You may know about Lynn Tilton’s fight with the SEC, which has accused the Patriarch Partners chief of defrauding her investors. The SEC brought its case in administrative court, which Tilton didn’t like, so she sued the SEC in federal district court in New York. In June the U.S. Court of Appeals for the Second Circuit rejected Tilton’s constitutional challenge to the SEC’s administrative process. The appellate court’s panel had included Judges Jon Newman, Christopher Droney, and Robert Sack. She had been represented by lawyers at Skadden, but retained a new team at Gibson Dunn, which entered an appearance to file a petition for rehearing of the Second Circuit’s decision.
On July 14th, Judges Newman and Droney issued a brief order striking Gibson Dunn from the case. The order didn’t include any reasoning, but did cite to an earlier Second Circuit case, In re FCC, 208 F.3d 137 (2d Cir. 2000), in which the same court had also tossed Gibson Dunn under similar circumstances. As it turns out, Judge Sack is a former partner at the firm and left in 1998 after he was nominated and confirmed to join the Second Circuit. Here was the crux of the FCC opinion:
It cannot have escaped the notice of the Gibson, Dunn firm and its several partners that one of the members of this Court’s panel, Judge Robert Sack, was a member of that firm from 1986 until 1998. It was therefore obvious that Gibson, Dunn’s appearance, if accepted by this Court, would draw into question Judge Sack’s ability or willingness to remain on the panel, regardless of whether counsel focused on the relevant texts, which are Canon 3C(1) of the Code of Conduct for United States Judges and Advisory Opinion No. 24 of the Committee on Codes of Conduct.
And on its face, sure. We wouldn’t want to have Judge Sack’s ability to remain on the current panel questioned.
The Ethical Standards
But what do that Canon and that Advisory Opinion say? Canon 3C(1) says:
(1) A judge shall disqualify himself or herself in a proceeding in which the judge’s impartiality might reasonably be questioned, including but not limited to instances in which:
(a) the judge has a personal bias or prejudice concerning a party, or personal knowledge of disputed evidentiary facts concerning the proceeding;
(b) the judge served as a lawyer in the matter in controversy, or a lawyer with whom the judge previously practiced law served during such association as a lawyer concerning the matter, or the judge or lawyer has been a material witness;
(c) the judge knows that the judge, individually or as a fiduciary, or the judge’s spouse or minor child residing in the judge’s household, has a financial interest in the subject matter in controversy or in a party to the proceeding, or any other interest that could be affected substantially by the outcome of the proceeding;
(d) the judge or the judge’s spouse, or a person related to either within the third degree of relationship, or the spouse of such a person is: . . .
(iii) known by the judge to have an interest that could be substantially affected by the outcome of the proceeding . . . .
Advisory Opinion No. 24 says, among other things:
A partner who leaves a law firm to become a federal judge should, if possible, agree with the partners on an exact amount that the judge will receive for his or her interest in the firm, whether that sum is to be paid within the year or over a period of years. Such agreed-upon payments may be made to the judge provided (1) it is clear that the judge is not sharing in profits of the firm earned after the judge’s departure, as distinguished from sharing in an amount representing the fair value of the judge’s interest in the firm, including the fair value of the judge’s interest in fees to be collected in the future for work done before leaving the firm, and (2) the judge does not participate in any case in which any attorney in the former firm is counsel until the firm has paid the full amount the judge is entitled to receive under the agreement.
Apart from recusal during the period when the judge is receiving payments from a former law firm, there is a broader question of the appearance of impropriety in the judge’s hearing cases involving that firm. Many judges have a self-imposed automatic rule of disqualification for a specified number of years after leaving the law firm. How long a judge should continue to recuse depends upon various circumstances, such as the relationship the judge had at the law firm with the lawyer appearing before the judge, the length of time since the judge left the law firm, and the relationship between the judge and the particular client, and the importance of that client to the firm’s practice. The Committee recommends that judges consider a recusal period of at least two years, recognizing that there will be circumstances where a longer period is more appropriate.
I deleted two subsections of Canon 3C(1) that don’t even arguably apply, but that Canon and Advisory Opinion No. 24 come down to this:
- A judge should be disqualified if her impartiality can be reasonably questioned;
- That impartiality could easily arise if there is any sort of personal bias or if the judge previously worked on the matter in controversy or if the judge or his family has an interest in the proceeding;
- Judges who are former law firm partners have to be especially careful about how residual payments from the partnership are handled, and those judges should recuse from matters involving their former firms for at least two years and longer if appropriate.
Was the Court Right?
Now, the court’s opinion in In re FCC does not seem crazy to me. Judge Sack had been on the court for under two years, and his impartiality might have been reasonably questioned by an opposing party who found itself up against Gibson Dunn in the Second Circuit then. But at this point it’s been 18 years since Judge Sack was at that firm. Can his impartiality as to matters involving Gibson Dunn reasonably be questioned at this point? He has now been on the Court of Appeals for six years longer than the 12 years he was a partner there. Could Judge Sack still be receiving residual payments from his partnership all those years ago? Given In re FCC’s citation of Advisory Opinion No. 24, I’m interested in the answer to that question, but it seems impossible that would be the case. Does he have relationships with the particular lawyers in the current case?
The court wasn’t kind to the firm in In re FCC, and hinted without an outright accusation that “tactical abuse” was afoot when the firm noticed its appearance after Judge Sack’s participation in that panel was already known. I don’t see that sort of abuse here. Tilton’s original firm, Skadden Arps, is full of excellent lawyers, and they found themselves on the wrong side of a 2-1 loss. It happens. But it’s not crazy that someone in as difficult a position as Tilton is might want to hire different counsel for different aspects of her matter. And do you know who else has a stable-full of excellent lawyers? Gibson Dunn! It seems entirely reasonable to me that Tilton wanted to hire them for reasons other than forcing Judge Sack’s disqualification from the panel.
Tell me I’m wrong and the Second Circuit was right. You know where to find me.