Daniel H. Shertzer, Lancaster, for appellant.
Paul R. Rosen, Michael Brodie, Pechner, Sacks, Dorfman, Rosen & Richardson, Philadelphia, for appellees.
Jones, C. J., and O'Brien, Roberts, Pomeroy, Nix and Manderino, JJ. Nix and Manderino, JJ., concur in the result. Eagen, J., did not participate in the consideration or decision of this case.
The proceeding from which this appeal arises commenced as a shareholder's derivative suit in equity brought by the appellant, Morris Slater, against the appellees -- Rimar, Inc. [hereinafter "Rimar"] Mt. Joy Millwork, Inc. [hereinafter "Mt. Joy"], and Robert I. Martin in his capacities of president and chairman of the board of Rimar, president of Mt. Joy, and controlling shareholder in both corporations. Before expiration of the time for answering or otherwise responding to appellant's complaint, the appellees filed on January 24, 1973, at the number and term of the equity action, a pleading entitled "Petition allowing a special injunction without a hearing." In this petition it was averred that appellant's lawyer in the suit, Daniel H. Shertzer, Esquire, had at various times served as an officer and director of both Rimar and Mt. Joy and as counsel for all three appellees; that in representing appellant in the instant suit Mr. Shertzer was making use of confidential information which he had acquired by virtue of his positions with the appellees, including his capacity as their lawyer; and that such conduct constituted representation of an interest adverse to that of his former clients, the appellees, in violation of the Canons of Professional Ethics.*fn1
Also on January 24, upon the representation of the defendants that immediate and irreparable harm would otherwise be suffered by them, the trial court entered, ex parte, an "order allowing special injunction without hearing." This order, inter alia, dismissed appellant's suit without prejudice to the bringing of a similar suit by another shareholder, "disqualified and removed" Mr. Shertzer as counsel in appellant's suit and prohibited Shertzer from representing any interest adverse to that of the appellees and from using or disclosing any information he had acquired while representing the appellees.*fn2 The order also directed that appellant not disclose to any person any information concerning the defendants which he had acquired from Mr. Shertzer. January 30, 1973 was fixed as the date of hearing to determine whether the "injunction" should be continued.
At the January 30 hearing appellant, through his counsel, submitted an unverified "reply" to appellees' petition, and testimony was taken. At the conclusion of the hearing the appellees' counsel stated that he had "no further evidence to present at any further hearing." Mr. Shertzer, however, responded to an inquiry from the bench with a statement that he "probably would" wish to present additional evidence. In the course of remarks as to the procedure which would be followed, the chancellor stated that "our practice is to continue or dissolve a preliminary injunction until final hearing. If it was stipulated here that this testimony taken today would be final, then we could place it on our argument list . . . and then write an opinion and dispose of the matter but, in view of the fact that Mr. Shertzer is stating that he may have testimony to take and the further fact that a
preliminary injunction was granted and continued -- is not final until the Court makes it final, the Court is going to make the following order. . . ." (R. 154a-155a). At this point the Court announced that it was continuing the preliminary injunction until final hearing, but then, after an unrecorded discussion with counsel (R. 156a) stated that it was making the injunction permanent.*fn3 This appeal by Morris Slater followed.*fn4
Appellant contends that the proceedings below failed to comply with the requirements of the Pennsylvania Rules of Civil Procedure, and that he was thereby deprived of procedural due process of law. From our review of the record we agree that the procedure which was followed was irregular and that to the extent that the decree of January 30 purported to grant permanent injunctive relief, it must be vacated. Insofar as it terminated ...