Clear lines

Preparing to give a talk to some trial judges on disqualification reminded me of how murky the standards are for economic interests.  The rule in the model code and most states provides that a judge is disqualified if the judge knows that she has an economic interest in a party to the proceeding or in the subject in controversy (or if a spouse, domestic partner, parent, child, or any member of the judge’s family residing in the judge’s household has one).  Then, you look up the definition for “economic interest,” and it is “more than a de minimis legal or equitable interest.”  Then, you look up “de minimis legal or equitable interest,” and it is “an insignificant interest that could not raise a reasonable question regarding the judge’s impartiality.”  In other words, a judge is disqualified if he owns a big enough interest in a party to raise a reasonable question regarding his impartiality.

That does not provide much more guidance than the catch-all “impartiality might reasonably be questioned” standard.  The rule does not explain whether the significance of the interest is determined by the absolute dollar amount or the size relative to the judge’s overall worth, or to the company’s overall worth, or to the community average household worth.  Such ambiguity could result in judges with similar size interests in similar size companies reaching different decisions on when to disqualify.  Cf., Arkansas Advisory Opinion 1994-8 (a judge is not disqualified from a case in which a subsidiary of AT&T is a party when an estate for which the judge is the executor and a beneficiary holds approximately 1,000 shares of an equity income fund about 18% of which is invested in AT&T); Connecticut Advisory Opinion 2011-7 (a judicial official is disqualified from a collection case brought by a bank in which the judge owns approximately $25,000 worth of stock or bonds “despite the fact that the Judicial Official’s investment represented a miniscule percentage of the stock issued”); Virginia Advisory Opinion 2000-5 (1% or less of the outstanding stock in a publicly held corporation is usually de minimis unless the stock is of significance to the judge; “judges should be conscious that the public might view stock ownership as a disqualifying interest”).  See also Huffman v. Judicial Discipline and Disability Commission, 2 S.W.2d 386 (Arkansas 2001) (upholding the admonishment of an judge who entered an ex parte TRO at the request of Wal-Mart while he and his wife owned $700,000 in Wal-Mart stock; a dissenting justice noted the canons regarding disqualification for a financial interest “are confusing”).

The de minimis standard replaced a rule requiring disqualification when a judge owned an economic interest “however small” because the standard was too broad, albeit crystal-clear and easy to apply.  (That is still the standard for federal judges and judges in some states including Delaware and New Jersey.)

There are alternatives to too broad other than too vague, however.  Some states have specified what amounts trigger disqualification rather than making each judge on her own try to calculate what is de minimus.  In California, a disqualifying financial interest is defined as more than 1% or a fair market value exceeding $1,000.  In Colorado, more than a 1% interest or a fair market value exceeding $5,000 is disqualifying.  In Maryland, disqualification is required if the judge owns “(1) an interest as the result of which the owner has received within the past three years, is currently receiving, or in the future is entitled to receive, more than $1,000 per year; (2) more than 3% of a business entity; or (3) a security of any kind that represents, or is convertible into, more than 3% of a business entity.”

Although the “impartiality might reasonably be questioned” standard is necessary and necessarily general to address the myriad of unforeseeable circumstances that might effect a judge’s neutrality, when possible, conflicts that can be anticipated, like economic interests, should be addressed with helpfully specific rules.

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