Risk Update

Judicial Conflicts of Interest — Judge Stock Ownership Rule Ripples

Lawyers Urge 2nd Circuit to Vacate Decision by Judge Who Owned Exxon Stock During Litigation” —

  • “Lawyers for an insurer Tuesday urged a Second Circuit panel to abandon a ruling by a Manhattan federal district judge, arguing it was wrong on the merits but also clouded by his ownership of stock in Exxon.”
  • “The U.S. Court of Appeals for the Second Circuit heard oral arguments in a $31 million case pitting ExxonMobil Oil against TIG Insurance.”
  • “TIG attorney Daniel Sullivan, a partner at Holwell Shuster & Goldberg, said the failure of U.S. District Judge Edgardo Ramos of the Southern District of New York to disclose his stock ownership was the very first example cited in a 2021 Wall Street Journal investigation that reported that 131 federal judges had heard cases involving a party in which they or their family members owned stock, a violation of federal law.”
  • “Ramos attributed the failure to disclose to a problem with the court’s conflict-screening software, the Journal reported at the time. Federal legislation to toughen judges’ financial disclosure requirements recently passed both houses of Congress.”

Conflict Claim Can’t Sink $2.75B Cisco Loss, Centripetal Says” —

  • “Centripetal Networks has told an appeals court that tossing out a $2.75 billion patent judgement in its favor against Cisco Systems Inc. because a district judge’s wife owned Cisco stock would prove “unjust,” robbing the company of a “David-versus-Goliath” win despite that jurist having no obvious bias. “
  • “Centripetal and Cisco on Friday filed another round of competing briefs over why Virginia Federal Judge Henry C. Morgan Jr.’s failure to recuse himself from the case after learning that his wife owned 100 shares of Cisco stock should or shouldn’t result in tossing out the decision and starting the case over with a new judge.”
  • “Near the end of the initial trial, on Oct. 17, 2019, Judge Morgan discovered that his wife had purchased a handful of shares of Cisco stock. Before he found out, the judge said he had already decided ‘virtually every issue’ on the case, and ultimately decided to disclose the financial interest but stay on the case. He put the stock in a ‘blind trust’ as a way of remedying the potential conflict.”
  • “Cisco argues this blatantly breaks the federal disqualification statute, and if the Federal circuit does not vacate Judge Morgan’s judgment, it ‘would seriously undermine public confidence in the judiciary.”‘ Centripetal, on the other hand, argues that the injustice the smaller company would suffer in having to re-litigate the case would be far greater than the injustice of the judge’s minor financial conflict.”
  • “The company could face prejudice if the case were to be litigated because evidence will have gone stale and witness’ memories could be lost, the company said. Therefore, the court should practice discretion, as it has in the past, and determine that the small financial conflict created no bias in the case, Centripetal said.”
  • “Cisco also attacked argument that Judge Morgan had already decided the case before learning of his wife’s stocks, pointing out that Judge Morgan had issued a lengthy opinion on merits of the case, entered judgment on the case, and written a 49-page opinion denying Cisco’s post-judgement motions all after he had learned of the financial conflict.”