The Volokh Conspiracy - Supreme Court Recusals Because of Stock Ownership:

The L.A. Times reports that the Exxon Valdez punitive damages case might yield a 4-4 division — with no precedent being set, and the lower court decision being affirmed — because "Justice Samuel A. Alito Jr. withdrew because he holds Exxon stock." And indeed important cases have in the past yielded 4-4 deadlocks because one Justice owned stock in one of the companies.

This is a pretty bad result, it seems to me: An important issue will be unresolved, the Justices' time will be wasted, the parties' money will be wasted, and all over what is likely just a few thousand dollars' worth of investment.

Isn't there some better solution, even if we insist that a judge may not own even a small stake in one of the parties? For instance, if the problem is indeed just that the Justice owns actual stock (as opposed to owning a share in some fund that owns the stock), wouldn't it be much better for the Justice simply to sell the stock if certiorari is granted? This would presumably be little loss for the Justice, who could sell at market rates and lose just the commission (plus perhaps have some taxable capital gain that he might rather have deferred). Nor would the Justice have any enduring bias in favor of the company — it's not like the past stock ownership created or reflected an emotional relationship that persists even when the stock is sold. Or am I missing something here?

UPDATE: My colleague and corporations law maven Stephen Bainbridge has more. Also, to respond to some general comments: (1) I'd try to make this divestment-instead-of-recusal something of a rule, whether strictly binding or just followed as a matter of practice and precedent. (2) If there are insider trading objections to this (a matter discussed in the comments), I think the law should be amended to remove such objections; the minor insider-trading costs created by such behavior seem to me to be greatly outweighed by the benefits of letting Justices do their jobs.

(3) I realize that litigants generally aren't entitled to their day in the Supreme Court; but it still strikes me as unfair to litigants to cause them to spend a lot of money litigating the matter there, and then have the case end up 4-4 just because of happenstance. It's not a horrible unfairness, but it's something of an unfairness. And, more importantly, it also creates costs to the legal system -- generally, the grant of certiorari is triggered by the Court's judgment that there is uncertainty (say, a circuit split) that should be resolved for the benefit of future litigants and prospective litigants. If resolving that uncertainty is (all else being equal) a benefit, failing to resolve it tends to be a cost.

	[Eugene Volokh, February 27, 2008 at 2:20pm] Trackbacks Supreme Court Recusals Because of Stock Ownership: The L.A. Times reports that the Exxon Valdez punitive damages case might yield a 4-4 division — with no precedent being set, and the lower court decision being affirmed — because "Justice Samuel A. Alito Jr. withdrew because he holds Exxon stock." And indeed important cases have in the past yielded 4-4 deadlocks because one Justice owned stock in one of the companies. This is a pretty bad result, it seems to me: An important issue will be unresolved, the Justices' time will be wasted, the parties' money will be wasted, and all over what is likely just a few thousand dollars' worth of investment. Isn't there some better solution, even if we insist that a judge may not own even a small stake in one of the parties? For instance, if the problem is indeed just that the Justice owns actual stock (as opposed to owning a share in some fund that owns the stock), wouldn't it be much better for the Justice simply to sell the stock if certiorari is granted? This would presumably be little loss for the Justice, who could sell at market rates and lose just the commission (plus perhaps have some taxable capital gain that he might rather have deferred). Nor would the Justice have any enduring bias in favor of the company — it's not like the past stock ownership created or reflected an emotional relationship that persists even when the stock is sold. Or am I missing something here? UPDATE: My colleague and corporations law maven Stephen Bainbridge has more. Also, to respond to some general comments: (1) I'd try to make this divestment-instead-of-recusal something of a rule, whether strictly binding or just followed as a matter of practice and precedent. (2) If there are insider trading objections to this (a matter discussed in the comments), I think the law should be amended to remove such objections; the minor insider-trading costs created by such behavior seem to me to be greatly outweighed by the benefits of letting Justices do their jobs. (3) I realize that litigants generally aren't entitled to their day in the Supreme Court; but it still strikes me as unfair to litigants to cause them to spend a lot of money litigating the matter there, and then have the case end up 4-4 just because of happenstance. It's not a horrible unfairness, but it's something of an unfairness. And, more importantly, it also creates costs to the legal system -- generally, the grant of certiorari is triggered by the Court's judgment that there is uncertainty (say, a circuit split) that should be resolved for the benefit of future litigants and prospective litigants. If resolving that uncertainty is (all else being equal) a benefit, failing to resolve it tends to be a cost.