1966), in which the Court again stated that the views expressed in Westinghouse had been rejected in Evening News Assn.

Allis-Chalmers Corp. v. Lueck, — U.S. —, 105 S.Ct. 1904, 85 L.Ed.2d 206, decided April 16, 1985, is the latest Supreme Court case holding that § 301 of the Labor Management Relations Act, 29 U.S.C. § 185(a), preempts all State law tort actions which derive from the rights and obligations established by a collective bargaining agreement. That case also held that regardless of whether a § 301 action was maintained in either a State court or in a federal court, all grievance proceedings, including provision for arbitration, must, as a matter of federal law, be followed in accordance with the provision of the collective bargaining agreement. See Dowd Box Co. v. Courtney, 368 U.S. 502, 82 S.Ct. 519, 7 L.Ed.2d 483 (1962), in which the concurrent § 301 jurisdiction of State and federal courts was recognized. See also Republic Steel v. Maddox, 379 U.S. 650, 85 S.Ct. 614, 13 L.Ed.2d 580 (1965), for a case in which a severance pay claim was held to be within the scope of § 301 and that plaintiff was required to follow the grievance procedures of the collective bargaining agreement which included arbitration of his claim. And see also Avco Corp. v. Aero Lodge 735, 390 U.S. 557, 88 S.Ct. 1235, 20 L.Ed.2d 126 (1968), which establishes that a defendant may remove to federal court any § 301 case that may have initially been filed in State court.

If this case did not present any additional questions, plaintiffs motion to remand would be denied without further discussion. Other questions, however, are presented in this case.

III.

The files and records in the case establish that two additional questions are presented in regard to (a) whether the defendant filed a timely petition for removal and (b) whether plaintiff, by his failure to raise that question in his motion to remand, intended to waive the apparent timeliness defect in the filing of defendant’s petition for removal.

The State court records show, as above stated, that plaintiff’s petition for damages was filed in State court on April 8, 1985. Those records also show that defense counsel entered their appearance in State court on behalf of the defendant on May 9, 1985. On May 10, 1985, a joint stipulation, executed by counsel for both parties, was filed in the State court case. That stipulation provided among other things that the time to answer or otherwise respond to plaintiff’s petition was extended 45 days from May 19, 1985.

On July 2, 1985 defendant filed an answer in State court and on the same day filed its petition for removal in this Court. It would thus appear that defendant’s petition for removal apparently was not filed within the time provided in 28 U.S.C. § 1446(b). For Section 1446(b) provides in relevant part that:

The petition for removal of a civil action or proceeding shall be filed within thirty days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based, or within thirty days after the service of summons upon the defendant if such initial pleading has then been filed in court and is not required to be served on the defendant, whichever period is shorter.

29 Fed Proc, L.Ed § 69:75, p. 564, entitled “Time requirement as mandatory” states the following:

The time requirement is mandatory. It must be strictly complied with and will be strictly or narrowly construed. Thus, for example, a removal petition which recites that defendants received copies of process “on or about” a certain date does not show with the requisite certainty that the petition has been filed within the 30-day period; accordingly, the petition will be remanded. Failure to file for removal in time precludes such filing at any subsequent stage of the proceedings. In other words, failure to file a petition for removal within the statutory period constitutes a waiver of the right to remove.

Paragraph 14A, Wright-Miller-Cooper Federal Practice and Procedure, § 3732, p. 527-30 states that:

The time limitations in Section 1446 are mandatory and must be strictly construed in accordance with the computation principles in Federal Rule of Civil Procedure 6. They will not be extended by continuances, demurrers, motions to set aside service of process, pleas in abatement, stipulations, or court orders, although a delay following the motion will be tolerated. (Emphasis ours).

It is clear that the time provided for removal in Section 1446(b) could not be extended by any stipulation filed in State court.

Unless there is some explanation which is not apparent from the record now before the Court, it would appear that the defendant, in fact, failed to file its petition for removal within the period of time provided by law and that the case should be remanded to State court. But that is not the end of the matter.

For Northern Illinois Gas Co. v. Airco Indus. Gases, 676 F.2d 270, 273 (7th Cir. 1982), states familiar principles applicable to removal as follows:

Removal must be effected within thirty days after a defendant receives a copy of the state court complaint, or is served, whichever occurs first. 28 U.S.C. § 1446(b). While the time limitation imposed by § 1446(b) is not jurisdictional, Ryan v. State Board of Elections of the State of Illinois [ (7th Cir.1981) ], supra, 661 F.2d at 1134; Perrin v. Walker, 385 F.Supp. 945, 947 (E.D.Ill.1974); see Ayers v. Watson, 113 U.S. 594, 598, 5 S.Ct. 641, 642, 28 L.Ed. 1093 (1885), it is a strictly applied rule of procedure and untimeliness is a ground for remand so long as the timeliness defect has not been waived. (Emphasis ours).

The second question above stated is therefore put in focus, namely, whether plaintiff, by failing thus far to even mention the question, intended to waive the apparent timeliness defect in defendant’s petition for removal. This Court can well understand why a party litigant in a § 301 case would want to waive a timeliness defect in a removal petition in order to have the case, which is governed by federal law regardless of where it may pend, tried in a federal rather than a State court for the reason that federal courts are much more experienced in processing § 301 cases than are State courts.

The fact, however, that plaintiff in his suggestions in support of his motion to remand has failed to recognize the full scope of § 301 as controlled by federal law, and the fact that plaintiff has filed a motion to remand to State court does not support a finding that plaintiff actually intended to waive the apparent timeliness defect in defendant’s petition for removal.

It should further be noted that defendant’s petition for removal did not contain any allegation whatsoever as to whether its petition for removal was timely filed. See Jennings v. Cantrell, 392 F.Supp. 563 (E.D.Tenn.1974), in regard to the necessity for such an allegation. This Court must therefore recognize that it is entirely possible that plaintiff did not recognize that a timeliness question might be presented under the circumstances of this case.

At any rate, we have concluded that it is appropriate that orders should be entered that require the parties to state their respective positions so that the pending motion to remand may be ruled in accordance with applicable law.

IV.

Accordingly, it is

ORDERED (1) that plaintiff is granted leave to file on or before August 15, 1985 either an amended motion to remand or a response to this order of Court which will expressly waive any timeliness defect that may exist in regard to the filing of defendant’s motion to remand.

If plaintiff did not intend to waive the apparent timeliness defect above discussed, he shall file an amended motion to remand which shall state with particularity the factual circumstances in regard to that question.

In the event that plaintiff intended to and now wishes to waive the apparent timeliness defect in regard to defendant’s petition for removal, he shall file an appropriate response to this order which shall expressly state that the apparent defect is waived and that plaintiff wishes to withdraw his pending motion to remand. It is further

ORDERED (2) that defendant shall on or before August 21, 1985 file an appropriate response to the filing that plaintiff may-make pursuant to Order (1) above.

In the event plaintiff files an amended motion to remand in which the apparent timeliness defect in the filing of defendant’s petition for removal is raised, defendant’s response to that amended motion shall show cause why, as a matter of fact and as a matter law, plaintiff’s amended motion to remand should not be granted on the sole ground that defendant’s petition for removal was not timely filed within the period provided in Section 1446(b).

ON AMENDED MOTION TO REMAND

I.

This case now pends on plaintiff’s amended motion to remand filed August 17, 1985 pursuant to the orders directing further proceedings entered by this Court on August 8, 1985. We have considered that motion, the suggestions filed in support, and the defendant’s suggestions in opposition filed August 21, 1985. We find and conclude that defendant’s amended motion to remand should be granted for the reasons we now state.

II.

The undisputed factual circumstances in regard to the timeliness of defendant’s petition for removal were stated in our August 8, 1985 memorandum and need not be repeated. It should be added, however, that defendant does not in any way put in issue paragraph 4 of plaintiff’s verified amended motion to remand which stated “[t]hat at no time during the discussion with defendant’s counsel concerning the stipulation did the question of removal ever arise.” Rather, counsel for the defendant contend that the stipulation extending defendant’s time to answer or otherwise respond to plaintiff’s State court petition “can reasonably be construed to extend the time within which the petition for removal could be filed and considered timely.” Defendant candidly states, however, that it is “well aware of case law stating a mere stipulation to ‘answer or otherwise respond’ is insufficient to enlarge the time within which a defendant may remove a case to federal court.”

Defendant nevertheless argues that “the stipulation signed by the parties here is much broader than an agreement to answer out-of-time” and that the language used in the stipulation “reasonably contemplates an objection to the jurisdiction of the state court, which would include a petition for removal.” We disagree.

If anything, the stipulation could be said to contemplate that the defendant did not intend to remove the case to federal court at the time that stipulation was executed. For the stipulation reflected the parties’ agreement that certain depositions that were then scheduled to be taken on May 29, 1985 “will be rescheduled following defendant’s answer or other response to plaintiff’s petition herein.” The long and the short of it is that neither the stipulation nor discussions that led to the execution of the stipulation ever attempted to reflect an agreement on plaintiff’s part that plaintiff would not raise any question about the timeliness of any petition for removal that defendant might file.

Transport Indemnity Co. v. Financial Trust Co., 339 F.Supp. 405 (C.D.Cal.1972), involved factual circumstances substantially similar to those presented in this ease. That court concluded that the parties’ stipulation in that case could not “reasonably be interpreted as containing ... an agreement by Plaintiff’s counsel that [he] would not object to removal to the Federal Court if defense counsel later decided to remove the case” and that the “failure of a defendant to move for removal within the thirty-day period is equivalent to a decision not to remove.”

The following statement from Transport Indemnity Co. is applicable to this case:

One can imagine a case in which defense counsel, just prior to the end of the statutory thirty-day period, had made the determination to remove the case and, finding himself pressed for time, communicates that fact to Plaintiffs’ counsel and obtains from Plaintiffs’ counsel a specific agreement that the latter would not object to the removal petition on timeliness grounds if defense counsel was a few days late in filing it. That might well constitute a true estoppel because defense counsel has reasonably relied to his detriment on the representation of his opponent. But that is not the instant case. There was no such reliance. Any unilateral reliance by defense counsel was unreasonable. (Emphasis ours).

We are satisfied that a defendant may not rely upon any stipulation extending the time to answer or respond to a complaint filed in State court as a waiver unless such a stipulation contains the sort of specific agreement mentioned in the hypothetical stated by Judge Hill in Transport Indemnity Co.

The cases cited by the defendant to support the notion that the plaintiff somehow waived the 30-day requirement of Section 1446(b) simply do not support defendant’s argument. Meadows v. Bicrodyne Corp., 559 F.Supp. 57 (N.D.Cal.1983), was based in large part on plaintiff’s action in appearing in federal court after removal “both to defend against motions and to bring substantive motions of their own.” Leininger v. Leininger, 705 F.2d 727 (5th Cir.1983), involved a case in which no motion to remand was ever filed. Judge Mansfield’s opinion in Maybruck v. Haim, 290 F.Supp. 721 (S.D.N.Y.1968), granted a motion to remand and set forth in detail the circumstances which may not properly be considered a waiver on a plaintiff’s part.

Transport Indemnity Co. followed and applied Maybruck and quoted the following from Professor Moore’s treatise on Federal Practice: “Removal proceedings are in the nature of process to bring the parties before the federal court; and mere modal or procedural defects are not jurisdictional, (citations) The limitation on the time for removal is not jurisdictional but is merely a formal and modal requirement which may be waived, or to which an objection may be precluded by estoppel, (citations) Under the prevailing view, a stipulation of the parties (citations) extending the time to answer, move or otherwise plead does not extend the time for removal.” Transport Indem., supra, 339 F.Supp. at 407.

Professor Moore’s statement of the applicable rules is consistent with the statements of the applicable rules which we quoted from 29 Fed.Proc., L.Ed § 69:75, p. 564, and 14 A Wright-Miller-Cooper, Federal Practice and Procedure, § 3722, p. 527-30, in our August 8, 1985 memorandum opinion.

We obviously agree with Professor Moore’s statement of the rules as quoted in Transport Indemnity Co. and with the cases cited in paragraph 0.168 [3-5-8] 1A, Moore’s Federal Practice, p. 603, n. 1. We therefore find and conclude that the defendant’s failure to file its petition for removal within the 30-day period must be considered as equivalent to a decision on its part not to remove the case to federal court. Defendant’s subsequent change of mind is therefore ineffective.

III.

Defendant also argues that although “the parties did not include in the joint stipulation language specifically waiving the time limit in § 1446,” this Court should nevertheless conclude that “plaintiff has by his consent to a very broad stipulation enlarging time, and subsequent failure to raise timeliness on his own motion, established a waiver of this procedural requirement.” We disagree.

Plaintiff’s failure to raise the timeliness question apparent on the face of the pleadings in his original motion to remand is no more legally significant than defendant’s failure to have included a statement that removal was timely under Section 1446(c) in its removal petition, as proper pleading required. See 32B Am Jur 2d, Federal Practice and Procedure, § 2485, p. 247, for a checklist of items to be included in a removal petition. See also Jennings v. Cantrell, 392 F.Supp. 563 (E.D. Tenn.1974), which we cited in our August 8, 1985 memorandum opinion.

Defendant’s argument that an original motion to remand which fails to raise the timeliness of a removal petition should be considered a “failure to raise an affirmative defense” within the meaning of the waiver provisions of Rules 8(c) and 12 of the Federal Rules of Civil Procedure is not supported by reason or any legal authority. Cf. Lusk v. Lyon Metal Products, 9 F.R.D. 250 (W.D.Mo.1949), in which Judge Duncan of this Court held that Rule 6(b) could not be utilized to extend the time period for removal on the ground of “excusable neglect.”

IV.

For the reasons stated, it is

ORDERED (1) that plaintiff’s amended motion to remand should be and the same is hereby granted. It is further

ORDERED (2) that the Clerk shall prepare the proper papers under which this case shall be remanded to the Circuit Court of Jackson County, Missouri from which it was removed.

      . The stipulation filed in State court the day after defense counsel entered their appearance on behalf of the defendant provided the following in its entirety:
      JOINT STIPULATION
      COME NOW Milton E. Rampy, plaintiff, and Southwestern Bell Telephone Company, defendant, by and through their attorneys, and enter into this joint stipulation and agreement as follows:
      1. Plaintiff and defendant jointly stipulate and agree to enlarge the time within which Southwestern Bell may answer or otherwise appropriately respond to plaintiff's petition herein. Pursuant to this stipulation and agreement, defendant Southwestern Bell Telephone Company may, without risk of default judgment, and without waiving any defenses or objections, including but not limited to jurisdiction or venue, appropriately respond to plaintiff's petition herein no later than 45 days following May 19, 1985, the date prescribed by Mo.RuIe 55.25 by which defendant must answer or otherwise respond.
      2. The parties stipulate and agree that defendant’s responses to plaintiff's first interrogatories and first request for production of documents herein shall be considered timely filed if provided to plaintiff within 20 days after defendant answers or otherwise responds to plaintiff's petition herein, without the necessity of defendant obtaining a protective order, unless otherwise later provided by order of this court.
      3. The parties stipulate and agree that certain depositions currently scheduled to occur on May 29, 1985, will be rescheduled following defendant’s answer or other response to plaintiffs petition herein, at a mutually agreeable date, without the necessity of defendant obtaining a protective order, unless otherwise later provided by order of this court.
      4. The parties stipulate and agree that responses to any additional discovery that may be filed before defendant answers or otherwise responds to. plaintiff’s petition herein shall be considered timely if responded to within the time provided by the applicable Missouri Rules of Court, or 20 days following defendant's response herein, whichever is later.
      WHEREFORE, it is the parties' express purpose to enter into this joint stipulation and agreement, which is entered into in good faith and with the intent to be jointly binding on both parties.
      Plaintiff filed its original motion to remand on July 19, 1985, shortly after the case was removed to this Court on July 2, 1985, and before filing any other pleading or taking any action of any sort in federal court.