[StBernard] 5th Circuit Judges Shrug Off Critics, Hang Onto Oil Investments

[Westley Annis]

5th Circuit Judges Shrug Off Critics, Hang Onto Oil Investments
By LAWRENCE HURLEY of Greenwire
Despite criticism over perceived ties to oil and gas companies, judges of
the New Orleans-based federal appeals court that frequently handles cases
affecting the energy industry have made little effort to divest themselves
of investments that could create conflicts of interest, according to new
financial disclosure statements.

Environmentalists and liberal groups often accuse the 5th U.S. Circuit Court
of Appeals of appearing to be slanted in favor of the industry, largely due
to the investments that some judges hold but also due to the fact that
several members worked in the energy sector when in private practice.

The financial disclosure statements, made available last month, show that
seven of the court's 15 active judges for whom 2010 reports are available
still hold stocks in oil and gas industry-related companies, own mineral
rights or invest in mutual funds focused on the energy industry. Chief Judge
Edith Jones is the only member of the court who has yet to file her report.

The 5th Circuit -- which has jurisdiction over Louisiana, Mississippi and
Texas -- hears a considerable number of oil and gas cases, including
offshore drilling permitting disputes (Greenwire, April 25).

The court would also handle any appeals concerning the multi-district
litigation arising from the Deepwater Horizon oil spill, which is before a
judge in the Eastern District of Louisiana.

Members of the court attracted particular scrutiny from liberal and
environmental groups last spring when the court, due to a mass of recusals,
was unable to decide Comer v. Murphy Oil, a high-profile case relating to
climate change.

A three-judge panel had initially ruled in 2009 that plaintiffs -- Gulf
Coast residents affected by Hurricane Katrina -- could proceed with their
lawsuit against various polluters. The plaintiffs claimed that global
warming, caused in part by greenhouse gas emissions, contributed to the
severity of the storm.

The court later agreed to re-hear the case en banc, meaning the entire court
would participate, but when eight of the 16 judges recused themselves, the
remaining eight members of the court concluded they did not have the
necessary quorum to decide the case (Greenwire, June 1, 2010).

What led to particular scrutiny was that by agreeing to hear the case en
banc, the judges had already vacated the panel decision, meaning the case
was essentially left undecided. The plaintiffs were left in legal limbo.

In the aftermath of that episode, there was a chorus of disapproval from the
left, including Alliance for Justice, an advocacy group focusing on legal
issues that put out a report called "Judicial Gusher: The Fifth Circuit's
Ties To Oil" that sought to raise the political temperature on the issue.

Nan Aron, the group's president, said in an interview the report was
intended to "alert the judiciary as well as litigants that there is a
significant problem, particularly at a time when the 5th Circuit will be
handling a great number of appeals arising from the oil spill."

Some Democrats in Congress used similar language this year when battling a
Republican attempt to grant the 5th Circuit jurisdiction over all Gulf of
Mexico-related oil cases, including those that would normally be in other
courts.

The bill, called the "Offshore Production and Safety Act," passed the House
but fell short in the Senate.

Sen. Patrick Leahy (D-Vt.), chairman of the Senate Judiciary Committee,
noted that the time that the majority of 5th Circuit judges "have a
financial interest in energy corporations that would likely require their
recusal in a lawsuit filed under the proposed legislation."

The rhetoric seems to have had little effect on the judges in question.

"I'm not surprised at all," Aron said.

Substantial holdings

The new reports show that only one judge who formerly had stocks in an oil
and gas company is now free from any association with the industry.

That is Judge Catharina Haynes, an appointee of President George W. Bush who
previously held up to $15,000 in BP PLC stock but sold several weeks after
the April 20 explosion of the Deepwater Horizon rig began the Gulf spill. BP
was the owner of the leaking oil well.

A number of the judges still have substantial holdings in various companies.

Judge James Dennis, for example, owns shares in various oil and gas
companies, including DCP Midstream and EV Energy Partners, in addition to
natural gas companies like Energy Transfer Equity and Regency Energy
Partners.

Judge Carolyn King, who was appointed by President Carter, personally holds
stock in Exxon Mobil Corp. and General Electric Co.

King's husband, Senior Judge Thomas Reavley, also a Carter appointee, holds
various mineral rights. Judges generally have to step aside based on their
spouses' conflicts of interest.

Another judge with mineral interests is Judge Priscilla Owen, appointed by
George W. Bush, whose investments in Texas are worth up to $255,000.

Several judges on the court also invest in mutual funds focused on oil and
gas companies or utilities.

'Ethical duty'

Legal ethics experts say there are some genuine concerns raised by judges'
holding stock and other investments, although they note that some of the
claims made by liberal and environmental groups are overheated.

"It seems to me that someone who is a federal judge has some responsibility
to avoid holding onto financial assets that will compromise his or her
ability to do the job," said Arthur Hellman, a professor at the University
of Pittsburgh School of Law.

Owning energy stocks while sitting on the 5th Circuit "has that effect
because they are so many of those cases," he added.

Charles Geyh, a professor at the Maurer School of Law at the University of
Indiana, Bloomington, said judges have an "ethical duty" to minimize the
need to recuse themselves.

If cases continue to come up that require recusal, that "would be something
the judge should think seriously about," he added.

But he warned against drawing too many conclusions based on Comer, pointing
out that it's unusual for an entire industry to be sued.

"There's no harm" in stepping aside, as long as it doesn't happen on a
regular basis, he said.

Despite all the attention the judges have received over their investments,
Jonathan Adler, a professor at Case Western Reserve University School of
Law, noted that the problem is largely one of appearance.

"I've not seen anything to make me think that any of the Circuit's judges
have acted improperly or were influenced by their holdings," he said.

The federal judiciary's code of conduct states that a judge "should divest
investments and other financial interests that might require frequent
disqualification."

Mutual funds are usually treated a little differently, but a Judicial
Conference ethics opinion states that a judge who invests in such a fund
"should evaluate whether his or her 'interest' in the fund might be affected
substantially by the outcome of a particular case, which would require
recusal."

Legal experts generally dismiss some of the other criticisms made by
Alliance for Justice and others about, say, what a judge did in private
practice before being appointed to the court.

That does not indicate that he or she would necessarily rule one way or the
other, they say.

"Most people recognize that the role of a lawyer and a judge are different,"
Geyh said.

There is one area in which the court has taken note of the criticisms that
came in the wake of the Comer case.

The court is currently considering a change (pdf) to its internal rules that
would ensure that, in the event of a similar mass of recusals, the initial
panel ruling would remain intact.

"I think the court is probably a little bit embarrassed," Hellman said.

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