US Panel Tightens Corp Disclosure Rules to Strengthen Judge Recusal Compliance

A federal judicial panel on Wednesday approved a rule change designed to help judges comply with their obligations to recuse themselves from cases in which they own stock in companies appearing before them.

The U.S. Judicial Conference’s Committee on Rules of Practice and Procedure, meeting in Chicago, endorsed the final amendment aimed at addressing concerns that judges were not always being adequately informed of potential financial interests that could require recusal.

The panel approved an amendment to Rule 7.1 of the Federal Rules of Civil Procedure, requiring parties in lawsuits to disclose when they are directly or indirectly owned by any publicly held business organisation, or by a parent entity holding a stake of 10 per cent or more.

U.S. District Judge Sarah Vance, who chairs the Advisory Committee on Civil Rules that drafted the proposal, said the objective is to ensure disclosure of not only a party’s direct parent company, but also “grandparents, great-grandparents and other entities” within a corporate structure.

The change follows a 2022 letter from U.S. Circuit Judge Ralph Erickson, who warned of a conflict-of-interest “nightmare” involving judges’ stock holdings in conglomerates such as Berkshire Hathaway.

Erickson, of the 8th U.S. Circuit Court of Appeals, said many judges were unaware until late in proceedings that companies appearing before them were ultimately owned by Berkshire Hathaway.

He noted that current disclosure requirements only require companies to identify their immediate parent, not the ultimate controlling entity.

For example, Orange Julius is owned by International Dairy Queen, a Berkshire subsidiary. However, Erickson said disclosure requirements currently stop at the subsidiary level, without identifying the ultimate parent company.

Judge Vance, based in New Orleans, said the revised rule would support compliance with 2024 guidance from the Judicial Conference’s Committee on Codes of Conduct, which strengthened recusal requirements in parent–subsidiary corporate relationships.

The rule change will now proceed to the Judicial Conference, the judiciary’s top policymaking body, for review. If approved, it will be submitted to the U.S. Supreme Court and then to Congress by May 1. If Congress takes no action, the amended rule will come into effect on December 1, 2027.

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