OLR Compendium > Public Reprimand of Bruno Rizzo

Public Reprimand of Bruno Rizzo

2013-OLR 13

A man died in early December, 2004, leaving a will that divided his estate equally between his three adult daughters, namely, the grievant and her two sisters. The daughters’ mother was the decedent’s former wife, who was acting as his power of attorney at the time of his death. The daughters’ mother was not named as a beneficiary in the will.

Prior to the decedent’s death, the grievant and her mother were estranged from one of the other daughters, who had sought restraining orders against the grievant and her mother. The mother hired Rizzo’s law firm on December 4, 2004 to represent her in the restraining order case. The grievant had separate counsel. The petitions for restraining orders were dismissed when the petitioner failed to appear in court.

The decedent’s will designated the daughter who had sought the restraining orders as the personal representative and the grievant as successor personal representative. The decedent’s property consisted of 78 acres of real estate, a coin collection and guns. The estate inventory reported total assets of approximately $940,000.

The grievant’s mother hired Rizzo’s firm to represent her in seeking to be appointed as personal representative of the decedent’s estate. In late December, 2004, Rizzo initiated probate proceedings by filing a petition for formal administration that was signed by the grievant, requesting her mother’s appointment as personal representative. The grievant’s mother signed an affidavit in support of the grievant’s petition. The daughter who had sought the restraining orders opposed the petition. In April, 2005, the court appointed an employee of a bank’s trust department as the personal representative of the decedent’s estate.

Representation Regarding the Decedent’s Missing Personal Property

Following Rizzo’s firm’s representation of the grievant’s mother in the restraining order case and in her effort to be appointed the personal representative, the law firm concurrently represented the grievant’s mother (who was a non-beneficiary) and the grievant and her other sister (who had not sought the restraining orders), who were estate beneficiaries, regarding the administration of the estate. The three clients did not sign conflict of interest waivers relating to the concurrent representation. The grievant’s mother was the only one of the three clients who had signed a fee agreement with the firm. The concurrent representation continued until early December, 2005, when the grievant’s sister hired separate counsel. Rizzo continued to jointly represent the grievant and her mother until approximately January, 2007.

An associate in Rizzo’s firm initially represented the grievant, her sister, and their mother regarding the administration of the estate from approximately April to October, 2005. The associate left the firm in the autumn of 2005, and Rizzo represented the clients thereafter.

Beginning in April, 2005, an issue arose as to whether the grievant’s mother had removed valuable items, including the coin collection, from the decedent’s home prior to his death and whether the decedent had gifted the items to her. The grievant, her sister, and their mother were united in believing that the decedent had gifted the items to the grievant’s mother. Significant time was spent in the personal representative’s pursuit of the grievant’s mother for the return of the items allegedly in her possession, while Rizzo and his associate asserted that the decedent had gifted the property to the grievant’s mother. Both the grievant and her sister wrote letters of support of their mother regarding the items.

In February, 2006, the personal representative sought a court order requiring the grievant’s mother to return the items. Following evidentiary hearings, the court issued an order in June, 2006, finding that the coin collection was not gifted to the grievant’s mother, but its whereabouts were unknown.

The grievant, her sister, and their mother were unified in their position that the decedent had gifted certain valuable items to the grievant’s mother, but Atty. Rizzo failed to obtain written consents from the clients after a consultation that included an explanation of the implications of the common representation, namely, that the mother’s financial interest in allegedly keeping the items conflicted with that of the grievant and her sister as beneficiaries of the estate. By concurrently representing the grievant and her sister, both beneficiaries of their father’s estate, and their mother, a non-beneficiary of the estate, regarding the issue of the decedent’s missing personal property, without first obtaining written conflict of interest waivers from the three clients after consultation, Atty. Rizzo violated former SCR 20:1.7(b), effective prior to July 1, 2007, which states:

A lawyer shall not represent a client if the representation of that client 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 in writing after consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved.

Representation in the Real Estate Transaction

In early October, 2005, the personal representative agreed to sell the estate’s 78-acre parcel of real estate to third parties for $835,000. The grievant’s mother thought the price was too low and suggested to Rizzo that the real estate should be developed. Rizzo contacted two local developers who made a proposal to develop the property. The proposal involved the grievant and her sister (the one who did not seek the restraining orders) buying the real estate from the estate at a price close to the third parties’ offer, creating a limited liability company (“LLC”) and then forming a joint venture with the developers.

On November 23, 2005, the grievant and her sister submitted an offer to purchase the real estate for $825,000. The probate court accepted the offer and denied the third parties’ offer. (The listing contract waived the realtor’s commission if the decedent’s daughters purchased the property, thereby saving the estate approximately $40,000.)

In early December, 2005, an attorney wrote to Rizzo and the personal representative on behalf of the grievant’s sister who had signed the offer to purchase with the grievant, stating that her client was withdrawing from the purchase because she had not understood what she had signed. The attorney thereafter represented the grievant’s sister in the estate. It was agreed that the grievant’s mother would take her daughter’s place in the joint venture, but her contribution to the deal would be “sweat equity” instead of money.

On December 16, 2005, the real estate closing was held, and documents were also signed in furtherance of the joint venture. The grievant purchased the real estate for $825,000 in her name alone by contributing her inheritance of $200,000 and obtaining a loan for the balance of the purchase price. The grievant and her mother signed a Legal Representation Agreement drafted by Rizzo in which they hired him to form a limited liability company, which was named after the grievant and her mother The grievant and her mother also signed a Members’ Agreement that allocated ownership of the LLC at 60% for the grievant and 40% for the grievant’s mother. The grievant contributed her $200,000 capital investment to the LLC, while the grievant’s mother contributed “sweat equity” for future work to be done in the real estate development. Rizzo prepared the organizational documents. The grievant and her mother did not sign any conflict of interest waivers regarding Rizzo’s concurrent representation of each of them in forming the LLC.

Atty. Rizzo also prepared documents whereby the LLC and a separate LLC owned by the developers formed a new company, a joint venture LLC, that would develop the real estate. The grievant’s LLC contributed the grievant’s $200,000 to the joint venture LLC, which bought the real estate for $825,000, using the grievant’s LLC’s contribution and the balance via a loan. The developers were responsible for development of the property and for all loans for financing and improvement.

Rizzo violated former SCR 20:1.7(b), effective prior to July 1, 2007, when he concurrently represented the grievant and her mother in forming their LLC and proceeding in the real estate transaction when the clients had a common goal but differing interests in the transaction, without obtaining written conflict of interest waivers after consulting with the clients. The grievant and her mother had a common goal of seeking to maximize profits, but the grievant was the sole capital contributor in the transaction, she assumed all of the financial risk in forming the LLC with her mother, and she had a strong interest in protecting and preserving her investment. The grievant’s mother had an interest in promoting the joint venture, but less of an interest than the grievant had in protecting the grievant’s investment.

Rizzo demonstrated that he had recognized the potential for a conflict in representing the grievant and her mother in forming their LLC, when he later stated in a deposition taken in the course of a lawsuit filed by the grievant’s mother against the grievant:

What I did explain to them was that in a deal where there are multiple parties, we take the position of … advancing the project, and really not advocating for either one of them, because we cannot do that. We don’t do it. And it’s clearly a conflict. You’re going to have to get your own lawyers.

Rizzo also testified in the same deposition:

I had talked to them individually, and how important it was to get an operating agreement in place, because they had serious issues that had to be dealt with…I wasn’t going to be in a position to argue one side or the other. So they had to get separate lawyers, or they were going to have to sign a waiver. And they said this is exactly the way we want it to be, that they waive getting separate lawyers.

In the course of his deposition, Rizzo also characterized the grievant and her mother’s LLC Members’ Agreement as a “temporary fix” and, as such, he was in a “bad spot” until the grievant and her mother came in and either waived the conflict of interest in writing or hired their own lawyers. While Rizzo recognized the potential conflict, he failed to effectively act upon it.

In the same deposition, Rizzo stated that the grievant and her mother had discussed with him the matter of the percentage of profits to be split between them, which was a term to be included in their LLC Members’ Agreement. Rizzo said that he told the clients, “The right split would be to make sure first that [the grievant] gets her money back, either with return, without a return, whatever you guys come to. And then after the profits are made, then you can decide how you want to split the profits.” Rizzo identified the LLC Members’ Agreement as the document that would have set out the terms of repayment to the grievant prior to any profit distribution being made. However, Rizzo did not include the terms of repayment of the grievant’s investment in any of the transactional documents.

Rizzo also said that with respect to the LLC Members’ Agreement:

…the problem with that document is that it doesn’t take into consideration the priority of [the grievant’s] $200,000. And the return, and whether or not she should have any return on that. And so the explanation was that this was done strictly on a temporary basis to satisfy the bank, to satisfy the court, to get the deal done, to get it to a point where you can preserve your profit.

Rizzo did not explain why the terms and timing of repayment of the grievant’s $200,000 contribution were not included in the transactional documents. Rizzo stated that such issues could have been effectuated through a more comprehensive agreement once the grievant and her mother came in to meet with him, but that did not occur due to their aversion to incur further attorney fees. In his response to the grievance and during depositions, Rizzo indicated that because of how events had transpired, the parties had to sign the transactional documents within a limited period of time in order for the transaction to move forward.

In a deposition, Atty. Rizzo described the grievant and her mother’s LLC Members’ Agreement that he prepared as being a “temporary fix” that did not incorporate all ultimately necessary terms, but was prepared to appease the lender. Rizzo stated:

…I had requested many times…that we get together and we sit down, and work out all the details that needed to be worked out in the [grievant and her mother’s] operating agreement, so we could get to that point. And essentially what happened was we never got to that point, because at some point they just didn’t want to spend anymore attorney’s fees. I knew that they were going to have problems, because that operating agreement did not deal with all the issues that can come up in a partnership.

In the same deposition, Rizzo also stated:

Q: With regard to the protection of [the grievant’s] investment of $200,000 that you mentioned, it was clear to you that that $200,000 had to be protected, and she had to have that returned before the profits were split, correct?

A: Yes.

Q: All right. And that was not reduced to writing anywhere by you, was it?

A: Not that I recall.

During the same deposition, the grievant’s counsel told Rizzo that she had spoken to one of the developers, who had assured her that it was always the position of the joint venture LLC that the grievant would receive the first $200,000 off the top of the profits before any fees were split. Rizzo said that the developers were aware of the grievant’s contribution of $200,000 and believed that repayment to her should be a priority.

When he did not protect the grievant’s $200,000 contribution, by failing to include terms in the transactional documents to have her capital contribution paid back before any profit distribution was made, Rizzo violated SCR 20:1.1, which states:

A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.

The grievant asserted that she did not have any meetings with Rizzo prior to the December 16, 2005 closing and that the only documents she reviewed prior to the closing related to the joint venture LLC, which she had picked up at Rizzo’s office. The grievant said she had one phone conversation with Rizzo, on December 7, 2005, in advance of the closing. The conversation appeared in a billing statement issued on December 29, 2005 from Rizzo’s office. There is no evidence that Rizzo sent any correspondence to the grievant regarding the transactions from November 23, 2005 (the date that the offer to purchase was submitted) to the closing on December 16, 2005.

Rizzo intimated during depositions that the grievant delegated management and decision- making responsibility to her mother regarding the real estate transaction. Rizzo’s billing statements between November 15, 2005 and December 16, 2005 contained six entries in which services were provided to “client” but the client was not identified. Rizzo’s billing statements reflected meetings and telephone conferences with the developers, Rizzo, and the grievant’s mother, if one infers that the grievant’s mother was the client, but there is no evidence that the grievant was included as a participant, other than general statements later made by Rizzo during depositions. While the grievant had assumed the risk in the transaction, there is little evidence that Rizzo met with her or explained the risks and responsibilities that she had assumed, whether there would be adverse tax consequences, unanticipated legal effects or a complete loss of investment.

At a deposition, the grievant testified that Rizzo did not review the documents with her that were signed at the closing. The grievant said she asked Rizzo what documents she was signing and he told her to trust him and just sign, “otherwise we’ll be here the whole day.” The grievant told OLR she believed she was signing paperwork to transfer title and that Rizzo did not explain any of the documents to her.

When he failed to communicate with the grievant prior to the real estate closing to advise her of the risks involved in investing in the real estate transaction and to explain the important terms of the transactional documents to her prior to her signing them, Rizzo violated SCR 20:1.4(b), which states, “A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.”

The grievant and her mother’s relationship deteriorated early in 2007, which led to the mother suing the grievant in late March, 2007. The grievant counterclaimed and also filed a malpractice claim against Rizzo via a third-party complaint. The claims between the grievant and her mother were settled in August, 2008. The malpractice claim was resolved via a confidential agreement in September, 2009. OLR has no information on the terms of the confidential agreement.

The grievant told OLR that the joint venture LLC eventually bought out her interest in the joint venture for a cash amount and that she also received a five- acre plot of the original property.

Atty. Rizzo received a private reprimand in 1992 and received a private reprimand in 2009.

In accordance with SCR 22.09(3), Attorney Bruno Rizzo is hereby publicly reprimanded.

Dated this 18th day of November, 2013.