Also known as:economic interests · pecuniary interest
Written by attorneys · grounded in primary & secondary sources — see below
An ownership or financial stake in property, a transaction, or the outcome of a proceeding. The stake must be direct, personal, and substantial enough to create a risk of bias, to render a statement contrary to the declarant's interest, or to trigger disqualification or ethical restrictions.
Sources & Authorities
How it applies
Common Examples
6
Statement Against Pecuniary Interest
Enzo Eastwood told his coworker that he had disabled safety alarms at the plant to avoid production shortfalls that would have led to his firing. Enzo later died in an unrelated accident. In a negligence suit by an injured neighbor, the coworker offers the statement to show the company knew of the risks. The statement qualifies as against Enzo's economic interest because a reasonable person would not have admitted conduct likely to cause termination and civil liability unless believing it true.
Judge Lending Prestige for Gain
Judge Edith Eberhardt appeared at a press conference endorsing a real-estate development in which her brother held a large ownership stake. The judge's participation lent the prestige of her office to the project and helped secure financing. The conduct violates the prohibition on using judicial office to advance the economic interests of others.
Put it into practice
Test Yourself
10
Practice Questions5
· 11 primary sources
Select any source to read its text and confirm it supports the definition.
Cases
Federal Rules
Model Codes
Restatements
Casebooks
Hornbooks
Study Supplements
Lawyer Acquiring Adverse Interest
Attorney Emanuel Escobar agreed to accept an equity stake in his client's startup in lieu of fees for handling a patent dispute. The stake gave Escobar a financial interest directly opposed to the client's later decision to sell the company at a price that would dilute the shares. The transaction required written disclosure, independent counsel advice, and client consent because it created a pecuniary interest adverse to the client.
Judge with Parallel Financial Stake
Judge Ella Emerson presided over a class action challenging a bank's lending practices while she herself was a named plaintiff in a nearly identical suit pending in another court. A favorable precedent in the case before her would have increased the settlement value of her own claim. Due process required her recusal because the direct economic interest created an intolerable risk of bias.
Family Ownership Triggers Recusal
Judge Eric Espinoza owned shares in a mining company that was a defendant in a pollution suit. His spouse also held a substantial interest in the same company through a family trust. Because both the judge and a household family member possessed an economic interest in a party, the judge was required to disqualify himself from the proceeding.
Property Owner Affected by Precedent
Judge Elliot Edmonds owned undeveloped land subject to the same subdivision regulations under review in a pending appeal. A ruling that relaxed the regulations would have increased the market value of his parcel. The direct economic interest in the subject matter required recusal to avoid the appearance of deciding a case that would benefit the judge's own holdings.
Common questions
Frequently Asked
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When does a judge's ownership of stock or property create a disqualifying economic interest?+
A judge must recuse when the judge or a household family member holds more than a de minimis legal or equitable interest in the subject matter or in a party. Ownership of even a small number of shares can disqualify if it could be substantially affected by the proceeding.
Supporting sources
Does the statement-against-interest exception require corroboration in a civil case?+
No. The corroborating-circumstances requirement applies only when the statement is offered in a criminal case to expose the declarant to criminal liability. In civil cases the exception turns solely on whether a reasonable person would have made the statement only if believing it true because it was contrary to the declarant's proprietary or pecuniary interest.
Supporting sources
What must a lawyer do before acquiring a pecuniary interest adverse to a client?+
The transaction and its terms must be fair and reasonable, fully disclosed in writing, the client must be advised in writing to seek independent counsel, and the client must give informed consent confirmed in writing.
Supporting sources
Why does a judge's parallel lawsuit create a due-process violation?+
When a judge stands to gain financially from a precedent that will enhance the value of the judge's own pending claim, the appearance and risk of bias become intolerably high. Due process then requires vacating the judgment and remanding to a neutral tribunal.
Supporting sources
ContractsPerformance, breach, and discharge · Impossibility, impracticability, and frustration of purposeUBEIntermediate