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ATTORNEY disciplinary
proceeding. Attorney publicly
reprimanded.
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¶1 PER CURIAM. We review the
referee's recommendation that we publicly
reprimand Attorney Shawn G. Rice for
professional misconduct committed in
connection with his personal involvement in
a commercial real estate transaction.
Neither the Office of Lawyer Regulation
(OLR) nor Attorney Rice has appealed the
recommendation filed by the referee, James
J. Winiarski. Therefore, the matter is
submitted to the court for review pursuant
to SCR 22.17(2). In conducting our review
we will affirm the referee's findings of
fact unless they are clearly erroneous.
See In re Disciplinary Proceedings
Against Sosnay, 209 Wis. 2d 241, 243, 562
N.W.2d 137 (1997). We review the referee's
conclusions of law de novo. See In
re Disciplinary Proceedings Against
Carroll, 2001 WI 130, ¶29, 248 Wis. 2d
662, 636 N.W.2d 718. In accordance with
our authority to supervise the practice of
law in this state, we determine the level
of discipline that is appropriate under the
particular circumstances, independent of
the referee's recommendation, but
benefiting from it. See In re
Disciplinary
Proceedings Against Widule, 2003 WI 34,
¶44, 261 Wis. 2d 45, 660 N.W.2d 686.
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¶2 Attorney Rice was admitted to
practice in Wisconsin in 1993. He has no
prior disciplinary history. On May 5,
2005, the OLR filed a complaint against
him, alleging four counts of conduct
involving dishonesty, fraud, deceit or
misrepresentation in violation of SCR 20:8.4
(c). Attorney Rice filed an answer and the
matter was submitted to a referee. The
parties executed a joint stipulation as to
facts and a hearing was conducted on March
7 and 8, 2006. Post-hearing briefs were
submitted and the referee filed his report
on September 25, 2006. No appeal was
filed.
¶3 The situation that gave rise to the
OLR complaint is explained thoroughly in
the referee's report and recommendation.
We draw heavily from that excellent report
and recommendation in our decision here.
As noted, the alleged misconduct occurred
in connection with a commercial real estate
transaction that went awry, resulting in
civil litigation. A stipulation was
submitted to the referee, but as the
referee notes, it includes
numerous "contentions" of the various
parties and was of limited assistance in
helping the referee resolve factual issues
in this disciplinary matter. Our
discussion does not describe every detail
or nuance of the underlying commercial real
estate transaction, only those findings we
find relevant to the disciplinary matter
before us today.
¶4 On June 17, 2002, Jetmir Ameti
("Ameti") through his real estate agent,
Paul Gottsacker ("Gottsacker"), submitted
an offer to purchase a parcel of commercial
property in Sheboygan, Wisconsin ("the
property") for $370,000. The offer was not
accepted.
¶5 Gottsacker and Ameti then
approached Attorney Rice because Gottsacker
knew that Attorney Rice had previously
expressed interest in purchasing commercial
real estate for personal investment
purposes. On or about June 25, 2002,
Attorney Rice, Gottsacker and Ameti
verbally reached an understanding.
Attorney Rice would purchase the property
and Ameti would lease the property from
Attorney Rice, with an option to eventually
purchase the property.
¶6 On July 8, 2002, Attorney Rice
drafted an offer to purchase the property
for $430,000, listing the buyer as Trinity
Partners, LLC ("Trinity"). Trinity
consisted of Attorney Rice and a trust
created for the benefit of his wife and
children. Ameti was not a member of
Trinity. He had no authority to sign
documents on behalf of Trinity.
¶7 On or about July 9, 2002,
Gottsacker met with Ameti to review the
offer to purchase. Ameti approved the
terms and Gottsacker signed Ameti's name to
the offer on behalf of Trinity Partners,
LLC, without indicating the signature was
not made by Ameti. Gottsacker then faxed
the offer to the seller. The signature on
the offer read: "Jetmir Ameti" under which
was typed: "Buyer's Signature; Print Name
Here: Trinity Partners, LLC."
¶8 Gottsacker apparently proposed that
Ameti's name appear on the offer, as
opposed to that of Attorney Rice, so that
the seller would not know there was a "new
player" interested in the property.
¶9 On July 11, 2002, several things
happened. The seller submitted a
counteroffer that amended the closing date,
but made no other substantial changes to
the offer. Attorney Rice signed Ameti's
name to the counteroffer, with a signature
block that falsely represented that Ameti
was a member of Trinity.
¶10 This action comprises the first
count of misconduct alleged in the OLR
complaint.
¶11 Ameti and Attorney Rice then signed
a letter of intent entitled "Intent to
Lease Proposal" that set forth the basic
terms of their agreement with respect to
the property. The letter identified the
tenant as Jetmir Ameti and the landlord
as "Trinity Partners, LLC or its assigns."
One provision of the letter of intent
read: "It is understood and agreed that
this letter of intent shall not be binding
upon either party until a Lease document is
drafted and fully executed by both Landlord
and Tenant and until the board of directors
for both Landlord and Tenant have fully
approved the Lease."
¶12 On July 24, 2002, Attorney Rice
sent a proposed lease to the attorney with
the law firm of von Briesen & Roper, S.C.,
which initially represented Ameti in the
negotiations.
¶13 On July 26, 2002, Attorney Rice
formed a new limited liability company
entitled 2327, LLC. Attorney Rice was the
sole member of 2327, LLC. On July 31,
2002, a Unanimous Consent of the Members of
Trinity Partners, LLC, was executed,
assigning its rights and obligations under
the offer for the property to 2327, LLC.
On the same date, an Assignment and
Assumption of Offer to Purchase was
executed between Trinity and 2327, LLC.
Attorney Rice signed the Assignment on
behalf of both entities.
¶14 Attorney Rice then hired Alpha
Terra Science to perform a Phase I
Environmental Site Assessment ("Phase I")
on the property. After reviewing the
results of the Phase I, Alpha Terra
suggested further testing as there was an
indication there might be a problem. At
this point, the "deal" began to go awry.
¶15 On July 31, 2002, Attorney Rice
submitted copies of the Phase I to the
seller's attorney. He then contracted with
Alpha Terra Science to conduct a Phase II
Environmental Site Assessment ("Phase II")
on the property.
¶16 In mid-August 2002, Gottsacker,
Ameti, and Attorney Rice held a three-way
telephone conference to discuss the results
of the Phase II. During this conversation,
Ameti indicated he was no longer interested
in leasing or buying the property because
the Phase II results showed the
property ". . . wasn't completely 100
percent clean." Attorney Rice and Ameti
had yet to agree upon the terms of the
lease and, thus, there was no binding
agreement between them—only the initial
letter of intent.
¶17 On the afternoon of August 14,
2002, Attorney Rice, who was anxious about
Ameti's apparent decision to pull out of
the deal, met with Thomas Schafer
("Schafer") to discuss Schafer's possible
purchase of the property.
¶18 Attorney Rice verbally agreed to
sell the property to Schafer. Gottsacker
attended that meeting. After the meeting,
Attorney Rice typed an "Outline of
Agreement" in which he proposed to sell his
entire ownership interest in 2327, LLC, to
Schafer for $440,000, plus all costs
incurred in acquiring the property. The
Outline of Agreement also stated: "Other
terms and conditions to be agreed by the
parties and set forth in a definitive
agreement." Schafer accepted the terms of
the Outline of Agreement, but changed the
closing date to September 26, 2002, and
returned a signed copy of the Outline of
Agreement to Attorney Rice.
¶19 The third count of the OLR
complaint alleged that Attorney Rice failed
to disclose a binding agreement to sell
real estate to one individual while
negotiating to sell the same property to a
second individual.
¶20 On August 15, 2002, Attorney Rice
received an e-mail from Ameti's counsel, an
attorney at Von Briesen & Roper, S.C.,
inquiring about the closing date. In
response to that e-mail, Attorney Rice sent
a letter via facsimile confirming that the
closing was scheduled for the following
date but did not include the time or
location of the closing. Attorney Rice
contends that he felt he had no need or
obligation to provide this information
because he understood that the inquiry was
in connection to efforts by Ameti to lease
the building, not to purchase the real
estate.
¶21 Attorney Rice also did not disclose
to Ameti's counsel that on July 31, 2002,
that he had formed a new entity, called
2327, LLC, for purposes of taking title to
the property, and that Attorney Rice had
assigned to 2327, LLC, Trinity's entire
interest in the property.
¶22 On August 15, 2002, Attorney Rice
sent an e-mail to Ameti's lawyer in which
he stated: "I understand your client did
not want to close if the property was not
100% clean. Phase II was faxed to you this
a.m. Please call me after reviewing it."
The responsive e-mail stated: ". . .
[Ameti] just told me he talked with Steven
[from Alpha Terra Science] regarding Phase
II and he was comfortable with the risk and
wanted to proceed."
¶23 Attorney Rice then sent an e-mail
stating: "My client is not as confident as
Jetmir is. Have you spoken to alpha terra
directly?"
¶24 Alpha Terra faxed the Phase II test
results to Ameti's lawyer on August 15,
2002.
¶25 Sometime on August 15, 2002,
Attorney Rice had a conversation with Ameti
during which Ameti indicated he was
interested in leasing and ultimately
purchasing the property.
¶26 Attorney Rice did not disclose to
Ameti or Ameti's lawyer that he had signed
an Outline of Agreement with Schafer.
Attorney Rice claimed that he was not
obligated to do so since neither party was
bound by the agreement at that time.
¶27 On August 15, 2002, Attorney Rice
faxed a proposed purchase agreement to
Schafer's lawyer.
¶28 On August 20, 2002, Attorney Rice
sent Ameti's lawyer an e-mail
stating: "Your client's indication on
Thursday, August 15th that he would not
lease the property if it was not 100% clean
caused Trinity Partners to pursue other
alternatives."
¶29 At some point after the August 16,
2002 closing, Attorney Rice resumed
discussions with Ameti and his lawyer
regarding leasing the property with an
obligation to buy the property at the
conclusion of the lease. During these
negotiations Attorney Rice did not disclose
that he had already signed an Outline of
Agreement with Schafer and had received a
$5000 payment.
¶30 Attorney Rice continued negotiating
the terms of the agreement with Schafer's
attorney. He contends that negotiations
stalled when Schafer attempted to change
the terms of the agreement. On September
5, 2002, Attorney Rice sent a letter to
Schafer and enclosed a $5000 check as
reimbursement for the payment previously
made to him.
¶31 On September 6, 2002, Ameti
executed an "Agreement to Purchase Limited
Liability Company Interest" in which
Attorney Rice agreed to sell his entire
interest in 2327, LLC, to Ameti for
$450,000, with a closing date of September
30, 2002. Attorney Rice did not disclose
to Ameti the August 14, 2002, Outline of
Agreement with Schafer. He contended that
he had no obligation to disclose that
document because it was non-binding.
¶32 Attorney Rice had subsequent
discussions with Schafer's attorneys in
which he did not disclose the September 6,
2002, agreement with Ameti. Again,
Attorney Rice contends that he regarded the
agreement with Ameti as non-binding and
that, therefore, he had no obligation to
disclose it to Schafer or his attorneys.
However, in a letter Attorney Rice later
wrote to the OLR investigator, Jessica
Long, dated March 15, 2004, Attorney Rice
stated:
Since no formal agreement was signed
with
Schafer, and since Rice believed the
Outline of Agreement was not a binding
contract, Rice entertained further
discussions with Ameti, who by that time
had obtained subsequent financing capable
of purchasing the property from 2327, LLC.
2327 LLC and Ameti entered into a valid and
binding contract for the purchase of the
LLC which controlled the property on
September 6, 2002.
¶33 Attorney Rice received a letter
from Schafer's attorney dated September 9,
2002, in which he indicated that Schafer
intended to "go forward with the closing on
September 12th or September 26th." On
September 12, 2002, Attorney Rice replied,
stating that he had earlier explained to
Schafer that if Schafer wanted to proceed,
he would be getting the property "as is,"
with the buyer assuming the risk for any
potential claims by third persons.
¶34 On September 20, 2002, Schafer
filed an affidavit of interest with the
Sheboygan County Register of Deeds.
¶35 On September 26, 2002, Michael
Mnichowicz ("Mnichowicz"), a lawyer at
Attorney Rice's firm, sent an e-mail to
Schafer's lawyer and Attorney Rice in which
he stated: "If you [Seibel, on behalf of
Schafer] are ready, willing and able to
close, I must assume your client is willing
to accept the property and the LLC subject
to the interests of Mr. Ameti since that
was one of the assumptions in which the
outline of agreement was based."
¶36 Amati subsequently filed a civil
lawsuit against several of the participants
to this real estate transaction, including
Attorney Rice. See Ameti v. Rice, et
al.,
No. 01-CV-679, Sheboygan County Circuit
Court.
¶37 During his deposition in connection
with this lawsuit, Attorney Rice testified
that he had consulted with an environmental
attorney in his firm after he received the
preliminary results of the Phase II and
before he spoke with Ameti and Gottsacker.
Attorney Rice stated that his firm's
environmental attorneys told him ". . .
that there was no action that was required
by the property owner or anyone else in
receipt of the report." Attorney Rice
testified that he was still concerned about
the contamination, but stated: "I deferred
to counsel in that it wasn't a clear
violation that required any action at that
point."
¶38 It was later determined that
Attorney Rice, in fact, did not consult
with an environmental attorney after he
received the preliminary results of Phase
II. Attorney Rice only consulted with an
environmental attorney at his law firm
after receiving the Phase I results. In
April 2003, as part of the then-pending
civil litigation, Attorney Rice's counsel
and Ameti's counsel signed a stipulation
that stated in relevant part as follows:
At no time prior to August 17, 2002, did
defendant, Shawn Rice, or any person acting
on his behalf, discuss or confer with any
attorney competent in environmental law at
Davis & Kuelthau, S.C., regarding either
the results or the significance of the
Phase II environmental assessment that was
performed by Alpha Terra Science, Inc.,
and/or Test America Incorporated on or
about August 9, 2002 to August 14, 2002.
In the stipulated facts executed in
connection with this matter, Attorney Rice
acknowledges that his deposition testimony
included a misrepresentation regarding
the "Phase II" report. The second count of
the OLR complaint alleges that Attorney
Rice gave false testimony during a
deposition in violation of SCR 20:8.4.
¶39 In addition, at his February 11,
2003 deposition in the civil suit, Attorney
Rice was asked whether he told Mnichowicz
about the purchase agreement he had signed
with Mr. Ameti on September 6, 2002.
Attorney Rice answered: "Mr. Mnichowicz
was aware of the agreement with Mr. Ameti
that was signed on September 6th."
Attorney Rice was then asked: "Was he
[Mnichowicz] was [sic] aware that you
weren't willing to sell the property to Mr.
Schafer subject to Mr. Ameti's interests
before September 30th?" Attorney Rice
replied: "You could read this several
ways." He then stated: "Mr. Mnichowicz
understood the entire situation here."
¶40 However, during his March 20, 2003
deposition in the civil suit, Mnichowicz
testified that he had not previously been
made aware by Attorney Rice of the
September 6, 2002 agreement with Ameti. He
testified that he saw that agreement for
the first time at his deposition. The
fourth count of the complaint also alleges
that Attorney Rice gave false testimony
during a civil deposition.
¶41 The civil lawsuit was settled prior
to trial. Pursuant to the terms of the
settlement, Attorney Rice subdivided the
property and conveyed a portion of the
property to Ameti for a purchase price of
$170,000. Attorney Rice conveyed the
remaining portion of the property to
Schafer and paid Schafer $55,000 in
exchange for a full release of all claims
against the property.
¶42 The OLR complaint against Attorney
Rice was filed on May 5, 2005.
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¶43 The referee reviewed all these
matters and reached the following
conclusions of law. The referee concluded
that the OLR had met its burden of proof
with respect to Counts I, II and IV,
pertaining to the allegations that Attorney
Rice violated SCR 20:8.4 twice by making
false statements in a deposition and in
executing a document falsely reflecting
Ameti as a member of Trinity.
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¶44 However, the referee concluded that
the OLR failed to prove Count III, stating
that the OLR "failed to prove by clear,
satisfactory, and convincing evidence that
by failing to disclose to Schafer that Rice
had entered into a binding agreement with
Ameti and, after having entered into the
binding agreement with Ameti, continuing to
negotiate a sale of the property to Schafer
without disclosing such negotiations to
Ameti, Rice engaged in conduct . . .
contrary to SCR 8.4(c)."
¶45 The referee thus concluded that
based on the record evidence presented,
Attorney "Rice did not have a binding
contract to sell or lease the subject real
estate to either Amati or Schaefer until
the September 6, 2002, contract." The
referee noted that "[t]he actions of Ameti
also show that he thought he could walk
away from the initial transaction." The
referee concluded that there
was "insufficient evidence" to show that
Attorney Rice was being dishonest or
deceitful when he continued negotiations
with Schafer after he entered into the
September 2002, binding contract.
¶46 We accept the referee's factual
findings and the legal conclusions drawn
from those findings.
¶47 Accordingly, we turn to the
appropriate discipline for the three
violations of SCR 20:8.4. We note that the
OLR argued for a 60-day suspension. The
referee rejected that recommendation,
explaining that he did not perceive
a "pattern of misconduct" in this case.
The referee recommended a public reprimand,
explaining:
I have carefully reviewed all the
evidence
cited by OLR in support of their argument
of a pattern of misconduct. I do not find
such a pattern of misconduct. Instead, I
find that Rice lacked experience in making
personal investments in commercial real
estate. . . .
Rice's judgment was clouded by the fact
that he had personally invested funds in
the transaction. His deposition testimony,
while untruthful and clearly a
misrepresentation, was an improper attempt
to try to protect himself from civil
liability in a transaction that had gotten
out of hand. Also, the evidence does not
show that Rice had any original intention
to misrepresent any facts to anyone.
I do not excuse any of Rice's
misrepresentations, but I also do not find
that they constitute a pattern of
misconduct. . . .
The referee continued:
It is of particular importance to me in
recommending appropriate discipline that
Rice did not enter into this transaction
with the intent to deceive anyone. He
found himself getting deeper and deeper
into a quagmire as a result of a poor
decision to involve himself personally in a
real estate investment opportunity. I also
place considerable weight on the fact that
Ameti and Schafer were not Rice's clients,
but rather astute businessmen who had no
reluctance to use all leverage available to
them to get their way.
The referee recommended further that the
court require Attorney Rice to pay the
costs of this proceeding.
¶48 Ultimately, we agree that a public
reprimand is adequate discipline for
Attorney Rice's misconduct in connection
with the handling of this commercial real
estate transaction. Attorney Rice is
further ordered to pay the costs of this
proceeding which total $28,832.91, as of
October 18, 2006.
¶49 IT IS ORDERED that Attorney Shawn
G. Rice is publicly reprimanded for his
professional misconduct.
¶50 IT IS FURTHER ORDERED that within
60 days of the date of this order Shawn G.
Rice pay to the Office of Lawyer Regulation
the costs of this proceeding. If the costs
are not paid within the time specified, and
absent a showing to this court of his
inability to pay the costs within that
time, the license of Shawn G. Rice to
practice law in Wisconsin shall be
suspended until further order of the court.
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