In re Citigroup Securities Litigation

Background

After Judge Preska was assigned to the case, she disclosed that the firm where her husband was Senior Counsel, Cahill Gordon & Reindel LLP (CGR), regularly represented Citibank and/or its subsidiaries. The lead plaintiffs in In re Citigroup Securities Litigation asked for extensive additional information, including information about the percentage of CGR’s revenue generated by representation of Citigroup-related defendants and entities since 2016. They said the information would help them decide whether to request recusal, meaning that the judge step aside from the case.

Co-lead plaintiffs in the related shareholder derivative litigation sent a letter expressing similar concerns and agreeing that due diligence was appropriate. Although the Class Representatives said they were not moving for recusal at that stage, the court construed both letters as motions for recusal. The court also noted that it had an independent duty to consider whether recusal was required.

Legal standard

Under 28 U.S.C. § 455(a), a judge must recuse herself when her impartiality might reasonably be questioned. Section 455(b) identifies specific mandatory grounds for disqualification, including when the judge, the judge’s spouse, or another covered person has a financial or other interest that could be substantially affected by the outcome. The court explained that appearance-based disqualification under Section 455(a) can be waived after full disclosure, but the mandatory grounds in Section 455(b) cannot be waived.

Court’s reasoning

The court found no mandatory basis for recusal under Sections 455(b)(4) or 455(b)(5)(iii). Judge Preska stated that she had no financial or other interest that could be substantially affected by the proceedings. Her husband was Senior Counsel at CGR, but he had not been an equity partner since December 31, 2016, did not participate in CGR’s profits, was compensated independently of the result of any particular case, was not involved in these proceedings, and did not currently represent Citigroup in any matter. The court also stated that CGR itself was not involved in these proceedings.

The court relied on Judicial Conference guidance stating that recusal is not required when a judge’s spouse is an associate or non-equity partner who has not participated in the case and whose compensation does not depend on its result. The court stated that the same reasoning applied to the husband’s Senior Counsel role, which involved a fixed pension rather than a salary. It also noted that even representation by the firm would not necessarily require recusal in those circumstances.

The court separately rejected the appearance-based argument under Section 455(a). It reasoned that the connection between the court and Citigroup was too tenuous because the husband did not represent Citigroup in this case or other cases, was not personally involved in the case, and was not an equity partner. The court concluded that an objective, well-informed observer would not reasonably question the judge’s impartiality merely because her husband worked at a firm whose other attorneys sometimes represented Citigroup in unrelated matters.

Disposition

Judge Loretta A. Preska concluded that recusal would be inappropriate. The order did not state a conventional grant-or-deny disposition; it treated the letters as recusal motions and resolved the recusal issue by concluding that stepping aside was not required. The parties were ordered to maintain separate time records concerning the motions and the letters underlying them.