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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