Opinion 25-23
March 27, 2025
Digest: On the facts presented, a full-time judge may not co-own a racehorse with a friend, whether directly or through a limited liability company.
Rules: 22 NYCRR 100.2; 100.2(A); 100.2(C); 100.3(A); 100.4(D)(1)-(4); Opinions 24-97; 20-187; 20-155; 18-169; 18-65; 17-182; 16-158; 15-187; 15-102; 12-142; 06-109; 04-02; 95-100.
Opinion:
The inquiring full-time judge would like to acquire a limited ownership stake in some racehorses in conjunction with a friend who is already in the business. The judge’s friend owns approximately a dozen racehorses through one or more limited liability companies (LLCs) and races them in multiple states. The friend hires a trainer to take care of them and also employs jockeys who receive a percentage of any race winnings. Accordingly, the judge asks:
1. May the judge invest in a new LLC solely owned by the judge’s friend, which will “do nothing more than hold [their] jointly owned horses”? The judge’s friend, as sole member of the LLC, will “be responsible for all other activities.” The judge envisions that the new LLC will enter into a contract with another entity to arrange for “services related to the business” and thereby ensure that the “new LLC would have no activity other than holding the horses.”
2. May the judge “simply invest in an individual horse when purchased, with no other action”? In this scenario, the judge anticipates that he/she would “invest in an individual horse and get paid a return on that horse (or loss), with no other business involvement and no additional corporate structure to handle it.”
3. New York and other states “require owners to register with each applicable state’s gaming commission as a horse owner in order to enter horses into races.” Thus, in either scenario above, the judge would need to be “licensed through the appropriate [state] gaming commission,” a process that involves fingerprinting and background checks and may take about a month to complete. Is that permissible?
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]). Indeed, a judge’s judicial duties must “take precedence” over the judge’s other activities (see 22 NYCRR 100.3[A]) and a judge must not lend the prestige of judicial office to advance private interests (see 22 NYCRR 100.2[C]). A judge must not engage in financial and business dealings that (a) may reasonably be perceived to exploit the judge’s judicial position, (b) involve the judge with any business, organization or activity that ordinarily will come before the judge, or (c) involve the judge in frequent transactions or continuing business relationships with “those lawyers or other persons likely to come before the court on which the judge serves” (22 NYCRR 100.4[D][1][a]-[c]). While a full-time judge generally may not serve as “an officer, director, manager, general partner, advisor, employee or other active participant” (22 NYCRR 100.4[D][3]), the judge nonetheless “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][3][b]). A judge may also “hold and manage investments of the judge and members of the judge’s family, including real estate” (22 NYCRR 100.4[D][2]).
We have recognized that judges “may participate in lawful gambling activities” (Opinion 18-65; see e.g. Opinions 16-158 [judge may attend and play games at a “Casino Night” fund-raiser for a local school]; 15-187 [judicial association may hold its annual conference at “a hotel resort and casino”]; 12-142 [judge may help plan a not-for-profit organization’s “casino themed” fund-raising event]). Such participation is of course subject to generally applicable limitations on judicial speech and conduct. For example, we said a judge may not compete in the World Series of Poker, where the event is clearly a commercial enterprise and would have required the judge to sign a broad release and consent to use of the judge’s name, likeness, interviews and footage for promotional purposes (see Opinion 15-102).
Direct Co-Ownership of Racehorse(s)
We start with the judge’s second question, as it is the most straightforward under our precedent. In Opinion 06-109, we considered whether a “recently-appointed full-time judge” may continue to retain a pre-existing 20% interest in a racehorse along with two attorneys who frequently appear in the judge’s court. We concluded that divestment was mandatory (id. [emphasis added and final citation omitted]):
The Rules Governing Judicial Conduct prohibit a full-time judge from serving as a partner in any business entity. 22 NYCRR 100.4(D)(3). Moreover, the Rules require a judge to divest himself/herself of financial interests that “might require frequent disqualifications.” 22 NYCRR 100.4(D)(4).
The Committee concludes that this partnership investment falls within both of these prohibitions. Divestment is therefore required “as soon as the judge can do so without serious financial detriment.”
In other words, as relevant here, we concluded that co-ownership of a racehorse with others was impermissible for a full-time judge under Section 100.4(D)(3), regardless of whether or not the co-owners were likely to appear before the judge.
In our view, Opinion 06-109 is directly on point and applicable to the judge’s second question, and therefore the judge may not directly co-own a racehorse with the judge’s friend.
Investment in Limited Liability Corporation Which Owns Racehorse(s)
We now turn to the judge’s first and third questions, which must be considered together. The judge’s first question strives to structure the judge’s ownership interest in racehorses as a purely passive investment in a business entity as permitted in prior opinions (see e.g. Opinions 24-97; 20-187; 18-169; 04-02). For example, we said a new full-time judge “may continue to hold stock in a closely held corporation” which leases a building and operates a car wash, “but may not remain as an officer, or be a director, manager, general partner, advisor, or employee of the business; nor may the judge participate in any active management or operation of the corporation or its businesses” (Opinion 04-02). We also said that a full-time judge “may provide a loan to a friend who is seeking money to start a personal fitness business, where the loan will be repaid to the judge with interest and the judge will not be a partner in the business nor have an equity share or active participation in running the business as a director, manager, or advisor” (Opinion 24-97).
The recurring theme of these opinions is that, although a full-time judge may not be a “general partner … or other active participant of any business entity” (22 NYCRR 100.4[D][3]), the Rules “do not prohibit a full-time judge from being a purely passive investor in a business entity” (Opinion 20-187). To fall within this exception, the judge may not take “any active role, title, or function in the management or control of the business” (id.), including the role of “a founder” (Opinion 18-169).
Critically here, the judge’s proposed investment in a friend’s new special-purpose LLC, which would own their racehorses, is not as straightforward as purchasing or holding shares or stock in a company or even making a loan to a friend. Rather, in light of the highly regulated context of horseracing, the judge must undergo fingerprinting and a background check in affirmatively seeking to be licensed by gaming commissions as an owner in each state where the horses will be raced.[1]
In our view, such activities go far beyond a “purely passive investment” in a business entity, and would, at the very least, create a public perception the judge is an active participant in the friend’s horseracing business as a co-owner.
[1] We do not mean to suggest that seeking or maintaining a non-law related license is necessarily improper for a full-time judge (compare Opinion 17-182 [full-time judge may retain or renew a pharmacy license and volunteer as a hospital pharmacist in a cancer research project] with Opinion 95-100 [full-time judge “may not apply for a real estate broker’s or sales license under any circumstance”]).