11th Circuit, 6th Circuit, Federal Judges, Legal Ethics, Money

Federal Judges Ruling On Cases Despite Holding Upwards Of $100,000 In Shares Of One Side

Several years back, the Washington Post uncovered multiple instances of federal judges committing basic ethical breaches related to ruling on cases despite holding significant financial stakes in one party. It was an embarrassing black eye for the federal judiciary and the legal system altogether. It forced the bench to develop a comprehensive financial reporting system and an automated computer check to avoid any further ethical lapses. Sounded reasonable at the time.

Well, it turns out the computer system doesn’t work.

Or at least it doesn’t work as well as anyone would have hoped. The Center for Public Integrity (CPI) just released a report this morning reflecting their efforts to manually review a sampling of federal court decisions and cross-check those with financial disclosure forms. The report found multiple lapses. The most egregious involved a judge with as much as $100,000 in Johnson & Johnson when he ruled in their favor on an appeal regarding a malfunctioning implant.

But by and large the legal world’s responses to these findings vary from tone-deaf to downright hypocritical….

As the Center for Public Integrity reports, the computer database designed to check for financial conflicts of interest is only as good as the data judges provide it, and in most if not all of these cases the problem was human error on the part of the judges. In fact, in the Johnson & Johnson example listed above, Judge James Hill claimed that he did not realize he held shares in Johnson & Johnson “due to the complexity of his family’s trusts.”

While there’s no reason to doubt Judge Hill’s explanation, the fact of the matter is this is exactly the sort of response that would never fly if offered by a lawyer standing before these judges. It’s constantly drilled into attorneys that it’s the lawyer’s ethical responsibility to vigilantly avoid even the appearance of impropriety. The “oops, my finances are hard” excuse would earn a benchslap heard round the world, so why are Judge Hill’s fellow judges largely comfortable with this excuse here?

Mostly because it’s the excuse his fellow judges like to use too:

“I don’t pay much attention to those stocks because it’s handled by a stockbroker,” said 11th U.S. Circuit Court of Appeals Judge Peter Fay, one of the 16 judges the Center found who wrongly participated in a case. “I don’t know what he’s doing. … I sit down at the end of the year and say, ‘help me fill out this form.’”

For some judges, their list of investments may fill up just a few lines on their annual financial disclosure form. Other judges, however, have much more complicated portfolios.

One appeals court judge, Helene White of the 6th U.S. Circuit Court of Appeals, filed a financial disclosure in 2012 that included 40 pages of financial holdings and transactions.

The Center found five examples in which White’s holdings overlapped with her caseload. The judge ruled in favor of her financial interests in two of them. Through letters to the involved parties, she admitted to failing to recuse herself in all five of the cases.

The best way to avoid these “complex investments” and the risk of judges hearing a case in which they hold a direct financial stake would be through mandating blind trusts or at least barring judges from holding individual stocks — which 59 percent of them currently do according to the Center.

The easiest fix to the conflict of interest problem would be to ban judges from owning stock, but that would be “an overreaction,” said Stephen Gillers, a New York University law professor who specializes in legal ethics.

“It would be a high price to demand of people who go on to the bench that they limit their investments to government securities and mutual funds,” he said.

I’m sensitive to the sacrifice judges make relative to the private sector to take a $200,000/year salary and lifetime tenure in the most prestigious legal jobs in the world judgeships, but let’s not kid ourselves. The argument for allowing judges to make more money to balance the private sector demands is based in the belief that it helps create a bench with diverse experiences rather than a bunch of retired private sector lawyers who already achieved financial security. That’s what we’d call “empirically denied” in a world where over two-thirds of all federal judges came from private practice. If letting judges invest freely isn’t helping draw in a professionally diverse bench, what’s the point in keeping it? Especially when the lapses — however frequent — shock the faith of the average American in the judicial system.

An official response from the courts to the Center’s report was remarkably tone-deaf:

David Sellers, a spokesman for the Administrative Office of the U.S. Courts, said in an email that while federal judges take their ethical responsibilities seriously, the more than two dozen conflicts identified by the Center are mistakes that can be attributed to human error.

“It appears that a very small number of judges inadvertently were involved in cases in which they had a financial conflict,” he wrote.

And the judges do not rule on cases by themselves. They typically sit with at least two other judges on each case.

Sellers noted that the two dozen conflicted cases represented just 0.02 percent of the 109,000 total cases decided in the U.S. Courts of Appeals over the last three years. Some experts agreed that it’s important to analyze the Center’s findings in a larger context.

Ugh. The Center admitted that its manual review was certainly not exhaustive, meaning there’s only a risk of even more ethical failures. And the fact that judges sit on panels? Judges on panels are not isolated entities checked by two other judges, but active participants in shaping oral argument and communicating with their colleagues — they help shape the opinion even when it’s unanimous. But putting all that aside, even if you buy the implicit argument the majority of judges holding financial stakes are recusing themselves appropriately, it’s not really an excuse. According to the Center, judges hold a a lot of stock in a lot of major companies:

All told, 150 of the judges on the appellate court invested between $76 million and $226 million in more than 1,000 corporations in 2012, according to the Center’s analysis. Disclosure rules require holdings to be reported in a range.

Among the most commonly held stocks owned by appellate judges were General Electric Co. (at least $2.5 million), tech giants Intel Corp. (at least $495,000), Microsoft Corp. (at least $630,000) and IBM Corp. ($1.5 million), plus energy heavyweight ExxonMobil Corp. (at least $3.8 million) — a list that generally dovetails with most commonly held stocks among all investors.

If we assume they Pollyanna idealistic vision of the appellate courts, recusal should be exceedingly rare. The judges on the court are put there to reflect the wisdom of the other two branches and in all but the most extreme circumstances, parties should have equal access to drawing judges from the same pool.

No one should have their case heard by a diluted pool of judges just because one party happens to be a profitable investment.

Federal judges plead guilty [Center For Public Integrity]
Ethics Lapses by Federal Judges Persist, Review Finds [Washington Post]

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