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Ethics Opinion

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NOTE: Various references in this ethics opinion to portions of the Michigan Code of Judicial Conduct are no longer accurate due to amendments effective August 1, 2013. Click here to review language added to (which is underlined) and language stricken from (which is indicated by strikethrough) Canons 2, 4, 5, and 7.

JI-119

May 12, 1998

SYLLABUS

    A judge may ethically participate in an "investment club" which has no lawyers as members. A judge may ethically participate in an "investment club" which has lawyers who may appear before the judge. However, a judge must refrain from financial and business dealings that tend to reflect adversely on the judge's impartiality. If other members of the investment club are lawyers that are likely to frequently come before the judge, the judge should either decide not to seek membership in the club or terminate the current membership. If the judge can reasonably conclude that members of the investment club that are lawyers are not likely to appear before the court on which the judge servers, the judge may ethically participate even if it is possible that a lawyer member may appear. Should the situation arise where a fellow lawyer member of the club appears before the judge, the judge must clearly disclose relevant information regarding the membership either in writing or on the record and recuse unless asked to proceed. References: MCJC 2, 3C, 5C(1) and (3); MCR 2.003(B) and (D); J-4, J-6; JI-6, JI-45, JI-86; CI-293, CI-300; Hirych v. State Fair Comm'n, 376 Mich 384 (1965); Ireland v. Smith, 214 Mich App 235, 250 (1995), In re Disqualification of 50th District Court Judge (On Remand); People v. Perkins, 193 Mich App 209 (1992).

TEXT

The Committee has been asked to address the ethical ramifications of a situation in which a sitting judge seeks to participate as a member of a local "investment club." In the investment club each member contributes a sum of money in which to form an "investment pool" which is then invested in accordance with the guidance of the membership as a whole. Profits and losses are shared on a pro rata basis according to each member's individual contribution. It is possible that lawyers may also be members of the investment club. The judge asks the Committee for guidance under the following scenarios:

  1. May a judge ethically participate in an investment club as described above which have no lawyers as members?
  2. May judges ethically participate in an investment club as described above which have lawyers as members who may appear before the judge?
  3. Must the judge disclose the membership in the investment club when the lawyer appears before the judge?
  4. Must the judge disqualify him/herself when the lawyer who is a member of the investment club appears before the judge?

The ethical conduct of judges is governed by the Michigan Code of Judicial Conduct. MCJC 2 requires judges to protect and promote public confidence in the judicial system by avoiding all impropriety and the appearance of impropriety in all activities. In relation to a judge's financial transactions and activities, MCJC 5C (1) and (3) states:

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

    ". . .

    "(3) A judge should manage investments and other financial interests to minimize the number of cases in which the judge is disqualified. As soon as it can be done without serious financial detriment, the judge should dispose of investments and other financial interests that require frequent disqualification."

MCJC 3C requires that judges raise the issue of disqualification whenever the judge has cause to believe that there may exist grounds for disqualification under MCR 2.003(B) as amended in 1995. MCR 2.003(B) now mandates that a judge is disqualified when the judge cannot impartially hear a case, including two instances relevant to the present inquiry: "(1) The judge is personally biased or prejudiced for or against a party of attorney." "(5) The judge knows that he or she, . . . has any other more than de minimis interest that could be substantially affected by the proceeding."

In situations where a judge has reason to believe that there may be reason for disqualification, recusal or disqualification is not always automatic. MCR 2.003(D) provides for a process where a judge, whose interest in the action before the court may fall within the realm of MCR 2.003(B), may retain jurisdiction over the matter. MCR 2.003(D) provides:

    "(D) Remittal of Disqualification. If it appears that there may be grounds for disqualification, the judge may ask the parties and their lawyers to consider, out of the presence of the judge, whether to waive disqualification. If, following disclosure of any basis for disqualification other than personal bias or prejudice concerning a party, the parties without participation by the judge, all agree that the judge should not be disqualified, and the judge is then willing to participate, the judge may participate in the proceedings. The agreement shall be in writing or placed on the record." Emphasis added.

Thus, as stated in J-6, although MCR 2.003(D) does not allow for remittal in cases of bias for or against a party, it does allow remittal in cases of bias for or against a lawyer or in situations where the judge has any other more than de minimis interest that could substantially affect the proceeding.

As noted in JI-45, whether a judge can impartially hear a case is a subjective matter. Certain relationships between a judge and a party or a judge and a lawyer raise a presumption of bias and or the perception that the judge has more than de minimis interest that could affect the proceeding, whether or not this is actually the case. In these situations the judge has the affirmative duty to avoid even the appearance of impropriety, pursuant to MCJC 2, and to raise the issue of disqualification, pursuant to MCJC 3C. Once the potential conflicting interest has been disclosed, the parties may properly decide whether to exercise their right of remittal and ask the judge to proceed. Absent remittal, the judge should recuse.

This approach has been well documented. In JI-6, the relationship between a landlord/judge and a tenant/lawyer created the appearance of impropriety if the lawyer practiced before the judge. It was concluded that, at a minimum, the judge should disclose the relationship and continue to preside over the matter only after informed remittal of the parties. The Committee recognized that:

    "Actual judicial impartiality may be completely unaffected by the landlord/tenant relationship described, . . . but the relationship casts a shadow of doubt over the judge's acts and decisions affecting the subleases or the clients. Disclosure and consent would remove the shadow. CI-293, CI-300.

In JI-86, it was determined that where a circuit court judge co-owns property with a court magistrate and a deputy sheriff that work in the same county, the judge is not per sedisqualified from reviewing the decisions of the magistrate or presiding over matters in which the deputy sheriff is a witness but that the judge should disclose the co-ownership relationship. Similarly, in J-4, the Committee stated that a judge's financial interest with a lawyer appearing before the judge in an unrelated manner falls short "of a presumption of bias, but requires the judge to disclose the relationship to the parties and their counsel, and to recuse unless asked to proceed."

Michigan courts have also recognized that where there is doubt regarding a judge's impartiality, the balance should weigh in favor of voluntary recusal. Hirych v. State Fair Comm'n, 376 Mich 384 (1965). The Court of Appeals has stated that the test for determining whether a judge should be disqualified is not just whether actual bias exists, but also where there is a likelihood or appearance that the judge would be unable to hold a balance between the interests of the court and the interests of the affected parties and that even where the judge is personally convinced the he or she is impartial, recusal or disqualification is warranted where there are circumstances of a nature to cause doubt about the judge's impartiality. Ireland v. Smith, 214 Mich App 235, 250 (1995). In In re Disqualification of 50th District Court Judge (On Remand); People v. Perkins, 193 Mich App 209 (1992), the Michigan Supreme Court addressed a situation in which a judge had an ownership interest in the building in which a law firm representing a litigant with a matter before the judge was located. The court stated that in a proceeding where a judge has a financial interest relating to a lawyer appearing before him or her, the judge has a duty to recuse, unless the parties ask the judge to proceed. Id. At 214.

In the scenario in which a judge seeks to participate as a member of a local investment club that has no lawyers as members, the judge may ethically do so. There is no indication that this scenario would "involve the judge in frequent transactions with lawyers or persons likely to come before the court on which the judge serves," contrary to MCJC 5C. Further, this scenario does not risk frequent situations in which there may exist the appearance of personal bias, prejudice or that the judge has more than de minimis interest in the proceeding.

Under certain circumstances, a judge may also ethically participate in an investment club that has lawyers as members who may appear before the judge. Since MCJC 5C(1) and (3) require that judges manage their financial interests to limit the number of cases that may involve the potential appearance of bias or other impropriety, a judge confronted with the reality that certain lawyers that are members of the investment club are likely to come before the court on which the judge serves should either decide not to seek membership in the club or terminate the current membership. This is especially true for judges who serve in smaller, less populated and often rural jurisdictions in which s smaller pool of lawyers greatly increases the likelihood that certain lawyers would appear before the judge. As stated in JI-6, if financial interests cause frequent disqualification or recusals, the judge should consider divestment.

If, however, the judge can reasonably conclude that members of the investment club that are lawyers are not likely to appear before the court on which the judge serves, the judge may ethically participate even if it is possible that a lawyer member may appear. J-4. Should the situation arise where a fellow lawyer member of the club appears before the judge, the judge must clearly disclose relevant information regarding the membership either in writing or on the record and recuse unless asked to proceed pursuant to the remittal provisions of MCR 2.003(D).

 
     

 

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