Did a justice’s small indirect interest in AT&T through an estate-held investment fund require recusal from an AT&T-related case?

Plain-English summary

A Supreme Court justice was executor and beneficiary of his father’s estate, which held shares in a fund with an investment in AT&T. An AT&T subsidiary was a party to a tax-related appeal before the court. The Committee assumed the justice did not manage the fund.

It concluded that the fund interest was too small to raise a reasonable question of impartiality or materially affect the fund’s value through the case outcome. Under the Code’s investment-fund exception and de minimis definition, the stated facts did not require disqualification.

Currency note

This opinion predates the Arkansas Code of Judicial Conduct that took effect July 1, 2009, as stated in JEAC Opinion 2009-04. Later rules and opinions may have changed the analysis. Treat this page as historical context and verify the current Code before relying on a specific rule.

Common questions

Q: Did the Committee treat every fund investment in a party as an economic interest?

A: No. It described the Code’s exception for a nonmanaged common investment fund unless the case could substantially affect its value.

Q: Was recusal required on the facts presented?

A: The Committee said no, treating the indirect interest as de minimis.

Background and rules framework

The Committee applied then-current Canon 3 E and the Code Terminology definitions of “De minimis” and “Economic interest” to the stated fund ownership.

Citations and references

• Arkansas Code of Judicial Conduct Canon 3 E and Terminology definitions of “De minimis” and “Economic interest”.

See also

No sibling opinions yet indexed.

Source

• Landing page: https://jddc.arkansas.gov/opinions/opinion-no-94-08/

Original opinion text

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

September 18, 1994

The Honorable Robert L. Brown

Associate Justice

Supreme Court of Arkansas

625 Marshall Street

Little Rock, AR 72201

RE: Advisory Opinion 94-08

Dear Justice Brown,

In your letter dated September 1, 1994 requesting an advisory opinion and subsequent materials supplied, you stated that you were the executor and one of three beneficiaries of your father's estate that holds an interest of approximately 1,000 shares of Equity Income Fund, First Exchange Series, a unit investment trust with investments in the Bell System Companies. We make the obvious assumption that you are not involved in the management of this fund. You advised that about 18% of the fund is invested in AT&T Corporation and that one of its subsidiaries, AT&T Communications of the Southwest, Inc., is currently a party in a matter pending before the Supreme Court that will be resubmitted for decision in the immediate future. You stated that the issue before the Court involves whether a city has appropriately levied a franchise tax or fee.

Canon 3 E provides that "(1) A judge shall disqualify himself or herself in a proceeding in which the judge's impartiality might reasonably be questioned, including but not limited to instances where:

(c) the judge knows that he or she, individually or as a fiduciary... has an economic interest in the subject matter in controversy or in a party to the proceeding or has any other more than de minimis interest that could be substantially affected by the proceeding":

Relevant definitions in the "Terminology" section of the Code are as follows:

"De minimis" denotes an insignificant interest that could not raise reasonable question as to the judge's impartiality. See Sections 3E(1)(c) and 3E(1)(d).

"Economic interest" denotes ownership of a more than de minimis legal or equitable interest or a relationship as officer, director, advisor or other active participant in the affairs of a party, except that:

(i) ownership of an interest in a mutual or common investment fund that holds securities is not an economic interest in such securities unless the judge participates in the management of the fund or a proceeding pending or impending before the judge could substantially affect the value of the interest";

The definition of "economic interest" states quite clearly that ownership of a common investment fund that holds an interest in securities is not an economic interest unless the judge participates in the management of the fund or unless there is a proceeding before the judge that could substantially affect the value of that interest. AT&T Corporation is one of the world's largest corporations. It has outstanding shares of over one billion, three hundred million shares. Your relatively small share of this fund's relatively small investment in AT&T Corporation clearly meets the "de minimis" test. It would take quite a stretch of the imagination to think that your decision concerning the franchise tax or fee in an Arkansas city could affect the value of the stock of AT&T and consequently the value of this fund.

The issue is whether your impartiality might reasonably be questioned because you have an economic interest in the subject matter in controversy or in a party to the proceeding or have any other interest more than de minimis that could be affected by the proceeding. Judges need to consider seriously the issues concerning disqualification but they also have an obligation to be available to handle the caseload before them. In this instance, the facts as outlined should not require your disqualification.

Very truly yours,

Edwin Alderson

for the Committee

Bruce T. Bullion and Howard Brill concur.