Friday, November 20, 2009

Thy Partner's Keeper

The New York Appellate Division for the First Judicial Department rejected the Departmental Disciplinary Committee's call for a six-month suspension and imposed a public censure in a matter in which a law partner discovered and reported misappropriations committed by his law partner. The lawyer had stipulated to three counts of misconduct that acknowledged unintentional misappropriation and failure to review escrow account records. The court lays out the facts and its reasoning as to sanction:

Partner Cherry's conversion occurred over a relatively short period of six months (approximately September 2005 - February 2006), and respondent purportedly wrote only six checks, all of which were for legitimate obligations. When respondent wrote those checks, he was unaware the payments were improper. Moreover, respondent was charged and admitted his liability for his failure to oversee the account.

Furthermore, we disagree with the Committee's assertion that respondent's "willful ignorance [of the conversion] is clearly unjustifiable in a two-person law firm" and thus warrants more than a public censure. In Matter of Glatman (47 AD3d 230, 232 [2007]) the court found censure appropriate when misappropriation of funds was "the result of either inadvertence or poor accounting practices, as opposed to an intent to steal funds". In Matter of Cardoso (152 AD2d 157 [1989]) an attorney in a two person law firm was censured for one act of unintentional "conversion" of funds by properly disbursing funds when, unbeknownst to him the account was at a deficit, and for his law partner's commingling and intentional conversion of approximately $31,000. In addition, the respondent in Cardoso, like respondent herein, left all handling of the escrow account to his partner, and once aware of the acts, dissolved the partnership and notified the Grievance Committee of his partner's defalcations (see also Matter of Linn, 200 AD2d 4 [1994]; Matter of Falanga, 180 AD2d 83 [1992]).

Finally, the Committee's reliance on Matter of Latimore (252 AD2d 217 [1999], lv dismissed 93 NY2d 995 [1999]) is misplaced. In Latimore, this Court suspended the attorney for one year for presigning several blank escrow checks requiring her signature and that of another attorney, thereby enabling her co-fiduciary to convert escrow funds. She failed to oversee the escrow account and failed to supervise salespeople working under her real estate broker's license who engaged in fraudulent practices. Additionally, she personally engaged in misleading practices in her brokerage and had received two prior letters of admonition.

Here, except for respondent's withdrawal of approximately $12,000 of his own funds, respondent's misconduct was that of omission and not affirmative actions like that in Latimore. Furthermore, respondent has an unblemished 28-year career with a history of public service, has shown remorse, has cooperated fully with all governmental authorities, and has accepted full responsibility for his misconduct and stipulated to the charges. Respondent's conduct here fits squarely within the cases in which public censure is imposed.

(Mike Frisch)

http://lawprofessors.typepad.com/legal_profession/2009/11/thy-partners-keeper.html

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