1998-09: Disqualification of Judge Because of Business Deal with Lawyer Whose Law Firm Appears Before the Judge

DISCLAIMER:  This Opinion interprets the 1993 Illinois Code of Judicial Conduct, which was superseded on January 1, 2023, by the 2023 Illinois Code of Judicial Conduct.  This Opinion does not consider or address whether the 2023 Code affects the analysis or conclusion of the Opinion.  A table cross-referencing the 1993 Code to the 2023 Code can be found at  IJEC CORRELATION TABLE.

IJEC Opinion No. 1998-09

April 8, 1998

TOPIC

Disqualification of judge because of business deal with lawyer whose law firm appears before the judge.

DIGEST

Judge need not be disqualified where members of law firm of judge’s business partner appear before the judge and where judge’s interest in the business deal and lawyer’s interest in firm’s cases before the judge are not significant enough to cause the judge’s impartiality to reasonably be questioned; judge will be disqualified where judge’s business partner personally appears before judge and judge’s interest in business deal is significant.

REFERENCES

Illinois Supreme Court Rules 63 C and 63D; Illinois Judicial Ethics Committee Opinion Nos. 94-16, 96-18 and 96-25.

FACTS

A newly appointed judge is a partner with a lawyer in a real estate deal. By virtue of this deal, the judge holds a 5% interest and the lawyer a 26-1/2% interest in a HUD 236 apartment building. The building has 300 units. By government regulation the partnership can disburse no more than $100,000 per year to all the partners. There are no partnership meetings and the only contact between the partnership and the judge is a yearly check and an Internal Revenue Service Schedule K.

The lawyer partner in effect manages the building by virtue of his 26-1/2% interest. However, the judge states that the partnership is structured so that it would be difficult for the lawyer manager to take action in the partnership that would Afinancially squeeze him, without that same action being taken toward the rest of the investors.

 The judge has had this investment for approximately 20 years. The lawyer partner has had his for about 17 years. The lawyer started out with a smaller percentage interest and bought additional percentages from other owners. The deal was initially structured as a tax shelter. As a result of taking previous deductions, the judge cannot sell his interest without suffering adverse economic consequences. The partner had offered to purchase the judge’s interest, but, because of the tax consequences to the judge, the offer was insufficient.

The lawyer is the prosecutor in traffic court for nine municipalities. He does not personally prosecute the charges but his partners and associates do. The bulk of the lawyer’s individual practice is in family law, however, the lawyer’s firm does benefit from the prosecuting business.

QUESTIONS

1. May the judge hear traffic cases in which the lawyer’s partners or associates are the prosecutors or the defense attorneys? May the judge hear divorce, small claims, or other cases where the parties are represented by law partners or associates of the judge’s business partner?

2. May the judge hear any case including divorce or small claims where his partner in the real estate deal personally appears before the judge on behalf of a party ?

3. If a conflict exists in any of these situations, would the conflict be removed if the judge transferred his interest in the buildings to his adult children, ages 23 and 25?

OPINIONS

Question 1

Rule 63C, Disqualification, states that Aa judge shall disqualify himself or herself in a proceeding in which the judge’s impartiality might reasonably be questioned. . . A The rule then provides several examples of such situations. These examples include situations where the judge, or a former partner or associate, served as a lawyer in the matter in controversy and situations where the judge was within the preceding three years associated with any firm or lawyer currently representing a party to the controversy. A referral of a case to a law firm by the judge prior to going on the bench where the judge retained a monetary, i.e. business, interest in the matter, will constitute an association of the judge with that firm, and will require disqualification if the referral was within the preceding three years. If the judge has a current referral fee arrangement with a firm where the judge retains financial responsibility for the matter, this will amount to a current relationship with that firm. IJEC Opinion No. 94-16.

In this case the judge has a current business relationship with a lawyer whose firm is appearing before the judge. It is thus a fact question whether the judge’s impartiality might reasonably be questioned. If the municipal prosecutions do not come before the judge often or if the legal fees for those cases, or from the divorce or other cases, will not significantly affect the lawyer’s draw or financial interest in the law firm, then the business deal gives little reason to question the judge’s impartiality in the court cases.

See, for example, IJEC Opinion No. 96-18 (judge need not disqualify himself or herself when the judge’s daughter is an associate of a law firm representing a party as long as the daughter is not acting as a lawyer in the proceedings and she has only a de minimis interest that could be affected by the proceeding) and IJEC Opinion No. 96-25 (judge is not required to be disqualified just because the judge has insurance policies with the defendant insurance companies, but must be disqualified if the judge has filed suit against the insurance companies).

The financial interest of the judge and the lawyer in the business deal appears to be more than de minimis. However, on these facts, it does not appear to be significant enough as to the traffic cases to cause the judge’s impartiality to be reasonably questioned. On the other hand, if the municipalities’ cases, the divorce or other cases handled by the judge’s business partner’s law firm, are significant to the firm, then the potential for favoring or disfavoring the judge’s business partner would be greater, and the potential for questioning the judge’s impartiality would have to be assessed.

Disclosure and Waiver of Disqualification

A judge who would be disqualified under Rule 63C because the judge’s impartiality might reasonably be questioned, may disclose the basis for the disqualification on the record under Rule 63D, and ask the parties and their lawyers to consider, out of the presence of the judge, waiving any disqualification, other than a disqualification for personal bias or prejudice concerning any party or its lawyer. If after such consideration the parties and the lawyers agree that the judge should not be disqualified, and the judge is then willing to participate, the disqualification is remitted and the judge may participate in the proceedings.

Question 2

Whether the judge’s impartiality could reasonably be questioned if his business partner himself appeared before the judge as a lawyer for a party in a traffic case, small claims case, divorce or other case, the issue is the same as in Question 1. Given the financial interest of the judge and the lawyer in the business deal, would that relationship cause the judge's impartiality to reasonably be questioned? Since the judge's business partner is also personally appearing before the judge, the judge’s ability to confer a benefit on his partner is greater and more direct. The benefit could be significant if the stakes are high in the divorce or other case, and even if the stakes were relatively low in a matter, the benefit to the lawyer in winning would be direct and possibly significant. Thus the judge's impartiality could reasonably be questioned and this would be a basis for the judge's withdrawal or disqualification.

The situation would raise similar considerations to those in IJEC Opinion No. 96-18 (judge need not disqualify himself or herself when the judge's daughter is an associate of a law firm representing a party as long as the daughter is not acting as a lawyer in the proceedings and she has only a de minimis interest that could be affected by the proceeding) (emphasis supplied).

As with question 1, under Rule 63D, the judge could disclose the basis for the possible disqualification and ask the parties to consider waiving it.

The judge’s financial interest in this partnership is significant. If it were insignificant, IJEC Opinion No. 96-25 would be applicable (where judge was merely covered by an insurance policy issued by defendant insurance company, disqualification would not be required). Also if the judge’s ability to enhance the lawyer's financial stake in the lawyer's firm were not significant, IJEC Opinion No. 96-18 supra would control.

Question 3

It is not clear whether the judge could remove all reasonable basis for questioning the judge's impartiality by merely transferring his or her interest to the judge’s grown children. The same calculations of interest in the deal and in the outcome of the cases would have to be made. See IJEC Opinion No. 96-18 (judge's daughter being associated with firm appearing before judge did not require disqualification). However, the specific provisions of Rule 63C(1)(d) do not require disqualification. That rule states that a judge shall disqualify himself or herself if the judge, the judge's spouse, parent or child wherever residing or any other member of the judge’s family residing in the judge's household Ahas more than a de minimis interest that could be substantially affected by the proceeding. Since the real estate deal in question is not the subject of any of the court proceedings in which the judge's business partner is involved, the children’s interest would not provide a basis for disqualification under this rule.