OHBPC 1991-12-06

Can a judge help organize and advise a business joint venture and introduce its potential customers?

Short answer: The opinion concluded that a judge's active involvement in advising, planning, and organizing a proposed joint venture, and introducing potential clients and businesses to each other, would fall within the Canon 5C(2) bar on serving as an officer, director, manager, advisor, or employee of any business, even before capitalization and without compensation; merely advising foreigners, without compensation and before capitalization, on how to make U.S. business contacts may be permissible under Canons 5A and 5B. This opinion interprets Ohio's former Code of Judicial Conduct.

Disclaimer: Advisory only. Not binding precedent.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ethics opinion (PDF)

Ohio BPC Opinion 91-027: A Judge's Involvement in a Proposed Business Joint Venture

Short answer: The opinion concluded that a judge's active involvement in advising, planning, and organizing a proposed business joint venture, and introducing potential clients and businesses to each other, would fall within the Canon 5C(2) bar on serving as an officer, director, manager, advisor, or employee of any business, even before capitalization and without compensation; merely advising foreigners, without compensation and before capitalization, on how to make U.S. business contacts may be permissible under Canons 5A and 5B.

Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the Ohio Board of Professional Conduct's rules of professional conduct and are persuasive authority. This summary is for research purposes only and is not legal advice. Verify current rules before acting on any specific guidance.

About this page: The plain-English summary and Q&A below were written by Ezel based on the official opinion. The opinion text is reproduced at the bottom; the official source (linked) controls.

View original opinion

Plain-English summary

The Board addressed a judge's proposed participation in a joint venture to help foreign enterprises establish business relationships with American companies, with trade representatives in Russia and Ohio. The judge would not serve as an officer, director, manager, or employee, would own no more than five percent of the stock, and would take no compensation, but asked about four specific activities. The Board used Canon 5C(1), (2), and (3) as its framework.

Canon 5C(1) sets general standards barring financial dealings that reflect adversely on impartiality, interfere with judicial duties, exploit judicial position, or involve frequent transactions with persons likely to come before the court. Canon 5C(2) permits investments and other remunerative activity but prohibits serving as an officer, director, manager, advisor, or employee of any business. Canon 5C(3) requires managing investments to minimize disqualification (linked to Canon 3C(1)(c)). The Board explained that passive investment is permitted, so subscribing to the stock would be allowed if it did not adversely reflect on impartiality or require frequent disqualification.

On the four questions: (1) actively advising, planning, and organizing the venture would fall within the Canon 5C(2) bar, even before capitalization, citing Op. 91-10 and Op. 88-7; (2) advising foreigners, before capitalization and without compensation, on how to make contacts and how U.S. business is conducted, might be permissible under Canon 5A (writing, lecturing, teaching, speaking on non-legal subjects) and Canon 5B (civic and charitable activities); and (3) and (4) introducing potential clients to businesses and vice versa suggested active involvement that could violate Canon 5C(2), regardless of timing relative to capitalization and regardless of compensation, especially because the venture's purpose was to broker such business relationships.

Currency note

This opinion issued in 1991 under Ohio's former Code of Judicial Conduct (superseded by the current Ohio Code of Judicial Conduct effective March 1, 2009). The Board's status list also notes it is not current due to subsequent rule amendments to Canons 1 through 6 of the former Code of Judicial Conduct, effective May 1, 1997. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against the current Ohio Code of Judicial Conduct before relying on any specific rule mentioned here.

Common questions

Q: Can a judge help organize and advise a business joint venture?

A: Under this opinion, no; the Board concluded that actively advising, planning, and organizing the venture would fall within the Canon 5C(2) bar on serving as an advisor of any business, even before capitalization.

Q: Can a judge invest in such a venture?

A: The opinion stated that subscribing to stock would be a permitted investment under Canon 5C(1), (2), and (3) so long as it would not adversely reflect on impartiality, interfere with judicial duties, exploit the position, or require frequent disqualification.

Q: Can a judge introduce the foreign businesses to American companies?

A: The opinion concluded that introducing potential clients and businesses to each other suggests active involvement that could violate Canon 5C(2), regardless of whether it occurs before or after capitalization and regardless of compensation.

Q: Is there anything the judge could permissibly do?

A: The opinion indicated that advising foreigners, before capitalization and without compensation, on how to make U.S. business and governmental contacts and how transactions are conducted, might be permissible if it complies with Canons 5A and 5B.

Background and rules framework

The opinion interprets the former Code of Judicial Conduct Canon 5C(1) (general standards for financial dealings), Canon 5C(2) (permitting investments but barring service as officer, director, manager, advisor, or employee of any business), Canon 5C(3) (managing investments to minimize disqualification), Canon 5A (writing, lecturing, teaching, and speaking on non-legal subjects), and Canon 5B (civic and charitable activities), with reference to Canon 3C(1)(c) (disqualification for substantial financial interest).

Citations and references

Rules of Judicial Conduct (Ohio, former):

Canon 5C(1), (2), (3), financial and business activities
Canon 5A, avocational writing, lecturing, teaching, speaking
Canon 5B, civic and charitable activities
Canon 3C(1)(c), disqualification for substantial financial interest

Other authorities cited:

E. Thode, Reporter's Notes to Code of Judicial Conduct (1973)
S. Lubet, Beyond Reproach: Ethical Restrictions on the Extrajudicial Activities of State and Federal Judges (1984)
Ohio Sup.Ct. Op. 91-10 (1991): judge as partner in a for-profit CLE business
Ohio Sup.Ct. Op. 88-7 (1988): judge as partner or co-shareholder in a political-consulting corporation

Source

Landing page: https://ohioadvop.org/advisory-opinion-index/
Original PDF: https://www.ohioadvop.org/wp-content/uploads/2017/04/Op-91-027.pdf

Original opinion text

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

The Supreme Court of Ohio
BOARD OF COMMISSIONERS ON GRIEVANCES AND DISCIPLINE
41 SOUTH HIGH STREET-SUITE 3370, COLUMBUS, OH 43215-6105
(614) 644-5800 FAX: (614) 644-5804

OFFICE OF SECRETARY

OPINION 91-27
Issued December 6, 1991

[Former CJC Opinion-provides advice under the former Ohio Code of Judicial Conduct which is superseded by the Ohio Code of Judicial Conduct, eff. 3/1/2009.]

[Not Current- subsequent rule amendments to Canons 1 through 6, Ohio Code of Judicial Conduct, eff. May 1, 1997]

SYLLABUS: A judge's active involvement in advising, planning, and organizing a proposed joint venture to assist foreigners to establish business relationships with American companies, would fall within the Code of Judicial Conduct Canon 5C(2) prohibition that a judge should not serve as an officer, director, manager, advisor, or employee of any business, even though such activity takes place prior to capitalization of the joint venture. Further, since the purpose of the proposed enterprise is to assist foreigners in establishing business relationships with American companies, a judge's introduction of potential clients to businesses and businesses to potential clients suggests an active involvement in a proposed enterprise which could violate Canon 5C(2), regardless of whether it was done before or after capitalization of the proposed enterprise, and regardless of whether the judge was compensated for such activity. However, with regard to advising foreigners, prior to capitalization and without compensation, on how to make contacts with business and governmental entities in the United States and informing them on how business transactions are conducted or organized in the United States, it is possible that such activity is permissible if in compliance with Canons 5A and 5B.

OPINION: This opinion responds to questions regarding a judge's participation in a proposed joint venture to assist foreign business enterprises establish business relationships with American companies. The proposed joint venture would establish trade representatives in both Volzhskyi, Russia and Cleveland, Ohio. In the proposed joint venture, Americans would raise capital for the venture through stock subscriptions and the Russians would raise capital from sources in their country. Employees of the joint venture would, in both Russia and America, seek customers for the foreign enterprise and would charge a fee for such services. The joint venture would assist in business negotiations and provide other services. The judge would not serve on the board of directors or as an officer, manager, or employee of the proposed joint venture. The judge would subscribe to stock in the company, but his stock ownership would not exceed 5% of the total funds raised. The judge would not receive compensation for his services. The judge specifically asks whether any of the activities set forth below would violate the Code of Judicial Conduct.

May a judge serve as an advisor, planner and organizer of the proposed joint venture prior to its being capitalized but not engage in the raising of any funds or allow his or her name to be used when funds are raised, or thereafter serve as an officer, director, manager, or employee?
May a judge, before capitalization of the joint, venture, advise the foreigners without compensation, on how to make contacts with business and governmental entities in the United States and on how business transactions are conducted or organized in the United States?
May a judge, before capitalization, advise the foreigners and introduce them without compensation to Americans who may be interested in doing business in the foreign city?
May a judge, after capitalization, introduce, the foreigners, without compensation, to American businesses which may be interested in doing business with the foreigners, and introduce Americans, without compensation, to foreigners who are interested in doing business with Americans?

The financial activities of judges are regulated by Canon 5C of the Code of Judicial Conduct. Canon 5C(l), (2) and (3) are set forth below and are used as a framework for analysis of the questions presented.

A judge should refrain from financial and business dealings that tend to reflect adversely on his [her] impartiality, interfere with the proper performance of his [her] judicial duties, exploit his [her] judicial position, or involve him [her] in frequent transactions with lawyers or persons likely to come before the court on which he [she] serves.
Subject to the requirements of subsection (1), a judge may hold and manage investments, including real estate, and engage in other remunerative activity, but should not serve as an officer, director, manager, advisor, or employee of any business.
A judge should manage his [her] investments and other financial interests to minimize the number of cases in which he [she] is disqualified. As soon as he [she] can do so without serious financial detriment, he [she] should divest himself [herself] of investments and other financial interests that might require frequent disqualification.

Canon 5C(1) provides the general standards governing financial activities. "The aim is to prevent the appearance to litigants, lawyers, and the public that patronizing the business in which a judge is actively involved will work to the advantage of the litigant, or that failure to patronize the business will work to his disadvantage. E. Thode, Reporter's Notes to Code of Judicial Conduct 81 (1973). Canon 5C(2) is a more specific provision and is both permissive and restrictive. It permits judges to make investments and engage in other remunerative activity subject to the requirements of 5C(1). But, it prohibits a judge from serving as an officer, director, manager, advisor, or employee of any business.

Canon 5C (3) requires judges to manage investments and other financial interests to minimize cases in which he or she is disqualified and to divest of investments and other financial interests that might require frequent disqualification. Canon 3C(1)(c) is the provision that requires disqualification for substantial financial interest in a subject matter in controversy or in a party to a proceeding, or any other interest that could be substantially affected by the outcome of the proceeding.

As to permitting investments, the rationale is that "[s]hort of keeping one's savings entirely in cash, to be stored in a safe-deposit box or under the mattress, some form of investment is an absolute necessity and cannot be prohibited to judges." S. Lubet, Beyond Reproach: Ethical Restrictions on the Extrajudicial Activities of State and Federal Judges 13 (1984). Also, since investment activities can take place outside of normal business hours they are unlikely to interfere with full-time judging. Id. at 14. Furthermore, the passive and private nature of most investments are out of the public eye and present little likelihood of impairing dignity of the judicial office. Id. However, the passive and private nature of investments can also create potential for conflict of interest or appearances of partiality. Id. For this reason Canon 5C (1) makes investments subject to the restrictions that they do not tend to reflect adversely on impartiality, interfere with the proper performance of judicial duties, exploit judicial position, or involve a judge in frequent transactions with lawyers or persons likely to come before the court on which the judge serves.

As to the Canon 5C(2) restriction on serving as an officer, director, manager, advisor, or employee of any business, "[t]his bar is absolute; it applies to all businesses, without regard to the nature of the enterprise, the form of its organization, or even its possible location well beyond the jurisdiction of the judge's court." Id. at 17. In keeping, this Board has previously advised that participation by a judge in a partnership for profit for purposes of providing continuing legal education courses is proscribed by Canon 5C(2), Canon 5C(1) and possibly Canon 2. Ohio Sup.Ct. Bd. of Comm'rs on Grievances and Discipline, Op. 91-10 (1991). The Board has also advised that it would be improper for a judge to be a partner or co-shareholder in a corporation formed for the purpose of acting as consultants to persons running for elective office, Ohio Sup.Ct, Bd. of Comm'rs on Grievances and Discipline, Op. 88-7 (1988).

In answering the questions requested, the Board begins by acknowledging that subscribing to stock in the proposed enterprise would be an investment permitted by the Canons 5C(1), (C)(2), and (C)(3), so long as it would not adversely reflect on impartiality, interfere with the performance of judicial duties, exploit the judicial position, or require frequent disqualification. However, in answer to Question One, the Board's opinion is that a judge's active involvement in advising, planning, and organizing a proposed joint venture to assist foreigners establish business relationships with American companies, would fall within the Canon 5C(2) prohibition that a judge should not serve as an officer, director, manager, advisor, or employee of any business, even if the activity took place prior to capitalization.

In answer to Question Two, regarding advising foreigners, prior to capitalization and without compensation, on how to make contacts with business and governmental entities in the United States and informing them on how business transactions are conducted or organized in the United States, it is possible that such activity is permissible if in compliance with Canon 5A and 5B. Under Canon 5A "[a] judge may write, lecture, teach and speak on non-legal subjects . . . if such avocational activities do not detract from the dignity of his [her] office or interfere with the performance of his [her] judicial duties." Under Canon 5B and subject to limitations found within Canons 5B(1) through (4), "[a] judge may participate in civic and charitable activities that do not reflect adversely upon his [her] impartiality or interfere with the performance of his [her] judicial duties. A judge, may serve as an officer, director, trustee, or non-legal advisor of an educational, religious, charitable, fraternal, or civic organization not conducted for the economic or political advantage of its members."

In answer to Questions Three through Four, especially since the purpose of the proposed enterprise is to assist foreigners to establish business relationships with American companies, the introduction of potential clients to businesses and businesses to potential clients suggests an active involvement in the proposed enterprise which could violate Canon 5C(2), regardless of whether it was done before or after capitalization of the proposed enterprise, and regardless of whether the judge was compensated for such activity.

Advisory Opinions of the Board of Commissioners on Grievances and Discipline are informal, nonbinding opinions in response to prospective or hypothetical questions regarding the application of the Supreme Court Rules for the Government of the Bar of Ohio, the Supreme Court Rules for the Government of the Judiciary, the Code of Professional Responsibility, the Code of Judicial Conduct, and the Attorney's Oath of Office.