IMO BERNARD S. BERKOWITZ, AN ATTORNEY AT LAW IMO JAMES P. DUGAN, AN ATTORNEY AT LAW
Case Date: 06/17/1994
Docket No: SYLLABUS
(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)
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
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 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).
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.
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."
would have received formal notice about any changes from the
Board of Adjustments, because he owned property affected by the
ordinance.
discussed the matter with Dugan, who informed him that the firm
had represented Bay Bridge for a number of years.
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." 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.
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.
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 . . . .
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 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.
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.
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.
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.
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).
reprimand is sufficient discipline for respondents' unethical
conduct. Chief Justice Wilentz and Justices Clifford, Handler, Pollock, O'Hern, Garibaldi, and Stein join in this opinion.
|