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An appellate justice who threw out a class action against large oil companies owned both stock and bonds in defendant Exxon while the case was pending, according to lawyers arguing the case now before the California Supreme Court. According to financial disclosure reports, 4th District Court of Appeal Justice Alex McDonald owned more than $10,000 in Exxon Capital Ventures bonds during the entire time the case was before him. McDonald also acquired and sold between $10,000 and $100,000 in Exxon Corp. stock while the case was before him. Charles Kagay, who argued the case before California’s highest court, said the scenario shows “what appears to be a naked conflict.” A 4th District court administrator, Steve Kelly, said McDonald inherited the stock in July 1998 and sold it nine months later, before the appellate court decision was released in January 2000. “He’s not clear how this would impact making his decision,” Kelly said. The bonds, Kelly added, are part of an IRA that McDonald owns, which is managed by Salomon Smith Barney. Kelly said McDonald will obtain a copy of the letter from the California Supreme Court and review it. He also indicated McDonald may not have realized he owned the bonds. Kelly was responding to a call left with McDonald’s secretary. Even though the case is now before a higher court, one legal ethics expert said the lower court’s decision should be revisited. “First of all, he should not have participated in that case,” said Stephen Gillers, who teaches legal ethics at New York University’s School of Law. “In my view, the appropriate remedy is to vacate the case and send it back to the court of appeal for a new hearing” before different justices, Gillers said. This “sloppiness,” Gillers continued, “should not be tolerated. And the way for the supreme court to make that clear is to send it back.” Kagay, of San Francisco’s Spiegel Liao & Kagay, wrote a letter to the court late Wednesday alerting them to McDonald’s holdings, but did not ask for specific relief. Kagay said a lawyer working on the case began to examine the records after recent stories reported that several state supreme court justices participated in votes to take cases when they should have recused themselves. “We hadn’t looked at it before because we just assumed the judges were policing themselves,” Kagay said. Aguilar v. Atlantic Richfield Corp., S068738, was argued in April before the California Supreme Court. Two of the justices, Kathryn Mickle Werdegar and Marvin Baxter, recused themselves because of a conflict of interest. A decision in the case was expected within weeks. McDonald’s opinion reinstated a summary judgment for the defense first granted, and then rescinded, by a superior court judge in San Diego. Justices Don Work and Richard Huffman concurred in McDonald’s opinion. The suit alleged that several oil companies with refineries in California, Exxon included, shared information in an effort to limit supply and drive up prices. McDonald, who was appointed to the bench in 1995 by then-California Gov. Pete Wilson, appears to have owned the IRA for many years. The $10,000 to $100,000 inheritance in Exxon stock in July 1998 was also accompanied by stock in several other companies, including Bell Atlantic Corp., IBM Corp. and SBC Communications Inc. “[The court was] reviewing a decision that they shouldn’t have been reviewing,” Kagay said.

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