The opinion of the court was delivered by: MENCER
We have before us in this case two very different, yet intimately related, motions which must be disposed of before the case proceeds further. One is a motion to disqualify the plaintiff's counsel, Mark B. Aronson. That motion is denied. The other is a motion
to certify this lawsuit as a class action and to designate Beaver Falls Thrift Corporation the class representative. That motion is also denied. Our reasoning for the denial of these motions is set forth in the following memorandum opinion.
On April 2, 1982, the law firm of Behrend, Aronson & Morrow filed this civil action against Commercial Credit Business Loans, Inc. (CCBL) on behalf of the plaintiff, Beaver Falls Thrift Corporation (Beaver Falls), individually and as representative of a class consisting of certain present or former commercial loan customers of CCBL. CCBL is the assignee of International Rediscount Corporation (IRC). Beaver Falls entered into the original agreement upon which this suit is based with IRC.
The gravamen of the plaintiff's claim is that interest payments under loan agreements between CCBL and the putative class members were improperly calculated to the disadvantage of the borrowers. CCBL filed an answer and counterclaim on May 3, 1982 in which it raised, inter alia, the defense of accord and satisfaction and/or release. The counterclaim is based upon the original "Collateral Loan Agreement" entered into between Beaver Falls and IRC and subsequent amendments thereto. The counterclaim sets out five specific acts by Beaver Falls which allegedly breach the agreement and claims damages in an amount in excess of $10,000. Beaver Falls disputes the allegations of the counterclaim in its reply.
Beaver Falls entered into the above-referenced Collateral Loan Agreement with IRC on July 7, 1976. On the same day, Beaver Falls' corporate subsidiary, Thrift Loan Consumer Discount Company (Thrift Loan), in a written "Double Assignment Agreement", agreed to make itself and its receivables subject to the Collateral Loan Agreement. By written assignment, IRC transferred its rights and obligations under the Collateral Loan Agreement to CCBL on October 2, 1978.
The Collateral Loan Agreement specified a rate of interest payable by Beaver Falls to IRC in the event of any loans made to Beaver Falls by IRC and stated further in Paragraph 6 that
if, subsequent to the date hereof, the prime rate, i.e., the interest rate charged by the majority of the five (5) leading New York City banks to their prime commercial customers, which is 7.25%, be changed, the charge set forth above shall be similarly changed, as of the first day of the month following such change, by an amount equal to the amount of such change in such prime rate.
This agreement was amended twice. On September 9, 1976, in "Amendment No. 1 to Collateral Loan Agreement", the parties lowered the base interest rate stated in the Agreement from.03151 percent per day to.03014 percent per day. The second amendment, deemed "Amendment No. 2 to Collateral Loan Agreement", was signed on May 15, 1981. This amendment established a flat annual interest rate of 15 percent. It is this Amendment No. 2 to Collateral Loan Agreement that CCBL contends operated as a release of any claim Beaver Falls may have had based on the original agreement.
Amendment No. 2 was the result of a series of correspondence and negotiations between the parties. During the course of these negotiations, Kenneth W. Behrend, a partner in the Behrend, Aronson & Morrow firm, was the president of both Beaver Falls and Thrift Loan and as such was closely involved with the negotiations leading up to the second amendment. Mark B. Aronson, the plaintiff's counsel sought to be disqualified by CCBL, is a law partner of Mr. Behrend. Mr. Aronson was also an officer and a director of the plaintiff corporation until the fall of 1982, after the commencement of this lawsuit.
MOTION TO DISQUALIFY PLAINTIFF'S COUNSEL
CCBL forwards two bases for the disqualification of the plaintiff's counsel. Disciplinary Rule (DR) 5-102(A) which mandates withdrawal of counsel when he learns that he or a member of his firm ought to be called as a witness on behalf of his client; and DR 2-103 and DR 2-104, as well as Rule 23, Fed.R.Civ.P., all of which prohibit the solicitation of ...