Opinion 11-21

March 9-10, 2011

Please Note: While it does not affect the outcome here, see AO-347 concerning the status of Section 100.4(H)(2).

Digest:         Under the circumstances presented, a recently-elected judge may accept a discretionary bonus paid by his/her law firm based on work actually performed by the judge before he/she assumed judicial office.

Rules:          22 NYCRR 40.2(a); 100.2; 100.2(A); 100.4(D)(1), (5); 100.4(G); 100.4(H)(2); Opinions 05-130(A); 00-67 (Vol. XIX); 00-03 (Vol. XVIII); 97-148 (Vol. XVI); 97-09 (Vol. XV); 96-91 (Vol. XV); 95-12 (Vol. XIII); 93-44 (Vol. XI).

Opinion:

         A recently-elected judge who was previously a partner at a law firm asks whether he/she may accept a discretionary year-end bonus from his/her former firm. Although the bonus was calculated after the inquirer became a full-time judge, the judge states that the bonus is based only on work he/she performed before assuming the bench. According to the judge, the funds from which the bonus is paid for a particular year are reserved from that year’s net profit and allocated to all eligible partners based on their performance over the course of the year. The judge notes that the bonus has been part of the firm’s compensation package for partners “[f]or the past several years,” and that the judge was also found eligible the prior year. The judge provides statistics comparing the judge’s proposed share of the bonus pool with the judge’s relative contribution to the firm’s revenues over the past two years. According to the judge, statistics regarding the judge’s strong performance within the firm undercuts any possible public perception that the firm might be attempting to “exercise economic discretion in my favor because I am now a Judge.” The judge states that the firm is holding the funds in escrow while he/she seeks guidance about whether he/she may accept the payment.

          A judge must avoid impropriety and the appearance of impropriety in all the judge’s activities (see 22 NYCRR 100.2) and must act at all times in a manner that promotes public confidence in the integrity and impartiality of the judiciary (see 22 NYCRR 100.2[A]). Therefore, the Rules Governing Judicial Conduct place some restrictions on a judge’s ability to accept gifts (see 22 NYCRR 100.4[D][5]) or engage in financial and business dealings (see 22 NYCRR 100.4[D][1]). In addition, a full-time judge may not practice law (see 22 NYCRR 100.4[G]).

         This Committee has previously advised that a full-time judge may collect legal fees the judge earned before assuming judicial office (see Opinions 05-130[A]; 00-03 [Vol. XVIII]; 97-09 [Vol. XV]; 96-91 [Vol. XV]; 95-12 [Vol. XIII]; 93-44 [Vol. XI]). Because fees, from which the inquiring judge’s bonus will be paid, were earned before taking office, the judge may accept the bonus without violating the rules relating to the financial and business activities of full-time judges (see Opinion 00-03 [Vol. XVIII]).¹ For example, assuming the fee arrangements are otherwise proper, a judge may collect contingency fees to the extent earned before the judge assumed office (see Opinions 05-130[A]; see also Opinions 96-91 [Vol. XV] [newly appointed part-time justice entitled to recover disbursements and share in legal fees for services rendered in pending litigation prior to assuming judicial office]; 93-44 [Vol. XI] [the judge may receive a fair and reasonable percentage of the fees fairly allocable to services rendered before the judge took the bench, which the judge’s former partners ultimately earn in the two contingent fee cases]). A judge may even collect fees previously earned that were “not payable for ‘one or more years’” (see Opinion 95-12 [Vol. XIII]). A judge may also receive the fair market value of his/her interest in a law partnership dissolving as a result of the judge’s election, as determined in accordance with generally accepted accounting principles (see Opinion 00-03 [Vol. XVIII]).

         Here, the information the judge provides suggests that the law firm has calculated the bonuses for all partners as it has in the past, based on their actual contributions to the firm’s financial performance over the course of the year. Furthermore, it does not appear that the discretionary bonus offered to the judge is more than “a fair and reasonable percentage” of the bonus pool “fairly allocable to services rendered” by the judge before the judge assumed judicial office (Opinion 93-44 [Vol. XI]). Accordingly, the bonus, though discretionary in nature, does not appear to be a gift or favor to the judge (see 22 NYCRR 100.4[D][5]) but, instead, a component of the judge’s compensation for work previously performed.²

         Therefore, the Committee concludes that the inquiring judge may accept a fair and reasonable discretionary bonus paid by his/her former law firm to all eligible partners, based on work the judge actually performed before he/she assumed judicial office.

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     ¹ For similar reasons, the Committee has advised that a judge need not report such compensation under Part 100, but only under Part 40 (see Opinion 97-148 [Vol. XVI]; 22 NYCRR 40.2[a]; 100.4[H][2]).

     ² Moreover, as the judge acknowledged in his/her inquiry, the judge must disqualify him/herself, subject to remittal, from matters in which the law firm appears for two years from the end of all of the judge’s financial dealings with the firm (see e.g. Opinion 00-67 [Vol. XIX] [judge who will be receiving compensation in concluding a business relationship with the judge’s former law partner has recusal obligations “for a period of two years from the last payment to the judge”]).