A federal appeals judge from Nashville crossed an ethical line when she ruled on a case that involved a financial firm that she owned stock in, according to a judicial watchdog group.
Judge Martha Daughtrey of the 6th U.S. Circuit Court of Appeals said the conflict was inadvertent and a mistake brought on by a complicated case that involved multiple parties and the merger of financial firms.
"It was one of those slip-ups you hope doesn't happen," said Daughtrey, who spent her legal career in Nashville before being appointed to the appellate court in Cincinnati in 1993.
The conflict of interest stemmed from JPMorgan Chase & Co. stock Daughtrey owned at the same time she ruled in favor of the company in a large stock fraud case in 2003, said Doug Kendall, executive director of the Washington, D.C.-based Community Rights Counsel, a nonprofit public interest law firm.
"The brightest line rule of federal conflicts of interest and judicial ethics is that you can't rule in a case in which you hold stock with one of the parties," Kendall said. "Our judicial system won't work if there is even a possibility that judges are swayed by their personal interests."
Daughtrey was among six federal appellate judges that the Community Rights Counsel identified this week for conflicts of interest based on stock ownership.
Kendall said he does not believe Daughtrey's ruling had any impact on stock prices, nor does he believe she ruled the way she did to try to affect her financial holdings.
"But judges more than anyone else have to follow clear mandates of federal law," Kendall said. "When you violate judicial rules of ethics, it matters, even if you're not doing it for any nefarious reason."
Judges are required to submit annual financial disclosure reports and make court clerks aware of the financial holdings they list, Kendall said.
Daughtrey owned between $15,001 and $50,000 in the JPMorgan stock, her 2003 financial disclosure report shows.
Several factors could have contributed to the failure by the clerk's office to notify her of the conflict and assign the case to another judge, Daughtrey said.
The stock Daughtrey owned belonged to Chase Manhattan, which merged with JPMorgan. The different names could have tripped up the clerk, or the clerk may have missed the conflict because the case was a consolidation of 19 cases involving as many as 10 defendants, Daughtrey said.
Kendall said that explanation does not make sense because the merger happened in 2000. Daughtrey listed JPMorgan Chase as stock holdings previously in 2001 and 2002, according to those reports. Daughtrey said she has not looked at her disclosure file recently.
"I'm sorry it happened," she said. "I think it was totally inadvertent on my part and the part of the clerk's office … I don't think I did anything unethical."
The Community Rights Counsel does not plan to file an ethical complaint against Daughtrey, Kendall said.
But the group supports proposed federal legislation that would require judges to post their financial holdings in easily accessible places — such as online and in courthouses — so the public can check for conflicts, Kendall said.
Daughtrey is married to Larry Daughtrey, political columnist and retired Capitol Hill reporter for The Tennessean.