Ky. judge recuses himself in long-running hedge fund state pension case
Franklin Circuit Judge Philip Shepherd has recused himself from overseeing a long-running court battle between the state and a group of massive hedge funds following complaints from the hedge funds and related parties.
Shepherd, who has presided over cases related to this high-dollar legal fight for more than four years, entered the order recusing himself from the case late last week. The case has been transferred to Franklin Circuit Judge Thomas Wingate.
The defendants argued that Shepherd was unfair to the hedge funds and other defendants, one of which the state’s attorney says is essentially holding $134 million in pension funds hostage. The defendants, in claiming that Shepherd should be removed, pointed out that his campaign posted a clipping of a newspaper article featuring similar case that involved the defendants – that case was thrown out by the Kentucky Supreme Court because they said the original plaintiffs, individual pension beneficiaries, could not sue but the state could. The defendants also made complaints about Shepherd’s use of his own research in an opinion.
Shepherd told the Herald-Leader that he could not comment on the case, but wrote in an order that while he believes many of the defendants’ allegations to be “incorrect or taken out of context,” he recused himself because it’s best to do so when questions about a judge’s potential conflict arise.
“This is a highly contentious lawsuit, which has been characterized by an extraordinary degree of conflict and disputes among counsel from its inception. The Court has done its best to be an impartial decision maker, and to base its decisions on the facts and the law. It is now apparent that the Court’s own role in this litigation will be yet another such area of conflict, which will detract from the ability of the judicial system to render justice to the litigants and the public,” Shepherd wrote.
After the state supreme court decided that individual pension beneficiaries couldn’t sue the hedge funds, as well as individuals involved with state worker pensions, Attorney General Daniel Cameron’s office sued a similar group of defendants in Franklin Circuit Court.
Ann Oldfather, attorney for Cameron’s office, pointed out that $134 million in pension funds “which belongs to the retirees of Kentucky,” is being held in reserve by one of the hedge funds as a result of a contract with the Kentucky Public Pension Authority (formerly Kentucky Retirement Systems).
Cameron’s office sued in part because of a belief that the contract went against the state constitution and therefore couldn’t be enforced, an opinion which Shepherd had shared during a previous version of the case.
Shepherd’s recusal came after the defendants asked Kentucky Supreme Court Chief Justice John Minton to designate a special judge to the case. Minton sent that request back to Shepherd, who then recused himself.
This year, Shepherd faces an electoral challenge for his judicial post. As chief judge of Franklin Circuit Court, he presides over many cases involving legal challenges against laws passed in Frankfort and related to state government matters such as public pensions.
Joe Bilby, attorney for Republican Commissioner of Agriculture and 2023 gubernatorial candidate Ryan Quarles, is challenging Shepherd.
Several Republican lawmakers have aligned themselves against Shepherd and for Bilby, with several donating to Bilby’s campaign on the same date that Senate President Robert Stivers hosted a fundraiser for Bilby.
