NEW YORK, June 28 (Reuters) - In an attempt to combat the influence of money in the courtroom, New York has adopted a rule prohibiting elected judges from overseeing cases involving their major campaign contributors.

Judges will be automatically disqualified from hearing the cases of parties, lawyers or law firms that contribute at least $2,500 in the preceding two years to their campaigns.

Ethicists cheered New York for establishing hard-and-fast rules rather than pliable guidelines, even as at least one observer referred to it as an "administerial nightmare."

The final rule, first proposed by Chief Judge Jonathan Lippman in February, was released Tuesday and will become effective July 15.

The rule could sharply reduce campaign contributions from lawyers who help elect judges in the state. There are about 1,000 elected judges in New York, or about 70 percent of the judiciary. Judges serving on most state trial courts are elected, while appellate court judges are appointed.

New York is one of 39 states that elect some judges, according to Justice at Stake, a nonprofit organization that advocates for judicial transparency. Most states typically rely on judges to recuse themselves and let litigators appeal if they disagree with the decision.

But the new rule comes with a catch: It leaves the disqualification determination in the hands of court administration, which must maintain records of campaign contributors in an updated, workable, easily-accessible database.

"It's an administerial nightmare across the board," said Marc Gann, past president of Nassau County Bar Association.

Lippman defended the rule, saying that electronic information obtained from the board of elections will be used to determine when a judge should be reassigned.

"I think like anything else there will be a learning curve and a phase in which we are getting up to speed," he said.

The governing body of the court system, headed by Chief Judge Lippman -- himself an appointed judge -- drafted and approved the rule. A committee of court administrators will help implement it.

PREVENTING MISUSE

The rules issued on Tuesday include some modifications from the proposed rule, after the court system received public comments from judges, bar associations and nonprofit groups. One key change is a new provision aimed at preventing parties from gaming the system by giving large chunks of money to judges that they do not want to appear before.

To avoid this, the court's chief administrator is empowered to establish a system where the noncontributing party can waive the disqualification rule -- essentially negating a contributor's attempt to achieve disqualification.

"The whole idea of a waiver is it allows somebody to decide if their rights have in fact been compromised," said Charles Hall, spokesman for Justice at Stake, which advocated for the waiver. The provision "makes the rule sustainable," said Hall.

Money has not yet infected New York judicial election campaigns to the extent it has in other states, according to anecdotal reports from lawyers and ethics groups. In Pennsylvania, Wisconsin and Alabama, by contrast, total candidate contributions topped $4 million in high-court races in 2007 and 2008, according to Justice at Stake.

Limits on campaign contributions vary according to the race and the district; the highest cap for campaign contributions from individuals in judicial races in New York is $50,000, though they rarely approach that number.

'AHEAD OF THE CURVE'

James Sample, an ethics professor at Hofstra Law School, applauded New York for "being ahead of the curve in addressing the concern before it is really a problem."

New York is at the forefront of a movement among states to force greater disclosure of judicial contributions. That movement was born of the 2009 Supreme Court decision in Caperton v. A.T. Massey Coal Company, in which the court ruled that a West Virginia judge should have recused himself from an appeal of a $50 million jury verdict against Massey. The company's chief executive had spent $3 million to get the judge elected.

Eight other states have implemented judicial recusal or disqualification rules since the Massey decision, according to the Brennan Center for Justice at New York University School of Law. Georgia and Tennessee also have rules in the works. Four states -- Montana, Nevada, Texas and Wisconsin -- considered reform but rejected it.

The American Bar Association is considering a model rule to guide individual states and courts to implement recusal and disqualification procedures. The rule is slated to be presented for passage at the ABA's annual meeting in August.

(Reporting by Carlyn Kolker;additional reporting by Noeleen Walder)