Conflicts of interest disclosures, waivers, recusals … and fig leaves

Much of the most interesting  case law and social science research around conflicts of interest concerns the related topics of disclosure and waivers, some of which is discussed in the prior posts collected here.   Recusals are relevant to this general area, too, in that they represent an alternative to waiver as a response to a disclosed conflict.   Today, we look a bit deeper at two stories covered in earlier posts to see what they tell us about disclosures, waivers and recusals.

The first story concerns disclosure and waiver in the recent Royal Bank of Canada case.  The case is noteworthy because the court declined to find that generalized language in an engagement letter between the bank and its client concerning a possible conflict was sufficient to waive the actual conflict at issue there. (See discussion starting on page 71 of the court’s decision, which is available through the link immediately above.)

Of course, at least in some circumstances, COI waivers by sophisticated parties are acceptable.  But in all cases involving any ambiguity, whether from a legal or ethical perspective, the efficacy of disclosures should be closely scrutinized and common sense applied to the claim of waiver.   By common sense I mean asking: Would a rational party have waived the COI  knowing all the relevant facts? And where the COI at issue seems to have been genuinely harmful to the complaining party – which was evidently the situation in the Royal Bank of Canada case – the proponent of the waiver will often have a tough sell indeed.

The second story concerns an aspect of the investigation (that is part of the broader inquiry concerning Governor Chris Christie)  of the chair of the Port Authority of New York and New Jersey, who was also a partner in a law firm – as  previously discussed briefly here  and more fully in this New York Times story.   Specifically, a Port Authority matter came before the chair in which a client of his firm had a clear interest and, while the chair apparently recused himself from voting on the matter, according to sources in the Times story, he evidently still “made his support for the plan [at issue] known to his fellow commissioners and was involved in planning” relating to the matter.

As described by a historian of the Port Authority, Jameson Doig (an emeritus professor at Princeton), who was interviewed for the Times piece, “the recusal afforded [the chair] an ethical fig leaf. ‘And the fig leaf is not adequate’…”  Note that the historian’s analysis may not be the final word on this – given the official investigations.  But the logic of analyzing recusals (this one and others) through a substance-over-form lens (like that which was applied by the court in the Royal Bank of Canada case) seems compelling to me.