CI-890
April 17, 1983
SYLLABUS
A judge may not hear cases involving members of a firm which has merged with the judge's former law partner, because of the potential for claims of judicial impropriety or conflict of interest which may arise when a judge has an interest in a law firm in the form of a percentage of accounts receivable as well as several contingency fees which arose as a result of the judge's prior association with a former law partner.
A judge may not hear cases involving members of a law firm where a judge owns certain real estate in conjunction with several lawyers in the law firm and the real estate is leased to the firm, for the reason that the financial relationship between the lawyers and the judge creates a potential for claims of judicial impropriety and conflict of interest.
References: MCJC 2A and C, 5C; CI-293; ABA i1070; GCR 912(2).
TEXT
Parties of a case are represented by lawyers A, B and C who are members of a law firm which has merged with the presiding judge's former law partner. The judge continues to have an interest in the law firm in the form of a percentage of certain accounts receivable as well as several contingency fees and the judge owns 25% of real estate, the remainder of which is owned by lawyers A, B and C and leased in whole to the law firm.
Both MCJC Canons 2 and 5 set forth certain standards which are helpful in determining when a judge should disqualify from hearing certain cases. Canon 2, which provides that a judge should avoid the appearance of impropriety in all activities, is set forth in pertinent part as follows:
"A. Public confidence in the judiciary is eroded by irresponsible or improper conduct by judges. A judge must avoid all impropriety and appearance of impropriety. He must expect to be the subject of constant public scrutiny. The judge must therefore accept restrictions on conduct that might be viewed as burdensome by the ordinary citizen and should do so freely and willingly.
". . .
"C. A judge should not allow family, social or other relationships to influence judicial conduct or judgment. The judge should not use the prestige of the office to advance the business interests of themself or others. The judge should not appear as a witness in a court proceeding unless subpoenaed."
Canon 5 sets forth specific standards as to the manner in which a judge should regulate extrajudicial activities in order to minimize the risk that such extrajudicial activities shall conflict with judicial duties. MCJC 5C states:
"(1) A judge should refrain from financial and business dealings that tend to reflect adversely on impartiality or the judicial office, interfere with the proper performance of the judicial duties, exploit the judicial position, or involve the judge in frequent transactions with lawyers or persons likely to come before the court which the judge 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. Provided, however, as to a judge holding office and serving as an officer, director, manage or employee of any business not prohibited heretofore by law or judicial canon, the effective date of the prohibition contained herein shall be the date of expiration of the current judicial term of office.
"(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 the judge can do without serious financial detriment, the judge should divest of investments and other financial interests that require frequent disqualification.
"(4) Neither a judge nor a member of the judges family residing in the same household should accept a gift, bequest, favor or loan from anyone except as follows:
"(a) A judge may accept a gift or gifts not to exceed a total value of $100.00, incident to a public testimonial to them; books supplied by publishers on a complimentary basis for official use; or an invitation to the judge and spouse to attend a bar-related function or activity denoted to the improvement of the law, the legal system, or the administration of justice;
"(b) A judge or a member of the judge's family residing in the household may accept ordinary social hospitality, a gift, bequest, favor or loan from a relative; a wedding or engagement gift; a loan from a lending institution in its regular course of business on the same terms generally available to persons who are not judges; or a scholarship or fellowship awarded on the same terms applied to other applicants;
"(c) A judge or a member of the judge's family residing in the household may accept any other gift, bequest, favor or loan only if the donor is not a party or other person whose interests have come or are likely to come before him, and, if its value exceeds $100, the judge reports it in the same manner as compensation is reported in Canon 6C.
"(5) For the purposes of this section "member of the family residing in the household" means any relative of a judge by blood, marriage, or a person treated by a judge as a member of the family, who reside in the household.
"(6) A judge is not required by this Code to disclose income, debts, or investments except as provided in this Canon and Canons 3 and 6.
"(7) Information acquired by a judge in the judicial capacity should not be used or disclosed by the judge in financial dealings or for any other purpose not related to the judicial duties."
Ethics opinions have concluded that a judge may not ethically preside in matters involving lawyers with whom he/she has a financial relationship. In CI-293, the Committee addressed the question of whether a judge was precluded from hearing cases presented by members of the former firm when the judge continued to hold stock in such firm. In instructing the judge in that situation to disqualify themself from presiding in cases presented by members of a former firm, this Committee explained the situation as follows:
"It would be a shame for anyone to be able to question your integrity by remarking that you ruled in favor of a client represented by your former law firm because you wanted your former law firm to be able to pay off its stock obligation to you. While such comment may be extremely unlikely, there is no question that your hearing cases involving members of your former firm so long as there is any financial obligation to you from that firm invites that kind of statement. This should be avoided in order to prevent the appearance of impropriety. Accordingly, we conclude that your acceptance of cases involving members of your former law firm so long as there is any financial obligation to you for the payment of your stock is precluded by the Michigan Code of Judicial Conduct."
Although the judge in this inquiry does not own any stock in the law firm and in fact never practiced with attorneys A, B and C, the judge does have a financial interest in the law firm in the form of a percentage of accounts receivable as well as a percentage (if any) of certain contingent fees. The judge's financial relationship with the law firm may be sufficient to call into question the judge's impartiality in cases presented by members of the law firm.
Moreover, the judge has an additional real estate business relationship with attorneys A, B and C for the reason. In CI-293 a judge and spouse owned 50% of the stock of a corporation with the other 50% of the stock owned by two members of the judge's former firm and spouses. In the facts presented in that inquiry, the corporation owned certain real estate that was, as in the present instance, leased to the judge's former firm. The judge was advised that the judge should disqualify from hearing cases presented by members of the former firm because of the potential claims of impropriety or conflict of interest that could arise, such as the former firm defaulting in its lease payments to the corporation or the stockholders of the corporation disagreeing as to certain business decisions relating to the corporation.
ABA i1070 also whether a judge should disqualify themself from hearing cases presented by lawyers who rented space in a building owned by the judge. ABA i1070 concluded:
"We think that so long as you maintain an interest in your building and rent space to lawyers, you should not preside as a judge in matters presented by these lawyers."
The same potential for impropriety, the appearance of impropriety or conflict of interest exists when the judge owns real estate in conjunction with three lawyers who practice with the judge's former law partner and the real estate is leased to the law firm.
GCR 912(2) strictly prohibits a judge from hearing cases presented by the judge's former law partner for a two year period. GCR 912(2) also sets forth other grounds for judicial disqualification. These grounds include the following:
"A judge is disqualified when the judge cannot impartially hear a case, including a proceeding where the judge
". . .
"(2) is personally biased or prejudiced for or against a party or attorney;
". . .
"(4) was a partner of a party, lawyer for a party, or a member of a law firm representing a party within the preceding 2 years;
". . .
"(6) owns or spouse or minor child owns a stock, bond, security, or other legal or equitable interest of a corporation which is a party . . . ."
As long as the judge continues to maintain any financial relationship with the law firm, the judge should disqualify from any cases presented by the former law partner and lawyers A, B or C.