Drexel Burnham Lambert Inc., In re, Docket No. 88-3060

• Decision Date: 21 February 1989
• Docket Number: Docket No. 88-3060
• Parties: Fed. Sec. L. Rep. P 94,198 In re DREXEL BURNHAM LAMBERT INCORPORATED, Drexel Burnham Lambert Group Incorporated, Michael R. Milken, Lowell J. Milken, Cary J. Maultasch, and Pamela R. Monzert, Petitioners.
• Court: U.S. Court of Appeals — Second Circuit

Page 116

869 F.2d 116

Fed. Sec. L. Rep. P 94,198

In re DREXEL BURNHAM LAMBERT INCORPORATED, Drexel Burnham

Lambert Group Incorporated, Michael R. Milken,

Lowell J. Milken, Cary J. Maultasch, and

Pamela R. Monzert, Petitioners.

Docket No. 88-3060.

United States Court of Appeals, Second Circuit.

Feb. 21, 1989.

MESKILL, Circuit Judge, concurring in Judge PIERCE's concurrence in the denial of rehearing in banc:

Although I was not a member of the panel hearing this matter, I concur with the sentiments expressed by Judge Pierce, who was a majority member of the panel, in his concurrence in the denial of rehearing in banc.

PIERCE, Circuit Judge, with whom MESKILL, CARDAMONE and MINER, Circuit Judges, join, concurring in the denial of rehearing in banc:

I write in concurrence with the majority which has denied rehearing in banc. The dissenting opinion is correct in implying that such statements are infrequently made. However, the publication thereof makes it appropriate to state another view.

Whether the district judge's impartiality might reasonably be questioned on the facts and circumstances present in this case should not be assayed on a record that is so antiseptic as to cause this court to be oblivious to the serious charges of judge-shopping made by respondents in their briefs and submissions. Although no findings have been made regarding this aspect of the case, it cannot be gainsaid that the question of alleged judge-shopping is a significant contextual matter. The presence of the judge-shopping issue in the case places upon this court the burden of scrutinizing with exceptional care the petitioners' efforts to have the district judge disqualified from continuing to preside over this litigation.

Most of the subject litigation was assigned to Judge Pollack in 1986 and 1987, and substantial pretrial activity had occurred by September 1988 when the SEC filed a 184-page civil complaint against Drexel in a civil enforcement action; it too was assigned to Judge Pollack. None of these actions involves Palais Royal, Inc. or the judge's wife, a major shareholder.

Soon after the SEC action was assigned to Judge Pollack, Drexel, at Bain's instance, took on the funding burden of Bain's purchase of Palais Royal. Drexel then engaged in an undisputed course of conduct with respect to Bain's acquisition of Palais Royal, all the while knowing that the subject litigation was assigned to Judge Pollack. Thus, the respondents in effect contend that Drexel, by its own actions, set the stage to seek the removal of the judge who had presided over much of this litigation for approximately two years. Are litigants to have the power by their own actions to veto the assignment of judges? Additionally, in considering the merits, the panel majority was confronted with the reality that Drexel owed no duty whatsoever to Palais Royal or to the district judge's wife, and it therefore concluded that Drexel's participation in the financing role it chose to assume was too remote from Bain's acquisition of Palais Royal to require Judge Pollack's disqualification. Under these circumstances, would a reasonable observer believe that Judge Pollack's refusal to recuse himself created an appearance of impropriety? Isn't the exceptional grant of a writ of mandamus to be made only when there is a clear and indisputable right to it? See Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 18, 103 S.Ct. 927, 938, 74 L.Ed.2d 765 (1983).

More problematic is the district judge's accusation of professional lapses by the firm representing a petitioner. In this demonstration of sensitivity to the question of whether counsel had transcended acceptable professional bounds, the district judge came perilously close to the indistinct line beyond which recusal is required.

However, two grounds militated against requiring his disqualification based on this episode: to begin with, the caselaw draws a distinction between a judge's conduct toward counsel and his conduct toward counsel's client. See In re Cooper, 821 F.2d 833, 841 (1st Cir.1987); Rosen v. Sugarman, 357 F.2d 794, 798-800 (2d Cir.1966). Although hostility directed at counsel can reach bounds which warrant relief if it appears that the client will be harmed, in the panel majority's view such is not the case here. Moreover, this conclusion is supported by the fact that no final determination was or will be made by Judge Pollack regarding the charges levelled at counsel. Rather, in accordance with the district court's rules, the issue has been referred to that court's chief judge and to the court's appropriate disciplinary panel for their consideration and presumably for ultimate determination. See Rule 4(i), General Rules, Rules for the United States District Courts for the Southern and Eastern Districts of New York (1987).

Most importantly, in the event that Judge Pollack should demonstrate partiality in handling this litigation, and should it result in the denial of a just and fair outcome for Drexel, such bias would be a weighty issue to be raised by Drexel on a direct appeal, especially since the applicable standard of review would no longer require Drexel to show that it had a "clear and indisputable" right to relief, the standard which is applicable to petitions for writs of mandamus but not to direct appeals.

I concur in the court's majority view that this is not a proper case for in banc review.

MINER, Circuit Judge, with whom MESKILL, CARDAMONE and PIERCE, Circuit Judges, join, concurring in the denial of rehearing in banc:

Merely to record my vote to deny rehearing in banc would be to permit the "expression of views" in the dissenting opinion to go unchallenged. It seems to me that the sensitive nature of the issues before us compels a reasoned rebuttal of the dissenters' conclusions. I therefore write separately to give my reasons for concurring in the majority determination.

In banc review is warranted "(1) when consideration by the full court is necessary to secure or maintain uniformity of its decisions, or (2) when the proceeding involves a question of exceptional importance." Fed.R.App.P. 35(a). In suggesting in banc review in this case, petitioners have neither demonstrated a lack of uniformity in our decisions relating to recusal of district court judges nor identified a legal question of transcending importance. Rather, the panel majority has applied well-settled rules to the specific facts of this case in deciding that the petition for writ of mandamus should be denied. Neither the panel dissenter nor the in banc dissenters contend that the applicable rules should be changed. Accordingly, the standard for in banc review simply has not been met.

To determine whether Judge Pollack's impartiality might reasonably be questioned, see 28 U.S.C. Sec. 455(a), the panel majority properly reviewed as an "objective observer," Liljeberg v. Health Services Acquisition Corp., --- U.S. ----, 108 S.Ct. 2194, 2203, 100 L.Ed.2d 855 (1988), the facts and circumstances surrounding the sale of Palais Royal stock by Mrs. Pollack to a buyer whose purchase was financed by Drexel Burnham Lambert Inc. That review revealed:

Mrs. Pollack has had no business or other dealings with Drexel; she will receive no money from Drexel; and Drexel is not essential to the completion or success of the transaction. Moreover, there is no nexus, direct, indirect or otherwise, between the civil suits pending before Judge Pollack and Mrs. Pollack's interest in Palais Royal.

In re Drexel Burnham Lambert Inc., 861 F.2d 1307, 1314 (2d Cir.1988).

It seems quite unexceptional to draw from these findings an objective conclusion that no appearance of partiality would be provided by Judge Pollack's continued service in the actions against Drexel. It certainly cannot be said that Judge Pollack, by reason of Drexel's financing of the Palais Royal deal, has any personal prejudice regarding the parties or personal knowledge of the facts underlying those actions, see 28 U.S.C. Sec. 455(b)(1), or that he or his wife have any financial interest that could be affected by the outcome of those proceedings, see 28 U.S.C. Sec. 455(b)(4). Nor were these conclusions affected when Drexel put up some of its own money to close the deal and thereafter acquired an equity in the purchaser, all of which was contemplated by the panel majority. The "flow of substantial sums" to Mrs. Pollack from Drexel, referred to by the in banc dissenters, was much too indirect and circuitous a movement to lead reasonable, objective and impartial observers along the path taken by my dissenting colleagues.

That Judge Pollack referred to a grievance...