The Breakdown in Federal AppealsAuthor(s): Timothy HarperSource: ABA Journal, Vol. 70, No. 2 (February, 1984), pp. 56-59Published by: American Bar AssociationStable URL: http://www.jstor.org/stable/20756954 .

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The Breakdown in

Federal Appeals

By Timothy Harper

The case already had become one of the most expensive and far-reaching cor

porate disputes in American legal his tory by the time a divided three-judge panel of the U. S. Court of Appeals for the Seventh Circuit reached a decision in January 1982.

The case was MCI Communications

Corp. v. American Telephone and Tele

graph Co., 708 F.2d 1081. The judges' 2-1 decision affirmed a district court jury's finding that AT&T had violated antitrust laws in fighting off competition for long-distance telephone calls by the upstart challenger MCI.

But the split panel threw out the jury's findings on damages?$600 million in compensatory damages to MCI,

which, when trebled under antitrust law, meant that AT&T had to pay MCI $1.8 billion. The Seventh Circuit panel held that while AT&T's liability had been established, a new trial was necessary to

set damages. Both MCI and AT&T requested a

rehearing en banc before all the Seventh Circuit's judges in regular active service. En banc rehearings are rare. There were

only 66 among the 13,217 cases decided in the 12 federal courts of appeals in the year ending June 30, 1983 (not counting the year-old Federal Circuit).

But MCI v. AT&T was such a large, complex and costly case (the Chicago law firm of Jenner & Block's fees to

MCI by then were estimated at more than $90 million) that it seemed natural for the Seventh Circuit to give it every consideration on the way to the Supreme Court. Indeed, the con

ventional wisdom is that en banc rehear

ings often keep cases from ever going up to the High Court.

Clash of ethics and efficiency There was no en banc rehearing,

however. As in an increasing number of

cases, a rehearing was denied not neces

sarily because the judges in the circuit voted against the en banc request. Rather it was precluded by a clash of disparate rules on judicial ethics and judicial efficiency.

Federal law and the Code of Judicial Conduct bar judges from making any determinations in cases in which they may have a personal interest. But in

some circuits?especially the Fifth and the District of Columbia?the strict recusal law routinely disqualifies so many judges that there aren't enough left to grant en banc rehearings. In most

circuits judges who recuse themselves are in effect counted as voting "no" on

the rehearing request. As a result, the self-correcting mecha

nism of the federal appeals courts is defeated. Because the U.S. Supreme Court reviews only a tiny fraction of the cases brought before it, an erroneous

ruling by a three-judge panel can remain in force, with no possibility of prompt correction. The situation "operates to

permit a minority of the active judges to deny en banc reconsideration of . . . the more pressing issues of our day," wrote

Judges William H. Timbers and James L. Oakes in a Second Circuit dissent. For litigants, the situation means that parties in some parts of the country will have a greater opportunity to be heard on appeal than parties elsewhere.

And there is no help in sight. The Supreme Court for 20 years has taken a hands-off stance to the problem, and Congress has taken no action.

When the MCI v. AT&T rehearing request was made, there was one

vacancy in the nine-judge Seventh Cir cuit. So among the eight remaining judges, five votes were needed for the majority to grant a rehearing under the circuit's local rules. But three of the eight disqualified themselves from MCI v. AT&T because of personal and finan

cial conflicts. That meant that all five of the judges eligible to vote?including Richard Cudahy, who had written the majority opinion in the original 2-1 deci sion?would have to agree to rehear the case. The judges never even held a for mal vote. The rehearing was simply denied without comment last April 11.

It wasn't until then that the lawyers on both sides formally learned that three judges had been disqualified?and that the lawyers' time and efforts preparing for a rehearing had been wasted because there had been virtually no chance of the request being granted.

In a dissent, Judge William H. Timbers noted that a minority of judges have the power to deny en banc reconsideration of pressing issues.

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Staying in line The purpose of en banc rehearings is

to keep a circuit in line with itself, with other circuits and with Supreme Court rulings. Essentially, it is a face-saving, self-policing mechanism by which the other judges in a circuit can block and then rectify a bad decision by a three judge panel.

A former Seventh Circuit law clerk who requested anonymity tells of a clas sic example in which several judges in the circuit used the threat of an en banc reversal to prod a recalcitrant judge into rewriting an opinion that included lan guage at odds with long-standing Supreme Court civil rights precedents. "Once the rest of the judges are alerted to a potentially embarrassing problem in an opinion, they can be counted on to pressure a judge or panel of judges to do the proper thing," the clerk said. "Oth erwise, a stubborn or sheepish judge who would prefer just to let the original opinion pass through, and wait for the unlikely event that the Supreme Court would overturn, could in effect embar rass the whole circuit."

Canon 3(c) of the Code of Judicial Conduct for United States Judges and 28 U.S.C. ? 455 govern judicial disqualifica tion. They require judges to disqualify themselves in a broad range of cases, including those in which the judge or a

member of the judge's family has a financial interest in the case, "however small," or has past or present inap

propriate links to a government agency or law firm involved in the case. Many judges privately complain that these rules are "too Draconian." They describe them as overreactions to the

Watergate scandal and to the U.S. Sen

ate's rejection of Clement Haynsworth as a nominee to the U.S. Supreme Court in 1969 after criticism of him for sitting in cases in which he had a financial interest.

One of the few judges to speak out against the strict disqualification statute is Patricia Wald of the D.C. Circuit. Last June at the District of Columbia Bar's annual meeting she said: "The process can and does result in a court

that is sometimes impotent to right its own errors. Recusals also obviously affect who sits on your panel. Because neither my husband nor I own any stock, for example, I had the dubious honor one year to write what seemed to me and my clerks an inordinate number of FERC [Federal Energy Regulatory Commission] opinions. Maybe FERC thought so as well. Even a brief time on the court makes me realize how unnec

essary and probably unwise the present de minimus financial rule is."

Indeed, it is a standing joke among judges in some circuits that the way to stay off a particularly tough case or class of cases is to buy some stock in a company involved.

Whose votes count? The rules governing the procedure for

granting en banc rehearings, in 28 U.S.C. ? 46(c) and Rule 35(a) of the Federal Rules of Appellate Procedure, require that a majority of the circuit's judges "in regular active service" must vote for a rehearing en banc.

Traditionally, the 13 circuits defined "in regular active service" as including all the regular judges, whether dis qualified or not. (Senior judges sit en banc for rehearings of cases for which they were on the original three-judge panel, but they do not vote on whether to rehear cases.) Thus in a nine-judge circuit, five judges had to approve a rehearing?no matter how many other

judges are disqualified. In circuits with widely diverse case

loads and few recusals, there is no prob lem in deciding whether to rehear cases en banc. But some circuits are especially vulnerable to the clash of ethics and effi ciency. The Fifth Circuit (Louisiana, Mississippi, Texas and the Canal Zone), for example, has a large number of oil

and gas cases?and judges with personal or family conflicts of interest in oil and gas cases. And the D.C. Circuit has a concentration of government administra

tive cases?and judges with personal or family links to the government agencies or law firms appearing before them.

The difficulties in granting en banc rehearings occasionally cause a circuit the kind of embarrassment that en banc rehearings are supposed to prevent. One D.C. Circuit case was decided 3-0, and

then reversed 8-0 by the Supreme Court after the other circuit judges could not muster enough rehearing votes because six of the 11 judges were disqualified.

American Paper Institute Inc. v. Amer

ican Electric Power Service Corp., 103 S.Ct. 1921 (1983).

The Fifth Circuit made a series of embarrassing flip-flops in New Orleans Public Service v. United Gas Pipe Line Co. A three-judge panel issued its ruling in November 1982 (690 F.2d 1203). A suggestion for rehearing en banc was denied Dec. 27 (694 F.2d 421). The judges in the circuit reconsidered and voted on Feb. 23, 1983, to rehear the case en banc on June 6, 1983, and vacated the panel's decision. Four days before the scheduled reargument date, four of the judges belatedly realized they had a possible conflict and disqualified themselves. They were New Orleans Public Service ratepayers and therefore members of a putative class in the suit. That took away the majority needed to rehear the case. Of the nine remaining judges, fewer than seven voted in favor of rehearing the case. The en banc hear ing was denied, and the panel's decision

was reinstated (707 F.2d 834). But after submitting the circumstances to the Judicial Conference's Advisory Commit tee on Codes of Conduct for advice, the disqualified judges reinstated them selves, and on Oct. 26 the case was once

again set for en banc consideration. The advisory committee said that being ratepayers and putative members of an uncertified class did not disqualify the judges.

Clark's complaint Chief Judge Charles Clark of the Fifth

Circuit pointed out at the Conference of Chief Judges meeting in Washington, D.C, during the fall of 1983 that his 13 judge circuit has only four judges who are not disqualified routinely from oil and gas cases. Those four rotate on the

"oil and gas panel," hearing all those cases. But as long as nine judges auto

matically recuse themselves on those cases, there can never be an en banc

Judge James L. Oakes agreed with Judge Timbers that the situation prevents consideration of some of the pressing issues of the day.

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rehearing of these often-important

energy cases.

In Hall v. Federal Energy Regulatory Commission, 700 F.2d 218, Clark let his frustration spill out last March with a dissent to the circuit's per curiam denial of an en banc rehearing request. "Liti

gants are entitled to the full statutory review, including hearing or rehearing en banc," Clark wrote. "I feel compelled to write as I do," he added, "because the denial of rehearing could give an erroneous impression, appearing as it does to come from the measured consid eration of 13 judges when, in reality, it results from the fact that no 'gas panel' case can ever go en banc due to dis

qualifications. It is also written with the hope that emphasizing the situation may assist rectification by changing the views of presently disqualifying judges or the appointing authority, or, failing in that, through the Supreme Court's supervisory power." As to why no litigant has challenged

the Fifth Circuit's competence to handle oil and gas cases, Judge Clark wrote, "this is a situation I attribute to discre tion rather than any valor or extraordi

nary confidence in those few who have recently manned the 'gas panel' of this court."

A new trend One week after the denial of the MCI

v. AT&T rehearing request, the Seventh Circuit's eight judges issued a unan imous order on April 18 for "operating procedures" that changed the way requests for en banc rehearings would be considered. Instead Of requiring the approval of a majority of all active judges?including those, who were dis qualified?the new rule said, "A simple majority of the voting active judges is required to grant a rehearing en banc."

In this single stroke the court man aged a 180-degree turnaround in the interpretation of the en banc rules.

Instead of counting recused judges as "no" votes for rehearings, they simply would not count. If the MCI v. AT&T rehearing request had been considered under the new rule, it could have been granted by only three of the five non recused judges. Was the timing of the new rule coincidental? Or was the turn about a direct response to the Seventh Circuit's apparent inability to grant a

rehearing en banc under the old rule? In either case, the sequence demonstrates

what is suddenly becoming a new trend.

Until last year the Eighth Circuit (Arkansas, Iowa, Minnesota, Missouri,

Nebraska, South Dakota and North

Dakota) and the Ninth Circuit (Califor nia, Alaska, Hawaii, Arizona, Nevada,

Oregon, Washington, Idaho and Mon

tana) were the only circuits whose recent cases and rules made it clear that

a quorum consists of the judges who are not disqualified. The Eighth Circuit's Local Rule 16(a) said: "A majority of the judges of this court in regular active ser vice who are actively participating in the affairs of the court and who are not dis qualified in the particular case or con troversy may order a hearing or rehearing en banc."

Although less explicit, a footnote to a dissent by Judge Stephen Reinhardt in Ford Motor Co. v. Federal Trade Com

mission, 673 F.2d 1008 (1982), explained that en banc rehearings in the Ninth Cir cuit also may be granted by a majority of the judges who are not disqualified.

In July the Fourth Circuit decided that a majority of the voting judges? rather than a majority of all the judges? could grant a rehearing en banc. Arnold v. Eastern Air Lines, Inc. 712 F.2d 899 (1983). In that case one judge had recused himself, and the remaining nine in the circuit split 5-4 in favor of a

rehearing. The majority opinion by Judge Francis D. Murnaghan Jr. held that the 5-4-1 tally "constituted a deter mination by a majority of the circuit judges who are in regular service order ing a rehearing en banc." He took note of the fact that a quorum of all the judges, including those who had recused themselves, meant that those who were disqualified were counted in effect as casting "no" votes for an en banc

rehearing.

"Patelitly, a judge who was dis qualified from acting must not be able to affect a determination of any cause from which he is barred," Murnaghan wrote. Should any judge recuse himself, Mur naghan added, "he is out of service inso far as that particular case is concerned.

To disqualify means to debar legally. That is synonymous with lack of legal capacity, i.e., with inability to serve."

To continue to count the votes of recused judges against rehearings, he declared, "would ascribe to Congress a

petulant inconsistency, devoid of any apparent explanation."

But two of Murnaghan's Fourth Cir cuit colleagues, H. Emery Widener Jr.

and James D. Phillips Jr., dissented as to what a circuit court should do: "If fewer than a majority of its judges in regular active service may order en banc deter

mination, as is now the case at bar, the en banc procedure will not so surely achieve a uniform body of law, relatively immune from shifting changes in mem bership or disqualification in the court. Given that en banc hearing is an extraordinary measure, the requirement of an absolute majority of all the judges

Chief Judge Charles Clark noted that his 13-judge circuit has only four judges who are not disqualified routinely from oil and gas cases.

Judge Francis D. Murnaghan Jr. stated, "To continue to count the votes of recused judges against rehearings would ascribe to Congress a petulant inconsistency, devoid of any apparent

explanation."

58 American Bar Association Journal

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in regular active service would help limit en banc review to those cases most mer

iting exceptional treatment. Although a disqualification may be viewed as a no vote, that effect is entirely incidental."

Hands off by the High Court The Supreme Court has refused to

settle the issue in the few cases in which circuit court en banc procedures have been discussed.

Last December 5 the Court rejected without comment an appeal by the American Broadcasting Corp. to over

turn the traditional rule in the Sixth Cir cuit. After a district court dismissed a defamation complaint by a Detroit housewife, a three-judge panel of the Sixth Circuit reinstated it, two to one. With one judge on the 10-judge court

disqualifying himself, the others voted 5-4 to rehear the case en banc. Before

the rehearing could be held, however, the court said it had made a mistake; six, not five judges, were needed for the

majority to rehear the case.

But ABC appealed, citing the Fourth Circuit's July decision scrapping the tra ditional rule and holding that a majority of the voting judges rather than the total judges could grant en banc review. In re ABC, No. 83-576.

The fact that the Supreme Court rejected the ABC appeal indicates that the justices have little current interest in getting involved in circuit en banc pro cedures. The Court's last word on the issue is now 20 years old.

In Shenker v. Baltimore & Ohio Rail road Co., 374 U.S. 1 (1963), an appellant claimed that a rehearing was improperly denied in the eight-judge Third Circuit after four judges voted to rehear the case, two to deny and two abstained.

Despite the 4-2 tally among the voting judges, there was no majority among all the judges in the circuit, and the Supreme Court upheld the denial.

The majority opinion by Chief Justice Warren cited the court's earlier ruling in Western Pacific Railroad Corp. v. West ern Pacific Railroad Co., 345 U.S. 247 (1953): "In our view, Section 46(c) is not addressed to litigants. It is addressed to the court of appeals. It is a grant of power. It vests in the court the power to order hearings en banc. It goes no fur

ther. It neither forbids nor requires each active member of a court of appeals to entertain each petition for a hearing or a

rehearing en banc. The court is left free to devise its own administrative machin ery to provide the means whereby a majority may order such a hearing."

Warren wrote that the Supreme Court

" If less than a majority could

determine the law of the circuit," Judge Walter R. Mansfield wrote, "the purpose of en banc procedure would be eroded."

would have nothing to say about how each circuit determines its quorum or decides its majority in considering whether to rehear cases en banc. As

long as courts of appeals follow what ever administrative machinery is in place, the chief justice wrote, then a liti gant's rights are not violated. "For this court to hold otherwise would involve it unnecessarily in the internal administra tion of the courts of appeals," he con cluded.

Minority rule The circuits themselves, tightly wrapped

in the cloak of judicial brotherhood and per curiam opinions, have rarely let dif ferences of opinion about the rehearing procedures become public. But angry

disagreement spilled out in public when the Second Circuit squabbled over en banc procedures in Zahn v. Interna

tional Paper Co., 469 F.2d 1033 (1972), which involved an environmental class

action suit by lakefront landowners against an alleged polluter. With eight active judges at the time,

four voted to approve a rehearing, three to deny it, and one judge disqualified himself. Judges Timbers and Oakes, who both voted for a rehearing, filed a dissent. Timbers, noting that the court's rule required five of the seven voting judges to approve a rehearing, wrote:

"Such a result seems to be most unfor

tunate in thwarting the clear intent of the rule. It is especially unfortunate here where the rule operates to permit a minority of the active judges of the court to deny en banc reconsideration of one of the more pressing issues of our day? an issue to which the best thinking of legal scholars, lawyers and judges had been devoted."

Three other judges, in an extraordi nary public showing of the sharpness of division within the Second Circuit, filed a "dissent to the dissent." Judge Walter R. Mansfield's opinion countered Tim bers's argument against a minority of the judges in a circuit setting policy by blocking rehearings. Was it any more the intent of the en banc procedure for a minority of all a circuit's judges? namely, a majority of the voting, non

recused judges?to accept and then

decide cases en banc? "If less than a majority could determine the law of the circuit," Mansfield wrote, "the purpose of en banc procedure would be eroded. Carried to its logical extreme it would mean that in a case where only five members of a nine-member court were

available (either because of vacancies,

disqualifications, illnesses and the like) the law of the circuit would be deter mined by a vote of only three.

"It was just to avoid such a possibility that Congress provided that a vote of a

majority of the court's full complement should be required. The majority requirement serves the further salutary

purpose of limiting en banc hearings to questions of exceptional importance rather than allow the court to drift into the unfortunate habit of requiring such hearings in every case where a minority of the court may desire a decision by the full court. At a time when the judicial workload of most courts of appeal is at an unprecendented high, sittings en banc should continue to remain the excep tion."

Finally, Judge Mansfield wrote, the Supreme Court will ultimately decide cases "of exceptional importance." But

that is not necessarily so. On Oct. 11 the Supreme Court denied certiorari in MCI v-

AT&T-_-Journal (Timothy Harper, a lawyer, is a

national writer for the Associated Press

in New York City. He received research

assistance in preparing this article

from the law firms of Patterson, Belknap, Webb & Tyler in New York City and Charne, Glassner, Tehan,

Clancy & Taitelman in Milwaukee,

along with Laurence Bodine and Lau

rie S. Pocius of the ABA Journal staff.)

February 1984 Volume 70 59

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