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Last year, California Chief Justice Ronald George held stock in 47 publicly traded companies, stashing hundreds of thousands of dollars in high-flying tech stocks and blue-chips like Microsoft, America Online, Johnson & Johnson and Citigroup. Fellow California Supreme Court Justice Marvin Baxter held stocks like Motorola, Nokia, IBM, Intel, Bank of America and Wells Fargo, in addition to farmland near Fresno. Justice Ming Chin was in Pacific Gas & Electric, Allstate Insurance, Home Depot and Sears, among others. And Justice Janice Rogers Brown owned stocks in a half-dozen companies, including K-Mart, Disney and MCI. There are no rules restricting judges from investing in stocks and other assets, though ethics rules require them to recuse themselves from any case in which financial holdings in excess of $1,500 create a conflict of interest. But the justices’ vast and varied holdings create a wide array of potential conflicts of interest that the court is apparently ill-equipped to track. On Thursday, the San Francisco Daily Journal reported 32 different instances in which one of four California Supreme Court justices voted on petitions despite owning stock in a party to the suit. George says the problem stems from a faulty automated system, introduced last July, that failed to flag potential conflicts. And he says the increasingly complex face of corporate America, with mergers and acquisitions constantly creating new subsidiary companies and sister entities, makes the task harder than ever before. But ethics professor Stephen Gillers says the fault can’t all be laid at the feet of a computer program and urged the justices to consider the need to monitor and enforce compliance with existing ethical rules. “If there are 32 instances of which we are aware, then the court system in California has a problem and that’s not acceptable,” said Gillers, a professor and vice dean of New York University School of Law. “It seems to me the supreme court has to re-establish public confidence in the judges and initiate an investigation to determine how widespread the ignorance of the rules is.” Gillers suggests the justices adopt the federal rule requiring corporate litigants to detail their subsidiary and parent company relationships in their briefs. Santa Clara University School of Law’s Gerald Uelmen, meanwhile, says lawyers should be more active in checking out and raising a justice’s potential conflicts of interest — and not just financial ones. He recently asked a justice to recuse himself from reviewing a decision written by the justice’s brother-in-law. Earlier this week, George said he ordered a review of the Full Court automated case management system. That followed the Daily Journal‘s report that two justices voted last week to deny review in a toxic tort against IBM despite owning the company’s stock. George also rescinded the order denying, by a 4-2 vote, review in Leth v. Superior Court, S096437, and said he’d call in two pro tem justices to vote in place of IBM shareholders Baxter and Chin. George said the case caption did not include a reference to IBM, the real party in interest, though the company was named in the conference memo prepared by staff. Baxter and Chin voted with George and Brown to deny review. Justices Joyce Kennard and Stanley Mosk voted to grant. Justice Kathryn Mickle Werdegar was not present and did not leave a vote. Baxter and Chin didn’t return several phone calls, but in a joint statement issued through court staff, said, “In this particular case involving IBM we inadvertently failed to recognize that IBM was involved in the case. “The court’s computer system unfortunately failed to highlight the conflict,” the statement continued. “All justices will continue to take all necessary steps to identify conflicts of interests and to recuse themselves as appropriate.” Though George acknowledges that the problem could be widespread — the Full Court program doesn’t track real parties in interest or corporate subsidiaries — he says Leth was the only case in which the votes of conflicted justices affected the outcome. George also said that during the justices’ weekly conference Wednesday, he urged his colleagues to rely less on computer notification. “It appears we were doing a much better job before we went to the automated system,” George said. Still, George said he is confident the justices’ actions were not influenced by how their rulings would affect the value of their investments. Most of the justices invest heavily in the stock market, opening them up to what George calls “a minefield” of potential conflicts. But although the Daily Journal identified several instances in which Chin, Baxter, Brown and George voted despite conflicts, three other justices appeared to steer clear of the problem. Justice Kathryn Mickle Werdegar last year held tens of thousands of dollars in real estate investments, as well as interests in three insurance companies, three water utilities, about a dozen technology and communications companies and two lumber companies. Kennard lists ownership of stock in only one company, Resource Biometrics. Mosk has most of his money in tax-exempt bonds, an aircraft rental company and two public utilities. While the vast array of a justice’s financial holdings may require additional vigilance on the part of that justice — and perhaps of the public — there’s nothing wrong with investing, says Gillers. “You don’t want to make the price of becoming a judge that his or her investments be limited to treasury bonds,” he says. “On the other hand, as a judge’s assets are disbursed among frequent litigants in the court, the judge will have to step aside in many cases. But there’s really nothing you can do except rely on the judge’s good judgment to avoid unnecessary conflicts.” Gillers says California courts could benefit by adopting a rule similar to Federal Rule of Appellate Procedure 26.1, which calls on any nongovernmental party to file a statement identifying all companies, subsidiaries and affiliates — and to place that statement in front of the table of contents for the judges to read. Santa Clara’s Uelmen concedes that the justices’ potential conflicts of interest don’t necessarily mean they’re biased. But he counters that the appearance of bias can be just as damaging. “Across the country courts have become more sensitive to avoiding even the appearance of impropriety,” says Uelmen. “A century ago, judges routinely were sitting on cases argued by close relatives.” And he says financial conflicts are part of a bigger picture. In December, the court adopted a new set of canons for appellate justices detailing when they are expected to recuse themselves. The rules say justices must recuse if they appeared or served as a lawyer or sat as a judge in an earlier stage of the case; have more than a 1 percent interest in a company or stock worth more than $1,500; or if a lawyer in the case is a relative. But there is no mechanism to force a justice off a case. Earlier this month, Uelmen cited the new rules in a motion for disqualification that suggested Baxter recuse himself from People v. Mower, S094490, a medical marijuana case, because Baxter’s brother-in-law, James Ardaiz, wrote the Fifth District ruling. Last week, Baxter sent a letter saying he’d recused himself from the matter. But if a justice were to refuse, court watchers say, there’s little that a litigant could do. And with the justices’ varied stockholdings, it’s almost impossible for litigants or their attorneys to keep track of all potential conflicts a justice may have. Gillers notes that a rule in the American Bar Association’s Code of Judicial Ethics says that judges shall minimize the number of cases in which they will be disqualified. Still, he says, “I can’t think of any judge who has ever been disciplined or criticized by an official body for violating that rule. We rely on a judge’s good sense.”

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