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APPELLATE JUDGES' FINANCIAL CONFLICTS OF INTEREST
Summary
Community Rights Counsel research indicates that in 1997
at least eight federal appellate judges--including some of
the most prominent appellate judges in the nation--ruled on
the merits in at least 17 federal appeals in which they had
a disqualifying conflict of interest.
In many cases, the judge in question issued a precedent setting
victory for the company in which the judge had a financial
interest. The stories of the losing claimants--which included
the father of a teenage suicide victim, nearly deaf former
railroad employees, and victims of work-place discrimination
and toxic risks--emphasize the enormous human consequences
of these pro-industry rulings. As described below, our findings
represent the tip of the iceberg and there are likely hundreds
of similar cases to be found throughout the federal judiciary.
Background and Impetus for Study
Community Rights Counsel (CRC) is a not-for-profit public
interest law firm located in Washington DC. Our mission is
to help local governments defend land use and environmental
laws. As part of our work, we are conducting a comprehensive
study into the efforts of corporate special interests and
foundations to use luxurious, privately funded judicial "educational"
seminars to advance their political agenda through the court
system. As part of that study, CRC recently completed a review
of every financial disclosure report filed by federal judges
since 1992.
In conducting our financial disclosure review, we discovered
that many judges hold stock in a large number of the biggest
companies in America. Certain judges own so many stocks that
we wondered how they could avoid conflict of interest problems.
We also discovered one of the cases discussed in this study,
in which a judge had ruled in favor of a company in which
he owned stock. Most alarmingly, some of the judges seemed
to view the financial disclosure process as a nuisance and
appeared not to take this responsibility seriously. These
findings convinced us to broaden the focus of our study to
investigate the prevalence of financial conflicts.
Methodology
The methodology used in our study was simple. We obtained
copies of the 1997 financial disclosure forms for every active
federal circuit court judge. We identified the disqualifying
financial interests from each of these forms and created a
"recusal list" for each judge. We then did a simple
Lexis® search to identify any cases that the judge heard involving
a litigant from the recusal list.1 We searched
for multiple variations on names for many of the companies
(e.g. GE and General Electric, Dupont & Du Pont) and used
abbreviated forms where appropriate (e.g. Dow for Dow Corning,
Lilly for Eli Lilly). We thus came up with a few cases involving
subsidiaries (i.e. GE Credit Corp., a subsidiary of General
Electric). We made no other effort, however, to identify and
search for conflicts involving all of the innumerable subsidiaries
of the large corporations owned by many judges.
Legal and Ethical Standards
The legal and ethical standards in this area could not be
clearer. Judges cannot rule in a case in which he or she has
a financial interest, period. This obligation is enshrined
in federal law (28 U.S.C. § 455) and the Canons of Judicial
Ethics (Canon 3). It is enforced by a certification requirement
which every judge must sign each year, subject to criminal
and civil sanctions, certifying that:
In compliance with the provisions of 28 U.S.C. § 455 and
of Advisory Opinion No. 57 of the Advisory Committee on
Judicial Activities, and to the best of my knowledge at
the time after reasonable inquiry, I did not perform any
adjudicatory function in any litigation during the period
covered by this report in which I, my spouse, or my minor
or dependent children had a financial interest, as defined
in Canon 3C(3)(c), in the outcome of such litigation.
Judges are required by the Canons to "keep informed
about the judge's personal and fiduciary economic interests,
and make a reasonable effort to keep informed about the personal
economic interests of the judge's spouse." (Canon 3(E)(2)).
Judges must also "manage the judge's investments and
other financial interests to minimize the number of cases
in which the judge is disqualified." (Canon 4(D)(4).
Overview of Study Results
The results of our study are quite remarkable. We identified
at least eight judges (over 5% of the judges in our study)
that ruled in at least 17 cases in which they had a disqualifying
financial interest. 2
It should be stressed that our research was merely a snapshot:
it only covered a single year, for a small portion of the
judiciary. Moreover, our search was very limited; it
included neither small stock holdings (judges are not required
to disclose financial interests with a value of less than
$1,000, even though these small interests are equally disqualifying)
nor most of the subsidiaries that would disqualify a judge
from hearing a case. Thus, it is a virtual certainty that
we missed many other cases in which judges improperly ruled
despite their financial interests. The study suggests that
the golden rule against judges participating in cases in which
they hold financial interests is being honored in the breach.
Five other factors make the results of our research extraordinary.
The Profile of the Judges: The judges implicated in
our study include many of the most respected and highest profile
judges on the federal appellate bench. The judges are Alex
Kozinski of the Ninth Circuit; Daniel Manion of the Seventh
Circuit; Bruce Selya and Sandra Lynch of the First Circuit;
Chief Judge Edward Becker of the Third Circuit; Judge Alice
Batchelder of the Sixth Circuit; Judges Morris Arnold of the
Eighth Circuit; and Judge Laurence Silberman of the DC Circuit.
The Importance of the Cases and the Percentage of Corporate
Victories: Many of the cases we identified are published,
precedent-setting rulings in favor of the corporations in
which the judge held a financial interest. For example:
Law v. General Motors, 113 F. 3d 908 (1997). Judge
Kozinski reported owning approximately $5,000 in General
Motors stock as part of an IRA account in his 1997 financial
disclosure. In 1997, he awarded a major victory to General
Motors. In particular, Kozinski upheld the dismissal of
a lawsuit by eight elderly, nearly deaf railroad workers
who accused GM of negligently damaging their hearing by
exposing them to excessive noise levels. In an opinion that
sets precedent for similar claims across the country, Kozinski
wrote that hearing loss claims founded on state law were
preempted by federal law, leaving the plaintiffs with no
way of recovering against GM.
General Electric v. U.S. Dep't of Commerce, 128
F.3d. 767 (DC Cir. 1997). Judge Silberman joined in a published
opinion striking down important portions of regulations
promulgated by the National Oceanic and Atmospheric Administration
(NOAA) to implement the Oil Pollution Act of 1990 (passed
by Congress in the wake of the Exxon Valdez Oil spill).
Just a few months before hearing and ruling in this case,
Judge Silberman became a trustee in the Gaull Marital Trust,
which owns between $15,000 and $50,000 of GE stock.
In the vast majority of the cases in which judges ruled despite
a financial conflict of interest, the judge in question ruled
in favor of their financial interest. In approximately 65%
(11 of 17) of the cases we identified, the judge ruled in
favor of their financial interest. In over 82% (14 of 17)
of the cases, the ruling was at least partially in favor of
the financial interest. The judges in our study ruled against
their financial interest in only 3 of the 17 cases we studied.
The Failure to Disclose Conflicts: The results of
our study are particularly remarkable in light of the context
in which they occurred. Most were also filed within ten days
of receipt by every federal judge of an urgent letter reminding
judges of their legal obligation "not only to be informed
about his or her personal financial interests but also to
make a reasonable effort to be informed about the personal
financial interests of the judge's spouse and minor children."
Nonetheless, every judge implicated in this study certified
under penalty of criminal and civil sanctions that
they had not performed any adjudicatory function in any case
in which they had a disqualifying financial interest. For
each judge, this certification was apparently inaccurate and,
as the methodology of our study makes clear, even a simple,
one-minute inquiry on Lexis® (available for free to every
federal judge) would have revealed these conflicts. Moreover,
each circuit requires corporations to file a corporate disclosure
form early in the appellate litigation process to ensure that
any judge can easily flag any financial conflicts. The results
of our study strongly suggest that judges are not taking their
certification responsibilities at all seriously.
Several specific cases help highlight the strength of the
story concerning the certification on judge's financial disclosure
forms. Consider the disclosure form for 1997 filed by Judge
Sandra Lynch. Judge Lynch filed her original disclosure form
on May 7, 1998 on which she claims to have not performed any
adjudicatory function in a case in which she owns stock. Several
weeks later, she filed an amended form in which she admits
that, after her marriage, she presided over three matters
involving IBM and CVS in which her husband owned stock. She
somewhat surprisingly asserts that "no disqualification
was required [in those three cases] under canon 3C(4)."
She also neglects to disclose that she ruled in favor of Monsanto
in a published decision in December 1997.
Consider also Judge Selya. Judge Selya purchased stock in
Eli Lilly on October 16, 1997 while two cases involving Eli
Lilly were pending before him. Judge Selya ruled in favor
of the company in one of those cases less than two months
later in December 1997. He then ruled again in the company's
favor four months later in another case in March 1998.3 Two months
after that he signed a form swearing under penalty of criminal
sanctions that none of the foregoing occurred.
The Strength of the Individual Stories: Our study revealed
many compelling stories that help illustrate the breadth of
the problem and the human consequences of the rulings:
Judge Kozinski owns disqualifying interests in only a handful
of companies. Presumably, the task of avoiding financial
conflicts is relatively easy for him. He still couldn't
manage to avoid authoring a precedent-setting ruling against
eight elderly, nearly deaf former railroad workers (stripping
them of any right to recover against General Motors) and
in favor of General Motors, in which he owns stock.
Judge Batchelder ruled in five cases in 1997 in which she
had a disqualifying interest. Four involved Wal-Mart. In
one of these cases, Judge Batchelder ruled in favor of Wal-Mart
and against a father of 19-year old who committed suicide
using a Magnum .357 purchased on layaway from Wal-Mart (which
sold him the gun in violation of a federal law prohibiting
gun sales to persons under 21). The fifth case involving
Judge Batchelder was an important class-action case involving
Bristol-Myers Squibb. When the Supreme Court considered
hearing the Bristol-Myers case, Justice O'Connor recused
herself. Our records indicate Justice O'Connor also owned
stock in Bristol Myers--presumably this is why she recused
herself.
Judge Morris Arnold ruled in a case in which he had an
interest in two of the litigants--both of which are named
twice in the case heading.
The Percentage of Judges Appointed By Presidents Reagan
& Bush: One unexpected result of our research is that
the vast majority of the judges implicated in this study were
appointed by Presidents Reagan and Bush. Seven of the eight
judges identified in our study were appointed by Presidents
Reagan and Bush, and these judges were responsible for 16
of the 17 problem cases identified. These ratios are significantly
out of proportion with the percentages of circuit court judges
appointed by Reagan and Bush (which stood in 1997 at about
60 percent). This fact is particularly interesting given the
fact that these same Reagan/Bush judges are also leading the
court in a shift from Warren-era liberalism to Rehnquist-era
conservatism--a shift that principally benefits the same large
corporations at the center of this story. It is particularly
troubling given the percentage of cases in which the judges
ruled in favor of their financial interest.
Footnotes:
1. The search string used was judge
(<judges name>) & name (<all entities identified
on the recusal list>).
2. This tally includes only rulings
on the merits of appellate cases. We have not tallied the
large number of preliminary rulings made by judges in each
case or attempted to identify other cases in which judges
have made preliminary rulings in cases in which they hold
financial interests.
3. Judge Selya reports selling
his stock in Eli Lilly in January 1998, less than two months
after he purchased the stock and before he ruled in Eli Lilly's
favor in the second of the two cases before him. The rapid
turnover in his holdings suggests that Judge Selya discovered
the conflict with the two Eli Lilly cases and sold his stock.
If true, this discovery of a conflict in January makes Judge
Selya's failure to disclose the conflict in his certification
in May even more egregious.
Case Summaries
Washington Post featured CRC's investigative research results
in a frontpage story.
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