Justice Alito Cast 2009 Vote in ABC Case When His Family Held Disney Stock

Justice Samuel Alito, acknowledging an unintentional conflict of interest, said a staff oversight led him to take part in a 2009 U.S. Supreme Court ruling involving Walt Disney Co. (DIS)’s ABC Inc. even though his children held Disney stock.

Alito voted against ABC in the case, joining a 5-4 majority that revived Federal Communications Commission efforts to crack down on televised vulgarities. The decision left open the prospect that the FCC rules might be struck down on First Amendment grounds.

“It was apparently an oversight on the part of my staff,” Alito said in an interview yesterday. “They did a check for Disney, but apparently they did not do a check for ABC, and as a result they did not come up with this.”

Federal law requires judges to disqualify themselves if they have a financial interest in a case, including owning stock in a company that is a party to a dispute.

Alito said his mother gave the stock to his two children, now in their 20s, when they were young. He said the shares were worth about $2,000 at the time of the gift. The family sold the stock last year.

“This was a trivial holding by my two children,” Alito said. “I’ve been meaning for many years to get rid of it.”

Stock Certificates

Alito said he didn’t sell the stock earlier in part because the holding was in the form of actual paper certificates -- 35 for each child. He said his mother “bought the stock certificates, which made it a pain in the neck to sell the stock.”

Alito said he learned about the conflict of interest only yesterday through inquiries by reporters.

“It had absolutely no effect on my judging,” he said. “I had no knowledge that there was any relationship” between Disney and ABC.

He has disqualified himself in other cases involving companies whose shares he owns. In 2008, Alito didn’t take part in the court’s 5-3 decision cutting the punitive damage award against Exxon Mobil Corp. (XOM) for the 1989 Exxon Valdez disaster to from $2.5 billion to $507.5 million.

Alito also stepped aside in June 2009 when the justices refused to hear another case, concerning home television recording, that involved a Disney unit.

He still owns shares in Exxon and Bristol-Myers Squibb Co. (BMY), according to his most recent financial disclosure report, released last week. He said in the interview that he is trying to reduce his individual stock holdings.

Ginsburg Precedent

Justice Ruth Bader Ginsburg was involved in a series of similar episodes in the 1990s, when she took part in cases involving companies in which her husband owned shares.

The Alito incident is “disturbing” and “sets a bad example” for lower court judges, said Arthur Hellman, an expert in judicial ethics at the University of Pittsburgh School of Law.

“I don’t think anybody would think that a judge or justice would be influenced by a financial interest this tiny in a very large corporation that does so many other things,” Hellman said. “But Congress deliberately made a decision to make it a bright-line rule.”

Alito’s participation will be “a big problem from a public relations standpoint, but if people look into the reality here, it’s a very small holding,” said Richard Painter, a law professor at the University of Minnesota in Minneapolis who served as President George W. Bush’s chief ethics officer.

The 2009 ruling theoretically could be re-opened, said Hellman. As a practical matter, that isn’t likely to happen because a federal appeals court has since ruled that the FCC is violating the Constitution’s free-speech guarantee. The Obama administration is appealing to the Supreme Court.

“Given all that has happened, it would seem to be fairly futile to undo that particular ruling,” Hellman said.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net.

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.

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