Friday, August 19, 2011

Split Sanction For Advanced Fee Misuse

The full Massachusetts Supreme Judicial Court has issued an opinion discussing the appropriate sanction for negligent misappropriation of advanced fees:

Sanctions in cases involving the misuse of retainers advanced for attorney's fee and expenses have depended on the totality of the circumstances at issue including the presence of other misconduct and, of importance, whether the misuse was found to be intentional or the product of negligence. In Matter of Garabedian, 415 Mass. 77, 84, 86 (1993), the respondent was suspended for three months for multiple acts of misconduct, including a "brief misappropriation" of a client's funds. In Matter of Hopwood, 24 Mass. Att'y Discipline Rep. 354 (2008), the respondent was suspended for one year for intentionally misusing a retainer, failing to refund the unearned part of the retainer, and failing to cooperate with bar counsel. Similarly, in Matter of Okai, 11 Mass. Att'y Discipline Rep. 187 (1995), the respondent was suspended for one year for (among other things) neglect, misrepresentations, commingling, spending unearned attorney fees advanced by his client, failing to return the unearned portion of the advanced fees, and failing to cooperate with bar counsel's investigation. In imposing the sanction, the board found the most serious matter to be the respondent's contumacious behavior in his own divorce case. With respect to the misuse of advanced legal fees, the board cited Matter of Garabedian, supra, and noted that such conduct standing alone would merit private discipline. In Matter of Morgan, 17 Mass. Att'y Discipline Rep. 437 (2001), the respondent received a one-year and one-day suspension for multiple failures to return the unearned portion of retainers, the failure to turn over client files, neglect, the failure to communicate with clients, an admission to criminal behavior (operating while under the influence of alcohol), and the failure to cooperate with bar counsel.

The respondent's conduct in the present case is marked by repeated instances of negligence in failing to observe the required formalities of proper accounting for and separating lawyer and client funds. Notably, the hearing committee found that the respondent withdrew $9,950 out of $10,000 the client had advanced for legal fees despite the fact that (as reconstructed during the hearing process) it was apparent that he had earned no more than $4,820 of it, and had failed to account for an additional $2,000 payment Barbuto made toward legal fees. Another troubling aspect is the respondent's handling of monies he sought and received for expenses. While the respondent intimated that he had incurred "expert consulting witness costs for the attorneys we have used for our side of the case" and received $7,350 to cover those costs, he never incurred them, and could not fully account for his use of the funds.

After comparing the respondent's conduct to the cases noted above, and taking into consideration the period of time during which the principal violations occurred (1997-2004), we conclude that the discipline recommended by the board is not markedly disparate, and is sufficient to protect the public and maintain confidence in the integrity of the bar. A judgment shall enter suspending the respondent from the practice of law for one year, six months of which is to be stayed on the condition that he provide audit reports of all his trust accounts quarterly for two years.

The case is Matter of Pudlo, decided today. (Mike Frisch)

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