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BP, Big Oil Get Big Win From Judges Not Judging: Ann Woolner

Good news for BP Plc. and other oil, coal and chemical companies seeped out last week from New Orleans, barely noticed in the blanket coverage of the as-yet uncontrolled oil gusher in the Gulf of Mexico.

Without having to prove they deserved to, the companies won a widely watched global warming lawsuit. If it weren’t for the unrelated disaster along the Gulf Coast, you would see more cheering about it from the energy sector.

The funny thing is that the companies won because appellate judges with conflicts of interest, presumably because of stock ownership, stepped off the case. Without a quorum the judges couldn’t consider the case, so they dismissed it.

The outrageous part is that three, un-conflicted judges on that same court had already ruled against the energy companies in the same case. But their opinion was nullified and is now dead, according to the court.

This isn’t the way the system is supposed to work. What happened is that the judges with conflicts of interest indirectly decided the case by saying they couldn’t decide the case. If they had wanted to use the case to boost stock value, they couldn’t have done a better job of it.

It’s tedious procedural stuff, but stay with me here. This is a perfect illustration of why federal judges should disclose their reasons for recusing themselves.

It’s also a powerful argument for requiring them to put their investments into blind trusts. Too many business cases get decided, not on the merits, but because judges own shares in companies that come before their courts.

Apartheid Case

The U.S. Supreme Court had to give up on a case involving American corporate involvement in South Africa’s apartheid for lack of a quorum. And the court’s ruling on damages for the Exxon Valdez spill turned out 4-4 on some issues because Justice Samuel Alito had shares in the company and stepped aside.

Right now, judges in Louisiana and Alabama are recusing themselves left and right from oil spill cases.

The climate change lawsuit is in a class by itself.

It began with Hurricane Katrina. The devastation along the Gulf of Mexico in 2005 prompted coastal residents to file a class-action suit in Mississippi laying partial blame on energy and chemical companies. Carbon emissions made the waters warmer, they argue, which made the hurricane stronger and its impact more brutal.

So they sued 30 chemical and energy companies, including two BP subsidiaries and Exxon Mobil Corp.

Kicked Out of Court

Whether you think their claim preposterous or perfectly legit, nothing about the case beats the 5th U.S. Circuit Court of Appeals in New Orleans for ridiculous.

The plaintiffs took the case there after a federal judge in Mississippi ruled against them and kicked the case out of his court.

They persuaded a three-judge panel to unanimously reverse the lower court and revive the suit. The judges said the case should go to trial on whether the emissions constituted a private or public nuisance, trespass or negligence.

That was a major ruling, as other cases that attempt to lay blame for climate change are making their way through various courts. It was a big win for environmentalists and frightening to business interests.

After the panel ruled in October, other members of the 16-judge circuit court wanted to consider the matter, as they sometimes do with major cases. So, abiding by the rules, in February they nullified the three-judge opinion, expecting to later replace it with a decision from the full court.

Off the Rails

Oral argument was set for last week.

Here is where it starts to edge off the rails. The rehearing order says seven of the circuit’s 16 judges removed themselves from the case. They don’t have to say why they disqualified themselves, and they didn’t.

A look at their 2008 financial disclosure reports, the latest available, shows three of the judges with shares in companies being sued and the others with holdings in mutual funds. The funds may or may not have had positions in the defendant companies.

Then, on April 30, the court posted this notice: “New circumstances have arisen that make it necessary for another judge to recuse.”

What new circumstances? Who knows? The court didn’t say. Jennifer Elrod, the most recently recused judge, didn’t return my call.

That left eight of the court’s 16 judges, not the majority needed to make a quorum. That meant the full court couldn’t decide the case. Oral argument was canceled.

Appeal Dismissed

Last week, the eight judges who remained on the case dismissed the appeal altogether. With the three who wrote the panel decision dissenting, the other five said the rules of the court bar them from reinstating that earlier ruling.

That means the trial court’s ruling dismissing the whole case is once again valid, and the companies get a pass.

This is no way to run a court. The rules never were meant to apply where the full court vacates a panel decision and then backs out of the case.

If judges refuse to disclose the reasons for their recusals, if cases get kicked out because of judges’ investments, let them sell off their shares and put their money where they have no control over it and no knowledge of their holdings.

Then, perhaps, they could do the jobs they were appointed to do. With oil spill cases bound for the 5th Circuit court, there is no time like the present.

(Ann Woolner is a Bloomberg News columnist. The opinions expressed are her own.)

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