Exxon Corp. v. Heinze
| Decision Date | 24 February 1992 |
| Docket Number | Civ. No. A91-0543. |
| Citation | 792 F. Supp. 72 |
| Parties | EXXON CORPORATION, et al., Plaintiffs, v. Harold HEINZE, et al., Defendants. |
| Court | U.S. District Court — District of Alaska |
Carl J.D. Bauman (argued), Joseph R.D. Loescher, Hughes, Thorsness, Gantz, Powell
& Brundin, Anchorage, Alaska, for plaintiffs.
Wilson Condon, Richard W. Maki (argued), Condon, Partnow & Sharrock, P.C., Anchorage, Alaska, and also Bruce M. Botelho, Asst. Atty. Gen. of State of Alaska, Juneau, Alaska, for defendants.
ORDER DENYING RECUSAL
Plaintiffs (collectively called "Exxon") were sued by the State of Alaska ("State"), in the state superior court, in a dispute over royalties due from Exxon to the State for oil drilled on State land. The State charged that Exxon had underpaid the royalties due it. Exxon counterclaimed charging that it had overpaid the State. This law suit is still in state court. For clarity I will refer to it as the royalty case. Exxon brought this separate suit in federal court seeking injunctive relief barring state trial judges and jurors from deciding the royalty case. For clarity, I will call this litigation the proper forum case.
Exxon argues that all state judges and jurors are disqualified from participating in the royalty case because if the State prevails at trial, a portion of the damages it recovers will be paid into the Permanent Fund and will be distributed to all Alaska state citizens as dividends. Conversely, if Exxon wins, the damages it recovers will be paid out of funds which otherwise would go into the Permanent Fund and be distributed to the State's citizens.
In Exxon's view, the possible impact of a judgment in the royalty case on the Permanent Fund, and by extension on possible future dividends, constitutes a financial interest in the outcome of the royalty case owned by every resident of Alaska. Consequently, argues Exxon, no resident of Alaska may participate as a judge or juror in deciding the royalty case. Cf. Aetna Life Insurance Co. v. Lavoie, 475 U.S. 813, 106 S.Ct. 1580, 89 L.Ed.2d 823 (1986).
The proper forum case was randomly assigned to me by the Clerk of Court. Exxon has filed a motion for my recusal, at Docket No. 10. Pursuant to 28 U.S.C. § 455, Exxon contends that its counterclaims in the royalty litigation might conceivably affect the quantity of money in Alaska's Permanent Fund. Since I, like the other United States District Court Judges for this District of Alaska, currently receive dividends, Exxon argues that I and, by implication, all resident Alaska judges should recuse.1 In the exercise of my discretion and after a careful evaluation of Exxon's arguments and the State's acquiescence, I decline Exxon's invitation.2 My reasons follow.
Article IX, Section 15 of the Constitution of the State of Alaska establishes the Permanent Fund and provides for the investment of its principal, and the paying over of its earnings from that investment into the State's General Fund. It provides:
Section 15. Alaska Permanent Fund. At least twenty-five per cent of all mineral lease rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments and bonuses received by the State shall be placed in a permanent fund, the principal of which shall be used only for those income-producing investments specifically designated by law as eligible for permanent fund investments. All income from the permanent fund shall be deposited in the general fund unless otherwise provided by law Effective February 21, 1977.
Statutes implement this provision by establishing the Alaska Permanent Fund Corporation.3 Other statutes provide for the Permanent Fund dividend.4 It is important to recognize that a resident's expectancy regarding future dividends is a matter of legislative grace, not state constitutional right.
At the outset, it is important to differentiate between two related grounds for disqualification set out in 28 U.S.C. § 455. On the one hand, a judge should disqualify herself if her impartiality "could reasonably be questioned." 28 U.S.C. § 455(a). In applying this standard, the judge should ask whether a reasonable person, aware of all the facts, would doubt the judge's impartiality. Liljeberg v. Health Services Acquisition Corp., 486 U.S. 847, 108 S.Ct. 2194, 2202, 100 L.Ed.2d 855 (1988); Davis v. Xerox, 811 F.2d 1293, 1295 (9th Cir.1987). Exxon does not suggest that the Permanent Fund Corporation, established by the legislature, is a party to this case or to the royalty case which involves a contest between the producers and the State over oil royalties payable to the State as the landowner of lands on which the producers successfully drilled for oil. Exxon suggests instead that if every issue in the royalty case were decided in its favor and it recovered the maximum possible on its counterclaims, then it would owe less money for royalties and that, under current Alaska law, the Permanent Fund would be reduced. As a result, there would be less money to pay out in dividends so that an individual Alaskan might receive $80.82 less per year at some indeterminate future date. Clearly, a reasonable person would not doubt a judge's impartiality on that basis. While the average citizen might believe federal judges are for sale, it is unlikely that she would believe they come so cheap. Cf. Davis v. Xerox, 811 F.2d at 1295.
More troublesome is 28 U.S.C. § 455(b)(4) (1991), which provides, in relevant part:
Exxon argues that each Alaskan, including the resident federal judges, has either a "financial interest in the subject matter in controversy" or an "other interest that could be substantially affected by the outcome of the proceeding." Clearly, an individual resident federal judge's interest in the outcome of this litigation is de minimis. Such an interest is not, until actually paid out, property personally owned, in any meaningful sense, but is a bare expectancy shared with the general public. See In re New Mexico Natural Gas Antitrust Litigation, 620 F.2d 794, 795 (10th Cir.1980); In re City of Houston, 745 F.2d 925, 931-32 (5th Cir.1984); In re Virginia Electrical and Power Co., 539 F.2d 357, 366-67 (4th Cir.1976). Consequently, an expectancy regarding future dividends is not an "other interest that could be substantially affected." Thus, recusal would only be appropriate if I determined that I possess a "financial interest in the subject matter in controversy," satisfying the first prong of 28 U.S.C. § 455(b)(4).
I recognize that the Ninth Circuit has given the phrase "financial interest" an expansive reading in conformity with its statutory definition at 28 U.S.C. § 455(d)(4): "ownership of a legal or equitable interest, however small." See Davis v. Xerox, 811 F.2d at 1295; In re Cement Antitrust Litigation, 688 F.2d 1297, 1311 (9th Cir. 1982). Nevertheless, the cases all involve ownership of stock or warrants to buy stock, albeit in tiny amounts. No Alaskan owns stock in the Permanent Fund. I recognize the fact that the statutory definition of "financial interest" includes "equitable interests." Exxon argues, by reference to the Permanent Fund's public relations material, that the Permanent Fund is a "Sacred Trust" in the eyes of its administrators. This may be so. However, no Alaskan "owns" an interest in the "Trust." The "right" to a dividend is a matter of legislative grace, not entitlement. What the legislature gives today, it can and, predictably will, take away tomorrow. See, e.g., State v. Anthony, 810 P.2d 155 (Alaska 1991) ().
No one suggests that, if the legislature decided to abolish the dividends completely, any resident would have a cause of action to protect her alleged "legal or equitable" interest in receiving future dividends. No Alaskan has an assignable interest in future dividends. No Alaskan has anything to sell or transfer similar to the admittedly tiny interests mentioned in the reported cases dealing with stocks and warrants. No one suggests that an expectancy in future dividends is protected by the Due Process or Takings Clauses, made applicable to the states by operation of the Fourteenth Amendment to the United States Constitution. If the contingent "right" to a dividend is a financial interest because the legislature may raise or lower it, at whim, then every activity the State is involved in concerns its citizens' financial interests because the legislature can raise or lower taxes, at whim, to pay its debts and the judgments against it. It has been said, "No man's life or property are safe while the legislature is in session."5
My conclusion that the expectancy a citizen has in receiving Permanent Fund dividends is not a financial interest is reinforced by consideration of 28 U.S.C. § 455(d)(4)(i)-(iv). It is important to stress that Congress did not identify the interests mentioned in those sections as "financial interests" and then exempt them from the reach of the statute. Instead, Congress provided that they were not "financial interests," thus delimiting the definition of financial interest by examples. It follows that any mere expectancy interest comparable to the interests mentioned in 28 U.S.C. § 455(d)(4)(i)-(iv) is also not a financial interest. The Court notes that all of the interests mentioned in 28 U.S.C. § 455(d) suggest a likelihood of future financial benefit far less contingent than the expectation interest of an Alaskan resident in future dividends from the Permanent Fund. None of the cited interests are subject to legislative whim as is an Alaskan resident's expectation...
To continue reading
Request your trial
-
Exxon Corp. v. Heinze
...noting that even if justification for recusal existed, the Rule of Necessity might require him to hear the case. Exxon Corp. v. Heinze, 792 F.Supp. 72, 76 (D.Alaska 1992) (citing United States v. Will, 449 U.S. 200, 212-16, 101 S.Ct. 471, 479-81, 66 L.Ed.2d 392 (1980)). Chief Judge Holland,......