Guardian Pipeline v. Morrissey, Lawrence ( 2008 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
Nos. 07-2267, 07-2283 & 07-2308
GUARDIAN PIPELINE, L.L.C.,
Plaintiff-Appellee,
v.
950.80 ACRES OF LAND, et al.,
Defendants-Appellants.
____________
Appeals from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 01 C 4696—James B. Moran, Judge.
____________
ARGUED APRIL 10, 2008—DECIDED MAY 8, 2008
____________
Before EASTERBROOK, Chief Judge, and ROVNER and
SYKES, Circuit Judges.
EASTERBROOK, Chief Judge. Guardian Pipeline needed
easements to build a natural-gas pipeline that the
Federal Energy Regulatory Commission authorized it to
construct. What it could not acquire by negotiation, it
proposed to take by condemnation under 15 U.S.C.
§717f(h). This action covers more than a hundred parcels
of land in northeastern Illinois. The district court appointed
a commission to receive evidence and propose findings
under Fed. R. Civ. P. 71.1. (It was Rule 71A at the time;
we cite the current version. No change material to this
2 Nos. 07-2267, 07-2283 & 07-2308
litigation has occurred.) The commission delivered a 277-
page report, which the district court adopted as its own
after de novo consideration. 486 F. Supp. 2d 741 (N.D. Ill.
2007). Most owners accepted Guardian’s offer or the
district court’s decision, but three groups of owners have
appealed to carry on the fight.
Appellants’ principal argument is that Thomas M. Ewert,
who served as chairman of the three-member com-
mission, was disqualified under 28 U.S.C. §455. Ewert
had been a state judge for 24 years before returning to
practice in 2001, and when appointed to head this com-
mission he had been in private life for less than a year.
According to appellants, however, Ewert was ineligible to
serve because the firm he joined (Spesia, Ayers & Ardaugh)
has pipeline companies as clients, and Ewert himself
did some work for pipeline companies during the three
years of the commission’s proceedings (though Ewert
did not file an appearance on behalf of a pipeline com-
pany in any suit). Appellants contend that anyone in
Ewert’s position would have been tempted to skew the
commission’s proceedings in Guardian’s favor in order
to enhance his prospect of being hired to work for other
pipeline companies in the future. That temptation dis-
qualified him under §455(b) for actual conflict, as well as
the more general standard of §455(a), appellants insist.
They also contend that Ewert’s law firm worked for
Guardian itself, but the district court found otherwise,
486 F. Supp. 2d at 745–46; we say no more about that
subject.
An unstated premise of appellants’ position is that §455
applies to commissioners, even though the statute is
addressed only to justices and judges of the United States.
Other circuits have disagreed about the application of
Nos. 07-2267, 07-2283 & 07-2308 3
§455 to special masters and land commissioners. Compare
Morgan v. Kerrigan, 530 F.2d 401 (1st Cir. 1976) (no), and
Rios v. Enterprise Association Steamfitters, 860 F.2d 1168(2d Cir. 1988) (no), with Jenkins v. Sterlacci, 849 F.2d 627,
630–32 (D.C. Cir. 1988) (yes), and United States v. Werner,
916 F.2d 175 (4th Cir. 1990) (yes). To resolve this con-
flict the Supreme Court amended Fed. R. Civ. P. 53(a)(2)
in 2003 to subject special masters to the requirements of
§455—but it left Rule 71.1 alone. It says that commissioners
are covered by particular subsections of Rule 53. Those
subsections are (c), (d), (e), and (f), which have nothing to
do with §455. See Fed. R. Civ. P. 71.1(h)(2)(D), and its
predecessor Fed. R. Civ. P. 71A(h). The subsection of
Rule 53 that incorporates §455 for masters is not among
those to which Rule 71.1 points.
Rule 71.1 treats commissioners more like jurors than
like judicial officers. Parties may “examine” commission-
ers, see Rule 71.1(h)(2)(C) and ask the judge to excuse them
for cause. This is consistent with the role commissioners
play. Unlike masters, who act as surrogates for a district
judge, commissioners hear evidence and make proposals
to the court on disputed questions of fact. Judges then
make independent decisions. Commissioners are sup-
posed to bring expertise to that task, and they could not do
so if the very knowledge and experience that made their
views desirable also disqualified them. Nor would it be
easy for courts to recruit lawyers to serve on commissions
if that foreclosed continued legal practice in fields related
to the condemnation proceeding. Since 2003, when the
Civil Rules brought masters within §455 while leaving
commissioners out, no court has held that §455 supplies
the standards for members of commissions in condemna-
tion proceedings.
4 Nos. 07-2267, 07-2283 & 07-2308
Let us assume, however, that §455 applies. The parties
have not contested this issue, so we lack the benefit of
adversarial presentation. The subject may be left for
another day, because the district court did not err in
concluding that Ewert was eligible to serve.
Neither Ewert nor his law firm has had Guardian as
a client, but Ewert and the law firm represent other pipe-
line operators. Ewert has never filed an appearance
on behalf of a pipeline operator in litigation, and the
matters on which he represents pipelines are unrelated to
land condemnation. According to appellants, however,
representation of any firm in the industry, on any legal
issue (contracts with customers or suppliers, rate filings
with the FERC, torts, securities, ERISA, tax, or labor
issues), is enough to make Ewert a partisan of every firm
in the business, on every legal issue. If that’s the rule for
lawyers who represent pipelines, it must be equally
disqualifying for a lawyer to represent any property
owner on any issue. And as almost every client owns
property and wants to maximize its value . . . .
Appellants rely on §455(b)(1), (b)(4), and (b)(5)(iii).
Subsection (b)(1) says that “personal bias or prejudice
concerning a party, or personal knowledge of dis-
puted evidentiary facts concerning the proceeding”, is
disqualifying. Ewert is not alleged to know any fact
material to this proceeding or to have had any dealings
with Guardian or any of the landowners. So subsection
(b)(1) is not remotely applicable. One might as well say
that someone who becomes a judge following a career as
a prosecutor is disqualified in all criminal cases, not
just those on which he worked, because prosecutors are
partisans and all partisans favor the causes they have
espoused. Likewise Justice Goldberg, who came to the
Nos. 07-2267, 07-2283 & 07-2308 5
Supreme Court (via the Department of Labor) from a
law firm that represented unions in contests with man-
agement, could not have adjudicated a suit in which
labor and management disagreed. That is not, however,
what §455 provides. Disqualification is case-specific; the
statute does not put a whole subject matter out of bounds
to a judge with no concrete interest in a particular dispute.
A lawyer’s role as an advocate in one dispute does not
disqualify him from serving as a neutral in another,
even if the subject matter overlaps.
Subsection (b)(4) disqualifies a person who “has a
financial interest in the subject matter in controversy or
in a party to the proceeding, or any other interest that
could be substantially affected by the outcome of the
proceeding”. Subsection (b)(5)(iii) is materially identical.
Ewert does not own stock in Guardian, and neither he
nor any close relative has an ownership interest, direct
or indirect, in any of the parcels under (or even near)
Guardian’s pipeline. According to appellants, Ewert’s
“interest” is his hope that pipelines will hire him or his
law firm in the future if this proceeding ends favorably.
No judicial decision or advisory opinion of the Com-
mittee on Codes of Conduct reads the word “interest”
that broadly. See Federal Judicial Center, Recusal: Analysis
of Case Law 10–15 (2002).
“Interest” means an investment or other asset whose
value depends on the outcome, or some other concrete
financial effect (such as how much property tax a
judge pays). See In re Virginia Electric & Power Co., 539
F.2d 357, 366–67 (4th Cir. 1976). Extending the word to
cover things that might or might not happen in the
future would mean that no lawyer, appraiser, or engineer
could serve on a commission, because it is always possible
6 Nos. 07-2267, 07-2283 & 07-2308
that whichever side prevails later could hire the person
who made the decision. One could say the same about
any arbitrator, or indeed any judge (for federal judges
may engage in private practice after resignation or re-
tirement). Lawyers frequently serve as arbitrators, even
though they practice law in the same field as the arbitra-
tion, without being disqualified for partiality. See, e.g.,
Sphere Drake Insurance Ltd. v. All American Life Insurance
Co., 307 F.3d 617 (7th Cir. 2002). The expertise accumu-
lated during practice may be why they are chosen to
serve as arbitrators; the same is true for commissioners.
This leads appellants to invoke §455(a), the catch-all
section dealing with appearance of impropriety. We
need not decide whether a fully informed person would
find a problem using the objective standard that applies
under §455(a), see Liteky v. United States, 510 U.S. 540(1994); Liljeberg v. Health Services Acquisition Corp., 486
U.S. 847 (1988), because the owners did not raise this
subject until after the commission had made its decision.
United States v. Balistrieri, 779 F.2d 1191, 1204–05 (7th
Cir. 1985), holds that arguments under §455(a) must be
presented early in the proceeding; a problem of appear-
ances is not a reason to set aside a decision that was
unaffected by any actual bias. See also, e.g., United States
v. Murphy, 768 F.2d 1518, 1540 (7th Cir. 1985). Appellants
say that their delay is justifiable because Ewert did not
spontaneously reveal his law firm’s book of business, but
then he did not have a duty to do so. Rule 71.1(h)(2)(C)
provides that litigants may examine a proposed com-
missioner at the outset; a litigant who lets this opportunity
pass, then looks up the commissioners in Martindale-
Hubbell after the proceedings have concluded, has no
one to blame but himself.
Nos. 07-2267, 07-2283 & 07-2308 7
One member of this court has argued that Balistrieri
should be overruled and belated challenges under §455(a)
entertained. See United States v. Boyd, 208 F.3d 638, 649–52
(7th Cir. 2000) (Ripple, J., dissenting). Appellants have
not asked us to reconsider Balistrieri—nor would this be a
good occasion to do so, not only because it is an open
question whether §455 applies, but also because com-
missioners in condemnation proceedings make recom-
mendations rather than decisions. An Article III judge
whose impartiality is beyond question reviewed the
commission’s recommendation and found its conclusions
sound. It would be pointless to empanel another com-
mission to make a fresh recommendation, when the judge
has already ruled on the merits. Judges deal with slanted
recommendations all the time; lawyers are advocates, to
whose advice judges apply critical analysis. Appellants
offer no reason to think that the district judge failed to
appreciate the significance, if any, of the fact that Ewert’s
law firm has pipelines as clients.
Most of appellants’ remaining arguments concern the
district court’s treatment of expert testimony. The court
had to determine how much the pipeline easements
reduced the value of the land, almost all of which is
devoted to farming. Guardian paid directly for any imme-
diate loss, such as crops that could not be grown while the
fields were dug up. But even after the pipeline had been
buried, some valves and access hatches remain above
grade and the immediate area cannot be used for crops.
What’s more, the easement’s restriction that no “permanent
structure” can be built on top of the pipeline limits the
extent to which in future years the parcels can be devel-
oped as housing or shopping centers. Appraisers debated
how much these easements reduced the value of the
parcels.
8 Nos. 07-2267, 07-2283 & 07-2308
Appellants say that the pipeline’s appraisers did not
know enough about the value of other parcels in the
vicinity (and Guardian accuses the owners’ appraisers of
the same shortcoming), that witnesses who opined on
technical questions should have been engineers rather than
land planners, and so on. The commission (and the district
judge) applied the standards of Fed. R. Evid. 702, and we
do not see any abuse of discretion. To the extent the
witnesses pressed to (if not beyond) the limits of their
expertise, the commission (and the district judge) re-
sponded by discounting the testimony, whose weaknesses
were explored at length. The commission’s lengthy report
works through the pros and cons of these witnesses and
their methods. In a non-jury proceeding, it is hard to fault
that approach.
What puzzles us is why both sides were fixated on
pairwise comparisons—that is, matching each subject
parcel with a supposedly “comparable” parcel that does
not have a transmission-corridor easement (whether for oil,
gas, or water underground, or rail or electricity above
ground), appraising that parcel, and then comparing the
appraised value of the “matched” parcel with appraised
values of the subject parcel with a pipeline easement. That
process is full of problems. No other parcel will be identical
to the subject parcel except for its lack of a transmission-
corridor easement. Location and other attributes always
differ, setting the stage for debate about whether an
appropriate comparison has been selected. And even if
very similar parcels can be found for comparison, the
appraisals are just estimates. Each of these comparisons
requires two appraisals: one of the “matched” parcel, and
one (informed by the comparison) of the subject parcel
with the easement.
Nos. 07-2267, 07-2283 & 07-2308 9
A different approach would be to gather data about the
actual selling prices of real estate with and without
transmission-corridor easements and use these data to
determine how much the easement reduces the value of
real estate in real transactions. The law of large numbers
would make up for the lack of closely matched comparison
pairs. How many feet of transmission easement encumbers
a parcel is a continuous variable and could be one inde-
pendent variable in a regression. Daniel L. Rubinfeld,
Reference Guide on Multiple Regression, in Reference Manual
on Scientific Evidence 179–227 (Federal Judicial Center 2d ed.
2000), provides a good description. Using real transaction
prices reduces the role of guesswork. Although no one
suggested such an approach in this proceeding, litigants
(and district judges) should keep it in mind for the future,
as it has the potential to be faster, less expensive, and more
accurate than a parade of witnesses offering estimates
that cannot be verified.
Other issues do not require discussion beyond saying
that we substantially agree with the district court’s con-
clusions. But we cannot close without expressing disap-
pointment about the lengthy, redundant briefs that ap-
pellants have filed. This court entered an order urging
appellants to file a single brief and directing them, if that
was not practical, to avoid repetition. They chose to file
three briefs, which substantially overlapped. Appellant
Morrissey filed a brief that devotes 17 pages to questioning
Ewert’s participation, and appellants Lowell and Marilyn
Phillips filed a brief that spends 13 pages on the same
topic; the arguments are very similar. The remaining
appellants submitted a brief that purports to adopt
Morrissey’s presentation but adds a further 5 pages on
the subject. These appellants devoted 14 pages to con-
10 Nos. 07-2267, 07-2283 & 07-2308
testing the experts’ qualifications and testimony; Morrissey
added 8 more on the subject. Guardian mercifully used
only 24 pages to answer all 165 pages in the appellants’
three briefs. A future, similar performance will lead
the court to strike the briefs and require the filing of new
briefs at counsels’ personal expense.
AFFIRMED
USCA-02-C-0072—5-8-08