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The New York Office of Court Administration on Thursday relaxed a rule that had required judges to disqualify themselves whenever they own stock in companies involved in cases before them, “no matter how small” the amount. Instead, the amended rule, issued by Chief Administrative Judge Jonathan Lippman, requires judges to use their discretion and disqualify themselves if their stock interest is “more than de minimis.” Lippman described the change as “a common sense approach designed to comport with the modern realities of stock ownership.” The new rule defines “de minimis” as “an insignificant interest that could not raise reasonable questions as to a judge’s impartiality.” He announced that new voluntary procedures will be put in place in Manhattan Supreme Court, starting in October, which will allow judges to use a computer program to determine whether they have a potential conflict. The amended rule, �100.0(D) of the Rules of the Chief Administrator, uses the test for disqualification adopted in 1991 by the American Bar Association and by more than half the states since then. The federal courts have the stricter standard, requiring disqualification for any amount of stock. The federal rule is tougher than either iteration of the New York rule because it does not permit the parties to consent to a judge’s handling of a case despite stock ownership. Under both versions of New York’s rule, a judge could continue to handle a lawsuit as long as the parties consented. The old rule created problems for judges. The requirement of disclosure of even a single share of stock, coupled with the lack of an effective screening mechanism, led to lapses in required disclosures. In February, the Daily News ran a three-part series based on its findings that one-third of the judges handling civil cases in Manhattan Supreme Court, 16 of 47, had failed to make required disclosures. In the wake of those articles, the state Judicial Conduct Commission has reportedly begun investigations into whether seven or eight judges statewide may not have made the required disclosures. The commission’s administrator, Robert H. Tembeckjian, declined to comment on whether any investigations are pending. He did say, though, that the commission has discretion in deciding whether to bring charges to take into account whether the rules have changed midstream while an investigation is in progress. The issue has also vexed the Appellate Division, 1st Department, which in March overturned a ruling issued by Acting Justice Marylin G. Diamond because she had not disclosed ownership in a company that appeared before her. Five months later, the court reversed itself, without anyone’s asking it to, in the course of deciding a motion to reargue. Relying on an ethics opinion issued in April, the court ruled that Justice Diamond did not have to disclose her ownership, which was in the parent company of a wholly owned subsidiary appearing before her. Diamond owned stock in JP Morgan Chase, but the plaintiff in the case before her was JP Morgan Chase’s subsidiary Chase Manhattan Mortgage Corp. Justice Stanley Sklar, who heads the association of Supreme Court justices in Manhattan, said the judges at 60 Centre Street felt “very strongly that the bar was not interested in whether a judge or judge’s spouse held a few shares of stock in a giant corporation.” Sklar, on behalf of the Manhattan justices, asked OCA to relax the rule and develop screening procedures after the Daily News series appeared. The state and city associations of Supreme Court justices backed the request as did the New York County Lawyers’ Association and the Network of Bar Leaders. Sklar said the justices were “extraordinarily grateful” that OCA has changed the rule so that no longer will ownership of a few shares of stock possibly force judges to recuse themselves or subject them to disciplinary proceedings. Gary Pillersdorf, the head of the network, a group of 41 bar leaders, called the new rule “a very positive change” that properly gives judges discretion to determine whether their stock ownership in a party rises to a level where their impartiality could be questioned. SCREENING PROCEDURES OCA has developed a database that includes all stock owned by Supreme Court justices hearing cases in Manhattan who want to participate in the screening program. Those judges are submitting information on stock owned by immediate family members living with them as well as their own holdings. A computer program, which has been modeled on the one used by the federal court in the Eastern District of New York, will be used to detect possible conflicts. Starting in October, Judge Lippman said, judges in Manhattan can delegate their courtroom clerks to cross-check all the names of parties in cases assigned to them against the database to determine whether they have potential conflicts. Once judges are alerted to a potential conflict, they will have to determine whether the amount of their stock ownership would draw their impartiality into question. If the judge decides there is no problem, there is no requirement that the parties be notified. Neither the computer screening system nor the rule change addresses the question in the 1st Department’s decision involving Diamond — whether the rule applies to corporate parents, affiliates and wholly owned subsidiaries of companies in which judges own stock. The question of whether the April advisory opinion relieves judges of the obligation to determine whether companies appearing before them have a corporate relationship to an entity in which they own stock remains to be determined by the courts. The April opinion was one of more than 3,000 issued by the New York State Advisory Committee on Judicial Ethics, a 22-member body headed by Justice George D. Marlow of the 1st Department.

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