(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
IN THE MATTER OF BERNARD S. BERKOWITZ, AN ATTORNEY AT LAW (D-86/87-93)
IN THE MATTER OF JAMES P. DUGAN, AN ATTORNEY AT LAW
Argued February 1, 1994 -- Decided June 17, 1994
PER CURIAM
This attorney disciplinary matter arose from a formal complaint charging Bernard S. Berkowitz and
James P. Dugan, partners in the law firm of Hannoch Weisman, with representing two parties with actual or
potentially adverse interests. The formal complaint, alleging violations of Rules of Professional Conduct
(RPCs) 1.7(a) and 1.8(a), was filed by Louis Ripps, a principal of Palmer Asphalt (Palmer), a New Jersey
corporation that manufactures roofing materials. The complaint alleges that Berkowitz represented Palmer
at the same time Berkowitz's partner, Dugan, represented Bay Bridge Associates (Bay Bridge), a residential
development with interests adverse to Palmer's. The complaint also alleged that Dugan had a personal
business interest in Bay Bridge.
On December 12, 1988, Palmer held its annual meeting at Hannoch Weisman's offices. Berkowitz
had represented Palmer as its corporate counsel for twenty-five years. At the meeting, Ripps showed
Berkowitz a newspaper article announcing that Bay Bridge proposed building a high-rise complex, a marina,
a shopping area, and restaurant on a twenty-acre site that surrounded Palmer's warehouse facility on three
sides. The article stated that Bay Bridge would try to rezone the property from heavy industrial to
residential and mixed use to accommodate the development. The article also disclosed that Bay Bridge was
to be represented by Dugan. Ripps testified that he discussed with Berkowitz his concerns that such a
development would threaten Palmer's business and that he asked Berkowitz to handle the matter on
Palmer's behalf and that Berkowitz agreed.
The following day Berkowitz discussed the potential conflict of interest with the chairperson of the
firm's executive committee. Both agreed that so long as the firm did not represent Palmer in opposition to
one of their clients, the firm could continue to represent Palmer.
On February 13, 1989, Ripps met with Berkowitz and Dugan. Ripps claims that he asked Dugan if
there was any public process in place and that Dugan's reply was vague, claiming that something was in the
works later on in the month. Berkowitz also told Ripps that he suspected that Dugan might have an interest
in the project. Ripps, suspicious of Dugan's vague answer to his question, went to the planning-board office
and discovered that a meeting of the board would be taking place the following day. Ripps telephoned
Berkowitz and "expressed tremendous alarm." Ripps was forced to contact another attorney to represent
Palmer at that planning board hearing on February 14, 1989. At the hearing, Ripps told Dugan that he
objected to Dugan's representation of Bay Bridge on the application that evening. Dugan had another
attorney address the planning board as Bay Bridge's attorney and Dugan was introduced as a witness. At
that time, it was disclosed that Dugan was a principal in Bay Bridge. Dugan spoke at great length at the
hearing. The planning board would not allow Palmer's attorney to be heard because two prior hearings had
already taken place. Ripps's attorney was instructed to submit his objections to the City Council. At the
conclusion of the meeting, the planning board passed a motion that an ordinance for a planned unit
development (PUD) be accepted and forwarded to the City Council for its adoption. Palmer's warehouse
would have been included in that new PUD district. The City Council adopted the PUD ordinance but
amended it to eliminate all properties, including Palmer's, not owned by Bay Bridge. Eventually, the
ordinance was declared invalid as a result of litigation instituted by Palmer and others.
The District Ethics Committee (DEC) found that RPC 1.8(a), which provides generally that a lawyer
shall not enter into a business transaction with a client or knowingly acquire an interest adverse to a client,
was inapplicable. The DEC also found no violation of RPC 1.7(a), which provides that a lawyer shall not,
without consent, represent a client if the representation of that client will be directly adverse to another
client. Finding no RPC violations, the DEC recommended that the complaint be dismissed.
On appeal, the Disciplinary Review Board (DRB) recommended that the DEC's findings be
reversed. The DRB found that the evidence clearly and convincingly established that Dugan and Berkowitz
acted unethically. The DRB determined that Dugan's and Berkowitz's conduct, through the application of
RPC 1.0 (which provides that a lawyer shall not represent a client if any attorney in the same firm, practicing
alone, would be prohibited from doing so) violated RPC 1.7. The DRB did agree that RPC 1.8(a) was
inapplicable. In determining the appropriate measure of discipline, the DRB balanced the attorneys'
unethical conduct with what it perceived to be a lack of evil motives and the absence of harm to the client. A
five-member majority recommended that both Dugan and Berkowitz receive a public reprimand. One
member recommended a private reprimand.
HELD: Bernard S. Berkowitz and James P. Dugan, partners in the same law firm, are both publicly
reprimanded for failing to recognize and to resolve the possible conflict of interest between their
respective clients.
1. The evidence clearly and convincingly demonstrates unethical conduct. As early as December
1988 both Berkowitz and Dugan were aware of facts that put them on notice that the interests of their clients
would be jeopardized if they did not act promptly to resolve the apparent conflict between Bay Bridge and
Palmer. Any legal advice regarding the decision of whether to oppose the proposed zoning would have
created a division of loyalties between the attorneys and their clients. Moreover, regardless of whether
Berkowitz explicitly said that he would represent Palmer in the matter, the facts were sufficient to establish
an attorney-client relationship. Both attorneys misled Ripps by ignoring or minimizing the conflict based on
the mistaken belief that no conflict would exist unless Palmer decided actually to oppose the proposed zoning
ordinance. Thus, both Berkowitz and Dugan violated their ethical duty to their clients. (pp. 11-16)
2. The evidence clearly and convincingly supports a finding that Dugan knowingly failed to disclose
to Berkowitz and Ripps his personal interest in Bay Bridge. That nondisclosure cannot be attributed to
Dugan's oversight or inadvertence; it was a conscious decision. Without disclosure, Ripps could not have
made an informed consent to continued representation even if the conflict had been revealed. Dugan's
interest in Bay Bridge exacerbated the degree of the conflict and underscores the gravity of the overall
misconduct. (pp. 16-17)
3. The Court disagrees with the DRB's conclusion that an absence of harm to Palmer should serve
as a mitigating factor. Ripps was forced to hire an attorney at the last minute to represent Palmer at the
planning board meeting and, thus, Bay Bridge held an advantage because of Dugan's actions. Further,
Palmer had to litigate the zoning matter, which caused actual harm to its interests. (pp. 17-18)
4. Generally, in cases involving a conflict of interest, absent egregious circumstances or serious
economic injury to the clients involved, a public reprimand is the appropriate measure of discipline. Because
there is no evidence of substantial injury or economic loss to Palmer, a public reprimand is sufficient
discipline. (pp. 18-20)
So Ordered.
CHIEF JUSTICE WILENTZ and JUSTICES CLIFFORD, HANDLER, POLLOCK, O'HERN,
GARIBALDI and STEIN join in this opinion.
SUPREME COURT OF NEW JERSEY
D-86/
87 September Term 1993
IN THE MATTER OF
BERNARD S. BERKOWITZ,
An Attorney at Law.
IN THE MATTER OF
JAMES P. DUGAN,
An Attorney at Law.
Argued February 1, 1994 -- Decided June 17, 1994
On an Order to show cause why respondents
should not be disbarred or otherwise
disciplined.
Michael J. Sweeney, Deputy Ethics Counsel,
argued the cause on behalf of Office of
Attorney Ethics.
Todd M. Sahner argued the cause for
respondent Bernard S. Berkowitz (Hannoch
Weisman, attorneys).
Dominic J. Aprile argued the cause for
respondent James P. Dugan (Bathgate, Wegener,
Dugan & Wolf, attorneys).
PER CURIAM.
This attorney disciplinary matter arose from a formal complaint charging two attorneys, partners in a large law firm, with representing two parties with actual or potentially adverse
interests. One of the parties was a manufacturing concern whose
operations were threatened by a proposed land development sought
by the other party.
The case presents the issue whether two attorneys, aware of
the different concerns of their respective clients, violated our
rules of ethics in failing to recognize and to resolve the
possible conflict of interest between the clients. That issue
must be addressed in light of the fact that the lawyers were
partners in the same law firm and the additional circumstance
that one of the attorneys had a personal proprietary interest in
a business venture of his client -- the client whose interests
were adverse to another client of the firm.
The respondents are Bernard S. Berkowitz and James P. Dugan, partners in the law firm known as Hannoch Weisman. A formal complaint was filed by Lewis Ripps. The complaint alleged that Berkowitz represented Palmer Asphalt ("Palmer"), a New Jersey corporation that manufactures roofing materials, in which Ripps was a principal. Berkowitz represented Palmer at the same time Berkowitz's partner Dugan represented Bay Bridge Associates ("Bay Bridge"). The complaint charged that Bay Bridge had been the proponent of a zoning ordinance to authorize the residential development of property that was contiguous to the land on which Palmer's warehouse was situated, and that during that time Dugan had had a business interest in Bay Bridge. The complaint claimed
that respondents had been in violation of the Rules of
Professional Conduct ("RPC"), specifically, RPC 1.7(a) and RPC
1.8(a).
The District Ethics Committee ("DEC") found that RPC 1.8(a),
which provides generally that a lawyer shall not enter into a
business transaction with a client or knowingly acquire an
interest adverse to a client, was inapplicable. The DEC also
found no violation of RPC 1.7(a), which provides that a lawyer
shall not, without consent, represent a client if the
representation of that client will be directly adverse to another
client. The DEC determined that: (1) Ripps had not retained
Berkowitz to challenge a zoning ordinance proposed by Bay Bridge;
(2) neither Berkowitz nor Dugan had known of Ripps' intention to
oppose the rezoning until February 13, 1989, the date of the
meeting among Berkowitz, Dugan, and Ripps; (3) neither had known,
until February 13, 1989, that the representation of Palmer and
Bay Bridge would be directly adverse; and (4) the representation
of a client who was engaged in the rezoning of areas surrounding
the property owned by another client did not necessarily involve
"directly adverse" representation. The DEC recommended that the
complaint be dismissed.
Following an appeal by Ripps, on a de novo review of the
record, the Disciplinary Review Board ("DRB") recommended that
the DEC's finding be reversed. In the DRB's view, the evidence
clearly and convincingly established that respondents' conduct
was unethical. The DRB determined that respondents' conduct,
through the application of RPC 1.10 (which provides that a lawyer
shall not represent a client if any attorney in the same firm,
practicing alone, would be prohibited from doing so) violated RPC
1.7. The DRB apparently agreed, however, with the DEC's
conclusion that RPC 1.8(a) was inapplicable. After balancing the
impropriety of respondents' conduct with what it saw as the lack
of evil motives on respondents' part and the absence of harm to
the client, a five-member majority of the DRB recommended that
each respondent receive a public reprimand. One member
recommended a private reprimand.
The facts are critical to the issue of whether respondents improperly represented clients with actual or potential conflicts of interest sufficient to constitute unethical conduct. Although many of the facts are not disputed, the parties proffered decidedly different versions of the events that gave rise to the charge of unethical conduct.
In 1988, when the relevant events began to unfold Berkowitz had been Palmer's corporate counsel for twenty-five years. He had also represented its principals, Ripps and Alton Adler, in other legal matters of a personal nature. On December 12, 1988, Palmer held its annual meeting at Hannoch Weisman's offices. Present were Berkowitz, Ripps, Adler, and Martin Goldstein, Palmer's accountant. Palmer's agenda contained sixteen items. The eleventh item on the agenda was a newspaper article
announcing that Bay Bridge proposed building a high-rise complex,
marina, shopping area, and restaurant on a twenty-acre site. The
proposed development surrounded the Palmer warehouse facility on
three sides. The article also stated that Bay Bridge would be
seeking to rezone the property from heavy industrial to
residential and mixed use to accommodate the marina, restaurant,
and possibly a theater. The article disclosed that Bay Bridge
would be represented by Dugan.
According to Ripps, at Palmer's annual meeting of December
12, 1988, he showed the article to Berkowitz. He described that
conversation as follows:
I brought the article to [Berkowitz's]
attention and I told him that I am very much
concerned about what I read in the paper,
because it seems to be apparently that
there's an attempt to rezone an area in which
my company is included within the boundaries,
because it talks about a proposed 20 acre
development which would border North Street
on the north, Avenue A on the east and 5th
Street on the south. And our plant, all
right, our warehouse facility was on 5th
Street within those borders. And I was
concerned because the article talks about
rezoning it for residential use, that I was
going to be a nonconforming use, and in
addition to which they talk about the fact
that the project is going to include 525
residential units, 10 houses, etcetera,
etcetera. And I was very alarmed about this,
probably because I had the feeling that you
bring in 525 residential units in a
cooperative ownership, now, I'm going too
far, not a single home owners, but 525 people
cooperatively working to do whatever it is
they could to protect their interests against
the interests of my company. . . . I asked
Mr. Berkowitz to, if he could, please help us
with this matter, because it was critical to
our company, certainly the value of our
property. We could not sell our property if
it were rezoned for residential use, other
than for residential use. And it certainly
would not bring the value to our company that
the property is worth. And we have a petrol
chemical business, I cannot pick up and move
it someplace else. This thing was business
threatening to me, and the worse [sic]
experience I have had in the years I've been
in the business.
Ripps further testified that the 13,000-square foot
warehouse was crucial to the operation of Palmer's manufacturing
business, located across the street, because Palmer had no other
place to store raw materials. Ripps also testified that aside
from being concerned about the rezoning of the property, he had
been worried that the residents of the development would perceive
asbestos -- used as a raw material in Palmer's compound and
stored in the warehouse -- as hazardous because of its "terrible
reputation." Ripps added that although Palmer had frequently
been inspected by the Occupational Safety and Health
Administration and had complied with all its regulations, "we
still have to confront the public's fears and the public's
apprehension."
Ripps stated that he had not then specifically informed
Berkowitz that he wanted to oppose the proposed rezoning
ordinance because he had been unaware, until February 13, 1989,
that a zoning ordinance had actually been proposed. Ripps
testified that although he had considered the rezoning and the
residential development as a serious threat to his business, he
had believed, at that time, that the proposal for an ordinance
had been in its preliminary stages and that, in addition, he
would have received formal notice about any changes from the
Board of Adjustments, because he owned property affected by the
ordinance.
Still, according to Ripps, he requested that Berkowitz
handle the zoning matter on Palmer's behalf and Berkowitz agreed.
Ripps also understood that Berkowitz would undertake further
activities with respect to the proposed zoning change, such as
communicating with local authorities and determining from Dugan
what the residential development actually entailed. According to
Ripps, he expected Berkowitz to handle the matter personally on
behalf of Palmer, albeit Berkowitz might seek the assistance of
other members of Hannoch Weisman to work with him. That
expectation was based on Berkowitz's statement, at the December
12, 1988, meeting, that some attorneys at Hannoch Weisman were
land-use experts, and on the fact that, in the past, several
attorneys from Hannoch Weisman had handled legal matters on
behalf of Palmer that were outside of Berkowitz's legal
expertise. Ripps concluded by saying that he had not expressed
panic, at the December 12, 1988, annual meeting, because he had
turned over the matter to the attention of Berkowitz, who,
although professing no knowledge of the residential development
and of Dugan's representation of Bay Bridge, nevertheless assured
Ripps that he would ask Dugan about it. In fact, Berkowitz
suggested that Ripps meet with Dugan to determine if the
residential development would affect Palmer's property. Also on
December 12, 1988, after Palmer's annual meeting, Berkowitz
discussed the matter with Dugan, who informed him that the firm
had represented Bay Bridge for a number of years.
That day or the next, Berkowitz discussed with Dean Gaber,
Esq., the Chairperson of Hannoch Weisman's executive committee,
and the person whom Berkowitz consulted on conflict-of-interest
issues, whether the firm could continue to represent Palmer in
other matters that were being handled by the firm, should Palmer
object to the zoning ordinance. According to Berkowitz, he and
Gaber "poured over the ethics rules" and concluded that so long
as the firm did not represent Palmer "in opposition to one of our
clients," the firm could continue to represent Palmer in other
matters.
Ripps testified that between December 12, 1988, and February
13, 1989, he made thirteen telephone calls to Berkowitz to
inquire about the progress of the matter. He was unable to
remember whether he had spoken to Berkowitz all thirteen times,
but he contended that all the conversations must have been about
the rezoning matter, as they had no other outstanding Palmer
matters to discuss. According to Ripps, he received little or no
response from Berkowitz, but he "thought nothing of it because
[he] had tremendous confidence in Berkowitz."
On February 13, 1989, Ripps met with Berkowitz and Dugan.
The record reflects that Berkowitz billed Palmer for three
conferences with Dugan, including that meeting. Ripps recalled
that at the February 13, 1989, meeting, Dugan confirmed that he
represented Bay Bridge and asked Ripps to "keep an open mind"
about the sale of the property to Bay Bridge. According to
Ripps, when he asked Dugan if there was "any public process in
place," Dugan's vague reply was, "yes, later on this month."
Ripps then recounted how, when Dugan stepped out of the meeting
for a few minutes, Berkowitz remarked "you know, Lewis, he said,
I wouldn't be surprised if Jimmy has a little interest in this,
because that's -- he does that in other kinds of investments he
gets involved in and represented clients that he has."
When Ripps became suspicious of Dugan's vague reference to a
public process or meeting "later on this month," he went to the
planning-board office and discovered that a meeting of the
planning board would be taking place the very next evening.
Berkowitz' testimony confirmed that Dugan had not said that "the
meeting is tomorrow," although Dugan could not recall discussing
the date of the planning-board meeting at that time.
Thereafter, Ripps telephoned Berkowitz and "expressed
tremendous alarm." According to Ripps, he asked Berkowitz:
what is it I'm supposed to do, we have this
hearing tomorrow night and, you know, can you
come down and represent us? I said, I don't
know whether you can or you can't represent
us and I don't want to be stuck tomorrow
evening. And I think we more or less
mutually agreed Berkowitz would not be able
to represent us that next evening and/or
should not represent us that evening. And I,
later that evening, called and imposed upon a
longstanding relationship with Feinberg to
represent us.
Indeed, William M. Feinberg, Esq., testified that Ripps had contacted him at home on the evening of February 13, 1989, asking whether he could represent Palmer before the planning board the
next evening. Ripps explained that the planning board would be
considering an application to amend the Bayonne zoning ordinance
that would detrimentally affect the value of his property by
rendering its use non-conforming.
On February 14, 1989, Ripps attended the planning board
meeting accompanied by Feinberg. When Dugan approached Ripps and
asked whether he would object if he, Dugan, represented Bay
Bridge on the application that evening, Ripps replied, after
consulting with Feinberg, that he would. At that juncture,
another attorney addressed the planning board, first introducing
himself as the attorney for Bay Bridge, and then introducing
Dugan as a witness. That attorney informed the planning board
that Dugan was a principal in Bay Bridge. According to Ripps, "I
was absolutely shocked. I had no idea that Dugan was a principal
in Bay Bridge." Ripps testified that the attorney "didn't do
much." Instead, Dugan and Bay Bridge's planner spoke at length.
At the end of Bay Bridge's presentation, the planning board
denied Feinberg an opportunity to be heard on the basis that two
prior hearings had already taken place on the matter. The
planning board instructed Feinberg to submit his objection to the
City Council.
At the conclusion of the meeting, the planning board passed
a motion that an ordinance for a planned unit development ("PUD")
ordinance be accepted and forwarded to the City Council for its
adoption. The Palmer warehouse would have been included in the
new PUD district. Parenthetically, Bay Bridge did not request
the planning board to rezone the property as a PUD. All that Bay
Bridge sought was the rezoning to a residential multi-family
district. Instead, the City's engineer's insistence led the
planning board to pass the motion to have the area rezoned as a
PUD.
Ultimately, the City Council adopted the PUD ordinance but
amended it to eliminate all properties not owned by Bay Bridge.
Accordingly, the Palmer property was not included in the PUD
district. Eventually, the ordinance was declared invalid as a
result of litigation instituted by Palmer and others. According
to Ripps, Hannoch Weisman continued to represent Palmer in a
corporate capacity until April 1989.
The DRB found that both Dugan and Berkowitz had violated RPC 1.7. RPC 1.7 states the rule governing conflicts of interest as follows:
(a) A lawyer shall not represent a client if the representation of that client will be directly adverse to another client unless:
(1) the lawyer reasonably believes that
representation will not adversely affect the
relationship with the other client; and
(2) each client consents after a full disclosure
of the circumstances and consultation with the
client . . .
(b) A lawyer shall not represent a client if the
representation may be materially limited by the
lawyer's responsibilities to another client or to
a third person, or by the lawyer's own interests,
unless:
(1) the lawyer reasonably believes the
representation will not be adversely affected; and
(2) the client consents after a full disclosure of
the circumstances . . . .
As the DRB noted, RPC 1.10 applies the conflict of interest
responsibilities to members within a law firm:
(a) when lawyers are associated in a firm, none of
them shall knowingly represent a client when any
one of them practicing alone would be prohibited
from doing so by RPC 1.7. . . .
The DRB correctly observed that the possibility of a
conflict was sufficient to warrant the lawyers involved taking
appropriate action under the conflicts rules. The fact that
Ripps unequivocally expressed to Berkowitz, on December 12, 1988,
his extreme concern about the adverse effect of a residential
development on his business was, accordingly, of great
significance to the DRB. The DRB correctly surmised that even if
Ripps had not specifically requested that Berkowitz oppose the
proposed zoning ordinance, nonetheless he obviously had serious
objections to the residential development itself because of its
deleterious effect on the operation of his business and on the
value of his property. The DRB noted that even Berkowitz himself
acknowledged that Ripps appeared very concerned about the harmful
impact of the development on his business and on his property.
Accordingly, the DRB concluded that the possibility of a very
serious conflict of interest was apparent as early as December
12, 1988.
The DRB observed that in avoiding a conflict of interest
the lawyer must have in mind not only the
avoidance of a relation which will obviously
and presently involve the duty to contend for
one client what his duty to the other
presently requires him to oppose, but also
the probability or possibility that such a
situation will develop. (citing In re Kamp,
40 N.J. 588, 594 (1963), citing Henry S.
Drinker, Legal Ethics 104 (1953)).
The DRB further noted that even if Ripps had never requested
that Berkowitz represent Palmer in the rezoning matter, a
conflict of interest had still existed because Berkowitz had
acted as corporate counsel for Palmer at the same time that Dugan
had had a personal interest in Bay Bridge when the interests of
those two clients had clearly been adverse. The DRB concluded
that even if Dugan had withdrawn from his representation of Bay
Bridge immediately on discovering that Palmer had objected to the
rezoning, Berkowitz could not have continued to represent Palmer
as its corporate counsel because of Dugan's personal interest in
Bay Bridge.
The DRB also properly determined that Berkowitz's erroneous
conclusion, after consultation with another partner in the firm,
that no conflict of interest had existed should not exonerate
him.
The DRB further found that Dugan had been just as obligated
as Berkowitz to make full disclosure of the circumstances of his
representation of Bay Bridge and to attempt to obtain Ripps'
explicit consent for any continued representation. The DRB,
however, found no clear and convincing evidence that Dugan had
knowingly omitted disclosure to Berkowitz and Ripps of his
personal stake in the Bay Bridge venture.
The consequences that attend the decision to discipline an attorney are serious, and we therefore require clear and convincing evidence to sustain a charge of misconduct. In re Pennica, 36 N.J. 401, 419 (1962). That evidence is present in this case.
In December 1988, Berkowitz and Dugan were clearly apprised of facts sufficient to alert them of the probability or possibility of a conflict between Bay Bridge and Palmer. According to Berkowitz and Dugan, no conflict existed under RPC 1.7 in December 1988 because Palmer had not yet decided to oppose the zoning change sought by Bay Bridge. That understanding of the rules of conflict is simply wrong. The proximity of Palmer's commercial property to Bay Bridge's proposed development provided a sufficient basis for a potential conflict between the interests of Bay Bridge and those of Palmer. Palmer was then confronted with a decision whether to oppose the proposed development. The necessity to make such a decision itself converted a potential conflict of interests into an actual conflict of interests. Moreover, such a decision would have to have been a fully-informed one. Any legal advice regarding the decision of whether to oppose the proposed zoning would obviously create a division of loyalties between respondents and their clients. Thus, Bay
Bridge's interests dictated that Palmer should not oppose the
zoning ordinance. Hence, Berkowitz could not advise Palmer to
oppose the proposed zoning without compromising Hanoch Weisman's
loyalty to Bay Bridge. Conversely, Dugan could not act for Bay
Bridge to discourage Palmer's opposition to the zoning without
undermining Hannoch Weisman's loyalty to Palmer.
Berkowitz claims, however, that neither he nor Hannoch
Weisman was actually representing Palmer regarding the Bay Bridge
development. Berkowitz's contention on this point involves much
too narrow an understanding of what "representation" entails in
assessing the application of the ethics governing conflicts.
Regardless of whether Berkowitz explicitly said that he would
represent Palmer in the matter, his relationship with Palmer as
corporate counsel, his indication that he would look into the
matter, and Ripps' apparent reliance on his anticipated advice
were sufficient to establish an attorney-client relationship.
When a client asks corporate counsel to look into a matter
affecting the corporation's legal interests, one presumes that
the counsel's legal advice on the matter is expected.
We are satisfied that as early as December 1988, at least
the potential for conflict should have been obvious to
respondents. Respondents were aware of facts that put them on
notice that the interests of their clients would be put in
jeopardy if they did not act promptly to resolve the apparent
conflict. Respondents failed to do so. The attorneys did not
make a full disclosure of the conflict as they were clearly
obliged to do. Further, both Dugan and Berkowitz misled Ripps by
ignoring or minimizing the conflict based on the mistaken notion
that no conflict would exist unless Palmer decided actually to
oppose the proposed zoning ordinance. However, as already noted,
that decision itself required legal advice and guidance that
these attorneys could no longer ethically furnish because of
their conflicting loyalties. "One of the most basic
responsibilities incumbent on a lawyer is the duty of loyalty to
his or her clients. From that duty issues the prohibition
against representing clients with conflicting interests." In re
Opinion No. 653,
133 N.J. 124, 129 (1993). Respondents violated
that duty of loyalty.
Further, we are satisfied that the evidence clearly and
convincingly supported a finding that Dugan knowingly failed to
disclose to Berkowitz and Ripps his personal stake in Bay Bridge.
To that extent we disagree with the DRB. That Berkowitz himself
suspected that Dugan might have a personal interest in Bay Bridge
and that Dugan was vague or less than candid in informing Ripps
about the status of Bay Bridge's zoning application before the
planning board in light of the scheduled public meeting the next
night dispel the inference that Dugan's nondisclosure can be
attributed to oversight or inadvertence. Further, Dugan's
awareness of the significance of his proprietary interest in Bay
Bridge is further evidenced by the fact that he was then
obviously fully prepared, on the following evening at the
planning-board meeting, to testify as a principal of Bay Bridge
and to substitute another attorney to represent Bay Bridge.
Those circumstances suggest a conscious decision on Dugan's part
not to reveal to Ripps or Berkowitz his interest in Bay Bridge.
Once Dugan became aware of Ripps' interest and concern about the
possible threat that the Bay Bridge proposal might pose to
Palmer, Dugan not only should have disclosed the representational
conflicts implicating himself and Berkowitz but also should have
disclosed his own personal stake in Bay Bridge. In the absence
of any disclosure of Dugan's personal interest in Bay Bridge,
Ripps could not have made an informed consent to continued
representation even if the conflict alone had been revealed.
Dugan's interest in Bay Bridge, under the circumstances,
exacerbated the degree of the conflict and underscores the
gravity of the overall misconduct. This Court has repeatedly
cautioned attorneys about the extreme risks that attend the
entanglement of an attorney's own business interests with his or
her lawyering. See, e.g., In re Dato,
130 N.J. 400 (1992); In re
Silverman,
113 N.J. 193 (1988); In re Reiss,
101 N.J. 475 (1986);
In re Wolk,
82 N.J. 326 (1980). Dangers of such entanglement are
particularly evident when, as in this case, they affect not only
the attorney's own client but also another party whose interests
are adversely affected by the attorney's conflicting loyalties.
That Dugan had an interest in Bay Bridge made it even more
imperative for him to deal forthrightly and expeditiously to
overcome the conflict.
The DRB also concluded that the "absence of harm to the
client" should serve as a mitigating factor. We disagree with
that conclusion. Respondents' unethical actions forced Ripps to
hire an attorney at the last minute to represent him at the
February 14, 1989, planning-board meeting. The zoning proposal
had advanced considerably by that time. Ripps' attorney
doubtless did not have an opportunity properly to prepare for
that meeting, and Palmer's interests were, therefore,
jeopardized. Bay Bridge, moreover, retained its distinct
advantage in the matter as a result of Dugan's own actions.
Although Dugan agreed at Ripps' insistence not to represent Bay
Bridge at the planning-board meeting, he did speak at the meeting
as a witness based on his status as a principal in Bay Bridge.
Dugan testified as a proponent of Bay Bridge, acting as a direct
adversary to Palmer. Finally, that the challenged ordinance was
ultimately declared invalid as a result of litigation instituted
by Palmer and others does not support a conclusion that
respondents' conduct caused no harm. That Palmer had to litigate
the validity of the ordinance supports a conclusion that
respondents' conduct caused actual harm to Palmer's interests.
Although respondents' conduct was not "evil," it was clearly
self-interested and inexcusable.
The primary purpose of discipline is not to punish the offender but to protect the public from members of the bar who
fail to meet their professional responsibilities. In re
Goldstaub,
90 N.J. 1, 5 (1982). That goal is consistent with the
need to maintain the public's confidence in the integrity of our
attorneys. "The severity of discipline to be imposed must
comport with the seriousness of the ethical infractions in light
of all the relevant circumstances." In re Nigohosian,
88 N.J. 308, 315 (1982).
Both Berkowitz and Dugan have repeatedly expressed an overly
narrow and self-serving view of the conflicts-of-interest rules.
Lawyers are expected to be fully versed in the ethics rules that
regulate their conduct. Ignorance or gross misunderstanding of
these rules does not excuse misconduct. As in In re Humen,
123 N.J. 289, 299 (1991), respondents' "conduct discloses an entirely
unacceptable insensitivity to . . . basic ethical
considerations."
We have generally found that in cases involving a conflict
of interest, absent egregious circumstances or serious economic
injury to the clients involved, a public reprimand constitutes
appropriate discipline. See, e.g., In re Porro,
134 N.J. 524
(1993); In re Doig,
134 N.J. 118 (1993); In re Woeckner,
119 N.J. 273 (1990); In re Paschon,
118 N.J. 430 (1990). Here, although
we find that the breach of ethics was not inconsequential with
respect to its adverse effects on Palmer, we are not presented
with evidence of substantial injury or economic loss. Under the
circumstances, we agree with the DRB's recommendation that public
reprimand is sufficient discipline for respondents' unethical
conduct.
ORDERED that respondents shall reimburse the Ethics
Financial Committee for appropriate administrative costs incurred
in the prosecution of this matter.
Chief Justice Wilentz and Justices Clifford, Handler, Pollock, O'Hern, Garibaldi, and Stein join in this opinion.