Appendix — Arizona v. United States District Court for the District of Arizona

APPENDIX A A-l

FILED

OCT 1 1982

PHILLIP B.

WINBERRY

CLERK US

COURT OF

APPEALS

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

In re CEMENT ANTITRUST LITIGATION

(MDL No. 296)

STATE OF ARIZONA, ef ai.,

Petitioners,

vs. No. 81-7465

Unitep States District COURT POR THE

District OF ARIZONA,

Respondent, b

Kaiser Cement & Gypsum

CORPORATION, ef al., OPINION

Real Parties in Interest.

4

On Petition for Writ of Mandamus

United States District Court for the District of Arizona

Honorable Cari A. Muecke, District Judge, Presiding

Argued and Submitted: January 4, 1982

BerorE: FERGUSON, NELSON AND REINHARDT, Circuit Judges

REINHARDT, Circuit Judge

Plaintiffs seek a writ of mandamus directing the district

court to vacate its opinion and order in which Judge Muecke

granted the defendants’ motion to recuse himself pursuant to 28

U.S.C. § 455(b)(4) (1976). In re Cement and Concrete

A-2 Appendix A

Antitrust Litigation, 515 F.Supp. 1076 (D. Ariz. 1981). Peti-

tioners request that we issue the writ pursuant to our super-

visory authority under the All Writs Act, 28 U.S.C. § 1651

(1976). We have previously dismissed plaintiffs’ appeal from

Judge Muecke’s order for lack of jurisdiction under 28 U.S.C.

§ 1291 (1976) and have denied plaintiffs’ petition for per-

mission to appeal pursuant to 28 U.S.C. § 1292(b) (1976). &

re Cement Antitrust Litigation, 673 F.2d 1020 (9th Cir. 1982).

In our opinion we concluded, however, that the petition for a

writ of mandamus would be reviewed on the merits. /d. at

1025. We now do so under our supervisory authority to insure

the proper and orde:'y administration of the federal judicial

system. See Schlangenhauf v. Holder, 379 U.S. 104 (1964); La

Buy v. Howes Leather Co., 352 U.S. 249 (1957).

L.

HISTORY OF PROCEEDINGS

Beginning in 1976, twenty-one separate actions were filed

in federal district courts in Arizona and California alleging a

conspiracy among various cement and concrete producers to fix

the price of cement and concrete in violation of the antitrust

laws. On September 12, 1977, the Judicial Panel on Multi-

District Litigation transferred those actions to the Central

District of Arizona and assigned the cases to the Honorable C.

A. Muecke for coordinated or consolidated pretrial procedures.

In re Cement and Concrete Antitrust Litigation, 437 F.Supp.

750 (J.P.M.D.L. 1977). The Panel on Multi-District Litigation

cited Judge Muecke’s familiarity with the litigation as one of the

reasons for transferring the case to the District of Arizona. Id.

at 753.

Early in 1979, Judge Muecke certified a nationwide class of

public and private cement producers and two siatewide govern-

mental entity classes. The parties lodged with the court a

master class list that contained the names of 210,235 putative

class members who could be identified with reasonable effort.

Pyne ee elapse rene dy: x gprthenn ens Aer in dha

exercise supervisory authority over the district courts a5 “

damus.” See, ¢.g., Bauman v. United States District Court, $5 F.2d 650 (9th

te ala Moore, Moore's Federal Practice 4110.28 at 312 (24 ed.

1982).

Appendix A A-3

Judge Muecke actively presided over the pretrial proceedings

through January of 1981, during which time he eatered over 75

pretrial orders, ruled on countless motions, supervised the

substantial completion of the discovery process, approved the

master class list, and gave notice to class members that they

could opt out of the class by written request prior to December

31, 1980.

On January 12, 1981, several of the defendants advised

Judge Muecke by letter that a comparison of his 1980 financial

disclosure report with the names on the master class list

revealed that Judge Muecke’s wife owned stock in seven of the

210,235 class members. The defendants asserted that the judge

was under a per se obligation to recuse himself pursuant to 28

U.S.C. § 455(b)(4) and Canon 3(C)(1)(c) of the Code of

Judicial Conduct. Judge Muecke ordered the parties to brief

the question and heard oral argument on two occasions.

Judge Muecke also requested an advisory opinion from the

Advisory Committee on Codes of Conduct of the Judicial

Conference of the United States. The Committee responded by

suggesting that Judge Muecke should disqualify himself be-

cause (1) his wife had a financial interest in the subject matter

of the proceeding within the meaning of section 455, (2) his

wife's interests could be substantially affected by the outcome of

the proceeding within the meaning of Canon 3 of the Code of

Judicial Conduct, and (3) his continued handling of the case

could create the appearance of impropriety in violation of

Canon 2 of the Code of Judicial Conduct. 515 F.Supp. at 1083-

84. See also Advisory Comm. on Judicial Activities, Dis-

qualification in Class Actions, Advisory Op. 68 (1981).

Judge Muecke recused himself in an opinion and order,

515 F.Supp. at 1076. The judge did not reach the issue of

whether he had a financial interest in the “subject matter” of

the proceeding, but rather, based his order of recusal on his

conclusion that his wife's stock constituted a financial interest in

a “party” to the proceeding within the meaning of 28 U.S.C.

§ 455(b)(4) (1976). In his opinion and order of recusal,

Judge Muecke made it clear that the sole reason he disqualified

himself was because he believed that section 455 imposed a per

se rule of recusal in such circumstances:

A-4 Aj, endix A

I must admit that my first reaction to [ respondents’ |

position recalled the words of Mr. Bumble in Dicken’s

Oliver Twist: “If the law supposes that... the law is an

ass—an idiot.”

... 1 have concluded [,however,] that I must recuse

myself, not because I feel a sense of conflict, and not

because I feel that to continue would create the appearance

of impropriety. I have concluded that I must recuse myself

for the sole reason that the law, as written, says I must. _

515 F.Supp. at 1078 ( footnote omitted). Judge Muecke further

indicated that he was willing and able to continue handling the

multidistrict proceeding and that he would have done so were it

not for section 455. Jd. at 1081. Judge Muecke certified his

order of recusal for an interlocutory appeal pursuant to 28

U.S.C. § 1292(b) (1976).

Plaintiffs have sought review of Judge Muecke’s recusal

order through three avenues: (1) an appeal pursuant to 28

U.S.C. § 1291; (2) a petition for permission to appeal pursuant

to 28 U.S.C. § 1292(b); and (3) a petition for a writ of

mandamus requesting this court to exercise its supervisory

authority over the district courts pursuant to 28 U.S.C. § 1651.

Although we dismissed the appeal under section 1291 and

denied permission to appeal under section 1292(b), we noted

that where a party claims exceptional circumstances, such as

major disruption of the litigation resulting from an order of

recusal, the party may seek a writ of mandamus in the court of

appeals. In deciding to review the petition on the merits, we

said, “[i]t is for just such an exceptional circumstance that the

writ was designed.” 673 F.2d at 1025.

I.

BAUMAN REVISITED

A. Introduction

In reviewing petitioners’ request for a writ of mandamus,

we are guided by the principles collected and distilled in

Bauman v. United States District Court, 557 F.2d 650 ( 9th Cir.

Appendix A A-5

1977). In Bauman, we expressed our concern over the

unprincipled use of the writ as a means of wresting control of

litigation from the district courts merely because appellate

judges disagree with interlocutory rulings of the district courts

or are sympathetic to arguments made in support of petitions.

Such unrestrained use of mandamus would undermine the

mutual respect that is an indispensable element of the relation-

ship between federal trial and appellate courts and would

“subvert the policies underlying the finality rule, 28 U.S.C.

§ 1291, or the carefully limited congressional scheme governing

interlocutory appeals ....” Jd. at 653.

In order to confine the use of mandamus to its proper

office, we enunciated five general guidelines in Bauman to assist

in the determination of whether mandamus is the appropriate

remedy in a particular case. The guidelines are: (1) whether

the party seeking the writ has no other adequate means, such as

direct appeal, to attain the relief he desires; (2) whether the

petitioner will be damaged or prejudiced in a way that is not

correctable on appeal; (3) whether the district court's order is

clearly erroneous as a matter of law; (4) whether the district

court’s order is an oft repeated error or manifests persistent

disregard for the federal rules; and (5) whether the district

court's order raises new and important problems or issues of

law of first impression. /d. at 654-55. Related considerations

include: whether the injury alleged by petitioners, although not

correctable on appeal, is the kind that justifies invocation of our

mandamus authority; whether the petition presents an issue of

law which may repeatedly evade appellate review; and whether

there are other compelling factors relating to the efficient and

orderly administration of the district courts.

As we noted in Bauman, the guidelines are cumulative and

may not all point to the same conclusion. Jd. at 655. Moreover,

all of the guidelines are unlikely to be met in any one case.

Some are more relevant to particular categories of cases than

others. Certain concepts relating to the traditional use of

mandamus are not necessarily applicable in supervisory man-

damus cases, or, at the least, are applied differently. The

guidelines are not susceptible of mechanical application; they

are not meant to supplant reasoned and independent analysis

A-6 Appendix A

by appellate courts. In sum, the guidelines serve only as a

useful starting point, an analytic framework for determinations

regarding the propriety of mandamus relief.

B. The Availability and Adequacy of Other Relief and the

Nature of the Harm Required for Mandamus Relief.

The first two criteria articulated in Bauman are designed to

insure that mandamus, rather than some other form of relief, is

the appropriate remedy. The petitioners must demonstrate that

they have no other adequate means of obtaining the relief

desired and that they will be damaged in a way not correctable

on appeal from final judgment. There is another consideration

as well: the injury must be the kind that warrants the in-

vocation of the extraordinary remedy of mandamus.

The relief sought by petitioners is a writ directing Judge

Muecke to vacate his order of recusal so that the able judge,

who has an extensive working knowledge of this complex

litigation, may continue to preside over the consolidated pretrial

proceedings. Petitioners thus hope to avoid the inevitable costs

and delay that would result from the assignment of a new

judge, and seek to prevent the loss of Judge Muecke’s unique

working knowledge of this case. We have already denied

petitioners’ request to review the order of recusal under 28

U.S.C. § 1291 (direct appeal of collateral order), and 28 U.S.C.

§ 1292(b) (discretionary interlocutory appeal). 673 F.2d

1020. While we may be free to reconsider that decision, we

decline to do so.

We do not think it would be proper to reconsider here a

decision we so recently announced unless new circumstances

had intervened or our earlier decision was indisputably or

patently erroneous. Otherwise, we would simply be substituting

the views of the individual members of this panel for the

judgment of the majority of our colleagues on the panel that

heard the matter previously. Therefore, while we are impressed

by the well reasoned and persuasive dissent of Judge Booche-

ver, and believe that the views he expressed have substantial

merit, we conclude that petitioners’ avenues of interlocutory

appeal from the recusal order must remain closed.

Appendix A A-7

We next consider whether a post-judgment appeal would

provide an effective remedy and thus render the exercise of our

mandamus authority inappropriate. Although it has been

stated that “disqualification questions are fully reviewable on

appeal after final judgment,” /n re Corrugated Container Anti-

Trust Litigation, 614 F.2d 958, 960-61 (Sth Cir.), cert. denied.

449 U.S. 888 ( 1980), a review of the authorities indicates that a

more accurate statement of the law is that an order denying a

motion for disqualification is reviewable on appeal after final

judgment. See, e.g, Berger v. United States, 255 US. 22

(1921); Potashnick v. Port City Construction Co., 609 F.2d

1101 (Sth Cir. 1980) cert. denied, 102 S. Ct. 1256 (1982); SCA

Services v. Morgan, 557 F.2d 110 (7th Cir. 1977); Los Angeles

Trust Deed & Mortgage Exchange v. SEC, 285 F.2d 162 (9th

Cir. 1960), cert. denied, 366 U.S. 919 (1961); 9 J. Moore,

Moore's Federal Practice 4 110.13[{10] at 187 n.1 (2d ed.

1982); C. Wright, A. Miller & E. Cooper, Federal Practice &

Procedure, § 3553 at 384 (1975); Comment, Disqualification

For Interest of Lower Federal Judges, 71 Mich. L. Rev. 533, 547

(1973).

It is, of course, possible that petitioners could seek to

challenge the recusal order after final judgment has been

entered, but no such review could prevent the damage that

petitioners allege they will suffer or afford effective relief

therefrom. Despite the fact that the petitioners may suffer

tremendous disruption, unreasonable delay, additional cost,

and the loss of Judge Muecke’s valuable experience, a post-

judgment reversal on appeal could not provide a remedy for

those injuries. Moreover, whatever collateral injuries petition-

ers suffer will have been incurred even if they prevail fully at

trial and thus have no right to appeal from the final judgment.

Equally important, when a trial judge enters an order

granting a motion for disqualification the error, if any, cannot

serve as a basis for reversal on appeal. Jn re Cement Antitrust

Litigation, 673 F.2d at 1025. A party cannot ordinarily

predicate a claim of prejudicial error on the fact that he was

required to try his cause before one judge who was duly

qualified to preside rather than another. Prejudicial error does

not occur simply because a particular judge fails to handle a

A-8 Appendix A

case or some other judge does; the mere assignment of a matter

to a judge does not affect the outcome of the case. It is the

conduct of the judge in conducting the proceeding that gives

rise to error which is prejudicial and requires reversal, not the

assignment of the case to the judge.? Thus, despite the fact that

an erroneous order of recusal may cause collateral injury to the

party, the error is harmless for purposes of Federal Rule of

Civil Procedure 61; therefore it does not constitute prejudicial

or reversible error. See Hampton v. City of Chicago, 643 F.2d

478, 480 n.7 (7th Cir. 1981); Kelly v. Metropolitan Board of

Education, 479 F.2d 810, 811 (6th Cir. 1973) (McCree, J.,

concurring ).

We conclude that petitioners have no effective right of

appeal and will be damaged in a way not correctable on appeal

from final judgment. However, we must also consider the

question whether petitioners have alleged the type of injury

necessary to justify invocation of the mandamus remedy. In

another context we stated that “[w]e have consistently rejected

petitioners’ position that the costs of trying massive civil actions

render review after final judgment inadequate.” Jn re Sugar

Antitrust Litigation, 559 F.2d 481, 484 (%h Cir. 1977)

(denying mandamus relief from an order certifying class). .

There are, of course, limits to the hardships which litigants

will be forced to bear as a result of erroneous interlocutory

orders, even in traditional mandamus cases. In Varsic v. United

States District Court, 607 F.2d 245 (9th Cir. 1979), we granted

a petition for a writ of mandamus where the plaintiff was

proceeding in forma pauperis and the district court erroneously

transferred his case from the Central District of California to

the Southern District of New York. Despite the fact that the

transfer order was fully reviewable on appeal after final

judgment, we found that plaintiff would suffer “peculiar hard-

ship” and stated that

assuming that Varsic loses in the Southern District of New

York, but successfully appeals the transfer order in the

Second Circuit, he will again be severely prejudiced. The

2 We do not intend to foreclose the issue of whether prejudicial error

could arise where an invidious purpose underlies the assignment of a case to a

particular judge. However, under the assignment system used in most, if not

all, of the district courts in this circuit, such an issue is unlikely ever to arise.

Appendix A A-9

impact of the inevitable delay which would result from a

second trial in the Central District of California following

the appeal in the Second Circuit, on a person in his

situation, would not be correctab!e on appeal.

Id. at 252 (emphasis added).

The principal damage that petitioners contend they will

incur as a result of the recusal order is additional cost and

unreasonable delay. Although the disruption of the proceed-

ings may not prejudice petitioners to the same degree as the

change of venue would have prejudiced Varsic, it appears that

the recusal order will significantly impair the progress of this

litigation. Nevertheless, we believe that there is a substantial

question as to whether petitioners have demonstrated the kind

of injury that would be necessary to justify the invocation of our

mandamus authority in a traditional mandamus case.

Here, however, we are reviewing the petition pursuant to

our supervisory mandamus authority. We are concerned with

far more than the injury to these particular petitioners; we are

concerned, inter alia, with the effect of the challenged order on

the operation of the courts. Petitioners’ contend that the recusal

order will have a major disruptive effect on the administration

of justice in the district of Arizona or any other district to which

the litigation may be transferred. Moreover, they contend that

the resolution of the legal question will, for reasons we consider

below, add importantly to the efficient operation and adminis-

tration of the district courts throughout this circuit. Under these

circumstances, the degree of injury to petitioners is a less critical

factor. We believe that in supervisory mandamus cases, as long

3 Our previous decision in Jn re Cement Antitrust Litigation, 673 F.2d

1020 (9th Cir. 1982), does not foreclose petuoners’ contention that the

demonstrate that the order would substantially delay the proceed-

ings, we stated that the contention would be reviewed in our consideration

the merits for the petition for mandamus:

for

[1)}f dissatisfied with the district judge's decision and confident that the

litigation will be greatly disrupted, a party may seek a writ of mandamus

from the court of appeals. It is for just such an exceptional circumstance

that the writ was designed. Plaintiffs have done so here and that petition

will be reviewed on the merits.

Id. at 1025 (citations omitted ).

A-10 Appendix A

as petitioners have demonstrated that they will suffer an actual

injury not correctable on appeal, they have satisfied both the

injury requirement and the second criterion in the Bauman

analysis.

C. Oft Repeated Errors, New and Important Issues of Law,

and The Need to Supervise the Administration of the

Federal Judicial System

The fourth and fifth factors noted in Bauman are whether

the district court’s order is an oft repeated error, or manifests a

persistent disregard of the federal rules, and whether the district

court’s order raises new and important problems or issues of

law of first impression. Here, the fourth factor is absent and the

fifth factor is indisputably present. It is unlikely that both of

these factors would be present where a petition for mandamus

presents a single issue, since one of the factors deals with

repeated error while the other deals with questions of first

impression.

While the two factors deal with contrasting situations, each

for its own reason may implicate the duty of appellate courts to

exercise supervisory control of the district courts in order to

insure proper judicial administration. See generally Schlangen-

hauf v. Holder, 379 U.S. 104 (1964); LaBuy v. Howes Leather

Co., 352 U.S. 249, 259-60 (1957) (“Supervisory control of

District Courts by Courts of Appeals is necessary to proper

judicial administration in the federal system.”); Goldblum v.

National Broadcasting Corp., 584 F.2d 904, 906 n.2 (9th Cir.

1978) (mandamus appropriate for the exercise of supervisory

control of district courts necessary to proper judicial adminis-

tration); 9 J. Moore, Moore's Federal Practice 4 110.28 at 312

(2d od. 1982).

In the present case, it is the fifth Bawman factor that

implicates our supervisory mandamus authority: we are faced

with the need to resolve a significant question of first impression

where the failure to do so may adversely affect the efficient

of the district courts. See Schlangenhauf v. Holder,

379 U.S. 104, 111 (1969) (“[I}ssue of first impression that

Appendix A A-ll

called for construction of Rule 35 in a new context. .. . Court of

Appeals should have also, under these special circumstances,

determined the “good cause” issue, so as... to settle new and

important problems.”); National Right to Work Legal Defense

& Education Foundation, Inc. v. Richey, 510 F.2d 1239, 1243

(D.C. Cir.), cert. denied, 422 US. 1008 (1975) (review by

mandamus appropriate “where the decision will serve to clarify

a question that is likely to confront a number of lower court

judges in a number of suits before appellate review is possi-

ble.”); 9 J. Moore, Moore’s Federal Practice J 110.28 at 312-13

(2d ed. 1982) (“The courts of appeals possess the . . . power to

supervise the administration of justice by their district courts . . .

and they may review immediately questions of unusual impor-

tance the determination of which are necessary to orderly, even

and efficient administration.” ).

Exercise of our supervisory mandamus authority is particu-

larly appropriate when an important question of law would

repeatedly evade review because of the collateral nature of the

issue.* See Colonial Times Inc. v. Gasch, 509 F.2d 517, 524-26

(D.C. Cir. 1975). In Colonial Times, the court held that

mandamus could issue to correct an error in the discovery order

before it. The court noted that the type of issues raised in the

A-12 Appendix A

Similarly, in this case, an important question of first

impression will evade review unless it is considered under our

supervisory mandamus authority. Moreover, that question may

continue to evade review in other cases as well. In cases in

which district judges recuse themselves, the orders of recusal

will be effectively unreviewable on appeal notwithstanding the

injuries to the parties and the possible disruption of the orderly

administration of the courts. While it is true that an order

denying a motion for recusal might at some later time become

the subject of an appeal, it would be contrary to the interest of

orderly judicial admin‘stration to delay resolution of the impor-

tant question before us in order to await the occurrence of such

a possibility.

We believe that the petition in this case presents a new and

far reaching question of major importance to the district courts,

that the question is likely to continue to evade review and that

its resolution would add importantly to the efficient and orderly

administration of the district courts. The exercise of our

supervisory mandamus authority is appropriate under such

circumstances.

D. The “Clearly Erroneous as a Matter of Law” Standard

Whether Judge Muecke’s recusal order is clearly erroneous

as a matter of law involves a pure question of statutory

construction. The meaning of the “clearly erroneous as a

matter of law” standard of review is elusive at besi, but

especially so when a question of law of first impression is

involved. If a district court were to adopt an interpretation of a

Statute that squarely contradicted the literal terms and clear

intent of the statute, it could readily be said that the inter-

pretation was clearly erroneous. But when a district court is

faced with two plausible interpretations of a statute that has not

been construed by an appellate court, it would be difficult in

one sense to characterize either interpretation as “clearly er-

roneous”. Viewed differently, however, if an appellate court

were to review the interpretation adopted by the district court

and reject it, that particular interpretation could at that point be

said to be “clearly” erroneous. See United States v. Mehrma-

nesh, 652 F.2d 766, 773 ( 9th Cir. 1980) (“If we decide that the

Appendix A A-13

district court was wrong in its reading of [the statute], appel-

lant’s right to relief will be “clear and indisputable.” ) ( Fletcher,

J. dissenting ).5

We believe that the test set forth by the Supreme Court for

determining when a finding of fact is “clearly erroneous” is

instructive where a question of law is involved as well. In

United States vy. United States Gypsum Co., 333 US. 364

(1948), the Court stated that under Rule 52(a) of the Federal

Rules of Civil Procedure:

[a] finding [of fact] is “clearly erroneous” when

although there is evidence to support [the district court’s

finding}, the reviewing court on the entire evidence is left

with the definite and firm conviction that a mistake has

been committed.

Id. at 395. The “firm conviction” test provides a helpful

approach to our efforts to determine when a district court's

interpretation of a statute falls under the third Bauman crite-

rion—“clearly erroneous as a matter of law as that term is used

in mandamus analysis,” Bauman, 557 F.2d at 650. Two of our

previous decisions suggest that we will characterize a ruling of a

district court on a question of law as “clearly erroneous” only

5 Ordinarily mandamus will not issue unless the petitioner can demon-

strate that his right to such relief is “clear and indisputable.” Will v. Calvert

437 U.S. 655, 662 (1978) (plurality opinion). See also

_ United States District Court, 426 US. 394 (1976); Banker's Life &

v. Holland, 346 US. 379 (1953). In H . City of

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here, the trial judge finds no reason to recuse himself other than one that

results from his interpretation of the statute, and the alleged error is thus

solely one of law, petitioner may be able tw establish a “clear and in-

disputable” nght to relief.

A-14 Appendix A

when, after a full review of the authorities, we are firmly

convinced that the district court’s interpretation was incorrect.®

In Mehrmanesh, we were unable to determine the meaning

of the statute simply from an examination of its language.

After considering the limited authorities available, we were of

the view that the “question decided below was a close one.” /d.

682 F.2d at 770-71. We were not firmly convinced, either way,

® The Second Circuit has recently employed a “firm conviction” standard

to determine if a trial court's interpretation of a statute was correct. In Jn re

International Business Machines Corp., No. $2-3037, slip op. at 4371 (2d Cir.

Aug. 13, 1982), the Second Circuit granted a petition for a writ of mandamus

ismi pending his determination of whether the Tunney Act, 15 U.S.C.

§ 16(b)-(h) (1976), was applicable to the stipulated dismissal.

The court stated: “Essential to IBM’s argument Judge Edelstein has

abused his jurisdiction is a firm conviction that the Turney Act does not apply

to... . stipulation{s] of dismissal.” Jd. at 4389. The court concluded that the

language of the statute and its legislative history “compelled” the conclusion

that the district court's interpretation of the statute was incorrect. /d. at 4394.

The Second Circuit also considered whether review by mandamus was

appropriate in that case:

We begin with the recognition that this is an extraordinary case. It has

been one of the longest antitrust cases since the enactment of the Sherman

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Appendix A A-15

as to what the correct result should be. We concluded,

therefore, that “[w]hether or not the district court’s inter-

pretation is ultimately upheld on appeal after final judgment,

we cannot now find it to be ‘clearly erroneous as a matter of

law....°” Id. (quoting Bauman v. United States District

Court, 557 F.2d 650, 660 ( 9th Cir. 1977)). In Varsic v. United

States District Court, 607 F.2d 245 (9th Cir. 1979), we also

could not determine the meaning of the statute simply from an

examination of the language. There we reviewed the legislative

history of an Employee Retirement Income Security Act venue

provision, compared its language with the language used in the

venue provisions of other statutes, and analyzed cases con-

struing those other provisions. After painstaking analysis of

these materials and other questions, we said “[wjhile we

should be careful in attaching the adverb ‘clearly’ to erroneous

in our hindsight review, we conclude that the test is met here.”

Id. at 252.

In Mehrmanesh we found the question close— we were not

firmly convinced of the correct answer. In Varsic, we ultimately

were. In line with the “firm conviction” test, United States

Gypsum, for determining whether findings of fact are “clearly

erroneous,” we conclude that: when we are firmly convinced

that a district court has erred in deciding a question of law, we

may hold that the district court’s ruling is “clearly erroneous as

a matter of law as that term is used in mandamus analysis,”

Bauman, 557 F.2d at 660.

Moreover, we have some doubt that the district court's

order need be “clearly” erroneous in supervisory mandamus

cases where the petition raises an important question of law of

first impression, the answer to which would have a substantial

impact on the administration of the district courts. In cases in

which the Supreme Court has reviewed the exercise of super-

visory authority by the appellate courts over the district courts,

it has not set forth any requirement that the order of the district

court be “clearly erroneous” as a prerequisite to the granting of

mandamus relief. See Schlagenhauf v. Holder, 379 U.S. 104

(1964); LaBuy v. Howes Leather Co., 352 U.S. 249 (1957); see

also Note, Supervisory and Advisory Mandamu: Under the All

Writs Act, 86 Harv. L. Rev. 595, 611, 615 & n.86 (1973)

A-16 Appendix A

(“Schlagenhauf... \eft no room in the area of advisory

[supervisory] mandamus for a requirement of degree of

error”).

The requirement that the petitioner demonstrate that the

order of the district court is “clearly” erroneous stems from our

desire to avoid interference with the district court’s control of

the litigation before it. In the normal run of cases, it would be

counterproductive for appellate courts to interfere when “the

most that could be claimed is that the district courts have erred

in ruling on matters within their jurisdiction.” Schlagenhau/,

or? U.S. at 112 (quoting Parr v. United States, 351 U.S. 513,

$20 (1956)). We are hesitant to declare that a district judge

has exceeded his authority” unless we are reasonably certain,

i.e., “firmly convinced,” that he has done so. But in supervisory

mandamus cases involving questions of law of major impor-

tance to the administration of the district courts, the purpose of

our review —and the reason for our correcting an error made by

a trial judge—is to provide necessary guidance to the district

courts and to assist them in their efforts to ensure that the

judicial system operates in an orderly and efficient manner.

Accordingly, in such cases we see no legitimate reason for

refraining from exercising our supervisory authority where we

can determine that an error has been made but cannot, for

whatever reason, characterize the error as “clearly” erroneous.

Considering the nature of the issue before us, we believe

that petitioners would be entitled to a writ were we to be firmly

convinced that the district court was incorrect in its inter-

pretation of section 455. Moreover, in light of the fact that the

petition presents a question of law of first impression, the

resolution of which would have a substantial effect on the

orderly and efficient administration of the courts, we might

usurpation of judicial power or a clear abuse of discretion, Bankers Life &

sree fe gh bin capa why sete means signer ay yey op ye

“compel [a district court] to exercise its authority when it is its duty to do

so.” Kerr v. United States District Court, 426 U.S. 394, 402 (1976) (quoting

Roche v. Evaporated Milk Assn., 319 U.S. 21, 26 (1943)).

Appendix A A-17

issue the writ even were we simply to conclude that the district

court was in error.®

IL.

THE RECUSAL STATUTE

We now turn to the question of the proper interpretation of

section 455. Section 455 provides in part that

(a) Any justice, judge or magistrate of the United States

shall disqv."fy himself in any proceeding in which his

impartialit, ..1ght reasonably be questioned.

(b) He shall also disqualify himself in the following

circumstances:

(4) [When] he knows that he, individually or as a

fiduciary, or his spouse .. . has a financial interest in

the subject matter in controversy or in a party to the

proceeding, or any other interest that could be

substantially affected by the outcome of the proceed-

(d) For the purposes of this section the following words or

phrases shall have the meaning indicated:

(4) “financial interest” means ownership of a legal or

equitable interest, however small... .

(e) No justice, judge, or magistrate shall accept from the

parties to the proceeding a waiver of any ground for

A-18 Appendix A

disqualification enumerated in subsection (b). Where the

ground for disqualification arises only under subsection

(a), waiver may be accepted provided that it is preceded

by a full disclosure on the record of the basis for dis-

qualification.

Another provision of section 455 excludes specified mutual fund

investments from the definition of “financial interest.” ®

run during which class members could opt out, Judge Muecke

was notified by the defendants that his wife owned stock in

several of the plaintiff class members. The defendants con-

tended that Mrs. Muecke’s stock ownership constituted a

financial interest in the subject matter in controversy or in a

party to the proceeding and that Judge Muecke was under a per

se duty to recuse himself. After extensive briefing, oral

argument, and an opinion from the Advisory Committee on

Codes of Conduct of the Judicial Conference of the United

States, Judge Muecke recused himself on the ground that his

wife’s stock ownership constituted a financial interest in a party

to the proceeding within the meaning of section 455(b)( 4).

In his opinion Judge Muecke correctly noted that in

subsection (b)(4) of the statute, the phrase “financial interest

in the subject matter in controversy or in a party to the

proceeding,” unlike the phrase “or any other interest,” is not

modified by the subsequent phrase “that could be substantially

affected by the outcome of the proceeding.” Thus, subsection

(b)(4) establishes two classes of disqualifying interests: first,

“financial interests in the subject matter in controversy or in a

party to the proceeding;” these interests require recusal whether

or not the outcome of the proceeding could have any effect on

the interests; second, “other intorests;” these interests require

recusal only if they could be substantially affected by the

outcome of the proceeding. See In re New Mexico Natural Gas

Anti-Trust Litigation, 620 F.2d 794, 796 (10th Cir. 1980). An

“interest” is disqualifying whether it is held by the judge or his

*Section 455(d)(4)(1) provides that “Ownership in a mutual or

common investment fund that holds securities is not a “financial interest” in

Sn ee ee ee Sey oe oe

Appendix A A-19

spouse. The issue before Judge Muecke, then, was whether his

wife’s stock ownership in several of the class members con-

stituted a financial interest in a party to the proceeding or the

subject matter in controversy. If such ownership constituted a

financial interest in either, it is irrelevant, for purposes of

recusal, whether that interest would be substantially affected by

the outcome of the proceeding.

Judge Muecke held that ownership of stock in a class

member constitutes a financial interest in a party to the

proceeding. In so holding, Judge Muecke rejected the petition-

er’s arguments that, because the statute does not refer to class

members and because general law does not treat class members

and parties in an identical fashion, class members are not

parties within the meaning of section 455. 515 F.Supp. at 1079.

Judge Muecke acknowledged that congressional silence on

the question of the status of class members creates some

difficulty in applying the statute:

Given that § 455 purports to adopt a per se rule

regarding disqualification, it is amazing that the statute is

not more specific as to when the per se rule would apply.

The problems created by the language of § 455 are

compounded by a dearth of legislative history on the

questions before this Court. Section 455 might operate

with some degree of success in the context of simple

litigation. When applied to complex multidistrict class

actions, however, the statute appears to break down.

Despite the proliferation of class-actions in this coun-

try, there is no indication that Congress directly considered

the question whether “party” under (b)(4) should be read

to include “class member.”

Id. at 1079.

However, Judge Muecke found unpersuasive petitioners’

argument that because general law does not treat class mem-

bers and parties in an identical fashion for all purposes, class

A-20 Appendix A

members are not parties for purposes of section 455. It is true

that for certain procedural purposes, class members and parties

are not treated identically.‘ But, these differences in treatment

are a concession to the nature of class action suits and the

purposes of Rule 23: if every class member had to be treated as

a party in all circumstances, the purposes of Rule 23 might in

some instances be frustrated. Thus, for example, the presence

of non-diverse class members will not defeat federal diversity

jurisdiction so long as the class representatives and the oppos-

ing parties are diverse; e.g., Freidman v. Myers, 482 F.2d 435

(2d Cir. 1973); see also Snyder v. Harris, 394 U.S. 332, 340

(1969); 13 C. Wright & A. Miller, Federal Practice and

Procedure § 1755 at 550 n. 82; some courts have held that class

members are not subject to discovery under Fed. R. Civ. P. 33;

e.g., Fischer v. Wolfinbarger, 55 F.R.D. 129 (W.D. Ky. 1971);

Wainwright v. Kraftco Corp., 54 F.R.D. 532 (N.D. Ga.

1972);"' and other courts have held that class members should

not be treated as parties for purposes of counterclaims under

Rule 13; e.g., Donson Stores vy. American Bakeries Co., 58

F.R.D. 481 (S.D.N.Y. 1973).*2

Whatever the rule may be with respect to treating class

members as parties for certain procedural purposes, it is clear

that class members and parties are treated in substantially the

same manner in regard to the substantive benefits and burdens

of judgment. Thus, Rule 23 provides that any class member

who has not opted out shall be included in the judgment,

‘© However, for other procedural purposes they are. Class members

Texas Gulf Sulfur Co., 55 F.R.D. 308 (S.D.N.Y. 1972); see also 3 H.

Newberg, Class Actions § 56606 ai 564 (1977); the filing of a complaint on

behalf of a class tolls the statute of limitations for all members of the class,

American Pipe & Const. Co. v. Utah, 414 U.S. 538 (1974); and when

a 23(b)(3) class is based on diversity, each member of the

class must satisfy the $10,000 amount in controversy requirement, Zahn v.

International Paper Co., 414 U.S. 291, 294 (1973) (“Each plaintiff in a Rule

23(b)(3) class action must satisfy the jurisdictional amount... . ™).

1! Contra Brennan v. Midwestern Life Ins. Co., 450 F.2d 999 (7th Cir.

1971), cert. denied, 405 U.S. 921 (1972).

%2 Contra Rodriguez v. Family Publications Service Inc., $7 F.R.D. 189

(C.D. Cal. 1972).

Appendix A A-21

whether favorable or not to the class member, Fed. R. Civ. P.

23(c) (2)-(3); a class member may appeal from an order

approving a settlement to which the member objects, Ace

Heating & Plumbing Co. v. Crane Co., 453 F.2d 30 (3d Cir.

1971); a class member is bound as a party for res judicata

purposes, see e.g., Brown v. Vermillion, 593 F.2d 321 (8th Cir.

1979); Smith v. Alleghany Corp., 394 F.2d 381 (2d Cir.), cert.

denied, 393 U.S. 939 (1968); 3B J. Moore, Moore’s Federal

Practice § 23.60 at 23-468; 13 C. Wright & A. Miller, Federal

Practice & Procedure § 1784 at 178 (“According to traditional

res judicata notions, a member of a class in a Rule 23 suit is

considered to be a party by representation, and will be bound

to the same extent as an actual party”).

On some occasions, courts have expressly described class

members as parties. In American Pipe & Construction Co. v.

Utah, 414 U.S. 538 (1974), the Supreme Court stated “[u ]nder

the circumstances of this case, ... the claimed members of the

class stood as parties to the suit until and unless they received

notice thereof and chose not to continue.” Jd. at 550-51. The

Court held that the statute of limitations was tolled for “all

members of the class who would have been parties had the suit

been permitted to continue as a class action.” jd. at 554.

Similarly, in comparing the status of members of an organiza-

tion that had filed suit to the status of class members in a class

action, the Seventh Circuit stated that “the [Supreme] Court’s

remarks plainly imply that the organization’s members are not

parties to an organizational representative suit. Yet class

members are parties to class actions. See e.g., Zahn v.

International Paper Co.,....” Local 194, Retail, Wholesale &

Department Store Union v. Standard Brands, 540 F.2d 864, 867

(7th Cir. 1976)."9

We need not decide the general question whether class

members are in fact “parties” to a class action suit; for some

purposes they are treated as such, and for other purposes they

are not. Here, we need decide only if, for purposes of section

"3 Cf. Greenfield v. Villager Industries, Inc., 483 F.2d 824, 831 (3rd Cir.

1973).

A-22 Appendix A

455, stock ownership in a class member constitutes an interest

in “a party to the proceeding.” We agree with Judge Muecke’s

analysis in rejecting petitioner’s argument that class members

are not parties within the meaning of section 455:

The problem with plaintiffs’ argument is that, where it

counts, class members and parties are identical. There is

no question that class members are included in the benefits

and burdens of a judgment on an equal basis with parties.

For this reason, there appears to be no reason in logic why

a financial interest “however small” in a named party to a

litigation should be grounds for recusal, but that the same

interest in a class member should not be. Neither the

degree of conflict, nor the appearance of impropriety is

altered by a litigant’s classification as “party” or “class

member.”

515 F. Supp. at 1079."4

A review of the statute’s legislative history adds consid-

erable support to Judge Muecke’s ruling that, because the

appearance of impropriety is simi!ar whether the interest is in a

named party or a class member, class members should be

viewed as parties for purposes of recusal under the statute.

Prior to its amendment in 1974, section 455 provided that

Any justice or judge of the United States shall dis-

qualify himself in any case in which he has a substantial

interest .. . or is so related or connected with any party or

his attorney as to render it improper, in his opinion, to sit

on the trial, appeal or other proceeding therein.

4 We agree with Judge Muecke’s analysis to the extent that it stands for

the proposition that there is no logical basis for excluding “class member”

from the definition of the term “party” as Congress meant that term to be

defined when it last amended section 455. We do not understand his analysis

to suggest, nor would we necessarily agree, that there is no logical or rational

:

88

tH

§

as

distinction, Judge Muecke l

application of section 455 to class actions creates substantial administrative

burdens which do not occur when ordinary civil cases are involved. 515 F.

Supp. at 1080-81. These arguments constitute “reasons in logic” for drawing

such a distinction and we consider them infra.

Appendix A A-23

The movement to amend section 455 was “spurred by the

ambiguities and uncertainties” of the above language. 120

Cong. Rec. 36268 (1974)(statement of Rep. Kastenmeier).

Representative Kastenmeier, the House sponsor of the bill to

amend section 455, pointed to two main problems under the

statute prior to its amendment. First, the statute provided no

guidance on the question of how to determine the substantiality

of a judge’s interest in a party; second, the sole arbiter of the

question of the subtantiality of the judge’s interest was the very

judge whose impartiality was being questioned. /d. The House

Judiciary Committee described the purpose of the amendment

as follows: “[B]y setting specific standards, Congress can

eliminate the uncertainty and the ambiguity arising from the

language in the existing statute and will have aided the judges

in avoiding possible criticism for failure to disqualify them-

selves.” H.R. Rep. No. 1453 at 6, 93rd Cong. 2d Sess. 1974;

reprinted in 1974 U.S. Code Cong. & Ad. News 6351, 6355

[hereinafter cited as House Report].

At the time that Congress was considering the merits of the

amended version of section 455, the American Bar Association

(ABA) had adopted a new Code of Judicial Conduct. Canon

3(C)(1) of the ABA Code provided that

A judge shall disqualify himself in a proceeding in which

his impartiality might reasonably be questioned, including

but not limited to instances where

(c) he knows that he, individually or as a fiduciary, or his

spouse ... has a financial interest in the subject matter in

controversy or in @ party to the proceeding.

“Financial interest” was defined in the new code as a “legal or

equitable interest, however small....” /d., Canon 3(c)(3).

Although recusal is required under the ABA Code of

Jua .ial Conduct where the judge has a financial interest in a

party, however small, Canon 3(D) of the Code specifically

provides that the parties may waive this ground for recusal if

they agree in writing that the interest is insubstantial and the

A-24 Appendix A

judge discloses the basis of his disqualification on the record. '®

The Reporter for the ABA committee which formulated the

Code explained why the committee adopted a waiver provi-

sion: “Because of the hardship to the litigants that could be

brought about in some jurisdictions by the delay in obtaining

another judge to replace a disqualified judge, the Committee

decided that under specified circumstances a judge's dis-

qualification based on economic interest ... could be waived.”

E. Thode, Reporter’s Notes to the Code of Judicial Conduct 7\

(1973).

The proposed amendment to section 455 was cast in terms

very similar to Canon 3(C) of the ABA Code of Judicial

Conduct. Indeed, one of the stated purposes of the amendment

was to bring the statutory requirement of recusal into line with

the ethical obligation imposed by the newly adopted ABA Code

of Judicial Conduct. 120 Cong. Rec. 36269 (1974). However,

there were significant differences between the ABA Code of

Judicial Conduct and the proposed amendment to section 455.

The most notable difference was the absence from the proposed

amendment of a waiver provision similar to that contained in

Canon 3(D). This difference was the subject of much of the

congressiona! debate about the amendment and was the source

of most of the opposition to the enactment of the new section

455.

The absence of a provision allowing waiver of a ground for

disqualification by the parties when a judge holds an in-

substantial interest in a party led to criticism from several

quarters. The Judicial Conference of the United States ex-

pressed its disapproval of the proposed amendment. The

Judicial Conference took the position that the amendment to

section 455 was unnecessary in light of its recent adoption of a

new judicial code. In addition, it objected to the fact that the

'S At the time Congress was debating the amendments to section 455, the

Judicial Conference of the United States had adopted

i

ty

;

;

FLL

ie

ui

i

Appendix A A-25

proposed amendment did not allow waiver of disqualification

when the judge’s interest was insubstantial. The Judicial

Conference expressed the view that a waiver provision would

be in the best interests of the litigants and the administration of

justice. House Report at 10-12; 1974 U.S. Code Cong. & Ad.

News at 6360-61."

A number of members of Congress objected to the inflex-

ible nature of the proposed amendment. Representative

Dennis of Indiana condemned the proposal as “unreasonable

and unrealistic” because it lacked a waiver provision. He

pointed to the possible adverse consequences both before the

House Judiciary Committee and on the floor of the House:

The necessary effect of this inflexible provision is that, by

legislative enactment, we could have a true Daniel come to

judgment—or a Learned Hand upon the bench—and if

the case involved, let us say, the Exxon Corporation, and

the judge owned 20 shares of common stock, which he had

inherited from his parents many years before and had

never particularly thought of since, he absolutely could not

sit, even though both parties to the cause preferred

him—because of his expertise, learning, and integrity—to

any and all other available members of the judiciary.

To me, an inflexible provision of this kind does not

make good sense, does not make for the highest quality of

justice, and represents an over-reaction to a problem

which, so far as the Committee has been advised, is largely

non-existent.

House Report at 15; 1974 U.S. Code Cong. & Ad. News at

6363. See also 120 Cong. Rec. at 36269.

® The Department of Justice suggested that a ground for disqualification

should be deemed to be waived if it is not asserted in a timely manner. In a

letter to the House Judiciary Committee, the Department of Justice stated that

a provision should be added to the proposed amendment requiring that

i

lt

:

BHI}

A-26 Appendix A

Representative Smith of New York noted that the “Ameri-

the disqualification for any financial interest is unreasonable.”

He also raised concerns over the possible effect such a sweeping

rule of disqualification could have on the federal judiciary.

After arguing in favor of a waiver provision, he stated:

I think this is very important in these days when judicial

manpower in our Federal courts to which this will apply is

being pushed to the outer limits, because in case after case

in which the judge may have a very slight financial interest,

as defined in the bill, the judges will not be able to sit and

must under the bill disqualify themselves, even if the

parties would like to have them sit.

120 Cong. Rec. at 36270.

Nevertheless, despite repeated objections to the lack of a

provision allowing waiver where the judge’s interest was in-

substantial, Congress refused to follow the lead of the ABA and

the Judicial Conference on this point. The Senate passed the

bill after Senator Burdick, Chairman of the Subcommittee on

Improvements in Judicial Machinery of the Committee on the

Judiciary and sponsor of the bill in the Senate, told that body

that “[t}he most significant provision in these new standards

would require a judge to disqualify himself in any case in which

he has a financial interest, however small, in the proceeding.”

119 Cong. Rec. at 33029 ( 1973) ( remarks of Senator Burdick ).

Senator Burdick stressed the fact that the proposed amendment

deviated from the ABA code in that the amendment did noi

allow for waiver of either financial interest or kinship within the

third degree as grounds for disqualification. Senator Burdick

explained that “(t]he rationale ... [for not allowing waiver] is

that these are... instances in which the public at large would

feel a judge most certainly should disqualify himself.” Jd. at

33030.

The House Judiciary Committee specifically noted that the

pe hye naeey he: a. epee sallgpectioge

had only a small financial interest in a party, whereas the

proposed amendment to section 455 did not. The Committee

Appendix A A-27

explained that “[w]hile the ABA canon on disqualification

believes that confidence in the impartiality of federal judges is

enhanced by a more strict treatment of waiver.... The

statutes contain ample authority for chief judges to assign other

judges to replace either a circuit judge or district court judge

who become disqualified.” House Report at 7; 1974 U.S. Code

Cong. & Ad. News at 6357. The Committee also said

“[n]otwithstanding the views expressed [by the Judicial Con-

ference] it is felt that the American people are entitled to

ethical behavior on the part of all three branches of the

Government, not merely the Executive or legislative branches.”

Id. at 6361.

Congress adopted a broad and sweeping per se rule despite

warnings that it might lead to major disruption of litigation and

to the loss of the judge with the most expertise in a given

matter, even where the judge’s financial interest in the party

was insubstantial. It was aware that the rule would in at least

some cases create the very type of hardships that petitioners

plead here. Congress weighed these hardships against the

importance of public confidence in the federal judiciary and

struck the balance in favor of the latter.

Given that Congress’ main concern in adopting section 455

was to promote public confidence in the impartiality of the

judiciary, it is entirely consistent with congressional intent to

hold that a financial interest in a class member requires recusal.

While Congress did not consider or discuss the status of class

members when it enacted section 455, we believe that Judge

Muecke’s construction of the statute effectuates the expressed

congressional purpose in adopting the per se rule.

We conclude that the term “party” as used in section 455

must be given its broad customary meaning rather than the

narrow construction suggested by plaintiffs, and hold that for

purposes of the recusal statute, the term “party” includes class

members. Thus, after five years of litigation, a multi-million

dollar lawsuit of major national importance, with over 200,000

class plaintiffs, grinds to a halt over Mrs. Muecke’s $29.70.

A new judge must now be assigned to conduct further proceed-

ings.

A-28 Appendix A

IV.

OTHER CONSIDERATIONS

We acknowledge that petitioners are not alone in their

contention that there are serious shortcomings in section 455.

The per se rule of recusal of section 455(b)( 4) has been subject

to much criticism. See Note, Judicial Disqualification in the

Federal Courts: A Proposal to Conform Statutory Provisions to

Underlying Policies, 67 lowa L. Rev. 525 (1982); Note, Dis-

qualification of Federal District Court Judges for Bias or

Prejudice: Problems, Problematic Proposals, and a Proposed

Procedure, 46 Alb. L. Rev. 229, 230 (1981); Comment, Dis-

qualification of Federal Judges for Bias or Prejudice, 46 U. Chi.

L. Rev. 236, 251-68 (1978); Note, Judicial Disqualification in

the Federal Courts: Maintaining an Appearance of Justice

Under 28 U.S.C. § 455, 1978 U. Ili. L. F. 863, 870-85. The

Judicial Conference of the United States has recently proposed

to Congress that section 455 be amended. '’

Congress discussed many of the arguments now being

advanced by critics of section 455 when it amended that section

in 1974. However, Congress did not discuss the question

whether class members should be classified as parties for

purposes of the per se rule of section 455 (b)(4), nor did

Congress consider whether ary reasons exist for treating class

action suits differently in any respect. In the words of Judge

Muecke,

[1}t is somewhat surprising that Congress did not consider

the effect of § 455 on the administration of class action

7 The proposed amendment would allow a judge to accept a waiver by

the parties if the ground for disqualification did not arise until after

“substantial judicial time had been devoted to the matter” and the judge's

interest would not be substantially affected by the outcome. Judicial

Conference of the United States, 1980 Proceedings 81. The proposed

amendment also provides that even “in the absence of waiver, disqualification

is not required if the judge determines that the public interest in avoiding the

cost of delay of reassignment outweighs any appearance of impropriety

arising from his continuing with the matter to completion.” Jd The issues

raised by the proposed amendment are, of course, for Congress te consider if

it wishes.

Appendix A A-29

litigation. Not only has the class action become an

increasingly common form of litigation in this country, the

likelihood of § 455 applying in a class action, with its many

“parties”, is much increased over simple litigation.

515 F. Supp. at 1080. Moreover, the administrative burden of

applying section 455 in class action proceedings is far greater

than in normal civil cases. Certification of the class may not

occur for months, or even years, after the complaint has been

filed; thus, the judge may not be able to compare his stock

holdings to the class membership list until after substantial

judicial resources have been invested in the litigation. Accord-

ingly, whatever Congress may decide generally with respect to

reconsidering the explicit decisions it made when it amended

section 455 in 1974, the question whether and how that section

should apply in class action cases would seem to warrant

congressional consideration.

We note that the administrative problems of applying

section 455 in class action cases are compounded by the fact

that the disqualifying interest may result from the ownership of

stock by a judge’s spouse. Although it may be possible under

most circumstances for a judge to control the extent and nature

of his or her own investments, the judge may be unable to

control the financial holdings or investment activities of a

spouse. The day has passed when a husband can order his wife

to arrange her financial affairs to suit his convenience. As

increasing numbers of women establish careers, the likelihood

that judges’ wives will insist on asserting the right to maintain

independent judgment and control over their investments also

increases. Indeed, as increasing numbers of women become

federal judges, the likelihood that there will be a number of

judicial husbands who will pursue independent careers and

treat their own investments in a similar fashion also increases.

Thus, from a practical standpoint, federal judges lack control

over a significant area of potential conflict under section 455:

stock ownership by their spouses in class members.

It now appears that the per se rule may give rise to a

greater number of conflicts—and a different kind—than in-

itially anticipated by Congress. The underlying assump-

tion—that conflicts can readily be avoided by judges following

A-30 Appendix A

the advice offered by Congress with regard to the management

of their financial affairs‘®—may, at least with respect to class

action cases, be somewhat fallacious. We recognize that this

fact does not affect the question whether a class member is a

party for purposes of section 455, as that provision was enacted

in 1974. We think it relevant, however, to the need for a

legislative evaluation of the reasonableness and consequences

of the per se rule in class action cases and to the question

whether the actual benefits of applying the per se rule in such

cases outweigh the resultant disruption to the orderly and

efficient administration of the judicial system. '?

The House Judiciary Committee considered, at least in part, the

burden that the amendment would impose on judges:

Under subsection (c), the judge has a duty to inform himself about

his own financial interests. This precludes use of a so called blind trust.

Subsection (d)(4) also provides that investments in mutual

funds .. . are generally not “financial interests.”

These provisions of the bill with relation to disqualification based on

financial interests are not intended to deprive the judge of the opportu-

nity to make financial investments. However, they must be considered in

light of Canon SC(3) of the ABA Code of Judicial Conduct which

himself of investments and other financial interests that “night

require frequent disqualification.

Therefore, a judge is free to invest. He should invest in companies

which are not likely to become litigants in his court. If that should

happen, then he must disqualify himself.

‘® There may be other, less disruptive methods of alleviating Congress’

concern that a judge not be put in the position of determining whether his

interest is “substantial,” whether it will be “substantially affected” by the

Appendix A A-3l

VL

CONCLUSION

For the reasons stated above, we reluctantly agree with

Judge Muecke that class members are parties within the

meaning of section 455 (b)(4), and that Mrs. Muecke’s stock

ownership in a class member constitutes a financial interest in a

party to the proceeding. Accordingly, as Judge Muecke

properly concluded, he was required to recuse himself.

The petition for the writ of mandamus is DENIED.

A-32 Appendix A

FILED

OCT 1 1982

PHILLIP B.

WINBERRY

CLERK US.

COURT OF

APPEALS

IN RE CEMENT & ANTITRUST LITIGATION

(MDL-296)

ARIZONA V. UNrTeD States District Court No. 81-7465

FERGUSON, Circuit Judge, concurring:

I agree that Judge Muecke properly determined that he

was required to recuse himself. I further agree that this court

has jurisdiction under the All Writs Act to review Judge

Muecke’s decision.

However, this case should not be considered as one that

expands the supervisory power of this court over district courts.

First, the decision of the district court was one mandated by the

law; this court is not reviewing an exercise of discretion.

Second, the matter does not in any way determine the rights of

the parties but instead is directed solely to the orderly adminis-

tration of the courts, the very core of this court’s supervisory

power. Third, the only way in which the new and significant

issue presented here could be adjudicated was by this court

assuming jurisdiction under the All Writs Act.