National Union Fire Ins. Co. of Pittsburgh, Pa., Matter of

• Decision Date: 14 April 1988
• Docket Number: No. 87-3061,87-3061
• Citation: 839 F.2d 1226
• Parties: In the Matter of NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PENNSYLVANIA, and Allstate Insurance Company, Petitioners.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1226

839 F.2d 1226

In the Matter of NATIONAL UNION FIRE INSURANCE COMPANY OF

PITTSBURGH, PENNSYLVANIA, and Allstate Insurance

Company, Petitioners.

No. 87-3061.

United States Court of Appeals, Seventh Circuit.

Submitted Jan. 12, 1988.

Decided Feb. 5, 1988.

Rehearing and Rehearing En Banc Denied April 14, 1988.

James G. Hiering, Keck, Mahin & Cate, Dennis C. Waldon, Jeffrey I. Berkowitz, A. Benjamin Goldgar, Chicago, Ill., for petitioners.

Franklin P. Auwarter, Mayer, Brown & Platt, H. Blair White, Sidley & Austin, Gary L. Prior, McDermott, Will & Emery, Lowell E. Sachnoff, Sachnoff, Weaver & Rubenstein, Ltd., Chicago, Ill., J. Alan Galbraith, Williams & Connolly, Washington, D.C., Mitchell S. Rieger, Schiff Hardin & Waite, Leonard M. Ring, Leonard M. Ring & Assoc., Francis J. McConnell, c/o Kovar, Nelson & Brittain, Chicago, Ill., for respondents.

Before WOOD, CUDAHY, and EASTERBROOK, Circuit Judges.

EASTERBROOK, Circuit Judge.

The financial troubles of Continental Illinois National Bank have produced a number of suits against the Bank and its officers. Three of Continental's insurers have sought declaratory judgments concerning the scope of their coverage. These declaratory judgment actions are before a fourth judge, the first three having recused themselves. Judge Shadur has declined to follow suit. Two of the three insurers have asked us to remove him from the case on the ground that his "impartiality might reasonably be questioned", 28 U.S.C. Sec. 455(a). Mandamus is the insurers' proper remedy, SCA Services, Inc. v. Morgan, 557 F.2d 110 (7th Cir.1977); Pepsico, Inc. v. McMillen, 764 F.2d 458 (7th Cir.1985); New York City Housing Development Corp. v. Hart, 796 F.2d 976 (7th Cir.1986); indeed it is their only remedy, United States v. Balistrieri, 779 F.2d 1191, 1204-05 (7th Cir.1985). Contra, In re City of Detroit, 828 F.2d 1160, 1165-67 (6th Cir.1987) (review available only after entry of final judgment).

Judge Shadur's son Robert is a lawyer. In February 1987 Continental hired Robert Shadur to represent it in a $5 million revolving credit transaction with the beneficial interest in a voting trust as security. Continental chose Robert Shadur at the debtor's request because he had recently represented Chemical Bank, a longstanding client, in a similar transaction with the same collateral. The debtor, which was to pay Continental's legal costs, wanted to avoid the time and expense of educating Continental's regular counsel about an unusual transaction. Robert Shadur advised his father of the retention. Judge Shadur immediately informed counsel and asked for their views:

Without in any way abdicating my responsibility [to decide whether my "impartiality might reasonably be questioned"], I believe it would be useful to obtain the observations of counsel to make certain that I will have taken into account all possible considerations bearing on that standard.

At the same time, under no circumstances do I intend to create a situation in which anyone feels constrained from commenting because I may, after full consideration, conclude that the cases should properly be kept on my calendar (with counsel therefore having to be concerned lest any comments suggesting possible recusal might redound to their disadvantage). Accordingly, I am designating plaintiffs' counsel to be responsible for (1) receiving all comments and then (2) transmitting them in redacted form that excludes all identification of the parties or lawyers involved.

Twenty law firms submitted responses in March 1987. Nineteen saw no reason why Judge Shadur could not continue to preside. One firm, representing two insurers, objected on the ground that Robert Shadur's work for Continental created an appearance of impropriety. This firm, Keck, Mahin & Cate, attached its name to the objection, despite Judge Shadur's instructions. Continental's response described the circumstances of Robert Shadur's retention and representation in some detail; because such a response could not be anonymous, Continental also identified itself.

In open court Judge Shadur said that "[m]y own look at the authorities does not suggest to me that the standard of 455(a) has been approached let alone met." Still concerned lest he overlook something, Judge Shadur solicited an opinion of the Advisory Committee on Codes of Conduct of the Judicial Conference. While waiting for the Committee's response, Judge Shadur continued to preside. The Committee's reply stated:

[R]ecusal is appropriate in the circumstances you have outlined. Remittal of disqualification, as provided by Canon 3D, is available only where a judge has already determined that under the circumstances the judge's impartiality might reasonably be questioned.... If impartiality may not reasonably be questioned, the judge is not disqualified and ought not to initiate the remittal procedure.

However, once a judge initiates the remittal procedure, whether or not there was a sufficient basis to do so, recusal is warranted whenever waivers are not obtained from all parties and all counsel. In such circumstances the parties and counsel are entitled to conclude that the remittal was sought only because the judge did believe that the judge's impartiality might reasonably be questioned. Moreover, in the circumstances you have outlined, recusal is additionally warranted because you have become aware of the identity of the counsel who declined to agree to your remaining in the case.

The committee notes Canon 3D's provision for lawyers agreeing "independently of the judge's participation" as indicating a need to arrange matters so that the judge will not learn who did, and who did not, consent to the waiver. See also Resolution L, Judicial Conference of the United States, October, 1971.

After receiving this letter, Judge Shadur issued an opinion on August 31, 1987, declining to recuse himself. He concluded that the Committee misunderstood the procedure he had employed to seek the views of counsel. He had not sought a "remittal of disqualification" under Canon 3D of the Code of Judicial Conduct; he had sought factual information and legal advice about the application of Sec. 455(a). Judge Shadur then held that as an original matter he is not disqualified. A judge's impartiality might "reasonably be questioned" only when a well-informed observer would doubt the judge's objectivity and disinterest. Judge Shadur thought that his son's representation of Continental would not occasion such a doubt. Four months later, the two insurers filed this petition for mandamus, asking us to remove Judge Shadur from the case and to vacate every order entered since March 1987. See New York City Housing Development Corp., 796 F.2d at 979; United States v. Murphy, 768 F.2d 1518, 1539-41 (7th Cir.1985).

I

Section 455 and Canon 3C set out in detail the extent to which a relative's employment or financial interests disqualify a judge. Section 455(b)(4) says that if the "spouse or minor child residing in [the] household" of a judge 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", then the judge must step aside. Robert Shadur is not a "minor child" residing with Judge Shadur and does not have a financial interest that could be affected by the outcome of the case. Section 455(b)(5) provides that the judge is disqualified if a relative within the third degree

(i) Is a party to the proceeding, or an officer, director, or trustee of a party;

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

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

Canon 3C(1)(c) and (d) use almost identical language. None of this poses the slightest problem for Judge Shadur's service.

The care with which these rules are drafted should make a court hesitate to treat the general language of Sec. 455(a) as a bar to judicial service whenever a relative has "something to do with" a party--which is pretty much how the insurers ask us to use Sec. 455(a). The judicial system has an interest in precise rules for disqualification, to reduce the time that must be spent fencing about who decides the case and get on with decision. Ruling on a motion for recusal is difficult business, and in the process tempers may become frayed, as they have in this case. Judges have an obligation to litigants and their colleagues not to remove themselves needlessly, see New York City Housing Development Corp., 796 F.2d at 980-81, because a change of umpire in mid-contest may require a great deal of work to be redone (as the insurers ask here) and facilitate judge-shopping.

To hesitate is not to say that the affairs of an emancipated child never call a judge's impartiality into question. Affiliations that pose risks similar to those identified in Sec. 455(b) may call for disqualification under Sec. 455(a). Parent and child have an emotional bond and sometimes a financial link. One's gain is the other's, at least to an extent. See generally Gary S. Becker, A Treatise on the Family 172-201 (1981). A parent may share a child's joy, may bask in reflected glory from a child's success, may receive support in old age from the child's wealth (or reduce the payments he makes for the child's benefit in life or by will). A $50 gift from Continental to Judge Shadur would disqualify him; a $5,000 gift from Continental to Robert Shadur could be worth more than $50 to Judge Shadur. Thus the affairs of emancipated children have at least the potential to call a judge's impartiality into question. Yet this chain supposes that Continental has made a gift to Robert Shadur, paying him more than the market price of his services. If Robert Shadur has earned his fee, he has surrendered something of value in exchange--his time, including the opportunity to work for someone else. The lawyer is better off ...