An appeal filed against a decision made by Carl J. Nichols, who bought bonds in Apple while overseeing a case against the tech giant, highlights the prevalence of judicial conflicts of interests.
© 2022 Bloomberg Finance LP
A federal judge who dismissed a child-trafficking and forced labor lawsuit against big technology firms including Apple and Microsoft is arguing that his decision should not be vacated over claims that he had a conflict of interest in the case.
The judge, Carl J. Nichols, a longtime corporate lawyer who was appointed to the United States District Court for the District of Columbia in 2019 by President Donald Trump, had bond holdings in Apple and Microsoft when he was assigned the case at the end of 2019. Then, in 2020, while the case was pending before him, he purchased more bonds in both companies, according to an appeal filed against his decision in last month. A separate filing that includes Judge Nichols financial disclosure forms shows that in 2020 he purchased bonds in Apple seven times, and Microsoft five times, holdings valued between $60,000 and $200,000.
The dispute over Nichols’ financial interest in companies involved in a case before him comes after a September article in the Wall Street Journal reported that 131 federal judges didn’t recuse themselves from 685 lawsuits in which they or their families had a financial interest, in apparent violation of the law, from 2010 to 2018. The Journal report threatened to upend hundreds of cases, opening a door for litigants to appeal decisions. Some of those cases prompted apologies and mea culpas from the judges mentioned.
The federal law in question, known as Section 455, requires that judges recuse themselves from cases in which their impartiality may be questioned, including if they have a “financial interest” in the subject matter of the case, or any parties involved.
While Nichols declined to comment for this article, he stated in a recent legal filing in April that he had not violated Section 455 because his holdings in Apple and Microsoft were bonds, not stocks – as initially asserted by the plaintiffs – and therefore did not have to recuse himself from the proceeding. Pointing to a prior legal opinion, he stated that a bond holding does not “convey an ownership interest in the issuer,” so it does not “give rise to a financial interest in the debtor.” Nichols further added that he no longer holds bonds in either Apple or Microsoft.
“Even one share of stock in a party will recuse a judge, but under the judge’s view, a large bond holding in a party, paying substantial interest, would have no effect,” Stephen Gillers, a professor at NYU Law School who focuses on judicial ethics, said in an email. “To me, that is inconsistent.”
The plaintiffs also pointed to another flurry of investments Judge Nichols made in tech-focused ETF funds dominated by holdings in four of the defendant companies. Over several transactions in 2019 and 2020, before and during his time overseeing the case, Judge Nichols held between $265,00 and $550,000 stock in Vanguard Growth – a fund dominated by shares in Apple, Microsoft, Alphabet and Tesla; each defendants in the lawsuit – according to a legal filing. Based on the shares in these companies held by Vanguard Growth, Judge Nichols held an interest valued between $90,000 and $192,000 in the companies that were listed as defendants in the lawsuit, according to the plaintiffs – a figure the plaintiffs argued was substantial enough to require recusal.
Judge Nichols’ actions are of “serious concern,” says Charles Geyh, a professor at Indiana University Maurer School of Law, who studies judicial conduct, ethics and procedure. Not only because of the size of the holdings, Geyh says, but also because Nichols increased his holdings multiple times while the case was before him. “This is more than your garden variety situation,” Geyh says. “It is so rare to see judges feathering their nests on purpose…normally you would have a judge recusal.”
The case was brought on behalf of 16 anonymous plaintiffs — either children hurt or killed in artisanal cobalt mines in the Democratic Republic of the Congo, or their family members — by Washington, DC-based human rights lawyer Terrence Collingsworth. The lawsuit claimed that some of the plaintiffs were working at mines that provided cobalt to several mining companies, such as Glencore, that in turn supplied the mineral for batteries made by five technology company defendants, which also included Dell.
In dismissing the case, Nichols said that, among other things, the plaintiffs had failed to establish a connection between the cobalt mines where the children were injured and their causal relationship to the tech companies. “It was a perfect storm,” says Collingsworth. “A Trump appointee who had been in corporate law for years and had investments in the companies we had sued.”
A decision before the United States Court of Appeals District of Columbia Circuit is expected in coming days.
