Draggin’ Y Cattle Co., Inc. v. Junkermeier, Clark, Campanella, Stevens, P.C.

Draggin’ Y Cattle Co., Inc. v. Junkermeier, Clark, Campanella, Stevens, P.C., 2017 MT 125 (May 30, 2017) (Baker, J.) (5-0, aff’d)

Issue: (1) Whether the district court erred in holding that Judge Huss should have been disqualified and (2) whether the district court erred in vacating Judge Huss’s order issued after he should have disqualified himself.

Short Answer: No.

Affirmed

Facts: On remand following reversal of summary judgment for Junkermeier, Judge Huss assumed jurisdiction. Peters and Junkermeier entered into a settlement agreement and stipulated for entry of judgment without New York Marine’s participation or authorization in November 2014. New York Marine moved to intervene in December 2014 to oppose the settlement, and requested additional discovery and a stay of the scheduled reasonableness hearing. Judge Huss held the settlement was reasonable and entered judgment for $10 million in Peters’ favor. New York Marine appealed, and Peters cross-appealed.

NY Marine contended in that appeal that Judge Huss had an apparent conflict of interest stemming from a sexual harassment complaint filed against him by his former court reporter. NY Marine alleged that Judge Huss had entered into a stipulated settlement without the participation or authorization of the Office of the Court Administrator (OCA), which acted as Judge Huss’s insurer by paying for his defense under a reservation of rights. NY Marine alleged further that the OCA filed a declaratory judgment action in which it contested the stipulated settlement amount’s reasonableness. NY Marine contended that Judge Huss’s potential conflict of interest violated the Montana Code of Judicial Conduct and should have resulted in Judge Huss’s disqualification.

This Court held that Rule 2.12 required Judge Huss to disclose the potential conflict, and remanded to case to Judge Russell Fagg to preside over the disqualification hearing. Draggin’ Y II, ¶ 12.

Judge Fagg held a hearing and Judge Huss testified.

Procedural Posture & Holding: The district court issued findings of fact regarding this case, the suit against Judge Huss, and the overlap in the timelines of the stipulated settlements in this case and in Judge Huss’s case. Applying Rule 2.12 of the Montana Code of Judicial Conduct, the district court concluded that Judge Huss was required to recuse himself and should have been disqualified from presiding over the stipulated settlement herein. The court further concluded that the new judge assigned to the case would have to decide several issues raised after NY Marine intervened, which had the effect of vacating all of Judge Huss’s order after NY Marine intervened. Peters appeals and the Supreme Court affirms.

Reasoning: The “ultimate question” under a Rule 2.12 analysis is whether the judge’s “impartiality ‘might reasonably be questioned.’” Reichert, ¶ 50. As the district dourt observed, the procedural posture and circumstances surrounding the stipulated settlement in the Peters’s case are strikingly similar to those surrounding Judge Huss’s personal stipulated settlement. The Court’s “objective examination of the circumstances surrounding [Judge Huss’s] potential judicial disqualification” confirms the District Court’s ruling that Judge Huss’s impartiality reasonably could be questioned. The district dourt correctly held that Judge Huss was required to disqualify himself pursuant to Rule 2.12(A).

(2) The district court’s order had the effect of vacating Judge Huss’s orders denying NY Marine’s motions for discovery and for a stay, his order determining the settlement was reasonable, and the entry of judgment against NY Marine. Peters alleges that this Court’s case law and M. R. Civ. P. 61 prohibit the district court from vacating Judge Huss’s decisions absent a showing of personal bias or of prejudice to NY Marine’s substantial rights. Peters further argues that Rule 2.12(A) does not provide grounds for vacating a judge’s decisions.

The circumstances herein are unique. Because the matter already was before this Court on appeal, the Court invoked § 3-1-805(1) to initiate a fact-finding process. The Code establishes rules and standards meant to ensure that parties have their cases decided by an impartial judge. Once it is determined that a judge’s impartiality reasonably has been placed in question, it would be impossible to assess whether the judge’s decision might have been the same had the judge not possessed the disqualifying interest. The Code can therefore provide the basis for vacating a judge’s decision, and has been used in that way previously. Rule 2.12 mandates that a judge cannot proceed in a case when disqualification is required under the Rule. Upholding the orders of a judge who should not have heard or decided the matter in the first place is directly contrary to the black-letter standards Rule 2.12 articulates.