Opinion 18-169
December 11, 2018
Digest: A full-time judge may not be a founder of, or serve as an officer in, a business entity that will broker sales of state-licensed marijuana dispensaries in another state. The judge may, however, be a minority shareholder in the company, provided he/she is a purely passive investor with no other role.
Rules: 22 NYCRR 100.2; 100.2(A); 100.3(B)(1); 100.4(D)(2)-(3); 100.4(D)(3)(b); Opinions 18-163; 06-135; 04-02; 99-73; 99-12.
Opinion:
A full-time judge asks if he/she may, together with two friends, form and serve as an officer and minority shareholder in a limited liability company that will broker sales and purchases of licensed marijuana dispensaries in another state. The company would not be involved in the sale or purchase of marijuana. The majority shareholders would run the business, and the judge would have no involvement in the company’s daily operations.
A judge must always avoid even the appearance of impropriety (see 22 NYCRR 100.2) and must always act to promote public confidence in the judiciary’s integrity and impartiality (see 22 NYCRR 100.2[A]). Thus, judges must “respect and comply with the law” (22 NYCRR 100.2[A]) and “be faithful to the law” (22 NYCRR 100.3[B][1]). A full-time judge also must not serve as an “officer, director, manager, general partner, advisor, employee or other active participant of any business entity,” unless an exception applies (22 NYCRR 100.4[D][3]). For example, a full-time judge may “manage and participate in a business entity engaged solely in investment of the financial resources of the judge or members of the judge’s family” (22 NYCRR 100.4[D][3][b]; see also 22 NYCRR 100.4[D][2] [permitting judges to “hold and manage investments of the judge and members of the judge’s family, including real estate”]).
In Opinion 04-02, a newly elected full-time judge owned a 50% interest in and served as the vice president and treasurer of a closely held corporation which leased a building and operated a car wash. Other shareholders included individuals who were not members of the judge’s family. We said the judge may continue to hold stock in the corporation, but “may not remain as an officer … or serve as a director, manager, general partner, advisor or employee of the corporation, nor … participate in any active management or operation of the corporation or its businesses” (id.). We have also advised that a full-time judge may be a “passive, limited partner” in a partnership that manages and owns a multiple dwelling residence (Opinion 99-12) or “a limited partner or investor” in a real estate development project, where the judge is not an officer and does not take an active role in the management or control of the business of the limited partnership (Opinion 99-73).
Here, the company would not be engaged solely in investment of the financial resources of the judge or members of the judge’s family; to the contrary, it would be engaged in brokering sales of marijuana dispensaries for profit. Accordingly, participating in the formation or creation of the proposed company would make this full-time judge an “active participant” in a business entity, which is forbidden (22 NYCRR 100.4[D][3]). Likewise, serving as “an officer” of a business entity is also prohibited for a full-time judge (id.).
As for merely investing in the company, we are mindful of the “current geographically limited or ‘patchwork’ legalization of marijuana,” where more than half of the individual states “allow some form of marijuana use, [but] it remains unlawful on the federal level” (Opinion 18-163). While judges must “respect and comply with the law” (22 NYCRR 100.2[A]) and “be faithful to the law” (22 NYCRR 100.3[B][1]), the proposed company would not be engaged in buying or selling marijuana, but in brokering sales of state-licensed dispensaries. Accordingly, we conclude the judge may be a minority shareholder in the proposed company, provided he/she is a purely passive investor in the company, with no other role (see e.g. Opinions 06-135; 04-02; 99-73; 99-12).