September 18, 1994
The Honorable Robert L. Brown
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,
for the Committee
Bruce T. Bullion and Howard Brill concur.
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