September 10, 2020
Digest: Where a judge’s prior financial connection with a commercial real estate trust completely terminated over a decade ago, the judge may preside over a lawsuit in which a subsidiary of that trust is a party.
Rules: 22 NYCRR 100.2; 100.2(A); 100.3(E)(1); 100.4(D)(1)(a)-(c); Opinions 17-143; 16-24; 15-126; 12-32; 12-13; 10-96; 04-50; 97-44; 95-104; 92-126.
A full-time judge asks if he/she may preside over a lawsuit involving the subsidiary of a commercial real estate trust which once loaned over $50 million to a limited liability partnership in which the judge was a principal. The loan was part of a complex real estate transaction which took place about fifteen years ago, and was repaid less than a year later. The entire transaction was completed before the judge assumed the bench, and he/she has had no subsequent relationship with either the trust or its subsidiary. The judge made a disclosure to the parties, and believes he/she can be fair and impartial in the matter.
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 judge must not engage in financial or business dealings that (a) may reasonably be perceived to exploit his/her judicial position; (b) involve the judge with any business, organization or activity that ordinarily will come before the judge; or (c) involve the judge in frequent or continuing business relationships with persons likely to come before the judge’s court (see 22 NYCRR 100.4[D][a]-[c]). A judge must disqualify him/herself in a proceeding where his/her impartiality “might reasonably be questioned” (22 NYCRR 100.3 [E]). Of course, if the judge doubts his/her ability to be impartial in a particular matter, then disqualification is required.
A judge who is currently receiving money from an attorney in concluding a prior business arrangement between them is disqualified, subject to remittal, from cases in which the attorney appears (see Opinion 97-44). The obligation continues for two years from the date of the final payment (id.). We applied the same two-year “tail” to many significant financial and business relationships between judges and attorneys (see e.g. Opinions 17-143 [attorney co-owns building with the judge]; 15-126 [judge’s former partners and associates]; 12-32 [attorney retained the judge as a forensic science expert]). Thus, the judge is disqualified, subject to remittal, in matters involving the attorney throughout the relationship and for two years after the relationship completely ends (id.).1
We have also addressed a judge’s obligations when the judge’s institutional lender appears as a party before him/her. Ordinarily, a judge need not disqualify him/herself merely because a litigant bank holds a mortgage on the judge’s personal residence or has granted the judge an auto loan (see Opinions 04-50; 92-126). In our view, “the ubiquitous and routine nature” of such loans and the fact that they are “rarely predicated on a special or personal relationship between the borrower and the institutional lender,” warrants neither recusal nor disclosure if the lender appears before a judge as a party (see Opinion 04-50).
We reached a different conclusion with respect to lenders only rarely, for example, when the mortgage-holder is an individual (rather than a financial institution) and the parcel is an investment property (see Opinion 95-104), or “while the judge is negotiating a mortgage loan with a bank that also may be the undisclosed seller of the property the judge is buying” (Opinion 10-96). In both instances, there was, at least temporarily, a relationship between the judge and the lender that could reasonably be perceived as special, personal, or otherwise non-routine. Even in that event, however, we said the obligation to disqualify ends once the mortgage negotiations and property purchases are concluded (id.).
Here, we recognize the loan may reasonably be perceived as special or otherwise non-routine, as it involved many millions of dollars and was part of a complex business transaction. Nonetheless, the loan was fully discharged over a decade ago, i.e. well beyond the ordinary two-year obligation on the conclusion of a significant business or financial relationship, and the inquiry reveals no other connection between the judge and the commercial real estate trust or its subsidiary.
Accordingly, absent any additional connections between the judge and the lender beyond an arms-length relationship, we conclude the judge is not disqualified from presiding over the action as long as he/she can be fair and impartial. We also conclude the judge has no further disclosure obligations.
1 Sometimes the obligation ends with the end of the financial relationship, as when the sole connection between the judge and an attorney was an escrow relationship and the escrow was released without controversy (see Opinion 16-24 [mandating disclosure during the escrow relationship]) or was strictly a landlord/tenant relationship, with no other factors (see Opinions 17-143; 12-13).