Financial and personal conflicts of interest affecting four Supreme Court justices left the court without a quorum last week and unable to decide whether to hear an appeal brought by more than 50 companies that did business in apartheid-era South Africa.
As a result, the Supreme Court announced on Monday that a lower court’s judgment allowing the high-profile lawsuit against the companies to move forward was automatically affirmed.
A quorum of six of the nine justices is necessary for the court to conduct business. While the recusal of four justices is unusual, so was the case that provoked it, a consolidation of 10 lawsuits filed in the name of everyone who lived in South Africa from 1948 to 1994 and who was injured by the official system of racial separation. The dozens of corporate defendants represented a who’s who of American business.
The outcome calls attention to the occasionally uncomfortable consequences of the justices’ ownership of stock in individual companies. With solitary recusals being much more frequent, a 4-to-4 deadlock is a more common outcome than an inability to proceed with the case at all.
That happened March 3, when nonparticipation by Chief Justice John G. Roberts Jr. resulted in a 4-to-4 tie in a case on the permissibility of lawsuits against the makers of federally approved pharmaceuticals. According to his most recent financial disclosure form, the chief justice owns stock in Pfizer Inc., the corporate parent of the defendant in that case, Warner-Lambert Co. v. Kent, No. 06-1498.
It remains to be seen whether the absence of Justice Samuel A. Alito Jr. from the Exxon Valdez punitive damages case, argued on Feb. 27, will result in a tie vote. His ownership of Exxon Mobil stock led to his recusal from that case, Exxon Shipping Co. v. Baker, No. 07-219. In a tie vote, the lower court’s decision is upheld but it has no effect as precedent in other cases.
Federal law makes it mandatory for judges to remove themselves from cases if they own even a single share of stock in a company that is a party in a case. Judges, unlike some executive branch officials, are not required to divest themselves of their stock holdings. Nonetheless, Congress acted in 2006 to deal with the recusal problem by making divestiture more appealing. It extended to the federal judiciary the relief from capital gains tax liability that it had already granted to executive branch officials who sell individual stocks and reinvest the proceeds in government securities or approved mutual funds.
Whether the apartheid case, which seeks $400 billion in damages from the corporate defendants, ever gets to trial remains highly uncertain, despite the Supreme Court’s inability to act on the companies’ request to dismiss it. The government of South Africa strongly opposes the litigation, and the Bush administration supported the companies’ appeal on the ground that the case “is causing present injury to important interests of the United States and the Republic of South Africa.”