"I wrote to you in my letter..." just an aside, I asked about this in church and no one paid attention, but if that's first Corinthians we're reading, there must have been a "lost" prior letter from Paul to the church at Corinth. I've learned that scholars call it "Corinthians A."

Okay, that was free... now to the question you actually asked, lol:

We are to "judge" within the family of God, by "fruit." We dare not judge those outside the Church by the impossible (for them) standards that we hold ourselves and one another to.

For example, when Paul is listing the qualifications for Elder and Deacon, how are we to determine a man's eligibility for such an office? Yes, we JUDGE, based on observations, conduct, reputation, our own interviews, etc. We are not to keep company with immoral people who might drag us down, nor tolerate immorality within the Church. We expect immorality outside the Church, and if we "avoid" such persons we would never evangelize! And look at who Jesus kept company with!

But among His disciples He did not tolerate immorality. As His people we are called out of such bondage and set apart to be holy. This passage of Scripture applies certainly to all believers, now as then, in all places, now as in Corinth.

-R