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Justice Roberts's Portfolio
Why stock investments and Supreme Court service don't mix

Monday, February 23, 2009

THE PLANNED merger of pharmaceutical firms Pfizer Inc. and Wyeth has created a complication in one of the most important business cases before the Supreme Court this term.

The case of Wyeth v. Levine was heard by the justices in November; no decision has yet been rendered. The case, which involves the obscure but important concept of federal preemption, has potential ramifications not just for Wyeth and the pharmaceutical industry, but for a host of other regulated entities looking to shield themselves from state court lawsuits.

According to his financial disclosure form, Chief Justice John G. Roberts Jr. owns stock in Pfizer. Now that Pfizer plans to merge with Wyeth, the chief justice's investment will be directly affected by the court's decision.

Even though the deal has not closed, probably will not be finalized before the end of the term and could fall apart, Chief Justice Roberts should divest himself of the Pfizer stock.

Chief Justice Roberts and others on the court, particularly relative newcomer Justice Samuel A. Alito Jr., have gradually been selling individual stock holdings that most often trigger conflicts. Avoiding such conflicts, which can require justices to recuse themselves, is particularly important at the Supreme Court because no other jurist can substitute for an absent justice. And when the court is evenly split -- and this happens almost exclusively when the court is short-handed -- the lower court's judgment is automatically upheld and the results are not applicable nationwide. An opportunity to clarify murky law or conflicting lower-court decisions is squandered.

A special law allows judges to avoid capital gains taxes if they are forced to sell holdings to eliminate a conflict of interest. This provision may offer little solace, given the recent losses in the stock market. Still, the chief justice should move quickly to clear up the potential conflict.

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