Opinion 24-151
September 12, 2024
Digest: (1) When the sole owner of a law firm is elected or appointed to full-time judicial office, he/she may enter into a sale of the assets of his/her firm for a fixed amount payable over a six-year period, so long as the law firm is dissolved when the judge assumes the bench. The sale arrangement may allocate risk between the judge and the purchaser in a manner that may allow the purchaser to pay less than the full agreed-upon amount, provided that the sales price places a clear upper limit on the compensation owing to the judge so that he/she does not in fact share in the purchaser’s overall profits.
(2) The inquirer may send a letter or e-mail to the law firm’s clients to inform them of his/her appointment or election as a full-time judge, the sale of his/her law practice to the purchaser, and the concomitant plan to transition clients to the purchaser.
(3) Once the judge has taken and filed his/her oath of office, he/she may not (a) issue a joint news release with the purchaser, (b) link to a previously issued joint news release with the purchaser, or (c) redirect web traffic automatically to the purchaser’s website. However, the judge may continue to maintain an announcement of the transition for a reasonable period of time on his/her former law firm’s website, including as a pop-up banner.
Rules: 22 NYCRR 100.2; 100.2(A), (C); 100.4(D)(3); 100.4(G); 22 NYCRR 1200.1.17; Opinions 18-31; 15-103; 14-85; 06-62; 05-130(B); 00-77; 00-26; 98-92; 97-44; 95-123.
Opinion:
A new full-time judge, who has not yet assumed the bench, asks several questions pertaining to the dissolution of his/her law practice. Although the judge is not subject to the Rules Governing Judicial Conduct “until the oath of office is taken and filed pursuant to Public Officers Law §§ 10 and 30” (Opinion 98-92), he/she wishes to ensure that steps taken now do not create an appearance of impropriety once the judge assumes the bench.
A judge must always avoid even the appearance of impropriety (see 22 NYCRR 100.2) and act in a manner that promotes public confidence in the judiciary’s integrity and impartiality (see 22 NYCRR 100.2[A]). A full-time judge may not practice law (see 22 NYCRR 100.4[G]) and “shall not serve as an officer, director, manager, general partner, advisor, employee or active participant of any business” (22 NYCRR 100.4[D][3]). A judge must not “lend the prestige of judicial office to advance the private interests of the judge or others” nor “convey or permit others to convey the impression that they are in a special position to influence the judge” (22 NYCRR 100.2[C]).
The inquirer’s current law firm is solely owned by him/her. The inquirer would like to sell the practice to another law firm (the “Purchaser”) and cease operations on the closing date, before assuming the bench. The inquirer and the Purchaser have agreed on a “fixed maximum” sales price which reflects the law firm’s prior revenues, to be paid over a period of six years following the closing. The obligation will be structured as a promissory note for a fixed amount with a six-year term. The annual payments under the note “shall be an amount equal to the difference between [the Purchaser]’s revenue from [the judge’s] former practice over the expenses incurred by [the Purchaser] in its operation of the [purchased] practice for the applicable annual period.” At the end of year six, “any remaining outstanding portion of the finite maximum purchase price and accrued interest thereon . . . will be cancelled.” The inquirer also notes that, under the proposed agreement, the Purchaser will have “the right to discontinue or limit the operations” of the practice during the six-year period.
We have advised that a new full-time judge may sell his or her shares of stock in an abstract company to other shareholder-lawyers on an installment payment basis, even if the purchasing lawyers appear in the judge’s court (see Opinion 00-26 [noting the judge’s disqualification obligations]). In addition, we have said a judge may receive fixed severance payments from the judge’s former law firm over a five-year period (see Opinion 95-123).
As described by the inquirer, the arrangement does not envision the continuance of the judge’s former law firm, which will be dissolved, nor will it make the judge an owner, participant or advisor in the Purchaser’s operations.
Thus, while the arrangement here presents certain new twists, we believe it is ethically permissible, provided the judge’s former law firm is completely dissolved when the judge assumes the bench. In our view, it is ethically permissible to structure the sale so that the Purchaser enters into a six-year promissory note with the judge for the balance of the sales price. Moreover, provided that the fixed sales price places a clear upper limit on the compensation owing to the judge, so that the judge will not in fact share in the purchaser’s overall profits, the arrangement is not rendered impermissible merely because the judge and the purchaser have allocated the risk between them in such a manner that the purchaser may potentially pay less than the full agreed-upon amount on conclusion of the six-year period. While we cannot advise on legal matters, we note that the sale of the inquirer’s law practice is also subject to Rule 1.17 of the Rules of Professional Conduct.[1]
We note that the judge will be disqualified in all matters involving the Purchaser or its attorneys during the six-year period of the promissory note, and for two years after the transaction and business relationship are completely concluded (see e.g. Opinions 06-62; 05-130[B]; 97-44). Disqualification on this basis may be subject to remittal under appropriate circumstances (see e.g. Opinions 18-31; 06-62; 00-26; 97-44).
2. Letter to Law Firm Clients
The inquirer next asks if he/she may, before assuming judicial office, “send a letter or email to [his/her] clients advising them of the transition” and the reason for it, and advise them that he/she “will be providing instructions to the clients with options for file transfer to [the Purchaser], to another firm, or to themselves.” During the same period, the inquirer and current colleagues who will be moving to practice with the Purchaser, would meet with clients to discuss the transition.
In our view, the Rules Governing Judicial Conduct do not preclude the inquirer from advising the law firm’s clients of his/her appointment or election as a full-time judge, the sale of his/her practice, and concomitant plan to transition all clients to a new firm unless they choose otherwise (see e.g. Opinion 00-77; 22 NYCRR 1200.1.17[c]). We presume any such correspondence will be sent on law firm letterhead or via the law firm’s email system before the inquirer takes and files his/her oath of office as a judge.
3. Joint News Release
The inquirer asks if he/she may, before assuming judicial office, cause his/her soon-to-be-dissolved firm to issue a joint news release with the Purchaser. The news release would explain that the Purchaser is acquiring the assets of the inquirer’s old firm as of a specific date, provide the names and professional background of the attorneys who will be joining the Purchaser’s practice, and some facts about the Purchaser’s practice. The news release would be posted on both firms’ websites.
To the extent the inquirer proposes to issue a joint news release with the Purchaser before he/she is subject to the Rules Governing Judicial Conduct, we decline to comment on it (cf. Opinion 98-92; 22 NYCRR 1200.1.17[c]).
Once the inquirer has taken and filed the oath of office as a full-time judge, however, he/she must not issue a joint news release with the Purchaser (see generally 22 NYCRR 100.2[C]; 100.4[D][3]; 100.4[G]).
4. Former Law Firm Website
Finally, the inquirer would like to “place a ‘pop-up’ banner” on his/her old firm’s website that would (a) announce the transition, (b) link to the joint news release, and (c) automatically redirect visitors to the Purchaser’s law firm website. As with the two prior items, the inquirer proposes to do this after the closing date of the sale but before dissolving the firm and assuming judicial office. However, the inquirer would also like to maintain the pop-up at the web address of his/her defunct former firm for 120 days after assuming judicial office. Conversely, if the inquirer’s firm’s website “must be unpublished” at the time he/she assumes judicial office, the inquirer proposes in the alternative to use “best practices” to direct search engine traffic for the old firm and its attorneys so that the announcement and transition pages will appear in the search results.
We again decline to comment on conduct that will be entirely completed before the inquirer is subject to the Rules Governing Judicial Conduct (cf. Opinion 98-92).
We have advised that judges may not provide written testimonials or other similar statements for use in promoting a professional enterprise (see e.g. Opinions 15-103 [judge may not write a review of the professional services of his/her divorce lawyer on an online rating service]; 14-85 [judge may not provide a testimonial for the judge’s former campaign manager to use in advertisements]). In such circumstances, we reasoned that publishing the judge’s remarks about the professional services he/she personally received would impermissibly lend the prestige of judicial office to advance the private interests of others (see 22 NYCRR 100.2[C]; Opinions 15-103; 14-85).
Accordingly, once the inquirer has taken and filed the oath of office, the judge may not link to a joint news release with the Purchaser and may not arrange to redirect web traffic automatically to the Purchaser’s website. However, the judge may maintain an announcement of the transition for a reasonable period of time on his/her former law firm’s website, including as a pop-up banner.
[1] For example, it appears that “written notice of the sale” must be “given jointly” by seller and buyer to each of the seller’s clients and “shall include information regarding: (1) the client’s right to retain other counsel or to take possession of the file” as well as other specified matters (22 NYCRR 1200.1.17[c]).