Friendship With Lawyer Prompts Court to Overturn Judge’s $125 Million Award

 

A federal appeals court on Tuesday ruled that a largely undisclosed decades-long friendship between a US magistrate judge and a lawyer warranted overturning an almost $125 million judgment the judge had issued against a Louisiana industrial port.

 

In a 2-1 ruling, the New Orleans-based 5th US Circuit Court of Appeals said now-retired US Magistrate Judge Kathleen Kay had disclosed to the parties only that the daughter of the plaintiff’s lead attorney was a law clerk, while failing to reveal the extent of her relationship with the lawyer.

 

“At best, this disclosure was incomplete,” US Circuit Judge James Graves wrote for the majority. He said Kay had been close family friends for nearly 40 years with the lead attorney for IFG Port Holdings, which had sued the Port of Lake Charles, Louisiana, in a complex contract dispute.

 

Graves said there was “vanishingly little direct or circumstantial evidence” that the port actually knew about the friendship, undermining its ability to consent to having the case heard by a magistrate judge rather than a life-tenured district court judge.

 

“Judge Kay’s actions raise serious concerns about the fairness of her proceedings,” Graves wrote. “Her unusually harsh order, coupled with the windfall verdict, exacerbates this impression.”

 

US Circuit Judge Andrew Oldham dissented, saying the majority’s ruling gave the port a “Hail Mary pass” to overturn the judgment, “encourages parties to scrutinise judges’ private affairs, and jeopardises virtually all magistrate and bankruptcy judge orders”.

 

“Recall the facts,” Oldham wrote. “The Port’s lawyers repeatedly searched for a legitimate, on-the-merits way out of this judgment. And after exhausting all legally meritorious options, they were able to overturn a $112 million judgment based primarily on wedding photos from the 1980s.”

 

The case involved a years-long contract dispute between IFG Port Holdings and the port over responsibility for securing permits to dredge part of Contraband Bayou so IFG could develop an export grain terminal.

 

Following a non-jury trial, Kay awarded IFG $124.5 million in 2019.

 

The port’s lawyers later said they learned that Kay had been longtime family friends with IFG’s lead attorney, William Monk of Stockwell, Sievert, Viccellio, Clements & Shaddock.

 

Although Kay had disclosed that Monk’s daughter had clerked for her, IFG said it had never been told that Monk had also been a groomsman at Kay’s wedding, or that the judge had officiated at his daughter’s wedding a few months before IFG filed its case in 2016.

 

A district court judge initially declined to overturn the award. After the 5th Circuit ordered an inquiry into the matter in September 2023, a lower-court judge held a three-day evidentiary hearing and ruled in the port’s favour.

 

The case is IFG Port Holdings v. Lake Charles Harbor & Terminal District, 5th US Circuit Court of Appeals, No. 22-30398.

 

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