Judges Breaking the Law: An Empirical Study of Financially Interested Judges Deciding Cases

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We present the first extensive study of nonrecusals by federal district judges and report two key empirical findings. First, we found seventy-five judges participated in over 200 total cases despite owning stock in one of the two parties to the litigation, a clear violation of both statutory law and judicial ethics. As we used a very conservative methodology and did not review every judge, this is a lower bound on recusal failures. Second, we found judges who employ very different strategies when deciding whether to recuse due to a potential financial conflict of interest. This variability signals two distinct problems: the current rules as to when a judge should or should not recuse are unclear, and, as a result, judges fail to recuse when they should and also recuse when they should not. This suggests a clear need for reform.

We provide a theoretical framework to evaluate judicial recusal policies due to financial relationships. We identify a trade-off between two core concerns of the judiciary: fairness and legitimacy. Fairness considerations suggest treating a judge's financial interests in a party like other relationships that judges have with litigants, lawyers, or witnesses. Legitimacy concerns urge a carve out for particular types of financial interests that would lead observers to think a judge could be acting to advance their own financial interests. These suggestions represent both a fundamental reorientation of existing recusal law and theory and a practical solution to a fundamental problem that has gone unobserved for too long.