FLORIDA SUPREME COURT

Judicial Ethics Advisory Committee

Opinion Number: 2018-11
Date of Issue: June 2, 2018

ISSUES

1. May a judge continue to participate in a 401(k) retirement plan account established with his former law firm?

ANSWER: Yes, a judge may continue to participate in the judge’s former law firm’s 401(k) retirement plan under the facts described in the judge’s inquiry.

2. If permitted to continue to participate in the 401(k) plan, must the judge disqualify himself or herself from any cases involving attorneys from the former law firm for as long as the judge continues to participate in the plan?

ANSWER: Not automatically, but the judge must disclose the judge’s participation in the firm’s 401(k) plan to the attorneys and parties in any case in which members of the judge’s former law firm are involved.

FACTS

The Inquiring Judge asks if the judge is allowed to continue to maintain retirement funds in the 401(k) plan associated with the judge’s former law firm. If allowed, the Inquiring Judge asks if the judge would be disqualified from hearing cases involving any attorney from the former law firm for so long as the judge participates in the 401(k). The judge was a member of a law firm for a number of years. While at the firm, the judge participated in the firm’s 401(k) retirement plan. The judge stated that the firm does not contribute to the plan and does not pay the plan’s management fees. The account is an individual account, the judge alone controls the assets in it, and it is managed by an independent investment firm.

DISCUSSION

The Canons of the Florida Code of Judicial Conduct most directly related to the judge’s questions provide in pertinent part as follows:

Canon 2. “A judge shall avoid . . . the appearance of impropriety in all of the judge’s activities.”

Canon 2A. “A judge shall . . . act at all times in a manner that promotes public confidence in the integrity and impartiality of the judiciary.”

The commentary to Canon 2A states: “The test for the appearance of impropriety is whether the conduct would create in reasonable minds . . . a perception that the judge’s ability to carry out judicial responsibilities with integrity [and] impartiality is impaired.” (emphasis added)

Canon 3E(1). “A judge shall disqualify himself or herself in a proceeding in which the judge’s impartiality might reasonably be questioned, . . . ”

The commentary to Canon 3E(1) states, in part: “A judge should disclose on the record information that the judge believes the parties or their lawyers might consider relevant to the question of disqualification, even if the judge believes there is no real basis for disqualification.”

Canon 5. A judge shall regulate extrajudicial activities to minimize the risk of conflict with judicial duties
D. Financial Activities
(1) A judge shall not engage in financial and business dealings that . . .
(b) Involve the judge in frequent transactions or continuing business relationships with those lawyers . . . likely to come before the court on which the judge serves.” (emphasis added)

The commentary to this section of the Canons provides in part: “This rule is necessary to avoid creating an appearance of . . . favoritism and to minimize the potential of disqualification.”

Canon 5D(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.”

Investment in 401(k) plans associated with law firms is a common form of retirement planning for practicing attorneys. As a new judge dissociates himself or herself from the practice of law, ethical issues of disqualification and disclosure arise if the judge maintains any degree of participation in a retirement account bearing the name of the former law firm.

A judge’s financial activities must be restricted in such a manner that even the appearance of issues that could affect the judge’s impartiality is avoided. Canon 3E (1) requires a judge to disqualify himself or herself in proceedings in which the judge’s impartiality might reasonably be questioned.

More specifically, Canon 5D (1)(b) instructs judges not to engage in financial and business dealings that involve the judge in frequent transactions or continuing business relationships with those lawyers or other persons likely to come before the court on which the judge serves. By the nature of the inquiry, it appears the inquiring judge is concerned members of the judge’s former law firm will likely appear before the court on which the judge serves. Canon 5D (4) instructs judges to manage their investments and other financial interests to minimize the number of cases in which the judge is disqualified. It further requires that, as soon as the judge can do so without serious financial detriment, judges shall divest themselves of investments and other financial interest that might require frequent disqualifications.

The first question thus becomes whether the arrangement described by the inquiring judge would indicate an ongoing relationship with the judge’s former law firm which could cause members of the bar or parties to matters before the court to reasonably question the judge’s impartiality and require the judge to remove the funds from the firm’s 401(k) plan and invest them elsewhere or else to disqualify himself or herself from cases involving members of the former law firm when no other reason for disqualification exists. If divestment or disqualification is not required, the second question which must be answered is whether the existence of the account should be disclosed.

Several prior opinions of this committee have allowed judges to continue to hold interests in real estate leased to a judge’s former law firm. See, e.g., Fla. JEAC Ops. 97-33 and 14-27. In each of those opinions, the property was owned by an entity separate and apart from the law firm, not by the law firm itself. The committee found that the judge was disqualified from hearing any cases involving other members of the entity owning the property, but not from hearing cases involving members of the former law firm. In Florida Judicial Ethics Advisory Committee Opinion 07-02, we opined that a judge could remain a beneficiary of a land trust along with some of the judge’s former law partners, but required the judge to dispose of the asset as soon as the judge could do so without suffering serious financial detriment. None of the opinions of this Committee have addressed the specific question asked by the inquiring judge.

At issue is the admonition in Canon 2 that a judge shall act at all times in a manner that would avoid the appearance of impropriety and that would promote public confidence in the integrity and impartiality of the judiciary. The standard to be applied is whether reasonable minds could believe that the judge’s association with the former law firm’s retirement plan would interfere with the judge’s ability to carry out his or her duties with integrity and impartiality. The Committee is of the opinion that, under the circumstances described by the judge, where the plan is managed by an independent investment firm, the law firm does not contribute to the 401(k) plan, the firm pays none of the management fees, the judge has an individual account, and the judge alone controls the assets in the account, the judge may continue to participate in the former law firm’s 401(k) plan. The judge is not required to sua sponte disqualify himself or herself from consideration of cases involving members of the judge’s former law firm solely because of the judge’s continued participation in the 401(k) plan, but should disclose the existence of the account to parties and counsel in any case in which members of the judge’s former law firm participate.

Several other jurisdictions appear to have addressed the issue with differing results based on the facts of each case. Pennsylvania Informal Advisory Opinion 10/29/2010 suggests that a judge should remove all funds from the firm’s retirement account if attorneys from the former law firm regularly appear before the judge, but finds it proper for the funds to remain in the account if the judge pays all management fees and the firm makes no further contributions.

Delaware Judicial Ethics Advisory Committee Opinion 2004-2 mentioned with approval a judge’s suggestion that the judge’s Keogh and 401(k) accounts be rolled over into a separate IRA account in the judge’s name and administered by a nationally-known brokerage firm.

Likewise, Alabama Judicial Inquiry Commission Opinion 91-417 found that a judge could properly maintain a Keogh account set up by the judge’s former law firm if a separate sub-account was set up over which the judge would have investment authority and for which the judge would pay the management fee.

In Minnesota Summary of Advisory Opinions, at 20 (2001), the importance of a judge divesting himself or herself from all financial interests or other economic ties to a former law firm is emphasized, to minimize burdens on the system created by frequent disqualifications. In that instance, the judge was permitted to maintain a retirement account with the judge’s former law firm for a short period of time, but was required to ultimately withdraw from the plan.

The Connecticut Committee on Judicial Ethics, in Opinion 2015-13, determined that a judge who submitted an inquiry with a factual scenario very similar to that of our inquiring judge could continue to maintain his retirement account with his former law firm for a period of time, but stated that since the judge had indicated the plan could be transferred without substantial loss, the judge could maintain the account only for a period of up to one year, and would be disqualified in all cases involving the firm. The opinion went on to state that the account could be maintained and not need to be transferred if a separate self-directed sub-account could be created. A similar result was reached in Commonwealth of Virginia Judicial Ethics Advisory Committee Opinion 01-3, in which a separate sub-account was created by the judge.

Where the former law firm was the plan administrator, Nebraska Judicial Ethics Advisory Opinion 92-5 found the arrangements would require disqualification. The committee stated:

Canon 2A requires that judges behave in a way that promotes public confidence in the impartiality of the judiciary. There is no escape from the fact that the judge is still a participant in his former law firm’s retirement plan. It would be very difficult to explain to the public that the judge’s continuing link to his law firm is far more formal than real. (emphasis added)

Throughout the Code of Judicial Conduct, references are made to the need for judges to conduct their affairs in a manner that will avoid conflicts of interest and to avoid actions or associations which might lead to questions about the judge’s impartiality. The facts presented by the inquiring judge suggest a degree of separation between the judge and the judge’s former law firm which would not create an actual conflict of interest. While no actual conflict appears to exist, the judge should consider the perceptions of the public, even if not entirely reasonable, and the ongoing need for disclosure and consideration of possible disqualification requests which could arise should the judge continue to maintain his or her retirement funds in a law firm’s 401(k) plan. The committee suggests that the judge consider withdrawing the funds from the firm’s retirement account and investing them in a separately owned account, if the transfer can be accomplished without serious financial detriment.

In answer to the judge’s question about disclosure and disqualification, the committee is of the opinion that the current arrangement described by the judge in the request for advisory opinion does not require the judge to disqualify himself or herself from all cases involving lawyers from the former firm. If, however, the judge does not divest himself or herself of the judge’s interest in the former law firm’s retirement account, the judge should disclose his participation in the account as suggested by the Commentary on Canon 3E(1). One member of the Committee agrees that our conclusion concerning disclosure is reasonable, but does not believe disclosure is required.

 

REFERENCES

Canon 2
Canon 2A
Canon 3E (1)
Canon 3E (2)
Canon 5D (1)(b)
Canon 5D (4)

Fla. JEAC Ops. 97-33, 05-06, 07-02, and 14-27.

Alabama Judicial Inquiry Commission Op. 91-417

Connecticut Committee on Judicial Ethics Op. 2015-13

Delaware JEAC Op. 2004-2

Minnesota Summary of Advisory Opinions, at 20 (2001)

Pennsylvania Informal Advisory Opinion 10/29/2010

Commonwealth of Virginia Judicial Ethics Advisory Committee Op. 01-3

_____________


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

For further information, contact Judge Miguel de la O, Chair, Judicial Ethics Advisory Committee, Eleventh Circuit, Miami-Dade County Courthouse, 73 W. Flagler Street, Room 1407, Miami, FL 33130.

Participating Members:
Judge Michael F. Andrews, Judge Roberto Arias, Judge Nina Ashenafi-Richardson, Judge W. Joel Boles, Judge Miguel de la O, Judge James A. Edwards, Judge David Green, Mark Herron, Esquire, Judge Barbara Lagoa, Judge Spencer D. Levine, Judge Michael Raiden and Charles Reynolds, Esquire.


All Judicial Ethics Advisory Committee opinions, subject matter indices, and a search engine are available on the Sixth Circuit’s website at www.jud6.org under Opinions. Committee opinions and related finding tools are also accessible on the Florida Supreme Court’s website at www.floridasupremecourt.org as a secondary posting under Court Opinions.


Copies furnished to:
Inquiring judge (Name of the Inquiring Judge deleted)
Justice Charles T. Canady, Justice Liaison
John A Tomasino, Clerk of Supreme Court
All Committee Members
Executive Director of the Judicial Qualifications Committee
Office of the State Courts Administrator