In rе: KENSINGTON INTERNATIONAL LIMITED and SPRINGFIELD ASSOCIATES, LLC, Petitioners In re: D.K. Acquisition Partners, L.P.; Fernwood Associates, L.P. and Deutsche Bank Trust Company Americas, Petitioners
No. 03-4212, 03-4526
United States Court of Appeals, Third Circuit
Opinion Filed: Dec. 18, 2003
353 F.3d 211
Richard Mancino (argued), Marc Abrams, Willkie, Farr & Gallagher, New York, NY, Joanne B. Wills, Klehr, Harrison, Harvey, Branzburg & Ellers, Wilmington, DE, for Petitioners in 03-4526.
Charles O. Monk, II (argued), Saul Ewing, Baltimore, MD, Norman L. Pernick, J. Kate Stickles, Saul Ewing, Wilmington, DE, for Respondents Owens Corning et al.
David M. Bernick (argued), Kirkland & Ellis, Chicago, IL, for Respondent W.R. Grace & Co.
Elihu Inselbuch (argued), Caplin & Drysdale, New York, NY, Marla R. Eskin, Campbell & Levine, Wilmington, DE, for Respondent Official Committee of Asbestos Claimants of Owens Corning.
Michael J. Crames (argued), Kaye Scholer, New York, NY, Edwin J. Harron, Young, Conaway, Stargatt & Taylor, Wilmington, DE, for Respondent James J. McMonagle.
Daniel K. Hogan, Law Offices of Daniel K. Hogan, Wilmington, DE, Sander L. Esserman, Stutzman, Bromberg, Esserman & Plifka, Dallas, TX, for Respondent Baron & Budd Claimants.
Jeffrey S. Trachtman, Kramer, Levin, Naftalis & Frankel, New York, NY, Adam G. Landis, Rebecca L. Butcher, Landis, Rath & Cobb, Wilmington, DE, for Respondent Credit Suisse First Boston Corp.
Neal J. Levitsky, L. Jason Cornell, Fox Rothschild, Wilmington, DE, Henry W. Simon, Robert A. Simon, Simon & Simon, Fort Worth, TX, for Respondent Waters & Kraus.
Michael R. Lastowski, Duane Morris, Wilmington, DE, for Intervenor Official Committee of Unsecured Creditors of USG Corp.
Mark E. Felger, Jeffrey R. Waxman, Cozen & O‘Connor, Wilmington, DE, for Intervenor Official Committee of Unsecured Creditors of Armstrong World Industries, Inc.
Stephen C. Neal (argued), Cooley Godward, Palo Alto, CA, Daniel J. DeFranceschi, Richards Layton & Finger, Wilmington, DE, for Amicus Curiae USG Corp.
Richard A. Samp, Washington Legal Foundation, Washington, DC, for Amicus Curiae Washington Legal Foundation.
Before: FUENTES, SMITH and GARTH, Circuit Judges.
GARTH, Circuit Judge.
We have before us two Emergency Petitions for a Writ of Mandamus. Both Petitions allege that a district court judge who has presided over five asbestos-related bankruptcies for the past two years has, through his association with certain advisors, created an appearance of partiality such that he must be disqualified from any further participation in those proсeedings. The parties seeking the district court judge‘s disqualification originally moved for recusal in the Bankruptcy Court, but filed Petitions for Mandamus in our Court after the district court judge withdrew the recusal motions from the Bankruptcy Court and stayed discovery on those motions. The District Court has yet to rule on the recusal motions. As originally filed, both Petitions asked us to issue an order directing the district court judge either to: (a) recuse himself pursuant to
After carefully considering all of the written submissions from the parties and amicus curiae and following a sharply-contested hearing, we have decided to direct the district court judge to rule on the withdrawn reсusal motions. In doing so, we will vacate the district court judge‘s order staying discovery on the recusal motions and direct that expedited discovery proceed without interruption. Because of certain temporal exigencies explained later in this opinion, we will direct that all discovery and the district court judge‘s ruling on the recusal motions be completed no later than January 31, 2004. We will retain jurisdiction over any further proceedings subsequent to the district court judge‘s ruling. See In re Sch. Asbestos Litig., 977 F.2d 764, 774-78 (3d Cir.1992).
We emphasize at the outset of this opinion that we are not ruling on the merits of the disqualification relief sought by the Petitioners. Our decision to remand the recusal motions to the district court judge is prompted by our overarching cоncern that we do not have an adequately developed evidentiary record before us.
I.
A. The Parties
This case arises from five Chapter 11 asbestos-related bankruptcies involving the following corporate entities: Owens Corning, W.R. Grace & Co., USG Corporation, Armstrong World Industries, Inc., and Federal-Mogul Global, Inc. (collectively, the “Five Asbestos Cases“).
The first Petition for Mandamus was brought by Kensington International Limited and Springfield Associates, LLC, two creditors of Owens Corning (collectively, “Kensington“).
The second Petition for Mandamus was filed by D.K. Acquisition Partners, L.P., Fernwood Associates, L.P., and Deutsche Bank Trust Company Americas, three creditors of W.R. Grace & Co. (collectively, “D.K. Acquisition Partners“).
In response to the Petitions for Mandamus, we received Answers from Owens Corning, the Unofficial Committеe of Select Asbestos Claimants, the Baron & Budd Claimants, W.R. Grace & Co., Waters & Kraus, LLP, a Dallas firm which filed a response on November 10 on behalf of asbestos claimants, James J. McMonagle (Legal Representative for Future Claimants of Owens Corning), the Official Committee of Asbestos Creditors of Owens Corning, the Official Committee of W.R. Grace Asbestos Claimants, and Credit Suisse First Boston (“CSFB“). We also received Replies to these Answers.
B. The Court-Appointed Consultants
On November 27, 2001, then-Chief Judge Becker of our Court1 ordered that the Five Asbеstos Cases, which were then pending in the District of Delaware, be transferred from the Bankruptcy Court to Senior District Court Judge Alfred M. Wolin of the District Court of New Jersey. Chief Judge Becker explained in his order that “these bankruptcy cases, which carry with them tens of thousands of asbestos claims, need to be consolidated before a single judge so that a coordinated plan for management can be developed and implemented.” Shortly after receiving the Five Asbestos Cases, Judge Wolin re-referred them to the Bankruptcy Court, but retained jurisdiction over the asbestos-related claims and issues.
On December 28, 2001, Judge Wolin named five “Court Appointed Consultants” (the “Consultants“) to assist him in the Five Asbestos Cases. The five individuals he named werе David Gross, Judson Hamlin, William Dreier, John Keefe, and Francis McGovern, all of whom had prior experience with asbestos or mass tort litigation.2 Pursuant to Judge Wolin‘s order, the Consultants were to “advise the Court and to undertake such responsibilities, including ... mediation of disputes, holding case management conferences, and consultation with counsel, as the Court may delegate to them individually.” The Consultants could also be delegated “certain authority to hear matters and to advise the Court on issues that may arise in these five large Chapter 11 cases.” Judge Wolin‘s order provided that he could, “without further notice, appoint any of the Court-Appointed Consultants to act as a Special Master to hear any disputed matter and to make a report and recommendation to the Court on the disposition of such matter.” In connection with his order, Judge Wolin announced at a Case Management conference that he would conduct ex parte meetings with the attorneys.
C. The G-I Holdings Bankruptcy
Two months earlier, the Bankruptcy Court for the District of New Jersey had appointed Judson Hamlin, one of the Consultants, to serve as the “Legal Representative of Present and Future Holders of Asbestos-Related Demands” in still another asbestos-related bankruptcy case captioned In re G-I Holdings Inc. The G-I Holdings case is not related to the Five Asbestos Cases and Judge Wolin has played no role in the G-I Holdings proceedings. The G-I Holdings bankruptcy does, however, share one common characteristic with the Fivе Asbestos Cases assigned to Judge Wolin: it too faced a wave of asbestos lawsuits. See Official Comm. of Asbestos Claimants of G-I Holding, Inc. v. Heyman, 277 B.R. 20, 24-28 (S.D.N.Y.2002) (explaining that, “[b]egin-
Mr. Hamlin was not the only Consultant who participated in the G-I Holdings bankruptcy. Less than one month after Judge Wolin appointed the five Consultants, Mr. Hamlin filed an application in G-I Holdings seeking the Bankruptcy Court‘s approval to engage David Gross, anоther Consultant, as his local counsel. In connection with that application, Mr. Gross submitted an affidavit to the G-I Holdings Bankruptcy Court disclosing his appointment as a Consultant to Judge Wolin in the Five Asbestos Cases. Mr. Hamlin‘s application was met with no objection and the Bankruptcy Court approved Mr. Gross as Mr. Hamlin‘s counsel.
D. Kensington‘s Recusal Motion
Almost two years later, Kensington filed a motion in the Bankruptcy Court seeking to recuse Judge Wolin from further participation in the Owens Corning bankruptcy. Kensington, which claims that it only recently learned about Messrs. Gross and Hamlin‘s participation in the G-I Holdings bankruptcy, asserted that Judge Wolin was precluded under
Three days later, the debtors in the W.R. Grace bankruptcy filed an application in the Bankruptcy Court to appoint Mr. Hamlin as the Legal Representative for Future Asbestos Claimants of W.R. Grace & Co. The application disclosed that Mr. Hamlin was already serving as a Consultant to Judge Wolin in the Five Asbestos Cases (including, of course, the W.R. Grace bankruptcy).
On October 23, 2003, Judge Wolin entered an order staying all discovery in connection with Kensington‘s recusal motion. The order explained that recusal motions are often brоught for improper purposes and that all discovery should be stayed until Kensington‘s motion could be tested by the adversarial process. Judge Wolin also announced in his order that he intended to issue a Case Management Order in the near future governing further proceedings on the recusal motion.
E. Kensington‘s Mandamus Petition
Dissatisfied with Judge Wolin‘s decision to sua sponte stay discovery on the recusal motion, Kensington filed an Emergency Petition for a Writ of Mandamus with us on October 28, 2003. Kensington‘s petition asked us to issue a Writ of Mandamus “directing Judge Wolin either (a) to disqualify himself under
On Oсtober 30, 2003, we issued an order staying “all proceedings affected by” Kensington‘s mandamus petition (with the exception of the recusal motion) and establishing a briefing schedule. Our order invited Judge Wolin to respond to Kensington‘s petition.
F. The District Court‘s Responses
In response to our invitation, Judge Wolin submitted three written responses to Kensington‘s petition. In his first response, Judge Wolin announced that he would “judge the Motion to Reсuse on the law and facts presented after all of the parties have been heard in full” and that he would seek to resolve the motion as quickly as possible. Judge Wolin also explained that he had recently finished a four-week bench trial in the Owens Corning bankruptcy case concerning the issue of “substantive consolidation.” That trial was necessary because Owens Corning had proposed a plan of reorganization which, if adopted, would substantively consolidate Owens Corning and its debtor-subsidiaries into a single bankruptcy estate. It is alleged that Kensington and CSFB have opposed substantive consolidation because it would significantly reduce their aggregate recovery.3 Judge Wolin stated in his response that he was prepar-
ing an opinion on substantive consolidation, but had not yet issued the opinion when Kensington filed its motion seeking his recusal. Judge Wolin also maintained that he had no information regarding the G-I Holdings bankruptcy.
In his second response, Judge Wolin addressed the suggestion made by D.K. Acquisition Partners that his ex parte communications with the Consultants and various attorneys somehow required his recusal.4 Judge Wolin explained that he had announced at his initial Case Management conference on December 20, 2001, that the size and complexity of the Five Asbestos Cases would require him to have ex parte communications. The purpose of the ex parte communications, according to Judge Wolin, “was to ensure that each committee or corporate constituency was affordеd the opportunity to provide to the Court insights as to why, in the competition for limited dollars, its claim was just.” Judge Wolin also wrote that, “[g]iven that these meetings occurred on a regular basis without complaint and given that the December 20, 2001 case management conference alerted all concerned that ex parte meetings were part of the District Court‘s case management plan, it strikes a discordant note that the conduct of ex parte conferences would be the ground for a recusal motion.”
In his third response, Judge Wolin again defended his Case Management methods
G. The Consultants’ Affidavits
In compliance with Judge Wolin‘s order, each of the Consultants filed affidavits in the District Court on November 14, 2003 describing their activities in the Five Asbestos Cases. Mr. Gross stated in his affidavit that Judge Wolin had been aware “[a]t all relevant times” of Mr. Gross‘s role in the G-I Holdings bankruptcy case. Mr. Gross also explained that his role in the Five Asbestos Cases was essentially “that of a settlement facilitator” and that he had never “assisted in any way in Judge Wolin‘s decision-making function” or “discussed with Judge Wolin ... any legal or factual issues before the Court or likely to come before the Court in any of the five bankruptcies assigned to Judge Wolin, or, ... in the G-I Holdings case.”
Mr. Hamlin explained in his affidavit that his assignments as a Consultant to Judge Wolin “consisted of reviewing appeals from the Delaware Bankruptcy Court and submitting a draft opinion in each of the [Five Asbestos Cases],” a role Mr. Hamlin likened “to that of a magistrate [judge] in providing recommended findings оf fact and conclusions of law to a district judge.” Mr. Hamlin asserted that he had prepared only one draft opinion in the Owens Corning bankruptcy and that Judge Wolin had not used that particular opinion. Mr. Hamlin also stated that he “did not discuss any substantive issues in the [Owens Corning] case with Judge Wolin at any time.”
H. The Answers
On November 21, 2003, Answers to the mandamus petitions were filed. The following opposed Kensington‘s efforts to disqualify Judge Wolin: Owens Corning Corp., the Official Committee of Asbestos Creditors in Owens Corning, James McMonagle (the Legal Representative for Owens Corning‘s Asbestos Claimants), and the Baron & Budd Claimants. CSFB supported Judge Wolin‘s disqualification.
I. D.K. Acquisition Partners’ Mandamus Petition
On November 14, 2003, the same day that the Consultants submitted their affidavits to the District Court, D.K. Acquisition Partners filed a motion in the W.R. Grace bankruptcy case seeking Judge Wolin‘s recusal. A week later, D.K. Acquisition Partners filed an emergency petition with us seeking the same relief sought by Kensington.
We ordered that D.K. Acquisition Partners’ mandamus petition be consolidated with the Kensington petition. We have since received Answers to D.K. Acquisition Partners’ petition from W.R. Grace & Co., the Official Committee of W.R. Grace Asbestos Claimants, and the Unofficial Committee of Select W.R. Grace Asbestos Claimants.
J. Hearing
On December 12, 2003, we held the hearing scheduled by our order of November 21, 2003. Both parties and amici were
II.
We turn now to the governing legal standards. Kensington and D.K. Acquisition Partners both seek Judge Wolin‘s disqualification under
A. Standards Governing Writs of Mandamus
We have the power to issue writs of mandamus under the All Writs Act,
B. Mandamus as a Means For Disqualifying a Judge
“Mandamus is a proper means for this court to rеview a district court judge‘s refusal to recuse from a case pursuant to
C. Standard for Disqualification under § 455(a)
Whenever a judge‘s impartiality “might reasonably be questioned” in a judicial proсeeding,
It is of no consequence that the judge is not actually biased because
In Haines v. Liggett Group Inc., 975 F.2d 81 (3d Cir.1992), where a mandamus petition filed by leading tobacco companies charged that the district court judge had disqualified himself when he stated that the tobacco industry сoncealed smoking risks and “despite some rising pretenders, ... may be the king of concealment and disinformation,” we held that “[i]mpartiality and the appearance of impartiality in a judicial officer are the sine qua non of the American legal system” and that “[a]ny tribunal permitted by law to try cases and controversies not only must be unbiased but also must avoid even the appearance of bias.” Id. at 98 (quoting Lewis v. Curtis, 671 F.2d 779, 789 (3d Cir.1982)). We went on to say in Haines that the district court judge in question had “been a distinguished member of the federal judiciary for almost 15 years and [was] no stranger to this court; he [was] well known and respected for magnificent abilities and outstanding jurisprudential and judicial temperament.” Id. Judge Wolin is no different—he exhibits the same admirable qualities and talents.
We went on to say in Haines that:
On the basis of оur collective experience, we would not agree that [the district court judge was] incapable of discharging judicial duties free from bias or prejudice. Unfortunately, that is not the test. It is not our subjective impressions of his impartiality gleaned after reviewing his decisions these many years; rather, the polestar is “[i]mpartiality and the appearance of impartiality.”
D. Standard for Disqualification under § 455(b)(1)
Whereas
As noted above, Kensington‘s mandamus petition relies on both
III.
In light of these standards, we now examine the arguments presented by the parties and amicus curiae both in support of, and in opposition to, Judge Wolin‘s recusal.
A. Arguments in Support of Disqualification
The parties asking for Judge Wolin‘s disqualification first seek to demonstrate that Messrs. Gross and Hamlin‘s dual roles in the Five Asbestos Cases and G-I Holdings gave rise to potential and actual conflicts of interest. In doing so, these parties contend, among other things, that:
- It is highly likely that a significant number of the future asbestos claimants in G-I Holdings will also be future claimants in the Five Asbestos Cases,8 thus creating a conflict between Messrs. Gross and Hamlin‘s duty to zealously represent their clients, on the one hand, and their duty to give Judge Wolin nеutral advice, on the other;
- Messrs. Gross and Hamlin never disclosed to the parties in the Five Asbestos Cases that they were representing
the asbestos claimants in G-I Holdings;
- Messrs. Gross and Hamlin repeatedly used their positions as advisors to Judge Wolin to advocate their clients’ partisan interests in G-I Holdings;
- Messrs. Gross and Hamlin challenged and criticized in G-I Holdings an expert witness who is likely to testify in Owens Corning;
- There were numerous instances in which Messrs. Hamlin and Gross, as partisan advocates for the asbestos claimants in G-I Holdings, met ex parte with James McMonagle, the Legal Representative for Future Asbestos Claimants in Owens Corning, to discuss “common futures issues;” and
- The debtors in W.R. Grace applied to the Bankruptcy Court to have Mr. Hamlin appointed as the legal representative for future asbestos claimants—an application which, if granted, would give rise to another conflict.
Building on that argument, the Petitioners next contend that, through his close association with the Consultants, Judge Wolin was “tainted” by association with Messrs. Gross and Hamlin, such that a reasonable person might question his impartiality. The Petitioners emphasize that it matters not whether Judge Wolin actually knew of the conflicts, but only that, as a result of Messrs. Hamlin and Gross‘s dual and conflicting roles, a reasonable person might question Judge Wolin‘s partiality. The Petitioners also point out that the Washington Legal Foundation, the only party with no direct interest in this case, supports Judge Wolin‘s recusal.9
B. Arguments Against Disqualification
The parties opposing Judge Wolin‘s disqualification argue first and foremost that the Petitions for Mandamus should be denied because they are untimely. See United States v. York, 888 F.2d 1050, 1055 (5th Cir.1989) (stating that timeliness requirement “prohibits knowing concealment of an ethical issue for strategic purposes“). The premise underlying this argument is that the Petitioners knew, or reasonably should have known, about Messrs. Gross and Hamlin‘s roles in G-I Holdings long ago, but chose not to act on that information until recently. Those parties point out, for example, that (a) Messrs. Gross and Hamlin‘s participation in G-I Holdings was a matter of public record and was widely reported in the asbestos litigation trade press; and (b) that certain law firms representing the creditors in the Owens Corning bankruptcy received notice of Messrs. Gross and Hamlin‘s participation in G-I Holdings.10
In addition to the timeliness argument, the parties opposing the mandamus petitions contend that:
- Kensington‘s petition for mandamus is merely a litigation tactic intended to derail the Owens Corning bankruptcy, as evidenced by the “barrage of motions and lawsuits” purportеdly filed by Kensington beginning in October 2003;
- The petitions for mandamus have failed to demonstrate that Judge Wolin‘s association with Messrs. Gross and Hamlin requires his recusal; and
- The complexity of the Five Asbestos Cases required a novel case management approach, thus justifying the use of advisors with broad powers and ex parte communications.11
Finally, certain parties have tried to impress upon us that even if Judge Wolin
IV.
After reviewing the written submissions from the parties, the District Court, and amicus curiae, and after hearing oral argument on December 12, 2003, we will, while retaining jurisdiction, remand this matter to Judge Wolin so that he can, in the first instance, decide (following expedited discovery) whether he should recuse himself from one or more of the Five Asbestos Cases. Our recital of the parties’ arguments as they are presented in this opinion are not to be taken or interpreted as expressions or inclinations of this Court respecting the issue of recusal or disqualification.
First and foremost, we are concerned that the existing record is inadequate and incomplete. We are reluctant to act in a complex situation such as this one, where so many vital interests are at stake, without a developed evidentiary record. We do not fault the parties. Judge Wolin‘s stay of discovery order prevented the parties from developing evidence of the circumstances which they allege give rise to the recusal motions.
Hence, a remand allowing for discovery is necessary because the primary inquiry to which we must respond pursuant to
In its Reply brief, Kensington asserted that, in light of the extensive briefing and scheduled oral argument, there was “no need to remand this case for further fact-finding” and that we could “and should enter a recusal order on the existing record.” Briefs without an evidentiary basis and oral argument are, however, a poor substitute for a developed evidentiary record which can result from an adversarial discovery process.
Among other things, discovery in this case may shed light on such matters as (i) the full extent of the Consultants’ activities in the Five Asbestоs Cases; (ii) Messrs. Gross and Hamlin‘s activities in G-I Holdings; (iii) the timeliness of the Petitions for Mandamus; and (iv) the extent to which recusal, if warranted in one of the bankruptcies, must be held to extend to the other bankruptcies. Because discovery is not an exercise which this Court can reasonably conduct, but is more the function of the District Court, we will vacate the stay Judge Wolin entered in his October 23, 2003 order and remand this matter to Judge Wolin so that his recusal ruling, which we direct that he make, may benefit from the discovery engaged in by the parties.12
Second, our decision to remand is impelled in large part by the standards
Finally, our decision to remand this matter to Judge Wolin is guided by the principle that “[d]iscretion is confided in the district court judge in the first instance to determine whether to disqualify himself ... [because the] judge presiding over a case is in the best position to appreciate the implications of those matters alleged in a recusal motion.” In re Drexel Burnham Lambert Inc., 861 F.2d 1307, 1312 (2d Cir.1988) (citation omitted). This principle rings particularly true where, as here, the district court judge has presided over (i) an extraordinarily complex litigation (ii) involving a multitude of parties (iii) fоr an extended period of time. Judge Wolin has been intimately involved in these proceedings for the past two years and, as demonstrated by his written responses, has acquired a familiarity with the issues beyond ours. Accordingly, he is in the best position to understand “the implications of those matters alleged in [the] recusal motion[s].” Id.
We realize, of course, that our decision to remand this matter to Judge Wolin will result in some delay, which causes us great concern. Not only can delay have unintended (and undesirable) ramifications for the debtors-in-bankruptcy; it can have a much more personal effect on the asbestos claimants who have filed claims against the debtors-in-bankruptcy and their related entities.13 We nevertheless believe that a short delay so that an evidentiary record may be developed is to be preferred rather than making an ill-informed decision on allegations alone.14 In an attempt to re-
V.
For the foregoing reasons, we will (i) vacate the discovery stay imposed by Judge Wolin in his order of October 23, 2003; (ii) direct that expedited discovery proceed without interruption, objections, or extensions; and (iii) direct Judge Wolin to rule on the recusal motions pending before him no later than January 31, 2004. This panel will retain jurisdiction in the event proceedings subsequent to Judge Wolin‘s ruling are required.
By expediting the filing of this opinion and by ordering compliance with our directions which establish a deadline or outside date of January 31, 2004, we believe any delay is minimal, but in this case essential.