- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- 24-10287 (5th Circuit, Nov 05,2024) Published
- Tag(s):
-
- Ruling:
- The appellants failed to meet their burden of showing that recusal of the bankruptcy judge was proper. Judicial recusal is proper only in exceptional circumstances, such as where the judge expresses animosity or prejudice based on facts or circumstances not reflected in the record or where the judge has personal reasons for the adverse treatment or rulings. Recusal is not proper if a judge's comments or rulings have some basis in the current or prior proceedings involving the same or related parties. Here, the judge's statements were based on the appellants' behavior in court.
- Procedural context:
- Following three failed motions to have the presiding bankruptcy judge recuse herself, the appellants filed a petition for a writ of mandamus with the district court. The district court denied the petition, which the appellants appealed to the Fifth Circuit.
- Facts:
- Highland Capital Management, L.P. was an investment firm that managed billion-dollar, publicly traded investment portfolios, and James Dondero was its CEO. In 2019, after a $180 million arbitration award was entered against it, Highland filed a Chapter 11 bankruptcy petition in the Delaware bankruptcy court. The Creditors Committee (the "Committee") moved to have venue transferred to the Northern District of Texas because Chief Judge Jernigan was familiar with two other entities for which Dondero had served as CEO. The motion was granted, and the case was assigned to Chief Judge Jernigan.
The first matter considered by Chief Judge Jernigan was whether to approve a settlement between Highland and the Committee in which Dondero would be replaced by an "Independent Board." Chief Judge Jernigan approved the settlement, and Dondero resigned as CEO but remained as a portfolio manager until October 2020.
Throughout 2020, Dondero proposed several plans that the Committee and the Independent Board opposed. The Committee and the Independent Board proposed their own plan (the "Joint Plan"), and Dondero objected to confirmation of that plan. Dondero and other creditors also objected to other settlements, appealed orders, and sought writs of mandamus. Chief Judge Jernigan ultimately confirmed the Joint Plan. In the confirmation order, Chief Judge Jernigan found that Dondero was a "serial litigator" and did not have a good faith basis to object to confirmation of the Joint Plan and that other members of Highland's board "march[ed] to the orders of Mr. Dondero."
Dondero appealed confirmation of the Joint Plan directly to the Fifth Circuit, which affirmed confirmation and the confirmation order except for provisions exculpating non-debtors. The Fifth Circuit also dealt with three other appeals in the Highland bankruptcy case.
In the meanwhile, Dondero and others filed a series of motions seeking to have Chief Judge Jernigan recused from the Highland bankruptcy case under 28 U.S.C. § 455. The motions asserted that Chief Judge Jernigan was so peeved at Dondero that her impartiality was subject to reasonable inquiry. The first motion was filed on the eve of a contempt hearing for Dondero.
Chief Judge Jernigan reviewed the first recusal motion on its merits and determined that recusal wasn't warranted. Dondero and his allies appealed to the district court, which ruled that the recusal order was not immediately appealable because it was interlocutory.
The Dondero parties filed a second recusal motion that (a) included additional allegations of bias and (b) asked Chief Judge Jernigan to enter a final, appealable order. Chief Judge Jernigan denied the second recusal motion, without prejudice, on procedural grounds.
Rather than accept the guidance of Chief Judge Jernigan, the Dondero parties filed a third recusal motion. Chief Judge Jernigan ruled that the motion was untimely and, in any event, failed on the merits.
The Dondero parties then filed a petition for a writ of mandamus with the district court. The district court denied the petition because the Dondero parties did not prove any exceptional circumstances.
- Judge(s):
- Wiener, Willett, and Duncan, Circuit Judges
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