American Rural Cellular, Inc. v. Systems Communication Corporation.
939 P.2d 185 (Utah App. 1997)

V. Failure to Recuse

Cellcom finally argues that the trial judge, Judge John R. Anderson, erred in denying Cellcom's motion to disqualify himself. Cellcom asserts that Judge Anderson should have recused himself because his former Firm's representation of Syscom in a transaction related to this litigation created the appearance of partiality.

In February 1992, Neal Sorensen and Syscom entered into an agreement under which Syscom agreed to buy Sorensen's stock in the corporation. The firm of Beaslin and Anderson represented Syscom and its president at the time, Rod Hauer, and acted as  escrow agent for the transaction. The Stock Purchase Agreement, which was drafted by Sorensen's attorney, referred to Syscom's litigation with Cellcom, specifically providing that Syscom would continue to provide the defense for both parties and would pay any judgment that might be entered, and that Sorensen would be entitled to a portion of any money collected as a result of Syscom's counterclaim. At the time this agreement was entered into, Judge Anderson was a partner in the firm of Beaslin and Anderson. Cellcom learned of the Stock Purchase Agreement in July 1995. On October 13, 1995, Cellcom filed a motion for disqualification, which the court denied.

Cellcom argues that Judge Anderson should have been disqualified on two grounds: (1) Utah Code Ann. 78-7-1(1) (1996), which states that a judge may not sit in a case "in which he is interested," and (2) canon 3(E) of the Utah Code of Judicial Conduct, which states, "A judge shall enter a disqualification in a proceeding in which the judge's impartiality might reasonably be questioned..."

A. Disqualification under Section 78-7-1(1)

We first consider whether Judge Anderson was an "interested" party under section 78-7-1 (1). Cellcom asserts that Judge Anderson should be disqualified under this section because he had a "potential financial interest" in the litigation. Cellcom states that  Judge Anderson's former law firm represented and its president in the purchase of stock from Neal Sorensen, and that "in advising Syscom on the fairness of the transaction, Judge Anderson's firm would presumably have assessed the proposed purchase price in light of Syscom's known liabilities and assets," which included "the outstanding litigation with Cellcom."  Cellcom asserts that Judge Anderson is liable for any potential claims ensuing from the firm's services, including its evaluation of the likely outcome of this litigation. Cellcom thus states that "because Judge Anderson's  potential exposure, however remote, depends on the outcome of the litigation, he is an 'interested' party within the meaning of  78-7-1(1)(a), and recusal was required."

In general, "[t]o effect the disqualification of a judge, the interest at issue must be direct, certain, and immediate, and not one which is indirect, contingent, incidental, or remote." 46 Am. Jur. 2d Judges 100 (1994); see also Blake v. Gilbert, 702 P.2d  631, 641 (Alaska 1985) (stating "an indirect or uncertain interest is not enough to disqualify a judge"); Bratz v. Bratz, 495 A,2d 292. 295 (Conn. App. Ct. 1985) ("The interest in the potential outcome of a case that will disqualify a judge must be a present one. It must be direct, certain and immediate."); Goldman v. Bryan, 764 P.2d 1296, 1300 (Nev. 1988) (stating judge's "disqualifying 'interest' must be a present interest in the outcome of the proceeding,  "not some indirect, remote, speculative, theoretical or possible interest"' (quoting State v. Scarborough, 410 P.2d 732, 734 (N.M. 1966))). In addition, the interest must be "substantial." 46 Am. Jur. 2d  Judges 101.

In this case, Cellcom has recognized that any interest the judge had in the outcome of this litigation was "remote." Cellcom has not proved that the attorney from Judge Anderson's former firm who represented Syscom in the prior matter actually evaluated this litigation, instead, Cellcom merely speculates that the attorney may have evaluated the litigation. The Stock Purchase Agreement was not drafted by the firm of Beaslin and Anderson, but was drafted by Sorensen's attorney. Further, the provision of  the agreement referring to this litigation is a standard provision determining, who would be responsible for paying any liability arising from the litigation and who would be entitled to any money collected in the event of a favorable verdict. Based on these facts, any interest Judge Anderson had in the outcome of this litigation was remote. indirect, and speculative, and the judge's disqualification was therefore not required under section 78-7-1(1).

B. Disqualification under Canon 3(E) of the whether or not the judge actually knew of facts creating an appearance of impropriety";

We next consider whether Judge Anderson should have been disqualified under canon 3(E) of the Utah Code of Judicial Conduct. Canon 3(E) states that "[a] judge shall enter a disqualification in a proceeding in which the Judge's impartiality might reasonably be questioned, including but not limited to instances where the judge had practiced law with a lawyer who had served in the matter [in controversy] at the time of their association."

The situation here does not fall under those specifically outlined under the canon in which disqualification is required. Judge Anderson did not practice law with an attorney who was counsel in this matter. However, recusal may nevertheless be required if the circumstances in this case are such that "the judge's impartiality might reasonably be questioned."

Utah courts have not specifically interpreted the "impartiality might reasonably be questioned" language of this canon; however, federal courts and the Supreme Court have construed this language in discussing the standard for determining whether a judge's recusal is required under the federal counterpart to the Utah rule, 28 U.S.C.A. 455(a) (1993). See, gg., Liljeberg v. Health Servs. Acquisition Corp., 486 U.S. 847, 858-70. 108 S. Ct. 2 194. 2202-07 (1988).

In Liljeberg, the Supreme Court held that section 455(a) "can be violated based on an appearance of partiality, even though the judge was not conscious of the circumstances creating the appearance of impropriety." Id. at 858, 108 S. Ct. at 2201. Thus, whether recusal is required "does not depend upon Utah Code of Judicial Conduct instead, recusal is required "'if a reasonable person, knowing all the circumstances, would expect that the judge would have actual knowledge."' Id. at 860-61. 108 S. Ct. at 2202-03 (citation omitted; see also United States v. Lovagli , 954 F.2d 811. 815 (2d Cir. 1992) ("In deciding whether or not to affirm a judge's denial of a [section 455] recusal motion, a court of appeals must ask the following question: Would a reasonable person, knowing all the facts, conclude that the trial judge's impartiality could reasonably be questioned?").

Federal courts have further discussed the types of circumstances that warrant recusal under section 455. For example, "recusal is usually warranted when a judge has a direct personal or fiduciary interest in the outcome of the case, regardless of whether or not the judge is actually aware of that interest at the relevant times." Lovaglia, 954 F.2d at 815 (citing Liljeberg, 486 U.S. at 850. 859, 108 S. Ct. at 2197. 2202). " Where a case, by contrast, involves remote, contingent. indirect or speculative interests. disqualification is not required." Id.

In this case, there was only a very limited connection between the present litigation and Judge Anderson's former firm's representation of defendants in the earlier matter. Further, as discussed above, Judge Anderson did not have any direct financial interest in the outcome of this litigation. Instead, any interest the judge had in the outcome of the litigation was remote and speculative. We conclude that these circumstances are not such as would cause a reasonable person to question the judge's impartiality in this case. Thus, the judge did not err in refusing to recuse himself under canon 3(E).