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The Judge Alito Vanguard Recusal Controversy:

Lawprof David McGowan opines on this at the Legal Ethics Forum. The post is long (because the issue and the relevant law are complex) and interesting, but here's the bottom line:

Did Judge Alito violate any rules by sitting on the case? Deborah Rhode opined on NPR that Alito's sitting on the case was "a violation of judicial ethics 101." Steve Lubet was more forgiving, describing it as a mistake justifying an "oops" response, but not an episode calling Alito's ethics into question. Steve Gillers pretty much agreed . . . .

I think Professors Lubet and Gillers are right, and that Professor Rhode is not. One can approach this question in a pragmatic, purposive manner, in which case it is clear that Judge Alito did nothing seriously wrong, and that this episode provides no basis to question his ethics, or in a strictly literal, formalist, manner, in which case a case might be made that he violated rules against conflicts by hearing the case the first time but then properly recused himself when a complaint was made. That case has not yet been established, however, though the reports cited above imply that it has.

Bruce Wilder (www):
He committed himself to recusal in such a case, and then did not follow thru on the promise. That makes it a little more serious, since it reinforces the obvious: that he should have noticed that it concerned a mutual fund company in which he had a substantial interest.

The consequence of his ethical error was that the case had to be heard again, at considerable expense.

I agree, though, that, by itself and absent a pattern, it is not the kind of major error, which should lead anyone to generally question his ethics. It was minor, and not the kind of thing, which would justify questioning the judge's personal character.
11.6.2005 5:48pm
BTD_Venkat (mail) (www):
Prof. McGowan's analysis seems off-kilter. For one thing, the subsection he points (d)(4)(i) only states that ownership in a fund does not equal ownership in the underlying securities. Ownership in a fund obviously equals ownership in a fund--this is obvious enough that it did not need to be spelled out.

As to the question of whether under propertly law there is an ownership interest in the fund or underlying securities, this is a complicated question that is relevant to a variety of other issues (e.g., tax) but shouldn't really bear on the conflicts issue.

The bottom line is that he had a financial interest with a litigant which may cause his impartiality to reasonably be questioned. If the answer to this question could turn on the precise nature of the rights conveyed by the mutual fund to the investor there would be room for much game playing when at the end of the day, I'm not sure mutual fund investors really distinguish between the types of ownership rights granted by the fund (nor would the public--so this shouldn't affect the "reasonably likely to be questioned" factor).

Obviously other technical rules bear on the analysis, and the reporters may be wrong in their descriptions, but Prof. McGowan's analysis seems incomplete. I wasn't sold after reading his post. (Nor do I think the violation is serious, I'm sure all judges have some recusal issues they haven't perfectly dealt with. If I were the White House I wouldn't try to get bogged down on defending this.)
11.6.2005 6:02pm
TL:
A cursory review of the blog cited reveals that it is very questionable indeed if Alito had any substantial outcome financially in the case. First, the facts of the case seem to parallel those of an interpleader situation (suffice it to say, that the legal consequences to Vanguard promise to be very immaterial to the overall health of any particular fund).

Second, did you see those disclosures on the Justices? (Including even Harriet?) It seems likely that a large deal of Judges and Justices in this country have money in a Vanguard fund of some flavor. The Star Fund, according to my information, is the most commonly invested fund of this sort in the world. Should this mitigate the likelihood that a judge would feel conflicted about hearing the case? Maybe. How about suit against the PBGC, under ERISA, for a breach of fiduciary duty? Potentially a whole lotta people, including judges would "have an interest" in a suit of that nature.
11.6.2005 8:23pm
Paul McKaskle (mail):
I agree completely with TL. The following is my comment on the Legal Ethics Forum:

"I think the pre-eminent consideration here is that the underlying lawsuit(s) sought no damages against Vanguard. The litigation involved claims by two opposing interests to ownership of an interest in Vanguard mutual funds. The widow said it was hers and creditors, who claim that her late husband defrauded them, said it was theirs. If so, then no interest of Vanguard is implicated, it owes the assets in question to someone and is not claiming the assets for itself. I don't know how the relevant litigation was structured, but in essence Vanguard was in the position of a "stakeholder" in an Interpleader action. It had nothing to gain no matter which claimant ended up with the assets. It may have been "named" in the litigation (since it held the assets for the benefit of whomever owned them). But the only outcome of the lawsuit as far as Vanguard was concerned would be an order to pay the funds to whichever claimant won the lawsuit. So, whether Judge Alito owned some Vanguard mutual funds is irrelevant as a substantive matter, no matter which claimant wins the underlying lawsuit, Vanguard neither benefits or loses. So, there is not even any indirect financial gain to Judge Alito no matter what the outcome of the lawsuit."
11.7.2005 12:05am
BTD_Venkat (mail) (www):
Well, I would think her claim would be for something like wrongful garnishment. While Vanguard considered itself to be an interpleader, merely trying to resolve a dispute with respect to competing claims for funds, from what I've read, she (although pro se) could have had a claim against Vanguar for improperly paying the money out.

Also, Judge Alito had stated in a letter during his earlier confirmation that he would recuse in any case involving Vanguard.

I don't think it's a big deal (although I don't buy the interpleader argument -- or at least not without seeing the pleadings or an account of them) and the White House (in a WApo) article wisely tried to explain it away:

White House spokeswoman Dana Perino said Alito had become involved in the case because a "computer screening program" at the 3rd Circuit had failed to pick up the potential conflict. She said that "as soon as the matter was brought to [Alito's] attention" by Maharaj's motion, he wrote a letter to Scirica requesting that the ruling be withdrawn and the case presented to a new panel.
11.7.2005 1:42am
Public_Defender:
This incident shows one of the problems with strict recusal rules--they often are more symbolic than helpful.

The federal recusal standards are stupidly strict. A judge who has a Wilshire 5000 index fund can not hear any cases involving any company in the Wilshire 500. No reasonable person could think that even a large holding in such an index fund would influence a judge's position on case involving Microsoft or GM.

Further, as we saw in the Delay case, once a judge is recused, the litigants can sometimes game the system for a replacement. (Even the decision about whether to seek recusal is often gaming the system.) This gamesmanship does more to harm the appearance of propriety than if the case had proceeded in front of the original, randomly chosen judge.

But rules are rules. Judge Alito made a mistake even though Vanguard's interest in the case was minimal. I'm with those who say that if this was a one-time mistake, it's no big deal.
11.7.2005 8:53am