A Rare Occurrence: Willkie Attorney Wins Recusal Motion To Disqualify Judge

Thursday, July 1, 2004 - 00:00

Editor: Can you please tell us about your career as a litigator?

Mancino:
I have been with Willkie since 1982 and before that I was a summer associate at the firm. I have spent my entire career with this great firm and have had a varied and interesting litigation practice over the years. I'm involved in any number of types of litigation including bankruptcy litigation, reinsurance litigation (principally arbitration in that context), insurance coverage litigation, fraudulent conveyance litigation, securities litigation and product liability litigation. My very broad practice area never permits my work to become boring.

Editor: Can you give us a little background on the asbestos bankruptcy case in which you were counsel to the creditors of W.R. Grace?

Mancino:
We got involved in the W.R.Grace bankruptcy last year representing several holders of Grace bank debt. The background of the Grace bankruptcy really goes back to the entire asbestos litigation crisis that continues to clog the courts and threaten the viability of many companies like Grace. Faced with increasing numbers of asbestos claims, and looking for an effective means of addressing those claims, Grace filed for bankruptcy in 2001. Together with four other major asbestos bankruptcies that were pending in the Delaware bankruptcy courts, the Grace case was assigned by then Chief Judge Becker of the Third Circuit Court of Appeals to Judge Alfred M. Wolin, a federal district judge in Newark, in December of 2001 for consolidated case management. Each of the five cases had progressed along slightly different paths in their reorganization process. With respect to Grace, there had not been much progress toward a plan of reorganization by the time we got involved. Most of the activity in the case involved a fraudulent transfer claim that certain of the creditor constituencies in Grace were pursuing against a company with which Grace had had a corporate transaction. What prompted our involvement, at least on the disqualification issue, was our learning in the fall of 2003 that a creditor in one of the other bankruptcy cases had discovered some information relating to the role in all of the bankruptcy cases of certain court-appointed advisors. That creditor had filed a motion to disqualify Judge Wolin in the Owens Corning case. After reviewing the facts behind the motion, we decided to file a disqualification motion on behalf of our clients in the Grace case.

Editor: Of the five bankrupt companies before the judge, not all of the litigants perceived the judge should have been disqualified. Please explain.

Mancino:
Most likely the status of those other cases was different from Grace. I believe Federal Mogul had really progressed toward a plan of reorganization and the Armstrong case was probably in a different posture as well. Disqualification motions were filed in the Grace case, in Owens Corning and then eventually in the USG case.

Editor: Describe the situation of a federal judge administering the case who had the appearance of bias for which he was ordered to recuse himself.

Mancino:
Recusal motions in and of themselves are very unusual. They are relatively rare. Here the procedural routes that these disqualification requests took were completely unique, as far as I know. The normal way in which a disqualification issue arises is for a litigant to file a request with the court itself. Then that judge decides on the motion of whether under section 454 of title 28 of the U.S. Code disqualification is warranted. Even in a normal situation, it is rather odd because you are asking the very judge whom you believe exhibited an appearance of partiality or bias to decide the issue and disqualify himself. However in this case the disqualification motions followed a more complex path. In the Owens Corning and the Grace cases, the disqualification motions were in the first instance filed with the district court asking Judge Wolin to recuse himself. However, those motions were not acted upon, and, indeed in the Owens Corning case, Judge Wolin had on his own motion stayed all proceedings on the motion and stayed the discovery that the creditors in Owen Corning were seeking, The decision was made to apply immediately to the Court of Appeals for the Third Circuit for a writ of mandamus, ordering Judge Wolin to recuse himself. In Grace we, too, filed a motion to disqualify Judge Wolin and when that was not acted upon we filed a petition for a writ of mandamus before the Third Circuit. The Third Circuit accepted those petitions, which is ordinarily not done because mandamus is an extreme remedy. In December the Third Circuit Appeals Court heard arguments on whether or not Judge Wolin should be recused. Without deciding that issue, the Appeals Court concluded it needed a more developed evidentiary record and remanded the matter back to Judge Wolin to conduct expedited discovery and then to decide the motions himself. We then appeared in front of Judge Wolin in that peculiar posture where you are asking the same judge whom you are claiming should be disqualified to recuse himself. All in all it was a very unusual situation.

Editor: Tell us a bit more about the court-appointed advisors who were advising Judge Wolin who in some cases had their own agendas. Aren't they meant to be totally impartial?

Mancino:
In our view, absolutely. These court appointed advisors, though it never really was clear what precisely their roles were, should have been completely impartial. Soon after Judge Wolin took over the asbestos cases, he held a case management conference at the end of December 2001 in which he announced he would be appointing advisors. He also announced that he would be conducting ex parte conferences with the parties, although he said he would use his power to hold ex parte conferences sparingly. He also overruled in advance any objections anyone might have had to those ex parte conferences. He then appointed five advisors, three were former New Jersey state judges, one a well known New Jersey lawyer and the fifth was Professor Francis McGovern who has had a long standing career in the mass tort area as an academic and mediator. It was unclear as to what these advisors would be doing because the order appointing them was very broad. As best as we could tell, there really were no guidelines established that would direct what these advisors would do in their respective roles or put any limitations or restrictions on how they did their jobs. The disqualification motions originally focused on the role of two of the advisors, David Gross and former Judge Hamlin. The motions stressed that these two advisors were not completely impartial neutrals because Judge Hamlin was acting at the same time as a representative for future asbestos claimants in the G1 Holding(f.k.a. GAF) bankruptcy, which was pending in New Jersey. Mr. Gross was his counsel. They both had a fiduciary duty to advance the interest of future asbestos claimants in the G1 case. The concern is that all of these asbestos bankruptcies have common issues as to how these claims will be dealt with both as a litigation matter, and as a bankruptcy matter. And they also have overlapping claimants because very frequently an asbestos claimant in one case is also an asbestos claimant in another case against another manufacturer. There was a real likelihood that some of the people that Hamlin and Gross were representing in G1 would be claimants in our bankruptcy cases as well. Initially they were advising the judge on the whole array of bankruptcy litigation issues that would come up in all of the bankruptcy cases. There were four all-hands meetings among these advisors and Judge Wolin in which their discussions with the judge covered almost all of the major issues in these asbestos litigations. Judge Wolin described himself as a neophyte in asbestos bankruptcy matters - that was his reason for bringing in these advisors - so they played a very important role in the cases.

Editor: Did you have a written record of what they covered in the meetings?

Mancino:
That was part of the problem; we did not. The meetings these advisors had with Judge Wolin amongst themselves and with the parties and their counsel on an ex parte basis were not recorded. Because we were foreclosed from pursuing discovery into many of the ex parte meetings, we never learned all that was discussed. What we did learn about the meetings with the advisors came from memoranda that had been drafted by one of Mr. Gross' associates and hand-written notes that the advisors had taken of the meetings. As we got into discovery, we had an opportunity to take limited depositions of the advisors and were able to probe a little bit into what was discussed, although in some cases, their memories were not as fresh as one would have hoped. That is the problem with ex parte conferences; no records are kept. Those who are excluded from the ex parte conference don't know what is being discussed and have no way of challenging or correcting things that are discussed.

Editor: And there is no guarantee that you will get a correct written record of those ex parte conferences even if you do get something written?

Mancino:
That is right, not if you are relying on the participants' own recollections or incomplete notes.

Editor: What were the findings of the Appeals Court once they took up the case?

Mancino:
Once the Third Circuit heard the case and had before it a much more developed evidentiary record, it concluded that these circumstances did give rise to an appearance of bias or partiality on the part of Judge Wolin such that he should have recused himself under section 455(a). What concerned the Third Circuit was, as we had argued, that these two advisors, Gross and Hamlin, were operating under a structural conflict of interest because of their duties as fiduciaries to future claimants in the G1 bankruptcy. The Third Circuit also found the regime of ex parte conferences and communications that Judge Wolin had instituted exacerbated the taint that was created by having these conflicted advisors involved although the Court did not need to decide whether they provided an independent basis for disqulification under section 455(b). The Third Circuit also found that the safeguards that Judge Wolin said existed with respect to the involvement of these two conflicted advisors and with respect to ex parte conferences were not sufficient to minimize the risks posed by them. The Third Circuit also found that the disqualification motions were timely and that the creditors in Grace and Owens Corning had not known about the conflict of interest that Hamlin and Gross were operating under until October 2003 and therefore their motions should have been allowed to go forward.

Editor: What will happen to the case at this point? Will it be reassigned to another federal judge?

Mancino:
It has been. Chief Judge Scirica has appointed Judge Buckwalter, a federal district judge in eastern Pennsylvania, to handle the W.R. Grace bankruptcy from the district court perspective. The bankruptcy elements of these asbestos bankruptcy cases are being handled by very experienced bankruptcy judges. In the case of the W.R. Grace case, Judge Fitzgerald is handling the bankruptcy of Grace and she will continue to handle the bankruptcy aspect while any district court activity relating to the Grace case will now happen in front of Judge Buckwalter.

Editor: There were no additional sanctions visited on Judge Wolin other than his being recused from the case?

Mancino:
I think it is important to note that in coming down with its ruling, the Third Circuit stressed that it had not found Judge Wolin to be biased or partial. Rather what they found was that the involvement of the conflicted advisors coupled with this regime of ex parte communications created an appearance of bias and partiality. That is the test under section 455(a). It is rather a matter of whether a reasonable person knowing all the circumstances might believe that the judge has an appearance of bias. The Third Circuit was not sanctioning Judge Wolin in any sense of the term, but rather was saying that under the circumstances he should have disqualified himself. The Court did note its disapproval of the manner and extent of the ex parte meetings that took place.

Please email the author at rmancino@willkie.com with questions about this article.