Is a judge disqualified from a refund suit against the Employees’ Retirement System because of judicial retirement benefits?

Plain-English summary

A city sued Alabama’s Employees’ Retirement System for equitable relief including a large refund. The assigned circuit judge participated in a separate Judicial Retirement Fund administered under the retirement system’s board. The Commission found no disqualification on the stated facts.

The opinion explains that Canon 3C addresses both financial interests in a party and other interests that could be substantially affected by a proceeding. It found the judicial and employee retirement funds completely separate and concluded that the case could not substantially affect the judge’s judicial retirement interest.

Because those facts resolved the issue, the Commission did not decide more remote or conditional financial-interest questions. It observed that the rule of necessity would probably apply if all judges had the same disqualifying interest.

In practice

The decision depends on the stated separation of the retirement funds and the absence of a substantial effect on the judge’s interest. The opinion did not decide hypothetical remote interests.

Common questions

Q: Was administration by the same retirement board enough for recusal?

A: No. The Commission focused on the separate funds and lack of substantial effect.

Q: What was the governing financial-interest test?

A: The opinion looked for an interest in a party or controversy, or another interest the case could substantially affect.

Q: Did the Commission apply the rule of necessity?

A: No. It found no disqualification, then observed that the rule probably would apply if all judges were disqualified.

Background and rules framework

The opinion applies Canons 3C(1)(c), 3C(1)(d)(ii), and 3C(3)(c) to financial interests and their potential substantial effect.

Citations and references

Alabama Canons of Judicial Ethics:

• Canons 3C(1)(c), 3C(1)(d)(ii), 3C(3)(c), and 3C(3)(c)(iii)

Cases:

• Ex parte Darby, 741 So. 2d 404 (Ala. 1999), value of a policyholder’s interest

Other opinions cited:

• Alabama Advisory Opinion 92-438, military retirement benefit
• Alabama Advisory Opinion 91-425, a policyholder interest and necessity

See also

• AL Judicial Ethics Op. 06-871: Judge Leading a Marriage Organization
• AL Judicial Ethics Op. 06-873: Justice’s Photograph in University Commercial

Source

• Landing page: Alabama JIC advisory opinions
• Original PDF: Advisory Opinion 06-872

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

JUDICIAL INQUIRY COMMISSION
DATE ISSUED: NOVEMBER 27, 2006 ADVISORY OPINION 06-872
DISQUALIFICATION WHEN RSA IS A
PARTY
ISSUES
May a circuit judge hear a case seeking
equitable relief, including a substantial
refund, from the Employees' Retirement
System ofAlabama? Answer: Yes.
FACTS
A circuit judge has been assigned to hear a
case in which a municipality has sued the
Employees' Retirement System of Alabama
(RSA) for equitable relief, including a refund
of an alleged overpayment in excess of
$500,000 in employer contributions. The
plaintiff city claims mutual mistake or reli­
ance on negligent misrepresentation by RSA.
Aquestion hasbeen raised whether thejudge
is disqualified to hear this case because he is
a member of the Retirement System, which
includes benefits and the provision of infor­
mation through newsletters and other forms
ofcorrespondence.
The assets of the Employees' Retirement
System are maintained in three funds: the
Annuity Savings Fund, the PensionAccumu­
lation Fund and the Expense Fund. §36-27-24,
Ala. Code (1975). The Board ofControl ofthe
Employees' Retirement System isthetrustees
ofthese funds. §37-27-25, Ala. Code (1975).
The judge is a member of a separate Judicial
Retirement Fund which is made up from
contributions from justices and judges and
from a yearly sum paidfrom the state General
Fund. §12-18-1(b), Ala. Code (1975). The Judi­
cial Retirement Fund provides a pension for
judges who meet statutorily prescribed re­
quirementsfor retirement. §12-18-4,Ala. Code
(1975). All currently serving elected circuit
judges are members ofthis fund. See, §12-18-5,
Ala. Code (1975). The Judicial Retirement
Fund is administered by the Secretary-Trea­
surer of the state Employees' Retirement
System, under the supervision ofthe Boardof
Controlofthe Employees' RetirementSystem.
§§ 12-18-2, Ala. Code (1975).
DISCUSSION
Canon 3C(1)(c) provides, in pertinent part,
that a jUdge should disqualify himself when
he knows that he has a financial interest in
the subject matter in controversy or in a
party to a proceeding, or any other interest
that could be substantially affected by the
outcome oftheproceeding. Canon3C(1)(d)(ii)
further requires disqualification whenever
the judge knows he has an interest that could
be substantially affected by the outcome of
the proceeding. Canons 3C(3)(c) and
3C(3)(c)(iii) explain that "financial interest"
includes ownership of a legal or equitable
interest, but that the proprietary interest ofa
policyholder in a mutual insurance company
or a similar interest is a "fmancial interest"
inthe organization "onlyifthe outcome ofthe
proceeding could substantially affect the
value ofth~_interest."
In Advisory Opinion 92-438, the Commission
addressed an inquiry from a jUdge whose
retirement with the military was soontovest.
The Commission advised the judge that his
recusal was required in anycase dealing with
either military retirement or military retire­
ment pay and/or benefits if the outcome of
the case could affect the judge's own military
retirement, payor benefits.
In Ex parte Darby, 741 So.2d 404 (Ala. 1999),
the Alabama Supreme Court held that a
judge's status as a policy holder of a mutual
insurance company did not entitle the
insured to recusal of the judge in a suit to
recover $70,000 in under insured motorist
benefits. The Court ruled the plaintiff was
not entitled to relief because he failed to
prove the outcome of the case would
substantially affect the value of the judge's
policy.
ADVISORY OPINION 06-872
PAGE 2
In Advisory Opinion 76-4, the Commission
concluded that the ownership of a life insur­
ance policy did not disqualify a judge should
the insurance company be a party to litiga­
tion before the judge unless the outcome of
the proceeding could substantially affect the
value of the judge's interest. The same con­
clusion wasreached in Advisory Opinions 91­
425 and 92-457 (Blue Cross-Blue Shield health
insurance policy and life and property insur­
ance with inter-insurance exchangecompany,
respectively).
Given the nature ofthe funds in question and
their complete separation, the judge's mem­
bership in the Judicial Retirement Fund does
not appear to meet the primary defmition of
a "fmancial interest" in Canon 3C(3)(c).
Moreover, the structure ofthe judicial retire­
ment system and the complete separation of
judicial retirement funds from Employees'
Retirement System funds indicate the out­
come of the case cannot substantially affect
thejudge's interest inthe JudicialRetirement
Fund. Canon 3C(3)(c)(iii).
Given the foregoing facts, the Commission
pretermits discussion of conditional and
remote financial interests. However, it notes
that, were the judge to be disqualified, the
Rule of Necessity would probably apply.
Under the Rule of Necessity, where every
judge has a disqualifying interest, the origi­
naljudge assigned is not disqualified to hear
the case. See Advisory Opinion 91-425.
It is the opinion ofthe Commission that the
inquiring judge is not disqualified to hearthe
subject case.
REFERENCES
Advisory Opinions 76-4, 91425, 92-438, and
92-457.
Alabama Canons of Judicial Ethics, Canons
3C(l)(c), 3C(1)(d)(ii), 3C(3)(c) and 3C(3)(c)(iii).
Exparte Darby, 741 So.2d 404 (Ala. 1999).
This opinion is advisory only and is based on
the specific facts and questions submitted by
thejudge whorequested the opinion pursuant
to Rule 17 of the Rules of Procedure of the
Judicial Inquiry Commission. For further
information, you may contact the Judicial
InquirY Commission, P. O. Box 303400, Mont­
gomery, Alabama 36130-3400; tel.: (334) 242­
4089; fax: (334) 353-4043; E-mail:
j [email protected].