Update (4 p.m.) – Breyer and Alito respond unconvincingly: “Because the respondents waived the right to respond to the petition, there was no requirement based on the rules to provide a corporate statement [that would have disclosed the UTC connection and triggered a stock-based recusal]. The court has a diligent conflict-checking process but without a response there would be no way to find out there was a conflict.”
Fix the Court has again uncovered likely missed recusals by two Supreme Court justices.
Justices Breyer and Alito, who may own up to $300,000 in United Technologies shares, failed to step aside from a January cert. determination in a case involving Rockwell Collins, a company UTC acquired last November.
The justices’ stock figures are current as of Dec. 31, 2017, with their 2018 disclosures scheduled for release in June.
These are the second and third missed recusals due to a merger that FTC has found in recent months Last June 2018 Chief Justice Roberts failed to disqualify himself from Roberts et al. v. AT&T Mobility, even though AT&T had acquired Time Warner, whose shares Roberts probably owns, the previous week.
“Supreme Court justices, like any judges ruling on publicly traded companies, should be cognizant of potential conflicts at all times, and that includes an awareness of the M&A activity of the companies in their portfolios,” FTC executive director Gabe Roth said. “Better yet, the three justices who own individual stocks should divest from these holdings and invest solely in blended funds and retirement accounts like the rest of their colleagues. Failing to do so – and allowing these unforced errors to persist – weakens public trust in the institution, which should concern the justices a great deal.”
Including today’s probable slip-ups, the justices have failed to recuse in spite of a conflict nine times since FTC started tracking this trend in October Term 2015. Six of these were due to justices’ securities, and with the growing frequency of mergers across industries, the justices’ continued stock ownership makes these errors more likely.
Today’s discovery is all the more interesting given Alito’s comments on stock conflicts last month before a House subcommittee. “We are prohibited by statute from participating in any case in which we have a financial interest,” Alito told the panel (at 1:15:26), responding to a question from a Rep. Ann Kirkpatrick on whether justices should own individual stocks. “So if we own stock in a company that is a party or related to a party, a subsidiary or a parent, then we are prohibited from participating in that case, and all of that is disclosed in our financial disclosure form.”
Even more concerning, the cert. denial gave a win to Rockwell Collins, i.e., the court acted in the direct financial interests of two voting members. On Jan. 14, United Technologies stock (UTX) rose 1.5%, while the NYSE composite only gained one quarter of one percent.
The case in question arose from a six-year-long employment dispute in Iowa. Accountant Jingyuan Feng was fired from her job in 2013 – she says for discrimination; Rockwell Collins said for poor job performance – and filed suit in state court two years later, which was then moved to the Northern District of Iowa. She lost her discrimination claim there shortly after and in 2017 lost again before an Eighth Circuit panel. She filed a petition at the Supreme Court in Feb. 2018, and the court denied cert. on Jan. 14, 2019 (p. 3).
Rockwell Collins was represented at the high court by Gibson Dunn, and their counsel of record Gene Scalia, but the company waived the right to respond to Feng’s suit.
Last term, the three stock-owning justices recused from more than three dozen petition determinations due to ownership in blue chips like PNC, Oracle, Caterpillar, Johnson & Johnson, Merck, Mondelez, Oracle, Pearson and Time Warner.
Since FTC’s founding the number of stocks owned by the justices has dropped from 76 at the end of 2014 to 44 at the end of 2017.