Free Statement - District Court of Colorado - Colorado

Case 1:03-cv-02073-WDM-KLM

Document 197

Filed 12/22/2005

Page 1 of 11

I N THE U NITED S TATES D ISTRICT C OURT F OR THE D ISTRICT OF C OLORADO Civil Action No. 03-cv-02073-WDM-PAC ROBERTA PULSE, TONYA HOUSE, Plaintiffs, v. THE LARRY H. MILLER GROUP, Defendant. D EFENDANT ' S S UBMISSION IN R ESPONSE T O C OURT ' S R EQUEST R EGARDING M ANDATORY D ISQUALIFICATION Defendant, by Holland & Hart, LLP, and Judith Holmes, Judith Holmes & Associates, LLC, respectfully submits this response to Judge Miller's request at the December 13 hearing for the parties' representations as to whether the Court must disqualify itself from further action in this case under 28 U.S.C. § 455(b) (Section 455(b)). Upon careful review of the statute and applicable case law, we believe that Section 455(b) requires mandatory disqualification. P ROCEDURAL & F ACTUAL B ACKGROUND Judge Miller's daughter-in-law, Kristine Miller, is a transactional intellectual property partner in the Boulder office of Holland & Hart, LLP (the "firm"), where the undersigned is an employment litigation partner. Ms. Miller became an associate with the firm in 1999 and became a partner in 2004. In May 2005, she voluntarily went on leave. At that time, she did not relinquish her partnership interest, nor has she relinquished it since then or expressed any desire or intention to relinquish it in the future.

Case 1:03-cv-02073-WDM-KLM

Document 197

Filed 12/22/2005

Page 2 of 11

Defendant retained Steve Gutierrez and the undersigned in early December 2005 as co-counsel with Ms. Holmes regarding the upcoming twoweek jury trial currently scheduled to begin on January 9, 2006 in this Court. When we entered our appearance on December 13, the undersigned contacted opposing counsel as a courtesy. He informed her that Defendant had retained us. He apprised her about the family relationship between the Judge and Ms. Miller and his understanding that the Court routinely disqualified itself as to matters in which Holland and Hart attorneys represented a party. And he noted Defendant did not know of Ms. Miller's relationship to Judge Miller before retaining him but was willing to try the case as scheduled before him. That afternoon, the parties' counsel contacted Judge Miller's chambers to request a conference to attempt to persuade him to continue to preside over the case. Later that day, the Court conducted a telephone hearing. The undersigned represented to the Court his understanding of Ms. Miller's status based upon his knowledge at the time of the hearing. The Court discussed Section 455 and asked counsel whether he had a duty to disqualify himself under Section 455(b)(5) apart from the parties' willingness to proceed in his court. The undersigned had not researched the applicability of that statutory subsection and indicated that he did not know the answer to the Judge's question. Opposing counsel offered no answer either. The Court requested on the record that the parties submit representations as to whether the Court was required to disqualify itself under Section 455(b). 2

Case 1:03-cv-02073-WDM-KLM

Document 197

Filed 12/22/2005

Page 3 of 11

The Court issued a Notice concerning disqualification [Docket No. 174], stating, "although [Ms. Miller is] on leave, she does professional work on behalf of the firm on a contract basis. Her compensation for that work is an hourly rate. Otherwise, she does not participate as a partner in the governance of the firm or share in the income or the expenses of the firm." Notice at 1-2 [Docket No.

174]. This statement reflected accurately the undersigned's representations based upon his then-current knowledge of Ms. Miller's situation based upon a brief conference with her before the hearing. Later that week, the undersigned learned additional material information about Ms. Miller's status: (1) Ms. Miller has unfettered discretion to return from leave at any time without any approval from the firm; (2) although Ms. Miller is on leave, she is actively considering returning from leave; and (3) the leave period is not indefinite but was approved only through May 2007, when Ms. Miller must return from leave absent an agreement between her and the firm to extend the leave. The undersigned conveyed this new information to opposing counsel two days before she filed "Plaintiffs' Brief Regarding Statutory Qualification." 1 Absent disqualification, the Parties plan to try the case on January 9.

1

Defendant styled this pleading as a "submission" rather than a brief, as there is no motion pending before the Court concerning disqualification. Indeed, the parties and counsel agreed to waive disqualification based on the ground that the Judge's "impartiality might reasonably be questioned" under Section 455(a). 3

Case 1:03-cv-02073-WDM-KLM

Document 197

Filed 12/22/2005

Page 4 of 11

A NALYSIS Section 455(b) is a mandatory recusal section. To a great extent, the provision does not concern the parties' rights, but the judiciary's rights in maintaining its own integrity. See Nobelpharma AB v. Implant Innovations, 930 F. Supp. 1241, 1266 (N.D. Ill. 1996). Accordingly, neither party may waive applicability of its provisions. See 28 U.S.C. § 455(e) (precluding waiver of grounds for disqualification enumerated in Section 455(b)). The only provision of Section 455 that is applicable here is Section 455(b)(5)(iii). 2 That subsection provides, in pertinent part that "[A Judge] shall . . . disqualify himself when "[h]e or his spouse, or a person within the third degree of relationship to either of them, or the spouse of such a person . . . is known by the judge to have an interest that could be substantially affected by the outcome of the proceeding . . . ." It is undisputed that Ms. Miller is the spouse of David Miller, the Judge's son, who is within the third degree of relationship to the Judge. Accordingly, the issue the Court must decide is whether Ms. Miller is "known by the judge to have an interest that could be substantially affected by the outcome of the proceeding." Section 455(b)(5)(iii). Under the facts presented here, there is no Tenth Circuit authority that controls. In other

2

Defendant agrees with Plaintiffs that because Ms. Miller is not actively working on the case, she is not "acting as a lawyer in the proceeding" under Section 455(b)(5)(ii). 4

Case 1:03-cv-02073-WDM-KLM

Document 197

Filed 12/22/2005

Page 5 of 11

circuits, there are two lines of authority as to whether a judge should disqualify himself if a person related to him within the third degree or, as here, that person's spouse, is a partner in a law firm representing a party before the judge. A. The Pashaian Approach

One line of authority is embodied by Pashaian v. Eccelston Properties, Ltd., 88 F.3d 77 (2nd Cir. 1996). Plaintiff cites this case to support the conclusion that Section 455(b)(5)(iii) does not require the Court's disqualification here. In Pashaian, the Second Circuit affirmed the trial court's denial of a motion to recuse the judge where a law partner of defendant's attorney was married to the sister of the judge's wife. The Court rejected the Fifth Circuit's bright-line disqualification rule, noting that "it would simply be unrealistic to assume . . . that partners in today's law firms invariably `have an interest that could be substantially affected by the outcome of' any case in which any other partner is involved." In Pashaian, the trial court reviewed under seal the extent of the attorney's participation in the net income of the firm and the amount at stake in the litigation. Only then did it reach a decision to deny the motion to disqualify. 3

3

The two other cases cited by Plaintiff, U.S. v. Sciarra, 851 F.2d 621, 635 (3rd Cir. 1988); and In Re IBM, Corp., 618 F.2d 923, 926 (2nd Cir. 1980) are not especially helpful in applying Section 455(b). Sciarra held that non-party witnesses compelled to provide deposition testimony in RICO action lacked standing under § 455 to seek recusal of judge for demonstrated bias. The point for which Plaintiff cites it is dicta. The In Re IBM, Corp. case, was a mandamus proceeding denying a petition requesting recusal of a judge for personal bias. 5

Case 1:03-cv-02073-WDM-KLM

Document 197

Filed 12/22/2005

Page 6 of 11

A judge following the functional approach in Pashaian focuses on the substantiality of the lawyer-relative's financial interest in the case before the court. The advantage of this approach is that it does not rely on the status of equity partnership to decide the issue. However, such a focus would likely require a court to conduct a mini-trial to determine substantiality of the interest at stake. Indeed, that is just what happened in Pashaian. 88 F.3d at 84. Where, as here, none of the parties moved to recuse the judge, a court presumably would order such a mini-trial sua sponte. It might well believe it had to demand production of sensitive information from the lawyer-relative's law firm about its finances and the financial position of the lawyer-relative in that law firm, and details of the terms and conditions of the engagement between the law firm and the client appearing before the court. The court then would have to analyze that information and reach a conclusion. This approach also might require the Court to conduct its own independent case analysis to determine the likely recovery by or exposure of a party. 4 These are substantial burdens for any court, especially where the statute at issue only requires it to determine whether the interest "could be substantially affected by the outcome of the proceeding." (emphasis added). Further, under

In cases where the disqualification issue arises early in the case, the Pashaian approach might require the court to take on the unenviable task of conducting such a case analysis in advance of discovery. In cases where it arises late in the proceeding, it might require the court to sift through discovery documents to reach a conclusion. 6

4

Case 1:03-cv-02073-WDM-KLM

Document 197

Filed 12/22/2005

Page 7 of 11

the circumstances of this case, the burdens would impose a substantial impact on both parties, who already are preparing for a two-week trial that is less than three weeks away. B. The Potashnick Bright-Line Approach

A more conservative line of authority is embodied by the Fifth Circuit's decision in Potashnick v. Port City Const. Co., 609 F.2d 1101 (5th Cir. 1980). Potashnick established a bright-line rule that "when a partner in a law firm is related to a judge within the third degree, that partner will always be `known by the judge to have any interest that could be substantially affected by the outcome' of a proceeding involving the partner's law firm.'" 609 F.2d 1101, 1113 (emphasis added). 5 In that case, the Fifth Circuit held that the trial judge should have disqualified himself from a case in which his father was a partner in a firm representing one of the parties to the litigation, stating that "[w]hile [the Judge's

Under the bright-line approach, if the lawyer-relative is an associate of a firm representing a party and is not working on the case, the result is different "because [his or her] salary interest as an associate is too remote to fall under this "financial interest prohibition." United States ex rel. Weinberger v. Equifax, Inc., 557 F.2d 456, 463 (5th Cir. 1977) (upholding trial judge's refusal to recuse himself because his son was an associate at law firm representing one of the parties). The same may be true when the relative is a non-equity partner. See In Re Mercedes-Benz Antitrust Litigation, 226 F.Supp.2d 552 (D.N.J. 2002) (denying recusal where the son of presiding judge was promoted to non-equity partner in a law firm representing the plaintiff, holding that the lawyer-relative's non-equity interest was not substantial enough to warrant disqualification under Section 455(b)(5)(iii)). In the case before this Court, Ms. Miller receives compensation for each hour of legal services she performs while on leave. However, she has the sole discretion to change that circumstance. An associate and a non-equity partner do not. 7

5

Case 1:03-cv-02073-WDM-KLM

Document 197

Filed 12/22/2005

Page 8 of 11

father's] financial interest was not actually affected by the outcome of the case, we interpret Section 455(b)(5)(iii) to require disqualification when the lawyerrelative's interest has the potential to be affected by the outcome." 609 F.2d at 1113. It explained that the statute's language is not limited solely to economic interests, but includes noneconomic interests also, including the partner's interest in his firm's reputation, its relationship with its clients, and its ability to attract new clients." Id. at 1114-15. See also 28 U.S.C. § 455(b)(4) (includes references to both financial interests and "any other interest"). As the Court concluded, "[u]nderlying our decision to disqualify [the judge] is the assumption that a partner will always have some interest which could be affected by the outcome of a proceeding handled by his law firm." Id. The advantages of the bright-line rule primarily are ease and speed of application. A court need only determine whether the lawyer-relative is an equity partner in his or her law firm. The judge can make the decision and move on. In this case, it is undisputed that Ms. Miller is an equity partner. Under this approach, the fact that she is voluntarily on leave is irrelevant because it did not divest her of her equity interest. She can decide at any time to return from leave, in which case she once again will share in the profits and expenses of the firm and in administrative duties. Associates and non-equity partners in any law firm (whether they are on leave or not) have no such power or discretion. Under this approach, her interest (unlike theirs) could be substantially affected by this Court's decision to remain on the case. 8

Case 1:03-cv-02073-WDM-KLM

Document 197

Filed 12/22/2005

Page 9 of 11

Application of the bright-line rule also avoids certain impracticalities. Under the Pashaian approach, Ms. Miller's interest could be substantially affected. But if the Court ruled the other way, her return from leave might necessitate a re-evaluation of that position. The re-evaluation may lead the Court to disqualify itself later in the case, perhaps during the pendency of posttrial motions or appeals in the case. This would foist significant burdens on the Court as well as the judge who inherits the case, potentially prejudicing one or both of the parties and virtually precluding the "just, speedy and inexpensive determination of every action" required by Rule 1, F ED . R. C IV . P. The Court has wide discretion in reaching a decision as to mandatory disqualification. See Higganbotham v. Okla. Trans. Comm'n, 328 F.3d 638, 645 (10th Cir. 2003) ("We will uphold a district court's decision unless it is arbitrary, capricious, whimsical, or manifestly unreasonable judgment.") (citations and internal quotations omitted). In addition, if the issue of whether Section 455 requires disqualification is a close one, the judge must disqualify himself. See Bryce v. Episcopal Church in the Diocese of Colorado, 289 F.3d 648, 659 (10th Cir. 2002) (citation omitted). In the absence of controlling Tenth Circuit authority, the Court will have to evaluate the benefits and burdens of each approach with respect to the facts presented by this case in reaching a decision that protects "the judiciary's rights in maintaining its own integrity." See Nobelpharma AB v. Implant Innovations, 930 F. Supp. 1241, 1266 (N.D. Ill. 1996). 9

Case 1:03-cv-02073-WDM-KLM

Document 197

Filed 12/22/2005

Page 10 of 11

DATED: December 21, 2005.

/s/ Steven M. Gutierrez______ Christopher M. Leh H OLLAND & H ART LLP 1800 Broadway, Suite 300 Boulder, CO 80302 Telephone: 303-473-2700 Fax: 303-473-2720 E-mail: [email protected] Steven M. Gutierrez, H OLLAND & H ART LLP 555 Seventeenth St., Suite 3200 Denver, CO 80202 Telephone: 303-295-8000 Fax: 303-295-8261 E-mail: [email protected] Judith H. Holmes J UDITH H OLMES & A SSOCIATES , LLC 7887 E. Belleview Suite 1100 Englewood, CO 80111 Telephone: 303-228-2267 Facsimile: 303-781-6877 Email: [email protected] ATTORNEYS FOR DEFENDANT

10

Case 1:03-cv-02073-WDM-KLM

Document 197

Filed 12/22/2005

Page 11 of 11

CERTIFICATE OF SERVICE

I hereby certify that on December 21, 2005, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system that will send notification of such filing to the following e-mail addresses: Kimberlie K. Ryan, [email protected] Whitney Traylor, [email protected] Judy Holmes, [email protected] [email protected] /s/Steven M. Gutierrez

11