Stocks, Bonds Get in Way of Clean Court Rulings: Ann Woolner
July 20, 2010, 9:16 PM EDTJuly 21 (Bloomberg) -- Someone sues you and wins a big ruling. Surprised at your loss, you then learn the judge owns shares in a company that will benefit from his decision. That’s supposed to be impartial?
There has got to be a rule against that, right? There is. And it should have prevented U.S. District Judge Martin Feldman of New Orleans from deciding whether to lift the Obama administration’s six-month moratorium on deepwater oil drilling.
He set aside the moratorium in June, staying on the case even though he has disclosed ownership in at least one company the moratorium was hurting, Allis-Chalmers Energy Inc.
Feldman’s handling of the matter shows, again, how tricky it is to find out judges’ investments and how hard it can be to persuade them to give up cases that can benefit them financially.
It’s one of two recent cases out of New Orleans that make you want to require judges to put all their investments into blind trusts. The problem in the other one was too many recusals, not too few.
In that one, eight members of the 16-judge federal appeals court in New Orleans stepped off a global warming case, presumably because of stock ownership in some of the energy companies being sued. Because there were so many, the recusals themselves had the effect of deciding the case in the companies’ favor. Without a proper quorum, the judges said the case had to be dismissed.
Stepping Aside
Judges never have to say why they step aside or explain why they don’t. Financial disclosure reports help, but they are slow in coming. For the most part, the reports now available cover 2008, a year that ended 18 months ago.
At least Feldman, 76, made his 2009 report public sooner, once questions arose about his investments in businesses affected by the moratorium. As of Dec. 31, 2009, he owned a small piece of Allis-Chalmers, which services deepwater drilling operations in the Gulf of Mexico and elsewhere.
“We do expect that our business in the offshore is going to suffer” because of the moratorium, Chief Financial Officer Victor Perez told Dow Jones Newswires last month.
Because of Allis-Chalmers and other energy companies that Feldman’s report lists, environmental groups asked him to disqualify himself from the moratorium case. It still matters who presides because his ruling was temporary, as was the decision by the 5th U.S. Circuit Court of Appeals, which refused to reinstate the moratorium for now. And now the courts must decide on a revised ban.
Citing Precedent
Feldman this week rebuffed the recusal request without much explanation. He merely cited precedent that said judges don’t have to recuse when the alleged financial interest is “remote, contingent, and speculative.”
It is true that none of the companies the judge reported as investments were plaintiffs or defendants in the case. And yet, it’s clear at least one of them, Allis-Chalmers, was losing revenue because of the moratorium.
Feldman’s stock ownership clearly means his “impartiality might reasonably be questioned,” which requires recusal under the Code of Judicial Conduct.
The judge seemed to understand that a company not directly involved could have a clear interest in the suit. Feldman voluntarily disclosed that once he realized he had shares of Exxon-Mobil, which has a well the moratorium shut down, he sold the stock.
Even then he didn’t go by the book. The rules say he was supposed to give up the case, not his shares.
Stocks and Bonds
He presumably still held stocks and bonds in other companies with Gulf of Mexico operations. In addition to Allis- Chalmers, Feldman disclosed he had bonds with El Paso Corp. and SandRidge Energy Inc. They all “engaged in oil and gas drilling or related work in the Gulf of Mexico,” environmental groups said when urging him to step off the case on July 2.
Presumably held because all we know is what he had as of Dec. 31, 2009. Annual disclosure reports aren’t due until May 15, and then crawl through a process to let judges redact information. That’s to keep angry prisoners or losing litigants from learning information, such as a spouse’s work address, that could be used for retaliation.
The redaction takes anywhere from 10 to 30 days after you file a request. And even then, you can’t get the reports electronically, or even by fax. You have to go to the Administrative Office of the U.S. Courts in Washington and pay 20 cents a page.
Judges Reports
If you don’t mind waiting for someone else to do it, a conservative interest group, Judicial Watch, buys reports for all federal judges, from district to Supreme courts, at a cost of thousands of dollars. The group scans them and posts them online. That takes time, too.
The delays only underscore the need for judges to explain why they recuse themselves and, when their continued handling of a case comes under attack, why they don’t.
Either that or hire someone else to decide what investments to buy, which ones to sell and when to do it. Then, with the judge in the dark, there would be no way and no need to disclose investments, no need and no way to use them to question his neutrality.
--Editors: Jim Rubin, James Greiff.
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To contact the writer of this column: Ann Woolner in Atlanta at awoolner@bloomberg.net
To contact the editor responsible for this column: James Greiff at jgreiff@bloomberg.net
