Measuring How Stock Ownership Affects Which Judges and Justices Hear Cases

Published in: The Georgetown Law Journal, v. 103, no. 5, 2015, p. 1163-1213

Posted on RAND.org on September 14, 2015

by James M. Anderson, Eric Helland, Merritt McAlister

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Under the federal judicial recusal rules, judges and justices who directly own stock in companies must recuse themselves in cases involving those companies. However, there has been little effort to measure the impact of these recusals on the pool of judges and justices that hear cases involving publicly traded corporations. Our empirical analysis finds that a surprisingly high rate of direct stock ownership partly shapes the group of judges and justices that decide these cases, resulting in judges that are more likely to be male, African-American, younger, with fewer personal assets, appointed by a Republican president, and more likely to be a former law professor. Since these corporations are important repeat-player litigants, this phenomenon raises important concerns about the federal judicial process. We propose and discuss several policies that might address this issue including requiring divestment, the use of financial derivatives to perfectly hedge the judge's equity position, the use of blind trusts, changing the recusal rules, equalizing the treatment of mutual funds and individual shares, and increasing transparency.

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