X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Lawyers seeking the recusal of Southern District of New York Judge Shira Scheindlin from presiding over nearly 900 consolidated suits in litigation over initial public offerings may not use testimony from ethics experts to support their motion, the judge ruled. Scheindlin rejected Wednesday an attempt to have legal ethics professors Geoffrey Hazard and Charles Wolfram interpret and offer opinions on the proposed recusal, saying the law is clear that experts may testify only on factual matters. “In our adversarial system, lawyers make arguments, judges write legal opinions — and there is no such thing as an expert opinion when it comes to interpreting a statute unless that opinion belongs to a court,” Scheindlin said. The decision will be published Tuesday. Scheindlin has yet to rule on the recusal motion, which was made by all but two of the 41 investment banks that have been sued in In re: Initial Public Offering Securities Litigation, 21 MC 92. Plaintiffs allege that the investment banks charged that institutional clients inflated commissions for IPO shares and required the clients to buy large blocks of shares on the first day of trading to force a sharp spike or “pop” in the share price. The cases were filed in the Southern District of New York and consolidated before Judge Scheindlin for organizational and discovery purposes. The plaintiffs, for the most part individual investors, allege a failure to disclose in the offering prospectuses activities that were designed to inflate the price of the stock, as well as a failure to disclose the compensation of the underwriters. In addition to the underwriters, more than 170 companies have been named as defendants. The recusal motion alleges that Judge Scheindlin, her husband and her son owned shares in some of the technology companies that were sued by investors. According to court transcripts, Jeffrey Barist of Milbank, Tweed, Hadley & McCloy, who represents Deutsche Banc Alex Brown, asked Scheindlin to recuse herself in late September because she “is one of the people who was allegedly damaged by the scheme.” But Judge Scheindlin said she had already “renounced any interest in participating in the class” on one of the stocks in question, and disclosed that she had made a profit of $900 on another, which takes her outside the class of investors who lost money. She also said she had no knowledge of her son’s investments. While she has yet to rule on the recusal motion, Scheindlin made clear at a Sept. 26 hearing that she was skeptical. “My worry is that the charge is so broad that there is a risk of judge shopping,” the judge said. “How do you deal with the judge issue? Do you take a financial disclosure from the entire court and look through everybody’s and say these 25 are out but these 10 are potentials?” And Judge Scheindlin was dismissive of the arguments in favor of considering the professors’ opinions made by Barist and co-counsel who joined in the motion. On Oct. 15, more than two weeks after the motion was made, the judge told the lawyers that the proposed affidavits “are supposed to put in factual material, but they are not supposed to, in essence, make an additional legal argument.” Even so, the judge said, she reviewed the declarations by Professors Hazard and Wolfram. The declaration submitted by Hazard of the University of Pennsylvania Law School said he had been “asked to give my opinion concerning whether 28 U.S.C. Section 455 requires recusal of the presiding district court judge.” Wolfram, of Cornell Law School, said in his declaration, “In summary, my opinion is that the facts compel her to recuse herself.” ‘NO PLACE’ FOR EXPERTS But Judge Scheindlin said there was no place for expert opinion on the matter. “These declarations offer — indeed, they only purport to offer — legal opinions and analyses on the question of whether the statute requires recusal,” she said. “Although the court certainly has respect for Professors Hazard and Wolfram, they are only offering opinions based on undisputed facts.” And, the judge said, the decision on whether to grant recusal “involves nothing more than interpreting the statute given certain undisputed facts; it is solely a question of law,” she said. All the defendant underwriters joined in the recusal motion, save two, Morgan Stanley Dean Witter & Co. and RBC Dain Rauscher Corp. None of the companies sued in the litigation joined in the motion. Liaison counsel for the plaintiffs are Melyvn I. Weiss and Ariana J. Tadler of Milberg Weiss Bershad Hynes & Lerach, and Stanley Bernstein and Robert Berg of Bernstein Liebhard & Lifshitz. Gandolfo V. DiBlasi of Sullivan & Cromwell is liaison counsel for the defendant underwriters. Jack C. Auspitz of Morrison & Foerster is liaison counsel for the defendant issuers.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.