U.S. v. Nobel

• Decision Date: 15 November 1982
• Docket Number: No. 82-1234,82-1234
• Citation: 696 F.2d 231
• Parties: 12 Fed. R. Evid. Serv. 567 UNITED STATES of America v. Harvey NOBEL, Appellant. . Submitted Under Third Circuit Rule 12(6)
• Court: U.S. Court of Appeals — Third Circuit

Page 231

696 F.2d 231

12 Fed. R. Evid. Serv. 567

UNITED STATES of America v. Harvey NOBEL, Appellant.

No. 82-1234.

United States Court of Appeals Third Circuit.

Submitted Under Third Circuit Rule 12(6)

Nov. 15, 1982.

Decided Dec. 17, 1982.

Rehearing and Rehearing In Banc Denied Jan. 5, 1983.

Jerome R. Richter, Ronald H. Surkin, Stephen M. Orlofsky, Blank, Rome, Comisky & McCauley, Philadelphia, Pa., for appellant.

Peter F. Vaira, U.S. Atty., Walter S. Batty, Jr., Asst. U.S. Atty., Chief of Appeals, Mary C. Spearing, Asst. U.S. Atty., Philadelphia, Pa., for appellee.

Before ALDISERT, ROSENN and SLOVITER, Circuit Judges.

OPINION OF THE COURT

SLOVITER, Circuit Judge.

Defendant Harvey Nobel appeals from the judgment of conviction entered after a jury found him guilty on fourteen counts of a fifteen-count indictment charging violation of 18 U.S.C. Sec. 2314 (interstate transportation of a security taken by fraud). Nobel contends that the judgment of the district court should be reversed and the case remanded for a new trial because the trial judge failed to disqualify himself as required under 28 U.S.C. Sec. 455 and the trial judge's tone of voice in addressing Nobel during the course of his testimony improperly communicated to the jury the judge's view that Nobel was guilty. We will affirm.

I. The Recusal Issue

The indictment charged that Nobel, the owner of Beaverbrook Motors, a New Jersey towing service, and Christine Gilch, an employee of Insurance Company of North America [INA], devised a scheme to defraud INA pursuant to which INA paid Nobel's company approximately $476,000 for nonexistent towing services. Gilch pled guilty. Nobel pled not guilty and his five-day jury trial began March 15, 1982.

On that day, shortly before the beginning of trial, the following colloquy occurred in the chambers of the district court THE COURT: Counsel will recall a conference on the 18th of December, 1981, at 8:30 A.M., and I related that I am a substantial holder of INA stock.

INA is not a party; nor is it the subject matter.

I related that I didn't believe it was a basis for recusal.

Now, when we had this conference neither Mr. Casper [Gilch's attorney] nor Mr. Nasuti [Nobel's attorney] were yet retained and my notes reflect that Mr. Casper anticipated no problem, and if, as I believe, there is not basis for recusal, would you, if you are so disposed, so relate.

MR. NASUTI: Me, Your Honor?

THE COURT: Yes.

MR. NASUTI: Yes, Your Honor.

THE COURT: So you agree there is no basis for recusal.

MR. NASUTI: My research reveals that, agrees with Your Honor.

THE COURT: All right.

MR. NASUTI: With Your Honor's research and conclusion.

(31a-32a). There is no dispute that the December 18, 1981 conference occurred, albeit unreported. There was no further discussion of recusal following the March 15, 1982 conference.

Section 455 provides in pertinent part:

(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) [When] [h]e knows that he, individually or as a fiduciary, 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;

....

(d) For the purposes of this section the following words or phrases shall have the meaning indicated:

....

(4) "financial interest" means ownership of a legal or equitable interest, however small ....

....

(e) No justice, judge, or magistrate shall accept from the parties to the proceeding a waiver of any ground for disqualification enumerated in subsection (b). Where the ground for disqualification arises only under subsection (a), waiver may be accepted provided it is preceded by a full disclosure on the record of the basis for disqualification.

28 U.S.C. Sec. 455 (1976 & Supp. IV 1980).

The statute on judicial disqualification in its present form was enacted in 1974 after Congress recognized that the "uncertain language" in the prior statute requiring disqualification "in any case in which [the judge] has a substantial interest" placed "the judge on the horns of a dilemma". H.R.Rep. No. 1453, 93d Cong., 2d Sess. 2, reprinted in 1974 U.S.Code Cong. & Ad.News 6351, 6352 [hereinafter "House Report"]. In an effort to ameliorate that situation, Congress turned to the language of the 1972 American Bar Association Code of Judicial Conduct which had been adopted by the Judicial Conference of the United States in 1973. In amended section 455, Congress used language which paralleled that of Canon 3C of the Code dealing with disqualification in most significant respects. ¹

Subsection (a) of section 455 sets out the general policy of disqualification "in any proceeding in which [the judge's] impartiality might reasonably be questioned." The general language of this subsection is particularized in subsection (b) which enumerates specific disqualification standards which were designed to "eliminate the uncertainty and ambiguity arising from the language in the [prior] statute." House Report at 5-6, reprinted in 1974 U.S.Code Cong. & Ad.News at 6355.

Subsection (b)(4) deals with disqualification either because of a "financial interest" held by the judge, the judge's spouse or minor child living at home or because such persons have another interest that could be substantially affected by the outcome of the proceedings. Such an interest is disqualifying in three instances. Two are not applicable here and defendant does not suggest otherwise. The district judge's financial interest in INA is patently not in "a party" since the only parties in a criminal action other than the United States are the named defendants. Similarly, under the circumstances in this case the judge's financial interest in INA was not an interest "that could be substantially affected by the outcome of the proceeding". In some instances, the resolution of a criminal proceeding might have a substantial effect upon the financial affairs of the victim company, such as by triggering personal liability of the defendant, insurance payments, or even the application of collateral estoppel which could in turn "substantially affect" the interests of stockholders of the victim company. See, e.g., Emich Motors Corp. v. General Motors Corp., 340 U.S. 558, 71 S.Ct. 408, 95 L.Ed. 534 (1951). In this case, however, by the time of the criminal trial a settlement had been effected which called for defendant to repay INA for substantially all of the funds which defendant received as a result of the fraud. ² Therefore, whatever applicability this statutory language might have in another instance, it did not mandate disqualification in this case.

Accordingly, defendant's argument for the applicability of subsection (b)(4) focuses upon his claim that a financial interest in the victim of a crime is a financial interest in "the subject matter in controversy". The accepted standard for reviewing judicial disqualification decisions is to determine whether there has been an abuse of discretion. United States v. Schreiber, 599 F.2d 534, 536 & n. 1 (3d Cir.), cert. denied, 444 U.S. 843, 100 S.Ct. 86, 62 L.Ed.2d 56 (1979). However, whether a financial interest in a corporation which was the victim of the crime at issue is a "financial interest in the subject matter in controversy" is a matter of law as to which our review is plenary.

We conclude that the defendant's construction of "subject matter in controversy" as encompassing the crime victim is not the plain meaning of the language. In a criminal action, the victim is not the "matter acted upon", the "matter presented for consideration", nor "the topic of dispute in a legal matter", which are the only arguably relevant definitions of "subject matter". See Webster's Third New International Dictionary (1961). The affairs of INA, the company defrauded, were not being resolved by the criminal proceeding nor were they the topic of dispute. ³

A similar statutory construction was reached in Department of Energy v. Brimmer, 673 F.2d 1287, 1295 (Em.App.1982), where the court stated, "[t]he use of the term 'subject matter' suggests that this provision of the statute will be most significant in in rem proceedings." The court held that a judge who owned stock in other participants in a federal Entitlements Program administered by the Department of Energy but who did not have stock in the refiner whose claims were at issue did not have a financial interest in the subject matter of the litigation. We hold that a judge presiding over a criminal action who holds stock in a corporate victim of the crime does not have a "financial interest in the subject matter in controversy."

Defendant argues that even if disqualification was not required under section 455(b)(4), the judge should have disqualified himself under section 455(a) because "his impartiality might reasonably be questioned." Congress designed this general standard "to promote public confidence in the impartiality of the judicial process by saying, in effect, if there is a reasonable factual basis for doubting the judge's impartiality, he should disqualify himself and let another judge preside over the case." House Report at 5, reprinted in 1974 U.S.Code Cong. & Ad.News at 6354-55. The focus under the statute is on the objective appearance of bias, rather than bias-in-fact. Potashnick v. Port City Construction Co., 609 F.2d 1101, 1111 (5th Cir.), cert. denied, 449 U.S. 820, 101 S.Ct. 78, 66 L.Ed.2d 22 (1980); Note, Judicial Disqualification in the Federal Courts: Maintaining an Appearance of Justice Under 28 U.S.C. Sec. 455, 1978 U.Ill.L.F. 863, 871; Note, Disqualification of Judges and Justices in the Federal Courts, 86 Harv.L.Rev. 736, 745 (1973).

We recognize that there have been cases in which appellate courts have held...