To The Readers Of The Metropolitan Corporate Counsel:
The bedrock principle that insures confidence in our judicial system is integrity. For this reason, lawyers and judges must avoid not just actual impropriety, but the appearance of impropriety as well. Nothing can be more corrosive of the public's confidence in the administration of justice than the impression that a judge's determination may have been influenced by self interest.
In his 1996 book entitled "(integrity)," Professor Stephen L. Carter, the William Nelson Cromwell Professor of Law at Yale University, observed that "integrity is like the weather: everybody talks about it but nobody knows what to do about it." With respect to our judicial system, however, the New York County Lawyers' Association has proposed a number of concrete reforms.
Responding to a perceived erosion of public confidence in the judiciary in New York State, in December 2002, Chief Judge Judith S. Kaye formed a Commission to Promote Public Confidence in Judicial Elections (widely known as the Feerick Commission). In the fall of 2003, NYCLA established a Task Force on Judicial Selection to examine and make recommendations on the Commission's reports, and take a broader look at issues related to judicial selection and conduct. Under the superb leadership of its co-chairs, NYCLA Past President Rosalind S. Fink and Board Member Susan B. Lindenauer, the group has issued numerous reports designed to improve Feerick Commission proposals and advance efforts to secure complete integrity in the judicial process. In this column, I discuss one report that was partially adopted by the Office of Court Administration (OCA), reforming rules related to disqualifying economic interest, but leaving some important unfinished business.
Recently, a number of judges have been publicly criticized for alleged conflicts of interest for presiding over cases in which they (directly or through a spouse) held securities in a publicly traded company that was a party to the action. Criticism arose despite the fact that the ownership interest was generally a modest holding that would not be affected by the outcome of the pending litigation. Under New York law, absent a waiver by the parties, mandatory disqualification of the judge was required no matter how insignificant the economic interest, and failure to disqualify can result in an appellate reversal.
NYCLA believes the existing rules and attendant procedures are deficient and, rather than foster confidence in our judiciary, undermine it. Accordingly, in June, NYCLA adopted its Task Force's recommendation to adopt the " de minimis " rule, already provided in the ABA Model Code of Judicial Conduct, as well as a panoply of reforms. These proposals would impose responsibilities upon the presiding judge, the lawyers and litigants, and the court system itself, to insure that all interests are laid on the table, including those of the parent, subsidiary or related companies, which heretofore were exempt from disqualification.
Under NYCLA's plan, mandatory disqualification would not be required unless the "economic interest" denotes ownership of more than a de minimis legal or equitable interest.Disclosure, however, would remain mandatory, and litigants would be required to file a statement at the commencement of the action disclosing any publicly owned parent, subsidiary or affiliate company. Any party would retain the right to object and seek disqualification of the judge. NYCLA also recommended that the court system facilitate this disclosure process by implementing a modern system for identifying potential conflicts through the installation of conflict software and by establishing an Office of Conflict Counsel.
NYCLA was pleased that, in September, the OCA adopted a rule implementing the de minimis standard for disqualification. Unfortunately, OCA failed to adopt the other recommendations, without which the vital goal of complete transparency remains illusory.
First, it is important for judges to notify parties when they have made a de minimis determination, including the amount and nature of any holding deemed de minimis . If such determinations are not announced, the parties may never know they have been made and will be deprived of the opportunity to assess them and seek the judge's recusal.
Second, in determining the existence of a disqualifying economic interest, a judge should consider stock ownership in a parent or affiliate, since the fate of a wholly owned subsidiary or an affiliate of a party to a litigation may have a direct impact on the financial status of its parent.
Third, in these times of complex corporate interrelationships, judges need help in identifying potential conflicts. Disclosure statements must be filed at the commencement of the action by plaintiffs and defendants as soon as they appear.
Fourth, explicit guidelines need to be developed to assist in making the de minimis analysis and ensure uniformity. Relevant factors are: the proportion of a judge's shares relative to total outstanding shares, the dollar amount of the judge's holdings and the potential for the relief sought to affect the value of outstanding shares.
Finally, procedures should be implemented permitting judges to avail themselves of "blind trusts." These investment vehicles would enable judges to invest funds without limiting their caseload. Rules should be adopted that would exclude judges from having a disqualifying economic interest with respect to investments on behalf of them and/or their families.
These reforms are vital to the advancement of fostering greater public confidence. Standing alone, however, the de minimis rule may well erode, rather than enhance, the perception of integrity. NYCLA applauds OCA for its first steps in this area, but urges it to complete the job. Let's insure that when litigants enter a courtroom, all of the cards are on the table.