DRAGGIN’ Y CATTLE COMPANY, INC., аnd ROGER and CARRIE PETERS, Plaintiffs and Appellants, v. JUNKERMIER, CLARK, CAMPANELLA, STEVENS, P.C., Defendant, NEW YORK MARINE and GENERAL INSURANCE COMPANY, Intervenor and Appellee.
No. DA 16-0595.
Supreme Court of Montana.
Decided May 30, 2017.
2017 MT 125, 387 Mont. 430, 395 P.3d 497.
Submitted on Briefs April 5, 2017.
For Appellant: Timothy B. Strauch, Strauch Law Firm, PLLC, Missoula; Donald L. Harris, Harris, Gannett & Varela, PLLC, Billings (Counsel for Draggin’ Y Cattle Co. and Peters); Thomas Marra, Marra, Evenson & Bell, PC, Great Falls (Counsel for Junkermier, Clark, Campanella, Stevens, P.C.).
For Appellee: Gary M. Zadick, Ugrin, Alexander, Zadick & Higgins, PC, Great Falls (Counsel for New York Marine and Gen. Ins. Co.).
¶1 Roger and Carrie Peters and Draggin’ Y Cattle Company, Inc., (collectively Peters) entered into a stipulated settlement with Junkermier, Clark, Campanella, Stevens, P.C., and Larry Addink (collectively Junkermier). The prеsiding judge—Judge George Huss—determined that the stipulated settlement was reasonable and entered judgment against Junkermier’s insurer, New York Marine and General Insurance Company. New York Marine appealed and questioned Judge Huss’s impartiality.
¶2 We concluded in that appeal that Judge Huss should have disclosed a potential conflict of interest. We referred the case to the District Court to determine whether Judge Huss should have been disqualified for cause. The District Court concluded that Judge Huss was required to recuse himself and should have been disqualified. The District Court also vacated all orders that Judge Huss issued after he should have been disqualified. Peters contend that the District Court erred in ruling that Judge Huss should have been disqualified and in vacating Judge Huss’s orders.
¶3 We affirm.
PROCEDURAL AND FACTUAL BACKGROUND
¶4 This is the third time this matter has been before this Court. Draggin’ Y Cattle Co. v. Addink, 2016 MT 98, 383 Mont. 243, 371 P.3d 970 (hereafter Draggin’ Y II); Draggin’ Y Cattle Co. v. Addink, 2013 MT 319, 372 Mont. 334, 312 P.3d 451 (hereafter Draggin’ Y I). We restate the relevant facts briefly.
¶6 Peters and Junkermier entered into a settlement agreement and stipulation for entry of judgment without New York Marine’s participation or authorization in November 2014. On December 5, 2014, New York Marine filed a motion to intervene and requested additional discovery and a stay of the scheduled reasonableness hearing. Ten days later, Judge Huss granted New York Marine’s motion to intervene, denied its motions for additional discovery and to stay, and held the reasonableness hearing. New York Marine contested the stipulated settlement’s reasonableness and denied liability for the settlement. Judge Huss concluded that the stipulated settlement was reasonable and entered judgment in the amount of $10,000,000 in Peters’s favor. New York Marine appealed, and Peters cross-appealed.
¶7 For the first time on appeal, New York Marine asserted that Judge Huss had an apparent conflict of interest stemming from a sexual harassment complaint that his former court reрorter filed against him. New York Marine alleged that Judge Huss had individually entered into a stipulated settlement without the participation or authorization of the Office of the Court Administrator (OCA), which acted as Judge Huss’s insurer by paying for his defense under a reservation of rights. New York Marine alleged further that the OCA had filed a declaratory judgment action in which it contested the stipulated settlement amount’s reasonableness.1 Judge Huss’s potential conflict of interest, New York Marine contended, violated the Montana Code of Judicial Conduct аnd should have resulted in Judge Huss’s disqualification.
¶8 We concluded that
¶9 Upon referral, Judge Fagg set a disqualification hearing, at which Judge Huss testified. The court’s ensuing order concluded that Judge Huss was required to recuse himself and should have been disqualified from presiding over the stipulated settlement. The District Court concluded further that the new judge assigned to the case would need to decide the issues raised by the parties after New York Marinе intervened in the case. The court’s order therefore had the effect of vacating all of Judge Huss’s orders after New York Marine intervened.
STANDARD OF REVIEW
¶10 We review judicial disqualification questions de novo. Draggin’ Y II, ¶ 10. Our inquiry requires an objective examination of the circumstances surrounding potential judicial disqualification and an accurate interpretation of the Montana Code of Judicial Conduct. Draggin’ Y II, ¶ 10.
DISCUSSION
¶11 1. Whether the District Court correctly concluded that Judge Huss was required
¶12 The District Court issued findings of fact regarding both the Peters’s case and the suit against Judge Huss. The court’s findings related to the Peters’s case fоcused on the time period following the Peters/Junkermier stipulated settlement. The court also made findings related to the suit against Judge Huss regarding the circumstances and procedural posture of that case and what Judge Huss agreed to under his stipulated settlement. Finally, the court’s findings addressed the overlap in the two stipulated settlements’ timelines. The court found that
Judge Huss did not disclose to the litigants in this case the existence of his confessed judgment in favor of [the court reporter], the fact that he had contractually agreed to cooperate in her execution of that judgment against the OCA, or the fact the OCA had challenged the reasonableness of Judge Huss’ stipulated judgment.
¶13 The court then reviewed the Montana Code of Judicial Conduct, particularly
¶14 Peters argue on appeal that the District Court erred by concluding that
¶15 Peters rightly point out that we “declin[ed] to address whether
Reichert, ¶ 46. Disqualification under
¶17 In Reichert, we considered the United States Supreme Court’s due process analysis in Caperton v. A.T. Massey Coal Co., 556 U.S. 868, 129 S. Ct. 2252 (2009), and observed that, “[b]ecause the codes of judicial conduct provide more protection than due process requires, most disputes over disqualification will be resolved without resort” to constitutional due process considerations. Reichert, ¶ 31 (citation and internal quotations omitted). The applicable standards of judicial conduct resolve the question presented in this case. Here, our focus is not whether Judge Huss had a personal “interest that could be substantially affected by the proceeding,” but instead whether his participation in his personal stipulated settlement could reasonably raise concerns about his impartiality in the instant proceedings. Reichert turned on the application of
¶18
¶19 Determining whether a party might reasonably question a judge’s impartiality requires an examination of the nature of the judge’s interest in the issues before the judge.
¶21 As the District Court observed, the procedural posture and circumstances surrounding the stipulated settlement in the Peters’s case are strikingly similar to those surrounding Judge Huss’s personal stipulated settlement. Peters and Junkermier entered into their stipulated settlement without New York Marine’s participation or authorization on November 13, 2014. Under the stipulated settlement, Junkermier confessed to a judgment of $10,000,000; it assigned any rights it may have had against New York Marine to Peters; and it agreed to cooperate with Peters in executing the stipulated settlement against New York Marine. Peters agreed under the stipulated settlement not to execute the judgment against Junkermier. New York Marine thereafter intervened, denied liability for the settlement, and contested the stipulated settlement’s reasonableness. Judge Huss held the reasonableness hearing on December 15, 2014, and he issued the order cоncluding that Peter’s stipulated settlement was reasonable on March 5, 2015.
¶22 The case against Judge Huss began in February 2014 when his court reporter filed a sexual harassment complaint against him. Similar to Junkermier, Judge Huss requested that his “insurer”—the OCA—defend and indemnify him against those claims. The OCA paid for Judge Huss’s defense, subject to a reservation of rights, until it concluded that it was not obligated to do so given the nature of the allegations against him. One month before Peters and Junkermier entered into their stipulated settlement, Judge Huss and the court reporter entered into a “Stipulation and Confession of Judgment Resulting From the State of Montana’s Refusal to Defend and Indemnify.” Judge Huss entered into the stipulated settlement without the OCA’s participation or authorization. Under the stipulated settlement, Judge Huss confessed to a judgment of $744,371; he agreed to cooperate in executing the judgment against the OCA; he assigned his rights against the OCA to the court reporter; and the court reporter agreed not to execute the judgment against Judge Huss in his personal capacity. One month before the reasonаbleness hearing in the present case, the OCA filed an action seeking a judicial declaration that it was not responsible for Judge Huss’s stipulated settlement. In its complaint, the OCA contested the stipulated settlement’s reasonableness and denied any liability for the settlement. Two weeks after presiding over the reasonableness hearing in the present case, Judge Huss filed an answer to the OCA’s complaint in which he asserted that his own stipulated settlement was reasonable.
¶23 At the disqualification hearing before Judge Fagg, Judge Huss acknоwledged that the OCA challenged his stipulated settlement, in part, on the ground that the settlement was unreasonable. He testified that he had denied that the settlement was unreasonable and that the OCA continued to question the settlement’s reasonableness until at least February 2015. He agreed that he had bound himself under the stipulated settlement to cooperate in obtaining a judgment against the OCA. He agreed also that the settlement allowed the court reporter to continue her sexual harassment claims against him if he breached his duty to cooperate and that he could be exposed to personal liability. Finally, Judge Huss testified that he remained a party in the OCA’s suit through at least February 2015. Judge Huss did not disclose any information related to the claims against him or his personal stipulated settlement to the parties here.
¶24 Peters’s claims that Judge Huss’s interests in the case against him were resolved by the time New York Marine intervened in the present case are belied by the fact that Judge Huss filed his answer to the OCA’s
¶25 Our “objective examination of the circumstances surrounding [Judge Huss’s] potential judicial disqualification” confirms the District Court’s ruling that Judge Huss’s impartiality reasonably could be questioned. Draggin’ Y II, ¶ 10. Judge Huss continued to have a present and immediate interest in his own personal stipulated settlement after New York Marine intervened in the present case. The nature of Judge Huss’s interest in his personal stipulated settlement raises reasonable questions regarding his “absence of bias or prejudice in favor of, or against, particular ... classes of parties”—e.g., parties arguing for, or against, the reasonableness of stipulated settlements reached while their insurer’s liability for defense and indemnity remains unsettled.
¶26 Based on the District Court’s finding of fact, we agree with its conclusion that Judge Huss’s impartiality in deciding the stipulated settlement’s reasonableness “might reasonably be questioned.” The District Court correctly held that Judge Huss was required to disqualify himself pursuant to
¶27 2. Whether the District Court erred in vacating Judge Huss’s orders issued after he should have disqualified himself.
¶28 The District Court determined that the “new judge assigned to this case will need to decide pending discovery issues, the stipulated judgment’s reasonableness, [New York Marine’s] motion to dismiss Peters’ cross-claims, and any other issues which arise.” The District Court’s order thus had the effect of vacating Judge Huss’s orders denying New York Marine’s motions for discovery and for a stay, his order determining that the settlement was reasonablе, and the entry of judgment against New York Marine.
¶29 Peters argue that the District Court erred in vacating Judge Huss’s orders given that the court did not find personal bias or prejudice. Peters first point out that we referred the disqualification issue to the District Court to hear the matter pursuant to
¶30 Peters argue also that
¶31 Peters misinterpret our rationale in Draggin’ Y II for referring the matter pursuant to
¶32 Here, New York Marine alleged on appeal in Draggin’ Y II that Judge Huss should have disqualified himself under
¶33 The circumstances are unique and dictated what we determined to be “the appropriate course of action” in light of the assertions New York Marine made on appeal. Draggin’ Y II, ¶ 31. New York Marine alleged facts raising serious questions about Judge Huss’s impartiality, invоking the possibility of “personal bias or prejudice of the presiding [district court] judge.”
¶34 We observed in Draggin’ Y II that “
¶35 The Code establishes rules and standards meant to ensure that parties have their cases decided by an impartial judge. E.g.,
¶36 Because disqualification proceedings are premised upon a litigant’s constitutional right to a fair and impartial tribunal, we are unpersuaded by Peters’s contention that a violation of the Code cannot be the basis for vacating a judge’s decision. The Code cautions that it is not “intended to be the basis for litigants to seek to change a judge’s decision.”
¶37 As we held in Draggin’ Y II,
¶38 Upholding such an order also would run counter to the Code’s Canons, which “provide important guidance in interpreting the Rules.”
¶39 We based our holding in Draggin’ Y II that “a judge should disclose information that is relevant to a possible motion for disqualification” under
¶40 We conclude that the District Court did not err in relying on
CONCLUSION
¶41 We affirm the District Court’s order concluding that Judge Huss should have disqualified himself and vacating the orders issued after he should have done so. The case is remanded for further proceedings before a new judge.
JUSTICES SANDEFUR, SHEA, McKINNON and RICE concur.
