NEW ORLEANS – Now that a block on all oil spill settlement payments to businesses has been lifted for the first time since December, some plaintiffs’ attorneys are concerned that a Supreme Court justice with close ties to BP’s lawyers might undo what they have gained.
Thousands of business claimants got what they had so desperately wanted this week when U.S. District Judge Carl Barbier ordered Claims Administrator Patrick Juneau to start paying claims again.
But the payment process is likely to be slow at first. Juneau said a new policy he had to adopt when BP won an earlier appeal will force accountants to do complex re-reviews of most pending business claims before they can be paid.
And that new so-called "matching" policy is expected to save BP millions, possibly billions, of dollars compared to what it would have had to pay under the accounting rules Juneau had been using to calculate losses and test eligibility.
But at the same time, BP is also asking the U.S. Supreme Court to reinstate the halt on all business loss payments. That brings up persistent questions about the relationship of two Supreme Court justices to the law firm handling BP’s appeal.
Justices Antonin Scalia and Samuel Alito each has a son who works at Gibson Dunn, a large national firm renowned for its Supreme Court appeals practice. In fact, the firm brags on its website that it gets more than 30 percent of its appeals to the High Court heard, while the overall average is less than 1 percent.
Gibson Dunn’s appellate group, led by former U.S. Solicitor General Ted Olson, asked the Supreme Court to hear BP’s case against Juneau’s payment methods and also filed a separate request to stop the business payments in the interim.
Alito’s son, Phil, just became an associate in the firm’s Washington, D.C., office last August. But Scalia’s son, Eugene, has been at Gibson Dunn for more than a decade and has been a full partner since 2003. That means he would share in profits for all the firm’s cases, making his relationship to Justice Scalia an issue under the law.
U.S. Code Title 28, Section 455 requires federal judges and justices to recuse themselves if their “impartiality might reasonably be questioned” or if their close relative or a close relative’s spouse “is known by the judge to have an interest that could be substantially affected by the outcome of the proceeding.”
Loyola Law Professor Dane Ciolino, a judicial ethics expert, said that means judges must disqualify themselves from cases if their close relative is a partner in the law firm arguing the case. Courts, including the New Orleans-based 5th Circuit Court of Appeals, have taken the position that recusal would always be necessary in those cases.
But the Supreme Court took a different stance in 1993, when seven of the nine justices at the time – including Scalia -- set a recusal policy. First of all, the letter says no recusal is necessary if a justice’s close relative simply works at a law firm bringing a case before the court – as is the case for Alito.
It does say a justice should step aside for cases involving law firms where a close relative is a partner – but with a caveat. The justices said they would not have to recuse if they “have received from the firm written assurance that income from Supreme Court litigation is, on a permanent basis, excluded from (their) relatives’ partnership shares.”
According to BP, Gibson Dunn sent such a letter to the high court in 2003, promising to withhold that portion of Eugene Scalia’s compensation “until further notice.”
Ciolino says this is not how the issue of a potential conflict would normally be solved, except at the Supreme Court. But regardless of the case law, what the Supreme Court says, goes.
“There are different viewpoints on whether this is a reasonable approach to the problem,” he said. “But at the end of the day it doesn't make any difference. At the end of the day, the Supreme Court sets its own recusal policy and there's no appeal from it.”
The issue of Eugene Scalia’s position at Gibson Dunn has risen to the fore again because Scalia has a great deal of unilateral control over whether around 30,000 business claims can start to be paid again under the BP settlement. As the justice assigned to the 5th Circuit, he is allowed to grant BP a new stay in the matter, without consulting other justices.
He did something similar in 2010 when he single-handedly granted a stay to block a $270 million payment from tobacco companies to the state of Louisiana for smoking cessation programs.
He granted the stay under the argument that three other justices were likely to agree with him to hear an appeal. They did not, and the case never got heard by the high court. But the block imposed by Scalia still remained in place for eight months.
Ciolino said history suggests Scalia will not back down from handling the case on his own in the BP matter, either, even with his son’s law firm involved.
“Justice Scalia may choose to refer this matter to the entire court or perhaps to another justice of the court, but historically Justice Scalia has bristled at allegations of partiality,” Ciolino said.
BP has already benefited from the rulings of a federal judge who is also dogged by allegations of conflicts of interest. The appeal now before the Supreme Court really stemmed from questions raised by 5th Circuit Judge Edith Clement, who has dissented in every major ruling against BP.
Clement sits on the board of directors of the Foundation for Research on Economics and the Environment, a Big Oil-backed think tank. She ignored an ethics opinion calling on her to step down from the board, even after other judges heeded that call, and she has not responded to questions about whether she should recuse herself from the BP case.
By contrast, Juneau’s claims office has been rocked by allegations of conflicts of interest involving members of the office staff dealing with their relatives or former employers at various plaintiffs’ law firms.
Several of Juneau’s top deputies have been forced out over just such conflict-of-interest concerns. David Duval, the claims office appeals coordinator and himself the son of federal Judge Stanwood Duval, had to resign from Juneau's office last fall when he sent an email containing claims information to his uncle’s law firm.