December 11, 2014
Digest: A judge may form a general partnership with his/her first cousins that will operate as an investment club, where the club will invest solely the financial resources of the judge and his/her cousins.
Rules: 22 NYCRR 100.0(C); 100.0(I); 100.2; 100.2(A); 100.4(A)(1)-(3); 100.4(D)(2); 100.4(D)(3); 100.4(D)(3)(b); 100.4(E)(1); 100.3[E][d][I]-[iii]); 100.4(G); Opinions 10-203(B); 10-193; 10-77; 05-130(B); 99-114 (Vol. XVIII); 99-84 (Vol. XVIII); 99-12 (Vol. XVII); 98-01 (Vol. XVI); 95-57 (Vol. XIII).
A full-time judge asks whether he/she may “pool [his/her] money together” with his/her first cousins “and form an investment club.” The judge states the club would take the form of a general partnership, and its sole purpose would be to invest the cousins’ pooled financial resources.
A judge must always avoid even the appearance of impropriety (see 22 NYCRR 100.2) and must always act to promote public confidence in the judiciary’s integrity and impartiality (see 22 NYCRR 100.2[A]). A judge may engage in extra-judicial activities that do not (1) cast reasonable doubt on the judge’s capacity to act impartially as a judge; (2) detract from the dignity of judicial office; or (3) interfere with the proper performance of judicial duties and are not incompatible with judicial office (see 22 NYCRR 100.4[A]-).
With respect to financial activities, a full-time judge is prohibited from serving as a “general partner” or other active participant of any business entity (see 22 NYCRR 100.4[D]), although a full-time judge may “manage and participate in a business entity engaged solely in investment of the financial resources of the judge or members of the judge’s family” (22 NYCRR 100.4[D][b] [emphasis added]). The term “member of the judge’s family” is defined, in turn, as “a spouse, child, grandchild, parent, grandparent or other relative or person with whom the judge maintains a close familial relationship” (22 NYCRR 100.0[I]).
The Committee previously has advised that a full-time judge may not belong to an investment club that is organized as a partnership for profit (see Opinions 98-01 [Vol. XVI]; 95-57 [Vol. XIII]). However, applying the exception for a business entity that engages solely in investing the judge’s family’s financial resources as permitted by Section 100.4(D)(3)(b), the Committee has advised that a full-time judge may serve as a general partner with his/her spouse and children in a family partnership engaged solely in holding and managing family investments (see Opinion 99-12 [Vol. XVII]); may, as the sole member of a limited liability corporation, manage real property the corporation owns (see Opinion 10-193); and may manage and participate in a wholly family-owned corporation whose sole function is to hold and manage the family’s investments, including real estate, where the judge and the judge’s children are the sole shareholders (see Opinions 10-77; 05-130[B]). Similarly, the Committee has advised that a full-time support magistrate may serve as an officer of a family-owned corporation engaged in permissible investment activities where the sole shareholders are the support magistrate and his/her spouse (see Opinion 99-84 [Vol. XVIII]).
In resolving the present inquiry, the Committee also seeks to harmonize and modify its prior opinions as needed to make it easier for judges to understand and apply the term “members of the judge’s family” as it appears in Section 100.4(D)(3)(b) and three other provisions of the Rules Governing Judicial Conduct (i.e. 100.4[D], 100.4[E], and 100.4[G]). The definition of “member of the judge’s family” is ambiguous as applied to cousins, siblings, and many other relatives who would ordinarily be considered family members in any usual sense.1
In Opinion 10-203(B), the Committee construed the definition of the phrase “member of the judge’s family” under Section 100.0(I) broadly, consistent with an intuitive, common-sense understanding of the phrase, to presumptively include the judge’s first cousin (i.e. a relative within the fourth degree) without requiring the judge to establish that he/she has maintained a close familial relationship with him/her. On further consideration, the Committee believes this presumption should be extended not only to all relatives within the fourth degree of relationship, but to all relatives within the sixth degree of relationship as well, notwithstanding that such a relative’s appearance in a proceeding as a party would require the judge’s disqualification.2 Relatives within the sixth degree of relationship include a great-grandparent, grandparent, parent, sibling, aunt, uncle, niece, nephew, first cousin, second cousin, child, grandchild, or great-grandchild (see 22 NYCRR 100.0[C]).
Turning specifically to use of the phrase “members of the judge’s family” in Sections 100.4(D)(2) and 100.4(D)(3)(b), the Committee notes these sections provide a full-time judge some flexibility in managing his/her own personal financial and real estate investments, along with those of members of the judge’s family, in light of the general prohibition on a full-time judge’s active participation in commercial enterprises and business activities (see 22 NYCRR 100.4[D]). Where a full-time judge pools and manages his/her own financial resources with those of his/her relatives, the Committee believes the sixth degree of relationship is not so remote as to create a risk the judge will be seen as impermissibly engaged in general business activities. Even if a full-time judge chooses to actively participate in business ventures with relatives within the sixth degree of relationship who are not otherwise close to the judge, such businesses must still be solely devoted to investing their own collective financial resources (see 22 NYCRR 100.4[D][b]).
For ease of application, the Committee believes the same construction of “member of the judge’s family” must apply to Sections 100.4(D)(2), 100.4(D)(3)(b), 100.4(E)(1), and 100.4(G).3 Therefore, Opinion 99-114 (Vol. XVIII) is modified to the extent it requires a demonstration that a full-time judge actually maintains a “close familial relationship” with a relative within the sixth degree of relationship before the judge may provide such relative with uncompensated legal advice as a “member of the judge’s family” (see Opinion 99-114 [Vol. XVIII]; 22 NYCRR 100.4[G]). Instead, consistent with the present opinion, a full-time judge is presumptively entitled to provide uncompensated legal advice to relatives within the sixth degree of relationship, should he/she wish to do so.
Here, because the proposed investment club would invest only the financial resources of the judge and his/her first cousins, who are within the sixth degree of relationship, the judge may participate as a general partner (Opinion 10-203[B]; see also 22 NYCRR 100.0[C]; 100.4[D][b]).
1 The definition specifically lists the judge’s spouse and each of the judge’s relatives within the second degree of relationship in the same line of descent (i.e., “child, grandchild, parent, grandparent”) but then concludes with the words “or other relative or person with whom the judge maintains a close familial relationship” (22 NYCRR 100.0[I]; see also 22 NYCRR 100.0[C] [defining degrees of relationship within the same or different lines of descent]). In order to give meaning to every word of the definition, relatives who are not specifically listed (such as siblings, aunts, uncles, and first cousins) would not qualify as “members of the judge’s family” unless the judge actually maintains a “close familial relationship” with them.
2 In general, disqualification is required when a “a person known by the judge to be within the sixth degree of relationship” to the judge or his/her spouse, by blood or marriage, is a party to the proceeding, is an officer, director or trustee of a party, or has an interest that could be substantially affected by the proceeding (see 22 NYCRR 100.3[E][d][I]-[iii]).
3 Unlike the other provisions, Section 100.4(E)(1) also contains a procedure for a judge to seek administrative approval to serve as a fiduciary for “a person not a member of the judge’s family” (22 NYCRR 100.4[E] [requiring “a longstanding personal relationship of trust and confidence”]).