Judges

Federal Judges Failed to Recuse in Hundreds of Cases

A Wall Street Journal report shows that federal judges do not always recuse when cases implicate their financial holdings.

|

Over 100 federal judges failed to recuse themselves from cases involving firms in which they held stock or other financial interests between 2010 and 2018, according to a new Wall Street Journal report. All told, the investigation identified 685 cases in which the judge or a family member owned stock in a company involved in a case before them.

A Wall Street Journal investigation found that judges have improperly failed to disqualify themselves from 685 court cases around the nation since 2010. The jurists were appointed by nearly every president from Lyndon Johnson to Donald Trump.

About two-thirds of federal district judges disclosed holdings of individual stocks, and nearly one of every five who did heard at least one case involving those stocks.

Alerted to the violations by the Journal, 56 of the judges have directed court clerks to notify parties in 329 lawsuits that they should have recused themselves. That means new judges might be assigned, potentially upending rulings.

When judges participated in such cases, about two-thirds of their rulings on motions that were contested came down in favor of their or their family's financial interests.

The clerk's office in each court often maintains a list of each judge's investments and checks for conflicts before assigning cases, but this is an imperfect check, as the study indicates, and does not prevent the serious appearance problem created by judicial decisions on matters related to a judge's investments.

The majority of the cases identified by the WSJ may have involved simple oversights, but the report highlights the need for federal judges to place their investments in index funds and equivalent instruments or place their investments in trust.

NEXT: Today in Supreme Court History: September 28, 1787

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Professor Adler….I am not sure your index fund recommendation is a valid one. I understand your rationale, but index funds can have the same problem as holding individual stocks. I am not speaking of total US Stock market funds, or total intl index funds.

    Index funds today can get very exotic. You still have the same problem.

    There are only 685 questionable instances of financial conflict of interest in the tens of thousands of federal cases heard in 8 years? That is all? Seriously?

    I’d say the Federal judges as a group are a model of rectitude compared to Congress and the Executive branch.

    1. The real question is whether the judge will be thinking in the back of their mind “will this ruling affect my portfolio?”

      Agree that there are some pretty specific indices that are available for investing via index funds, but I doubt that’s what Adler had in mind.

      But even a broadly based index fund, e.g. one based on the S&P 500 might move one way or the other based on a ruling. The more one has invested in the “broader market” the more likely one might be inclined to be “pro business” and let that influence rulings. Of course, that ship has sailed long ago.

      1. ah….Clem, I have to be honest. While I appreciate the WSJ reporting, I don’t see a lot in the article to get all that excited about. Are there instances of venality where it can be shown that a sitting federal judge specifically ruled in ways to deliberately benefit/enrich themselves by the ultimate outcome of the case? A few, no doubt. A very few.

        When it comes to our federal judiciary, my inclination is to leave well enough alone. There are rules in place for federal judges to recuse themselves. And there are rules in place to review instances where federal judges did not recuse themselves. If I am not mistaken, SCoTUS relies on the honor system (The Chief leaves it to the associate justices to determine their need to recuse). Our federal judges are not deliberately enriching themselves, and I’ll trust their judgment on when to recuse, and when they think they can decide a case impartially. I just do not see a ‘problem’; meaning, what the WSJ is reporting is an exceptionally rare occurrence given the enormous number of cases heard every year by the federal judiciary.

        If there were no mechanism to review, I would feel differently. But there is a review mechanism, and based on what I see in the WSJ article, it works really well. No need to ‘fix’ it.

        There is no common ‘legal’ definition of the term index fund that I am aware of. It (index fund) can be whatever you want/need it to be. And that is the fatal flaw in Professor Adler’s thinking. Professor Adler assumes diversification by using an ‘index’ fund. They ain’t all diverse, mostly by design.

        Nor do I agree that a judge should be required to divest, or place their assets into a blind trust. Full and transparent disclosure is enough, IMHO. That is a philosophical difference between Professor Adler and myself. Professor Adler evidently prefers a significantly higher degree of direct control over someone else’s finances; a rather curious application of libertarianism.

        1. > If I am not mistaken, SCoTUS relies on the honor system

          And as we all know, that has worked out marvelously.

          BTW, anyone know who paid off Bart o’Kavanaugh debts?

          1. BTW, anyone know who paid off Bart o’Kavanaugh debts?

            This conspiracy theory is stupid.

          2. “BTW, anyone know who paid off Bart o’Kavanaugh debts?”

            His parents.

        2. If I am not mistaken, SCoTUS relies on the honor system (The Chief leaves it to the associate justices to determine their need to recuse).

          It does rely on the honor system, but the Chief Justice doesn’t “leave it to” them; he doesn’t have any authority one way or the other.

          Professor Adler evidently prefers a significantly higher degree of direct control over someone else’s finances; a rather curious application of libertarianism.

          No; thinking that libertarianism is at issue here is what’s rather curious. We are talking about government employees and the conditions under which they do their government jobs. Libertarianism is not a theory of the relationship between the government and its own employees.

      2. But even a broadly based index fund, e.g. one based on the S&P 500 might move one way or the other based on a ruling.

        Possible but extremely unlikely.

    2. According to the WSJ, “federal law since 1974 has prohibited judges from hearing cases that involve a party in which they, their spouses or their minor children have a “legal or equitable interest, however small.”

      So owning shares in an index fund will often not help. In any dispute where one of the parties is a major public corporation and the other isn’t, the index-fund-holding judge is likely to hold a small interest, at least, in the corporation.

      It does seem to me that the index fund should be allowed, so long as it is broad-based and not directed at a particular sector, but not direct ownership.

      1. I fully agree, bernard.
        The “absolute zero” or “however small” standard is absurdly narrow in this day and age. Fine for 100 years ago.

      2. Funny how this doesn’t apply to the Court of Claims. After all, if the court rules in favor of the plaintiff and against the government, in some abstract way the judges are on the hook for part of the tab, so therefore that should tell us this absolute rule is silly.

  2. When judges participated in such cases, about two-thirds of their rulings on motions that were contested came down in favor of their or their family’s financial interests.

    This doesn’t really tell us much unless we compare it to how publicly traded companies fare in federal court generally. Especially since federal court is considered more defense friendly. In addition, there are lots of federal claims that plaintiffs can assert that would never move the meter on a stock price (e.g., TCPA, ADA, etc.). If these claims are dismissed on the pleadings or summary judgment, it’s extremely unlikely it has anything to do with financial ties.

  3. Only Catholic priests and nuns, who have taken a vow of poverty should be permitted to become federal judges.

    1. How many Catholic Church leaders live in opulent properties? When an organization owns a $5 million or $10 home for its top official, the ‘vow of poverty’ is ridiculous.

    2. What a wonderful idea. KevinP for President !

    3. But then who would hear the cases where damages are being sought by victims of pedophilia?

  4. “jurists were appointed by nearly every president from Lyndon Johnson”

    LBJ has not been president for 53 years. 88-95 year olds should not deciding lawsuits.

    1. 79 yo’s or 75 yo’s should not be attempting to lead our country

      1. So Don Nico….75 or 79 is bad, but 78 is ok? 🙂

        (I am just being a smarty pants)

      2. Yes, that’s correct.

        Its a general plague.

        Pelosi, 81, Chuck Schumer, 70, Mitch, 79 lead Congress. Grassley at 88 is running again for a 6 year term!

        #2 Democrat in the House was born before Hitler invaded Poland. Fun fact, his DOB is closer in time to Lincoln’s first inaugeration than Biden’s.

  5. I thought the whole point of a Rule 7.1 Statement was to make sure the clerk didn’t assign the case to a judge who had a financial interest. This sounds like a clerking issue, not a judging issue.

    1. Perhaps, but it seems to me that a judge should recuse if their financial interests are at stake.

      Now, if only there was some recusal method for the Supreme Court that wasn’t strictly voluntary.

  6. That this net has caught so many fish simply shows that the mesh is waaaay too fine.

    The law should have some sort of materiality limit – eg if the judge’s “tainted” investment has a market value of less than $25,000 it shouldn’t matter. The gain / loss effect of a judgment on an investment of is pretty unlikely to be more than 20%, and federal judges are not going to put their thumbs on the scale for five grand. Or if they are, they’re already taking envelopes behind the courthouse.

    1. The typical district court case isn’t going to come anywhere close to having a 20% impact. 1% would probably be a “big” move for a publicly traded stock as a result of litigation, and the vast majority of outcomes wouldn’t even be noticed by investors.

      1. I agree, i was going for a top end estimate. Though I suppose if the judge held an out of the money option, a judgment could move the price of the option by more than 20%.

    2. If the judge is paid significantly more for judging the case than the shares are worth, seems pretty unlikely they’d rule on the basis of protecting their investments.

  7. Don’t have a clue where my family holds stock. Some of them would tell me it’s none of my business if I asked. Some of them are so far gone they don’t know themselves.

    This doesn’t seem like a terribly serious problem.

  8. An unethical federal judge?

    I am SHOCKED! SHOCKED! I tell you!

  9. The judges should follow the lead of the presidents of the Dallas and Boston Federal Reserve banks.

  10. “serious appearance problem”

    Either it poses an undue risk of bias, or it doesn’t.

    I don’t think the primary consideration is public appearance. That sort of thing can, at one extreme, ensnare the innocent and, at the other extreme, can provide a way for guilty people to minimize their situation (“I admit it *looked* bad to suspicious nitpickers…”).

  11. No one has asked: Why doesn’t some part of the federal judiciary have some administrators who do what the WSJ did and double check the judges? If done timely it would save considerable embarrassment.

  12. The two thirds statistic reminded me of what the Boston Globe intended as an exposé on DUI trials in Massachusetts. Some judges were not making their conviction quota. Wait, we don’t have quotas. Some judges were ruling “not guilty” at a rate greater than the state average for all DUI trials including both bench and jury trials. Which could mean (1) they’ve been bribed, (2) they are alcoholics doing favors for their alcoholic buddies, (3) they are lawyers doing favors for their lawyer buddies, or (4) they get a disproportionate share of innocent defenders because state law makes it hard for prosecutors to drop DUI charges and obviously innocent defendants are better off with a bench trial. I’d rank those last to first in order.

    So tell me what fraction of cases were decided in the big company’s favor by judges without a conflict of interest. We could be seeing a bias in who has the better case or the better lawyers, David or Goliath.

Please to post comments