May a court lease its managed retail space to a coffee-shop company partly owned by an attorney who regularly appears there?

Plain-English summary

A court managed a parking facility with retail space and considered leasing part of it to a coffee-shop LLC. One member was an attorney who, along with law partners, regularly appeared before the court. Lease proceeds would enter a court facilities fund used for construction-related costs. Source: Opinion 10-05, p. 1

The committee said the coffee-shop business itself was not the issue. The lease would create an ongoing financial relationship between the court and an advocate who regularly appeared there. Rental payments benefiting the court could suggest a special relationship and undermine confidence in rulings involving the attorney. Source: Opinion 10-05, pp. 1–2

The committee applied Rule 21-200(B)'s appearance and judicial-prestige concerns and drew on earlier opinions about continuing business dealings with people who appear before a judge. It said a court-managed facility presented the same concern as a judge's private rental property. It also found the lease barred if an immediate family member held the LLC interest but the attorney's economic benefits and obligations were the same. Source: Opinion 10-05, pp. 2–4

In practice

The opinion's conclusion turns on the attorney's regular appearances, the continuing lease payments to a court fund, and the apparent connection that a court-managed tenancy could convey. Its family-member conclusion assumes the attorney would retain the same financial benefits and obligations. Source: Opinion 10-05, pp. 2–4

Common questions

Q: Was the proposed coffee shop itself the problem?

A: No. The committee treated a retail coffee shop as a public convenience; the concern was the ownership and ongoing lease relationship with an attorney appearing in court. Source: Opinion 10-05, pp. 1–2

Q: Why did the lease affect impartiality?

A: The attorney's rent would benefit the court's facilities fund, creating a possible public impression that the court had a special interest in the attorney's finances. Source: Opinion 10-05, p. 2

Q: Would ownership through an immediate family member change the answer?

A: No, on the committee's assumption that the attorney would have the same economic benefits and obligations. It said that arrangement raised the same concerns. Source: Opinion 10-05, pp. 3–4

Background and rules framework

The committee interpreted Code of Judicial Conduct Rules 21-200(B) and 21-500(D) in light of a court-controlled lease, citing its prior rental and property-sale opinions. It distinguished a completed, arm's-length sale without ongoing financing from a continuing lease relationship. Source: Opinion 10-05, pp. 2–3

Citations and references

New Mexico Code of Judicial Conduct:

• Rules 21-200(B) and 21-500(D). Source: Opinion 10-05, pp. 1–3

Statutes:

• NMSA 1978, § 34-8A-14(B) (2000) and § 34-9-14(B) (2000), cited for the court facilities fund and construction financing. Source: Opinion 10-05, p. 1

Other opinions cited:

• AO 01-04 and AO 05-04, involving rental property and people connected to court work. Source: Opinion 10-05, p. 2
• AO 06-06 and AO 07-06, contrasting a continuing property transaction with an arm's-length sale. Source: Opinion 10-05, pp. 2–3

See also

• NM Judicial Ethics Op. 11-03: Foreclosure Sale Purchase
• NM Judicial Ethics Op. 12-09: Recreational Balloon LLC

Source

• Landing page: New Mexico judicial advisory opinions
• Original PDF: Advisory Opinion 10-05

Original opinion text

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

April 21, 2010

Re: Judicial Advisory Opinion No. 10-05

Dear XXX

You have asked whether the XXXXX Court, as manager of the parking facility adjacent to the courthouse, including retail space within that facility, is ethically barred from leasing space to a limited liability company (LLC) whose members include an attorney who personally, and whose law partners, regularly appear before the judges of your court. The LLC proposes to operate a retail coffee shop from this space. Pursuant to NMSA 1978, § 34-8A-14(B) (2000), rental proceeds from the lease of this space are deposited in the court facilities fund, and used to pay principal, interest and other expenses associated with the bonds issued to fund construction of the XXXXXX Court and the parking garage, NMSA 1978, § 34-9-14(B) (2000).

In the opinion of this committee, such a lease is ethically barred because it presents at least an appearance of impropriety, if not an outright conflict of interest, for the judges of the Court who hear this attorney's cases, Rule 21-200(B) NMRA. Specifically, it would improperly put the court in a continuing business relationship with an advocate who frequently appears before the court.

You write that the court has previously declined to lease the commercial

space to businesses whose presence might create a direct conflict of interest, such as bonding, insurance or law offices. In this situation, the nature of the business to be operated from the space could not itself be perceived to create any conflict, since a retail coffee shop is merely a convenience for the public with no other regular connection to the judicial process. The only issue here is whether the fact that the business is partly owned by an attorney who practices in your court would render a lease arrangement inappropriate.

The problem we see with such an arrangement is that the lease between the court and the LLC that includes this attorney would create an ongoing financial relationship between the court and the attorney, in which the attorney's regular payments on the lease would benefit the court's financial interests. This arrangement could create a public impression that the court has a special interest in that attorney's financial solvency, since it would be using the proceeds of his1 rental fees to defray court facility costs. As a result, agreeing to locate the attorney as a paying tenant within the facility managed by the court, for the benefit of the court's facility fund, would suggest a special relationship between the attorney and the court that could undermine public confidence in the objectivity of the court's rulings involving that attorney. This could lead some litigants to retain this attorney or his firm on the implicit assumption that the attorney has a special relationship with the court; or to undermine confidence in the court's objectivity among litigants appearing against parties represented by that attorney.

This committee has dealt with analogous situations where an individual judge asked whether it would be ethical to rent office space owned by the judge within their community to counselors who received referrals from the court, AO 01-04; to rent warehouse space to a drug task force, AO 05-04; or where a hearing officer asked about the ethics of selling his home to an attorney regularly appearing before that hearing officer, AO 06-06. In each of these opinions, we concluded that the transactions would be improper because of the appearance it would lend that the property-owning judge or hearing officer could be influenced by the presence of a paying tenant who might appear before that official. We particularly noted that the continuing business relationship each transaction would create between the judge or hearing officer and the tenant would violate Rule 21-500(D) NMRA:

(1) A judge shall not engage in financial and business dealings that:
….
we assume the masculine pronoun herein for convenience

(b) involve the judge in frequent transactions or continuing business relationships with those lawyers or other persons likely to come before the court on which the judge serves.

The significance of the continuing relationship between landlord and tenant as a basis for barring the transaction was illustrated when the same hearing officer in AO 06-06 subsequently requested an opinion on whether he could sell the home to the attorney using outside financing instead of a real estate contract between buyer and seller, AO 07-06. In that situation, the committee determined that the transaction would not be a violation of the code, so long as it was an arm's-length transaction without special price terms, and the attorney stopped appearing before the hearing officer until the transaction had been completed.

While the financial transaction you have presented does not involve an individual judge managing his personal property but rather the court doing so under its statutory authority as an agency of government, we believe the result is the same. Leasing the commercial space in the court-managed facility to an attorney who regularly appears in the court would impact the court's financial interests just as the individual leases or real estate contract in the prior opinions would give the appearance of potentially influencing the judge's decisions when the lessees appeared in court. Judges are generally obligated to avoid any appearance that they cannot be impartial toward a particular party, regardless of whether that appearance arises from a financial transaction or from other factors, Rule 21-200(B).

Finally, we note that Rule 21-200(B) also precludes lending the prestige of judicial office for private gain. We believe that placing an attorney in physical premises managed by the court for the benefit of the court's operations tacitly signals to defendants or claimants looking for representation that the attorney leasing the court's own space is deemed trustworthy and responsible by the court. Some who are unsophisticated in judicial processes might even assume the lessee attorney to be formally related to the court in some way. The actual and apparent impartiality of the judicial system is too important to risk in this way.

You have also asked for our opinion as to whether the result would be different if the LLC member were not the attorney personally, but rather a member of his immediate family. We assume that the financial implications of having an immediate family member in place of the attorney are the same as those for the attorney himself - i.e., that the attorney would enjoy the same benefits and incur

the same obligations if the immediate family member were the LLC member. We believe that in such a scenario the transaction would be subject to the same concerns as we have raised above, and would be equally barred.

We therefore conclude that to lease the commercial space managed by the Court XXXXX to an attorney who practices in that court would violate the Code of Judicial Conduct.
Very truly yours,

James J. Wechsler
Chair cc: Hon. Kevin L. Fitzwater
Hon. Freddie J. Romero
Paul L. Biderman, IPL Director
Professor Robert L. Schwartz