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In 1999, Wal-Mart Stores Inc. was battling to prevent the Union of Food and Commercial Workers from organizing at Wal-Mart locations around the country. In a key tactic, lawyers for the Bentonville, Ark.-based retailer asked a local judge to put a stop to it. The judge, Donald Huffman, owned Wal-Mart stock worth about $700,000, which seems to present an ethical problem. But instead of disqualifying himself, the judge signed a temporary restraining order that prohibited the union from trespassing on Wal-Mart property throughout the United States. “I’m the kind of guy that likes to get things done, and I don’t necessarily stand on ceremony,” Judge Huffman. “Sometimes you get burned.” He did. The Arkansas Judicial Discipline and Disability Commission admonished Huffman in a letter in July. Now he is trying to convince the Arkansas Supreme Court that signing the TRO while holding Wal-Mart stock was proper. At the same time, the case has drawn attention to dozens of other cases across Arkansas, in which judges holding Wal-Mart stock are ruling in cases involving the retail giant as a party — often without informing the opposing party. In fact, in Benton and seven surrounding counties, nearly all the cases involving Wal-Mart are assigned to judges who own stock in the company, causing some lawyers to question whether anyone can get fair rulings against the company in northwest Arkansas. And throughout the state, they wonder if many judges are biased, even if only unconsciously, in favor of the state’s biggest economic player. “It’s hard to begrudge somebody a piece of the Wal-Mart action,” says Edward C. Brewer III, an expert in legal ethics and a professor at Northern Kentucky University’s Salmon P. Chase College of Law. “Good Lord, what a rocket. But look at it from the perspective of someone coming from outside of the state to litigate there.” A lawyer who comes from outside the state learns quickly that it is hard to escape Wal-Mart in Bentonville, a town with a population of a little less than 20,000. Just across the historic town square from the Benton County Courthouse is the little five-and-dime store — now a museum — that the late Sam Walton built into a retail empire, the second-biggest corporation in America. Nearby, a newspaper vending machine offers the town’s daily newspaper, owned by Wal-Mart heir Jim Walton. On the north side of the square is the Bank of Bentonville, whose parent company is chaired by the same Jim Walton. BEYOND THE COURTHOUSE DOOR Wal-Mart’s influence doesn’t stop at the courthouse door. Benton County is building an addition to the courthouse with the help of a $600,000 grant from the Walton Family Foundation, says the county treasurer. What’s more, four of the five judges in Bentonville, including Huffman, own Wal-Mart stock. A short drive away on Walton Boulevard, more than 40 lawyers work at the Wal-Mart home office in the legal department, more than at any law firm in the state outside of Little Rock, Ark. After election day, Wal-Mart may even have one of its own on the Arkansas Supreme Court. Max Koonce is the former top in-house lawyer for workers’ compensation claims against the company. Governor Mike Huckabee appointed him in the spring to serve out an unexpired term on the Court of Appeals. Koonce, who also worked for another Arkansas business giant, Tyson Foods, has impressive campaign support that includes contributions from Jim Walton and former Wal-Mart Chief Operating Officer Don Soderquist. Of course, it’s not surprising that people in Wal-Mart’s backyard buy and hold the company’s stock. Until the price began to slump at the beginning of the year, Wal-Mart shares seemed only to go up. For many Arkansans, modest investments have turned into small fortunes. An investor who put $10,000 into Wal-Mart 15 years ago, for example, would have about $300,000 today. “It’s the local big company, and people just hold a lot of it,” says Amy Stewart, a lawyer at the Rose Law Firm in Little Rock who represented Amazon.com in a trade secret suit that Wal-Mart filed. “I’m so used to assuming everyone has Wal-Mart stock,” says Stewart, laughing. She’s not that far off. Financial disclosure forms filed by judges across the state show that although judges’ stock holdings sometimes include other Arkansas corporations, such as Tyson Foods, Dillards, J.B. Hunt, TCBY and Acxiom, Wal-Mart is by far the bench’s investment of choice. Twenty-two Arkansas trial judges, or one in five, report holding Wal-Mart stock. Two Supreme Court justices and two judges on the Court of Appeals also own a piece of Wal-Mart. All but four of the 26 judges report more than $12,500 in Wal-Mart holdings, the top level on the disclosure forms. A Wal-Mart spokesman said the company had not made efforts to have cases in Arkansas assigned to judges that own its stock. Judge Huffman first raised the issue of his big Wal-Mart stake in the high-profile case in which Wal-Mart sued Amazon.com. Huffman then recused himself at the request of the parties. Wal-Mart withdrew the case and refiled in Washington state, where the suit was eventually settled. In the union lawsuit, several months after Huffman was forced to recuse, a judge in Fort Smith, Ark., dissolved the TRO. Under the old Model Rules governing judges, drafted by the American Bar Association, a judge was required to recuse when he or she had any economic interest in a party, no matter how small. One share of stock was enough. The rule still applies in federal court and many states. In 1990, though, the ABA added an exception for judges who held only “de minimis,” or insignificant, interests. Around half the states, including Arkansas, adopted the change, says Cynthia Gray, an expert on judicial ethics at the American Judicature Society. But how much is insignificant? Ten years of experience with the rule provide surprisingly little guidance, ethics experts say. One way of answering the question is to measure a judge’s stock against all the stock of a company, says Prof. Brewer, a test he thinks is much too easy on judges. An amount that is significant to an individual is likely to be a drop in the sea of a big company’s net worth. Another approach is to put the asset in the context of the rest of the judge’s finances. An asset that is insignificant to a very wealthy judge may mean a lot to a judge who is not wealthy. Yet a third way is to treat any real economic interest — “more than a cupcake,” in Brewer’s words — as disqualifying. “Whatever ‘insignificant’ is, I don’t think $10,000 is insignificant,” he says, noting that a judge could send a child to college for a year with that money. Some Arkansas judges do disclose their Wal-Mart holdings and hear Wal-Mart cases only if the parties agree, as permitted under the Arkansas rules. In rural Yell County, Judge William Bullock sends a letter to lawyers for both sides in cases involving the retailer, advising them that he owns stock and giving them the option of getting another judge. And Arkansas Supreme Court Justice Don Corbin routinely sits out when Wal-Mart is a party, even when it means the governor has to appoint a special justice to fill in for him. Others keep their stock ownership to themselves. In Fayetteville, home of the Bud Walton Arena and the Walton Arts Center, Judge Kim Smith was assigned to most of the 16 Wal-Mart cases filed in the Washington County courthouse since 1996. He says that he used to send out recusal letters in Wal-Mart cases before the 1990 rule change. But Judge Smith, who recently completed a term on the Judicial Discipline and Disability Commission, considers his Wal-Mart stock to fit the de minimis exception. He declined to be specific, but said the value of his stock is “more than $12,500, but not in that category of Donald Huffman.” And Judge Margaret Meads, who sits on the Court of Appeals, hears Wal-Mart cases, despite the fact that her husband owns more than $12,500 in Wal-Mart stock. In December, in fact, she joined a unanimous panel in upholding Bentonville Judge Tom Keith’s decision to grant summary judgment for Wal-Mart in a tort case. Keith, who says he owns a little less than $30,000 in Wal-Mart stock, says he generally discloses it in the courtroom “before I make any decision of consequence,” although he could not guarantee that he does that in every case. Meads did not return calls seeking comment. One Arkansas lawyer who had a recent Wal-Mart case in which Meads sat said she did not disclose her husband’s stock ownership. No plaintiffs’ lawyer contacted for this story could say that a particular judge’s decisions were influenced by economic or other improper considerations. And in almost all the cases, the chance that a decision for or against Wal-Mart would affect the judges’ investments by moving the share price was remote. Still, many of them say that Arkansas can be a tough place to make a living suing Wal-Mart and other big corporations. Discussing Arkansas judges, Eureka Springs lawyer Richard Parker says, “I think they divide the world into two types of people. First, there’s the people that are rich, smart, prudent, go to church and bought Wal-Mart and Tyson stock. Then there’s the people who are too damn stupid and didn’t, and don’t deserve any breaks in life.” Parker represents a personal-injury plaintiff suing Wal-Mart in Carroll County, just east of Benton, where the lone judge owns stock in the company. Although judicial ethics experts say it is the judges’ responsibility to keep track of their financial holdings and to disqualify themselves when appropriate, there is little oversight of their decisions. In Arkansas, one reason is that the group that requires financial disclosure has no authority over judges, and the group that disciplines judges doesn’t read the disclosure forms. Judges and other public officials in Arkansas are required to report their financial holdings to the Arkansas Ethics Commission. But the Ethics Commission only makes sure the judges file the reports; it doesn’t have the authority to discipline them for conflicts of interest. The body that does discipline judges, the Judicial Discipline and Disability Commission, only reviews the disclosure forms after a complaint has been filed, says Executive Director James A. Badami. In addition, the disclosure forms require the filer to check one of only two boxes: “more than $1,000″ or “more than $12,500.” So there is no way to know if a judge has hundreds of thousands of dollars in the stock of a party. Judge Huffman’s $700,000 in stock was correctly reported as “more than $12,500.” Badami says he thinks $12,500 probably is de minimis. BENTONVILLE BLUES Since 1991, Bentonville judge David Clinger’s disclosure forms show that he and his wife Xollie Duncan own more than $12,500 in Wal-Mart stock. (In September, Gov. Huckabee appointed Duncan to fill the remaining term of Judge Oliver Adams, who had died. Adams also held more than $12,500 in Wal-Mart stock.) Neither Clinger nor Duncan returned phone calls seeking comment. But if Clinger had exactly $12,501 in Wal-Mart stock when he first filed a financial disclosure in 1991, and then held onto it, he would have stock worth more than $70,000 today (down from about $100,000 at the turn of this year), based on reported stock prices. The same week in July that Huffman was reprimanded because of his temporary restraining order against the union, Wal-Mart lawyers sued one of their senior computer programmers, claiming that he was trying to steal secret computer files and programs. Huffman recused immediately, but Clinger signed a temporary restraining order against the former employee and directed the county sheriff to take his home computer. Of course, only a handful of the Wal-Mart cases in the Bentonville courthouse involve big companies or unions. Most of the 42 civil case filings involving the company in the last three years were brought by people who live nearby and have no other option except to sue Wal-Mart in its home town. On a recent September day, one of those people parked by the Bank of Bentonville and walked, slowly and with a limp, to the courthouse to file the latest set of papers in a slip-and-fall case against Wal-Mart. Harry Hauser, 72, a retired Air Force lieutenant colonel, slipped on a wet floor in a Rogers, Ark. Wal-Mart in 1994, badly breaking his left leg. When he first filed the case, the 16 screws that hold Hauser’s femur together routinely set off the courthouse metal detector. Now the court officers just wave him through. Hauser earned a law degree after leaving the military, so even though he has a lawyer, he has been doing much of the work on his case himself. He says that he was surprised when he found out that the judge on his case, Clinger, holds stock in Wal-Mart. But while he says he’s disappointed the judge hasn’t yet sanctioned Wal-Mart for what he claims are repeated delays and failures to turn over evidence, Hauser remains hopeful that he will get a fair trial. After six years, he would like to get on with his life. Kim Green helped research this story.

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