Jawbone
A consent reprimand by the New Jersey Disciplinary Review Board was approved by the state Supreme Court
This disciplinary case arises as a result of several business transactions between respondent and Paul Wiebel, a long time client of respondent and respondent’s law firm. Those transactions took place between 2002 and 2009.
Specifically, in 2003, Wiebel purchased a one-third stock interest in Destiny Plastics, Inc. (Destiny Plastics), for $1.2 million. Wiebel also extended a loan to Destiny Plastics in the amount of $2.5 million. On March 24, 2003, Wiebel executed a personal guaranty to Premium Financial Services in connection with financing for Destiny Plastics. Billing records from respondent’s law firm showed that it had charged Wiebel for a legal review of this guaranty, but respondent could not recall if he was the attorney that reviewed the agreement. Respondent recalled, however, advising Wiebel not to sign the guaranty.
Respondent later became involved with Destiny Plastics when he agreed to loan money to the company to purchase molds for the manufacture of plastic cutlery. On April 15, 2003, to effectuate this transaction, respondent incorporated Jawbone, LLC (Jawbone). Pursuant to a July 2, 2003 Sale, Lease and Repurchase Agreement, Jawbone loaned Destiny Plastics $430,000 to purchase the molds (the Jawbone Agreement). Pursuant to the Jawbone Agreement, Jawbone took title to the new cutlery molds and leased the molds back to Destiny Plastics. Respondent and Destiny Plastic’s Chief Executive Officer signed the Jawbone Agreement, with Wiebel signing the agreement as a personal guarantor for the payment and leasing obligations due to Jawbone. Destiny Plastics ultimately defaulted on the loan, filed for bankruptcy protection, and litigation ensued, in which Wiebel indemnified respondent and Jawbone.
Respondent stipulated that he entered the Jawbone Agreement without complying with the written disclosures and informed consents required by RPC 1.8(a). Further, neither the stipulation nor accompanying exhibits include a signed, written consent from Wiebel. Although the Jawbone Agreement stated that “[t]he parties acknowledge that each has had the opportunity to consult with independent counsel of their own choosing in connection with the review and execution of this agreement,” that provision did not apply to Wiebel, who was not a party to the agreement but, rather, was a guarantor.
Further, from February 2002 through April 2005, respondent provided seven loans to Wiebel, totaling $950,160. Respondent admitted that, with the exception of the $430,000 obligation to Destiny Plastics (discussed above), all loans made by respondent to Wiebel were not memorialized in promissory notes or other written documentation. Thus, respondent further admitted, the loans were provided without the written disclosures and signed, informed consents that RPC 1.8(a) requires.
In order to pay off the outstanding debt to respondent, on December 1, 2009, Wiebel assigned his 46.25 percent ownership interest in Silver Ridge Rocky Mountain, LLC to respondent. Respondent accepted this assignment as the full repayment of all outstanding sumsowed to him. In total, respondent released Wiebel from $950,160 of debt. On January 14, 2010, the Silver Ridge operating agreement was amended to reflect that Wiebel was no longer a member and that respondent held a 92.5 percent interest in the company.
The DRB found reprimand appropriate in light of Respondent’s 40 year unblemished record. (Mike Frisch)