May 31, 2017
from the United States District Court for the Southern
District of Indiana, Terre Haute Division. No.
2:14-cv-135-WTL-DKL - William T. Lawrence, Judge.
Kanne, Sykes, and Hamilton, Circuit Judges.
HAMILTON, CIRCUIT JUDGE.
Richard Watkins has sued Trans Union for violating the Fair
Credit Reporting Act. The merits of his claims are not the
subject of this appeal. The issue here is whether attorney
John Cento should be disqualified from representing Watkins.
That is because over ten years ago Cento earned a living
defending Trans Union in hundreds of lawsuits alleging Fair
Credit Reporting Act violations. Because the Southern
District of Indiana makes use of Indiana's rules
governing attorney conduct, Indiana Rule of Professional
Conduct 1.9 (Duties to Former Clients) governs Trans
Union's effort to have Cento disqualified.
district court found that Rule 1.9 does not require
Cento's disqualification, but the court authorized an
interlocutory appeal of that decision under 28 U.S.C. §
1292(b), which we accepted. Trans Union argues that the
district court applied the wrong legal standard to decide
disqualification and misapplied the standard that it did
apply. We disagree and affirm the decision of the district
court. Because this case turns on the trajectory of
Cento's legal career, we begin there. We then review the
facts and procedural history of Watkins's case before
reviewing the district court's reasons for denying
disqualification under Rule 1.9.
Factual and Procedural History
John Cento's Legal Career
Cento began his career as an attorney at the Indianapolis law
firm of Katz & Korin, P.C., where he worked with Robert
Schuckit. Trans Union was a client first of Schuckit, and
then Katz & Korin when Schuckit joined the firm. Cento
began representing Trans Union in 2001, and between 2003 and
2005 worked almost exclusively on Trans Union cases. Schuckit
then left Katz & Korin in June 2005 to form his own law
firm. Cento followed, but he stayed with Schuckit's new
firm for just a month.
all of the cases in which Cento represented Trans Union
involved the Fair Credit Reporting Act (FCRA). The FCRA
imposes a duty to maintain reasonable procedures for accurate
reporting. See 15 U.S.C. § 1681e(b). The Act authorizes
a private cause of action for consumers against consumer
reporting agencies such as Trans Union for willful, knowing,
or negligent failures to comply with the law. 15 U.S.C.
§§ 1681n-p. A defendant may avoid liability for
violations that occur despite the defendant's good-faith
effort to comply with the law See, e.g., 15 U.S.C.
§§ 1681g(e)(5), (7).
defended Trans Union against those claims of FCRA violations
for five years. Between 2001 and 2005, he represented Trans
Union in over 250 cases and billed over 4, 000 hours of work
for Trans Union. He worked with Trans Union's in-house
counsel and employees, and he was given access to any
information necessary for litigation. Today, twelve years
after Cento last represented Trans Union, Schuckit and his
firm continue to represent Trans Union. Some of the Trans
Union employees with whom Cento worked remain with the
2013, Cento formed Cento Law, which represents consumers
bringing FCRA violation claims against credit reporting
agencies. The law firm advertises the experience of its
attorneys on its webpage: "Our credit report attorneys
have litigated hundreds of Fair Credit Reporting Act cases
across the country. Our experience in this area of law is
derived not only from representing consumers, but from years
of prior representation of two of the three national consumer
reporting agencies, Trans Union and Equifax." Cento Law,
http://www.centolaw.com (last visited Aug. 21, 2017). In
2012, and again in 2013, Cento was disqualified from cases in
which he represented plaintiffs who brought claims against
his former client, Trans Union. Childress v. Trans Union,
LLC (Childress I), No. L12-CV-00184-TWP-DML, 2012
WL6728339 (S.D. Ind. Dec. 28, 2012); Hobson v. Trans
Union, LLC, No. L13-CV-54, 2013 WL 2443917 (N.D. Ind.
June 5, 2013).
The Watkins Litigation
present case, Richard Watkins selected Cento to represent him
in his case alleging FCRA violations against Trans Union
under 15 U.S.C. §§ 1681e, 1681g, and 1681L Watkins
had applied for a loan in 2009 and discovered that his Trans
Union credit file contained twenty "collection
tradelines" that were not his. He disputed the accuracy
of his credit file, and Trans Union removed the incorrectly
attributed collections. But when Watkins applied for a
mortgage in 2013, he learned that the collections had once
again been placed in his credit file. The problem, Watkins
alleges, is that Trans Union's algorithms have resulted
in the merging or mixing of Watkins's credit file with
that of another person to create a "mixed file, "
and that Trans Union has failed to remedy the continued
inclusion of collections not belonging to Watkins. The merits
of Watkins' claims will turn on whether the procedures
Trans Union used "reasonable procedures to assure
maximum possible accuracy" of the information about
Watkins, see 15 U.S.C. § 1681e(b), and whether Trans
Union made good-faith efforts to comply with the law, §
1681g(e)(5) & (e)(7).
filed Watkins's complaint in May 2014. One month later,
Trans Union filed a motion to order Cento to show cause why
he should not be disqualified as Watkins' lawyer.
Watkins v. Trans Union, LLC, No.
2:14-cv-135-WTL-DKL, 2016 WL 4919999, at *1 (S.D. Ind. Sept.
15, 2016). The district court granted that motion and
permitted Cento to seek limited discovery to aid in showing
cause. Id. This was an unusual procedural path for
seeking attorney disqualification. Rather than file a motion
to disqualify, Trans Union sought a show-cause order in
reliance on the cases in which Trans Union had successfully
sought disqualification against Cento in the past.
Id.; see also Childress I, 2012 WL 6728339;
Hobson, 2013 WL 2443917. The discovery process that
followed the show-cause order resulted in a magistrate judge
report with three alternate recommendations (to hold an
evidentiary hearing; to decline to disqualify; or,
alternatively to disqualify), but Judge Lawrence, to whom the
case was reassigned after the magistrate proceedings, decided
to "exercise [the court's] authority to begin with a
clean slate." Watkins, 2016 WL 4919999, at *2.
The parties briefed the attorney disqualification issue and
the court held a hearing before issuing its decision.
Id. at *1.
district court, as on appeal, Trans Union relied on
LaSalle National Bank v. Lake County, 703 F.2d 252
(7th Cir. 1983), and Analytica, Inc. v. NPD Research,
Inc., 708 F.2d 1263 (7th Cir. 1983), to argue that
federal common law governs the standard for disqualification.
Both cases predate Indiana Rule of Professional Conduct 1.9,
which, as the district court found here, governs the issue of
disqualification. After analyzing the precedents and the
history of the adoption of the Rules of Professional Conduct,
Judge Lawrence followed the guidance of Rule 1.9 rather than
LaSalle National Bank or Analytica and held
that Cento should not be disqualified. Watkins, 2016
WL 4919999, at *6. The prior representations are not
factually related such that the same matter is in dispute in
Watkins. Nor, the judge found, is there a risk that
confidential information from the prior matters would
materially advance Watkins' present claims. Id.
at ""4-6. Moreover, the judge noted, over a decade
has passed since Cento represented Trans Union. Id.
at *6. Accordingly, the judge held that the requirements for
disqualification were not met. He permitted Cento to continue
representing Watkins. Id.
interlocutory appeal under 28 U.S.C. § 1292(b), Trans
Union argues that the district court applied the wrong legal
standard for attorney disqualification and misapplied the
standard it chose. We affirm the decision of the district
review for abuse of discretion the district court decision
rejecting disqualification. Owen v. Wangerin, 985
F.2d 312, 317 (7th Cir. 1993); Whiting Corp. v. White
Machinery Corp., 567 F.2d 713, 715 (7th Cir. 1977) (The
district court "possesses broad discretion in
determining whether disqualification is required in a
particular case ... ."), quoting Schoetter v. Railoc
of Ind., Inc., 546 F.2d 706, 710 (7th Cir. 1976). An
abuse of discretion can be shown when the district court
based its decision on an erroneous view of the law or a
clearly erroneous evaluation of evidence. See, e.g., Novo
Terapeutisk Lab. AIS v. Baxter Travenol Lab., Inc., 607
F.2d 186, 188-89 (7th Cir. 1979) ("This court has relied
on the broad discretion of the district court in refusing to
disturb a disqualification order, but we have not allowed a
strict standard of review to prevent reversal when the
district court predicated its disqualification ruling on a
misunderstanding of the law.") (citations omitted). This
standard of review is consistent with other areas of law in
which district judges have discretion but in exercising it
must apply the correct rule of law. See, e.g., Cooter
& Gell v. Hartmarx Corp., 496 U.S. 384, 405 (1990)
("district court would necessarily abuse its discretion
[in deciding Rule 11 sanctions motion] if it based its ruling
on an erroneous view of the law"); Ervin v. OS
Restaurant Services, Inc., 632 F.3d 971, 976 (7th Cir.
2011) (application of incorrect legal rule to decide class
certification would amount to abuse of discretion).
observed that granting a motion for disqualification has
"immediate, severe, and often irreparable ...
consequences" for the party and disqualified attorney.
Freeman v. Chicago Musical Instrument Co., 689 F.2d
715, 719 (1982). Disqualifying a lawyer immediately deprives
the losing party from the "representation of his
choice" and disrupts the litigation. Id. In
sum, "disqualification, as a prophylactic device for
protecting the attorney-client relationship, is a drastic
measure which courts should hesitate to impose except when
absolutely necessary ... [because it] destroy[s] a
relationship by depriving a party of representation of their
own choosing." Id. at 721.
the duty of confidentiality represented in the Rules of
Professional Conduct, like the Code of Professional
Responsibility that came before them, is fundamental to the
profession and the relationship between lawyer and client.
See id. Courts have a duty to safeguard the privacy
of the attorney-client relationship and in doing so to
"maintain public confidence in the legal
profession" and to protect "the integrity of the
judicial proceeding." Id.
disqualification is appropriate in this case is governed by
the Indiana Rules of Professional Conduct. Lawyers
representing clients in federal courts must follow federal
rules, but most "federal courts use the ethical rules of
the states in which they sit." Huusko v.
Jenkins, 556 F.3d 633, 636 (7th Cir. 2009). Watkins
filed suit in the Southern District of Indiana, which has
adopted the Indiana Rules of Professional Conduct to govern
attorneys' conduct. S.D. Ind. Local Rule 83-5(e). Indiana
adopted the ABA Model Rules of Professional Conduct as its
Rules of Professional Conduct in 1987. United States v.
Goot, 894 F.2d 231, 234 (7th Cir. 1990). Rule 1.9
governs the duties lawyers owe to former clients and thus
whether Cento should be disqualified from representing
Watkins because of a duty he may owe to his former client,
Indiana Rule of Professional Conduct 1.9
Rule of Professional Conduct 1.9 mirrors the A.B. A. Model
Rule of the same number and reads, in relevant part:
A lawyer who has formerly represented a client in a matter
shall not thereafter 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 gives informed
consent, confirmed in writing.
interpreting the Rules of Professional Conduct, federal
courts may rely on the specific guidance offered in the
commentary. See Nix v. Whiteside, 475 U.S. 157, 166
(1986); Strickland v. Washington, 466 U.S. 668, 688
(1984); United States v. Williams, 698 F.3d 374, 386
(7th Cir. 2012) (Hamilton, J., dissenting in part)
(commentary to A.B. A. standards governing norms of legal
practice can be "valuable guidance"). The
commentary to Rule 1.9 defines two matters as
"substantially related" when two matters
"involve the same transaction or legal dispute,
'' or when there is a "substantial risk that
confidential factual information as would normally have been
obtained in the prior representation would materially advance
the client's position in the subsequent matter."
Ind. R. Prof'1 Conduct 1.9, cmt. 3.
two matters "involve the same transaction" is
determined by an inquiry into whether the matters are
factually related. Comment 2 states: "The scope of a
'matter' for purposes of this Rule depends on the
facts of a particular situation or transaction." It is
the direct involvement "in a specific transaction,
" that makes "subsequent representation of other
clients with materially adverse interests in that transaction
clearly ... prohibited." Id., cmt. 2.
prior and present matters do not involve the same transaction
or legal dispute, they may still be substantially related if
there is a substantial risk that confidential information
would materially advance the client's position in the
present matter. The commentary tells us that information
"disclosed to the public or to other parties adverse to
the former client ordinary will not be disqualifying, "
and that information "acquired in a prior representation
may have been rendered obsolete by the passage of time."
Id., cmt. 3.
issue most pertinent to this case, the commentary explains
that "a lawyer who recurrently handled a type of problem
for a former client is not precluded from later representing
another client in a factually distinct problem of that type
even though the subsequent representation involves a position
adverse to the prior client." Id., cmt. 2.
"In the case of an organizational client, general
knowledge of the client's policies and practices
ordinarily will not preclude a subsequent
representation." Id., cmt. 3.
1.9 clarified and narrowed the contours of an older federal
common-law rule for attorney disqualification referred to as
the "substantial relationship test." The Model
Rules of Professional Conduct, of which Rule 1.9 is a part,
replaced the Model Code of Professional Conduct, which was
based on canons first promulgated in 1908. Monroe Freed-man,
The Kutak Model Rules v. The American Lawyer's Code
of Conduct, 26 Vill. L. Rev. 1165 (1981); Kathleen
Maher, Keeping Up Appearances, 16 Prof. Law. 1
(2005). The Rules were the product of the Kutak Commission,
as it became known, formed in 1977 to assemble a set of
governing rules for the profession. Freedman, Kutak Model
Rules, at 1166. Some of the Model Rules, including Rule
1.9, explicitly rejected the old canons. Maher, Keeping
Up Appearances (2002 revisions to Rule 1.9 deleted the
lingering reference to "appearance of impropriety"
originally housed in Canon 9 because it was "no longer
helpful to the analysis of questions arising under this
Rule"). The Kutak Commission's proposed Model Rules
of Professional Conduct were issued in 1983 and then adopted
by the states in the years that followed. Indiana adopted the
Model Rules of Professional Conduct as its Rules of
Professional Conduct in 1987. Goot, 894 F.2d at 234.
Rule 1.9 Does Not Disqualify Cento from ...