In re Cement & Concrete Antitrust Litigation

Decision Date26 May 1981
Docket NumberMDL Docket No. 296. Master File No. CIV 76-488 A PHX CAM.
Citation515 F. Supp. 1076
PartiesIn re CEMENT AND CONCRETE ANTITRUST LITIGATION.
CourtU.S. District Court — District of Arizona

Josef Cooper, San Francisco, Cal., Kenneth R. Reed, Chief Counsel, Antitrust Div., Phoenix, Ariz., Frederick Furth, Furth, Fahrner, Bluemle, Mason & Wong, San Francisco, Cal., for plaintiffs.

David Bonderman (Made Motion for Recusal in this Matter), Arnold & Porter, Washington, D. C., William J. Maledon, Martori, Meyer, Hendricks & Victor, George R. Carlock, Ryley, Carlock & Ralston, Phoenix, Ariz., for defendants.

OPINION AND ORDER

MUECKE, Chief Judge.

This matter is before the Court on Motion to Recuse, pursuant to 28 U.S.C. § 455(b)(4) and Canon 3 C(1)(c) of the Code of Judicial Conduct. I am asked to disqualify myself for the reason that my wife owns shares of stock in several members of the plaintiff class.

The present case is one of a growing number of very large antitrust class actions that have confronted the federal court system in recent years. The original suit was filed in this district in 1976. Similar actions which were filed in other parts of the country were thereafter transferred to this district by the Panel on Multidistrict Litigation. The subject matter of this case involves allegations of a nation-wide price fixing conspiracy in the cement industry. Plaintiffs are purchasers of cement or cement-containing products. In one way or another, Cement touches millions of people.

The history of Cement is long and complex. In the five years since it was filed, this Court has spent hundreds, if not thousands of hours reading and researching pleadings, conducting hearings, meeting with counsel, and issuing decisions. While trial is not yet underway, discovery has been substantial and is nearing completion.

In order to put defendants' motion in context, it is important to appreciate the size of the plaintiff classes. One of these classes, the National Cement Class, consists of more than 210,000 names, a substantial portion of which are corporate entities. The shareholders of these corporations would number in the millions. Before the present dispute, the class list existed only on microfiche and, to this Court's knowledge, had never been committed to hard copy.

On January 12, 1981, I received a letter from Mr. David Bonderman, on behalf of various Cement defendants. Mr. Bonderman advised the Court that, comparing the contents of my 1980 financial disclosure report with the names on the National Cement Class list, it appeared that my wife owned shares of stock in seven of the 210,000 class members. From this, Mr. Bonderman concluded that I was under a per se obligation to recuse myself pursuant to 28 U.S.C. § 455(b)(4) and Canon 3 C(1)(c) of the Code of Judicial Conduct.

I must admit that my first reaction to Mr. Bonderman's position recalled the words of Mr. Bumble in Dickens' Oliver Twist: "If the law supposes that ... the law is a ass — an idiot."1 Upon closer review of the authority cited by Mr. Bonderman, however, it became apparent that his argument was not without support in the language of § 455 and Canon 3 C. Therefore, on January 14, 1981, the Court ordered that plaintiffs be prepared to respond to the legal arguments raised in the letter at a hearing, which was set for Friday, January 30, 1981.

The Court's decision in this matter follows extensive briefing as ordered by the Court from the parties, oral argument on two occasions, and input from the Advisory Committee on Codes of Conduct of the Judicial Conference of the United States. I have concluded that I must recuse myself, not because I feel a sense of conflict, and not because I feel that to continue would create the appearance of impropriety. I have concluded that I must recuse myself for the sole reason that the law, as written, says I must.

28 U.S.C. § 455 and Canon 3 C

The relevant language of § 455 and Canon 3 C is identical:

Any ... judge ... shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned. He shall also disqualify himself in the following circumstances:
. . . . .
He knows that he ... or his spouse ... has a financial interest in the subject matter in controversy or in a party to the proceeding, or any other interest that could be substantially affected by the outcome of the proceeding....
For the purpose of this section the following words or phrases shall have the meaning indicated:
. . . . .
"Financial interest" means ownership of a legal or equitable interest, however small ....
(Emphasis added).

Defendants have taken the position that my wife's stock ownership in class members constitutes a "financial interest" in either the "subject matter in controversy" or in a "party to the proceeding."

Both of these arguments could be avoided if the words "any other interest that could be substantially affected by the outcome of the proceeding" could be read to modify a disqualifying "financial interest." If this were the case, a financial interest in the "subject matter in controversy" or in "a party to the proceeding" would be disqualifying only if the interest was such that it could be "substantially affected by the outcome of the proceeding." Despite the logical attractiveness of such a reading, the only Circuit Court to have addressed the issue has rejected it:

The statute differentiates between two kinds of interests. If the judge has a direct ownership, legal or equitable, then disqualification is required regardless of the size of the interest, unless one of the specified exceptions applies. On the other hand, an interest not entailing direct ownership falls under "other interest," and requires disqualification only if the litigation could substantially affect it.

In re New Mexico Natural Gas Antitrust Litigation, 620 F.2d 794, 796 (10th Cir. 1980). See also Opinion of the Advisory Committee on Codes of Conduct of the Judicial Conference of the United States, May 7, 1981 at 3, which is attached to this Opinion as Exhibit A and incorporated by reference herein.

The Advisory Committee's Opinion

Given the similarity between § 455 and Canon 3 C, defendants' argument raises ethical as well as legal considerations: For this reason, all memoranda in this matter, filed in the Motion to Recuse, including a transcript of oral argument, were referred to the Advisory Committee on the Codes of Conduct with a request for an opinion, which request was first initiated by this Court to the Committee on January 29, 1981.

Upon due consideration of all materials that were provided to this Court, the Advisory Committee concluded that I should recuse myself. The Committee did not consider the first issue raised by defendants, whether my wife's stock ownership in a class member constituted a "financial interest in a party to the proceeding." While the Committee's opinion was not specific, it suggested the applicability of defendants' alternate arguments, that my wife's stock constitutes a "financial interest in the subject matter in controversy" or "any other interest that could be substantially affected by the outcome of the proceeding." In recommending recusal, the Committee emphasized that ethical considerations require a judge to consider "possible and potential conflicts of interest as well as actual conflicts of interest." Advisory Opinion at 4. The Committee also suggested that any eventual judgment which would result in a financial benefit to a corporation in which my wife owned stock might create the appearance of impropriety. See Canon 2, Code of Conduct.

§ 455

Regardless of the applicability of § 455, this Court is very persuaded by the Advisory Committee's conclusions as to Canon 3 C. Section 455 outlines the legal boundaries of when a judge must recuse himself. Canon 3 C defines the ethical boundaries. Even if I could legally proceed with a case, I would refuse to do so if I were to determine that it was ethically improper.

Given that § 455 purports to adopt a per se rule regarding disqualification, it is amazing that the statute is not more specific as to when the per se rule would apply. The problems created by the language of § 455 are compounded by a dirth of legislative history on the questions before this Court. Section 455 might operate with some degree of success in the context of simple litigation. When applied to complex multidistrict class actions, however, the statute appears to break down.

The first question raised by defendants is whether the class members in whom my wife owns stock are "parties" within the meaning of § 455(b)(4). If they are, the statute commands my recusal "however small" my wife's interest in them might be.

Despite the proliferation of class-actions in this country, there is no indication that Congress directly considered the question whether "party" under (b)(4) should be read to include "class member."

The strongest points raised by plaintiffs are that the statutory language does not refer to class members, and that general law does not treat class members and parties in an identical fashion. See e. g. Greenfield v. Villager Industries, Inc., 483 F.2d 824 (3d Cir. 1973) (the purpose of class actions is to bind persons (class members) who are not "parties"); Hawaii-Pac Venture Capital Corp. v. Rothbard, 564 F.2d 1343 (9th Cir. 1977) (class members have no absolute right to intervene in class action).

The problem with plaintiffs' argument is that, where it counts, class members and parties are identical. There is no question that class members are included in the benefits and burdens of a judgment on an equal basis with parties. For this reason, there appears to be no reason in logic why a financial interest "however small" in a named party to a litigation should be grounds for recusal, but that the same interest in a class member should not be. Neither the degree of conflict, nor the appearance of impropriety is altered by a litigant's...

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