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In re Lanza

The Supreme Court of New Jersey
322 A.2d 445 (1974)
ELI5:

Rule of Law:

An attorney may not represent both a buyer and a seller in a real estate transaction unless the attorney makes a full disclosure of all facts and potential areas of conflict to both parties and obtains their informed consent. If an actual conflict of interest materializes, the attorney must withdraw from representing all parties.


Facts:

  • Elizabeth E. Greene retained respondent, Guy J. Lanza, to represent her in the sale of her residence.
  • Lanza later agreed to represent the prospective purchasers, James and Joan Connolly, in the same transaction, without first consulting with Greene.
  • At Greene's request, the closing date was moved to an earlier date, which left the Connollys $1,000 short of the full purchase price.
  • To facilitate the earlier closing, the Connollys proposed, and Lanza advised Greene to accept, a postdated check for $1,000 as part of the purchase price.
  • The Connollys took possession of the property after the closing.
  • Greene later deposited the check, but it was returned for insufficient funds.
  • The Connollys refused to make the check good, claiming they discovered a water condition in the cellar that would cost $1,000 to fix, a condition they alleged Greene had misrepresented.
  • Greene contacted Lanza for assistance regarding the bounced check, but he took no effective action on her behalf.

Procedural Posture:

  • The Bergen County Ethics Committee investigated the conduct of respondent, Guy J. Lanza.
  • The Committee found that Lanza's conduct violated Disciplinary Rule 5-105, which forbids an attorney from representing adverse interests under most circumstances.
  • The Committee filed a presentment with the Supreme Court of New Jersey.

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Issue:

Does an attorney violate their professional duty of loyalty by representing both a buyer and a seller in a real estate transaction without first fully disclosing all potential conflicts of interest, and by continuing the dual representation after an actual conflict arises?


Opinions:

Majority - Per Curiam

Yes. An attorney's dual representation of a buyer and seller is unprofessional without first obtaining the informed consent of both parties after a full and specific disclosure of all potential conflicts; continuing representation after an actual conflict arises is also a violation. Lanza's conduct was unprofessional in two respects. First, he failed to provide Greene with a specific and detailed explanation of the potential conflicts before undertaking to represent the Connollys; a generic statement that the attorney foresees no conflict is insufficient. Second, when the conflict became actual—when the Connollys refused to honor the postdated check—Lanza's duty was to withdraw entirely and advise both parties to seek independent counsel, not to continue representing both ineffectively.


Concurring - Pashman, J.

Yes. While concurring in the judgment of reprimand, the concurring opinion argues that dual representation in a buyer-seller transaction should be completely forbidden, regardless of disclosure or consent. The conflict of interest in a buyer-seller relationship is so inherent and the potential for harm so great that true impartiality and undivided loyalty are impossible ideals. The concept of 'full disclosure' is illusory because a client cannot be expected to comprehend all the potential complexities and risks. The public interest demands that each party in such a significant transaction have their own advocate, and a per se ban on dual representation is the only way to ensure this protection.



Analysis:

This case establishes a high bar for the 'full disclosure' required to obtain valid informed consent for dual representation in real estate transactions, moving beyond a generic waiver to require a specific and detailed explanation of potential conflicts. It underscores that even with initial consent, an attorney must withdraw immediately when a potential conflict becomes an actual dispute. The strong concurrence by Justice Pashman highlights a significant judicial movement toward viewing dual representation in buyer-seller contexts as an inherently untenable conflict, foreshadowing stricter rules and potential future prohibitions on the practice.

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