You have asked this Committee's advice concerning the propriety of your status as shareholder and treasurer of an investment partnership that trades in publicly listed stock. The partnership consists of twenty-one persons, mostly retired individuals. It meets once a month to decide upon purchases and sales and your service as treasurer takes two or three hours a month and is uncompensated. You ask whether the Committee believes that the partnership is a "business" under Canon 5(C)(1) and (2).
Canon 5(C) provides, in part:
"(1) A judge should refrain from financial and business dealings that tend to reflect adversely on his impartiality, interfere with the proper performance of his judicial position, or involve him in frequent transactions with lawyers or persons likely to come before the court on which he serves.
"(2) Subject to the requirements of subsection (1), a judge may hold and manage investments, including real estate, and engage in other remunerative activity permitted by Canon 4, but should not serve as an officer, director, manager, advisor, or employee of any business."
On the facts that you have presented to us, the Committee does not believe that the activity you describe violates subsection (1). We assume that none of the members of the group are lawyers who practice on a regular basis in your court. The group is small and we assume that it is investing relatively small amounts of money in a relatively defined group of companies that are not usually involved in litigation in your court. Subsection (3) of Canon 5 requires judges to manage their investments so as to minimize the number of cases from which they are disqualified.
Your inquiry about subsection (2) is more troublesome. Normally, one thinks of a business as an organization that deals in some way with the general public for profit. Your group operates only for the benefit of its members. It is small and, we assume, admits new members only infrequently, if at all. In that sense, it is not a business. The Canons of Judicial Ethics appear to look at "business" in a somewhat different way for a specific purpose. The leading text on judicial ethics uses the difference between capital and labor as the test for differentiating business from investment. "Use of one's savings is not typically understood as a means of livelihood; use of one's labor is." Shaman, Lubet, and Alfini, Judicial Conduct and Ethics176 (1990). In the situation you describe, the collegial nature of the investment process suggests a rather more substantial use of your labor than would be the case if you were just deciding on your own personal investments.
But the decisive factor for us in what admittedly is a very close case is that the Canons of Judicial Ethics specifically disapprove of judges advising nonfamily members on investment matters. Aside from the restriction in Canon 5(C)(2), Canon 5(B)(3) forbids a judge from giving investment advice to a charity. In our view, if a judge should not give investment advice to a charity, a judge should not be giving investment advice to twenty private persons in an investment club. Your participation in discussions about purchase and sale of securities is, in our opinion, the giving of investment advice within the meaning of the Canons. Giving investment advice to, and sharing investment advice with, a group of other private individuals on a regular basis seems to us to be sufficiently removed from permitted private investment that it falls within the prohibition of Canon 5(C)(2) because you are serving both as an advisor and as an officer of the group.