COMMITTEE ON CODES OF CONDUCT
ADVISORY OPINION NO. 49
Code of Judicial Conduct Does not Require a Judge to Disqualify in
a Case Where a Trade Association Appears as a Party because Judge owns
a Small Percentage of Outstanding, Publicly-traded Shares of One or More
Members of Trade Association.
The Committee has been requested to render an opinion as to whether
a judge who owns a small percentage of the outstanding publicly-traded
shares of one or more members of a trade association is required by the
Code of Conduct for United States Judges to disqualify where the association
appears as a party in a case.
Under Canon 3C(1):
(1) A judge shall disqualify himself or herself in a proceeding
in which the judge's impartiality might reasonably be questioned, including
but not limited to instances in which:
* * *
(c) the judge knows that . . . [he or she] has a financial
interest in the subject matter in controversy or in a party to the proceeding,
or any other interest that could be affected substantially by the outcome
of the proceeding.
"Financial interest" is defined in Canon 3C(3)(c) as:
ownership of a legal or equitable interest, however small . . . except
that:
(i) 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 funds; . . .
(iii) the proprietary interest of a policy holder in a mutual insurance
company, or a depositor in a mutual savings association, or a similar proprietary
interest, is a "financial interest" in the organization only if the outcome
of the proceeding could substantially affect the value of the interest.
Professor Thode's notes to the ABA Code of Judicial Conduct state that,
"[t]he 'financial interest' of a judge that will disqualify him is his
direct legal or equitable ownership interest, no matter how small, in a
party or in the subject matter of proceeding before him." See Thode,
Reporter's
Notes to Code of Judicial Conduct 69-70 (ABA 1973). Noting that deposits
in a mutual savings association or a policy in a mutual insurance company
create a "technical legal interest," Professor Thode states that "these
technical interests, and other similar ones" should not be a basis for
disqualification. The Note concludes:
In Canon 3C(3)(c) the Committee endeavored to set a standard
for economic disqualification for indirect and technical interests that
assures impartiality and the appearance of impartiality but at the same
time makes available to a judge some types of nondisqualifying investments.
Id. at 71.
While the exceptions of Canon 3C(3)(c) do not specifically refer
to trade associations, the judge's interest in an association of this nature
is clearly an "indirect and technical interest." Accordingly, the Committee
sees no impropriety in a judge serving in a proceeding where a trade association
appears as a party, even though the judge owns a small percentage of the
publicly-traded shares of one or more members of the association, subject,
of course, to the general qualifications set forth in Canon 3C(1)(c) and
3C(3)(c) of the Code of Conduct.
It is to be understood that this formal opinion of the Committee,
like all of its opinions, does not attempt to interpret the statutory law
and in this case particularly 28 U.S.C. §§ 455(b)(4) and (d)(4).
The Committee's charter does not permit it to render opinions that would
be interpreting the law.
June 9, 1977
Revised July 10, 1998