CI-502

April 3, 1980

SYLLABUS

A judge may carry on a business venture as a sole proprietorship and such business activity is not a violation of MCJC 5C(2).

The term "business" as used in ethics rules includes the business organization through which a commercial pursuit is carried on, and accordingly a judge may not ethically serve in a business unless such service qualifies as passive business activity of a personal character. Conduct of a business by a judge in corporate form or service by a judge as an officer or director of a corporation, where the corporation is in fact the judge's alter ego and the stock that is owned exclusively by the judge or the judge and the judge's immediate family, is passive business activity of a personal character, and is not prohibited.

References: MCJC 5C; CI-470; ABA i1385.

TEXT

A judge asks whether it is proper for a judge to conduct a mail order business, holding out for sale publications and articles of manufacture, under a style that avoids use of the judicial title and a manner that does not interfere with the proper performance of judicial duties, nor reflects adversely upon the judge's impartiality. The business could be formed as a sole proprietorship doing business under a properly recorded assumed name, or in corporate form with the judge as sole stockholder, director and officer.

Any business activity of a judge is subject to the limitations of MCJC 5C. In addition to the requirements set forth in the in the facts, the business activity may not exploit the judicial position or involve the judge in frequent transactions with lawyer or persons likely to come before the court on which the judge serves. MCJC 5C (1) and (2) state:

"(1) A judge should refrain from financial and business dealings that tend to reflect adversely on his or her impartiality or his/her judicial office, interfere with the proper performance of his or her duties, exploit his or her judicial position, or involve him or her in frequent transactions with lawyers or persons likely to come before the court on which he or she serves.

"(2) Subject to the requirements of subsection (1), a judge may hold and manage investments, including real estate, and engage in other remunerative activity, but should not serve as director, officer, manager, advisor or employee of any business . . . ." Emphasis added.

The Michigan Code of Judicial Conduct does not define "business," and the Business Corporation Act, MCL 450.1101 et seq., contains no definition. In CI-470 we cited favorably to ABA i1385 that stated in pertinent part:

"Under Canon 5C(2), a judge may engage in certain forms of remunerative or other business activity but the Canon prohibits a judge from serving as a director, manager, advisor of any business. The intent of that provision is to allow a judge to engage in forms of passive business activity of a personal character which do not involve an active personal association in the direction or operation of business organizations. The language of that prohibition is absolute and applies to the situation you have described."

We accept the position impliedly taken by the ABA committee that the Canon was intended to prevent a judge from becoming entangled in business matters with other parties. Further, we note that the terms "director, officer, manager, advisor or employee" all assume the existence of a second party owner, whether corporate or natural. Accordingly, we conclude that the Canon does not prohibit a judge from carrying on a business as a sole proprietor, within the limits of MCJC 5C(1).

In CI-470, we considered the question of a judge's participation as a stockholder and officer in a corporate business venture. While accepting in principle the position taken in ABA i1385 (which would on its face prohibit a judge's one-man corporation) we distinguished the case of a one-man corporation as follows:

"This is not to say that a judge's participation in any business corporation as an officer is prohibited. The ABA opinion notes that '[t]he intent of the provision is to allow a judge to engage in forms of passive business activity of a personal character.' We believe the term "business organization" suggests to some extent an organization of various persons, and believe further that the prohibition on a judge's involvement in such organizations must be read in light of the fact that a judge may engage in forms of passive business activity of a personal character. A judge could properly function as an officer of a corporation if the corporation were in fact his/her alter ego and if all the stock were owned by the judge or the judge and his or her immediate family."

Therefore it would not be improper for the inquire to carry on the proposed business in a corporate form, with the judge as sole shareholder.