HC2, Inc. v. Messer

Background

HC2, Inc. brought claims against Andrew Delaney for breach of contract and faithless-servant conduct. The court denied HC2’s request for an initial emergency order, later granted a limited emergency order, and ultimately denied HC2’s request for a preliminary injunction. The court also dismissed Delaney’s counterclaims, first allowing him to replead and later dismissing the amended counterclaims.

After Delaney filed for bankruptcy, the court stayed the case and treated his motion to dismiss for lack of jurisdiction as withdrawn, while allowing him to renew it after the stay was lifted. The bankruptcy court later approved a settlement between HC2 and the bankruptcy trustee that withdrew and dismissed with prejudice Delaney’s pre-bankruptcy claims, counterclaims, and arguments. The district court then substituted Chapter 7 Trustee Gregory Messer for Delaney and terminated Delaney from the action.

Recusal Motion

Delaney moved under 28 U.S.C. § 455(a) and (b)(1) for recusal, meaning removal of the judge from the case. He argued that the judge’s past affiliation with a predecessor of WilmerHale created an appearance of partiality because Delaney asserted that WilmerHale was involved in the litigation. He also alleged undisclosed relationships between the judge and WilmerHale partners Jay Holtmeier and Jamie Gorelick. Finally, he argued that rulings against him showed actual bias. HC2 responded that Delaney could not seek recusal because he was no longer a party and that the motion lacked a credible basis and was untimely.

Court’s Analysis

The court first held that Delaney lacked standing to invoke the recusal statute because he had been terminated as a party after Messer was substituted as the Chapter 7 Trustee. The court reasoned that Delaney’s rights were no longer at issue in the pending action.

The court then ruled that the motion would fail on the merits even if Delaney had standing. Under Section 455(a), recusal is required when an objective, informed observer could reasonably question the judge’s impartiality. Under Section 455(b)(1), recusal is required for personal bias or prejudice concerning a party or personal knowledge of disputed evidence.

The court found no reasonable basis to question its impartiality based on the judge’s former partnership in Wilmer, Cutler & Pickering. The judge stated that this was a predecessor of WilmerHale, that he had never been a partner in or affiliated with WilmerHale, and that he had resigned from the predecessor firm in 2003. The court concluded that the affiliation, which ended nearly twenty years earlier and predated the events at issue by more than a decade, was too remote.

The court also found that the judge had no ongoing professional or personal relationship with Holtmeier or Gorelick and had not had contact with either for years. The court rejected Delaney’s reliance on the judge’s prior work with Holtmeier as an assistant United States attorney because that connection was also too remote. Finally, the court held that unfavorable judicial rulings ordinarily do not establish actual bias. The court also found the motion untimely because it was filed more than a year and a half after the case began and relied on information about the judge’s former firm affiliation that had been publicly known for years.

Disposition

The motion for recusal was denied. The court stated that the stay entered because of Delaney’s bankruptcy remained in effect. It directed the clerk to close the docket entries associated with the recusal motion.