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In re Drexel Burnham Lambert Inc.

filed: February 21, 1989.

IN RE DREXEL BURNHAM LAMBERT INCORPORATED, DREXEL BURNHAM LAMBERT GROUP INCORPORATED, MICHAEL R. MILKEN, LOWELL J. MILKEN, CARY J. MAULTASCH, AND PAMELA R. MONZERT, PETITIONERS


Meskill, Circuit Judge, concurring in Judge Pierce's concurrence in the denial of rehearing in banc. Pierce, Circuit Judge, with whom Meskill, Cardamone and Miner, Circuit Judges, join, concurring in the denial of rehearing in banc. Miner, Circuit Judge, with whom Meskill, Cardamone and Pierce, Circuit Judges, join, concurring in the denial of rehearing in banc. Jon O. Newman, Circuit Judge, with whom Kearse, Pratt, and Altimari, Circuit Judges, join, dissenting.

Petition for rehearing is DENIED.

Meskill, Circuit Judge, concurring in Judge Pierce's concurrence in the denial of rehearing in banc:

Although I was not a member of the panel hearing this matter, I concur with the sentiments expressed by Judge Pierce, who was a majority member of the panel, in his concurrence in the denial of rehearing in banc.

Pierce, Circuit Judge, with whom Meskill, Cardamone and Miner, Circuit Judges, join, concurring in the denial of rehearing in banc:

I write in concurrence with the majority which has denied rehearing in banc. The dissenting opinion is correct in implying that such statements are infrequently made. However, the publication thereof makes it appropriate to state another view.

Whether the district judge's impartiality might reasonably be questioned on the facts and circumstances present in this case should not be assayed on a record that is so antiseptic as to cause this court to be oblivious to the serious charges of judge-shopping made by respondents in their briefs and submissions. Although no findings have been made regarding this aspect of the case, it cannot be gainsaid that the question of alleged judge-shopping is a significant contextual matter. The presence of the judge-shopping issue in the case places upon this court the burden of scrutinizing with exceptional care the petitioners' efforts to have the district judge disqualified from continuing to preside over this litigation.

Most of the subject litigation was assigned to Judge Pollack in 1986 and 1987, and substantial pretrial activity had occurred by September 1988 when the SEC filed a 184- page civil complaint against Drexel in a civil enforcement action; it too was assigned to Judge Pollack. None of these actions involves Palais Royal, Inc. or the judge's wife, a major shareholder.

Soon after the SEC action was assigned to Judge Pollack, Drexel, at Bain's instance, took on the funding burden of Bain's purchase of Palais Royal. Drexel then engaged in an undisputed course of conduct with respect to Bain's acquisition of Palais Royal, all the while knowing that the subject litigation was assigned to Judge Pollack. Thus, the respondents in effect contend that Drexel, by its own actions, set the stage to seek the removal of the judge who had presided over much of this litigation for approximately two years. Are litigants to have the power by their own actions to veto the assignment of judges? Additionally, in considering the merits, the panel majority was confronted with the reality that Drexel owed no duty whatsoever to Palais Royal or to the district judge's wife, and it therefore concluded that Drexel's participation in the financing role it chose to assume was too remote from Bain's acquisition of Palais Royal to require Judge Pollack's disqualification. Under these circumstances, would a reasonable observer believe that Judge Pollack's refusal to recuse himself created an appearance of impropriety? Isn't the exceptional grant of a writ of mandamus to be made only when there is a clear and indisputable right to it? See Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 18, 74 L. Ed. 2d 765, 103 S. Ct. 927 (1983).

More problematic is the district judge's accusation of professional lapses by the firm representing a petitioner. In this demonstration of sensitivity to the question of whether counsel had transcended acceptable professional bounds, the district judge came perilously close to the indistinct line beyond which recusal is required.

However, two grounds militated against requiring his disqualification based on this episode: to begin with, the caselaw draws a distinction between a judge's conduct toward counsel and his conduct toward counsel's client. See In re Cooper, 821 F.2d 833, 841 (1st Cir. 1987); Rosen v. Sugarman, 357 F.2d 794, 798-800 (2d Cir. 1966). Although hostility directed at counsel can reach bounds which warrant relief if it appears that the client will be harmed, in the panel majority's view such is not the case here. Moreover, this conclusion is supported by the fact that no final determination was or will be made by Judge Pollack regarding the charges levelled at counsel. Rather, in accordance with the district court's rules, the issue has been referred to that court's chief judge and to the court's appropriate disciplinary panel for their consideration and presumably for ultimate determination. See Rule 4(i), General Rules, Rules for the United States District Courts for the Southern and Eastern Districts of New York (1987).

Most importantly, in the event that Judge Pollack should demonstrate partiality in handling this litigation, and should it result in the denial of a just and fair outcome for Drexel, such bias would be a weighty issue to be raised by Drexel on a direct appeal, especially since the applicable standard of review would no longer require Drexel to show that it had a "clear and indisputable" right to relief, the standard which is applicable to petitions for writs of mandamus but not to direct appeals.

I concur in the court's majority view that this is not a proper case for in banc review.

MINER, Circuit Judge, with whom MESKILL, CARDAMONE and PIERCE, Circuit Judges, join, concurring in the denial of rehearing in banc:

Merely to record my vote to deny rehearing in banc would be to permit the "expression of views" in the dissenting opinion to go unchallenged. It seems to me that the sensitive nature of the issues before us compels a reasoned rebuttal of the dissenters' conclusions. I therefore write ...


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