No. __-____ IN THE Supreme Court of the United States __________ KATHERINE F. LEGGETT, INDIVIDUALLY AND AS EXECUTRIX OF THE ESTATE OF PATRICK D. LEGGETT; GEORGE D. MCKAIN, BY HIS ATTORNEY IN FACT, ANITA KATHRYN MCKAIN GREER; AND ADELE S. MCDOUGAL, Petitioners, v. EQT PRODUCTION COMPANY, A PENNSYLVANIA CORPORATION, ET AL., __________ Respondents. On Petition for a Writ of Certiorari to the Supreme Court of Appeals of West Virginia __________ PETITION FOR A WRIT OF CERTIORARI __________ MICHAEL W. CAREY CAREY, SCOTT, DOUGLAS & KESSLER, PLLC 707 Virginia Street, East Charleston, WV 25301 (304) 345-1234 MARVIN W. MASTERS THE MASTERS LAW FIRM, L.C. 181 Summers Street Charleston, WV 25301 (304) 342-3106 September 8, 2017 DAVID C. FREDERICK Counsel of Record BRENDAN J. CRIMMINS JEREMY S.B. NEWMAN KELLOGG, HANSEN, TODD, FIGEL & FREDERICK, P.L.L.C. 1615 M Street, N.W. Suite 400 Washington, D.C. 20036 (202) 326-7900 (dfrederick@kellogghansen.com) QUESTION PRESENTED The underlying dispute in this case involves royalty payments under leases of mineral interests and has broad significance in the oil and natural gas industry. The West Virginia Supreme Court of Appeals granted rehearing of an initial decision announcing a rule of law favorable to owners of mineral rights such as petitioners. One of the justices who voted to grant rehearing was Justice Elizabeth Walker, whose spouse and primary campaign funder owned stock in many natural gas and energy-producing companies that would benefit from a decision favorable to respondent. The question presented is: Whether the participation by a judge in a case in which she has a substantial pecuniary interest arising from her spouse’s ownership of stock in companies that will be affected by the decision violates the Due Process Clause of the Fourteenth Amendment. ii PARTIES TO THE PROCEEDINGS Petitioners Katherine F. Leggett, individually and as Executrix of the Estate of Patrick D. Leggett; George D. McKain, by his attorney in fact, Anita Kathryn McKain Greer; and Adele S. McDougal were plaintiffs and petitioners in the proceedings below. Respondents EQT Production Company, a Pennsylvania corporation; EQT Corporation, a Pennsylvania corporation; EQT Energy, LLC, a Delaware limited liability company; EQT Investments Holdings, LLC, a Delaware limited liability company; EQT Gathering, LLC, a Delaware limited liability company; and EQT Midstream Partners, LP, a Delaware limited partnership, were the defendants and the respondents in the proceedings below. Patrick D. Leggett was a plaintiff and a petitioner in the proceedings below. Following Mr. Leggett’s death on May 7, 2017, petitioners moved the district court to substitute his wife Katherine F. Leggett in her capacity as Executrix of the Estate of Patrick D. Leggett as a plaintiff. On June 20, 2017, the court granted that motion and substituted Katherine F. Leggett, Executrix of the Estate of Patrick D. Leggett, as the party plaintiff for and on behalf of Patrick D. Leggett. iii TABLE OF CONTENTS Page QUESTION PRESENTED .......................................... i PARTIES TO THE PROCEEDINGS ......................... ii TABLE OF AUTHORITIES ...................................... vi INTRODUCTION ....................................................... 1 OPINIONS BELOW ................................................... 3 JURISDICTION.......................................................... 4 CONSTITUTIONAL, STATUTORY, AND JUDICIAL CODE OF CONDUCT PROVISIONS INVOLVED ............................................................ 4 STATEMENT OF THE CASE .................................... 5 REASONS FOR GRANTING THE PETITION ....... 12 I. JUSTICE WALKER’S PARTICIPATION IN A CASE IN WHICH SHE HAD A SUBSTANTIAL PECUNIARY INTEREST CONFLICTS WITH THIS COURT’S PRECEDENTS............................. 12 A. This Court Consistently Has Held That The Due Process Clause Is Violated When A Judge With A Substantial Pecuniary Interest Participates In A Case ............................. 12 B. Justice Walker Had A Substantial Pecuniary Interest In The Outcome Of The Case That Required Disqualification .................................................... 15 iv II. WIDESPREAD UNCERTAINTY EXISTS REGARDING THE NATURE OF PECUNIARY INTERESTS REQUIRING DISQUALIFICATION .................................. 20 A. Courts Have Taken Disparate Approaches To Disqualification Based On Pecuniary Interests ........................... 21 B. Courts’ Different Approaches To Disqualification Lead To Conflicting Outcomes In Similar Cases ..................... 26 III. THE SCOPE OF PROHIBITED PECUNIARY JUDICIAL CONFLICTS IS A RECURRING ISSUE OF NATIONAL IMPORTANCE ................................................ 30 CONCLUSION.......................................................... 33 APPENDIX: Opinion Answering Certified Questions by the Supreme Court of Appeals of West Virginia on Rehearing, Leggett, et al. v. EQT Prod. Co., et al., No. 16-0136 (May 26, 2017) ............................ 1a Order of the Supreme Court of Appeals of West Virginia Supplementing April 26, 2017 Order Dismissing as Moot Petitioners’ Motion To Vacate Order Granting Rehearing, Leggett, et al. v. EQT Prod. Co., et al., No. 16-0136 (May 1, 2017) ........................................................... 59a Order of the Supreme Court of Appeals of West Virginia Dismissing as Moot Petitioners’ Motion To Vacate Order Granting Rehearing, Leggett, et al. v. EQT Prod. Co., et al., No. 160136 (Apr. 26, 2017) ................................................ 61a v Order of the Supreme Court of Appeals of West Virginia Granting Rehearing, Leggett, et al. v. EQT Prod. Co., et al., No. 16-0136 (Jan. 25, 2017) .................................................................. 63a Opinion Answering First Certified Question by the Supreme Court of Appeals of West Virginia, Leggett, et al. v. EQT Prod. Co., et al., No. 16-0136 (Nov. 17, 2016) .................................... 65a Order of Certification to the Supreme Court of Appeals of West Virginia, Leggett, et al. v. EQT Prod. Co., et al., Civil Action No. 1:13CV4 (N.D. W. Va. Feb. 10, 2016) .................................... 95a Petitioners’ Motion To Cancel the May 2, 2017 Argument; Vacate Justice Elizabeth D. Walker’s Vote To Grant Rehearing, Resulting in the Denial of the Rehearing Petition; and Issue the Mandate from the Decision Reached by a Majority of This Court on November 17, 2016 (W. Va. filed Apr. 24, 2017) .................................. 101a Constitutional, Statutory, and Judicial Code of Conduct Provisions Involved .................................... 120a U.S. Const. amend. XIV (Due Process Clause).... 120a W. Va. Code § 22-6-8 ....................................... 120a W. Va. Code of Judicial Conduct: Canon 2, Rule 2.11 ..................................... 124a Letter from Supreme Court Clerk regarding grant of extension of time for filing a petition for a writ of certiorari (July 24, 2017) .................. 126a vi TABLE OF AUTHORITIES Page CASES Aetna Life Ins. Co. v. Lavoie, 475 U.S. 813 (1986) ...........................................14, 15, 18, 19, 20, 21, 22, 25, 26, 28, 29 American Motors Sales Corp. v. New Motor Vehicle Bd., 69 Cal. App. 3d 983 (1977).........26, 27 Brown v. Vance, 637 F.2d 272 (5th Cir. 1981)..........................................................22, 23, 26 Caperton v. A.T. Massey Coal Co., 556 U.S. 868 (2009) ..................................................1, 12, 17, 29, 30, 31 Chevrolet Motor Div. v. New Motor Vehicle Bd., 146 Cal. App. 3d 533 (1983) ................................ 26 Chrysler Motors Corp. v. Lee Janssen Motor Co., 534 N.W.2d 309 (Neb. 1995) ........................ 27 City of Edgerton v. General Cas. Co. of Wisconsin, 527 N.W.2d 305 (Wis. 1995) ....................24, 25 Doss v. Long, 629 F. Supp. 127 (N.D. Ga. 1985) ...... 23 Gas Utils. Co. of Alabama v. Southern Nat. Gas Co., 996 F.2d 282 (11th Cir. 1993)............... 25 General GMC Trucks, Inc. v. General Motors Corp., 237 S.E.2d 194 (Ga. 1977) ........................ 27 General Motors Corp. v. Capitol Chevrolet Co., 645 S.W.2d 230 (Tenn. 1983) .............................. 27 Gibson v. Berryhill, 411 U.S. 564 (1973)......13, 14, 15, 17, 18, 20, 25, 26 Haas v. County of San Bernardino, 45 P.3d 280 (Cal. 2002) .................................................23, 24, 26 Johnson v. Mississippi, 403 U.S. 212 (1971) ........... 30 vii Johnson v. Sturdivant, 758 S.W.2d 415 (Ark. 1988)..........................................................21, 22, 25 Johnson Timber Corp. v. Sturdivant, 752 S.W.2d 241 (Ark.), on reh’g sub nom. Johnson v. Sturdivant, 758 S.W.2d 415 (Ark. 1988) .......21, 25 Murchison, In re, 349 U.S. 133 (1955) ................18, 30 Nissan Motor Corp. v. New Motor Vehicle Bd., 153 Cal. App. 3d 109 (1984) ...........................26, 27 Placid Oil Co., In re, 802 F.2d 783 (5th Cir. 1986) ...... 25 Rippo v. Baker, 137 S. Ct. 905 (2017) ...................... 32 Snyder v. Viani, 916 P.2d 170 (Nev. 1996) .............. 28 Sollenbarger v. Mountain States Tel. & Tel. Co., 706 F. Supp. 776 (D.N.M. 1989).......................... 25 State ex rel. McLeod v. Crowe, 249 S.E.2d 772 (S.C. 1978)............................................................ 23 Tumey v. Ohio, 273 U.S. 510 (1927) ...............1, 12, 13, 17, 24, 32 United States Fid. Ins. & Guar. Co. v. Michigan Catastrophic Claims Ass’n, 773 N.W.2d 243 (Mich. 2009) ....................................................28, 29 University Ford Chrysler-Plymouth, Inc. v. New Motor Vehicle Bd., 179 Cal. App. 3d 796 (1986) ................................................................... 26 Ward v. Village of Monroeville, 409 U.S. 57 (1972) ..................................................13, 15, 18, 20 Williams v. Pennsylvania, 136 S. Ct. 1899 (2016) ....................................................1, 19, 31, 32 Williams-Yulee v. Florida Bar, 135 S. Ct. 1656 (2015) ................................................................... 31 Withrow v. Larkin, 421 U.S. 35 (1975) .................... 32 viii CONSTITUTION, STATUTES, AND RULES U.S. Const. amend. XIV (Due Process Clause) ....4, 11, 12, 24, 33 28 U.S.C. § 455 .......................................................... 25 28 U.S.C. § 455(f ) ...................................................... 19 28 U.S.C. § 1257(a) ..................................................... 4 W. Va. Code: § 22-6-8 ............................................................... 4, 5 § 22-6-8(a)(2) .......................................................... 5 § 22-6-8(e)............................................................... 5 W. Va. Code of Judicial Conduct Canon 2, Section 2.11 ...................................................... 5, 11 ADMINISTRATIVE MATERIALS U.S. Dep’t of Justice, Civil Rights Div., Investigation of the Ferguson Police Department (Mar. 4, 2015), available at https://www. justice.gov/sites/default/files/opa/pressreleases/attachments/2015/03/04/ferguson_ police_department_report.pdf ............................. 23 OTHER MATERIALS John R. Allison, A Process Value Analysis of Decision-Maker Bias: The Case of Economic Conflicts of Interest, 32 Am. Bus. L.J. 481 (1995) ................................................................... 33 ix Appellants’ Opening Br., Whisenhunt Invs., LLC v. Exxon Mobil Corp., No. 16-3541 (8th Cir. filed Nov. 3, 2016) ........................................ 17 John W. Broomes, Waste Not, Want Not: The Marketable Product Rule Violates Public Policy Against Waste of Natural Gas Resources, 63 U. Kan. L. Rev. 149 (2014) ........... 16 Class Action Compl., Hutchison v. XTO Energy Inc., Case 4:16-cv-00094-BRW, Dkt. #1 (E.D. Ark. filed Feb. 23, 2016) ............................ 17 Compl., Marburger v. XTO Energy Inc., Case 2:15-cv-00910-DSC-CRE, Dkt. #1 (W.D. Pa. filed July 14, 2015) .............................................. 17 Richard E. Flamm: History of and Problems with the Federal Judicial Disqualification Framework, 58 Drake L. Rev. 751 (2010)..................................... 30 Judicial Disqualification: Recusal and Disqualification of Judges (2d ed. 2007) .......12, 21, 32 John P. Frank, Disqualification of Judges, 56 Yale L.J. 605 (1947) ........................................ 32 John Burritt McArthur, Some Advice on Bice, North Dakota’s Marketable-Product Decision, 90 N.D. L. Rev. 545 (2014) .................................. 16 Pet. for Cert., Edgerton Sand & Gravel, Inc. v. General Cas. Co. of Wisconsin, No. 94-1843 (U.S. filed May 8, 1995), 1995 WL 17048671 ...... 24 Martin H. Redish & Lawrence C. Marshall, Adjudicatory Independence and the Values of Procedural Due Process, 95 Yale L.J. 455 (1986) .............................................................. 32-33 x Supreme Court of Appeals, State of West Virginia, Beth Walker Sworn in as New Supreme Court Justice (Dec. 5, 2016), http: //www.courtswv.gov/public-resources/press/ releases/2016-releases/dec5_16.pdf ...................... 9 The Federalist No. 10 (James Madison) (Jacob Cooke ed., 1961) ................................................... 31 Elizabeth Walker, Financial Disclosure Statement Filing (Jan. 26, 2017), available at http://www.ethics.wv.gov/Financial%20 Disclosure/2017/Walker,%20Elizabeth% 202016.pdf.............................................................. 9 Katherine F. Leggett, individually and as Executrix of the Estate of Patrick D. Leggett; George D. McKain, by his attorney in fact, Anita Kathryn McKain Greer; and Adele S. McDougal respectfully petition for a writ of certiorari to review the judgment of the West Virginia Supreme Court of Appeals. INTRODUCTION This case presents an important question concerning the scope of the due process principle that a judge with a substantial pecuniary interest in the outcome of a case is disqualified. It has long been clear that “a judge must recuse himself when he has ‘a direct, personal, substantial, pecuniary interest’ in a case.” Caperton v. A.T. Massey Coal Co., 556 U.S. 868, 876 (2009) (quoting Tumey v. Ohio, 273 U.S. 510, 523 (1927)). But courts have divided over whether such an interest exists when a judge has an economic interest in a case’s outcome, but does not own an interest in any of the parties or the specific transaction at issue. Several courts have correctly held that recusal is required whenever the circumstances create a “ ‘possible temptation’ ” for the judge to reach a particular outcome. Id. at 878 (quoting Tumey, 273 U.S. at 532). Other courts have taken a narrower view, holding that recusal is not required so long as the judge has no economic interest in the parties or specific subject matter of the case, regardless of any other financial incentives. Although this Court has recently reaffirmed the fundamental importance of an impartial tribunal as an element of due process in cases such as Caperton and Williams v. Pennsylvania, 136 S. Ct. 1899 (2016), the Court has not given any guidance on what sorts of pecuniary interests give rise to a constitutional disqualification requirement in more than three decades. 2 The extraordinary facts of this case underscore the need for this Court’s review. Justice Walker of the West Virginia Supreme Court of Appeals participated in this case even though her spouse owned stock in many companies whose financial fortunes will be affected by the rule of law announced by that court in this case. Respondent is a natural gas company that holds a lease entitling it to extract natural gas owned by petitioners. Respondent deducted significant amounts from royalty payments owed to petitioners on the basis of so-called postproduction expenses incurred in bringing the natural gas to market. The West Virginia Supreme Court of Appeals was confronted with the question whether those deductions are permissible. The answer to that legal question is of immense importance to the oil and natural gas industry in West Virginia and throughout the nation. The federal district court that certified the question to the West Virginia Supreme Court of Appeals expressly recognized that the question “carries great significance not only to [respondent], but to oil and gas lessees generally.” Leggett v. EQT Prod. Co., 2016 WL 297714, at *9 (N.D. W. Va. Jan. 22, 2016). Courts in other States have divided over the permissibility of deductions for post-production expenses, and the issue has likewise been debated in the scholarship. Thus, the West Virginia court’s ruling in this case not only applied to thousands of natural gas wells throughout the State, but also had the potential to affect the development of the law regarding royalty payments by natural gas producers throughout the country. The West Virginia Supreme Court of Appeals initially ruled that respondent’s deductions were impermissible. But after respondent moved for 3 rehearing, Justice Elizabeth Walker joined the court. Justice Walker’s spouse owned stocks of many natural gas and energy producing companies, including shares of at least one company whose subsidiary had significant natural gas operations in West Virginia and was a party to several pending cases presenting similar issues. He also provided the vast majority of the funding for Justice Walker’s election campaign. Justice Walker cast the decisive vote to grant rehearing, and, on rehearing, the court reversed itself and issued a decision favorable to natural gas companies, holding that deductions of post-production expenses were proper. Petitioners’ due process rights were violated when the rehearing petition was decided by a tribunal that included a justice who had a pecuniary interest in reaching an outcome against them. This Court’s review is needed to protect litigants’ rights to due process and to provide guidance to judges facing recusal decisions arising from financial conflicts of interest. OPINIONS BELOW The district court’s February 10, 2016 order of certification to the West Virginia Supreme Court of Appeals (App. 95a-100a) is not reported. The November 17, 2016 opinion of the West Virginia Supreme Court of Appeals answering the first certified question (App. 65a-94a) is not reported (but is available at 2016 WL 6835732). The January 25, 2017 order of the West Virginia Supreme Court of Appeals granting rehearing (App. 63a-64a) is not reported. The April 26, 2017 order of the West Virginia Supreme Court of Appeals dismissing as moot petitioners’ motion to vacate the order granting rehearing (App. 61a-62a) is not reported. The May 1, 2017 supplemental order regarding petitioners’ motion 4 to vacate the order granting rehearing (App. 59a60a) is not reported. The May 26, 2017 opinion of the West Virginia Supreme Court of Appeals answering certified questions on rehearing (App. 1a-58a) is reported at 800 S.E.2d 850. JURISDICTION On May 26, 2017, the West Virginia Supreme Court of Appeals of issued a decision on rehearing that answered certified questions from the United States District Court for the Northern District of West Virginia. A month earlier, on April 26, 2017, one of the justices who participated in that decision on rehearing, Justice Walker, notified the Clerk of the West Virginia Supreme Court of Appeals of her decision not to disqualify herself. That same day, the court issued an order denying as moot a motion filed by petitioners asking the court to vacate its order granting rehearing because Justice Walker had a conflict of interest requiring her disqualification under the Due Process Clause of the Fourteenth Amendment. Assuming out of an abundance of caution that the time for filing a certiorari petition runs from the date of the April 26 order respecting Justice Walker’s participation, rather than from the court’s May 26 decision answering the certified questions, the petition would have been due on July 25, 2017. On July 24, 2017, the Chief Justice extended the time for filing a certiorari petition to and including September 8, 2017. App. 126a. The jurisdiction of this Court is invoked under 28 U.S.C. § 1257(a). CONSTITUTIONAL, STATUTORY, AND JUDICIAL CODE OF CONDUCT PROVISIONS INVOLVED The Due Process Clause of the Fourteenth Amendment to the U.S. Constitution; West Virginia Code 5 § 22-6-8; and Canon 2, Section 2.11 of the West Virginia Code of Judicial Conduct are reproduced at App. 120a-125a. STATEMENT OF THE CASE 1. Petitioners are owners of oil and natural gas mineral interests found beneath land in West Virginia. App. 67a-68a. Respondent holds a lease under which it operates oil and gas wells on that land. Id.1 As originally executed in 1906, the lease provides for respondent to pay flat-rate annual royalties of $300 per natural gas well. App. 68a. In 1982, the West Virginia legislature enacted West Virginia Code § 22-6-8, more commonly known as the “flat-rate statute.” The flat-rate statute governs oil and gas leases, such as petitioners’ lease, that provide for flat-rate royalties. The legislature found that such leases provided “wholly inadequate compensation,” were “unfair, oppressive, [and] work[ed] an unjust hardship on” owners of mineral interests, and “unreasonably deprive[d] the economy of the state of West Virginia of the just benefit of the natural wealth of th[e] state.” Id. § 22-6-8(a)(2). To remedy that unfairness, the statute provides that a natural gas company cannot obtain a drilling permit unless it files an affidavit certifying that “it shall tender to the owner of ” the mineral interests “not less than one eighth of the total amount paid to or received by or allowed to the owner of the working interest at the wellhead for the oil or gas so extracted, produced or marketed.” Id. § 22-6-8(e). Most of the wells respondent operates on petitioners’ property 1 Respondents are the lessee, EQT Production Company, and several affiliated companies. For simplicity, this petition refers to EQT Production Company as “respondent.” 6 are governed by the flat-rate statute and the oneeighth royalty requirement. App. 68a. The certified question decided by the West Virginia Supreme Court of Appeals in this case concerned respondent’s practice of deducting certain expenses from the one-eighth royalties paid to petitioners. Respondent sold natural gas extracted from the wells at issue to affiliated companies at a discounted price. That price accounted for certain “post-production” expenses, meaning expenses that the affiliate would incur in gathering and transporting gas from the wellhead to market. App. 73a. Through those sales to affiliates, respondent deducted post-production expenses from its royalty payments to petitioners, and therefore paid less than one-eighth of the proceeds that its affiliates received from selling the gas into the market. App. 70a-71a. 2. In December 2012, petitioners filed a complaint against respondent and one of its affiliates in the Circuit Court of Doddridge County, West Virginia. Dkt. 1-1.2 The defendants removed the action to the Northern District of West Virginia. Dkt. 1. In May 2014, petitioners filed an amended complaint in the district court against respondent and five affiliates. Dkt. 52. The amended complaint alleged that the defendants took improper deductions to reduce royalty payments to petitioners, in violation of the lease and the flat-rate statute. Id. ¶¶ 32, 38. Petitioners brought claims for breach of contract, breach of fiduciary duty, and fraud. Id. ¶¶ 50-58. 2 “Dkt.” refers to the docket entries for the proceedings in the U.S. District Court of the Northern District of West Virginia, No. 1:13-cv-4. 7 The defendants moved to dismiss the amended complaint. The district court dismissed petitioners’ fiduciary-duty claims and held that petitioners could not recover under a state consumer protection statute, but otherwise denied the motions. Dkt. 108, at 8-21. Following discovery, the defendants filed motions for summary judgment. The district court granted summary judgment to the affiliate defendants, holding that they committed no fraud and could not be liable for respondent’s alleged breach of contract. 2016 WL 297714, at *4-8. The court also granted respondent’s motion for summary judgment as to petitioners’ fraud claim, id. at *13-14, but deferred ruling on petitioners’ breach-of-contract claim, id. at *11-12. The district court determined that the breach-ofcontract claim turned on an unsettled issue of West Virginia law — namely, whether the flat-rate statute permits natural gas companies to deduct postproduction expenses from royalties paid to property owners. The court decided to certify questions regarding that issue to the West Virginia Supreme Court of Appeals. Id. at *8-12. The district court observed that courts in other jurisdictions had applied one of two “general deduction rules”: the “at the well” rule (which permits deduction of postproduction costs) and the “marketable product” rule (which does not permit deductions). Id. at *9. The court concluded that “determining the applicability of either rule in this case carries great significance not only to [respondent], but to oil and gas lessees generally.” Id. 3. In February 2016, the district court certified to the West Virginia Supreme Court of Appeals the 8 question “whether a lessee of a flat-rate lease, converted pursuant to West Virginia Code § 22-6-8, may deduct post-production expenses from his lessor’s royalty.” App. 98a.3 In April 2016, the West Virginia Supreme Court of Appeals entered an order accepting the certified questions. Order (Apr. 6, 2016). In November 2016, the West Virginia Supreme Court of Appeals issued a 3-2 opinion, authored by Justice Brent Benjamin, holding that, for leases governed by the flat-rate statute, the statute “require[s] . . . that the lessee not deduct” from the one-eighth royalty “any expenses that have been incurred in gathering, transporting, or treating the oil or gas after it has been initially extracted . . . or any other costs that may be characterized as post-production.” App. 81a-82a. The court’s opinion noted a split among state courts regarding the deductibility of post-production costs. App. 75a. In concluding that post-production expenses were not deductible under leases governed by the West Virginia flat-rate statute, the court explained that “the flat-rate statute was indisputably enacted to right past wrongs” and that “[i]t would have been perversely inconsistent with the overarching remedial intent of the flat-rate statute for a Legislature so passionately dedicated to ensuring the future flow of adequate compensation to oil and gas landowners to have purposefully provided a mechanism of royalty valuation specifically designed to curtail that compensation.” App. 77a-78a. 3 The district court also certified a second question, which the West Virginia Supreme Court of Appeals ultimately declined to answer and which is not pertinent to this petition. App. 6a n.5. 9 On December 19, 2016, respondent filed a petition for rehearing. On January 12, 2017, the West Virginia Oil and Natural Gas Association (“WVONGA”) filed an amicus brief in support of the petition, asserting that the court’s ruling applied to “many thousands of . . . gas wells throughout West Virginia.” WVONGA Br. 2-3. On January 1, 2017, Justice Elizabeth Walker replaced Justice Benjamin on the West Virginia Supreme Court of Appeals as a result of the 2016 election.4 On January 25, 2017, the West Virginia Supreme Court of Appeals voted 3-2 to grant rehearing, with Justice Walker in the majority. App. 63a-64a. 4. In April 2017, petitioners became aware of financial disclosures filed by Justice Walker. See 4/24/17 Mot. 4-5 (App. 105a-107a).5 Those disclosures revealed that Justice Walker’s husband, Michael Walker, owned stock in many natural gas and energy companies, including Chevron Corporation, Columbia Pipeline Group, Conoco Phillips, Dominion Resources, Duke Energy Corporation, General Electric Corporation, Portland General Electric, and ExxonMobil Corporation. Id.6 ExxonMobil’s subsidiary XTO Energy Inc. had significant natural gas production operations 4 See Supreme Court of Appeals, State of West Virginia, Beth Walker Sworn in as New Supreme Court Justice (Dec. 5, 2016), http://www.courtswv.gov/public-resources/press/releases/2016releases/dec5_16.pdf. 5 Pet’rs Mot. To Cancel the May 2, 2017 Argument, Vacate Justice Walker’s Vote To Grant Rehearing, and Issue the Mandate from the Decision Issued on November 17, 2016 (W. Va. filed Apr. 24, 2017) (“4/24/17 Mot.”) (App. 101a-119a). 6 See Elizabeth Walker, Financial Disclosure Statement Filing (Jan. 26, 2017), available at http://www.ethics.wv.gov/Financial% 20Disclosure/2017/Walker,%20Elizabeth%202016.pdf. 10 in West Virginia, including nearly 800 gas wells in West Virginia. Id. An XTO Energy employee served on the board of WVONGA, which submitted multiple amicus briefs on behalf of respondent in the West Virginia Supreme Court of Appeals. Id. In addition, petitioners learned that Michael Walker loaned $525,000 to Justice Walker’s campaign. Id. at 4 (App. 105a). Those loans accounted for more than 70% of Justice Walker’s campaign funds and exceeded the total of all loans provided to her four opponents in the election. Id. at 4, 10 & n.8 (App. 105a, 112a-113a). According to a policy of the West Virginia Secretary of State, campaign loans from a spouse cannot be forgiven. Id. at 4 (App. 105a). As of March 31, 2017, the loans from Michael Walker to Justice Walker were past due and had not been repaid. Id. On April 24, 2017, petitioners filed a motion asking the West Virginia Supreme Court of Appeals to cancel oral argument, vacate Justice Walker’s vote to grant rehearing, and issue the mandate from the court’s original decision in petitioners’ favor. Id. at 1, 14-15 (App. 101a-102a, 118a). Petitioners argued that Justice Walker’s participation in the decision to grant rehearing violated petitioners’ due process rights because her husband’s ownership of stock in natural gas and energy companies created an unconstitutional risk of bias. Id. at 1-2, 9-11, 13-14 (App. 102a, 111a-114a, 117a-118a). Under West Virginia procedural rules, canceling Justice Walker’s vote would have resulted in the rehearing petition being denied by an equally divided vote and the mandate issuing. Id. at 13-14 (App. 117a-118a). 5. On April 26, 2017, Justice Walker issued a memorandum to the court clerk stating: “I find no 11 basis for my disqualification under Canon 2, Rule 2.11 of the Code of Judicial Conduct because neither I nor my husband has an economic interest in the subject matter in controversy.” App. 62a.7 Her memorandum did not expressly address petitioners’ argument that her participation violated the Due Process Clause. That same day, the court issued an order denying petitioners’ motion. App. 61a. On May 1, 2017, Justice Walker issued a supplemental memorandum to the court clerk reiterating that she saw no basis for disqualification, but stating that, “out of an abundance of caution, my husband has divested himself of ownership of shares of stock of any company engaged in the business of producing coal, oil and gas, wind or solar energy.” App. 60a. On May 26, 2017, the court issued its opinion on rehearing. Contrary to its original decision, the court held by a 4-1 vote that the flat-rate statute “permits allocation or deduction of reasonable post-production expenses.” App. 4a. The court reasoned that the previous majority “misapprehend[ed] the applicability of certain common law principles and exceed[ed] its charge in its interpretation of the subject statute.” App. 10a. Justice Walker joined the majority opinion. App. 44a. Justice Davis dissented, arguing that “there is and was no legal basis for granting a rehearing in this case.” App. 50a. She concluded that “[t]he new majority opinion has used legal sophistry to fool only itself ” and that it had “rewritten the statute to say what it was never intended to say.” App. 55a, 58a. 7 Rule 2.11 treats a judge and her spouse as a single economic unit for analysis of a judge’s financial conflicts. App. 124a. 12 REASONS FOR GRANTING THE PETITION I. JUSTICE WALKER’S PARTICIPATION IN A CASE IN WHICH SHE HAD A SUBSTANTIAL PECUNIARY INTEREST CONFLICTS WITH THIS COURT’S PRECEDENTS A. This Court Consistently Has Held That The Due Process Clause Is Violated When A Judge With A Substantial Pecuniary Interest Participates In A Case For nearly a century, this Court has held that a judge with a pecuniary interest in a case cannot constitutionally participate. The Court first announced that principle in Tumey v. Ohio, 273 U.S. 510 (1927), which this Court recently called “[t]he early and leading case” on judicial disqualification. Caperton v. A.T. Massey Coal Co., 556 U.S. 868, 876 (2009).8 In Tumey, this Court held that a litigant’s due process rights were violated because the judge had “a direct, personal, substantial pecuniary interest in reaching a conclusion against him in his case.” 273 U.S. at 523. Two circumstances created such an impermissible pecuniary interest in Tumey, which involved a village mayor presiding over trials for minor criminal charges. Id. at 515. First, the mayor received a portion of the fines imposed on a convicted defendant, but would receive no additional compensation if the defendant was acquitted. Id. at 520. Second, those fines provided a substantial portion of the village’s income, and the mayor was “charged 8 Courts and commentators have sometimes differentiated between “recusal” and “disqualification,” but today the terms “are frequently viewed as synonymous.” Richard E. Flamm, Judicial Disqualification: Recusal and Disqualification of Judges § 1.1, at 4 (2d ed. 2007) (“Flamm, Judicial Disqualification”). This petition uses the terms interchangeably. 13 with the business of looking after the finances of the village.” Id. at 533. The trial violated due process because those pecuniary interests “offer[ed] a possible temptation to the average man as a judge . . . which might lead him not to hold the balance nice, clear, and true.” Id. at 532. In subsequent cases, this Court has confirmed that a judge’s substantial pecuniary interest in the outcome of a case is sufficient to require disqualification, even if the judge has no relationship to the parties in the case and will not receive a direct payment based on the outcome. In Ward v. Village of Monroeville, 409 U.S. 57 (1972), this Court again reviewed a conviction from an Ohio mayor’s court. Unlike in Tumey, the mayor did not share in the fines from a conviction; only the second rationale from Tumey — that fines contributed a substantial portion of the village’s funds — was present. Id. at 59-60. The Court again held that the procedure violated due process, explaining that “[t]he fact that the mayor [in Tumey] shared directly in the fees and costs did not define the limits of the principle.” Id. at 60. Because “the mayor’s executive responsibilities for village finances may make him partisan to maintain the high level of contribution from the mayor’s court,” the procedure “ ‘necessarily involve[d] a lack of due process of law.’ ” Id. (quoting Tumey, 273 U.S. at 534). The next year, the Court reaffirmed that “the financial stake need not be as direct or positive as it appeared to be in Tumey” to be disqualifying. Gibson v. Berryhill, 411 U.S. 564, 579 (1973). In Gibson, a state optometry board composed of optometrists presided over a proceeding to determine whether to revoke the licenses of nearly half the optometrists in the State. Id. at 578. Although the board members 14 had no direct relationship to any of the parties, they had a disqualifying pecuniary interest in the outcome of the case because their practices could be aided by reduced competition from the revocation of their competitors’ licenses, such that “success in the Board’s efforts would possibly redound to the personal benefit of members of the Board.” Id. This Court accordingly affirmed the district court’s conclusion that the board “was so biased by prejudgment and pecuniary interest that it could not constitutionally conduct hearings looking toward the revocation of appellees’ licenses to practice optometry.” Id. This Court has also held that a disqualifying pecuniary interest exists when a decision will create a rule of law that could benefit the judge’s finances, even if that judge has no relationship to the parties or the controversy at issue. In Aetna Life Insurance Co. v. Lavoie, 475 U.S. 813 (1986), the Alabama Supreme Court affirmed a $3.5 million punitive damages award on a bad-faith-refusal-to-pay claim against an insurance company. Id. at 816. In so doing, the court made legal rulings favorable to plaintiffs in such cases, in an area of law that was “unsettled at the time.” Id. at 816-17, 822. The opinion was authored by a justice who had two pending bad-faith-refusal-to-pay claims against other insurers, including one that presented “[a]ll of the[ ] issues” covered by his opinion. Id. at 823. The judge had a substantial pecuniary interest because the decision “had the clear and immediate effect of enhancing both the legal status and the settlement value of his own case.” Id. at 824. His participation therefore “violated [the insurance company’s] due process rights.” Id. at 825. 15 Those decisions establish the principle that a judge has a disqualifying pecuniary interest in a case when the outcome of the case could have a meaningful impact on the judge’s finances. As Ward, Gibson, and Lavoie demonstrate, such an interest can exist even when the judge has no direct interest in any of the parties to the litigation or the specific transaction at issue. B. Justice Walker Had A Substantial Pecuniary Interest In The Outcome Of The Case That Required Disqualification 1. The certified question presented to the West Virginia Supreme Court of Appeals in this case had the potential to benefit companies in the stock portfolio of Justice Walker’s spouse. Justice Walker therefore had a substantial pecuniary interest in the outcome of this case that, under this Court’s due process precedents, required disqualification. The underlying issue in this case — whether oil and gas companies can deduct post-production expenses from royalty payments under mineral leases — has substantial financial implications for the oil and gas industry. The district court recognized that fact when it decided to certify the question, explaining that: the resolution of this case “carries great significance not only to [respondent], but to oil and gas lessees generally.” 2016 WL 297714, at *9. WVONGA, a trade association of oil and natural gas producers, filed multiple amicus briefs in this case because the West Virginia court’s decision would be “applicable to the many thousands of . . . gas wells throughout West Virginia” and would be “important to many.” WVONGA Br. 2-3 (filed Jan. 12, 2017). In fact, the potential financial impact of this case on the oil and gas industry goes far beyond 16 West Virginia. States have divided roughly evenly on whether to apply the landowner-friendly “marketable product” rule (which forbids deduction of postproduction expenses from royalty payments) or the gas-company-friendly “at the well” rule (which permits such deductions). Petitioners’ Petition in Support of Certified Question, 2017 WL 1059058, at *18-20 (W. Va. filed Feb. 28, 2017). Scholars have also sharply disagreed on the issue.9 The decision in this case is part of a nationwide debate with the potential to influence whether jurisdictions across the country adopt a royalty rule favorable to energy producers or owners of mineral rights. Justice Walker’s vote to grant rehearing benefitted natural gas and energy producing companies, including those in which her spouse (and primary campaign funder) held stock, because it created the potential that the court’s original decision would be overturned in favor of a decision more friendly to companies that hold leases on mineral interests. In particular, her vote benefitted ExxonMobil, whose shares Michael Walker owned and whose subsidiary XTO Energy is a major natural gas producer in West Virginia. See 4/24/17 Mot. 5 (App. 106a-107a). An XTO Energy employee served on the board of WVONGA, which filed amicus briefs in support of respondent. Id. At the time of Justice Walker’s vote to grant rehearing, XTO Energy and ExxonMobil had several pending cases presenting similar questions regarding whether 9 Compare John Burritt McArthur, Some Advice on Bice, North Dakota’s Marketable-Product Decision, 90 N.D. L. Rev. 545, 545-46 (2014) (advocating for marketable-product rule), with John W. Broomes, Waste Not, Want Not: The Marketable Product Rule Violates Public Policy Against Waste of Natural Gas Resources, 63 U. Kan. L. Rev. 149, 149-50 (2014) (arguing against marketable-product rule). 17 post-production expenses can be deducted from oil and gas royalties.10 In short, Justice Walker’s spouse’s ownership of stocks of many natural gas and oil producing companies created a “possible temptation” that “might” have led her “not to hold the balance nice, clear, and true.” Tumey, 273 U.S. at 532. That temptation was exacerbated in this case because Justice Walker’s spouse provided the majority of her campaign financing, resulting in “a debt of gratitude . . . for his extraordinary efforts to get [her] elected.” Caperton, 556 U.S. at 882. Justice Walker’s recusal was therefore required. 2. Justice Walker’s explanations for her failure to recuse contravened this Court’s precedents. She stated that recusal was not required because her spouse did not have “an economic interest in the subject matter in controversy.” App. 60a, 62a. Justice Walker’s statement did not elaborate on her understanding of the phrase “subject matter in controversy.” In context, her denial of an economic interest even in the face of ownership of stocks in companies that would be affected by her decision suggests that she viewed her recusal obligations as limited to a scenario in which either she or her husband had a direct interest either in a party to the case or in the mineral rights or lease at issue. That reasoning cannot be squared with this Court’s cases. In Gibson, the optometry board members had 10 See, e.g., Compl. ¶ 1, Marburger v. XTO Energy Inc., Case 2:15-cv-00910-DSC-CRE (W.D. Pa. filed July 14, 2015); Class Action Compl. ¶ 1, Hutchison v. XTO Energy Inc., Case 4:16-cv00094-BRW (E.D. Ark. filed Feb. 23, 2016); Appellants’ Opening Br. ii, Whisenhunt Invs., LLC v. Exxon Mobil Corp., No. 16-3541 (8th Cir. filed Nov. 3, 2016). 18 no economic interest in the optometry practices under review, but their participation nonetheless violated due process because they could benefit financially from the reduction in competition. 411 U.S. at 578-79. In Lavoie, the judge had no economic interest in the controversy at issue and was not a party, but, because he had pending lawsuits asserting similar legal claims, this Court concluded that he had a disqualifying pecuniary interest. 475 U.S. at 823-24. Likewise, even though Justice Walker and her spouse had no interest in respondent or the specific lease in question, they had an economic interest in the rule of law that would be established in this case. Thus, as in Lavoie, Justice Walker “acted as ‘a judge in [her] own case.’ ” Id. at 824 (quoting In re Murchison, 349 U.S. 133, 136 (1955)). Justice Walker’s subsequent statement that her husband sold his energy stocks after she voted to grant rehearing, see App. 60a, does not eliminate the due process violation. At the time Justice Walker cast that crucial vote, she had a disqualifying pecuniary interest. Even assuming that she had no conflict of interest when the court decided the merits on rehearing, petitioners’ constitutional rights were nonetheless violated. In Ward, the decision by the conflicted mayor was reviewable through a trial de novo in a different court. 409 U.S. at 61. But this Court held that “the State’s trial court procedure” could not “be deemed constitutionally acceptable simply because the State eventually offers a defendant an impartial adjudication. Petitioner is entitled to a neutral and detached judge in the first instance.” Id. at 61-62. So too, here, petitioners were entitled to 19 have “neutral and detached” judges decide respondent’s petition for rehearing.11 The fact that, on rehearing, the West Virginia Supreme Court of Appeals voted 4-1 in favor of respondent similarly does not negate the due process violation. As this Court held last year, “an unconstitutional failure to recuse” by a judge on a multimember court “constitutes structural error even if the judge in question did not cast a deciding vote.” Williams v. Pennsylvania, 136 S. Ct. 1899, 1909 (2016).12 If the court’s decision is not closely divided, that “may mean only that the judge was successful in persuading most members of the court to accept his or her position. That outcome does not lessen the unfairness to the affected party.” Id. (citing Lavoie, 475 U.S. at 831-32 (Blackmun, J., concurring in the judgment)). Here, too, there is no way to know the extent to which Justice Walker influenced her colleagues’ analysis of this case while operating under a disqualifying conflict of interest. Due process therefore necessitates vacating the decision below and the order granting rehearing. 11 The federal recusal statute provides that, if new facts become available demonstrating a disqualifying financial interest “after substantial judicial time has been devoted to the matter,” then “disqualification is not required” if the judge “divests himself or herself of the interest that provides the grounds for the disqualification.” 28 U.S.C. § 455(f ). Justice Walker’s actions were inconsistent with the procedures contemplated in that provision because her financial interest existed and should have been apparent to her from the moment she became involved in the case, yet she still made a crucial decision while under the influence of that interest. 12 In any event, Justice Walker cast the deciding vote in the court’s 3-2 decision to grant rehearing. 20 II. WIDESPREAD UNCERTAINTY EXISTS REGARDING THE NATURE OF PECUNIARY INTERESTS REQUIRING DISQUALIFICATION It is now beyond question that “[i]t would certainly violate the due process clause to subject a person’s life, liberty, or property to a judge who has a substantial pecuniary interest in reaching a conclusion either against that person, or in favor of his adversary.” Flamm, Judicial Disqualification § 6.3, at 150. But no clear standard exists regarding “the kind and degree of pecuniary interest that would be sufficient to warrant disqualifying a judge from sitting on a particular case.” Id. This Court has not decided a case involving a claim of an unconstitutional pecuniary interest since its decisions in Ward, Gibson, and Lavoie in the 1970s and 1980s. Since then, federal and state courts have exhibited pervasive confusion regarding disqualification for pecuniary interest. That confusion has primarily manifested itself in cases, like this one, where the judge has no direct interest in the parties or the specific transaction at issue, but the judge’s decision has the potential to affect the judge’s finances. In such cases, courts have reached opposing outcomes on similar facts, and even judges on the same court frequently disagree regarding the handling of disqualification disputes. The time is ripe for this Court to provide clarity regarding the boundaries of the constitutional principle that a judge with a substantial pecuniary interest in a case cannot participate. 21 A. Courts Have Taken Disparate Approaches To Disqualification Based On Pecuniary Interests Courts vary widely in their approach to determining when a pecuniary interest is sufficiently substantial to require recusal. Some courts look broadly to whether the outcome will have an effect on the judge’s financial interests. Other courts look more narrowly to whether the judge has a financial stake in the parties or the specific transaction at issue. 1. Several courts have held that disqualification is constitutionally required when the judge has a substantial pecuniary interest in the outcome of the case, even without a direct interest in the specific subject matter of the controversy. In Johnson v. Sturdivant, 758 S.W.2d 415 (Ark. 1988), the Arkansas Supreme Court relied on this Court’s Lavoie decision in vacating a judgment because one of the Arkansas justices had a pending insurance claim that was affected by the rule of law announced in the case. Id. at 416. The case turned on whether a paper company was the employer of two drivers contracted to haul logs to the company’s sawmill, such that the company could be held vicariously liable for an automobile collision caused by the drivers. See Johnson Timber Corp. v. Sturdivant, 752 S.W.2d 241, 243-44 (Ark. 1988). Justice Purtle wrote an opinion holding that a factual dispute existed as to whether the drivers were employees, even though their contracts defined them as independent contractors, and accordingly sustained the jury’s verdict against the company. Id. at 247-48. “As it turn[ed] out, Justice Purtle ha[d] a claim against an insurance company of one of the appellants and that claim relate[d] to the issue of an independent 22 contractor which is the main issue in this case.” Johnson, 758 S.W.2d at 416. The Arkansas Supreme Court admonished that Justice Purtle’s “personal legal business should never conflict with his role as a justice” and cited Lavoie in support of its conclusion that its “decision must be set aside and resubmitted for consideration.” Id. Courts have likewise invalidated, as contrary to due process, systems in which disputes are resolved by adjudicators whose compensation depends on ad hoc selection by prosecuting officials or plaintiffs. In Brown v. Vance, 637 F.2d 272 (5th Cir. 1981) (Wisdom, J.), the Fifth Circuit invalidated Mississippi’s system in which police officers could choose the justice of the peace who would hear traffic cases, and the justice was paid according to his caseload. The court reasoned that “the relevant constitutional fact is that a judge’s bread and butter depend on the number of cases filed in his court.” Id. at 276. That creates “the temptation” to take “a biased view that will find favor in the minds of arresting officers.” Id. That “possible temptation” was “not as obvious on its face as it was in Tumey and Ward,” id. at 280, because the Mississippi judges were paid regardless of the outcome of the case, see id. at 275. The court nevertheless held that the “possible temptation” to curry favor with law enforcement was “a fatal constitutional flaw.” Id. at 276. The Fifth Circuit also invalidated Mississippi’s civil system in which plaintiffs could choose the judges who would hear debt-collection actions. It explained that “[i]t is reasonable to infer, and the record supports the inference, that creditors would file more frequently in the courts of the judges who tended to favor the plaintiffs.” Id. at 284. The system provided 23 an unconstitutional pecuniary “incentive for judges to enhance their compensation by developing an image as . . . a creditors’ judge.” Id. at 276. That “[p]ossible temptation” was again sufficient to demonstrate a due process violation. Id. at 286.13 In Haas v. County of San Bernardino, 45 P.3d 280 (Cal. 2002), the California Supreme Court extended Brown’s reasoning to administrative hearings. The court invalidated a system in which temporary administrative hearing officers were chosen (and paid) by counties on an ad hoc basis. The court held that an officer under such a system has an unconstitutional pecuniary interest, even though “the adjudi13 Several other courts similarly have held that judges under fee systems have an unconstitutional pecuniary interest where judges are paid for each case, and plaintiffs or prosecuting officers can choose their judge. See, e.g., State ex rel. McLeod v. Crowe, 249 S.E.2d 772, 778 (S.C. 1978) (fee system “violate[s] the due process clause of both the State and Federal Constitution since they confer upon magistrates a pecuniary interest in the subject matter of civil proceedings before them”); Doss v. Long, 629 F. Supp. 127, 129 (N.D. Ga. 1985) (fee system “failed the constitutional test of Tumey and its progeny”). Even so, the U.S. Department of Justice recently concluded that the problem of municipal courts ruling on the basis of the municipality’s fiscal interests, in violation of litigants’ due process rights, still exists. See U.S. Dep’t of Justice, Civil Rights Div., Investigation of the Ferguson Police Department 3 (Mar. 4, 2015) (finding that the municipal court in Ferguson, Missouri, “primarily uses its judicial authority as the means to compel the payment of fines and fees that advance the City’s financial interests” and that “[t]his has led to court practices that violate the Fourteenth Amendment’s due process and equal protection requirements”), available at https://www.justice.gov/sites/default/ files/opa/press-releases/attachments/2015/03/04/ferguson_police_ department_report.pdf. The persistence of such conflicts of interest in municipal court systems underscores the confusion regarding the governing due process standard. 24 cator’s pay is not formally dependent on the outcome of the litigation.” Id. at 289. It explained that the officer’s “future income as an adjudicator is entirely dependent on the goodwill of a prosecuting agency that is free to select its adjudicators and that must, therefore, be presumed to favor its own rational self-interest by preferring those who tend to issue favorable rulings.” Id. Adjudicators “selected and paid in this manner,” the court concluded, “have a ‘possible temptation . . . not to hold the balance nice, clear and true.’ ” Id. (quoting Tumey, 273 U.S. at 532) (ellipsis in original). 2. Courts in other cases have rejected calls for disqualification based on a judge’s pecuniary interest in the outcome of a case, on the ground that the judge had no relationship to the parties or the specific object of the controversy. In City of Edgerton v. General Casualty Co. of Wisconsin, 527 N.W.2d 305 (Wis. 1995), the court rejected disqualification based on a financial interest in a member of an amicus curiae. A justice’s spouse worked for an insurance company, St. Paul, that was a member of an industry group that filed an amicus brief. Id. at 307. The case concerned whether insurance companies were liable for environmental cleanup costs, and the justice’s spouse was a staff attorney who regularly litigated cases on behalf of St. Paul involving similar insurance issues. See Pet. for Cert. at 3-4, 6-7, Edgerton Sand & Gravel, Inc. v. General Cas. Co. of Wisconsin, No. 94-1843 (U.S. filed May 8, 1995), 1995 WL 17048671. The plaintiff argued that recusal was required under the Due Process Clause. See id. at 8. The Wisconsin Supreme Court reasoned that disqualification was not required because St. Paul was not “a party to the action” and the justice’s 25 spouse was “not its counsel in this case,” without giving further consideration to the extent of the justice’s pecuniary interests or explicitly addressing this Court’s due process precedents. 527 N.W.2d at 308-09. Similarly, in Gas Utilities Co. of Alabama v. Southern Natural Gas Co., 996 F.2d 282 (11th Cir. 1993) (per curiam), the Eleventh Circuit held that disqualification was not required under the federal recusal statute, even though the case had a “potential industry-wide impact” on the natural gas industry and the judge’s relatives had “proprietary interests in land leased to oil and gas interests.” Id. at 283. The court reasoned that recusal was not necessary because the leases were “not to companies involved in the present action.” Id.; see also In re Placid Oil Co., 802 F.2d 783, 786-87 (5th Cir. 1986) (holding that judge’s interest was too “remote” to require disqualification under federal recusal statute even though the case had potential for “a dramatic impact on the entire banking industry” and judge had “a large investment in a Texas bank”).14 Those decisions, while consistent with Justice Walker’s statements here, conflict with the reasoning of this Court’s decisions in Gibson and Lavoie, the Arkansas Supreme Court’s decision in Sturdivant, 14 By contrast, in Sollenbarger v. Mountain States Telephone & Telegraph Co., 706 F. Supp. 776 (D.N.M. 1989), the judge reached the opposite result — determining that recusal was required — under materially identical circumstances. The judge owned stock in companies that were in the same industry as the parties, and the case had the potential to have broad industry impact, such that “the whole industry is before the court.” Id. at 783. Because the judge recused himself under the federal recusal statute, 28 U.S.C. § 455, he was not required to consider whether his participation would have violated due process. 26 and the Fifth Circuit’s decision in Brown, because the courts focused on whether the judge had an interest in the parties to the case, rather than whether the judge had a pecuniary interest in the outcome of the case. B. Courts’ Different Approaches To Disqualification Lead To Conflicting Outcomes In Similar Cases 1. The courts’ differing approaches to disqualification questions produce conflicting outcomes in similar cases. That is particularly apparent in a series of cases involving state motor vehicle boards. Several States have established such boards to adjudicate disputes involving franchised car dealers, and in many cases they feature car dealers as members. In a series of decisions applying federal and state due process principles, the California Court of Appeal invalidated as unconstitutional that State’s system in which car dealers participated on a board that adjudicated franchise disputes between car dealers and manufacturers. See American Motors Sales Corp. v. New Motor Vehicle Bd., 69 Cal. App. 3d 983, 987-92 (1977); Chevrolet Motor Div. v. New Motor Vehicle Bd., 146 Cal. App. 3d 533, 541 (1983); Nissan Motor Corp. v. New Motor Vehicle Bd., 153 Cal. App. 3d 109, 114 (1984); University Ford Chrysler-Plymouth, Inc. v. New Motor Vehicle Bd., 179 Cal. App. 3d 796, 806 (1986).15 Those cases held that an unconstitu15 The California Supreme Court denied review in each case. See American Motors, 69 Cal. App. 3d at 998; Chevrolet Motor Div., 146 Cal. App. 3d at 541; Nissan Motor, 153 Cal. App. 3d at 116; University Ford, 179 Cal. App. 3d at 806. In Haas, the California Supreme Court favorably cited University Ford as consistent with this Court’s decisions in Lavoie and Gibson. See 45 P.3d at 287 & n.13. 27 tional pecuniary interest existed even though the car dealers had no interest in the specific controversies they decided, because “[i]t is to every dealer’s advantage not to permit termination [of a franchise] for low sales performance, which fact however is to every manufacturer’s disadvantage.” American Motors, 69 Cal. App. 3d at 987. Thus, “[t]he conclusion is unavoidable that dealer-members of the Board have an economic stake in every franchise termination case that comes before them.” Id. The court explained that, because of the membership of car dealers, “the tribunal is clearly biased and slanted towards the car dealers.” Nissan Motor, 153 Cal. App. 3d at 113. Courts in several other States have reached the opposite result and have approved of the participation of car dealers on similar boards. In General GMC Trucks, Inc. v. General Motors Corp., 237 S.E.2d 194 (Ga. 1977), the Georgia Supreme Court decided that a motor vehicle board, a majority of which was composed of franchised car dealers, could constitutionally decide disputes between franchised dealers and competing dealers seeking a license for a new franchise. Id. at 195. The court rejected the argument that the franchised dealers on the board “must necessarily be prejudiced in favor of franchised dealers,” reasoning that “[m]embers of a commission are presumed to be fair and impartial.” Id. The Tennessee Supreme Court and Nebraska Supreme Court have relied on that decision in upholding the participation of car dealers on a board that adjudicates disputes between car dealers and manufacturers. See General Motors Corp. v. Capitol Chevrolet Co., 645 S.W.2d 230, 235-38 (Tenn. 1983); Chrysler Motors Corp. v. Lee Janssen Motor Co., 534 N.W.2d 309, 315-16 (Neb. 1995). 28 The fact that courts in different States have reached conflicting results regarding the due process implications of the same type of tribunal reinforces the need for this Court to clarify the standard for disqualification based on a pecuniary interest. 2. The uncertainty regarding the correct approach to pecuniary conflicts is also shown by the fact that some decisions not to recuse have drawn sharp dissents by the judge’s colleagues. For example, in Snyder v. Viani, 916 P.2d 170 (Nev. 1996), the Nevada Supreme Court had issued a 3-2 decision limiting dram shop liability of liquor-serving establishments for car accidents, and a justice in the majority (Justice Rose) held an economic interest in a bar in Las Vegas. Id. at 171; id. at 179 (Steffen, J., dissenting). Three justices (including Justice Rose) held that “Justice Rose’s ownership did not create a direct, ongoing pecuniary interest such that would disqualify him from participation in this case.” Id. at 172. Two justices dissented, describing Justice Rose’s participation as “inappropriate” because his “majority vote . . . in the instant case could produce” a reduction of “insurance costs” for the bar in which he held an interest. Id. at 179 (Steffen, J., dissenting). The dissent concluded that this Court’s decision in Lavoie had “direct application” there because, as in Lavoie, Justice Rose’s decision provided him with a “pecuniary benefit.” Id. A dispute regarding the standard for pecuniary conflicts has also sharply divided the Michigan Supreme Court. In United States Fidelity Insurance & Guaranty Co. v. Michigan Catastrophic Claims Association, 773 N.W.2d 243 (Mich. 2009), the court split 4-3 on a disqualification motion regarding a justice’s financial interest similar to Justice Walker’s 29 interest here. Justice Hathaway’s husband’s law practice focused on no-fault insurance claims, the topic at issue in the case, and his law practice allegedly could have been “substantially affected by the outcome of the proceedings.” Id. at 248 (Corrigan, J., dissenting). In an opinion for the court joined by three other justices, Justice Hathaway concluded that recusal was not required because “my husband has no connection to or financial interest in this matter. He is not an attorney for or employee of any party, nor is he a litigant in either of these cases.” Id. at 244 (majority). But three justices dissented or authored separate statements, concluding that, in light of this Court’s decision in Caperton, further briefing was necessary to address whether the financial conflict of interest violated due process. See id. at 246-52 (Corrigan, J., dissenting); id. at 25256 (statement of Young, J.); id. at 256-57 (statement of Markman, J.). Michigan Catastrophic Claims Association vividly illustrates the confusion in the lower courts and the need for this Court’s review. This Court’s decision in Caperton spurred renewed attention to the due process requirement of an impartial tribunal. But with respect to the prohibition on participation with a substantial pecuniary interest — the original basis for constitutional disqualification, see Caperton, 556 U.S. at 876 — the Court has not provided guidance since Lavoie. Until this Court clarifies the standard, judges and courts will continue to disagree and struggle to determine what sort of pecuniary interests require disqualification. This case provides the Court an excellent opportunity to dispel the confusion. 30 III. THE SCOPE OF PROHIBITED PECUNIARY JUDICIAL CONFLICTS IS A RECURRING ISSUE OF NATIONAL IMPORTANCE This Court’s guidance is necessary to help judges resolve constitutional questions regarding pecuniary conflicts of interest that unfold every day in courts across the country. Although judges routinely recuse themselves due to pecuniary interests, a paucity of judicial authority exists regarding when recusal is constitutionally required. Judges “do recuse themselves in many situations,” but “a judge who does so rarely writes an opinion explaining why.” Richard E. Flamm, History of and Problems with the Federal Judicial Disqualification Framework, 58 Drake L. Rev. 751, 760 (2010). “As a result, the existing judicial disqualification jurisprudence” provides insufficient guidance “as to whether disqualification is warranted in a particular case.” Id. at 761. This area of the law is too fundamentally important to be allowed to persist in a state of confusion and uncertainty. “It is axiomatic that ‘[a] fair trial in a fair tribunal is a basic requirement of due process.’ ” Caperton, 556 U.S. at 876 (quoting Murchison, 349 U.S. at 136) (alteration in Caperton); see also Johnson v. Mississippi, 403 U.S. 212, 216 (1971) (per curiam) (“Trial before ‘an unbiased judge’ is essential to due process.”). Three times in the past decade, this Court has reaffirmed the fundamental importance of maintaining the integrity of the judiciary in general and has acknowledged the threat to judicial integrity posed by pecuniary conflicts of interest in particular. In Caperton, this Court recognized pecuniary interest as the original situation in which this Court has required recusal, noting that in such cases the 31 Court has showed “concern with conflicts resulting from financial incentives.” 556 U.S. at 878. As the Court recognized, the pecuniary-interest rule “reflects the maxim that ‘[n]o man is allowed to be a judge in his own cause.’ ” Id. at 876 (quoting The Federalist No. 10, at 59 (James Madison) (Jacob Cooke ed., 1961)) (alteration in Caperton). The dissent in Caperton likewise acknowledged that “the Federal Due Process Clause requires disqualification of a judge[ ] when the judge has a financial interest in the outcome of the case.” Id. at 890 (Roberts, C.J., dissenting). In Williams-Yulee v. Florida Bar, 135 S. Ct. 1656 (2015), this Court found the governmental interest in judicial integrity sufficiently compelling that it upheld a ban on campaign solicitations by judicial candidates designed to protect that integrity. Even though the ban was a content-based speech restriction subject to strict scrutiny, see id. at 166465 (plurality), the Court found that it was narrowly tailored to advance “the State’s compelling interest in judicial integrity,” id. at 1668 (majority). The Court described the “public perception of judicial integrity” as “ ‘a state interest of the highest order.’ ” Id. at 1666 (quoting Caperton, 556 U.S. at 889). Last year, in Williams, the Court applied the principle that recusal is required when an unconstitutional potential for bias exists to the circumstances of a judge who, as district attorney, had authorized his office to pursue the death penalty against a defendant whose sentence he subsequently reviewed in a post-conviction proceeding. Although members of this Court disagreed on the outcome of the case, even the dissenting Justices again reaffirmed the rule that pecuniary conflicts of interest require recusal. 32 See 136 S. Ct. at 1912 (Roberts, C.J., dissenting) (“It is clear that a judge with ‘a direct, personal, substantial, pecuniary interest’ in a case may not preside over that case.”) (quoting Tumey, 273 U.S. at 523); id. at 1917-18 (Thomas, J., dissenting) (pecuniaryinterest disqualification derived from the “commonlaw rule” under which “[m]ost jurisdictions required judges to recuse when they stood to profit from their involvement”); cf. Rippo v. Baker, 137 S. Ct. 905, 907 (2017) (per curiam) (“Recusal is required when, objectively speaking, ‘the probability of actual bias on the part of the judge or decisionmaker is too high to be constitutionally tolerable.’ ”) (quoting Withrow v. Larkin, 421 U.S. 35, 47 (1975)). Commentators have elaborated on the historical foundations and continued importance of pecuniaryinterest disqualification. The leading treatise on judicial disqualification states that “[t]he notion that judges should stand fair and detached between the parties who appear before them is as old as the history of courts,” and it notes the existence of “edicts designed to ensure judicial impartiality” dating as far back as the Babylonian Talmud and the Roman Code of Justinian. Flamm, Judicial Disqualification § 1.2, at 5. Indeed, at common law, pecuniary interest was the only basis for judicial disqualification. See id. at 6; John P. Frank, Disqualification of Judges, 56 Yale L.J. 605, 609 (1947) (“The common law of disqualification, unlike the civil law, was clear and simple: a judge was disqualified for direct pecuniary interest and for nothing else.”). Scholars have reaffirmed the contemporary importance of disqualification for pecuniary interests.16 16 See Martin H. Redish & Lawrence C. Marshall, Adjudicatory Independence and the Values of Procedural Due Process, 95 33 * * * This case exemplifies the urgent need for this Court to clarify the standard for pecuniary-interest disqualification under the Due Process Clause. The West Virginia Supreme Court of Appeals granted rehearing of a decision in petitioners’ favor based on the vote of a newly elected justice who had a financial incentive to rule in respondent’s favor. The justice determined that recusal was not required on the basis that neither she nor her spouse had “an economic interest in the subject matter in controversy.” App. 60a, 62a. But, although they may not have owned stock in respondent or an interest in the particular lease at issue in the litigation, the justice’s spouse (and primary funder of her election campaign) owned stock in many companies that stood to benefit from a ruling in respondent’s favor. Justice Walker’s decision cannot be squared with this Court’s due process precedents, and it illustrates the persistent confusion in the courts regarding the standard governing recusal for pecuniary conflicts. CONCLUSION The petition for a writ of certiorari should be granted. Yale L.J. 455, 494 (1986) (“The decisionmaker who has a direct financial interest in the outcome of a case presents perhaps the clearest instance of partiality.”); John R. Allison, A Process Value Analysis of Decision-Maker Bias: The Case of Economic Conflicts of Interest, 32 Am. Bus. L.J. 481, 484 (1995) (“Regardless of exactly how decision-maker bias is defined or how finely the categories are delineated, however, a decision maker’s economic stake in the outcome of a decision is typically viewed as one of its most egregious forms.”). 34 Respectfully submitted, MICHAEL W. CAREY CAREY, SCOTT, DOUGLAS & KESSLER, PLLC 707 Virginia Street, East Charleston, WV 25301 (304) 345-1234 MARVIN W. MASTERS THE MASTERS LAW FIRM, L.C. 181 Summers Street Charleston, WV 25301 (304) 342-3106 September 8, 2017 DAVID C. FREDERICK Counsel of Record BRENDAN J. CRIMMINS JEREMY S.B. NEWMAN KELLOGG, HANSEN, TODD, FIGEL & FREDERICK, P.L.L.C. 1615 M Street, N.W. Suite 400 Washington, D.C. 20036 (202) 326-7900 (dfrederick@kellogghansen.com)