United States Court of Appeals For the Second Circuit

August Term 2022

Argued: February 9, 2023 Decided: July 2, 2024

No. 21-2905

ISABEL LITOVICH, ON BEHALF OF HERSELF AND ALL OTHERS SIMILARLY SITUATED, UNITED FOOD AND COMMERCIAL WORKERS UNION AND PARTICIPATING FOOD INDUSTRY EMPLOYERS TRI-STATE PENSION FUND, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, HOLDCRAFT MARITAL TRUST, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, MICHAEL V. COTTRELL, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, FRANK HIRSCH, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED,

Plaintiffs-Appellants,

v.

BANK OF AMERICA CORPORATION, MERRILL LYNCH, PIERCE, FENNER & SMITH, INCORPORATED, BOFA SECURITIES, INC., BARCLAYS CAPITAL INC., CITIGROUP INC., CITIGROUP GLOBAL MARKETS INC., CREDIT SUISSE SECURITIES (USA) LLC, DEUTSCHE BANK SECURITIES INC., THE GOLDMAN SACHS GROUP, INC., GOLDMAN SACHS & CO. LLC, JPMORGAN CHASE & CO., J.P. MORGAN SECURITIES LLC, MORGAN STANLEY, MORGAN STANLEY & CO. LLC, MORGAN STANLEY SMITH BARNEY LLC, NATWEST MARKETS SECURITIES INC., WELLS FARGO & CO., WELLS FARGO SECURITIES, LLC, WELLS FARGO CLEARING SERVICES, LLC,

Defendants-Appellees.

Appeal from the United States District Court for the Southern District of New York No. 20-cv-03154, Lewis J. Liman, Judge.

Before: LEE AND NATHAN, Circuit Judges, AND RAKOFF, District Judge. *

Plaintiffs-Appellants, bond investors who bought and sold certain types of corporate bonds from and to Defendants-Appellees, who are investment bank dealers of those bonds, appeal from the district court’s judgment granting Defendants-Appellees’ motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Several months after the district court’s order, the parties learned that the district court judge had presided over part of the case while his wife owned stock in one of the Defendants, although she had divested that stock before the district court judge issued his decision.

In light of these circumstances, we are tasked with deciding whether, pursuant to 28 U.S.C. § 455, vacatur is warranted because the district court judge was required to disqualify himself before issuing his decision. Under § 455(a), a federal judge “shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned,” including, under § 455(b)(4), when “he knows *The Honorable Jed S. Rakoff, of the United States District Court for the Southern District of New York, sitting by designation.

2 that . . . his spouse . . . has a financial interest . . . in a part