In Re Federal Savings and Loan Insurance Corporation and Glenn M. Young, 852 F.2d 565, 4th Cir. (1988)
In Re Federal Savings and Loan Insurance Corporation and Glenn M. Young, 852 F.2d 565, 4th Cir. (1988)
2d 565
Unpublished Disposition
(James Paul Murphy, Allen W. Levy, Squire, Sanders & Dempsey; Jordan
Luke, Jose P. Ceppi, Office of General Counsel, Federal Home Loan
Bank Board), for petitioner.
(Mary Goman Slocum, Office of the U.S. Trustee; Edward James
Westbrook, Motley, Loadholt, Richardson & Poole; John Waites, Trustee,
U.S. Department of Justice; Robert Geoffrey Levy, Trustee, Levy &
Goodwill), for respondent.
Before HARRISON L. WINTER, Chief Judge, and K.K. HALL and
SPROUSE, Circuit Judges.
PER CURIAM:
The Federal Savings and Loan Insurance Corporation ("FSLIC") petitions for a
writ of mandamus to compel Honorable Solomon Blatt, Jr., Chief Judge of the
United States District Court for the District of South Carolina to recuse himself
from certain bankruptcy proceedings in which FSLIC is a party. FSLIC also
seeks to require Judge Blatt to vacate an order entered on February 8, 1988,
which denied FSLIC's motion for recusal, revoked the admission to practice
pro hoc vice of FSLIC's lead counsel, and referred the bankruptcy case to the
United States Bankruptcy Court for the District of South Carolina. Although we
do not applaud all of the tactics of FSLIC in this matter, we regretfully
conclude that Judge Blatt's participation has created an appearance of impaired
impartiality that can only be remedied through mandamus.
I.
2
On April 16, 1987, SFB, one of the largest creditors in the bankruptcy cases
pending before Judge Blatt, was declared insolvent by the Federal Loan Bank
Board. In accordance with established procedure, FSLIC was appointed as
receiver of SFB's assets and thus, entered the bankruptcy proceedings as
successor-in-interest to the failed lending institution.
FSLIC filed a notice of appeal challenging the denial of both of its motions.
The appeal was subsequently dismissed as part of a settlement agreement
reached between FSLIC and the trustee. Pursuant to that agreement, the Trustee
conveyed certain collateral to FSLIC and sold other assets of the estate at public
auction. From the proceeds of that auction, a $3,000,000 escrow fund was
created to satisfy the unsecured creditors. The agreement further provided that
if the unsecured creditors were otherwise adequately compensated in the final
liquidation, the fund would be paid in its entirety to FSLIC. The fund was
subject, however, to the administrative expenses of the estate, including
attorneys' fees. It, therefore, became in FSLIC's interest to oppose the fee
requests of the Trustee's attorneys.
10
11
(1) the opinion of this Court in In Re Federal Deposit Insurance Corp., No. 873862 (4th Cir. November 24, 1987) which directed Judge Blatt to recuse
himself from another proceeding involving Hilton Head;
12
(2) Judge Blatt's long-standing personal relationship with both West and
McCutchen;
13
(3) Judge Blatt's allegedly unusual action in "reaching out" for jurisdiction over
the case;
14
(4) repeated ex parte contacts between Judge Blatt and the Trustee as well as
Trustee's counsel; and
15
(5) Judge Blatt's statement, quoted in the January 1, 1988 edition of a local
Hilton Head newspaper, in which he described his role in the bankruptcy
proceedings as that of "the people's buyer."
16
17
18
Judge Blatt also rejected as grounds for recusal his successful effort to obtain
the transfer of the bankruptcy case from New York to South Carolina reasoning
that time had been of the essence in an effort to protect the economic wellbeing of the Hilton Head community and that a prompt resolution would have
been possible only in his court. He further rejected FSLIC's position on ex parte
contacts, concluding that ex parte conferences with "everybody" was part of his
normal judicial procedure. Finally, the Chief Judge asserted that his statements
in the Hilton Head newspaper reflected nothing more than his general concern
for the community and did not raise any question of bias for or against the
parties. Accordingly, FSLIC's motion for recusal was denied.
19
In the course of the bench colloquy, Judge Blatt occasionally diverged from his
analysis of the motion to directly criticize Young's performance. In the Chief
Judge's view, Young had failed to pursue recusal in a timely fashion, had used
motions for disqualification and recusal as intimidating tactical weapons, and
had misstated or distorted facts in the record. After announcing his decision on
the recusal motion, Judge Blatt informed Young that
20
I'm going to revoke your right to practice pro hac vice in this case and I'm going
to require that before you apply, not your firm, before "you" apply to be
admitted to any court in the state of South Carolina to practice pro hac vice, that
you apply, that you give that judge a copy of what I have had to say so he will
know who he is dealing with.
21
Finally, Judge Blatt observed that "I know if I stay in this case, you're [FSLIC]
going to appeal ... and spend hundreds of thousands of dollars more of
unsecured creditors money...." He, therefore, ruled that the whole remaining
case would be referred to the bankruptcy court. The denial of the recusal
motion, the revocation of Young's admission, and the referral of the case to the
bankruptcy court for a "full and final" determination were all subsequently
embodied in a formal order of the district court.
22
At that juncture, the instant petition for a writ of mandamus was filed with this
Court on behalf of FSLIC and its chief counsel, Mr. Young. Petitioners
contended that the extraordinary remedy of mandamus was merited because
Judge Blatt had failed to conform to the duty imposed by 28 U.S.C. Sec. 455 of
recusing himself in circumstances where "his impartiality might reasonably be
questioned." Petitioners also contended that mandamus or a writ of prohibition
was necessary to address the improper revocation of Young's pro hac vice
admission. Concluding that petitioners' allegations raised questions of serious
concern, we directed that a response be filed on behalf of Judge Blatt. We have
now received and considered that response, as well as submissions by the
Trustee. The matter is, therefore, ripe for disposition.
II.
23
The respondent and the Trustee have advanced substantially similar arguments
in opposition to the petition. It is contended that (1) the petition is essentially
moot because Judge Blatt has in fact recused himself by transferring this case to
the bankruptcy court; (2) the grounds for FSLIC's recusal motion were apparent
as early as July of 1987 and that the belated attempt to force recusal through an
untimely petition should not be sanctioned; and (3) the recusal effort is
meritless because there is no reasonable basis to challenge Judge Blatt's
impartiality. Respondent also contends that the revocation of Young's pro hac
vice admission was justified by his repeated acts of misconduct; did not violate
local rules or the dictates of due process; and left him avenues other than
mandamus in which to seek vindication. Respondent maintains that there is,
therefore, no compelling justification for mandamus in this matter. We must
disagree with respondent's position.
24
25
26
The specific facts of the present case further support a reasonable question
concerning Judge Blatt's impartiality. The principal issue remaining in the case
is the level of attorney's fees. The potential beneficiaries of any decision
include two attorneys who have had extensive personal and professional
relationships with the presiding judge. We recognize, as respondent urges, that
in a small state such as South Carolina, with a close-knit bar, lawyers and
judges will frequently know each other. There is, however, a substantial
difference between being acquainted and the type of long-standing involvement
Judge Blatt concedes that he has had with both West and McCutchen.
27
We do not suggest, in any fashion, that Judge Blatt would have allowed his
prior relationship with the Trustee's attorneys to affect his determinations.
Unfortunately, there would be ample reason for FSLIC and the public at large
to question whether he could with impartiality make the subtle evaluations
necessary to set the appropriate level of compensation for those individuals.2 It
was, therefore, a clear violation of the Chief Judge's independent duty under 28
We cannot accept respondent's suggestion that the referral of the fee dispute to
the bankruptcy court has mooted the issue of his recusal. In the first instance,
the bankruptcy court operates under the jurisdiction of the district court and the
matter is, thus, still within the broad ambit of the Chief Judge's authority. Even
more significantly, the referral does not dissipate the shadow on the appearance
of impartiality created by Judge Blatt's initial participation. Indeed, it would
darken that shadow if the district court were to be permitted to take action in
contravention of its statutory duty and then effectively insulate itself from
appellate scrutiny by transferring the dispute to a lesser tribunal.
III.
29
We can perceive but one method that will restore the public image of judicial
impartiality in this case. The district court's order of February 8, 1988, must be
vacated in its entirety. FSLIC's motion for recusal must be granted and the
remaining case assigned to another district judge.4 Accordingly, it is
ORDERED that the petition for a Writ of Mandamus is granted. Pursuant to
this order, Chief Judge Solomon Blatt will vacate his order entered on February
8, 1988, and recuse himself from all further participation in this matter.
30
It is so ORDERED.
In his review of Federal Deposit, Judge Blatt placed far more emphasis on our
observation that he is a Hilton Head landowner than was warranted. The Chief
Judge's residence was simply a small part of the totality of the circumstances
which led to the conclusion to Federal Deposit
In Liljeberg v. Health Services Acquisition Corp., --- S.Ct. ----, 1988 WL 59897
(U.S. June 17, 1988), the Supreme Court strongly reaffirmed the rule that
recusal is required by Sec. 455 whenever a reasonable observer would question
a district judge's impartiality