Aetna Cas. & Sur. Co., In re

• Decision Date: 26 November 1990
• Docket Number: No. 90-5184,90-5184
• Citation: 919 F.2d 1136
• Parties: In re The AETNA CASUALTY AND SURETY COMPANY, Petitioner. . Re
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1136

919 F.2d 1136

In re The AETNA CASUALTY AND SURETY COMPANY, Petitioner.

No. 90-5184.

United States Court of Appeals Sixth Circuit.

Reargued June 13, 1990.

Decided Nov. 26, 1990.

Claire McGuire (argued), Office of the Gen. Counsel, Federal Home Loan Bank Bd., Washington, D.C., for FDIC.

Janet L. Mayfield (argued), Knoxville, Tenn., for Thomas G. Hull.

William B. Luther, Steven S. Usary, Luther, Anderson, Cleary, Ruth & Speed, Chattanooga, Tenn., Larry L. Simms (argued), Julia A. Dahlberg, Paul Blankenstein, Gibson, Dunn & Crutcher, Washington D.C., Geoffrey C. Hazard, Jr., New Haven, Conn., for Aetna Cas. & Sur. Co.

Before MERRITT, Chief Judge, KEITH, KENNEDY, MARTIN, JONES, KRUPANSKY, WELLFORD, MILBURN, GUY, RYAN, BOGGS and NORRIS, Circuit Judges.

WELLFORD, Circuit Judge.

Petitioner Aetna Casualty & Surety Co. (Aetna) seeks a writ of mandamus ordering Chief Judge Thomas Hull of the Eastern District of Tennessee to recuse himself from a series of cases, asserting that the recusal is required by 28 U.S.C. Sec. 455. We must first determine whether the extraordinary writ of mandamus is available in a controversy of this kind.

Both of these cases involved bankers bond claims arising from the failures of the United American Bank and City & County Bank of Roane County arising out of defalcations by members of the Butcher family. After a hearing on January 10, 1990, Judge Hull entered a January 30, 1990 order denying Aetna's motion for recusal in these cases. Subsequently, however, Judge Hull recused himself from the C & C-Roane case.

I. MANDAMUS JURISDICTION

We are now faced with the question of whether Judge Hull should be disqualified from further participation in the case of FDIC v. Aetna, CIV-1-85-797. This case involves a claim against the bankers blanket bond issued by Aetna, which claim is based on fraudulent losses at the former UAB-Chattanooga Bank. We also must decide whether any of the orders previously entered by Judge Hull in the UAB-Chattanooga and C & C-Roane bond claim lawsuits should be vacated. Aetna has also raised questions of propriety as to a December 14, 1989, order entered by another Eastern District of Tennessee Judge, The Honorable Leon Jordan, in the UAB-Knoxville bond case, to which that case was later apparently assigned by Judge Hull.

The problem facing us arises out of a series of separate actions filed against Aetna in December of 1985. These cases were assigned to Judge Hull who, pursuant to an uncontested motion, consolidated seven cases brought by the Federal Deposit Insurance Corporation (FDIC). In September of 1986 Judge Hull disqualified himself from the consolidated cases, as did other judges in that district. The cases were then assigned to another judge, but he was never in a position to handle any of the cases. Later, in 1987, then Chief Judge Lively of this court reassigned the consolidated cases to Judge Eugene E. Siler, Jr., a district judge from Kentucky. Aetna then moved to try the seven cases, as consolidated, in 1988. In April of 1989, Judge Hull--despite the reassignment of the cases by the Chief Judge of this circuit--denied Aetna's motion based on a finding that "several different banks are involved in this action and consolidation would not be appropriate."

Aetna promptly sought clarification of these orders denying consolidation of the seven cases for trial and reassignment of three cases by Judge Hull to himself. In each of the seven cases, FDIC sought to hold Aetna liable on its bond furnished with respect to the failures of different banks operated and/or controlled by the Butcher family. On April 24, 1989, Judge Hull entered the following order in the three cases reassigned reassigned to himself:

In an Order dated September 11, 1986, this Court indicated that the presiding judges in the Southern, Northeastern, and Northern Divisions of this district had disqualified themselves from trying a group of seven cases, including the three indicated above.

The reason that the undersigned disqualified himself was because the seven cases had been consolidated for trial, and in four of the cases, the firm of Morton, Lewis, King & Krieg, for whom his daughter works, were participating in the case. It now appears that the cases will not be tried together, and can be tried individually. This Court has no disqualification for trying these three cases because the law firm of Morton, Lewis King & Krieg is not participating in these three cases. These cases are some of the oldest cases on the docket in the Eastern District of Tennessee and need to be tried. Therefore, the above-styled cases will be pretried by United States Magistrate Robert P. Murrian, and set for a trial date, each to be set separately. Magistrate Murrian will then pretry the other four related cases that are still assigned to the Honorable Eugene Siler. They will also be set for an appropriate trial date.

J/A 14-15 (emphasis added). ¹

After one case was set for trial in Knoxville by Magistrate Murrian to commence in January of 1990, Aetna in May of 1989 moved to recuse Judge Hull in CIV-3-85-1242, a case involving Joseph H. Adams, Jr., Jacob F. Butcher, and Wayne Angel as third party defendants. The motion was based on 28 U.S.C. Sec. 455, Canon 3 C of the Code of Judicial Conduct, and the Fifth Amendment due process clause. First, in the motion for recusal, Aetna asserted that Judge Hull was disqualified from participating with respect to its motion to consolidate for trial. Aetna relied on the following parts of Sec. 455:

(a) Any justice, judge, or magistrate of the United States shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned.

(b) He shall also disqualify himself in the following circumstances:

(4) He knows that he, individually or as a fiduciary, or his spouse or minor child residing in his household, 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;

(5) He or his spouse, or a person within the third degree of relationship to either of them, or the spouse of such a person:

(ii) Is acting as a lawyer in the proceeding;

(iii) Is known by the judge to have an interest that could be substantially affected by the outcome of the proceeding....

28 U.S.C. Sec. 455 (emphasis added).

Aetna pointed out in its motion for recusal that "each of the seven cases involves virtually identical parties and legal issues and highly similar factual issues. In each case, the FDIC has brought suit, in its corporate capacity, against Aetna to recover the full bond penalty under a Bankers Blanket Bond, Standard Form No. 24, issued by Aetna to an insured Tennessee bank of which the FDIC had been the receiver." ² Aetna claimed, moreover, that the law firm with which Judge Hull's daughter had been associated "actively represented" the FDIC at the time in November of 1988 that it had moved Judge Siler "to continue the consolidation of these seven cases for trial." Aetna complained that it received no prior notice that Judge Hull would reenter the picture and that his order gave no explanation as to why he was no longer disqualified.

Aetna asserted that Judge Hull's daughter had been associated with the firm in question for five years prior to 1988 and "had participated as counsel for the FDIC on at least one occasion in a consolidated case." It claims that Judge Hull's participation in the consolidated cases in any fashion was also a violation of Sec. 455(a), because his "impartiality might reasonably be questioned," and also of Sec. 455(b)(4) and (5)(ii), because his daughter had been a participant in the proceeding and because her interest in the firm (and in FDIC's being a prevailing party) "could be substantially affected" by his actions. Furthermore, Aetna claims that Judge Hull himself has an interest in the outcome of the consolidated proceedings because he had an ownership interest in a company which has similar fidelity bond coverage with Aetna and there are adversary claims pending with respect to interpretation of these policy provisions. ³

FDIC took the position in response that Aetna's motion for recusal was dilatory in purpose, and noted as of July 18, 1989, "the recent transfer from employment" from the firm in controversy by the Judge's daughter. ⁴

Finally, on October 30, 1989, Judge Hull, "for the convenience of the court" assigned CIV-3-85-1242 to Judge Leon Jordan for trial. At a hearing on the Aetna motion to recuse, the record reflects the following pertinent comments by Judge Hull (January 10, 1990) on recusal by reason of his daughter's position with a firm representing FDIC:

It was then that it came--it did come to my attention as the Chief Judge of the District that the cases weren't being tried. I mean, these were the oldest cases we've got in the Eastern District of Tennessee, and there wasn't much happening on them, so I, I took a look at them in my position as Chief Judge to see what I could do with them. We then in the meantime got them assigned to Judge Siler. I believe even before that time at one time it looked like Ken Porter was going to become the Judge and he didn't, so I, I even had--I think I had them assigned to him for a while ...

But in the meantime, Judge Siler really didn't have the time to come over here and try these. It was after looking them over I became convinced that they shouldn't be tried together anyway that they're separate, they're separate people, they're--the FDIC representing, the bank representing.

. . . . .

I went ahead and decided I, as Chief Judge of the District, I decided that we were going--I called Judge Siler about it and I said, "I can try these three cases here and I'll take those off of you, and these other four you, you can stay on them because the Morton firm is still involved in them"; and at that time I believe my daughter was...