For Suspension: Chief Justice Wilentz and Justices Clifford, Handler, Pollock, O'Hern, Garibaldi and Stein. Opposed -- none.
This disciplinary proceeding arose from a random compliance audit of respondent's trust account. As a result of the audit, the Office of Attorney Ethics (OAE) filed a complaint charging respondent with a number of ethical infractions. The charges included failure to maintain required records, payment of personal expenses from the attorney's trust account, depositing personal funds into the trust account to replace client funds improperly used to pay business expenses, depositing the trust funds of a client into respondent's business account, failure to safeguard client funds, misappropriation of client funds, and commingling personal funds with trust funds.
The District VI Ethics Committee (Ethics Committee or Committee) conducted a hearing on the allegations. The Committee found that respondent had violated DR 9-102(A), (B), and (C)*fn1 (among other things, requiring attorneys to maintain, identify and segregate client funds, and to comply with record-keeping
requirements) and recommended public discipline. The Ethics Committee did not, however, find clear and convincing evidence of a violation of DR 1-102A(4) and (6) (proscribing attorney conduct that involves dishonesty, fraud, deceit, or misrepresentation, or that otherwise adversely reflects on a lawyer's fitness to practice law). It consequently dismissed those charges. In addition, the Ethics Committee concluded that respondent had not intentionally used clients' funds and that "respondent's conduct was the result of his inexperience, the bad example of his preceptor, and the enormous pressure of the practice to which he fell heir."
Reviewing the Ethics Committee's presentment, the Disciplinary Review Board (DRB) found respondent guilty of unethical conduct for his record-keeping derelictions, failure to safeguard and segregate client funds, and misappropriation of funds. The DRB held that respondent had not knowingly misappropriated trust-account funds. Although the DRB unanimously found that the ethical infractions warranted public discipline, it was divided on the appropriate punishment: the four-member majority concluded that a one-year suspension was proper, while the three-member dissent recommended a public reprimand. Our independent review of the record leads us to conclude that a three-month suspension is the appropriate discipline.
Respondent was graduated from the University of Temple Law School in 1977. Soon after being admitted to practice law in this state in December 1978, respondent formed a professional relationship with a Hudson County attorney. Characterizing his status as that of an independent contractor, respondent submitted weekly bills to the attorney for services rendered and received paychecks drawn on the attorney's trust account. That attorney apparently paid all of his operating expenses, including respondent's salary, from his trust account. Respondent testified that he had assumed his mentor's bookkeeping
methodology was an appropriate way for an attorney to maintain records.
In 1980, respondent learned that another attorney in his building intended to retire. After brief discussions on a Friday afternoon, respondent agreed to take over the attorney's practice beginning the following Monday. The retiring attorney left the country abruptly.
According to respondent, the practice included over 200 files that were in a state of complete disarray. Respondent had to file numerous motions to reinstate complaints because his predecessor had failed to answer interrogatories. Respondent testified that there was no filing system, that mail had been left stacked in foot-high piles, and that there was no transition period between the retiring lawyer's departure and respondent's assumption of responsibility.
Respondent did not hire an accountant because of the limited cash flow his practice generated. Whatever record-keeping practices respondent used mirrored those of his prior employer. Consistent with his prior experience, respondent created two bank accounts: a trust account from which he paid all his business expenses, such as salaries, rent, and supplies, and a business account, from which he paid personal expenses, such as credit cards and student loans. Settlement checks were deposited in the trust account. After clients received payment, respondent left his fees in the trust account and used that account to pay various business expenses. Because he never kept a running balance of the trust account and never used client ledger cards, respondent never knew exactly how much money was in the account or precisely whose money it was. Respondent occasionally deposited his own funds into the trust account if he believed that its balance was too low to permit payment of operating expenses. Nonetheless, two checks drawn on the trust account were returned for insufficient funds when clients presented them for payment. In both cases,
however, the checks cleared when presented for payment a second time.
The random audit of respondent's books and records disclosed the following deficiencies, which are set forth in the DRB's Decision and Recommendation:
Failure to Maintain Required Records
Respondent failed to maintain receipts and disbursement journals for his trust account, failed to maintain a separate trust ledger for each client, and failed to reflect all transactions on client ledger sheets. In addition, almost every check written by respondent to pay his business expenses had been drawn on trust account funds. Respondent was unable to identify numerous deposit tickets for funds deposited into his trust account and unable to produce trust account records or case files prior to January 1, 1984. Respondent attributed his misuse of trust funds to a ...