Professor Bainbridge...on law, politics, religion, culture & food

Nacchio Conviction Reversed

Former Qwest CEO Joe Nacchio’s conviction for insider trading has been reversed and remanded for a new trial by the 10th Circuit in an opinion available here.  Congratulations to Jay Brown, for having correctly predicted the outcome and the grounds on which the trial court was reversed.

My friend and UCLAW colleague Eugene Volokh comments:

The reversal stemmed from the trial judge’s exclusion of economic expert evidence. Among other things, the trial judge concluded that the evidence would “invit[e] the jurors to abandon their own common sense and common experience and succumb to this expert’s credential.” The panel majority responded:

While economic analysis sometimes asks jurors to “abandon their own common sense,” App. 3920, that is not a reason to deem expert testimony inadmissible. Armchair economics is not the way to decide complex securities cases.

Absolutely right.

Larry Ribstein likewise observes:

I have been arguing for years that one of the many problems with criminalizing conduct like Nacchio’s is that judges and juries do not understand how firms operate, and substitute popular misconceptions. It’s worse than “armchair economics”—it’s anti-economics. Most people get their information about corporate executives from newspapers, films, and other media sources that portray corporate executives as selfish, greedy, and irresponsible. Resentment of the rich and powerful inclines them to accept these judgment.

And then there’s Ellen Podgor, who opines that:

“Armchair economics is not the way to decide complex securities cases."This line from the Tenth Circuit decision in the Nacchio case says it all.  The decision discussed here recognizes that white collar crime cases are not simplistic cases.  Document cases need to be explained to the jury, and this can require testimony from qualified experts.  In reversing and remanding the Nacchio conviction, the court recognizes that white collar cases deserve to be treated with a high standard.  Not only do juries need to be provided with the expert opinions that will allow them to understand the financial matters being presented, but the accused also deserves to have his or her day in court. This is especially true given the large sentences that are being given to those convicted of corporate related crimes. The right to present a defense is an important principle in our criminal system.  This decision reaffirms that principle and emphasizes that included in the right to present a defense is the right to explain that defense to the jury.

The reversal is quite striking. The trial judge - US District Court Judge Edward Nottingham - has a strong record, having been “reversed only 14 times out of 108 appeals during his 17-year career on the bench.,” according to a press report.

Interestingly, while not finding that Judge Nottingham was biased against Nacchio, the 10th Circuit opinion ordered that any retrial be held before another judge. Again, we go to Podgor for comment:

The court stated that “the improper exclusion of his expert witness merits a new trial, but we conclude that the evidence before the district court was sufficient for the government to try him again without violating the Double Jeopardy Clause.” In allowing for a new trial, the Tenth Circuit does provide for a new judge, saying that “it would be unreasonably difficult to expect this judge to retry the case with a fresh mind.”

It’s pretty unusual for an appeals court to grant a defense request for a new judge. I wonder if the decision in this case has anything to do with the apparently unrelated investigation into Nottingham’s personal conduct, as reported by the Rocky Mountain News:

U.S. District Judge Edward Nottingham, recently linked to a high-priced escort service in Denver, is the focus of a broadening investigation into allegations he “has brought disrepute to the judiciary,” the Rocky Mountain News has learned.

In an order made public Thursday, Robert Henry, chief judge of the 10th Circuit, said he is taking under advisement a complaint about a judge’s conduct. The order doesn’t name the judge, but the person who filed the complaint confirmed that it was Nottingham. ... Henry’s decision to move forward with allegations about Nottingham’s conduct is significant because complaints against judges typically are dismissed after a preliminary review. ...

[Nottingham’s] current troubles started last year, when his ex-wife went public with statements Nottingham made during their divorce proceedings.

The judge admitted he had spent $3,000 over two days at the Diamond Cabaret, a topless dance club in downtown Denver, and that he didn’t remember everything that happened because he had been drinking.

Nottingham released a statement after his comments were publicized, saying he wouldn’t discuss the allegations and calling them “private and personal matters involving human frailties and foibles.”

A few months later, a Denver woman who is disabled filed a complaint with the 10th Circuit, saying Nottingham parked in a handicapped spot outside a Denver Walgreens drug store without a handicapped permit.

When the woman, Jeanne Elliott, blocked him from pulling out of the parking spot, Nottingham became angry and threatened to call U.S. marshals to remove her, Elliott said. ...

Last week, 9News reported that Nottingham’s name and phone number were on a list of clients seized during a raid on a Denver prostitution ring known as Denver Players or Denver Sugar.

Not exactly what you want in the way of judicial temperament. Having said that, presumably Nottingham’s alleged extracurricular misconduct alone isn’t enough to justify requiring a new judge to hear the retrial. After all, if Nottingham’s misconduct justifies a different judge in one case, wouldn’t it do so in all? Perhaps those who followed the case more closely than I can elaborate on what Judge Nottingham did or did not do during trial to justify this unusual step?

Update: Jay Brown has followed the case very closely and suggests:

… the issue that did come up constantly at the trial was a sort of test of wills that arose from having two federal judges in the court room, Judge Nottingham and Herbert Stern, a former federal judge in New Jersey.  I wrote an editorial for the Denver Post on the subject early in the proceeding (In courtroom with three judges, only one with gavel matters).  Most likely it was this dynamic that caused the court to conclude that the case should go to another judge.

I will say this, however.  The defendant’s brief was an epitome of understatement on this issue, merely asking for a new judge.  The subtle stroke was, however, sufficient to alert the panel (probably already to some degree aware of the issue from press reports) and carry the day.  It was the right strategy from someone who knows how courts operate.