Judicial “Unrecusal”

In my last post, I wrote about recusal at the supreme court level. That’s when a justice has to get off a case because of some kind of conflict. In recent times, the reverse of recusal has emerged.  We now have “unrecusal.”

One of the most common reasons a judge has to get off a case is ownership of shares of stock in one of the companies involved in the litigation.  That is an automatic ground for disqualification, no matter how small the amount.  So unrecusal is selling stock in a company to get rid of the conflict that created the need for recusal in the first place.     

Here’s another little wrinkle on “unrecusal”.  Under a law that went into effect December 20, 2006, any federal judge who has to sell stock to remove a conflict of interest in a case can defer the capital gains taxes on that stock, so long as the proceeds are reinvested within sixty days in certain government-approved investments.  That’s pretty nice.  As head of the Judicial Conference, Chief Justice Roberts urged Congress to give this break to federal judges (executive branch officials have long had this privilege). And he’s taken advantage of it himself.  On Dec 6, 2006 (before the new law went into effect) he recused himself from an upcoming anti-trust case, Credit Suisse v. Billing, then suddenly on March 26, 2007, the day before the oral argument in the case, (and after the new law was in effect) he abruptly unrecused, presumably having sold his stock, and participated in the case. 

 Chief Justice Roberts did the same thing in 2007 in Stoneridge v. Scientific Atlanta, a major securities case.  In Stoneridge the Court was to decide whether shareholders could sue third parties such as investment banks, law firms, and accountants for a company’s fraud.  Both Roberts and Justice Stephen Breyer owned stock in Cisco Systems, Inc., the parent company of Scientific-Atlanta. But Roberts sold his stock so he could participate in the case.  Breyer (who apparently owns more individual stocks than any other justice) did not.  If eight justices hear a case, a tie means the lower court decision stands. There was speculation before the Stoneridge case was argued that with only seven justices, there could be a pro-investor ruling, while with eight, and a tie, the lower court’s pro-company ruling would stand.  As it turned out, though, the vote in the case was 5-3 against extending liability beyond the company itself. So even if Justice Breyer had unrecused in the case too it wouldn’t have mattered.

 A few weeks ago, Justice Breyer’s wife dumped her shares in Nestle so that he could stay on a major medical patent case argued December 7, 2011.

 Ethics is one of the subjects I teach at the University of Cincinnati College of Law.  Unrecusal has been much discussed among academic legal ethicists, who go both ways on it.  But it just doesn’t pass my sniff test. It feels as if a justice is selling a stock in order to be able to rule in favor of that company.  That may not be true, but in judging, appearances are crucial.  

I’ve never heard of an Ohio Supreme Court Justice, or any other Ohio state judge, for that matter, “unrecusing” from a case in this manner.  I hope it never happens. Of course, there’s no tax break in it for a state court judge.

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