SUPREME COURT OF NEW JERSEY Disciplinary Review Board Docket Nos. DRB 12-053, 12-054, 12-055,. and 12-056 District Docket Nos. XIV-2007- 0135E, XIV-2007-0134E, XIV-2008- 0308E, and X-2007-0022E IN THE MATTERS OF RANDI KERN FRANCO AND ROBERT ACHILLE FRANCO ATTORNEYS AT LAW Decision Argued: June 21, 2012 Decided: August 7, 2012 HoeChin Kim appeared on behalf of the Office of Attorney Ethics. Respondents appeared pro se. To the Honorable Chief Justice and Associate Justicesof the Supreme Court of New Jersey. These matters came before us on recommendations for several different forms of discipline for respondents’ violations of various RP__~Cs, filed by Special Master William A. Krais. Specifically, the special master recommended that respondent Randi Kern Franco (Randi) be disbarred for the knowing misappropriation of escrow funds in a real estate transaction. He also recommended that she receive separate three-month suspensions for (i) entering into certain business transactions with a client without taking the necessary precautions prescribed by RPC 1.8(a) and (2) recordkeeping violations and negligent misappropriation of client funds. As for respondent Robert Achille Franco (Robert), the special master recommended the imposition of an admonition for what he described as respondent’s commingling of a retainer fee and his personal funds, a violation of RPC 1.15, (presumably (a) and (d)); and for his violation of various provisions of R_~. 5:3- 5, specifically, charging a minimum, non-refundable fee in a post-judgment matrimonial action, tendering a retainer agreement to the client that failed to state when bills would be rendered, commencing work on the matrimonial matter in the absence of an executed retainer agreement, and failing to render bills to the client in accordance with the applicable Court Rule. The 2 special master also recommended the imposition of separate reprimands for Robert’s representation of both parties to a loan agreement and for his "passive negligence associated with [Randi]’s many bookkeeping and recordkeeping deficiencies." For the reasons set forth below, we recommend that Randi be disbarred for the knowing misappropriation of escrow funds. AS for Robert, we determine to suspend him for three months for allowing the deposit of a matrimonial client’s retainer fee into his personal checking account, charging an unreasonable fee, conflict of interest, and his passive negligence with respect to Randi’s recordkeeping improprieties and negligent misappropriation of client funds. Robert was admitted to the New Jersey bar in 1989. Randi was admitted in 1991. At the relevant times, they practiced law as Franco & Franco, a partnership in Morristown. Neither respondent has a disciplinary history. All four of these disciplinary matters were heard together by the special master on the following dates: September 20, 22, 23, 27, and 29, 2010, and October 4, 6, and 12, 2010. Respondents appeared pro se. 3 THE BYRON MATRIMONIAL MATTER (DRB 12-056; District Docket No. X-2007-0022E) This matter involves Robert’s non-compliance with several Court Rules governing family court actions and the deposit of a prospective client’s retainer fee into his personal checking account. Because the amended formal ethics complaint was so ¯unclear, the special master directed the presenter for the District X Ethics Committee (DEC) to write a letter identifying the specific rules that Robert had allegedly violated. According to the DEC presenter, Robert violated R_~. 1:21-6 (presumably (a)(2)) and RP__~C 1.15 (presumably (d)), when he deposited into his personal checking account a client’s $2750 check, representing the retainer fee in a post-judgment matrimonial matter; violated RPC 1.5 (presumably (a)) by charging the client, Leslie Byron, an unreasonable fee; and violated RPC 1.15 (presumably (d)), based on the following actions and inactions: Failing to execute the retainer agreement Commencing work on the matter absent a fully-executed retainer agreement ¯ Failing to provide Byron with a Statement of Client Rights and Responsibilities~ ¯ Failing to inform Byron when bills would be rendered Failing to render bills to Byron during the alleged engagement ¯ Requiring the payment of a minimum fee2 [Letter from DEC presenter Khaled J. Klele to respondent Robert A. Franco, dated December 18, 2009.] Robert testified that he had handled matrimonial matters for fifteen to twenty years and that they comprised about thirty percent of his practice. On May ii, 2005, he met with Byron for more ~than two hours to discuss a post-judgment matrimonial matter. At the end of the meeting, Byron gave him a $2750 check, which represented payment of a retainer fee. Robert endorsed the check, which, he claimed, was mistakenly deposited into his personal checking account by his mother. The mistake i According to the DEC presenter, this omission also violated R~ 5:3-5(a), (a)(5), and (b). 2 According to the presenter, this requirement imposed on the client also violated R__. 5:3-5(a), (a)(5), and (b). notwithstanding, he acknowledged that what had happened was unethical. On May 13, 2005, Robert sent a retainer agreement to Byron, which he asked her to sign and return to him. He also enclosed a case information statement (the CIS), which he requested she complete within the next month. Finally, Robert informed Byron that he would be preparing a notice of motion and supporting certification and asked her to provide him with "the essential elements of relief" that she would be seeking so that he could lay the necessary foundation for the motion. According to Robert, this request provided her with the "ability and latitude to provide . . . any additional information." As for the required Statement of Clients Rights and Responsibilities (the statement), Robert testified that, although the statement was not mentioned in his May 13, 2005 letter to Byron, its inclusion was "part and parcel of the envelope that goes to the client who’s interested in becoming a client of my practice." According to Robert, he did not hear from Byron, after he sent the May 13, 2005 letter to her. She never executed the retainer agreement and did not send him a completed CIS. She did not provide him with any information pertaining to the 6 "essential elements of relief," although he stated that she had provided him with "a staggering amount of information" at their initial consultation. She failed to send him a copy of the previous year’s tax return, which he also had requested in the letter. Robert believed that he could begin working on the matter before Byron returned the signed retainer agreement and he did so, because, .in his mind, she had met with him, had given him a retainer, and, therefore, he "assumed that she had retained [his] services." He recalled that Byron "wanted to move very quickly on this" and "get" her former husband. As seen below, Byron denied that she had retained him. Robert was able to work on the motion in the absence of the completed CIS because Byron had provided him with "quite a bit of financial information" at their meeting, all of which "went into preparing the Notice of Motion." According to respondent, he devoted 7.25 hours to Byron’s matter, at a $350 hourly rate, resulting in a total fee of $2,537.50. On August 26, 2005, Byron wrote to Robert, stating "I have finally had a chance to review the retainer agreement and I have decided that I will not be retaining you." In that letter, Byron also asked for the return of the $2750 retainer. 7 Notwithstanding the absence of a fully-executed retainer agreement, its terms were at issue at the disciplinary hearing. In paragraph 3, for example, the agreement provided that "It]he Law Firm has agreed to accept no Retainer payment from you." The provision went on to state that the expected costof filing the motion, replying to opposition, and appearing in court would be $2500. In paragraph 3B, however, the agreement stated: "You agree to pay a minimum of $2,500.00 for legal services regardless of the amount of time actually spent on this case." Robert acknowledged that he had accepted a retainer from Byron, notwithstanding the agreement’s assertion that the firm had agreed to "accept no Retainer payment from you." He pointed out, however, that the agreement also stated that the expected cost of the engagement would be $2500. When asked about the language expressly stating that Byron would pay a $2500 minimum, "regardless of the amount of time actually spent on this case," Robert countered that the same paragraph also stated that all legal fees would be based on the hourly rate set forth in the agreement. Thus, he denied that, if he had only spent one hour on the case, he would have kept the entire $2500. He stated that, due to Byron’s financial circumstances, $2500 was a reasonable minimum fee for her to pay, in light of the work that he would have to do on her behalf. He added that, if she were a person of means or if the matter were acrimonious, he might have requested a larger retainer. Robert acknowledged that, notwithstanding paragraph 4’s claim that Byron would be billed at the hourly rates set forth in the retainer agreement, the agreement did not identify when the bills would be issued. Moreover, he stated that he had never issued a bill to Byron, even after she had written to him, on August 26, 2005, to inform him that she would not be retaining him. THE LUNING-TO-LIGIERI LOAN (DRB 12-054; District Docket No. XIV- 2007-0134E) The formal ethics complaint charged Robert with a concurrent conflict of interest, a violation of RPC 1.7(a), as the result of his arranging for a loan from one client to another. The complaint was later amended to include a violation of RPC 1.8(a), based on the creditor client’s agreement to reimburse respondent for monies he had spent in purchasing certain supplies for her. In March 2007, Rebecca Ligieri borrowed $4100 from Aagot Luning. Ligieri testified that, at the time, she and her then 9 fiance, John Habenstein, had fallen behind on the rent for her apartment. After she received an eviction notice, Habenstein, who knew respondents, asked them if they knew anyone who would lend money to them so that they could pay their rent. Ligieri and Luning both testified that Robert arranged for Luning to lend money to Ligieri. The loan permitted Ligieri to bring the rent up-to-date and to remain in the apartment through the end of the lease term. At the time, there was no retainer agreement between Ligieri and the firm or between Habenstein and the firm. According to Robert, he represented only Luning in the transaction. He prepared the March 15, 2007 note on her behalf and witnessed Ligieri’s signature. When the loan was made, respondents were holding in their attorney trust account, the proceeds from Luning’s late husband’s life insurance policy for, among other things, the payment of certain of her debts. Luning testified that she had authorized Robert to take the loan from the life insurance proceeds. Under the terms of what Robert described as an interest- free loan, Ligieri received $4100, which she was to repay to Luning, plus a $i000 "fee," within one month (April 15, 2007). When Ligieri repaid the loan, she issued a personal check to i0