Limited Training On Escrow Accounts Does Not Prevent Interim Suspension

The New York Appellate Division for the First Judicial Department has imposed an interim suspension until further order based on allegations of misuse of entrusted funds

The Committee maintains that respondent's bank records and deposition testimony support the allegations that respondent converted and/or misappropriated client funds in the above-described matter. The Committee argues that this misconduct immediately threatens the public interest and warrants his interim suspension.

In opposition, respondent does not deny or controvert his statements to the Committee or the documentary evidence substantiating those statements. Respondent, through the affirmation of counsel, asserts that after he left a large firm at which he had practiced for 10 years, family and friends referred small matters to him, including the complaining client's matter. Respondent states that his practice at the law firm involved no real estate transactions, and he had no background or training in real estate transactions. He advises that he had never opened an IOLA account in his career until he realized he needed to do so to complete the subject real estate transaction. He states that his law school training with respect to the rules governing IOLA accounts was "limited," and he has taken no continuing legal education courses on the subject. Respondent advises that he has closed the IOLA account, has no private clients, and does not intend to seek work from private clients in the future.

Respondent concedes that the unauthorized withdrawals were of funds due the client, and asserts that they were made at a time when he had been asked to leave the marital home and needed to pay living expenses. Furthermore, he explains that, in his current position as a contract attorney for the New York City Department of Education, he does not interact with private clients or handle their money. Respondent finally asserts that he has been admitted to practice for 17 years, and that this is his first disciplinary matter. Respondent maintains that the motion should be denied because he is not a danger to the public and there is minimal likelihood of the recurrence of similar conduct.

The court

We find that the Committee has met its burden and respondent should be immediately suspended until further order of this Court. The record establishes that respondent repeatedly misappropriated and/or converted client funds and used the funds without permission for his own personal purposes (see Matter of Carlebach, 156 AD3d 44 [1st Dept 2017]; Matter of Perchekly, 149 AD3d 17 [1st Dept 2017]). This Court has consistently held that it is improper to use an escrow account for such purposes (see e.g. Matter of Sieratzki, 186 AD3d 85, 90 [1st Dept 2020]).

Although respondent eventually made payments to the client, this is insufficient to avoid an interim suspension (see Matter of Schuman, 183 AD3d 32 [1st Dept 2020]; Matter of Baumgarten, 177 AD3d 145, 150 [1st Dept 2019]). While respondent cites to a lack of experience regarding the rules related to the maintenance of accounts holding client funds, he declined to familiarize himself with them at any time prior to or during his representation of the subject client. Respondent's personal circumstances, while unfortunate, are more appropriately considered in mitigation of any charges the Committee ultimately pursues (see Matter of Afilalo, 139 AD3d 175 [1st Dept 2016]). We note, too, that respondent attempted to prevent an investigation by the Committee by suggesting to the client that she withdraw her complaint in exchange for the balance of the funds that were owed to her as a result of the real estate transaction.

Accordingly, the Committee's motion should be granted, and respondent suspended from the practice of law, effective immediately, and until further order of this Court.

(Mike Frisch)