Judge Harrison is a state trial judge. He owns a small portfolio of publicly traded stocks, including shares in 'Global Tech Inc.' Global Tech Inc. is a massive conglomerate with diverse holdings. A lawsuit is filed in Judge Harrison's court where a plaintiff is suing 'Local Software Solutions LLC,' a small, independently operated software company that is a subsidiary of Global Tech Inc. Judge Harrison's financial interest in Global Tech Inc. constitutes less than 0.001% of the company's total outstanding shares and represents a negligible portion of his overall investment portfolio. Is Judge Harrison required to disqualify himself from the case?
- AYes, but only if the value of his shares in Global Tech Inc. exceeds a certain statutory threshold, regardless of its percentage of total shares.
- BNo, unless a party can demonstrate that Judge Harrison holds a substantial financial interest in the specific subsidiary, Local Software Solutions LLC.
- CNo, because his financial interest is de minimis and would not reasonably be perceived as influencing his judgment.
- DYes, because any financial interest, no matter how small, in a parent company of a party requires disqualification.
Show answer & explanationAnswer & explanation
Correct answer: D. Yes, because any financial interest, no matter how small, in a parent company of a party requires disqualification.
A judge is required to disqualify himself if he has a financial interest in a party to the proceeding. A 'financial interest' includes ownership of more than a de minimis legal or equitable interest. Most codes define 'de minimis' as an interest that is so insignificant that it could not be reasonably regarded as affecting the judge's impartiality. However, for publicly traded securities, any ownership interest, no matter how small, in a party or a parent company of a party is typically considered a disqualifying financial interest under the Code, even if it is otherwise de minimis in monetary value or percentage of total shares. The 'de minimis' exception usually applies to other types of interests, not direct ownership of a party's stock.
Why the other options are wrong
- A. The rule is often about the existence of the interest, not just a threshold value, especially for publicly traded stock in a party.
- B. The financial interest in the parent company is sufficient, and the focus is not on the specific subsidiary's shares.
- C. The concept of 'de minimis' does not typically apply to direct ownership of stock in a party or its parent company when it comes to disqualification.
Judicial Disqualification (De Minimis Financial Interest)
A judge must disqualify themselves if they have a financial interest in a party to the proceeding. While some codes allow a 'de minimis' exception for certain interests, direct ownership of stock in a party (or its parent) is typically not considered de minimis, regardless of size.
- Financial interest includes ownership of stock in a party.
- The 'de minimis' exception for financial interests is narrow.
- Direct stock ownership in a party usually requires disqualification, however small.
Memory trick: A judge's 'wallet' must be 'empty' of 'party stock' to keep the 'scales' balanced.