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In re Leahy

Decided: July 15, 1988.

IN THE MATTER OF RAYMOND H. LEAHY, AN ATTORNEY AT LAW


On an order to show cause why respondent should not be disbarred or otherwise disciplined.

For suspension for one year -- Chief Justice Wilentz and Justices Clifford, Handler, Pollock, O'Hern, Garibaldi and Arnold M. Stein. Opposed -- None.

Per Curiam

[111 NJ Page 128] The District IX (Monmouth County) Ethics Committee (the local Committee) filed a presentment charging respondent, Raymond H. Leahy, with having engaged in unethical conduct in 1978. The charges generally involved respondent's failure to maintain separate accounts and his misuse of client funds entrusted to him. On review, the Disciplinary Review Board (DRB) found respondent to be "in flagrant disregard" of Rule 1:21-6, requiring the maintenance of separate business and trustee accounts, and of DR 9-102, calling for the preserving of the identity of client funds and property. (The ethical infractions having occurred in 1978 and the Rules of Professional Conduct not having become effective until September 10, 1984, respondent's conduct is measured against the Disciplinary Rules in effect at the time of the misconduct.) The DRB concluded that respondent was guilty of knowing misappropriation of his client's funds, but because the misconduct preceded our decision in In re Wilson, 81 N.J. 451 (1979), which would

ordinarily warrant disbarment, the DRB unanimously recommended a two-year suspension from the practice of law, citing In re Smock, 86 N.J. 426 (1981).

On his appeal to this Court respondent does not dispute the finding of ethical misconduct, which is borne out by our own independent review of the record. Rather he focuses on the discipline to be imposed, and submits that a public reprimand and a period of community service would be in order. For that result he relies on In re Stier, 108 N.J. 455 (1987), and In re Kotok, 108 N.J. 314 (1987). The Office of Attorney Ethics (OAE), recognizing the disparity in penalties imposed for misappropriations adjudicated before the Wilson decision, takes the position that although suspension is required, the period thereof is difficult to pinpoint. The OAE goes no further than to acknowledge that two years is "in the ballpark."

In the course of his representation of one Dominic Blumetti in a divorce proceeding respondent came into possession of $13,738.50, representing the partial proceeds of the sale of a tavern. The funds were included in the marital assets, the division of which was the subject of dispute in the divorce proceedings. On January 25, 1978, respondent deposited the funds in his business account and, with the consent of Mrs. Blumetti's lawyer, issued Blumetti a check drawn on his business account in the amount of $6869.25, representing half of the proceeds. Although the other half should have remained in respondent's business account, in fact on the day Leahy issued his check to Blumetti, the total balance in the account was $10,760.49, which means that when the check cleared, the balance, which should have been about $6870, would be only $3881.24. The only rational explanation for this state of affairs is that respondent had already invaded his client's funds.

Because a dispute arose over the handling of the divorce case, Blumetti discharged respondent and retained new counsel. In due course, and in keeping with the final judgment of divorce, that lawyer asked Leahy to transfer the funds -- the

remaining half of the $13,738.50 -- that he had been holding for Blumetti for about four months. As was later discovered, during that period the highest balance in the account was $2761.48 and the lowest balance was a $634.10 overdraft. The funds, therefore, were not in respondent's account to transfer.

Confronted with that dilemma Leahy immediately sought to rectify the situation: he obtained a $20,000 home improvement loan from a bank and deposited about $16,000 of those funds into his attorney business account. Shortly thereafter he issued a check to Blumetti for $6494.25. Leahy arrived at that figure by deducting $375, representing outstanding legal fees, from the remaining half of the funds he had been holding for his former client. (Leahy claimed Blumetti owed him $1000 in fees but had assured him that the remainder over $375 would be paid later.) On the face of the check appeared the typewritten words "Trust Account," even though it was drawn on respondent's business account.

A dispute arose over the outstanding legal fees. Blumetti refused to pay. Respondent sued. Blumetti failed to answer or appear. Respondent was awarded judgment, and then moved, successfully, for an order permitting him to levy against Blumetti's bank account. Blumetti filed an ethics complaint charging Leahy with various infractions arising out of the handling of the marital action. The local Committee conducted a hearing and concluded that Blumetti's complaints were groundless.

Significant events following on the heels of this first ethics hearing may be extracted from the DRB's Decision and Recommendations:

During the course of that hearing, however, a question arose concerning respondent's handling of Blumetti's funds. Respondent was requested to produce his trust account records for 1978. Respondent first informed the committee that the records were in his automobile. A recess was taken so respondent could retrieve them. When respondent returned to the hearing room, he reported his ...


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