Friday, February 1, 2008

If It's Not Conversion, It's Not Disbarment

An attorney was charged with 35 counts of professional misconduct in the course of representing a client in a matrimonial matter. A New York hearing panel that reviewed a referee's report sustained 26 of the charges and recommended a suspension of 2 1/2 years plus restitution. A majority of the Appellate Division for the First Judicial Department accepted the proposed discipline:

"With regard to sanction, we note that the breadth of respondent's misconduct is troubling, for at almost every turn throughout the matrimonial matter, respondent committed some form of misconduct, whether it be false notarizations, disregard of a court order, charging an exorbitant fee, threatening her client to pursue that fee, or using client funds that were in dispute. In light of this, we conclude that respondent should be suspended from the practice of law for a period of two and one-half years (citation omitted) and she is directed to make restitution to her client in the amount of $30,464.

We disagree with the dissent with regard to the severity of the sanction to be imposed, and in that vein, note the mitigating factors present, including respondent's 28-year legal career, which was previously unblemished by any disciplinary history, and the fact that she is 68 years old, suffering from a variety of ailments, and is the sole means of support for her divorced daughter and grandson. We also take into account the Referee's finding that respondent has accepted responsibility for her actions and is remorseful. More importantly, and as the dissent also notes, the Committee "did not characterize" respondent's conduct as conversion; indeed, while the Referee's report states that respondent's actions "could be deemed a conversion of funds," no finding of conversion, or venality, was made, a fact apparently not lost on the Referee, or the Hearing Panel, when their recommendations for sanctions were made. Given the totality of the circumstances presented and the absence of an opportunity to contest the allegation of intentional conversion, we disagree with the dissent's recommendation of disbarment."

The dissent finds misappropriation and would disbar:

"...respondent, over the course of approximately three years, made multiple withdrawals totaling over $30,000 from two accounts containing funds belonging to Mr. Tebbetts. Respondent knew that the money in those accounts belonged to Mr. Tebbetts; two court orders and a judgment clearly required that the funds respondent used for her own purposes were to be given to Mr. Tebbetts to reimburse his 401(k) plan. Thus, respondent repeatedly and intentionally used Mr. Tebbetts' escrowed funds for her own purposes without Mr. Tebbetts' permission...and our rule requires disbarment absent "extreme mitigating circumstances" (citation omitted)

That the Committee did not characterize as "conversion" respondent's conduct in misappropriating Mr. Tebbetts' money is immaterial. No authority or principle of law requires such a characterization or allegation to trigger our general rule that an attorney who intentionally uses on multiple occasions a client's money should be disbarred. Indeed, the applicable disciplinary rule, DR 9-102(A), does not itself use the term 'conversion' ('Prohibition Against Commingling and Misappropriation of Client Funds or Property. A lawyer in possession of any funds or other property belonging to another person, where such possession is incident to his or her practice of law, is a fiduciary, and must not misappropriate such funds or property or commingle such funds or property with his or her own').

Until now, the determinative inquiry, as we stated in Matter of Nitti (268 AD2d at 42), has been whether the lawyer 'repeatedly and intentionally use[d] clients' escrowed funds for h[er] own purposes without permission' (emphasis added). When that misconduct is committed, '[t]his Court has clearly established that, as a rule, disbarment is called for' (id.). Unfortunately, the majority forsakes this substantive inquiry and stresses that a particular label was not used by the Committee. Similarly focusing on form instead of substance, the majority disregards the fact that respondent knew she was being charged with misappropriating Mr. Tebbetts' money and relies on 'the absence of an opportunity to contest the allegation of intentional conversion.'

Moreover, no extreme mitigating circumstances are present warranting a departure from the typical penalty of disbarment..."

(Mike Frisch)

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