(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).
Argued June 7, 1994 -- Decided July 29, 1994
PER CURIAM
Phillip F. Guidone represented the Lions Club of Chester, New Jersey, in its sale of a twenty-five-acre
tract of land in Mount Olive, New Jersey. The Lions Club had purchased the land hoping to use it to conduct
a fund-raising activity. When that fell through, the Club decided to sell the land.
A member of the Club, Frank Adessa, told Guidone that he would be contacted by Frank Torsiello, a
person who was interested in purchasing the land. Guidone received a letter from Torsiello Construction
Management (TCM), dated May 8, 1986, offering to buy the property for $1,250,000. The Club accepted the
offer. Guidone prepared a contract of sale. Disputes arose, however, about the terms of the sale and Guidone
entered into negotiations with TCM's attorney.
While the negotiations continued, Adessa disclosed to Guidone that he and his brother were partners
in TCM. Adessa offered a twenty-percent interest to Guidone, which he accepted in June 1986. Guidone did
not disclose his partnership interest to the Club. He continued to negotiate the final terms of the contract,
including one that gave the purchaser a ninety-day extension of the one-year deadline for closing.
The contract for sale was executed in July 1986. Thereafter, Guidone represented TCM in its
application for zoning approvals in Mount Olive Township. He disclosed that representation to the Club, which
agreed that his familiarity with the property would help expedite the process. However, in filing the application
in Mount Olive, Guidone did not disclose the names of the TCM partners holding ten-percent or greater
interests, including himself, although that information was requested. More importantly, Guidone did not inform
the Club about the possible adverse consequences of his dual representation of the Club and TCM.
In or before September 1987, Guidone told the Club members that TCM had requested a price
reduction because a portion of the property was wetlands. For the first time, Guidone disclosed his participation
in the partnership. The disclosure generated turmoil among the membership. Guidone, with the approval of
a majority of the Club's members, proceeded to handle the closing. Again, he failed to explain fully to the Club
the pitfalls of his conflicting representation.
The Disciplinary Review Board (DRB) found that Guidone had not complied with RPC 1.7, which
requires client consent after full disclosure in cases involving conflicts of interest. In addition, it found that
Guidone violated RPC 1.8(a), which requires an attorney involved in a business transaction with a client or
adverse to a client to disclose the conflict, to advise the client to secure independent counsel, and to obtain
written consent of the client to further representation. Finally, the DRB found that Guidone had violated RPC
8.4(c), which prohibits attorneys from engaging in dishonesty, fraud, deceit, or misrepresentation. The Court's
independent review of the record satisfies it that Guidone violated the foregoing Rules of Professional Conduct.
HELD: Respondent clearly engaged in conduct that violated the Rules of Professional Conduct governing
conflict of interest situations. Based on the factual circumstances of the case, a three-month suspension from
the practice of law is warranted.
1. Disciplinary sanctions in conflict of interest cases can vary from a public reprimand to a lengthy suspension
from the practice of law. What distinguishes a reprimand case from a suspension is that the conflicting interest
of the attorney in the latter has been both undisclosed and adverse to the pecuniary interests of the attorney's
client. (pp. 6-8)
2. The circumstances of this case warrant a three-month suspension despite Guidone's otherwise exemplary legal
career. Guidone concealed his adverse interest for a long time, and that concealment impaired the confidence
of many of the members of the Club who had reposed special trust in Guidone as an attorney and as an officer
of the Club. Furthermore, the amount of money at stake and the complexity of the transaction called for a
heightened sensitivity on Guidone's part. (pp.9-10)
So Ordered.
CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK, O'HERN, GARIBALDI, and
STEIN join in the Court's opinion. JUSTICE CLIFFORD did not participate.
SUPREME COURT OF NEW JERSEY
D-
127 September Term 1993
IN THE MATTER OF
PHILLIP F. GUIDONE,
An Attorney at Law.
Argued June 7, 1994 -- Decided July 29, 1994
On an Order to show cause why respondent
should not be disbarred or otherwise
disciplined.
Walton W. Kingsbery, III, Deputy Ethics
Counsel, argued the cause on behalf of
the Office of Attorney Ethics.
Francis X. Crahay argued the cause for
respondent (Tompkins, McGuire &
Wachenfeld, attorneys).
PER CURIAM
This matter arises from a Decision and Recommendation of the
Disciplinary Review Board (DRB) that respondent be suspended from
the practice of law for a period of three months. To his credit,
respondent admits the gravamen of the complaint concerning his
representation of the Lions Club of Chester, New Jersey (the
Club), in its sale of a twenty-five-acre tract of land in Mount
Olive, New Jersey. His principal dereliction was that, shortly
before the contract was signed, he had acquired a twenty-percent
interest in the partnership that purchased the property. Yet,
for over a year, he continued to represent the Club as seller
without disclosing his interest as a purchaser. Although no loss
or unfair advantage ensued, respondent deeply regrets the
misunderstandings that his dual role in the transaction created.
The Club had acquired the tract of land intending to use the site to conduct a fund-raising activity for the Club. The Club was unable to obtain necessary zoning approvals, but the property had increased in value considerably since the time of its purchase. As a result, the Club decided to place the property on the market.
At that time, Frank Adessa, a member of the Club, told respondent to expect a phone call from Frank Torsiello, who was interested in acquiring the property. Respondent received a letter from Torsiello Construction Management (TCM), dated May 8, 1986, making the offer to purchase the property for $1,250,000. The Club accepted that offer because it was the first one to comply with the Club's desired terms, which included the purchase price of $1,250,000, a 10" deposit that would become nonrefundable after a short period of time, and (subject to subdivision and site-plan approval) closing of title within one year of the signing of the contract. Respondent prepared and sent to TCM a contract of sale. However, disputes about the terms of the sale ensued and respondent entered into negotiations with TCM's counsel.
While the negotiations continued, Adessa disclosed to
respondent that he and his brother were partners in TCM. Adessa
offered a twenty-percent interest to respondent, which interest
respondent accepted in June 1986. Respondent did not disclose
his participation in the purchasing partnership to the Club. He
continued to negotiate the final terms of the contract, including
one that gave the purchaser a ninety-day extension of the one-year deadline for closing.
The contract was executed in July 1986, and a $125,000
deposit was placed in respondent's escrow account. Thereafter,
respondent undertook to represent TCM in connection with its
application for zoning approvals in Mount Olive Township. He
disclosed that representation to the Club, which agreed that it
would be in the mutual interests of the Club and TCM that he,
being familiar with the zoning bodies in the adjoining community,
should undertake that representation. However, in filing the
application for developmental approval in Mount Olive Township,
respondent failed to disclose on the application the names of the
TCM partners holding ten-percent or greater interests, including
himself, although that information was requested. More
importantly, respondent did not sufficiently inform the Club
about the possible adverse consequences of his dual
representation of the Club and TCM.
Paradoxically, when in March 1987 the attorney for TCM
requested an adjustment of the purchase price because four acres
of the unimproved land constituted wetlands and could not be
developed, respondent declined even to discuss the matter with
the Club, telling the attorney for TCM that all objections to
title had to be cleared within three months and that he found
"no basis for the reduction of the purchase price."
In or before September 1987, however, respondent
communicated to the Club TCM's request for a price reduction and
its request for an extension of time to close. Respondent then,
for the first time, disclosed to the Club that he had "a position
in the partnership." Turmoil broke out at the meeting. Some
Club members were deeply disillusioned. Nonetheless, a majority
of Club members authorized respondent to proceed with the closing
of the property in accordance with the contract, which respondent
subsequently did about a month and a half later. Again
respondent failed fully to explain to the Club the pitfalls of
that conflicting representation. Ultimately, two of the TCM
partners sued respondent and the Adessas, seeking a declaratory
judgment that they had no interest in the property because they
had failed to fulfill their partnership obligations.
On this record, the DRB found at a minimum that respondent had not fully complied with Rule of Professional Conduct (RPC) 1.7, which requires client consent after full disclosure in cases involving conflicts of interest. In his application for site-plan and subdivision approval, respondent did not provide to both
parties a full explanation of the risks in his common
representation of them as required by the Rule, thus posing a
substantial risk of disservice to the Club's interest. In
addition, respondent violated RPC 1.8(a), which requires an
attorney involved in a business transaction with a client or
adverse to a client (1) to disclose the relevant facts to the
client fully and in writing, (2) to advise the client to consult
independent counsel and to give the client a reasonable
opportunity to do so, and (3) to obtain written consent from the
client. Respondent failed to reveal to the Club his
participation as a partner in the TCM venture between June 1986
and September 1987, nor did he advise the Club to seek the advice
of independent counsel and obtain the Club's consent. Finally,
the DRB, unlike the District Ethics Committee, found that
respondent had knowingly concealed his participation in the
transaction in violation of RPC 8.4(c), which prohibits attorneys
from engaging in dishonesty, fraud, deceit, or misrepresentation.
In reaching that conclusion, the DRB relied on the fact that
respondent's name had not been typed on the June 1986 letter
setting forth the percentage of each TCM partner's interest in
the transaction, the fact that his cash contributions to the
venture had been made payable to Adessa rather than to TCM, and
the fact that he had failed to disclose his business interest to
the Club for over one year.
Respondent defended his failure to disclose on the basis
that his relationship with the purchasing partnership had never
been fully resolved. He pointed out that (1) as of September
1986, long after the Club's contract had been signed, the
partners had yet to settle on a name for the partnership, (2) at
the closing Torsiello, the lead partner, refused to accept the
other partners' cash contributions, and (3) the omission of his
own name in the partnership agreement had been inadvertent.
Respondent's view was that he had not been obliged to disclose
his interest because it had been a minority interest and because
all the terms of the transaction had been fully set before he
became involved. This is not a sufficient defense. To repeat
what we said in In re Berkowitz, ___ N.J. ___ (1994), "Ignorance
or gross misunderstanding of these rules [of professional
responsibility] does not excuse misconduct." Id. at ___ (slip
op. at 19).
Our independent review of the record satisfies us that it
contains clear and convincing evidence that respondent violated
RPC 1.7, RPC 1.8 and RPC 8.4.
The more difficult issue is the appropriate measure of discipline. The purpose of discipline is not to punish the offender but to protect the public. In re Goldstaub, 90 N.J. 1, 5 (1982). Through our disciplinary system, we seek to maintain the public's confidence in the integrity of attorneys. Ibid.
Consequently, "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).
"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." In re Berkowitz, supra, ___ N.J. at ___
(slip op. at 19) (citing In re Porro,
134 N.J. 524 (1993); In re
Doig,
134 N.J. 118 (1993); In re Woeckener,
119 N.J. 273 (1990);
In re Paschon,
118 N.J. 430 (1990)). Of course, when an
attorney's conflict of interest causes serious economic injury to
clients, we have not hesitated to impose a period of suspension.
See In re Dato,
130 N.J. 400 (1992) (imposing one-year suspension
on attorney who purchased client's property at below-fair-market
price); In re Gallop,
85 N.J. 317 (1981) (imposing six-month
suspension on attorney who took deed to housekeeper's real
property to her disadvantage); In re Hurd,
69 N.J. 316 (1976)
(imposing three-month suspension on attorney who counseled client
to transfer title to real property to attorney's sister for
twenty percent of property's value).
Respondent argues that his actions did not cause any
economic injury to his client, let alone serious economic injury.
That is substantially correct. A blue-ribbon committee appointed
by the Club itself investigated all the circumstances and
concluded, indeed, that the Club had suffered no economic injury
as a result of respondent's conduct.
What distinguishes this case from cases warranting only a
public reprimand is that the conflicting interest of the attorney
was both pecuniary and undisclosed. For example, the conflicting
interest in Baldasarre v. Butler,
132 N.J. 278 (1993), in which
the attorney represented both sides in a complex real estate
transaction, was at least perceived, if not fully appreciated by
the clients. See also In re Nichols,
95 N.J. 126 (1984)
(imposing public reprimand on attorney who purchased client's
home while continuing representation of client in two matters);
In re Loring,
62 N.J. 336 (1973) (imposing public reprimand on
attorney who represented clients in sale of house while pressing
adverse lien on his own behalf on proceeds of sale).
When an attorney has concealed an adverse pecuniary interest
from a client, we have been more inclined to impose a period of
suspension. In In re Humen,
123 N.J. 289 (1991), we imposed a
two-year suspension in part because the attorney had loaned
$40,000 to a client without informing her that he was the
mortgagee. That attorney violated RPC 1.4 by failing to explain
the matter sufficiently to his client, RPC 1.8 by acquiring a
pecuniary interest adverse to his client without advising her to
seek independent counsel, and RPC 8.4 by deceiving the client and
misrepresenting the mortgage situation to her. However, we have
not invariably suspended attorneys for such misconduct. See In
re Paschon, supra,
118 N.J. 430 (imposing public reprimand on
attorney who failed to reveal to borrower that attorney's
children were members of group of lenders).
On balance, however, we are satisfied that the circumstances
of this case warrant a period of suspension. Respondent
concealed his adverse pecuniary interest for a long period of
time, and that concealment impaired the confidence of many of the
members of the Club who had reposed special trust in respondent
as an attorney and as an officer of the Club. Furthermore, the
amount of money at stake and the complexity of the transaction
warranted a heightened sensitivity on the part of respondent.
See Baldasarre, supra, 132 N.J. at 296. In addition, some of the
TCM principals complained (perhaps for ulterior reasons) of
respondent's conflict of interest as well.
We are mindful of the many tributes to respondent's
impeccable character that we have received and the almost-universal respect in which fellow members of the bar and, indeed,
the public at large hold respondent. This is the only mark on an
otherwise exemplary career. We perceive, however, a qualitative
difference between respondent's conduct and that of the
respondents in In re Berkowitz, supra, ___ N.J. ___, in which the
corporate client was aware of the conflict that existed when a
member of its law firm sought on his own behalf a zoning change
that would have been adverse to the pecuniary interests of the
client.
Under the circumstances, we agree with the DRB's
recommendation that respondent be suspended for a period of three
months.
Respondent shall reimburse the Ethics Financial Committee
for appropriate administrative costs.
Chief Justice Wilentz and Justices Handler, Pollock, O'Hern, Garibaldi, and Stein join in this opinion. Justice Clifford did not participate.