[00:00:00] Speaker 01:
We have four argued cases this morning.

[00:00:02] Speaker 01:
The first is number 21, 1888 Central Pill Networks Inc.

[00:00:08] Speaker 01:
versus Sixth Cisco Systems Inc.

[00:00:11] Speaker 01:
Mr. Fleming.

[00:00:12] Speaker 04:
Good morning and may it please the court Mark Fleming together with Sophie Brooks on behalf of Cisco.

[00:00:17] Speaker 04:
I would address three points.

[00:00:19] Speaker 01:
Before you start, let me clarify what's involved here.

[00:00:24] Speaker 01:
In the district court, you argued that recusal was required under 455A.

[00:00:29] Speaker 01:
And the briefing here addresses only 455B4.

[00:00:37] Speaker 01:
Can we assume that you're waiving any argument under 455A?

[00:00:42] Speaker 04:
You can't assume that Judge Dyke.

[00:00:43] Speaker 04:
I mean, we certainly pressed 455A, as this court always advises.

[00:00:47] Speaker 04:
We had to pick our issues on appeal.

[00:00:49] Speaker 04:
We had to brief a number of merits issues as well.

[00:00:52] Speaker 04:
So we picked the 455B, which we think is a clear violation.

[00:00:55] Speaker 04:
We do also think there was a 455A problem, but we are not presenting that to the court today.

[00:01:00] Speaker 01:
Well, you're not presenting it to the court today, so you're waiving that, are you?

[00:01:06] Speaker 04:
That's fair, Your Honor.

[00:01:07] Speaker 04:
Yes.

[00:01:07] Speaker 04:
We're proceeding under 455B.

[00:01:09] Speaker 04:
And our position is there was a violation of 455B, starting on August 11, 2020, when the district judge discovered the financial interest.

[00:01:20] Speaker 04:
Second, that the proper remedy is vacator of all orders and judgments entered after that date, as this court did in the Shell case.

[00:01:27] Speaker 04:
And then third, also as in Shell, the case should be remanded to a different district judge who can decide what further proceedings are appropriate.

[00:01:34] Speaker 01:
And I must support it.

[00:01:35] Speaker 01:
If I understand your brief on appeal, and correct me if I'm mistaken about this,

[00:01:39] Speaker 01:
that the only rulings that the judge made that you're challenging on appeal were rulings that he made after he discovered the stock ownership, right?

[00:01:51] Speaker 04:
That's correct.

[00:01:51] Speaker 04:
The findings of fact and conclusions of law that were issued in October, then subsequently the entry of judgment and the decision of our post-judgment motions under Rule 52 and Rule 59.

[00:02:02] Speaker 04:
And all of those we submit need to be vacated and set aside, and the case sent back to a new district judge.

[00:02:07] Speaker 03:
And just to, I think, pursue this point one further step.

[00:02:11] Speaker 03:
I don't remember, did any of your arguments, particularly on the post trial, renew arguments that you had lost in pre-judgment rulings?

[00:02:27] Speaker 04:
As I stand here, I don't think there were any further... I mean, I think we probably did preserve our positions, for instance, on claim construction in post-trial filings, in our proposed filings of factual conclusions of law, for instance.

[00:02:44] Speaker 03:
Don't you do or you do not have claim construction arguments in your blue brief?

[00:02:50] Speaker 04:
No, we did we did not have you any construct except except no That's right.

[00:02:53] Speaker 01:
Well, you have time construction agreements But it's because the claim construction was changed as part of the final decision from the Martin concern for one of them That's correct.

[00:03:02] Speaker 04:
That's right.

[00:03:03] Speaker 04:
Yeah So if I may proceed with 455 B and of course, I'm happy to take questions on any of these subjects I think the court has our has our briefing and has our positions for

[00:03:12] Speaker 04:
I don't think it's disputed that ownership of the Cisco stock is of financial interest for purposes of 455B, and the only dispute I think among the parties as to whether there was a violation is whether moving the Cisco stock and only the Cisco stock into a blind trust

[00:03:27] Speaker 04:
constitutes divesting himself or herself of the interest for purposes of 455F.

[00:03:33] Speaker 04:
We think the plain language of the statute answers that.

[00:03:36] Speaker 04:
To divest means to deprive or dispossess of the financial interest.

[00:03:40] Speaker 04:
455D4 defines financial interest as ownership of a legal or equitable interest, however small.

[00:03:47] Speaker 04:
So when 455F speaks of divesting of the interest, it requires giving up ownership, and a blind trust doesn't do that.

[00:03:54] Speaker 04:
All of the authorities that have carefully considered this

[00:03:57] Speaker 04:
have concluded putting assets into a blind trust does not remove them from the ethics rules.

[00:04:02] Speaker 04:
And we think the views of the Judicial Conferences Committee on Codes of Conduct is particularly persuasive here, as the committee says.

[00:04:09] Speaker 00:
I don't want to beat a dead horse, but in terms of the orders between October 21, 2019 and August 11, 2020, do you believe those do not need to be vacated?

[00:04:18] Speaker 04:
They don't need to be vacated.

[00:04:20] Speaker 04:
Of course, when one goes back to the district judge, the district judge always has authority to reconsider interlocutory orders to the extent they need to be reconsidered.

[00:04:29] Speaker 04:
A new district judge would have that same authority.

[00:04:31] Speaker 04:
But I don't think this court needs to vacate them because our position is, at least given the record as we know it, we're not arguing there was a 455B violation during that time.

[00:04:41] Speaker 01:
I'm not sure that your statement about the authority to vacate the rulings is correct.

[00:04:52] Speaker 01:
This is for the proceedings to be governed by Rule 63.

[00:04:57] Speaker 01:
Excuse me, my understanding of the interpretation that's been given to Rule 63 is that the new judge can't vacate the old rules.

[00:05:06] Speaker 01:
But that's not something that's for us to decide now, I guess.

[00:05:11] Speaker 04:
No, I agree with that.

[00:05:12] Speaker 04:
I direct the court to this court's decision in Exxon versus United States, which is 931, FedSec and 874, where this court has said a successor judge steps into the shoes of his or her predecessor, is bound by the same rulings, but to the extent a trial judge can alter a previous ruling,

[00:05:27] Speaker 04:
so too can a successor judge.

[00:05:29] Speaker 04:
And that doesn't change when you've got a Rule 63 process where you have a new judge who comes in.

[00:05:34] Speaker 04:
Certainly, obviously, the new judge will look at the reasoning behind the former rulings.

[00:05:38] Speaker 04:
It might take him as persuasive.

[00:05:39] Speaker 04:
But I don't think there's anything in Rule 63 that forbids a new judge from reconsidering an interlocutory order just the same way as Judge Morgan would have been able to if he were still sitting on the case.

[00:05:49] Speaker 03:
It might be a little bit stronger than that.

[00:05:51] Speaker 03:
There might actually be a law of the case hurdle to overcome.

[00:05:55] Speaker 04:
I don't know that law of the case applies when you're talking about an interlocutory order and the case hasn't gone to judgment.

[00:06:01] Speaker 04:
I mean, unless this court were to say something, which my understanding is this court is not going to address the merits unless it decides not to vacate, which we, of course, think it should.

[00:06:08] Speaker 04:
But I don't think an interlocutory ruling by a district judge, whether the same district judge or a prior district judge, is law of the case.

[00:06:15] Speaker 04:
I don't know of authorities saying that.

[00:06:17] Speaker 04:
But this is something, again, that the new district judge could consider after hearing from the parties.

[00:06:22] Speaker 04:
So I'm happy to talk further about divestment.

[00:06:26] Speaker 04:
I think that the court has our views, and most importantly, I think the views of the judicial conference, which is that using a blind trust is not a divestment.

[00:06:34] Speaker 04:
It doesn't alter the ethics rules.

[00:06:36] Speaker 04:
We brought the opinion advisory, opinion 110, to the district court's attention.

[00:06:40] Speaker 04:
The court didn't address it.

[00:06:41] Speaker 04:
We also have the House report that accompanied the amendment to 455 in 1974, which says that 455C, quote, precludes use of a so-called blind trust.

[00:06:51] Speaker 04:
Judge McEwen's article makes the same point.

[00:06:53] Speaker 04:
We also have the executive branch's approach, which I think is also persuasive here.

[00:06:57] Speaker 04:
The Office of Government Ethics has a promulgated regulation on this, which interprets 18 U.S.C.

[00:07:02] Speaker 04:
208, in which Congress used the same phrase, financial interest, as is used in 455.

[00:07:07] Speaker 04:
And the regulation says, in the case of a blind trust, conflict of interest statutes apply to the assets that an interested party transfers to the trust until he or she is notified by the trustee that the asset has been disposed of or has a value of less than $1,000.

[00:07:22] Speaker 04:
And the regulation explains why that is.

[00:07:24] Speaker 04:
because the interested party knows what assets he or she has placed into the trust.

[00:07:29] Speaker 04:
And there's no requirement that the assets be diversified in any way, so there's still the possibility that the interested party could be influenced by the investment.

[00:07:36] Speaker 04:
That's particularly the case in a situation like this, where the only assets transferred into the blind trust were the party stock.

[00:07:44] Speaker 04:
Centripetal on the other side only cites a 2005 law review article

[00:07:48] Speaker 04:
It says without elaboration that a judge can move assets into a blind trust.

[00:07:51] Speaker 04:
It doesn't cite anything.

[00:07:52] Speaker 04:
It doesn't engage with the plain language of the statute or the House report.

[00:07:56] Speaker 04:
It predated advisory opinion 110 by about eight years.

[00:07:59] Speaker 04:
So we don't think that the authors of that article would stand by their statement even today.

[00:08:03] Speaker 04:
And even if they would, it's not a sufficient basis, we think, for this court to go against the terms of the statute and be very well considered the use of the judicial conscience.

[00:08:11] Speaker 03:
We don't have any reason to think that Judge Morgan or Judge Morgan's wife has divested this stock since the papers here were filed.

[00:08:23] Speaker 04:
No.

[00:08:24] Speaker 04:
No indication was given.

[00:08:26] Speaker 04:
And I'll note that the trust document which Judge Morgan gave to the parties, which neither party cited so they're not in the appendix,

[00:08:32] Speaker 04:
but we can provide them if the court wants to see them.

[00:08:34] Speaker 04:
Specifically envisioned that the trustee would inform Mrs. Morgan if the assets were to be transferred or go below $1,000 in value and we've been given no indication that such a notification was given.

[00:08:47] Speaker 03:
And I take it your view would be that even if that happened, that wouldn't cure the problem.

[00:08:53] Speaker 03:
No, I was just using that simply.

[00:08:56] Speaker 03:
And it would be too late anyway.

[00:08:57] Speaker 04:
Correct.

[00:08:57] Speaker 04:
Absolutely.

[00:08:58] Speaker 04:
Chase Manhattan makes clear that a divestment many years after the key decisions have been made is not enough to trigger the 455F safe harbor.

[00:09:07] Speaker 04:
So unless the court has further questions about divestment, we've talked a bit about the remedy.

[00:09:11] Speaker 04:
I think the closest analogy here is this court's decision in Shell.

[00:09:15] Speaker 04:
It was a 455B case like this one.

[00:09:18] Speaker 04:
It involved just under 100 shares of stock.

[00:09:20] Speaker 04:
Their stock had been inherited rather than purchased.

[00:09:23] Speaker 04:
Unlike here, the judge only learned of the stock after entering detailed merits decisions on summary judgment.

[00:09:29] Speaker 04:
Also unlike here, he took the initiative and tried to address the problem by severing off the companies that were implicated by the financial interest and only entering judgment as to the other companies.

[00:09:39] Speaker 04:
This court still vacated.

[00:09:41] Speaker 04:
And here I think it's an even more compelling case.

[00:09:44] Speaker 04:
Unlike in Shell, the judge at first proposed to do nothing at all, simply told the parties about it.

[00:09:49] Speaker 04:
The court's comments at the hearing suggested that the court did not view 455B as the bright line that this court has said that it is.

[00:09:56] Speaker 04:
So we think this is a case where the same remedy as in Shell is appropriate.

[00:10:01] Speaker 03:
Can I ask you, is there a case that involved an exercise of appellate discretion as to a remedy to deny a remedy?

[00:10:20] Speaker 03:
for a B4 violation.

[00:10:22] Speaker 03:
Shell didn't, although it spoke of the possibility, or spoke of remedial discretion, I guess, on the basis of Lilderberg, which was only a 455A case anyway.

[00:10:35] Speaker 03:
But are there cases that actually say, even with a violation of this bright line rule and a decision entered while that violation was going on,

[00:10:49] Speaker 03:
that we're going to say we're not going to undo that?

[00:10:56] Speaker 04:
And I don't know that it was framed in terms of discretion, but I think this court's decision in Polaroid may be an example of that, where there was an analysis that because it wasn't clear that there even was a violation, even assuming that there had been one,

[00:11:11] Speaker 04:
The party that was raising the violation, their Kodak, had waited six years in order to do it.

[00:11:16] Speaker 04:
What happened there was the judge disclosed that her mother-in-law had stock in Kodak and said, I don't think I need to recuse because of my mother-in-law's stock.

[00:11:25] Speaker 03:
At the time of the earlier judgments?

[00:11:30] Speaker 04:
Yes, far before.

[00:11:31] Speaker 04:
And then the case went to trial.

[00:11:33] Speaker 04:
It went up to appeal.

[00:11:33] Speaker 04:
Cert was denied on liability.

[00:11:35] Speaker 04:
It came back.

[00:11:36] Speaker 04:
for trial and damages.

[00:11:37] Speaker 04:
And by that point, the mother-in-law had passed away, and the judge said, I'm now a beneficiary of the will, so I'm going to recuse myself from further proceedings.

[00:11:45] Speaker 04:
And Kodak said, we want to undo everything that's gone before.

[00:11:49] Speaker 04:
And this court said, no, that's not appropriate, even if the judge maybe should have recused six years before, which is something the court assumed and did not decide.

[00:11:58] Speaker 04:
Nonetheless, it found, I think under the rubric of harmless error, essentially,

[00:12:01] Speaker 04:
that because Kodak had waited so long that it would harm the reputation of the courts to undo something that the party had sat idly by and endured without objection.

[00:12:16] Speaker 04:
the only example I can come up with and the only example that's... But there are some other examples.

[00:12:20] Speaker 01:
I mean, I think there's a circuit case that refused in a B4 situation to vacate where the only rulings being challenged were legal rulings that would be reviewed de novo on appeal.

[00:12:34] Speaker 01:
I know we rejected that in the Shell case, but I think there are, there's other circuit authority, but that's not the case here.

[00:12:41] Speaker 01:
We're not dealing with it.

[00:12:43] Speaker 04:
Oh, by no means.

[00:12:43] Speaker 04:
No, in fact, centripetal throughout its brief on the merits is very clear.

[00:12:46] Speaker 04:
It seeks highly deferential review by this court of the factual findings.

[00:12:50] Speaker 04:
We, of course, have some arguments that we've made as a matter of law on the merits, but as Your Honor noted, that doesn't make a difference under the decision in shell.

[00:12:58] Speaker 04:
So we think under both shell and under the Lilieberg factors, I mean, this really is a situation where I think not vacating

[00:13:04] Speaker 04:
would send a very dangerous message.

[00:13:06] Speaker 04:
And it would suggest that investments could be disregarded or simply not found out, that one could go through and issue what is, I think, a historic judgment, and then simply move the stock into a blind trust.

[00:13:18] Speaker 04:
And I don't know that that's the message that this court wanted to send, and certainly not in shell.

[00:13:23] Speaker 04:
And there's no reason to treat this case differently from shell.

[00:13:26] Speaker 04:
Unless the court has other questions at this time, I've reserved the balance of my time for a bottle.

[00:13:30] Speaker 04:
OK.

[00:13:30] Speaker 02:
We'll give you two minutes for a while.

[00:13:34] Speaker 02:
May it please the court.

[00:13:35] Speaker 02:
There's been no allegations in this case that the district court judge was biased based on his wife's stock purchase of the Cisco stock.

[00:13:46] Speaker 02:
And that's an important fact to consider.

[00:13:49] Speaker 02:
But he was still obligated to recuse, right?

[00:13:52] Speaker 01:
He was when he found out.

[00:13:53] Speaker 01:
At least once he became aware of the stock.

[00:13:55] Speaker 02:
That's correct.

[00:13:56] Speaker 02:
But the bias issues would be very important when we look at what the remedy is for vacator.

[00:14:00] Speaker 02:
What Cisco is complaining about is that the judge misinterpreted the statute, particularly 455F, regarding whether or not the divestment or the divestment himself of the interest was sufficiently done by a blind trust.

[00:14:17] Speaker 02:
Now, there's never been a single case which that term has been interpreted by any court.

[00:14:21] Speaker 02:
So when this court makes a determination, it'll be the first time it's ever been construed, that statute.

[00:14:28] Speaker 02:
So it will be a case of first impression.

[00:14:30] Speaker 02:
There's also no clear congressional intent what that means, divest of his or her interest in the disqualifying financial stake.

[00:14:40] Speaker 02:
The judge in this case went above and beyond to try to do the right thing.

[00:14:45] Speaker 02:
He actually paid money out of his own pocket to hire a lawyer to devise this blind trust.

[00:14:50] Speaker 02:
That was a form of divestment.

[00:14:52] Speaker 02:
The term divestment is a general term.

[00:14:54] Speaker 00:
Do you have any case law to support what you're arguing right now?

[00:14:57] Speaker 02:
No, there's no case law on this at all.

[00:14:59] Speaker 02:
Either way, one way or the other.

[00:15:01] Speaker 02:
The only thing that both parties have are some secondary sources.

[00:15:04] Speaker 02:
They are not meant to be used for interpretive processes.

[00:15:07] Speaker 01:
Well, the Inray cement litigation case, whatever the name of it is, does have a statement in there that a blind trust doesn't work, right?

[00:15:16] Speaker 02:
Exactly.

[00:15:16] Speaker 02:
For 455C, if you look at the congressional record back from 1974, it actually talks about you should not put your investments into a blind trust.

[00:15:26] Speaker 02:
Judges should not put their investment into a blind trust.

[00:15:27] Speaker 02:
But then they single out, they differentiate,

[00:15:30] Speaker 02:
the judge's spouses and my children living at home as a different class of investments.

[00:15:37] Speaker 02:
He should make himself reasonably aware of their financial interests.

[00:15:42] Speaker 02:
There is just not a clear-cut definition as to what the divestment should have been in this case.

[00:15:48] Speaker 02:
But Judge Morgan's interpretation of that was reasonable.

[00:15:52] Speaker 02:
He was trying to avoid a situation that would be counterproductive to what the spirit of the law was about.

[00:15:59] Speaker 00:
Can you cite a definition of divest that supports your position?

[00:16:03] Speaker 02:
I Googled it yesterday, divest.

[00:16:06] Speaker 02:
I pulled off Google.

[00:16:08] Speaker 02:
They're probably someone of power, rights, or possession.

[00:16:12] Speaker 02:
Now, Judge Morgan's wife, when she put into blind trust, she relinquished control, responsibility, and knowledge of that.

[00:16:18] Speaker 02:
She no longer has the rights to control that issue.

[00:16:21] Speaker 02:
So it's a general interpretation.

[00:16:24] Speaker 02:
If this court gives a very strict interpretation, a bright line test of what divest means, it'll be for the first time.

[00:16:29] Speaker 02:
But Judge Morgan went with a more general, flexible approach to determine what the vest is.

[00:16:35] Speaker 02:
He did it because the spirit of 455F, which was created 14 years after 455A, B, and C, and 74, came out.

[00:16:44] Speaker 02:
That 14-year gap created a lot of problems.

[00:16:48] Speaker 02:
Your Honor mentioned Anne Rae Seaman, a nice circuit case that caused this ridiculous issue to come up where a judge's wife had invested in

[00:16:57] Speaker 02:
handful of stocks in a very large class action.

[00:17:00] Speaker 02:
So the Congress brought in 455F for this very solution to give the judges some flexibility when they've invested substantial time in the matter to divest the interest.

[00:17:13] Speaker 02:
And that's what Judge Morgan attempted to do.

[00:17:16] Speaker 02:
Now, there's absolutely no proof of bias.

[00:17:18] Speaker 02:
That's the reason Cisco dropped the 455A argument, that a regional observer standard would not have flown here.

[00:17:27] Speaker 02:
We're looking at just a simple interpretation of the statute.

[00:17:30] Speaker 02:
If Judge Morgan interpreted the statute incorrectly, like I said, it's never been done before, it was not egregious, it was not clear-cut.

[00:17:40] Speaker 02:
And that's what's required for vacatur.

[00:17:42] Speaker 02:
You have to have an egregious example.

[00:17:45] Speaker 02:
And vacatur should only be, as the Supreme Court says, in Liljeberg in extraordinary circumstances.

[00:17:51] Speaker 02:
One of the things we did in our brief is we focused on the three Liljeberg factors.

[00:17:57] Speaker 02:
the risk of the injury to the parties in the particular case, the risk of denial of the relief will produce injustice in other cases, and the risk of undermining the public confidence in the judicial process.

[00:18:09] Speaker 02:
All three of those factors weigh very heavily for no vacancy.

[00:18:12] Speaker 01:
So this is a harmless error already?

[00:18:14] Speaker 02:
It is to some degree, but it's a harmless error.

[00:18:18] Speaker 02:
And on those three factors, they all weigh in favor of no vacancy.

[00:18:23] Speaker 02:
If you look at the very first factor, the risk of injustice to the parties in this particular case.

[00:18:27] Speaker 02:
Is there a risk of injustice to Cisco if there is no vacatur?

[00:18:31] Speaker 02:
Well, we've already established that no one's alleging bias.

[00:18:35] Speaker 02:
There's no bias here at all.

[00:18:36] Speaker 02:
So there's no injustice to Cisco if there's no vacatur.

[00:18:40] Speaker 02:
On the other hand, if there is vacatur,

[00:18:42] Speaker 02:
There's extreme injustice.

[00:18:44] Speaker 03:
Just on the bias point, I guess my understanding has been that maybe the central reason for this small set of bright line rules is that an inquiry into bias is a

[00:19:05] Speaker 03:
potentially very unreliable and difficult and uncertain inquiry.

[00:19:10] Speaker 03:
And so in a defined set of circumstances, Congress has decided that we are just not going to make that inquiry at all in these circumstances, which are clear enough.

[00:19:23] Speaker 03:
We're just going to say the public perception as a categorical matter is sufficiently at risk because of the possibility of bias.

[00:19:36] Speaker 03:
And that's not going to go beyond that.

[00:19:39] Speaker 03:
Why is that not a driving concern for what's called the remedial issue?

[00:19:46] Speaker 02:
Because under the Supreme Court factors and the legitimate, the three factors.

[00:19:50] Speaker 03:
And that was, again, that was a 455A case, right?

[00:19:53] Speaker 02:
It was a 455A, but it's also been applied to 455B in other cases.

[00:19:58] Speaker 01:
Well, I'm not aware of any case that has said we're going to inquire whether there was actual bias in a B4 situation before we find that there was an obligation to recuse or in determining whether the remedy should be vacatur.

[00:20:14] Speaker 02:
No, and I think Your Honor is correct.

[00:20:17] Speaker 02:
There is no case that you made that determination, but here I'm saying there's not an allegation of bias.

[00:20:22] Speaker 02:
Cisco has not even had an allegation of bias.

[00:20:24] Speaker 02:
That's a big difference.

[00:20:26] Speaker 02:
The judge said he had already formed his opinion, had already written his draft of the opinion by the time he found out about the stock.

[00:20:33] Speaker 03:
Well, most of it.

[00:20:35] Speaker 02:
He said about 150 pages, it turned out to be 167 pages, something like that.

[00:20:40] Speaker 02:
But he had already made up his mind.

[00:20:41] Speaker 02:
He said the stock purchase could not and did not inform his decision.

[00:20:46] Speaker 02:
So the fact that there's no challenge or no allegation of bias is what I'm talking about in this particular instance.

[00:20:51] Speaker 02:
It's already admitted there is no bias.

[00:20:53] Speaker 01:
This notion that the judge had already made his decision by the time he discovered the stock ownership seems to me somewhat inconsistent with the history of the statute in which

[00:21:03] Speaker 01:
arose in significant part out of the Haynesworth confirmation hearings where there was a question as to whether he should have recused in a circuit case because of stock ownership that he discovered after the oral argument and I guess after the

[00:21:19] Speaker 01:
the straw vote, and he was criticized for that at the confirmation hearing.

[00:21:25] Speaker 01:
And that experience was what led to this automatic recusal provision in the statute.

[00:21:34] Speaker 01:
So that would seem to suggest that the fact that the judge is fairly far down the road in making a decision

[00:21:49] Speaker 02:
Yeah, I mean, and that was the very, the reason 455 was enacted, and I'll quote and I'll give the congressional records, says, the section proposed to amend 28 U.S.C.

[00:22:00] Speaker 02:
455 to modify the automatic disqualification provision to permit a judge or his or her spouse of minor children to resolve the conflict by divesting themselves of the property, creating the conflict.

[00:22:12] Speaker 02:
The 455F was actually designed to solve the automatic disqualification, so it's not that bright-line test.

[00:22:18] Speaker 02:
But even if it is, if the court finds that he did not divest properly, then you look at the remedy.

[00:22:25] Speaker 02:
And there's two different things.

[00:22:26] Speaker 02:
The recusal is one issue.

[00:22:28] Speaker 02:
Vacator is a completely separate issue and a different inquiry.

[00:22:31] Speaker 02:
And the Supreme Court has laid out the inquiry of that.

[00:22:33] Speaker 02:
And the public confidence is one of those issues.

[00:22:36] Speaker 02:
But the first two issues involve whether or not there be injustice to the parties or a risk of injustice to other cases.

[00:22:44] Speaker 02:
And if this court gets to the vacator issue,

[00:22:47] Speaker 02:
There's obviously no risk of injustice to Cisco with no vacations, but there's a huge risk to some triples.

[00:22:54] Speaker 03:
I'm sorry.

[00:22:55] Speaker 03:
Why is there obviously no risk of injustice to Cisco?

[00:23:00] Speaker 02:
Because Cisco has not alleged any bias because of the judge's wife's stock ownership.

[00:23:08] Speaker 02:
It's actually about stocking Cisco.

[00:23:12] Speaker 02:
So if anything,

[00:23:13] Speaker 03:
Right, but I've always had difficulty understanding why the direction of the ruling and the ownership could, in any reliable way, indicate that there's really no risk to the party whose stock was owned, because a perfectly plausible reaction of a judge under the obligation to be impartial

[00:23:42] Speaker 03:
upon discovering ownership is to bend over backwards against his wife's own financial interests.

[00:23:51] Speaker 03:
And as long as that's a plausible concern, which psychologically it surely is, how do you erase that as a possibility?

[00:24:01] Speaker 02:
Well, as the record indicates here, the judge said he'd already made his decision and drafted his opinion.

[00:24:08] Speaker 02:
is editing to do.

[00:24:10] Speaker 02:
He put down his pen.

[00:24:11] Speaker 02:
He put down his pen when he found out about the stock.

[00:24:14] Speaker 03:
He stopped working on it until after the... Have you ever changed your drafts in the late editing process to do something other than, you know, find typos and actually change a result?

[00:24:25] Speaker 03:
I have.

[00:24:27] Speaker 02:
I think it's plausible you could change your draft, but the judge said it did not and could not.

[00:24:34] Speaker 02:
That's the record.

[00:24:35] Speaker 02:
It did not and could not change his opinion.

[00:24:37] Speaker 02:
He'd already formed his opinion.

[00:24:38] Speaker 02:
So I would take the judge at his word.

[00:24:41] Speaker 02:
So the risk of injustice here would be much more outweighed, just like the Polaroid case.

[00:24:46] Speaker 01:
When you get back to the Hainsworth situation, which led to the statute, which was exactly a situation in which the argument was, well, he was so far down the line that it wouldn't have had any effect.

[00:24:59] Speaker 01:
And that was thought to be inadequate as a justification for continuing.

[00:25:05] Speaker 02:
Well, under the vacature standards and the way that the Supreme Court had set up the factors, that is one of the factors you look at.

[00:25:14] Speaker 02:
You look at factor three, which is the public interest in having a neutral and impartial judiciary.

[00:25:24] Speaker 00:
Do you agree with your opposing counsel's list of what would be vacated if we find a violation of 455B4?

[00:25:31] Speaker 02:
I think if this court decides to vacate, they can send it back to the district court.

[00:25:37] Speaker 02:
But there's not necessary to reassign the case to a new judge.

[00:25:41] Speaker 02:
That is an extreme measure to take.

[00:25:45] Speaker 01:
What case has given it back to the same judge who should have recused himself?

[00:25:51] Speaker 02:
If this court determines that the judge did not divest properly, you could tell him how to divest properly.

[00:25:58] Speaker 02:
And he could divest that interest properly and then have

[00:26:01] Speaker 02:
opinion back in front of him.

[00:26:04] Speaker 02:
So it is something that that's the only issue that's really at stake here.

[00:26:08] Speaker 02:
Did the judge divest his answers properly?

[00:26:10] Speaker 03:
Just to be clear, I'm not sure I heard an answer to Judge Cunningham's question.

[00:26:15] Speaker 03:
I think Mr. Fleming said all orders from August

[00:26:19] Speaker 03:
11th going forward have to be vacated.

[00:26:22] Speaker 02:
I disagree with that.

[00:26:23] Speaker 03:
You disagree?

[00:26:24] Speaker 03:
Yes.

[00:26:27] Speaker 03:
Assuming that something needs to be vacated, what's the subset that you would say can stay in place?

[00:26:35] Speaker 02:
I'd say the memorandum and opinion, original opinion that he had already drafted stays in place.

[00:26:41] Speaker 02:
And then the subsequent post trial would be vacated.

[00:26:45] Speaker 02:
Because he had already formed the one opinion.

[00:26:47] Speaker 02:
It was done.

[00:26:48] Speaker 02:
It was completed.

[00:26:49] Speaker 02:
And that's the logical breaking point.

[00:26:51] Speaker 02:
But once again, I do want to go back to the vacator, because I do think that's an extreme, extraordinary remedy.

[00:26:57] Speaker 02:
And I don't think that's what the Supreme Court had in mind.

[00:26:59] Speaker 02:
And those are my factors.

[00:27:01] Speaker 03:
And do you have a case in which a court of appeals has remanded to a judge that

[00:27:11] Speaker 03:
violated, as it turns out, the B4 or any of the B rules and said, since you can divest, we're going to remand it to you because you can keep the case if you do divest.

[00:27:25] Speaker 02:
No, because as I said, this would be a case of first impression.

[00:27:29] Speaker 02:
This issue has never come up about what is a proper divestiture or not.

[00:27:33] Speaker 02:
Whether a blind trust is a proper divestiture, there's not a case on point.

[00:27:37] Speaker 02:
So what I'm saying is there's no time limit on divestiture.

[00:27:42] Speaker 02:
It's not strict.

[00:27:43] Speaker 02:
It has to be a certain amount of time.

[00:27:45] Speaker 03:
Does the word prompt?

[00:27:47] Speaker 03:
Is that in the statute?

[00:27:49] Speaker 03:
No, it's not in the statute.

[00:27:50] Speaker 03:
Oh, OK.

[00:27:51] Speaker 02:
So it is something that just talks about a divestment herself or herself of the interest to provide the grounds for disqualification.

[00:28:01] Speaker 02:
But it is.

[00:28:02] Speaker 00:
Do you know why the judge treated that other stock differently?

[00:28:06] Speaker 00:
I think it was called cloud hair or something like that.

[00:28:08] Speaker 00:
Do you have any more insight on that?

[00:28:12] Speaker 02:
It was a former partner of Centripetal.

[00:28:16] Speaker 02:
And so he just sold it because it had no difference.

[00:28:19] Speaker 02:
It was not one of the parties.

[00:28:21] Speaker 02:
The problem the judge had here was with owning Cisco stock, he wanted to go by the letter of the law.

[00:28:27] Speaker 02:
And these facts in this case,

[00:28:30] Speaker 02:
the judge did everything possible to make sure the public had confidence in what was going on.

[00:28:35] Speaker 01:
But he didn't divest.

[00:28:36] Speaker 01:
I mean, assuming that putting it in a blind trust is not a divestiture.

[00:28:40] Speaker 01:
Well, he didn't divest.

[00:28:41] Speaker 01:
I mean, the statute told him exactly what to do, and he didn't do it.

[00:28:46] Speaker 02:
Well, if you look at a very strict interpretation of divestiture, then that would be correct.

[00:28:53] Speaker 02:
do what he thought was right by the spirit of the law.

[00:28:57] Speaker 02:
And so this is one of those public interest issues that a vacatur would have much more harm on how the judiciary is perceived than a non-vacatur.

[00:29:08] Speaker 02:
Thank you.

[00:29:10] Speaker 04:
All right.

[00:29:10] Speaker 04:
Thank you.

[00:29:11] Speaker 01:
Mr. Fleming, you have two minutes.

[00:29:14] Speaker 04:
Thank you, Your Honor.

[00:29:15] Speaker 04:
Four points, if I may.

[00:29:16] Speaker 04:
First of all, the statute doesn't say divest of control.

[00:29:18] Speaker 04:
It says divest of the interest, and it defines what the interest is.

[00:29:22] Speaker 04:
It means ownership.

[00:29:23] Speaker 04:
So nearly giving up whatever control was given up by putting it into a blind trust does not satisfy the plain language of the statute.

[00:29:30] Speaker 04:
There is no need to show an egregious violation, actual bias.

[00:29:34] Speaker 04:
That wasn't shown in shell.

[00:29:35] Speaker 04:
It wasn't found.

[00:29:36] Speaker 04:
It wasn't even suggested that that was important.

[00:29:38] Speaker 04:
The government was the appellant in that case.

[00:29:41] Speaker 04:
It wasn't arguing that Judge Smith was actually biased.

[00:29:43] Speaker 04:
The point was simply there was a violation of a bright line rule, and that triggers the point that I think was called out by Judge Toronto's questioning, which is it's difficult to understand the effect that a financial interest has on human decision making.

[00:29:55] Speaker 04:
and Congress meant to make that decision clear so that parties and judges and reviewing courts did not have to embark on what is a very difficult process to untangle psychological motivations.

[00:30:06] Speaker 04:
With respect to the Lilleberg factors, I mean, we rely primarily on Shell, which applied the Lilleberg factors, and we think that this case is on all fours with Shell, but one can walk through them.

[00:30:15] Speaker 04:
I mean, in Lilleberg and talking about the first factor effect on the parties,

[00:30:19] Speaker 04:
The Supreme Court looked to see whether anyone had made a showing of special hardship by reliance on the individual judgment.

[00:30:25] Speaker 04:
Centripetal hasn't shown anything like that here.

[00:30:28] Speaker 04:
Certainly, vacator would delay a final judgment.

[00:30:30] Speaker 04:
That's true in every case, and I don't know of any authority that's relied on that under the first factor.

[00:30:35] Speaker 04:
Besides, Centripetal bears some of the blame for the delay.

[00:30:37] Speaker 04:
Had they not tried to wave an unwavable conflict and instead said to the judge, you know what, there is a problem here,

[00:30:43] Speaker 04:
It might have been that a new judge could have come in very quickly and picked up where Judge Morgan had to leave off.

[00:30:48] Speaker 04:
Instead, we had full briefing on the post-judgment motions and briefing on this appeal.

[00:30:52] Speaker 04:
And while that's unfortunate, it's not a special hardship to sentripetal.

[00:30:57] Speaker 04:
I think the second factor, the effect of a vacator on parties in other cases, the Supreme Court's own reasoning in Lilleberg applies just as well here.

[00:31:04] Speaker 04:
In fact, not vacating would send a very dangerous message to other cases that there are no practical consequences to a violation of 455B.

[00:31:11] Speaker 04:
Similarly, the third factor, public confidence in the judicial process

[00:31:15] Speaker 04:
I think what this court said and did in shell applies just as well here.

[00:31:18] Speaker 04:
Finally, you cannot remand to the same judge.

[00:31:21] Speaker 04:
The Second Circuit in Chase, Manhattan made very clear why you can't do that for them.

[00:31:25] Speaker 04:
That was a 455A case, all the more the case in a 455B context.

[00:31:30] Speaker 04:
Simply selling the stock now and then reissuing a decision that was issued under the shadow of a longstanding 455B violation would not make any sense at all and would not be consistent with Congress's mandate.

[00:31:41] Speaker 03:
And in your view, is the reassignment to be left to the chief judge of the Eastern District, if there is to be a reassignment?

[00:31:50] Speaker 04:
I must confess, I don't know the answer to that.

[00:31:52] Speaker 04:
It would probably depend on the district's rules for reassignment.

[00:31:55] Speaker 04:
But that's probably the best way to do it.

[00:31:56] Speaker 04:
My understanding as well is that Judge Morgan has retired from the bench at this point.

[00:32:00] Speaker 04:
So I'm not even sure remanding to him is even a possibility.

[00:32:05] Speaker 01:
OK.

[00:32:05] Speaker 01:
Thank you, Mr. Green.

[00:32:06] Speaker 01:
Thank you, Your Honor.

[00:32:07] Speaker 01:
The case is submitted.