Me. Code. Jud. Cond. 3.11
Me. Code. Jud. Cond. 3.11
Advisory Notes - 2015
Rule 3.11 is based on Rule 3.11 of the ABA Model Code, but with paragraphs (D) and (E) added. Paragraph (D) covers some matters addressed in 1993 Canon 4(D)(1)-(4). The terms of Rule 3.11 differ significantly from 1993 Canon 4(D). Paragraph (E) addresses payments that a judge may continue to receive after becoming a judge for services rendered and interest in a practice earned before becoming a judge. This clarification is important to assure individuals contemplating judicial service that they will not lose fees or payments already earned upon becoming a judge.
The Comments to Rule 3.11 of the 2011 Model Code are surprisingly brief, cautioning about the potential that financial interests could raise ethical issues with other Rules in the Model Code and advising that judges must divest of financial interests that could lead to frequent recusals. Thus, it may be important, when close questions arise, to look for guidance to other recent reviews of this issue such as 13D Federal Practice and Procedure §3546, Grounds for Disqualification - Financial Interest (3d ed. updated April 2015) (reviewing judicial financial interest issues pursuant to the governing federal laws that may differ from some state practices).
That treatise notes that, under federal law, a judge is disqualified from presiding in a matter if the judge, the judge's spouse, or a minor child residing in the household "'has a financial interest in the subject matter in controversy or in a party to the proceeding.'" Id. (quoting 28 U.S.C. § 455(b)(4) ). However, the treatise then notes four categories of financial interests or activities that are not disqualifying under federal law:
| First, ownership in a mutual or common investment fund that holds securities is not a "financial interest" in those securities unless the judge participates in the management of the fund. Second, an office in an educational, religious, charitable, fraternal, or civic organization is not a "financial interest" in securities held by the organization. Third, the proprietary interest of a policyholder in a mutual insurance company, or a depositor in a mutual savings association, or a similar proprietary interest, constitutes a "financial interest" in the organization only if the outcome of the proceeding could substantially affect the value of the interest. And fourth, ownership of government securities is a "financial interest" in the issuer only if the outcome of the proceeding could substantially affect the value of the securities. |
Id. (footnotes omitted).
The issue of stocks held in a retirement account or IRA, a frequent source of judicial ethics concerns, was thoughtfully addressed by the Fourth Circuit in Central Telephone Co. of Virginia v. Sprint Communications of Virginia, Inc., 715 F.3d 501, 509-16 (4th Cir. 2013). There, as final judgment was being entered in May 2011, the trial judge discovered and reported to the parties that his IRA fund managers had purchased for his IRA eighty shares of stock in one of the parties between October 2009 and March 2010. Id. at 509-10. The judge promptly ordered the stock sold. Id. at 510. The opinion held that recusal was not required, in part because "[d]ecisions to buy and sell stocks in the IRA were made by the fund managers without input from the presiding judge." Id. at 516 (quotation marks omitted). The court also held that the recusal proponent's argument failed because it did not distinguish between direct ownership of securities and ownership of securities in a common investment fund over which the judge exercises no management responsibilities. Id. at 515. In its decision, the court discussed the "safe harbor" provided for federal judges, stating:
| Sprint's argument, however, fails to distinguish between direct ownership of securities and ownership of securities in a common investment fund over which a judge exercises no management responsibilities. The judicial recusal statute specifically carves out the latter situation from the definition of a "financial interest": "Ownership in a mutual or common investment fund that holds securities is not a 'financial interest' in such securities unless the judge participates in the management of the fund." §455(d)(4)(i). Congress created this exception to enable judges to hold securities without risking recusal across a broad range of cases. See New York City Dev. Corp. v. Hart, 796 F.2d 976, 980 (7th Cir. 1986) ("When Congress amended §455 in 1974, it designed § 455(d)(4)(i) as a safe harbor, a way for judges to hold securities without needing to make fine calculations of the effect of a given suit on their wealth."). Moreover, the operation of § 455(d)(4)(i) is "mechanical": "Just as § 455(b)(4) requires disqualification when there is any financial interest, however small, so § 455(d)(4)(i) eliminates any inquiry into the size of the likely effect of a decision on the value of securities held through a mutual fund." Id. (citation omitted). |
Id. at 515-16.
The Fourth Circuit ruling appears consistent with the treatise, 13D Federal Practice and Procedure §3546, which notes that by federal law, 28 U.S.C. § 455(b)(4), a judge is disqualified only if the judge "knows" of the financial interest. The treatise then observes that 28 U.S.C. § 455(c) provides that a judge should inform himself or herself about personal and fiduciary financial interests, and make a reasonable effort to inform himself or herself about the personal financial interests of a spouse and minor children residing in the household. 13D Federal Practice and Procedure §3546. The terms relating to financial interest issues in 28 U.S.C. § 455are similar to terms used in the ABA Model Code and state judicial ethics rules. See 28 U.S.C. § 455; Model Code Jud. Conduct 3.11 (2011); M. Code Jud. Conduct 3.11 (2015). Thus, federal precedent provides useful guidance for addressing state judicial ethics questions.
Opinions addressing financial interest disqualification questions regularly emphasize that the determinations courts must make are highly fact driven, thus it is difficult to identify any overarching legal principles that can guide new decision-making as disqualification issues related to financial interests arise. The following are a sample of some opinions that have addressed the question.
In Exxon Mobil Corp. v. United States, 110 Fed. Cl. 407, 409-415 (2013), after entering a final judgment in favor of four oil companies in related cases, a judge reported that the judge's spouse had inherited a small amount of stock in the parent corporation of two of the oil companies. On appeal, the judgment was vacated and remanded on determination that, under federal law, recusal was mandatory. See Shell Oil Co. v. United States, 672 F.3d 1283, 1291 (Fed. Cir. 2012). In a related case, when the government did not argue that there was a financial conflict of interest, the Court of Claims held that the judge's spouse had no interest in a party and the financial interests in non-parties were too remote to require recusal. Exxon Mobil Corp., 110 Fed. Cl. at 413-15.
In ClearOne Communications, Inc. v. Bowers, 643 F.3d 735, 776-77 (10th Cir. 2011), where a judge's spouse was of counsel to a law firm that had done unrelated work for a party in the litigation but there was no evidence supporting an allegation that the spouse or judge had a financial interest in the outcome of the litigation, there was no conflict of interest requiring the judge to recuse.
In In re Vazquez-Botet, 464 F.3d 54, 56-58 (1st Cir. 2006), the fact that the judge's wife represented an unindicted co-conspirator of the defendant did not constitute a financial interest in the proceeding that would justify issuance of mandamus.
In Sensley v. Albritton, 385 F.3d 591, 600 (5th Cir. 2004), the fact that a judge's wife was an at-will employee of the office of the district attorney who was appearing in litigation before the judge did not constitute a direct financial interest requiring recusal under 28 U.S.C. § 455(b)(4) or a non-financial interest requiring recusal under 28 U.S.C. § 455(b)(5)(iii).
In Chase Manhattan Bank v. Affiliated FM Ins. Co., 343 F.3d 120, 127-29 (2d Cir. 2003), although the value of stock issued by a party that the district judge owned comprised not even one percent of judge's personal fortune, 28 U.S.C. § 455(b)(4) establishes a bright line test that requires disqualification whenever a judge has knowledge of a financial interest, no matter how small. Further, the Second Circuit held that, under some circumstances, recusal may be required by § 455(a) even if the judge lacks actual knowledge of the financial interest. Chase Manhattan Bank, 343 F.3d at 127-29.
In Gordon v. Reliant Energy, Inc., 141 F. Supp. 2d 1041, 1043-45 (S.D. Cal. 2001), a judge was required to recuse in a class action pursuant to § 455(b)(4) because he and his family members had purchased electricity from one of the defendants. Although the plaintiffs amended their complaints to exclude the judge and his family from the class, the judge had a financial interest because he and his family had underlying interests (in the form of legal claims worth up to or in excess of $7,200 that would be identical to the plaintiffs' claims) that were not extinguished by their exclusion from the class. Gordon, 141 F. Supp. 2d at 1043-45.