Shell Oil Company and Atlantic Richfield Company v. United States ( 2012 )

United States Court of Appeals
for the Federal Circuit
__________________________
SHELL OIL COMPANY AND ATLANTIC
RICHFIELD COMPANY,
Plaintiffs-Appellees,
v.
UNITED STATES,
Defendant-Appellant.
__________________________
2010-5161
__________________________
Appeal from the United States Court of Federal
Claims in case no. 06-CV-141, Senior Judge Loren A.
Smith.
_________________________
Decided: March 7, 2012
_________________________
MICHAEL W. KIRK, Cooper & Kirk, PLLC, of Washing-
ton, DC, argued for plaintiffs-appellees. With him on the
brief was DAVID LEHN. Of counsel was PETER A.
PATTERSON.
STEPHEN C. TOSINI, Senior Trial Counsel, Civil Divi-
sion, Commercial Litigation Branch, United States De-
partment of Justice, of Washington, DC, argued for
defendant-appellant. With him on the brief were TONY
WEST, Assistant Attorney General, JEANNE E. DAVIDSON,
SHELL OIL COMPANY v. US 2
Director, and FRANKLIN E. WHITE, JR., Assistant Director.
Of counsel on the brief was HEATHER R. CAMERON, Attor-
ney, United States General Services Administration, of
Washington, DC.
__________________________
Before RADER, Chief Judge, O’MALLEY, and REYNA,
Circuit Judges.
O’MALLEY, Circuit Judge.
This case is an appeal from a decision of the Court of
Federal Claims requiring the United States to indemnify
certain oil companies for environmental cleanup costs
under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1978, 42 U.S.C.
§ 9601, et seq. (“CERCLA”). The Court of Federal Claims
initially entered judgment in favor of all four plaintiffs in
this litigation: Shell Oil Company (“Shell”), Atlantic
Richfield Company (“Arco”), Texaco Inc. (“Texaco”), and
Union Oil Company of California (“Union Oil”) (collec-
tively, “the Oil Companies”). Upon discovering that his
wife had a financial interest in the parent company of
Texaco and Union Oil, however, Judge Loren A. Smith:
(1) vacated his 2008 and 2009 summary judgment rulings
in favor of the Oil Companies; (2) sua sponte severed
Texaco and Union Oil from the lawsuit and directed the
clerk of court to reassign their claims to a different judge;
(3) reinstated his prior summary judgment decisions with
respect to Shell and Arco only; and (4) entered final
judgment against the government in the total amount of
$68,849,505.88. See Shell Oil Co. v. United States, 93
Fed. Cl. 439 (2010) (liability); Shell Oil Co. v. United
States, 93 Fed. Cl. 153 (2010) (damages); Shell Oil Co. v.
United States, No. 06cv141 (Fed. Cl. Aug. 4, 2010), ECF
No. 80 (final judgment).
3 SHELL OIL COMPANY v. US
The government appeals from the Court of Federal
Claims’ decision entering final judgment in favor of Shell
Oil and Arco, and seeks reversal on a number of grounds,
including the trial judge’s treatment of the discovered
financial conflict. Because we find that the presiding
judge was required to recuse himself under 28 U.S.C.
§ 455(b)(4), and that vacatur is appropriate in the circum-
stances of this case, we vacate the final judgment and the
summary judgment orders on which it was premised, and
remand with instructions that this case be reassigned to a
different judge.
BACKGROUND
During World War II, the United States entered into
contracts with several oil companies for the production of
aviation fuel (“avgas”). Production of avgas resulted in an
increased production of hazardous waste which was
dumped at a waste site in California (referred to as “the
McColl site”). Several decades later, after years of litiga-
tion in federal district court in California, the Oil Compa-
nies were held liable under CERCLA for the costs of
cleaning up the waste dumped at the McColl site.
On February 24, 2006, the Oil Companies filed suit in
the Court of Federal Claims seeking reimbursement of
the CERCLA cleanup costs from the government based on
certain language in the avgas contracts. Because there
was extensive discovery and the parties entered into
comprehensive stipulations of fact in the underlying
CERCLA action, the parties agreed that no further fac-
tual development was necessary, and the case was liti-
gated on successive summary judgment motions – one as
to liability and the other relating to damages. The trial
court’s decisions on these summary judgment motions are
the subject of this appeal.
SHELL OIL COMPANY v. US 4
First, on February 2, 2008, the court granted the Oil
Companies’ motion for partial summary judgment on
liability, finding that the avgas contracts contained “open
ended indemnification agreements” and that the “reim-
bursement clause of the contracts encompasses costs for
the CERLCA cleanup as those costs were ‘charges’ and ‘by
reason of’ production of the avgas.” Shell Oil Co. v.
United States, 80 Fed. Cl. 411, 417-19 (2008). The Oil
Companies subsequently moved for summary judgment
with respect to the amount of recoverable damages. On
March 31, 2009, the court granted, in part, Plaintiffs’
motion for summary judgment as to damages and
awarded $84,536,763.65 collectively to Plaintiffs. Shell
Oil v. United States, 86 Fed. Cl. 470, 475 (2009).
On April 22, 2009, the government filed a motion for
reconsideration asking the court to revisit its decision
with respect to the remediation of property damage. The
court denied the motion on September 28, 2009.
On October 30, 2009, the trial court entered final
judgment awarding the sum of $87,344,345.70 to the Oil
Companies as follows:
• Shell Oil: $51,166,317.71
• Union Oil: $16,543,019.08
• Arco: $16,543,019.08
• Texaco: $3,091,989.83.
On November 16, 2009, 1 the trial judge conducted a
telephone conference and informed the parties that, when
he was entering final judgment in this case, he realized
that his wife had inherited 97.59 shares of stock in Chev-
1 November 16, 2009 was the deadline for the par-
ties to seek rehearing under Rule 59 of the Rules of the
United States Court of Federal Claims.
5 SHELL OIL COMPANY v. US
ron Corporation, which is the parent corporation for
Texaco and Union Oil. He explained that his wife inher-
ited the shares in 2004, prior to the initiation of this
lawsuit. Transcript, Shell Oil v. United States, No.
06cv141 (Fed. Cl. Dec. 7, 2009), ECF No. 60 at 4:9-16.
The judge then indicated that he initially did not discover
the conflict because he “was particularly focused on Shell”
and was looking for “conflict between Chevron and owner-
ship in Shell or Texaco rather being a part of Shell.” Id.
at 3:6-10; 5:21-24.
During the telephone conference, the judge did not
identify the specific date on which he became aware of the
conflict or whether he had sought a formal advisory
opinion on the issue. Instead, he indicated that he “con-
sulted with the various technical powers that be in the
judiciary and looked at some of the material” and deter-
mined the appropriate resolution was to “break Texaco
out of this case, vacate all the orders as they relate to
Texaco” and have the clerk’s office reassign Texaco to a
different judge. 2 Id. at 3:13-4:1. The trial judge noted,
however, that if the parties had a mutually agreeable
alternative he would consider it. Both parties asked for
more time to analyze the issue.
On December 10, 2009, the government filed a Motion
for Relief from Judgment and for Recusal pursuant to
Rule 60(b) of the Rules of the Court of Federal Claims. In
that motion, the government argued that recusal was
mandatory and unwaivable under 28 U.S.C. § 455(b)(4),
and that the presiding judge was required to recuse
himself from the entire proceeding, not just with respect
to individual parties. The government further argued
2 Although the judge referred only to Texaco during
the telephone conference, it is undisputed that Chevron is
also the parent company of plaintiff Union Oil.
SHELL OIL COMPANY v. US 6
that the court’s orders as to Shell Oil and Arco would still
have an unfair preclusive effect with respect to the claims
by Texaco and Union Oil given the identity of issues
between the Oil Companies.
During the course of briefing on the Rule 60(b) mo-
tion, the government obtained a copy of the judge’s finan-
cial disclosure statement for the calendar year 2008. That
disclosure report, which the judge signed and certified on
May 15, 2009, disclosed an interest in “Chevron Texaco
Stock.” See Exhibit - 2008 Financial Disclosure Form,
Shell Oil, No. 06cv141 (Fed. Cl. Jan. 7, 2010), ECF No.
66-1.
On December 28, 2009, before briefing on the govern-
ment’s Rule 60(b) motion was complete, the government
appealed the court’s October 30, 2009 final judgment to
this court. The government has explained that it filed the
appeal at that time to avoid expiration of the time to
appeal the court’s judgment.
On February 2, 2010, the judge issued an order indi-
cating that, in light of the government’s appeal, he no
longer had jurisdiction to rule on the government’s pend-
ing Motion for Relief from Judgment and Recusal. In the
order, the trial judge stated that:
the Government could restore jurisdiction by
withdrawing its appeal, in which case the Court
would vacate its earlier decisions with respect to
Texaco and Union Oil. The Government could
then appeal the Shell Oil and Atlantic Richfield
portions of the decision. The case almost solely fo-
cuses on the facts in Shell’s case. It could also
then re-litigate the Texaco and Union Oil cases
before another judge.
7 SHELL OIL COMPANY v. US
Order, Shell Oil, No. 06cv141 (Fed. Cl. Feb. 2, 2010), ECF
No. 71 at 2. Accordingly, the government filed a motion
in this court to remand.
On May 19, 2010, this court granted the government’s
motion to remand the case so that the trial court could
consider the government’s Rule 60(b) motion to vacate
and for recusal. In the order, this court stated that, “we
deem the better course is to remand so that the trial court
may rule in the first instance on the United States’ mo-
tions.” Shell Oil Co. v. United States, No. 2010-5034 (Fed.
Cir. May 19, 2010). We further found that the govern-
ment’s request to have the court assign a “new judge to
rule on its Rule 60(b) motion, should first be presented to
the Court of Federal Claims and thereafter may be raised
on appeal from a subsequent ruling, if appropriate.” Id.Accordingly, the case was remanded.
On the same day this court remanded the case, the
government filed a motion asking the Chief Judge of the
Court of Federal Claims to transfer the case to a different
judge. Motion to Reassign Case, Shell Oil, No. 06cv141
(Fed. Cl. May 19, 2010), ECF No. 72. In that motion, the
government requested that the case be transferred to a
different judge to address the merits of the government’s
still pending Rule 60(b) motion for relief from judgment
and for recusal.
On May 27, 2010, the trial judge issued an order find-
ing a conflict with respect to Texaco and Union Oil, but
not with respect to Shell Oil and Arco. Based on that
conclusion, the judge ruled that he would allow Shell Oil
and Arco to proceed to appeal “in the interest of justice,”
sua sponte severed Texaco and Union Oil from the case,
and ordered the clerk’s office to reassign their claims to
SHELL OIL COMPANY v. US 8
another judge. 3 In reaching this decision, the court noted
that “[i]t would be manifestly unfair to allow a conflict
with two of the four parties to delay the decision for the
two companies where no conflict of any kind existed or
exists.” Order, Shell Oil, No. 06cv141 (Fed. Cl. May 27,
2010), ECF No. 74. Accordingly, the judge denied as moot
the government’s: (1) Rule 60(b) motion for relief from
judgment and for recusal; and (2) motion for the Chief
Judge to transfer the case to another judge. The judge
then vacated his October 30, 2009 judgment and its 2008
and 2009 summary judgment orders and reissued his
prior decisions with respect to Shell and Arco only. Shell
Oil Co. v. United States, 93 Fed. Cl. 439 (2010) (liability);
Shell Oil Co. v. United States, 93 Fed. Cl. 153 (2010)
(damages).
On August 4, 2010, the judge entered final judgment
against the United States in the amount of
$68,849,505.88, allocated as follows:
• Shell Oil: $52,027,916.08;
• Arco: $16,821,589.80
The government timely appealed the final judgment
to this court on September 17, 2010. As a general rule, a
judge’s refusal to recuse under § 455 can be reviewed on
an appeal from a final judgment. See 13D Charles Alan
Wright, Arthur R. Miller & Edward H. Cooper, Fed. Prac.
& Proc. § 3553, at 149 (3d ed. 2008) (noting that, where a
judge refuses to disqualify “it is safe to say – generally, at
least – that such an order can be reviewed on appeal from
a final judgment in the case”). This is particularly true
3 At this stage, Texaco and Union Oil’s claims are
pending before a different judge on the Court of Federal
Claims in Texaco, Inc. v. United States, Case No.
06cv1411. On July 12, 2010, the Texaco court issued an
order staying the case pending resolution of this appeal.
9 SHELL OIL COMPANY v. US
where, as here, the party asking for recusal timely raised
the issue to the court below. We have jurisdiction under
28 U.S.C. § 1295(a)(3).
STANDARD OF REVIEW
Given our exclusive jurisdiction over appeals from fi-
nal judgments of the Court of Federal Claims, we apply
the law of this circuit when reviewing the denial of the
government’s request for recusal. See 28 U.S.C.
§ 1295(a)(3) (“The United States Court of Appeals for the
Federal Circuit shall have exclusive jurisdiction . . . of an
appeal from a final decision of the United States Court of
Federal Claims.”). Consistent with the vast majority of
courts to consider this issue, we review a judge’s failure to
recuse for an abuse of discretion. See Phonometerics, Inc.
v. Westin Hotel Co., 319 F.3d 1328, 1334 (Fed. Cir. 2003)
(“Under the law of the Eleventh Circuit, the pertinent law
on this recusal issue, a district court’s refusal to recuse
may be raised in an appeal from the final judgment and is
reviewed for an abuse of discretion.”) (citations omitted).
DISCUSSION
The government argues that the judgment of the
Court of Federal Claims is tainted because the judge’s
wife owns shares in the parent company of two parties to
the proceeding: Texaco and Union Oil. Specifically, the
government argues that the trial judge was required to
disqualify himself under 28 U.S.C. § 455(b)(4) from the
entire proceeding, and, because he failed to do so, this
court should vacate the lower court’s judgment and re-
mand the matter with instructions that the case be as-
signed to a different judge. The government further
argues that the judge’s decision to sever Texaco and
Union Oil while reissuing the decisions with respect to
Shell Oil and ARCO “could have preclusive or prejudicial
effect upon the remaining matters,” such that the gov-
SHELL OIL COMPANY v. US 10
ernment would be prejudiced by any order other than one
which vacates the judgment at issue in this appeal.
Appellant’s Br. 30.
In response, the Oil Companies argue that: (1) the
trial judge complied with § 455(b)(4) when he severed
Texaco and Union Oil from this lawsuit and had them
transferred to a different judge; and (2) any error in the
judge’s decision not to disqualify himself would be harm-
less because this court reviews the trial court’s grant of
summary judgment de novo.
For the reasons discussed below, we find that the trial
judge was required to recuse himself under § 455(b)(4).
Given the circumstances, we conclude that vacatur is the
appropriate remedy. 4
A. 28 USC § 455(b)(4) Mandates Recusal
Section 455 governs the disqualification or recusal of
federal judges. Section 455(a) provides that “[a]ny justice,
judge, or magistrate judge of the United States shall
disqualify himself in any proceeding in which his imparti-
4 The government previously moved for summary
reversal on the conflict issue. This court denied that
motion, noting that “the better course is to deny the
United States’ motions without prejudice to the United
States raising its issues in its briefs.” Order on Motion,
Shell Oil Co. v. United States, No. 2010-5161 (Fed. Cir.
Jan. 4, 2011). We have noted that “summary disposition
is appropriate, inter alia, when the position of one party is
so clearly correct as a matter of law that no substantial
question regarding the outcome of the appeal exists.”
Joshua v. United States, 17 F.3d 378, 380 (Fed. Cir. 1994)
(citation omitted). Given the unique posture and circum-
stances of this case, particularly the judge’s decision to
sever the parties with whom his wife has a financial
interest, summary disposition was not appropriate here.
11 SHELL OIL COMPANY v. US
ality might reasonably be questioned.” 5 While § 455(a)
operates as a “catchall” recusal provision, § 455(b) lists a
number of specific circumstances where recusal is re-
quired. The subsection at issue here, § 455(b)(4), provides
that a judge shall disqualify himself when he “knows that
he . . . or his spouse . . . has a financial interest in the
subject matter in controversy or in a party to the proceed-
ing.” A “financial interest” is defined as “ownership of a
legal or equitable interest, however small.” 28 U.S.C.
§ 455(d)(4). It is well-established that the ownership of
stock constitutes a “financial interest.” The statute
defines a “proceeding” to include “pretrial, trial, appellate
review, or other stages of litigation.” § 455(d)(1).
Section 455(b)(4) “expressly provides that the judge
must know of his or her interest” before he is required to
recuse. Liljeberg v. Health Servs. Acquisition Corp., 486
U.S. 847, 859 (1988) (“A careful reading of the respective
subsections makes clear that Congress intended to re-
quire knowledge under subsection (b)(4) and not to re-
quire knowledge under subsection (a).”). This language
“embodies an actual knowledge test regarding disqualify-
ing circumstances and provides a bright line as to dis-
qualification based on a known financial interest in a
party – i.e., an equity financial interest of any size is
disqualifying.” Chase Manhattan Bank v. Affiliated FM
Ins. Co., 343 F.3d 120, 127 (2d Cir. 2003); see also Union
Carbide Corp. v. U.S. Cutting Serv., 782 F.2d 710, 714
(7th Cir. 1986) (“Since the statute forbids only the know-
ing possession of a financial interest, since Judge Getzen-
danner relinquished control of the case as soon as she
5 Given that section 455 applies to “any justice,
judge, or magistrate judge of the United States,” it “in-
cludes judges who sit on the United States Court of Fed-
eral Claims.” Addams-Moore v. United States, 79 Fed. Cl.
578, 580 n.1 (2007).
SHELL OIL COMPANY v. US 12
found out about the financial interest, and since she did
not resume control until the financial interest was elimi-
nated, at no time was she in literal violation of the stat-
ute.”). Pursuant to § 455(c), a judge “should inform
himself about his personal and fiduciary financial inter-
ests, and make a reasonable effort to inform himself about
the personal financial interests of his spouse and minor
children residing in his household.” 28 U.S.C. § 455(c).
Recusal under § 455(b) cannot be waived. Indeed, the
statute specifically provides that “[n]o justice, judge, or
magistrate judge shall accept from the parties to the
proceeding a waiver of any ground for disqualification
enumerated in subsection (b).” 28 U.S.C. § 455(e). Al-
though recusal under § 455(b)(4) is mandatory, there is a
statutory exception where the judge discloses and divests
himself of the financial interest. Specifically, § 455(f)
provides that, if a judge or spouse “has a financial interest
in a party (other than an interest that could be substan-
tially affected by the outcome),” and this interest appears
or is discovered “after substantial judicial time has been
devoted to the matter,” then “disqualification is not re-
quired if the [judge or spouse] divests himself or herself of
the interest that provides the grounds for the disqualifica-
tion.” 28 U.S.C. § 455(f); see also Kidder, Peabody & Co.
v. Maxus Energy Corp., 925 F.2d 556, 561 (2d Cir. 1991)
(finding that § 455(f) applied where the judge immedi-
ately disclosed and divested his stock and the parties had
devoted nearly three years to the litigation).
The legislative history reveals that § 455(f) was
created:
to permit a judge or his or her spouse . . . to re-
solve the conflict by divesting themselves of the
property creating the conflict. Disqualification
would continue to be automatic if the interest in
13 SHELL OIL COMPANY v. US
the controversy was one that could be substan-
tially affected by the outcome. For example, a
significant stockholder in a closely held corpora-
tion with close acquaintances would be expected
to recuse himself or herself rather than divest.
In re: Certain Underwriter Defendants, 294 F.3d 297, 304
(2d Cir. 2002) (citing H.R. Rep. No. 100-889, reprinted in
1988 U.S.C.C.A.N. 6029-30). Where a judge discovers a
financial interest and divests in accordance with § 455(f),
disqualification under § 455(b)(4) is no longer required.
See United States v. Pappert, 1 Fed. Appx. 767, 769 (10th
Cir. 2001) (finding that the judge’s “prompt divestment
prevented her from having to recuse” and that once the
judge “divested herself of the stock that created the con-
flict . . . § 455(b)(4) no longer applied”).
Here, there is no evidence that the judge’s wife di-
vested the Chevron stock and therefore § 455(f) is inappli-
cable. 6 Because the stock was not divested, recusal is
mandatory under § 455(b)(4), and cannot be waived.
Given the lack of divestiture, as soon as he discovered the
conflict, the trial judge was required to disqualify himself
from the entire proceeding and ask the clerk of court to
transfer the case to another judge.
Although the judge explained that he did not discover
the interest until he was entering final judgment, the
record reflects knowledge of his wife’s financial interest in
Chevron at least as early as May 15, 2009 when he com-
pleted his certified Financial Disclosure Report disclosing
6 During oral argument, counsel for the government
stated that: “We are unaware of any divestiture. There
was not any divestiture as of the time we filed our notice
of appeal or as of the time of severance.” Oral Argument
at 13:50, available at http://www.cafc.uscourts.gov/oral-
argument-recordings/2010-5161/all.
SHELL OIL COMPANY v. US 14
an interest in “Chevron Texaco Stock.” While the May 15,
2009 disclosure date post-dates the trial judge’s February
2, 2008 and March 31, 2009 opinions addressing the oil
companies’ motions for summary judgment as to liability
and damages, it pre-dates his September 28, 2009 deci-
sion denying the government’s motion for reconsideration
with respect to damages, as well as his October 30, 2009
entry of final judgment. 7 Accordingly, the judge should
have recused himself as of May 15, 2009 and should have
taken no further action other than the ministerial act of
transferring the case to another judge. See United States
v. O’Keefe, 128 F.3d 885, 891 (5th Cir. 1997) (noting that,
when a judge recuses himself from a case, he “may take
no action other than the ministerial acts necessary to
transfer the case to another judge”). Neither entering
final judgment nor denying the motion for reconsideration
can be construed as “ministerial tasks.” See id. (finding
that, post-recusal, the district court judge “performed a
discretionary act, not a ministerial act” when he ruled on
a motion for reconsideration).
The Oil Companies argue that the judge’s decision to
sever Texaco and Union Oil satisfied § 455(b)(4) because
he is no longer presiding over a proceeding in which his
spouse has a financial interest. In other words, the Oil
Companies suggest that the judge cured the conflict by
“divesting” two of the parties from the case. Although a
judge can divest a financial interest to avoid recusal,
nothing in the statutory text supports the idea that a
judge can avoid otherwise mandatory recusal by severing
from the proceeding the parties in which his spouse has a
7 Because the financial disclosures must be filed
yearly, the same stock ownership should have been dis-
closed on each financial disclosure which post-dated the
2004 inheritance. It is unclear from the record whether
these disclosures were made, however.
15 SHELL OIL COMPANY v. US
financial interest and transferring those parties to a
different judge. Because the divestment exception set
forth in § 455(f) applies only to divesting a financial
interest in a party, and there is no indication that Con-
gress intended to create an exception whereby a judge can
sever or “divest” certain parties from the case to resolve a
conflict, we find Plaintiffs’ argument is not well-taken.
This is particularly true where, as here, there is substan-
tial overlap with respect to the issues involved in the
remaining parties’ claims, and the matters had been
considered jointly throughout the proceedings.
Because the judge’s wife owns shares in the parent
company of Texaco and Union Oil, § 455(b)(4) requires
recusal. See Key Pharms., Inc. v. Mylan Labs., Inc., 24 F.
Supp. 2d 480, 482 n.2 (W.D. Pa. 1998) (noting that, under
§ 455, “the owner of stock in a parent corporation has a
direct legal or equitable interest in a controlled subsidiary
and the judge should disqualify himself”). The judge’s
decision to sua sponte sever Texaco and Union Oil did not
satisfy the statutory requirement of disqualifying himself
from the entire proceeding. We emphasize that there is
neither an allegation nor suggestion that the judge was
unduly influenced by his wife’s financial interest, which
no one argues was substantial. The statute does not
require as much – it simply requires recusal whenever
financial conflicts of interest exist, regardless of whether
those conflicts affect the outcome of the case. Because
the judge was required to recuse himself under
§ 455(b)(4), his failure to do so violated the statute.
B. The Appropriate Remedy
Given our conclusion that the trial judge erred in not
recusing himself from the case, we turn now to the appro-
priate remedy. Plaintiffs argue that any error in the
judge’s decision not to recuse is harmless because the
SHELL OIL COMPANY v. US 16
judgment is subject to de novo review on appeal. In
response, the government argues that, under the Oil
Companies’ theory, “any conflicted court could enter
summary judgment and the error would be harmless”
given the standard of review on appeal. Appellant’s Reply
3.
As the Supreme Court has noted, “[a]lthough § 455
defines the circumstances that mandate disqualification
of federal judges, it neither prescribes nor prohibits any
particular remedy for a violation of that duty.” Liljeberg,
486 U.S. at 862. Instead, Congress “wisely delegated to
the judiciary the task of fashioning the remedies that will
best serve the purpose of the legislation.” Id.In Liljeberg, the Supreme Court affirmed the Fifth
Circuit’s decision to vacate a district court judge’s final
judgment where that judge should have disqualified
himself under § 455(a) due to an appearance of impropri-
ety. Id. at 852. Although the Court agreed with the Fifth
Circuit that vacatur was appropriate under the facts of
that particular case, it explained that harmless error
analysis can apply to violations of § 455(a). Id. at 862
(“As in other areas of the law, there is surely room for
harmless error committed by busy judges who inadver-
tently overlook a disqualifying circumstance. There need
not be a draconian remedy for every violation of
§ 455(a).”). The Court concluded that, when deciding
whether to vacate a judgment for violation of § 455(a), a
court should consider: (1) “the risk of injustice to the
parties in the particular case”; (2) “the risk that the denial
of relief will produce injustice in other cases”; and (3) “the
risk of undermining the public’s confidence in the judicial
process.” Id. at 864.
While the Supreme Court in Liljeberg did not specifi-
cally address whether violation of § 455(b) could consti-
17 SHELL OIL COMPANY v. US
tute harmless error, this court and courts in other circuits
have indicated that the “differences between sec-
tions 455(a) and 455(b) d[o] not ‘preclude the application
of harmless error analysis in the context of a 455(b)
violation.’” Polaroid Corp. v. Eastman Kodak, Co., 867
F.2d 1415, 1421 (Fed. Cir. 1989) (citing Parker v. Connors
Steel Co., 855 F.2d 1510, 1527-28 (11th Cir. 1988)); see
also Patterson v. Mobil Oil Corp., 335 F.3d 476, 485 (5th
Cir. 2003) (“[W]e are confident that § 455(b) violations are
also subject to the doctrine of harmless error.”) (citation
omitted).
In Polaroid, this court rejected Kodak’s attempt to
distinguish Liljeberg on grounds that it dealt with
§ 455(a) rather than § 455(b). Polaroid, 867 F.2d at
1420. 8 Specifically, the panel stated that the “argument
is meritless, the Supreme Court having made no such
distinction in outlining the test to be used in deciding
whether to vacate ‘for violation of § 455.’” Id. at 1420-21.
The court, citing with approval the Eleventh Circuit’s
decision in Parker, concluded that the Supreme Court’s
Liljeberg decision did not draw any distinctions between
8 The facts in Polaroid are distinguishable from
those at issue here. In Polaroid: (1) the trial judge in-
formed the parties at the outset of trial that her mother-
in-law owned stock in Kodak but that she did not think it
was a disqualifying conflict; (2) at the time of final judg-
ment, neither the judge nor her spouse had a financial
interest in a party to the proceeding (and thus § 455(b)(4)
did not apply); (3) years later, after the judgment was
appealed, this court affirmed, and the case was returned
to the district court for assessment of damages and trial
on remaining claims, the judge held a pretrial conference
explaining that her mother-in-law died and that “she was
sua sponte disqualifying herself because she was a legatee
and her husband was executor of the estate”; and
(4) Kodak sought to vacate all of the judge’s orders after
six and a half years of litigation. 867 F.2d at 1416-17.
SHELL OIL COMPANY v. US 18
sections 455(a) and 455(b) with respect to the appropriate
remedy. Id. at 1421 (citing Parker, 855 F.2d at 1527-28).
Applying the Supreme Court’s guidance in Liljeberg, we
found that “the risk of injustice to the parties weighs far
more heavily on Polaroid’s side of the scales” and that
there was “little or no risk of injustice in other cases”
because “the present denial rest[ed] on the specific facts of
this case.” Id. at 1420. As such, this court affirmed the
district court’s denial of the motion to vacate.
In light of our decision in Polaroid, violations of
§ 455(b) can constitute harmless error. Accordingly,
although violation of § 455(b)(4) mandates recusal, man-
datory recusal does not require mandatory vacatur.
Instead, circuit courts have discretion with respect to the
appropriate remedy for a violation of § 455. For the
reasons discussed below, we conclude that, under the
circumstances of this case, vacatur is the appropriate
remedy.
Applying the harmless error factors articulated in Lil-
jeberg, we first consider the risk of injustice to the parties.
See Liljeberg, 486 U.S. at 864. Here, the trial court’s
decision to reinstate its judgment with respect to Shell Oil
and Arco may have a prejudicial effect on the now-severed
litigation of Texaco and Union Oil’s claims. Indeed, given
the identity of issues involved, the parties do not dispute
that a decision in this case will control the outcome in the
severed case involving Texaco and Union Oil. See Oral
Argument at 16:20 (noting that the Texaco case is stayed
pending resolution of this case, and that this appeal “will
be dispositive in that case, most probably”). The govern-
ment argues that, if the judge’s opinions with respect to
Shell Oil and Arco are allowed to stand, the government
would be precluded from challenging the court’s determi-
nations under the doctrine of collateral estoppel because
the issues would have already been decided adversely to
19 SHELL OIL COMPANY v. US
the government. We agree. Because the Oil Companies’
avgas contracts contain substantially similar language
and the facts relating to dumping waste at the McColl site
are nearly identical as to all four companies, the judg-
ment here could have a preclusive or prejudicial effect in
the severed case.
In addition to the risk of injustice to the parties, we
find that, under these circumstances, there is also a “risk
of undermining the public’s confidence in the judicial
process.” See Liljeberg, 486 U.S. at 864. This is particu-
larly true given that, several months after disclosing a
financial interest in “Chevron Texaco Stock,” the trial
judge: (1) denied the government’s motion for reconsidera-
tion; and (2) entered final judgment in excess of $86
million in favor of the Oil Companies.
The Oil Companies argue that the risks of injustice
are non-existent because this court will subject the dis-
trict court’s judgment to de novo review. In support of
this position, Plaintiffs assert that “[e]very federal circuit
court of appeals to consider the question has held that the
availability of de novo appellate review renders harmless
any error in failing to recuse under Section 455.” Appel-
lees’ Br. 57; see Williamson v. Indiana Univ., 345 F.3d
459, 464-65 (7th Cir. 2003) (“On appeal, this court reviews
the grant of summary judgment de novo . . . and therefore
Williamson has received a full review by an impartial
panel”); Higganbotham v. Oklahoma, 328 F.3d 638, 646
(10th Cir. 2003) (noting that the court “independently
reviewed th[e] issues de novo and concluded that the
plaintiff’s complaint was properly dismissed” and that any
“error by the district court judge in not recusing himself
would have been harmless under the circumstances of
this case”); Patterson, 335 F.3d at 485 (“Because we
review a summary judgment ruling de novo, using the
same standards as the district court, the parties are
SHELL OIL COMPANY v. US 20
guaranteed a fair, impartial review of the merits of the
ruling.”). Unlike the circumstances here, however, the
courts in the cases upon which Plaintiffs rely specifically
found that the risks of injustice and concern for public
confidence set forth in Liljeberg were not implicated. See
Williamson, 345 F.3d at 465 (“Likewise, the risk of injus-
tice in other cases and concern for public confidence are
not implicated by these facts.”); Higganbotham, 328 F.3d
at 646 (considering the risks from Liljeberg and conclud-
ing that “none of these risks is present”); Patterson, 335
F.3d at 486 (considering the risk of injustice and the
public’s confidence in the judicial process in finding that
the § 455(a) violation constituted harmless error).
The fact that this court reviews the grant of summary
judgment de novo does not supplant our consideration of
potential injustice stemming from a trial judge’s failure to
recuse in accordance with § 455(b)(4). In other words, a
judge’s failure to recuse does not automatically constitute
harmless error whenever there is de novo review on
appeal. Otherwise, as the government notes, under
Plaintiffs’ theory, there would be no need for a trial judge
to recuse from any action in which the appellate court will
apply de novo review. If that were the case, a judge’s
financial interest in a party would always be harmless so
long as the case is decided on summary judgment. Such a
result is untenable. Because we find that the trial judge’s
failure to recuse in this case was not harmless error,
particularly given the risk of injustice and risk of under-
mining the public’s confidence in the judicial process, we
conclude that the appropriate remedy is to vacate the
district court’s orders and remand the case.
CONCLUSION
For the foregoing reasons, we vacate Judge Smith’s
final judgment in favor of Shell Oil and Arco, as well as
21 SHELL OIL COMPANY v. US
the summary judgment orders on which it was premised.
Specifically, we vacate the following: (1) the May 27, 2010
Opinion and Order granting Plaintiffs’ cross-motion for
summary judgment as to liability (ECF No. 75); (2) the
May 27, 2010 Opinion and Order granting Plaintiffs’
motion for summary judgment as to damages (ECF No.
76); (3) the Final Order dated August 2, 2010 (ECF No.
79); and (4) the Judgment dated August 4, 2010 (ECF No.
80). This case is hereby remanded with instructions that
it be reassigned to a different judge on the Court of Fed-
eral Claims.
VACATED AND REMANDED