Opinion 24-97

May 9, 2024

Digest:  A judge may provide a loan to a friend who is seeking money to start a personal fitness business, where the loan will be repaid to the judge with interest and the judge will not be a partner in the business nor have an equity share or active participation in running the business as a director, manager, or advisor. 

Rules:   22 NYCRR 100.2; 100.2(A); 100.4(D)(3); 100.4(D)(3)(b); Opinions 20-187; 18-169; 04-02; 99-73; 99-12.

Opinion:

          A full-time judge asks if it is ethically permissible to lend money, at interest, to a friend who is starting a fitness studio.  The judge will be a client of the business, but will have neither an equity stake nor any position or active role in the business.

          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]).  A full-time judge 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]).

          We have advised that a full-time judge may invest his/her own money as a limited partner in a real estate development project (see Opinion 99-73); as a “passive investor” limited liability partner in a franchisee of a for-profit business (see Opinion 20-187); as a limited partner in a partnership that owns and manages a multiple-dwelling residence (see Opinion 99-12); as a 50% stockholder in a corporation that owns and manages a car-washing enterprise (see Opinion 04-02); and as a “minority shareholder” in a business entity that will broker sales of state-licensed marijuana dispensaries in another state, “provided he/she is a purely passive investor with no other role” (Opinion 18-169).  In each instance, we emphasized that, consistent with the Rules, full-time judges must be entirely passive investors with absolutely no role in the operation or management of the entity; they could not be an officer, director, general partner, advisor, or employee.

          Here, the judge would be providing a loan to the judge’s friend, a fitness instructor, as seed money to begin the friend’s business.  The loan would be repaid to the judge with interest, and the judge would not be a partner in the business, nor would the judge have an equity share nor any participation in operating or managing the business or serving as a director, manager, employee, or advisor.  Accordingly, we conclude that it is ethically permissible for the judge to provide a personal loan to the judge’s friend.