United States District Court, District of New Jersey, D
May 1, 2002
IN RE: MERCEDES-BENZ ANTITRUST LITIGATION MERCEDES-BENZ USA, INC., PLAINTIFF/COUNTERCLAIM DEFENDANT,
COAST AUTOMOTIVE GROUP, LTD. AND TAMIM SHANSAB, DEFENDANTS/COUNTERCLAIMANTS/THIRD PARTY PLAINTIFFS, V. DAVID MICHAEL MOTOR CARS CORP., RAY CATENA MOTOR CARS CORP. AND CONTEMPORARY MOTORCARS, INC., THIRD PARTY DEFENDANTS.
The opinion of the court was delivered by: Alfred M. Wolin, United States District Judge
In accordance with the Court's Memorandum Opinion filed herewith,
It is on this 1st day of May, 2002
ORDERED that the Court denies its own Order to Show Cause for recusal;
and it is further
ORDERED that the objections of those parties arguing that the Court
should recuse itself are overruled.
This matter is opened before the Court upon its own Order to Show Cause
dated April 10, 2002, why the Court should not recuse itself from further
proceedings in the above-captioned matters. The Court has received a
number of written
submissions from the parties in response to its Order
to Show Cause. Counsel for the putative plaintiffs' class and
defendants/counterclaim plaintiffs Coast Automotive have appeared in
opposition to recusal. Mercedes-Benz USA has taken no position. The only
parties to have appeared in support of recusal belong to the so-called
"independent dealers group," defendants Prestige Motors, Globe Motor
Car, Country Imported Car, and David Michael Motors Cars.
This matter has been pending before the Court for approximately three
years. Following a substantial delay during which plaintiffs re-pled
their complaint and the Court entertained two motions to dismiss, the
Court assumed direct control of case management from the United States
Magistrate Judge. A number of case management devices were put into
place, as reflected in the Orders posted upon the web site of the Court.
Among these were the establishment of lead and liaison counsel, a
committee for the independent dealers, a special master, a document
depository and an expedited schedule for discovery and briefing of a
motion to certify the matter as a class action.
At the beginning of his lawsuit, the Court notified counsel that its
son, Marc E. Wolin, Esquire, was then an associate at the law firm of
Carpenter Bennett and Morrissey, counsel to the national distributor
Mercedes-Benz USA. No party objected to the Court's continued involvement
in this matter on that ground. With this procedure, the Court was
following a practice of many years duration. Indeed, the Third Circuit
Court of Appeals has had the opportunity to rule on this issue where the
Carpenter Bennett firm appeared before this Court, finding no abuse of
discretion when the Court refused to recuse itself on the basis of Mr.
Wolin's association. Sandusky v. Sodexho USA, No. 94-5655, slip op. at
6-7 (3d Cir. May 24, 1995).
The occasion of the Order to Show Cause revisiting this issue is Mr.
Wolin's elevation to partner at Carpenter Bennett. The authority conceded
by all parties to be primarily relevant is 28 U.S.C. § 455(b), which
provides that a judge:
shall . . . disqualify himself in the following
(5) He or his spouse, or a person within the
third degree of relationship to either of them, or
the spouse of such person:
(iii) Is known by the judge to have an interest
that could be substantially affected by the outcome of
Obviously, Mr. Wolin is related within the prohibited circle of
consanguinity to the Court and, if the condition of subsection (iii)
exists, then the Court must recuse itself regardless of the preferences
of the parties. Thus, the issue is whether Mr. Wolin's new status as
partner in Carpenter Bennett creates "an interest that could be
substantially affected by the outcome of the proceeding."
The factual context of this decision is as follows. First, the Court
takes judicial notice of the fact that modern law firm economics have led
to the inception of at least two types of partnership. One is the
traditional equity partner, in which each member is the general agent of
the others, enjoys an ownership interest in the entity, and has a share
in decision making. Because the partners' interests derive from their
participation as principals, successes, failures, profits and losses are
born together. of course, this interest, particularly with respect to
income, will generally be proportionate to the partner's seniority,
capital contribution, business generation and a host of other factors as
adjusted by the partnership agreement.
A second type of partnership is a newer creation, the nonequity
partner. As the name suggests, the non-equity partner position lacks some
of the perquisites of traditional partnership, most typically that the
non-equity partner is paid a fixed salary rather than a percentage of
firm profits. What other benefits the non-equity partner might have that
would distinguish her or him from an associate will differ from firm to
firm. Perhaps they will have some say in governance or enhanced job
security. The Court understands that the point of the nonequity
partnership is to introduce flexibility in large-firm management which was
lacking in the old, up-or-out regime of the past. No doubt the iterations
of "non-equity partnership" are as varied as the imaginations of managing
Lastly, it is relevant to discuss the Carpenter Bennett firm itself and
Mr. Wolin's place within it. Much information is available from public
sources. With some seventy lawyers, the firm is large as New Jersey law
firms go. The legal press reports that firm revenues are among the top
twenty for New Jersey firms. Tim O'Brien, The New Jersey Too Twenty
. . ., 165 N.J.L.J. 25, 26, 27 (July 2, 2001). The firm's client list is
dominated by large corporations. It is obviously stable and
well-established, having been founded in 1898. In fact, in the Court's
long experience in New Jersey legal profession, Carpenter Bennett has
maintained a reputation for excellence that places it in the elite of our
In addition to information from public sources, the Court has made
inquiry of the firm in connection with this Order to show cause. The
Court asked for the following information:
1. The importance of the Mercedes-Benz matter.
2. The size of the firm.
3. The reputation of the firm in relation to the
importance of the matter.
4. Total firm revenues.
5. Participation of Mr. Wolin in firm profits.
6. What bonuses are paid and how they are determined
for partners in Mr. Wolin's position.
7. The effect of the outcome of the matter on
the reputation of the firm.
8. Whether a fee award is possible based upon
the outcome of the litigation.
9. Whether success or failure in the matter will
affect the compensation to the firm.
10. Whether Mercedes-Benz USA is a material client for
The answers solicited by these questions were, in some cases,
necessarily subjective and involved sensitive information. Respecting the
candor and cooperation with which the Court's inquiry was met, the Court
will discuss in this opinion only that information it considers material
to its decision. The firm's letter will be filed under seal attached to
an appropriate Order of the Court.
After roughly nine years as an associate, Mr. Wolin joined the
partnership of the firm four months ago. He has had no contact with either
of the above-captioned matters in the course of his practice at the
firm. It appears that Mr. Wolin's new position is best characterized a
non-equity partnership. His compensation does not depend on firm
profits. Any bonus he might receive will not be affected by the outcome of
the matter before the Court. Carpenter Bennett's fees will be calculated
on a time and expense basis and is not contingent on a successful
defense. Although an attorneys fee award might be
Mercedes-Benz USA as an element of damages,*fn1 a fee award in favor of
this defendant seems remote.
Employment of a judge's daughter or son by a law firm appearing before
the Court is not so rare that the resulting conflict of interest issues
are unfamiliar to the courts. As noted, the core question is whether a
related person has an interest likely to be substantially affected by the
outcome of the pending matter. It appears to be settled that employment
as an associate usually will not involve such an interest; the courts
reason that a salaried attorney's income will not depend on the fortunes
of the firm. See generally Richard E. Flamm, Judicial Disgualification:
Recusal & Disqualification of Judges § 8.5.5 (1996) (collecting
The waters are murkier with respect to partners. Chief Justice
Rehnquist declined to recuse himself from the case of Microsoft Corp. v.
United States, 530 U.S. 1301 (2000), although his son was a partner in
one of the firms retained by Microsoft and had actually worked on the
case (although apparently not on that branch before the Supreme Court).
The Chief Justice noted that the firm billed on an hourly rate regardless
of the outcome and wrote that it would be "unreasonable and speculative"
to hold that the Supreme Court's decision would have an impact on his
son's non-pecuniary interests on the facts presented.
The Second Circuit, in Pashaian v. Eccelston Props., Ltd. 88 F.3d 77
(2d Cir. 1996), reached a parallel conclusion. Pashaian affirmed a
district judge who refused to recuse himself although his brother-in-law
was a partner in a firm appearing before him. The Court of Appeals
wrote: "It would simply be unrealistic to assume . . . that partners in
today's law firms invariably `have an interest that could be
substantially affected by the outcome of' any case in which any other
partner is involved." id. at 83 (emphasis in original).
Both the Microsoft and the Pashaian cases are readily distinguishable
from the situation at bar. Chief Justice Rehnquist emphasized the limited
number of Justices of the Supreme Court, contrasting them with the judges
of lower courts who are more easily replaced if a conflict arises.
Moreover, unlike here, the Chief Justices son's firm was not practicing
before the Supreme Court itself. The related attorney in Pashaian was a
member of Cahill, Gordon & Reindel, a far larger firm than Carpenter
Bennett with over 220 lawyers. The Third Circuit most closely approached
this issue in an aside in Moody v. Simmons, 858 F.2d 137, 141 n. 4 (3d
Cir. 1988), cert. denied. 489 U.S. 1078 (1989), although the facts are
not explored in that opinion. In Moody the Court of Appeals rejected the
bizarre argument that the entire Third Circuit was disqualified because
Judge Mansmann's husband was a partner in a law firm appearing before
Yet, read together, both the Chief Justice and the Pashaian panel teach
that section 455(b)(5)(iii) cannot be applied as a per se bar to firms
whose partners are related to the judiciary. The fundamental question, as
the emphasis in Pashaian makes clear, is whether there is a substantial
interest at stake for the related attorney. 88 F.3d at 83; see also H.R.
Rep. 93-1453, 93d Cong., 2d Sess., reprinted in 1974 U.S.C.C.A.N. 6351,
6352 (citing importance of "substantial" in related context). Whether an
interest is substantial is necessarily a fact sensitive inquiry, and it
cannot fairly be answered by a mechanical, "no partners" application of
Where the related partner is a non-equity partner, the question is
further from the dividing line than the partners in either Microsoft or
Pashaian. Clearly the most relevant issue to any substantial-interest
analysis is the attorney's compensation. But, like an associate, a
non-equity partner's financial stake in the outcome of the firm's cases
is indirect. This Court, like Chief Justice Rehnquist, is prepared to
consider non-economic interests involved with the outcome of a piece of
litigation, without deciding whether legally they are encompassed by
section 455(b)(5)(iii)'s "substantial interest" standard. 530 U.S. at
1301. The Court is satisfied that the likelihood of any fallout for
Carpenter Bennett such that the fortunes of new, non-equity partners will
be "substantially" affected is far too remote to require recusal of the
Indeed, it is not even clear that the parties supporting recusal would
necessarily disagree. Princeton Motorsport expressly concedes that if
Mr. Wolin is a non-equity partner then recusal is not necessary. Globe
Motor Car cites an opinion of the Committee on Codes of Conduct*fn2
discussing the analogous section of the ABA Model Code of Judicial
Conduct. Counsel for Globe forthrightly notes, however, that the opinion
does not require recusal when the related partner is considered
In fact, no party has cited authority for the proposition that a Court
must recuse itself under section 455(b)(5)(iii) when a relative is a
non-equity partner of a firm appearing before it. Indeed, such a per se
rule would be anomalous in light of the line of cases, representing the
more enlightened view in this Court's opinion, that even equity partners
must be considered on their merits before recusal is required.
Therefore, the Court finds that Section 455(b)(5)(iii) does not
mandate recusal of the Court from the above-captioned matters.
This does not end the discussion, however. Section 455(a) states that
a judge "shall disqualify himself in an proceeding in which his
impartiality might reasonably be questioned." Whether doubts concerning
impartiality are reasonable is the key point; doubts that are not fairly
deemed reasonable do not warrant recusal. United States v. Dalfonso,
707 F.2d 757, 760 (3d Cir. 1983) (quoting H.R. Rep. No. 1453, 93d Cong.,
2d Sess., reprinted in 1974 U.S.C.C.A.N. 6351, 6355). The Court will,
briefly, address this alternative provision.
First, it is clear that parties may waive grounds for recusal under
section 455(a), in stark contrast to those grounds specified under 455
(b) for which waiver is irrelevant. 28 U.S.C. § 455(e). The parties
long ago waived any objection based upon Mr. Wolin's position as an
associate at Carpenter Bennett. As discussed, for purposes relevant to
issues of economic self-interest and conflict of interest, Mr. Wolin's
status was unaffected by his elevation to partnership. The Court finds
the previous waiver still applicable and effective as to any argument for
recusal under section 455(a).
Even were it otherwise, the Court rejects the argument that its
impartiality "might reasonably be questioned." This Court has presided
over countless matters involving Carpenter Bennett in the approximately
nine years since Mr. Wolin became associated with the firm. In each
case, the Court engaged in the same careful, written disclosure utilized
in these matters. Objections have been rare and, where a party has
appealed, the Court of Appeals has affirmed the Court's refusal to recuse
itself. No one has suggested that the Court's supervision of this matter
has been tainted to date.
Moreover, under section 455(a) other considerations come into play.
The Court cannot properly overlook its very substantial investment of
time and complex case management expertise in these cases. Class
certification discovery is ongoing under the supervision of this Court's
appointed Special Master. The resulting motion will be submitted in the
summer. Meanwhile the case is years old. This is no time for the Court to
abandon its post through an excessively nice sense of the proprieties.
Fairness to the litigation process and to the parties weigh against
recusal in this situation. Where the reasonableness of any suggestion of
bias is so clearly tenuous, recusal would be error.
For the reasons set forth above, the Court will deny its own Order to
Show Cause for recusal. The objections of those parties arguing that the
Court should recuse itself are overruled. An appropriate Order is