FLORIDA SUPREME COURT

Judicial Ethics Advisory Committee

Opinion Number: 2010-25
Date of Issue: July 7, 2010

Note: This opinion recedes from JEAC opinions 89-5, 90-9, 93-25, and 96-13.

ISSUE ONE

May a judge hold stock in an insurance company that underwrites bail bonds which may be subject to forfeiture, or subject to motions to set aside and remit bond forfeitures?

ANSWER: Yes, if the judge does not have more than a de minimis interest that could be substantially affected by the proceeding.

ISSUE TWO

Whether a judge is disqualified from forfeiting bonds or hearing motions to set aside forfeitures or motions to remit forfeitures, if the judge holds stock in an insurance company which underwrites the bail bonds.

ANSWER: No, if the judge does not have more than a de minimis interest that could be substantially affected by the proceedings.

ISSUE THREE

Whether a judge must disclose the stock ownership in any case in which the insurance company underwrites a bail bond.

ANSWER: Yes, but only if the judge believes the parties or their lawyers might consider the information relevant to the question of disqualification.

FACTS

Prior to being appointed to the bench, the inquiring judge purchased non-voting preferred stock in an insurance company that underwrites bail bonds throughout the United States.  The judge anticipates being assigned to a criminal division wherein the judge may be called upon to forfeit bonds, set aside forfeitures, or remit forfeitures on bonds that were underwritten by the insurance company.  The judge has described the judge’s equity interest in the company as “tiny” and has asserted that were the judge to grant a motion to forfeit a bond or vacate or remit a forfeiture, the benefit to the judge would be “infinitesimal” and “extremely attenuated.”

DISCUSSION

Canon 5D governs a judge’s financial activities.  While providing that a judge may hold and manage investments, the judge is subject to Canon 5D(4) which sets forth the manner in which investments should be managed:

(4) A judge shall manage the judge’s investments and other financial interests to minimize the number of cases in which the judge is disqualified.  As soon as the judge can do so, without serious financial detriment, the judge shall divest himself or herself of investments and other financial interests that might require frequent disqualifications.

Therefore, whether or not the judge must divest the insurance company stock is dependent upon whether or not disqualification is required.  If disqualification is required, divestment would likewise be required, since it is apparent that a judge in a criminal division would have frequent opportunities to rule upon forfeiture issues.

Canon 3E governs disqualification.  Canon 3E(1)(d)(iii) provides in part as follows:

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 where: . . .

(c) The judge knows that he or she individually . . . has an economic interest in the subject matter in controversy or in a party to the proceeding or has any other more than de minimis interest that could be substantially affected by the proceeding;
(d) The judge . . .:
(iii) is known by the judge to have a more than de minimis interest that could be substantially affected by the proceeding.

It is clear from the foregoing that the intent of Canon 3E is to require disqualification only if the judge “has an economic interest in the subject matter … or has … more than a de minimis interest that could be substantially affected by the proceeding.”  The inquiring judge has advised the committee that the judge’s interest is “tiny” and that any benefit that the judge would receive as a result of rulings involving the company would be “infinitesimal.”

The Fla. Code Jud. Conduct, Definition Section, defines “economic interest” and “de minimis”:

“Economic interest” denotes ownership of a more than de minimis legal or equitable interest, or a relationship as officer, director, advisor, or other active participant in the affairs of a party, except that:
                         . . .
(iii) a deposit in a financial institution, the proprietary interest of a policy holder in a mutual insurance company, of a depositor in a mutual savings association, or of a member in a credit union, or a similar proprietary interest, is not an economic interest in the organization unless a proceeding pending or impending before the judge could substantially affect the value of the interest;
(iv) ownership of government securities is not an economic interest in the issuer unless a proceeding pending or impending before the judge could substantially affect the value of the securities.

“De minimis” denotes an insignificant interest that could not raise reasonable question as to a judge’s impartiality.

It is apparent from the facts offered by the inquiring judge that the judge’s interest in the company is insignificant and could not raise reasonable questions as to the judge’s impartiality.  Furthermore, any proceeding involving the insurance company would not substantially affect the value of his stock.  Since the judge has no “economic interest” in the subject matter in controversy and the judge has only a “de minimis interest,” disqualification is not required.

Disclosure of the judge’s interest is required only if the judge believes the party or their lawyers may consider the stock ownership relevant to the issue of disqualification, even if the judge believes there is no real basis for disqualification.  Commentary, Canon 3E(1).  This decision must be made on a case by case basis.  It is not this Committee’s belief as to whether or not the information is relevant but the judge’s belief as to whether or not it is relevant that is dispositive.

The foregoing analysis may appear to be inconsistent with many prior opinions of this Committee.  For example, in Fla. JEAC Op. 89-05, this Committee suggested that a judge should not hear cases involving a bank in which the judge had an ownership interest.  However, in this opinion there was no discussion regarding the extent of the judge’s holding nor whether or not the judge’s interest was substantially affected.  However, the judge in that inquiry chose to disclose and the Code at that time required disqualification when there was disclosure.  The Code now provides that disclosure does not require disqualification.

In Fla. JEAC Op. 90-09, this Committee advised the inquiring judge that disclosure of an ownership interest of a “minuscule amount” of stock in various publicly held companies was going the “extra mile” to satisfy Canons 2 and 3.  The Committee approved the judge’s suggestion that he advise litigants that there is a technique to achieve disclosure of ownership and determine whether disqualification was warranted.  The Committee also advised the judge that disqualification was not required when the judge’s adult child owned stock in the bank and the trust department sought fees from the court.  The Committee found that the assets were of “minimal significance” and that any benefit flowing to the bank from its status as trustee over an estate under the control of the judge could not substantially affect the value of the interest held by the judge’s children.

In Fla. JEAC Op. 93-25, this Committee advised that a judge is disqualified from cases involving companies in which the judge owns stock through a pension fund or IRA if the investment is not insignificant.  At that time, the Code required that a judge is disqualified if the judge had a financial interest in a party and defined financial interest as “ownership of a legal or equitable interest, however small....” Former Canon 3C(1).  In Re: The Florida Bar - Code of Judicial Conduct, 281 So. 2d 21 (Fla. 1973).  This language is no longer in the Code.  In 1990, the ABA Code of Conduct abandoned “financial interest, however small,” and substituted “economic interest that is more than de minimis.”  The Florida Supreme Court followed suit in 1994 in adopting the current Code and eliminating the language “financial interest, however small” and substituting therefor “an economic interest in the subject matter in controversy or in a party to the proceeding or has any other more than a de minimis interest that could be substantially affected by the proceeding.”  Canon 5E(1).  In Re: Code of Judicial Conduct, 643 So. 2d 1037 (Fla. 1994).

Finally, in Fla. JEAC Op. 96-13, a divided Committee advised that disclosure was required when a corporation in which the judge owned stock was a party but that the parties could agree to waive disqualification pursuant to Canon 3F.  A minority of the Committee advised that no disclosure or disqualification was required because of the de minimis exception of Canon 3E(1)(c). 

All the foregoing opinions were issued over 14 years ago by the Committee on Standards of Conduct Governing Judges, the predecessor Committee to the Judicial Ethics Advisory Committee.  This Committee cannot find any recent ethics opinions requiring disqualification of a judge who does not have an economic interest in a party or more than a de minimis interest that could be substantially affected by the proceeding.  Furthermore, this Committee could find no Supreme Court decision nor District Court of Appeal decision which would require disqualification under circumstances presented by the inquiring judge.

It is interesting to note that all previous opinions on this issue, except Fla. JEAC Op. 96-13, were based upon the 1973 Code which required disqualification when a judge had a financial interest in a party, however small (emphasis added).  This language is no longer in the Code and all opinions prior to 1994 are thus distinguished.

In Fla. JEAC Op. 96-13, a divided Committee advised a judge that disqualification would be appropriate even if the judge had a de minimis interest in the corporation.  The Committee apparently concluded that the judge had an economic interest in a party and did not consider whether or not that interest was de minimis.  Had the Committee applied the definition of “economic interest” and “de minimis” as set forth in the 1994 Code, the result should have been different.

For the reasons set forth above, this Committee recedes from the above referenced prior opinions and advises that disqualification is required only when a judge has more than a de minimis interest in the affairs of a party or when a judge has more than a de minimis interest that could be substantially affected by the proceedings.  Since disqualification is not required, the judge does not have to divest the stock in the insurance company.

REFERENCES

In Re: Code of Judicial Conduct, 643 So. 2d 1037 (Fla. 1994)
In Re: The Florida Bar - Code of Judicial Conduct, 281 So. 2d 21 (Fla. 1973)

Fla. Code Jud. Conduct, Canons 2, 3, 3E, 3E(1), 3E(1)(c), 3E(1)(d)(iii), 3F, 5D, 5D(4), 5E(1) Definition Section

Fla. JEAC Ops. 96-13, 93-25, 90-09, 89-05

_____________

The Judicial Ethics Advisory Committee is expressly charged with rendering advisory opinions interpreting the application of the Code of Judicial Conduct to specific circumstances confronting or affecting a judge or judicial candidate.

Its opinions are advisory to the inquiring party, to the Judicial Qualifications Commission and the judiciary at large. Conduct that is consistent with an advisory opinion issued by the Committee may be evidence of good faith on the part of the judge, but the Judicial Qualifications Commission is not bound by the interpretive opinions by the Committee. See Petition of the Committee on Standards of Conduct Governing Judges, 698 So. 2d 834 (Fla. 1997). However, in reviewing the recommendations of the Judicial Qualifications Commission for discipline, the Florida Supreme Court will consider conduct in accordance with a Committee opinion as evidence of good faith. See Id.

The opinions of this Committee express no view on whether any proposed conduct of an inquiring judge is consistent with the substantive law which governs any proceeding over which the inquiring judge may preside.  This Committee only has authority to interpret the Code of Judicial Conduct, and therefore its opinions deal only with the issue of whether the proposed conduct violates a provision of that Code.

For further information, contact: Judge Kerry I. Evander, Chair, Judicial Ethics Advisory Committee, Fifth District Court of Appeal, 300 South Beach Street, Daytona Beach, Florida  32114-5002.

Participating Members:
Judge Roberto Arias, Judge Robert T. Benton, Dean Bunch, Esquire, Judge Lisa Davidson, Judge Kerry I. Evander, Judge Jonathan D. Gerber, Judge T. Michael Jones, Judge C. McFerrin Smith III, Judge Richard R. Townsend.


Copies furnished to:
Justice Peggy Quince
Thomas D. Hall, Clerk of Supreme Court
All Committee Members
Executive Director of the J.Q.C.
Office of the State Courts Administrator
Inquiring Judge (Name of inquiring judge deleted from this copy)