Source: http://ny.findacase.com/research/wfrmDocViewer.aspx/xq/fac.19881115_0040146.C02.htm/qx
Timestamp: 2017-04-30 11:03:24
Document Index: 508491912

Matched Legal Cases: ['§ 455', '§ 1407', '§ 455', '§ 455', '§ 455', '§ 455', '§ 1651', '§ 455', '§ 455']

| In re Drexel Burnham Lambert Inc.
IN RE DREXEL BURNHAM LAMBERT INCORPORATED, DREXEL BURNHAM LAMBERT GROUP INCORPORATED, MICHAEL R. MILKEN, LOWELL J. MILKEN, CARY J. MAULTASCH, AND PAMELA R. MONZERT, PETITIONERS, IN RE IVAN F. BOESKY SECURITIES LITIGATION. SECURITIES AND EXCHANGE COMMISSION, PLAINTIFF,v.DREXEL BURNHAM LAMBERT INCORPORATED, DREXEL BURNHAM LAMBERT GROUP INCORPORATED, MICHAEL R. MILKEN, LOWELL J. MILKEN, CARY J. MAULTASCH, AND PAMELA MONZERT, DEFENDANTS
A petition for a writ of mandamus has been filed by Drexel Burnham Lambert Incorporated, et al. seeking the recusal under 28 U.S.C. § 455 of Senior United States District Court Judge Milton Pollack on the grounds that he is disqualified from presiding over pending civil fraud actions, which name petitioners as defendants. The underlying actions against petitioners were instituted by the Securities and Exchange Commission on September 7, 1988, and earlier by individual and class action plaintiffs. Plaintiffs filed opposition papers to the issuance of the writ. The petition for a writ of mandamus is denied. Judge Lumbard dissents and votes to grant the writ in a separate opinion.
We trace the facts and circumstances chronologically. Nearly two years ago, in December 1986, 11 shareholders' class action suits alleging injury as a result of insider trading were brought against Ivan Boesky and others, including Drexel Burnham agents. These actions were filed in the Southern District of New York and in the Northern and Central Districts of California. The suits brought in the Southern District of New York were assigned to Judge Pollack. In March of 1987 an additional civil fraud action, in which Drexel was also a named defendant, styled Arden Way Associates, et al. v. Ivan F. Boesky, et al., (Arden Way), was begun in the Southern District. The two Drexel corporations were represented in these suits by Cahill Gordon & Reindel (Cahill Gordon) of New York City. As a result of the multiple claims asserted in these related class and individual actions, the Judicial Panel on Multidistrict Litigation, on July 24, 1987, brought together all the pending actions, including Arden Way, in the Southern District of New York for coordinated or consolidated pretrial proceedings pursuant to 28 U.S.C. § 1407 (1982). This request to transfer was addressed to Southern District Chief Judge Brieant with a suggestion that all of the class and non-class actions be assigned to Judge Pollack. An order consenting to the transfer was filed on August 5, 1987. The entire group of cases are referred to as "In re Ivan F. Boesky Securities Litigation" (Boesky Litigation) and charged Drexel, along with other defendants, with acting in concert with Boesky and his affiliated companies to violate the securities and civil anti-racketeering laws of the United States.
The present proceeding was precipitated on September 7, 1988 when the Securities and Exchange Commission, as plaintiff in the underlying civil enforcement action, filed an 184-page complaint against Drexel and others in the Southern District of New York in an action styled Securities & Exchange Commission v. Drexel Burnham Lambert Incorporated, et al., (Drexel Litigation). The complaint, which has nothing to do with Palais Royal, alleges that Drexel and others had devised and carried out fraudulent insider trading schemes, manipulated stocks, and committed other violations of the federal securities laws. Counsel for Drexel maintains that two days later--on September 9--they first became aware that Judge Pollack's wife had a $30 million interest in the Palais Royal sale. After having been notified of the potential conflict by means of an ex parte telephone call placed by Drexel's attorneys on Saturday, September 10, the judge set a hearing in his chambers for September 13, where the situation was explored by the court and by counsel for the SEC and Drexel. The topic of recusal was broached by Drexel's counsel and was rejected by Judge Pollack.
Petitioners urge that the district court judge be recused in this proceeding on three separate bases: (1) under 28 U.S.C. § 455(a) because his "impartiality might reasonably be questioned" by reason of his wife's substantial interest in the Palais Royal transaction; (2) because his personal attacks on defense counsel's integrity purportedly reflect bias and accentuate the alleged appearance of existing impartiality; and (3) under § 455(b)(4) because his wife has a "financial" or "other interest that could be substantially effected" by the outcome of the proceedings.
The SEC, plaintiff in the Drexel Litigation, and the class and individual action plaintiffs in the Boesky Litigation oppose the application for the writ. They argue, in substance, that Drexel's role is too remote from Mrs. Pollack's sale of stock to bring into reasonable question the judge's impartiality under § 455(a); that there is no basis to conclude that the outcome of the litigation pending in the district court could affect Mrs. Pollack's interest in the Palais Royal transaction; and that the district judge's comments to counsel were an appropriate response in the circumstances. The Arden Way plaintiffs also argue that Drexel's untimely use of § 455 was a part of its litigation strategy to manipulate the judicial process. Before we consider the statute, its legislative history, and its construction by this and other courts, we discuss briefly the scope of our review.
An appellate court's power to issue a writ of mandamus upon a claim of wrongful refusal to recuse is inextricably related to the scope of review over the district court's determination. Hence, we discuss these subjects together. Although a court of appeals has authority to "issue all writs . . . agreeable to the usages and principles of law," 28 U.S.C. § 1651(a)(1982), "[t]he remedy of mandamus is a drastic one, to be invoked only in extraordinary situations." Kerr v. United States District Court, 426 U.S. 394, 402, 96 S. Ct. 2119, 48 L. Ed. 2d 725 (1976); see also Allied Chem. Corp. v. Daiflon, Inc., 449 U.S. 33, 34, 101 S. Ct. 188, 66 L. Ed. 2d 193 (1980)(per curiam). Further, it is well-settled 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." See Moses H. Cohen Memorial Hosp. v. Mercury Constr. Co., 460 U.S. 1, 18, 74 L. Ed. 2d 765, 103 S. Ct. 927 (1983) (emphasis added); Allied Chem. Corp., 449 U.S. at 35; In re International Business Machines Corp., 618 F.2d 923, 927 (2d Cir. 1980). Were this not so, mandamus applications to review a judge's refusal to recuse would become an effective tactic for harassment and delay.
Discretion is confided in the district judge in the first instance to determine whether to disqualify himself, see Apple v. Jewish Hospital & Medical Center, 829 F.2d 326, 333 (2d Cir. 1987). The reasons for this are plain. The judge presiding over a case is in the best position to appreciate the implications of those matters alleged in a recusal motion. In deciding whether to recuse himself, the trial judge must carefully weigh the policy of promoting public confidence in the judiciary against the possibility that those questioning his impartiality might be seeking to avoid the adverse consequences of his presiding over their case. See In re United States, 666 F.2d 690, 695 (1st Cir. 1981). Litigants are entitled to an unbiased judge; not to a judge of their choosing.
A judge is as much obliged not to recuse himself when it is not called for as he is obliged to when it is. See In re Union Leader Corp., 292 F.2d 381, 391 (1st Cir.), cert. denied, 368 U.S. 927, 7 L. Ed. 2d 190, 82 S. Ct. 361 (1961). Thus, upon reviewing this petition we must determine whether Judge Pollack can "indisputably" be said to have abused his discretion in denying the motion to recuse himself. In re United States, 666 F.2d at 697. As an appellate court, we do not ask ourselves whether we would have ruled in the same manner as did the trial court, but rather whether the district judge's decision is a rational one finding support in the record. See In re United States, 666 F.2d at 695. Further, in adopting the 1974 amendments to § 455, Congress noted that the revised statute was "not designed to alter the standard of appellate review on disqualification issues." H.R. Rep. No. 1453, 93rd Cong., 2d Sess., reprinted in 1974 U.S. Code Cong. & Ad. News 6351, 6355 (House Report).
The pertinent provisions of 28 U.S.C. § 455 provide as follows:
(a) Any justice, judge, or magistrate of the United States shall disqualify himself in any proceeding in which his ...