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California Fourth District Court of Appeal Justice Alex McDonald on Monday defended his participation in an appeal of a class action against Exxon Corp. and other oil refiners while he owned Exxon stock and bonds. In a seven-page statement, McDonald said he sold all 416 shares of Exxon Corp. stock 26 days before oral argument to eliminate a conflict of interest. He also said his Exxon bonds didn’t cause a conflict because their value couldn’t be affected by the outcome of the appeal. McDonald wrote that he “therefore was under a duty to participate.” He said he didn’t comment earlier because the California Supreme Court was reviewing his ruling. Last week, the justices affirmed McDonald, ruling 7-0 in favor of the defendants. The case, Aguilar v. Atlantic Richfield, 01 C.D.O.S. 4903, alleged that oil refining companies in California shared information in an effort to limit the supply of cleaner-burning gas and drive up prices. The docket indicates the case was fully briefed by the end of January 1999. According to court administrator Steve Kelly, McDonald was assigned the case March 15. He sold his shares April 14, listened to oral argument May 10 and — due to delays stemming from a partial settlement in the case — ultimately issued his opinion for a three-judge panel in January 2000. McDonald’s stock and bond ownership didn’t come under scrutiny until earlier this month, when a plaintiffs’ lawyer discovered what he said “appears to be a naked conflict” and reported it to the state high court. In his statement, McDonald maintains he had no conflict when the case first came to his San Diego-based court in March 1998. Before briefing and completion of the appellate record, he said, he ruled on several preliminary petitions as part of a three-justice writ panel. At that point, he didn’t own the Exxon stock. He inherited the shares that summer, after his mother died on July 2, 1998, and left him stock worth more than $30,000. He said he “sold the stock before oral argument and before the court of appeal decided the case. The disposition of the stock eliminated what otherwise would have been a reason for disqualification.” As for the bonds, he said his ownership does not constitute a “financial interest” as defined by the Code of Civil Procedure section 170.5, which defines it as a “legal or equitable interest in a party” of more than $1,500. But McDonald said, “A note or debenture valued at $43,000 issued or guaranteed by a corporation the size of Exxon Corporation is a debt instrument that does not constitute a legal or equitable interest in the issuer.” The statute was amended in 1984. Before that date, the code specifically disqualified a judge from hearing matters in which he or she held or owned bonds issued by a party. McDonald did not return telephone calls Monday, instead referring calls to Donald Maffly, a partner with San Francisco’s Chandler, Wood, Harrington & Maffly and a longtime acquaintance of the justice. Last week, the Utility Consumers’ Action Network announced it had written to the Commission on Judicial Performance requesting that McDonald be sanctioned for an ethical violation. Maffly said McDonald has not been contacted by the agency. He said the justice issued the statement in part because of news coverage by The Recorder, The San Diego Union-Tribune and other media outlets. “We clearly don’t believe there was any conflict, that his participation was perfectly appropriate,” said Maffly. “It’s a matter of his reputation being tarnished.” Charles Kagay, a partner with San Francisco’s Spiegel Liao & Kagay who represented one of the plaintiffs in Aguilar and who brought the alleged conflict to the attention of the state high court, reiterated Monday that he wasn’t “going after Judge McDonald.” But he said he still wanted to know whether McDonald had worked on the complex case between the day it was assigned to him and the day he sold his shares. As for the bonds, Kagay questioned whether McDonald’s interpretation of the statute complies with its spirit. “The whole point of disqualification is to avoid impropriety and the appearance of impropriety. Judges are supposed to be sensitive to both,” he said.

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