MICHAEL R. MILKEN, ET AL., PETITIONERS V. SECURITIES AND EXCHANGE
COMMISSION

   No. 88-1628

   In The Supreme Court Of The United States

   October Term, 1988

   On Petition For A Writ Of Certiorari To The United States Court Of
Appeals For The Second Circuit

   Brief For The Respondent In Opposition

            TABLE OF CONTENTS
   Questions Presented
   Opinions below
   Jurisdiction
   Statement
   Argument
   Conclusion

                            OPINIONS BELOW

   The opinion of the court of appeals denying mandamus (Pet. App.
A1-A32) is reported at 861 F.2d 1307.  The opinions of the court of
appeals on denying rehearing en banc (Pet. App. A33-A44) are not yet
reported.  The opinion of the district court (Pet. App. A45-A50) is
not yet reported.

                             JURISDICTION

   The judgment of the court of appeals was entered on November 15,
1988.  A petition for rehearing was denied on February 21, 1989.  The
petition for a writ of certiorari was filed on April 5, 1989.  The
jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

                          QUESTIONS PRESENTED

   1. Whether the court of appeals applied the proper standards for
determining judicial disqualification under 28 U.S.C. 455(a).

   2. Whether a petitioner seeking a writ of mandamus from a court of
appeals ordering the disqualification of a trial judge must
demonstrate a "clear and indisputable" right to mandamus relief.

                               STATEMENT

   The Securities and Exchange Commission (SEC or Commission) brought
this action on September 7, 1988, alleging numerous violations of the
federal securities laws by petitioners Michael R. Milken, Lowell J.
Milken, and Pamela R. Monzert, and by Drexel Burnham Lambert
Incorporated and Drexel Burnham Lambert Group Incorporated
(collectively, Drexel), Cary Maultasch, and others.  /1/ The case was
assigned to Senior United States District Judge Milton Pollack of the
Southern District of New York.  Petitioners and Drexel moved to
disqualify Judge Pollack, who denied the motion.  The court of appeals
denied a petition for a writ of mandamus.  Petitioners seek review of
the court of appeals' denial of their mandamus petition.

   1. a. In December 1986, almost two years before the Commission
filed its suit, eleven shareholder class action suits were filed in
New York and California, alleging that Ivan F. Boesky and Drexel,
among others, violated the federal securities and civil
anti-racketeering laws.  See Pet. App. A4-A5.  An additional private
civil fraud action naming Boesky and Drexel as defendants was filed in
March 1987.  Id. at A5.  Because of the relationship among the suits,
the Judicial Panel on Multidistrict Litigation in July 1987 asked
Chief Judge Brieant of the District Court for the Southern District of
New York to consolidate the cases before Judge Pollack (to whom some
of the cases had already been assigned) pursuant to 28 U.S.C. 1407.
Pet. App. A5.  The Panel's letter stated:  "If related cases are filed
in your district, we would anticipate that they would automatically be
assigned to Judge Pollack." See SEC Opp. to Mandamus Pet., Add. at 5a.
 The cases -- known collectively as In re Ivan F. Boesky Securities
Litigation, MDL Docket No. 732, M21-45-MP -- were consolidated, and
Judge Pollack presided over them for the next 14 months, issuing 36
case management orders and three published opinions in that time.
Pet. App. A5.

   b. In June 1988, Bain Venture Capital (Bain) signed a contract with
the shareholders of Palais Royal, Inc. (Palais Royal) to purchase
their stock in that company for $84.5 million in cash.  See Pet. App.
A6.  Palais Royal, a closely held company whose shareholders consisted
of Moselle Pollack, who is Judge Pollack's wife, and members of her
family, operated a chain of department stores in Texas.  Mrs. Pollack
was to receive approximately $30 million from Bain for her interest.
Id. at A17.

   The sales contract gave Bain the exclusive responsibility for
obtaining the financing it needed to consummate this leveraged buyout
transaction.  Pet. App. A6, A47.  Indeed, at Bain's request, none of
the selling shareholders had any contact with potential lenders.  Id.
at A6, A46.  At the time the contract was being negotiated, Bain
assured Shearson Lehman Hutton Inc. (Shearson), which was acting as
financial adviser to Palais Royal's shareholders, that it had had
discussions with potential lenders and investment bankers and that it
was confident of its ability to secure the required financing.
Chapman Aff. Paragraph 3 (Oct. 4, 1988).  Shearson itself also
anticipated that financing could be obtained.  Ibid.  According to
Shearson, as long as financing could be obtained, "it was of no
relevance or concern to the selling shareholders which entity or
entities provided the financing for the acquisition." Id. Paragraph 4.

   During the summer of 1988, Bain solicited several investment banks
and institutional lenders about providing financing for the
acquisition of Palais Royal (and, as part of the same transaction, of
another department store company).  See Coffman Decl. Paragraph 4(c)
(Oct. 4, 1988) (reporting statements of Bain officer);  Moseley &
McCarthy Aff. Paragraph 3 (Sept. 20, 1988).  Bain contacted Drexel
about financing in late July, one month after Bain and the
shareholders had entered into the contract.  Id. Paragraph 4.  Bain
was still negotiating with other investment bankers at least as late
as the end of August 1988 (see Pritchard Decl. Paragraph 3 (Oct. 10,
1988) (reporting conversations with institutional lenders)), but
Drexel ultimately was chosen.  It was Drexel's potential role in
arranging financing for Bain for its acquisition of Palais Royal that
was to form the basis of the motion by petitioners and Drexel to have
Judge Pollack disqualified.  /2/

   2. a. When the Commission filed the complaint on September 7, 1988,
it designated the case as related to the private actions pending
before Judge Pollack.  Consistent with the Multidistrict Panel's
directive and pursuant to local court rule, the case was assigned to
Judge Pollack.  /3/ Petitioners immediately responded with concerted
efforts to keep the case from being assigned to him.  See Pet. App.
A18.  /4/

   b. In the late afternoon of Saturday, September 10, three days
after the Commission's complaint was filed, two of Drexel's attorneys
called Judge Pollack at his home, without first notifying counsel for
the Commission, and informed him of Drexel's possible role in
financing the Palais Royal transaction and his wife's interest in the
transaction.  Pet. App. A9;  see id. at A19.  /5/ Judge Pollack
expressed disapproval of the ex parte contact and of the failure of
Drexel's counsel even to try to notify counsel for the Commission
before calling him.  Id. at A79.  At Judge Pollack's request, Drexel's
attorneys notified counsel for the Commission, and a conference was
convened for September 13 in the judge's chambers to discuss the
matter.  Id. at A75-A76.  Although recusal was suggested at the
conference, on the basis of the information provided Judge Pollack
reacted negatively to the suggestion.  No motion for disqualification
was made at that time.  See id. at A9.  /6/

   c. One week later, after Judge Pollack denied requests by Drexel
and petitioners to proceed with extensive discovery, they filed a
motion requesting that Judge Pollack recuse himself because of his
wife's interest in the Palais Royal transaction.  /7/ The motion was
made chiefly under 28 U.S.C. 455(a), which provides:  "Any justice,
judge or magistrate of the United States shall disqualify himself in
any proceeding in which his impartiality might reasonably be
questioned."

   At the time the motion was filed, there was no contract between
Bain and Drexel.  There was, however, a draft understanding, under
which it was contemplated that Drexel would assist Bain in obtaining
financing, by underwriting debt and by making a bridge loan from its
own capital, and would be entitled to buy a percentage of the holding
company that was newly formed to purchase the Palais Royal business
(Specialty Holdings, Inc., or SHI).  See Pet. App. A7;  Moseley &
McCarthy Aff. Paragraphs 6-8, 11 (Sept. 20, 1988).  Under the contract
between Bain and Drexel that was ultimately executed on November 1,
1988, Drexel underwrote $277 million in high yield debt to finance the
purchase of the two companies;  because only $90.5 million of the debt
had been placed by that date, Drexel also agreed to extend a bridge
loan to Bain of $186.5 million of its own funds.  Pet. 3;  see Moseley
Suppl. Decl. Paragraphs 3-7 (Nov. 10, 1988).  In return for its
services, Drexel received substantial fees and was enabled to purchase
from Bain 8.5% of the equity in SHI, the newly formed purchasing
company.  See Pet. 3;  Pet. App. A7, A47.  Drexel's purchase of that
stock, however, occurred after Mrs. Pollack and the other Palais Royal
shareholders had become completely disassociated from Palais Royal;
when they sold their stock to SHI, Bain was the sole owner of SHI.
See id. at A7, A46.

   d. On October 17, 1988, Judge Pollack denied the recusal motion,
concluding that there was "no reasonable basis for doubting the
Court's impartiality in this case by reason of the Palais Royal stock
sale." Pet. App. A47.  Judge Pollack found that Mrs. Pollack would be
receiving no money from Drexel;  that the only contract the selling
shareholders had was with Bain (and with SHI, which was then a wholly
owned subsidiary of Bain);  that the Palais Royal shareholders had
been excluded by Bain from any participation in dealings with
prospective lenders, including Drexel;  and that the selection of
Drexel was to be "the unrestricted and voluntary choice to be made by
Bain with which Palais Royal and its stockholders have nothing to say
and no concern." Id. at A46-A47.  /8/

   3. a. Petitioners, Drexel, and Maultasch thereupon filed a petition
for a writ of mandamus in the court of appeals, asking that court to
direct Judge Pollack to recuse himself.  In a divided decision, the
court denied the requested relief.  Pet. App. A1-A22.

   The court stated its belief that, "in light of the facts and
circumstances that are known, a reasonable person would not conclude
that the judge's impartiality could reasonably be questioned under
Section 455(a)." Pet. App. A20.  The court added that its conclusion
was "reinforced because of the particular procedural posture in which
this case is before us as a petition for a writ of mandamus." Ibid.
The court stated that "the exceptional remedy of mandamus will only be
invoked where the petitioner has demonstrated that its right to such
relief is 'clear and indisputable.'" Id. at A11 (quoting Moses H. Cone
Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 18 (1983), and
Allied Chemical Corp. v. Daiflon, Inc., 449 U.S. 33, 35 (1980)).  If
such a strict standard were not required, the court reasoned, mandamus
challenges to a trial judge's refusal to disqualify himself "would
become an effective tactic for harassment and delay." Pet. App. A11.
In this case, the court concluded, the petitioners had "failed to
establish the necessary clear and indisputable right to that
extraordinary writ." Id. at A20.  /9/

   In assessing whether Judge Pollack's recusal was required under
Section 455(a), the court of appeals applied an "objective (test that)
assumes that a reasonable person knows and understands all the
relevant facts." Pet. App. A13.  Given the facts of this case, the
court found no basis for recusal:  "Mrs. Pollack has had no business
or other dealings with Drexel;  she will receive no money from Drexel;
 and Drexel is not essential to the completion or success of the
transaction.  Moreover, there is no nexus, direct, indirect or
otherwise, between the civil suits pending before Judge Pollack and
Mrs. Pollack's interest in Palais Royal." Id. at A17.  /10/ The court
concluded that the connection between Drexel and Judge Pollack was too
remote, because "Drexel has no obligation direct or indirect to Mrs.
Pollack," adding that the theory underlying the disqualification
motion here "would mean that any remote connection even, for example,
to investors who buy SHI bonds from Drexel would mandate recusal." Id.
at A17-A18.

   The court then discussed the assertions supporting the claim that
Drexel's recusal motion was untimely and that the motion represented
"an attempt by Drexel to manipulate the judicial process through
judge-shopping." Pet. App. A18.  The court did so, it explained,
because "a reasonable person knowing all the facts and circumstances
should consider (such assertions) in order to decide whether the
failure to recuse was an abuse of sound judicial discretion." Id. at
A18, A20.  The court noted, however, that those assertions were not
established facts.  Ibid.  "Consequently," the court stated, "our
decision does not turn on these assertions." Id. at A20.

   b. Judge Lumbard dissented on the ground that Section 455(a)
required disqualification.  Pet. App. A22-A32.  For him, "the
inescapable relevant fact (was) that Drexel has been, and is now,
retained by the firm which is under contract with Mrs. Pollack and
members of her family to arrange financing for the cash purchase of
Palais Royal, their family business, from which members of the family
will receive over $84 million and Mrs. Pollack herself, and as
trustee, will receive $30 million in cash." Id. at A23.  Judge Lumbard
concluded "that a reasonable person knowing these ultimate conceded
facts would reasonably question Judge Pollack's ability to supervise
such litigation impartially." Ibid.  /11/

   c. The court of appeals denied rehearing en banc.  Four judges in
the majority joined in an opinion that stressed the presence in the
case of a judge-shopping issue, Drexel's formal undertaking of its
financing obligation after the present suit was filed, and the high
standard for mandamus relief, requiring a showing of a "clear and
indisputable right." Pet. App. A34-A37.  /12/ The same four judges
also joined a second opinion that, in addition to explaining that the
panel had merely "applied well-settled rules to the specific facts of
this case" (id. at A38), concluded that recusal was not required
because the "'flow'" of money "to Mrs. Pollack from Drexel * * * was
much too indirect and circuitous a movement to lead reasonable,
objective and impartial observers" to question Judge Pollack's
impartiality (id. at A39).  Id. at A37-A40.  /13/ The four dissenting
judges pointed to two circumstances:  Drexel's provision of financing
for a transaction in which Mrs. Pollack received approximately $30
million (the transaction had by this time been completed);  and Judge
Pollack's referral of misconduct charges based on counsel's alleged
breach of confidence owed to Mrs. Pollack.  Id. at A40-A44.  /14/

   4. At petitioners' request, the court of appeals subsequently
stayed the issuance of its mandate for 30 days.  Pet. App. A51.
Because the present petition was filed within that time, the stay
continues in effect pending this Court's disposition of the petition.
Fed. R. App. P. 41(b).  As a result, there remains in place a stay of
district court proceedings that had been entered on October 20, 1988.
Pet. App. A53.

   On April 14, 1989, shortly after petitioners filed their petition
for a writ of certiorari, Drexel and Maultasch entered into
comprehensive settlements with the Commission.  Under the settlements,
Drexel and Maultasch would be permanently enjoined from violating the
federal securities laws, and far-reaching relief would be provided to
investors.  The settlement with Drexel would require the company to
install new personnel and management practices, to institute internal
and external monitoring to prevent future violations of the securities
laws, to cooperate with the Commission's continuing investigation, and
to pay $350 million into a civil disgorgement fund to compensate
persons with valid claims against Drexel for securities law
violations.  /15/ In addition, pursuant to an agreement between Drexel
and the United States Attorney for the Southern District of New York,
the entry of a consent judgment with the Commission in the present
matter is a precondition to resolving related criminal charges against
Drexel.  Under the criminal settlement, Drexel would enter guilty
pleas to six counts charging securities and mail fraud and would pay
an additional $300 million in penalties.

   Under the court of appeals' stay of district court proceedings, the
proposed consent decree could not be approved and entered by the
district court.  Accordingly, the day agreement was reached on the
civil settlements, the Commission, Drexel, and Maultasch jointly asked
the court of appeals to modify its stay of the district court
proceedings for the purpose of allowing the district court to consider
and, if appropriate, to enter and administer the proposed final
judgments.  The motion asked that Judge Pollack be permitted to enter
and administer the settlements or, if that request were denied, that
another district judge be allowed to do so pending disposition of the
certiorari petition.  In support of the motion, the Commission's
Director of Enforcement stated that prompt implementation of the
proposed consent decree was essential "to protect the investing public
from repetition of the conduct alleged in the Commission's complaint
and to help ensure that Drexel will comply with the federal securities
laws in the future." Lynch Aff. Paragraph 3, (Apr. 13, 1989).
Similarly, the Assistant United States Attorney handling the criminal
charges against Drexel stated that a delay in entry of the final
judgment against Drexel would produce a concomitant delay in entry of
Drexel's guilty pleas to the criminal charges, which not only would
postpone Drexel's cooperation in the continuing criminal investigation
but also would mean that very soon the five-year federal statute of
limitations would begin to bar prosecutions of certain persons and
offenses involved in the investigation.  Baird Aff. Paragraphs 3, 4
(Mar. 2, 1989).

   On April 19, 1989, the court of appeals denied the joint motion,
stating that its stay of the mandate would "remain in effect until the
Supreme Court disposes of the case." The Commission and Drexel
thereafter jointly asked the court to clarify whether, pending this
Court's action, a judge other than Judge Pollack might be assigned to
enter and administer the final judgment against Drexel.  On April 26,
1989, the court adhered to its prior ruling, stating:  "A decision to
assign the case, or any part of it, to another judge rests with Judge
Pollack or with those responsible for the assignment of cases in the
United States District Court for the Southern District of New York * *
*.  That decision does not rest with us." App. A, infra.  On April 27,
1989, the Commission and Drexel asked Chief Judge Brieant of the
Southern District of New York to assign another judge to enter and
administer the judgments.  On May 4, 1989, the Assignment Committee of
the Southern District denied the request.  App. B, infra.

                               ARGUMENT

   The court of appeals' decision rests on legal principles that are
consistent with 28 U.S.C. 455(a), with this Court's recent decision in
Liljeberg v. Health Services Acquisition Corp., 108 S. Ct. 2194
(1988), and with well-established standards for mandamus relief.  No
other court of appeals has repudiated those principles.  Petitioners'
challenge to the court of appeals' decision is, at bottom, simply a
disagreement with the court's application of those principles to the
particular facts presented here.  That fact-specific complaint does
not call for this Court's review.

   1. Petitioners contend (Pet. 9-14) that the decision of the court
of appeals misconstrues the standards for applying 28 U.S.C. 455(a),
is inconsistent with this Court's decision in Liljeberg, and conflicts
with the decisions of other courts of appeals.  Those contentions are
incorrect.

   a. Petitioners first attempt to find an important legal issue in
the court of appeals' decision by suggesting (Pet. 9) that the
decision "focuses on the perceptions of a super-sophisticated person
who is presumed to know and understand all financial and legal nuances
-- including the hoary doctrine of contractual privity." That
suggestion mischaracterizes the court's analysis.  The court ruled
against petitioners because it concluded that a reasonable person,
knowing all of the objectively ascertainable facts, would not question
Judge Pollack's impartiality.  Thus, the court, in explaining the
standards to be applied, stated that the test under Section 455(a) "is
an objective one which assumes that a reasonable person knows and
understands all the relevant facts." Pet. App. A13.  And in applying
Section 455(a) to the facts here, the court in no way departed from
the fully informed, reasonable person inquiry.  Id. at A17-A20.
Contrary to petitioners' suggestion, at no point did the court adopt a
"purely legalistic perspective." /16/

   The approach taken by the court of appeals is correct.  Congress
intended that Section 455(a) be applied by asking the question put by
the court of appeals -- what would a reasonable, fully informed person
think about the judge's impartiality?  See ibid.; H.R. Rep. No. 1453,
93d Cong., 2d Sess. 5 (1974);  S. Rep. No. 419, 93d Cong., 1st Sess. 5
(1973).  This Court in Liljeberg applied the same standard.  The Court
affirmed the court of appeals' ruling that "a reasonable person,
knowing the relevant facts" (108 S. Ct. at 2197) would question the
judge's impartiality;  and the Court came to the conclusion that a
violation had occurred, and that retroactive relief was required,
based on an assessment of the objectively ascertainable facts on which
a reasonable observer might base an assessment of the risks of
judicial bias (see 108 S. Ct. at 2202, 2205-2206).  Nothing in
Liljeberg remotely suggests that disqualification might be required
because an ill-informed lay person might suspect the worst of a judge.
 /17/

   b. Petitioners also err in arguing (Pet. 10-11) that the court of
appeals' discussion of the possibility of judge-shopping by the
defendants (Pet. App. A18-A20) creates a legal issue warranting this
Court's review.  As an initial matter, not even petitioners suggest
that this issue meets the ordinary requirements for review of a legal
question by this Court -- e.g., an intercircuit conflict, or an actual
or likely impact on other cases.  In any event, the court of appeals
did not rest its decision on allegations of judge-shopping.  /18/ The
court, after relying on the facts of the Palais Royal transaction and
the remoteness of any connection between Drexel and Mrs. Pollack,
carefully pointed out that it was discussing the allegations in order
to fill in the background that the statutorily required objective
observer would take into account in judging recusal (ibid.), and it
expressly stated:  "our decision does not turn on these assertions."
Id. at A20.

   Hence, petitioners are wrong in suggesting (Pet. 11) that the
court's decision stands for the proposition that allegations of
misconduct are to be "weigh(ed)" or "balanced against the appearance
of judicial bias." Rather, as stated by Judge Pierce in explaining why
en banc review was not warranted, the court's discussion of the
misconduct allegations stands only for the proposition that such
allegations are "a significant contextual matter" that "places upon
this court the burden of scrutinizing with exceptional care the
petitioners' efforts to have the district judge disqualified." Pet.
App. A35.  As so understood within the Second Circuit itself, the
court's discussion is wholly unobjectionable and certainly not an
issue for this Court's review.  /19/

   c. Petitioners further argue (Pet. 11-13) that this Court's review
is demanded because the decision below conflicts with the Court's
decision in Liljeberg.  But, as we have already explained, the court
of appeals in no way departed from the legal standards elaborated in
Liljeberg.  Nor does this case involve any question of the trial
judge's subjective awareness of a disqualifying circumstance or,
indeed, of the proper remedy for an adjudicated violation -- the two
issues that were presented in Liljeberg.

   Moreover, the facts involved in Liljeberg are markedly different
from those presented here.  Notably, in Liljeberg, once the trial
judge's subjective state of mind was ruled irrelevant, the case (from
the outside observer's standpoint) involved a judge with a direct
financial interest (as a fiduciary) in the dispute that was the
subject of the litigation, in violation of Section 455(b)(4).  See 108
S. Ct. at 2206.  By contrast, petitioners do not even contend in this
Court that Judge Pollack actually has an interest in the outcome of
the present case or that this Court should find that disqualification
is required except under Section 455(a)'s appearance test.

   The disputed issue in the present case (putting aside the question
of standards for mandamus relief) is whether there was a sufficient
connection between Drexel and Mrs. Pollack through the Palais Royal
transaction so as to create a disqualifying appearance of partiality.
At bottom, petitioners ask this Court to grant their petition simply
to disagree with the court of appeals' and district court's narrow,
fact-dependent answer to that question.  Because there was no privity
or other legal relationship between Drexel and Mrs. Pollack, the
question whether their connection called for recusal presented no
occasion for application of a bright-line rule, but was a question of
degree.  The court of appeals concluded that the connection was too
remote, explaining that Mrs. Pollack had no interest in who Bain
selected to provide it with financing and that Drexel was not
indispensable to the transaction.  Pet. App. A17.  That conclusion,
which was examined with evident care by the full Second Circuit, does
not warrant this Court's review.

   2. Petitioners seek this Court's review of the standards for
mandamus review of a trial judge's denial of a disqualification
motion.  Pet. 15-20.  They argue that the court of appeals erred, and
departed from the standards applied by three other courts of appeals,
in requiring petitioners to demonstrate a clear and undisputable right
to disqualification of the trial judge in order to justify the
granting of their mandamus petition.  This contention is incorrect and
does not merit this Court's review.

   To begin with, it is not clear that the mandamus standard made a
difference to the court of appeals' decision in this case.  Thus,
while the court of appeals stated in its analysis that it must apply
the special mandamus standard (Pet. App. A10-A12), in its conclusion
the court simply stated that recusal was not warranted by the facts of
this case, adding that the conclusion was "reinforced" by the
procedural posture of the case (id. at A20).  /20/ Similarly, because
of the distinctive character of the judgment required under Section
455(a) -- a highly fact-specific judgment about how an objective
observer might view the situation -- it is hardly clear to what extent
the special "clear and indisputable right" standard for mandamus
relief actually makes a difference to the outcome of disqualification
cases in general.  Petitioners' challenge to the proper standard for
such relief, therefore, has an abstract quality that counsels against
this Court's review.

   In any event, the court of appeals' decision correctly follows
well-established mandamus principles and precedent.  Based on the
longstanding congressional policy against piecemeal litigation, it is
well established that mandamus relief is generally not available
unless the petitioner demonstrates a clear and indisputable right to
the relief sought.  As this Court has explained on several occasions,

      it is in the interest of the fair and prompt administration of
      justice to discourage piecemeal litigation.  It has been
      Congress' determination since the Judiciary Act of 1789 that as
      a general rule appellate review should be postponed * * * until
      after final judgment has been rendered by the trial court.  A
      judicial readiness to issue the writ of mandamus in anything
      less than an extraordinary situation would run the real risk of
      defeating the very policies sought to be furthered by that
      judgment of Congress.

Kerr v. United States Dist. Court, 426 U.S. 394, 403 (1976) (citations
omitted).  Accord Allied Chemical Corp. v. Daiflon, Inc., 449 U.S. 33,
35 (1980) (per curiam).  Thus, as the Court reaffirmed most recently
in Mallard v. United States Dist. Court, No. 87-1490 (May 1, 1989),
slip op. 12, mandamus petitioners must "carry 'the burden of showing
that (their) right to issuance of the writ is "clear and
indisputable."'" See also Gulfstream Aerospace Corp. v. Mayacamas
Corp., 108 S. Ct. 1133, 1143 (1988);  Moses H. Cone Memorial Hosp. v.
Mercury Constr. Corp., 460 U.S. at 6;  Allied Chemical Corp. v.
Daiflon, Inc., 449 U.S. at 35;  Will v. Calvert Fire Insurance Co.,
437 U.S. 655, 662 (1978);  Bankers Life & Casualty Co. v. Holland, 346
U.S. 379, 384 (1953);  United States v. Duell, 172 U.S. 576, 582
(1899).

   It is not disputed in this case that interlocutory mandamus relief
may be available in proper circumstances in judicial disqualification
cases.  /21/ And petitioners offer no good reason for departing from
the ordinary mandamus standard for judicial disqualification cases.
All of their arguments (Pet. 17-18) come down to the proposition that
applying the ordinary mandamus standard may result in a trial being
held whose outcome is eventually overturned on appeal.  That, however,
is the necessary consequence of the congressional policy disfavoring
interlocutory appeals and does not distinguish disqualification
motions from numerous other motions routinely made during and before
trial.  Indeed, this Court has noted -- in discussing the possible
harm caused by requiring a party to wait until final judgment before
appealing an adverse ruling on a motion to disqualify counsel -- that
such harm "does not 'diffe(r) in any significant way from the harm
resulting from other interlocutory orders that may be erroneous, such
as orders requiring discovery over a work-product objection or orders
denying motions for recusal of the trial judge.'" Firestone Tire &
Rubber Co. v. Risjord, 449 U.S. 368, 378 (1981) (citation omitted;
emphasis added).  /22/

   Nothing in the legislative history of the 1974 amendments to
Section 455 suggests any intention on the part of Congress to create a
special category of interlocutory appellate review for recusal cases.
To the contrary, permitting such review would undermine the balance
Congress sought to achieve.  Congress was concerned that the public
should perceive the courts as being free of bias, but Congress was
also concerned that spurious recusal motions would have a disruptive
effect on the proper functioning of the judicial system and that use
of the recusal statute for judge-shopping would in itself impair
public confidence.  See H.R. Rep. No. 1453, supra, at 5.  As the court
of appeals appropriately concluded, if a less rigorous standard were
to be applied, "mandamus applications to review a judge's refusal to
recuse would become an effective tactic for harassment and delay."
Pet. App. A11.  The ordinary standard requiring a clear and
indisputable right to relief strikes the proper balance in the present
setting as it does in other settings.

   Finally, petitioners contend (Pet. 18-20) that review is warranted
because three circuits have rejected the "clear and indisputable
right" standard for mandamus review of trial judges' denial of
disqualification motions.  To the contrary, two of the referenced
circuits -- the Fourth and Fifth -- have in fact expressly required
that a party seeking mandamus review of a district court's recusal
decision must establish a "clear and indisputable" right to the
requested relief.  In re Beard, 811 F.2d 818, 826 (4th Cir. 1987);  In
re Placid Oil Co., 802 F.2d 783, 786 (5th Cir. 1986).  And neither In
re Rodgers, 537 F.2d 1196 (4th Cir. 1976), nor In re Faulkner, 856
F.2d 716 (5th Cir. 1988), which petitioners cite as examples of a
"less stringent standard" (Pet. 19) in those circuits, enunciates any
contrary standard for mandamus review.

   In the Seventh Circuit, also asserted by petitioners to be in
conflict with the Second Circuit here, the proper standard for
mandamus review of disqualification denials simply has not been
settled.  To be sure, the Seventh Circuit has held that Section 455(a)
rulings may be reviewed only by mandamus and not on direct appeal
(Durhan v. Neopolitan, No. 88-2108 (Apr. 20, 1989), slip op. 12;
Union Carbide Corp. v. U.S. Cutting Service, Inc., 782 F.2d 710,
712-713 (1986);  United States v. Balistrieri, 779 F.2d 1191,
1204-1205 (1985), cert. denied, 475 U.S. 1095 (1986)), and it has
stated that it will "interpret generously our power to issue the writ
(of mandamus)" in recusal cases (Union Carbide Corp., 782 F.2d at
713).  The Seventh Circuit has, however, never repudiated the "clear
and indisputable right" standard for mandamus review in
disqualification cases.  Indeed, in Union Carbide itself, the court
stated that mandamus would be denied in "routine" cases, and its
statement about the "generous" interpretation of the mandamus power
applies by its terms only to "serious" recusal questions.  782 F.2d at
712, 713.  Moreover, in United States v. Horak, 833 F.2d 1235 (7th
Cir. 1987), which was not itself a judicial recusal case, the court
cited a judicial recusal mandamus case in affirming that mandamus is
an "'extraordinary remedy'" available only to a party that
demonstrates a "'clear and indisputable'" right to it.  Id. at
1248-1249, citing Pepsico, Inc. v. McMillen, 764 F.2d at 458 (7th Cir.
1985) (not itself discussing standard for mandamus relief).  In short,
petitioners are wrong in asserting that there is a conflict over
mandamus standards in recusal cases between the Seventh and Second
Circuits, let alone in implicitly suggesting that there is a conflict
sufficiently concrete and developed to warrant this Court's review.
/23/

                              CONCLUSION

   The petition for a writ of certiorari should be denied.

   Respectfully submitted.

   WILLIAM C. BRYSON

      Acting Solicitor General

   DANIEL L. GOELZER

      General Counsel

   PAUL GONSON

      Solicitor

   JACOB H. STILLMAN

      Associate General Counsel

   ROSALIND C. COHEN

      Assistant General Counsel

   KATHARINE GRESHAM

      Special Counsel Securities and Exchange Commission

   MAY 1989

   /1/ Petitioners and Maultasch are all present or former employees
of the Drexel corporate defendants.  The three other defendants in the
case are Victor Posner, Steven Posner, and Pennsylvania Engineering
Corporation.  The complaint alleged that the defendants had devised
and carried out a pervasive scheme involving insider trading, stock
manipulation, fraud on Drexel's own clients, and numerous other
violations of the federal securities laws.  See Pet. App. A8.

   /2/ It is only Drexel's role in arranging financing that is at
issue here, and Drexel no longer seeks to have Judge Pollack
disqualified.  There is no evidence in the record that petitioners
themselves, as Drexel employees, were in any way involved in the
transaction.

   /3/ Rule 15 of the Rules for the Division of Business Among
District Judges of the Southern District of New York provided in
relevant part:

      If it appears from the information and designation sheet or
      otherwise that a civil action or proceeding is related to a
      previously filed civil case still pending in this court, the
      newer case * * * shall be assigned to the same judge to whom the
      older case * * * was assigned * * *.

         Cases are related if they present common questions of law and
      fact, or arise from the same source or substantially similar
      transactions, happenings, events or relationships, or if for any
      other reason they would entail substantial duplication of labor
      if assigned to different judges.

   /4/ According to an affidavit submitted by the SEC paralegal who
filed the complaint, Lowell Milken's attorney was waiting in the
Clerk's office and attempted "'to prevent (her) from filing the Drexel
court papers.'" Pet. App. A18.  At the same time, according to an
affidavit submitted by an SEC attorney, one of Michael Milken's
attorneys, who was also in the Clerk's office, "'threatened that if
the Commission filed its action as one related to those pending before
Judge Pollack', he would seek Rule 11 sanctions." Ibid.  When the case
was assigned to Judge Pollack, counsel for petitioners and Drexel
immediately proceeded to the Judge's chambers and, arguing that the
case was not related to the private suits, requested that he "refrain
from accepting the case until they had an opportunity to consult with
other counsel." Id. at A18-A19.

   /5/ According to the individual attorneys representing Drexel and
petitioners, they first became aware of Mrs. Pollack's involvement in
the Palais Royal transaction on September 9, 1988.  See Pet. App.
A8-A9, A24.  There were, however, two earlier occasions on which the
fact that Judge Pollack's wife was involved in the Palais Royal
transaction was or might have been made clear to Drexel or to the
attorneys' law firms.

   First, Drexel was represented both in its negotiations with Bain
and in the Boesky litigation by Cahill Gordon & Reindel (albeit by
different attorneys from those representing Drexel in the present
suit).  In late July or early August 1988, Drexel and the law firm
obtained copies of the Palais Royal/Bain contract, which listed "Mrs.
Moselle Pollack" as a selling shareholder.  See Pet. App. A7-A8.
Drexel also conducted a substantial "due diligence" inquiry into
Palais Royal in July 1988.  Ibid.

   Second, in June 1988, Palais Royal shareholders Phyllis and George
Asch, who are Mrs. Pollack's daughter and son-in-law, met with tax
attorneys at Paul, Weiss, Rifkind, Wharton & Garrison to discuss the
tax consequences of the sale of their Palais Royal stock.  Pet. App.
A8.  Other attorneys from the same law firm represent Michael Milken
in the present suit.  Moselle Pollack's relationship to Judge Pollack
and her interest in Palais Royal were evidently known to the tax
attorneys at Paul Weiss.  See id. at A56-A57 (1987 letter from tax
partner regarding Palais Royal:  "cc:  Mrs. Milton Pollack").

   /6/ Some of Judge Pollack's sharp comments at the conference were a
reaction to the conduct of the attorneys in raising the
disqualification issue ex parte and without full investigation.
Drexel's attorney -- whose law firm was representing Drexel in the
Palais Royal transaction and had had a copy of the Bain/Palais Royal
contract since mid-August, see note 5, supra -- acknowledged that he
had not read the contract and still did not know precisely what it
said.  Pet. App. A78-A79;  see also 9/13/88 Tr. 36.  When Drexel's
attorney stated that he had a "general understanding of who the
parties are and what the obligation is" and referred to the limited
basis for the information he had conveyed to Judge Pollack in the ex
parte telephone call on Saturday, September 10 (Pet. App. A78), Judge
Pollack said:  "If you fellows had put that in an affidavit and come
up on a Rule 11, you would have gotten whacked.  You didn't make any
investigation at all to find out what you were talking about before
you approached a judge who was handling a lawsuit?" Id. at A79.  The
Judge also warned counsel that if they were to file a recusal motion
"on the basis of insufficient information and failure to investigate
and concealment of anything," they could anticipate his imposing
appropriate sanctions on them.  Id. at A81.

   /7/ That motion made no reference to the related private actions
pending before Judge Pollack.  It was not until a week later that
petitioners and Drexel moved for Judge Pollack to disqualify himself
from the private actions.

   /8/ On October 10, 1988, prompted by the relationship between the
Paul Weiss tax attorneys and the Palais Royal shareholders (see note
5, supra), Judge Pollack issued a show cause order against Paul Weiss
and the individual attorneys in the firm representing Michael Milken.
Stating that it appeared that the lawyers and firm "may have
participated herein on the pending motions for recusal of the Court
adversely to PALAIS ROYAL and its STOCKHOLDERS, WITH KNOWLEDGE, actual
and imputed, of the confidential business (information)," the order
directed the lawyers and firm to show cause why an investigation and
hearing should not be held to determine (i) "whether (they) are
proceeding herein in breach of fiduciary duties and obligations and
with professionally conflicting interests in the pending matter
seeking disqualification of the Court pursuant to 28 U.S.C. Section
(455) in respect to the interest of Palais Royal and its stockholders"
and (ii) whether, if so, they should be required to withdraw the
recusal motion.  Pet. App. A54-A55.  The next day, Judge Pollack,
without proceeding further, referred the matter to the Chief Judge of
the District Court.  Id. at A71-A72.

   /9/ The court of appeals also rejected the claims that
disqualification was required under 28 U.S.C. 455(b)(1) and (4).  Pet.
App. A21-A22.  Those claims, as to which there was no dissent in the
court of appeals, are not renewed in this Court.

   /10/ In observing that Drexel was not essential to the transaction,
the court of appeals, like the district court (Pet. App. A47-A48),
relied on an affidavit by investment banker Lewis L. Glucksman, former
head of Lehman Brothers Kuhn Loeb, stating that, based on Drexel's own
analysis of the transaction, "a number of major investment banking
firms could handle the placing of Bain's notes on terms comparable to
those offered by Drexel." Pet. App. A17.  See id. at A6.

   /11/ Judge Lumbard rejected the court's reliance on the absence of
a connection between Drexel and Mrs. Pollack, stating that such
reliance "exalt(ed) the form of the transaction over its substance"
and that "it most certainly is the public perception that Mrs. Pollack
is to be paid $30 million thanks to Drexel." Pet. App. A27, A28.  In
the circumstances, Judge Lumbard added, it was "irrelevant" that
"there might have been others who would be interested in working on
the deal." Id. at A28.

   Judge Lumbard also stated his view that Judge Pollack's negative
reaction to the recusal motion, including his show cause order,
confirmed what he believed would be the reasonable person's doubts
about Judge Pollack's ability to "act impartially in these cases."
Pet. App. A23, A26-A27.

   /12/ That opinion also explained that Judge Pollack's issuance of
the show cause order, while troublesome, did not require
disqualification, because the order was directed only at counsel and
not at the parties, and because another judge would hear the matter.
Pet. App. A36-A37.

   /13/ The opinion states:  "the panel has ruled on all the
significant issues pertaining to recusal that have been raised up to
this point.  Its conclusions merely were 'reinforced' by the stringent
requirements for success on a mandamus petition." Pet. App. A40.

   /14/ The dissenters also stated that the recusal question would
remain available for plenary review on direct appeal, because the
panel had decided the recusal question only under special mandamus
standards.  Pet. App. A42.  Moreover, they urged Judge Pollack to
reconsider his decision in light, inter alia, of the details of the
now-completed transaction and of the impending settlement between the
SEC and Drexel.  Id. at A43.

   /15/ The settlement with Maultasch would bar him from the
securities industry and require him to cooperate with the Commission's
investigation.

   /16/ The court of appeals disagreed with Judge Lumbard's statement
that recusal must not be judged "'from a purely legalistic
perspective.'" Pet. App. A14 (quoting id. at A28)).  As the court's
opinion makes perfectly clear, however, its disagreement was not a
rejection of the fully informed, reasonable person standard.  Rather,
the court explained that what it understood Judge Lumbard to mean, and
what it was rejecting, was the suggestion that recusal must be judged
based on what a less-than-fully informed person would surmise about
the judge's impartiality.  "Like all legal issues, judges determine
appearance of impropriety -- not by considering what a straw poll of
the only partly informed man-in-the-street would show -- but by
examining the record facts and the law, and then deciding whether a
reasonable person knowing and understanding all the relevant facts
would recuse the judge." Ibid.

   /17/ Of course, contrary to petitioners' suggestion (Pet. 13), the
Liljeberg Court did not assume that the reasonable objective observer
knew that the trial judge had in fact forgotten about his interest in
the litigation.  It is only the "'objectively ascertainable'" (108 S.
Ct. at 2202) facts that the statutorily required observer must assume
in assessing the situation.  As Liljeberg establishes, the appearance
standard of Section 455(a) cannot depend on subjective facts about a
judge's mental state.  That hardly means, however, that
disqualification can be based on less than complete knowledge of the
objective facts.

   For the same reason that petitioners are wrong in claiming that the
court of appeals' approach conflicts with the approach taken in
Liljeberg, petitioners' assertion that the decision below conflicts
with decisions of other courts of appeals (Pet. 13-14) founders on
their mischaracterization of the inquiry conducted by the court of
appeals.  Neither In re Faulkner, 856 F.2d 716 (5th Cir. 1988), nor
Parker v. Connors Steel Co., 855 F.2d 1510 (11th Cir. 1988), the
decisions relied on by petitioners, suggests that the standard should
be anything other than whether a reasonable, fully informed person
would question a trial judge's impartiality.

   /18/ It is worth noting that the allegations are not, as
petitioners suggest (Pet. i, 6, 11), "unsubstantiated." It is true
that the courts below did not make a finding on the general question
whether petitioners and the Drexel defendants engaged in
"judge-shopping." But, as shown above, the factual basis for the
allegations, as set forth by the court of appeals (Pet. App. A18-A20),
is largely undisputed.

   /19/ The Committee Reports accompanying the 1974 amendments to
Section 455 explain:

      (I)n assessing the reasonableness of a challenge to his
      impartiality, each judge must be alert to avoid the possibility
      that those who would question his impartiality are, in fact,
      seeking to avoid the consequences of his expected adverse
      decision.  Disqualification for lack of impartiality must have a
      reasonable basis.  Nothing in this proposed legislation should
      be read to warrant the transformation of a litigant's fear that
      a judge may decide a question against him into a "reasonable
      fear" that the judge will not be impartial.  Litigants ought not
      to have to face a judge where there is a reasonable question of
      impartiality, but they are not entitled to judges of their own
      choice.

H.R. Rep. No. 1453, 93d Cong., 2d Sess. 5 (1974);  S. Rep. No. 419,
93d Cong., 1st Sess. 5 (1973).

   /20/ As noted above, the opinions on denial of rehearing en banc
took somewhat different views of whether the court of appeals settled
the recusal question as it would be presented without the special
mandamus standard.  Compare Pet. App. A40 with id. at A42.

   /21/ This Court has not directly ruled on that question.  In Ex
parte American Steel Barrel Co., 230 U.S. 35 (1913), the Court denied
a request for mandamus ordering reinstatement of a trial judge without
addressing the question, ruling that "(t)he writ of mandamus will be
granted by this court only when it is clear and indisputable that
there is no other legal remedy" and stating that review was possible
"in due course of law," presumably on appeal from a final judgment.
230 U.S. at 45.  In Mallard, the Court recently reiterated the general
rule that mandamus petitioners "must show that they lack adequate
alternative means to obtain the relief they seek." Slip op. 12.

   Virtually every circuit has found mandamus to be an appropriate
remedy for erroneous denial of recusal motions in proper
circumstances.  See In re United States, 666 F.2d 690 (1st Cir. 1981);
 In re Beard, 811 F.2d 818 (4th Cir. 1987);  In re Placid Oil Co., 802
F.2d 783 (5th Cir. 1986);  Pepsico, Inc. v. McMillen, 764 F.2d 458
(7th Cir. 1985);  Scarrella v. Midwest Federal Savings & Loan, 536
F.2d 1207 (8th Cir.), cert. denied, 429 U.S. 885 (1976);  In re Cement
Antitrust Litig., 673 F.2d 1020 (9th Cir. 1982), aff'd, 459 U.S. 1190
(1983);  Bell v. Chandler, 569 F.2d 556 (10th Cir. 1978).  See also
United States v. 0.21 Acres of Land, 803 F.2d 620 (11th Cir. 1986);
Mitchell v. Sirica, 502 F.2d 375 (D.C. Cir.), cert. denied, 418 U.S.
955 (1974);  13A C. Wright, A. Miller & E. Cooper, Federal Practice
and Procedure Section 3553, at 660-661 (1984).  But see Pittsburgh v.
Simmons, 729 F.2d 953, 954 (3d Cir. 1984) ("A refusal to recuse is
reviewable only after final judgment.");  see also Cleveland v.
Krupansky, 619 F.2d 576, 578 (6th Cir.), cert. denied, 449 U.S. 834
(1980) ("The order entered by a District Judge refusing to disqualify
himself is not reviewable upon appeal until a final judgment has been
entered in the case.").

   This issue is not presented for review here.  (Of course, if
mandamus is not available, then the decision by the court of appeals
to deny mandamus relief was correct.) We do not dispute the
availability of mandamus relief in proper circumstances.  Moreover,
there is no doubt of the courts' jurisdiction to grant relief under 28
U.S.C. 1651;  the conflict goes only to the proper occasions for its
exercise.  See LaBuy v. Howes Leather Co., 352 U.S. 249, 254-255
(1957).

   /22/ Petitioners are incorrect in their suggestion (Pet. 16-17)
that the court of appeals' insistence on the "'extraordinary' nature
of mandamus relief" is inconsistent with the "even more
'extraordinary' procedural circumstances" that prompted this Court in
Liljeberg to vacate the trial court's judgment pursuant to Fed. R.
Civ. P. 60(b)(6).  In fact, similar concerns underlie both the
standard for mandamus relief and the requirements for relief under
Rule 60(b)(6).  Both Congress and this Court, in adopting Rule 60(b),
made the determination that, under certain circumstances, the policy
in favor of the finality of judgments should give way to other
compelling concerns.  With respect to Rule 60(b)(6), this Court
requires a showing of "extraordinary circumstances" before relief may
be granted.  Liljeberg, 108 S. Ct. at 2204, citing Klapprott v. United
States, 335 U.S. 601, 614-615 (1949), and Ackermann v. United States,
340 U.S. 193, 200 (1950).  See also Liljeberg, 108 S. Ct. at 2209
(Rehnquist, J. dissenting) (requirement that relief will be granted
under Rule 60(b)(6) only upon a showing of extraordinary circumstances
"is essential if the finality of judgments is to be preserved").
Similarly, this Court's insistence that a writ of mandamus is an
"extraordinary remedy" available only upon a showing of "clear and
indisputable" entitlement to such relief is grounded in the policy
that appellate review should be postponed until after the trial court
renders its final judgment.  See Kerr v. United States Dist. Court,
426 U.S. at 403;  Allied Chemical Corp. v. Daiflon, Inc., 449 U.S. at
35.

   /23/ Neither the Seventh Circuit nor any other circuit has
suggested, as petitioners seem to urge (Pet. 15-18), that the standard
for review on mandamus in recusal cases should be the same as the
standard on appeal.  Moreover, petitioners' suggestion (id. at 15-16)
that "abuse of discretion" is not the proper standard for appellate
review of judicial disqualification decisions is squarely contradicted
by the legislative history of the 1974 amendments to Section 455:

      (T)he proposed legislation * * * is not designed to alter the
      standard of appellate review on disqualification issues.  The
      issue of disqualification is a sensitive question of assessing
      all the facts and circumstances in order to determine whether
      the failure to disqualify was an abuse of sound judicial
      discretion.

H.R. Rep. No. 1453, supra, at 5;  S. Rep. No. 419, supra, at 5.
Petitioners' suggestion has also been rejected by every court of
appeals that has addressed the issue.  See, e.g., United States v.
Wilensky, 757 F.2d 594, 599-600 (3d Cir. 1985);  Gilbert v. Little
Rock, 722 F.2d 1390, 1399 (8th Cir. 1983), cert. denied, 466 U.S. 972
(1984);  Phillips v. Joint Legislative Committee, 637 F.2d 1014, 1021
(5th Cir. 1981), cert. denied, 456 U.S. 960, 456 U.S. 971 (1982);
Blizard v. Frechette, 601 F.2d 1217, 1221 (1st Cir. 1979);  S.J.
Groves & Sons Co. v. International Brotherhood of Teamsters, Local
627, 581 F.2d 1241, 1248 (7th Cir. 1978).

   APPENDIX