The opinion of the court was delivered by: HERLANDS
HERLANDS, District Judge:
The defendant Lowell M. Birrell has moved, pursuant to 28 U.S.C.A. § 144,
to disqualify District Judge William B. Herlands (the writer of this opinion) from presiding over this case on the ground that Judge Herlands (hereinafter "the Court") has a personal bias or prejudice against the defendant. The case had been referred to the Court for all purposes by an order of the Chief District Judge, dated September 27, 1966, in accordance with Rule 2 of the General Rules of United States District Courts for the Southern and Eastern Districts of New York.
The indictment herein charges the defendant Birrell and thirteen others with distributing the common stock of American Leduc Petroleums Ltd. (hereinafter "American Leduc") in violation of the registration and anti-fraud provisions of the Securities Act of 1933 (15 U.S.C.A. §§ 77e(a), 77q(a), 77x), the mail fraud statute (18 U.S.C.A. § 1341) and the general conspiracy statute (18 U.S.C.A. § 371).
The defendant's "Affidavit of Personal Bias or Prejudice" asserts that the Court has a personal bias or prejudice against him. The defendant contends that the facts and the reasons for his belief that bias or prejudice exists are contained in a statement by the Court which appears as the opening sentence of a reported opinion by the Court, in ruling upon motions in a civil action to quash certain subpoenas duces tecum, In Re Equitable Plan Co., 185 F. Supp. 57 (S.D.N.Y. 1960), modified, Ings v. Ferguson, 282 F.2d 149 (2d Cir. 1960).
The sentence referred to by the defendant states:
"This action is another chapter in the attempt to unravel the affairs and make whole the victims of Lowell Birrell, presently a fugitive from justice under indictment for crimes arising out of his financial activities." 185 F. Supp. at 58.
The subject matter of the civil action giving rise to the motions to quash the subpoenas was a derivative stockholders' action for the benefit of Doeskin Products, Inc. then pending in the Supreme Court of the State of New York. The plaintiffs in that case sought the cancellation of one million shares of the stock of Doeskin Products, Inc. which had been issued to the defendants in the derivative action while Doeskin Products, Inc. was under the alleged domination of Birrell. The defendants in the derivative action were a group of Canadians who claimed to have purchased the shares of Doeskin Products, Inc. from a Latin American corporation. Neither the plaintiffs nor the defendants in the derivative action were parties to the motions before this Court.
Equitable Plan Company - a debtor in a Chapter X reorganization proceeding pending in the United States District Court for the Southern District of California and with ancillary proceedings pending in the United States District Court for the Southern District of New York - had large stockholdings in Doeskin Products, Inc. Although the trustee of Equitable Plan Company was not a party to the State Court stockholders' derivative action, the referee permitted him to participate in the hearings.
The trustee's position was that the defendants in the derivative action knew that the one million shares of Doeskin Products, Inc. (which they claimed to have purchased in good faith from the Latin American corporation) were actually held and controlled by Birrell and that the ostensible stock purchase by the defendants was, in fact, part of a scheme to continue Birrell's alleged control of and beneficial interest in Doeskin Products, Inc.
To substantiate his position, the trustee endeavored to prove that the defendants in the derivative action fraudulently cooperated with Birrell in taking $100,000 from Doeskin Products, Inc. In order to prove this allegedly fraudulent transaction, the trustee in the ancillary proceeding in the Southern District of New York caused subpoenas duces tecum to be issued to three foreign banks requiring the production of records and documents located in branches outside the United States. The subpoenas were served at the New York agencies of the respective banks. The motions before this Court were made by the three banks to quash the said subpoenas.
Edward C. Kalaidjian, Esq., a member of the firm of Thacher, Proffitt, Prizer, Crawley & Wood, attorneys in New York for the trustee, submitted a twelve-page affidavit in opposition to the motion made by the banks. Mr. Kalaidjian also submitted an opposing memorandum of law that confined itself to an exposition of the legal issues involved.
The Kalaidjian affidavit undertook to acquaint the Court with essential background facts and details of the alleged transactions for the relevant purpose of showing that the trustee subpoenaed each of the banks "to obtain urgently needed material evidence." (Kalaidjian affidavit, pp. 3, 8). The affidavit described with particularity the transactions involved and also indicated what probable proof and what "conclusive proof" (Kalaidjian affidavit, p. 7) the trustee expected to obtain through the subpoenaed bank records, if produced for examination in the trustee's ancillary proceedings pending in the United States District Court for the Southern District of New York.
The facts recited in the Kalaidjian affidavit also relevantly showed the legitimate relationship between the subpoenas and the trustee's powers and responsibilities.