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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.




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