Ethics. To recuse or not?

• Author: Randy Maniloff
• Pages: 32-33

ETHICS

To recuse

or not?

Investigations into federal judges’

financial interests spark debate

BY RANDY MANILOFF

Following the 2010 explosion

of the Deepwater Horizon

oil rig in the Gulf of Mexi-

co , numerous lawsuits were

 led in the U.S. District Court for the

Eastern District of Louisiana. Many

were assigned to Judge Carl Barbier .

At the time, records show he owned a

de minimis amount of debentures in

Halliburton and Transocean, parties in

the litigation.

Early on in the case, Judge Barbier

sold his investments, which each paid

him between $1,001 and $2,500 in

2008, but the companies requested his

recusal. The jurist declined. The New

Orleans-based 5th U.S. Circuit Court

of Appeals sided with Barbier, holding

in In re: Cameron International Corp.

that the judge was not obligated to

relinquish his role in the case.

The appeals court concluded the

debentures—debt instruments that paid

the judge interest on money he had

loaned to the companies—are not the

type of “ nancial interest” in a party

that legally required his recusal.

It would have been different if Judge

Barbier had owned even a single share

of Halliburton or Transocean stock.

If so, recusal would have been man-

dated by 28 U.S.C. § 455(b)(4), which

obligates disquali cation when a judge

“knows that he, individually or as a  -

duciary, or his spouse or minor child re-

siding in his household, has a  nancial

interest in the subject matter in contro-

versy or in a party to the proceeding.”

The rule for stocks is a bright line based

on one of the “ nancial interest”de ni-

tions: “ownership of a legal or equita-

ble interest, however small.” There are

some exceptions, including ownership

of shares in a mutual fund.

Despite the clarity of the rule, in

September, the Wall Street Journal, in a

front-page story, reported that between

2010 and 2018, more than 130 federal

judges failed to recuse themselves from

685 cases in which they or family mem-

bers owned stock.

When brought to their attention, the

judges offered all manner of reasons

for the statutory violations, including

 awed internal procedures , lack of

awareness that their spouse’s holdings

mandated recusal and mistaken beliefs

that shares held in an account run by a

money manager were an exception.

Congress noted the Wall Street Jour-

nal’s  ndings. (So did Chief Justice John

Roberts in his 2021 Year-End Report

on the Federal Judiciary, calling for

more rigorous ethics training for judg-

es.) Weeks after they were published,

the House Judiciary Committee’s Sub-

committee on Courts, Intellectual Prop-

erty and the Internet held a hearing.

Renee Knake Jefferson, a legal ethics

professor at the University of Houston

Law Center who testi ed before the

subcommittee, said in her testimony

that she welcomed the Wall Street Jour-

nal’s investigation. But “we shouldn’t

have to rely on journalists for the en-

forcement of judicial ethics, ” she said.

Little enforcement

The Wall Street Journal’s was not the

 rst empirical study to reveal recusal

missteps by federal judges. In December

2020, Penn State Law professor Benja-

min Johnson and John Newby Parton,

a Princeton University master’s degree

candidate in public affairs , published

the results of several years of research

on the issue. Writing in the North Car-

olina Law Review, the authors conclud-

ed 75 federal judges between 2009 and

2012 participated in more than 200

cases despite owning stock in a litigant.

But Parton says the problem with

the recusal system is greater than sim-

ply some judges getting it wrong when

they own stock in a party before them.

And looking at the Deepwater

Horizon case, Johnson questions why a

judge’s debt investment is treated differ-

ently than an equity interest for recusal

purposes. “In both cases, the judge has

put money in the company and stands

to bene t if it does well,” Johnson says.

“The difference is simply that bonds

are considered safer than stocks.”

Johnson makes the same point

about a judge’s ownership of deriva-

Illustration by Sara Wadford/Shutterstock

ABA JOURNAL | FEBRUARY–MARCH 2022

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Practice Matters | ETHICS