April 4, 1989
Please Note: The digest of Opinion 15-155 states: “A judge is not disqualified from presiding in a matter where the judge and his/her spouse own a de minimis interest in large corporations that are parties in the matter, nor need the judge disclose such de minimis interest(s), provided he/she can be fair and impartial.” It has come to our attention that Judiciary Law § 14 states: “No judge shall be deemed disqualified from passing upon any litigation before him because of his ownership of shares of stock or other securities of a corporate litigant, provided that the parties, by their attorneys, in writing, or in open court upon the record, waive any claim as to disqualification of the judge.” While we cannot comment on legal issues, please consult the Committee for further guidance concerning a judge’s ethical obligations as a shareholder of a corporate litigant.
Topic: A Supreme Court Justice inquires whether a judge must disqualify himself or herself where the judge has a financial interest in the subject matter in controversy. A further inquiry is made whether the relationship of minimal stock ownership in a large publicly owned corporation can be likened to the exceptions to the ownership of government securities. Finally it is suggested that a procedure be set up so that the IAS clerks be given a list of each judge’s financial investments in order that the delay encountered as a result of an inappropriate assignment my be prevented.
Digest: A judge may not hear a case where the judge is even a minimal shareholder in a large corporate party to the controversy; there are no exceptions for such shareholders that are comparable to the exceptions for owners of government securities. Therefore, a judge who is a shareholder in a corporation that is party to a lawsuit, even if the value of the shares is minimal, must disqualify himself or herself, subject to the procedures available for remitting disqualification. The Committee has no power to act upon the suggestion that judges provide a list of holdings to IAS clerks. (See 22 NYCRR 100.5[c]).
Rules: Code of Judicial Conduct, Canon 3; Rules of the Chief Administrative Judge, 22 NYCRR 100.3(c)(iii); 100.3(d); 100.5(c).
An inquiring Supreme Court justice holds 300 shares of stock in a major corporation which appears to have 900,000,000 shares available for trading. This judge has taken the position that the fact of such ownership makes disqualification the only alternative where the corporation is a defendant in a case. The judge is correct, although, as explained below, a remittal of disqualification is possible under section 100.3(d). The Canon and the Rule of the Chief Administrator both are clear. The Rule (22 NYCRR 100.3[c]) reads, in relevant part:
(c) Disqualification. (1) A Judge shall disqualify himself or herself in a proceeding in which his or her impartiality might reasonably be questioned including but not limited to circumstances where:
(iii) the judge knows that he or she, individually or as a fiduciary, or his or her spouse or minor child residing in his or her household, has a financial interest in the subject matter in controversy or in a party to the proceeding, or any other interest that could be substantially affected by the outcome of the proceeding;
* * *
(3)(iii) financial interest means ownership of a legal or equitable interest, small ....
Sections 100.3(c)(3)(iii)(a) and (iv) also are relevant peripherally to this inquiry, as they provide an exception to the general rule. They state:
(iii)(a) ownership in a mutual or common investment fund that holds securities is not a “financial interest” in such securities unless the judge participates in the management of the fund:
* * *
(iv) ownership of government securities is a “financial interest” in the issuer only if the outcome could substantially affect the value of the securities.
However, since there is no exception which fits the inquirer’s circumstance, the only recourse is provided in section 100.3(d). Pursuant thereto the judge may participate in the proceeding only if, after the judge’s disclosure in the record of the basis of the disqualification, “the parties, by their attorneys, independently of the judge’s participation, all agree that the judge’ relationship is immaterial or that his or her financial interest is insubstantial ....” The agreement must be in writing or made orally in opencourt upon the record.
The inquirer also suggests an administrative remedy for the delay caused by having cases assigned to a judge who has a “financial interest” in a party. The Committee notes, however, that it is an inappropriate forum to deal with the suggestion that IAS clerks maintain lists showing judges’ investments, and further notes that judges expressly are not required at present to disclose generally their investments (22 NYCRR 100.5[c]), although Part 40 of the Chief Judge’s Rules, effective January 1, 1991, will require certain annual disclosures of financial interests by judges.