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In re Li

Supreme Court of New Jersey

January 24, 2018

In the Matter of Yuexin Li

         District Docket No. XIV-2016-0186E

          BONNIE C. FROST, ESQ., CHAIR EDNA Y. BAUGH, ESQ., VICE-CHAIR PETER J. BOYER, ESQ. BRUCE W. CLARK, ESQ. HON. ]V[AURICE J. GALLIPOLI THOMAS J. HOBERMAN EILEEN R1VERA ANNE C. SINGER, ESQ. ROBERT C. ZMIRICH.

          ELLEN A. BRODSKY CHIEF COUNSEL, PAULA T. GP.ANUZZO DEPUTY CHIEF COUNSEL, MELISSA URBAN FIRST ASSISTANT COUNSEL, TIMOTHY M. ELLIS, LILLIAN LEWIN, BARRY R. PETERSEN, JR. COLIN T. TAMS, KATHRYN ANNE WINTERLE ASSISTANCE COUNSEL.

         Dear Mr. Neary:

         The Disciplinary Review Board reviewed the motion for discipline by consent (censure or such lesser discipline as the Board deems appropriate) filed by the Office of Attorney Ethics (OAE), pursuant to R. 1:20-10(b) (1). Following a review of the record, the Board determined to grant the motion.

         In the Board's view, as a matter of stare decisis, a censure is the appropriate discipline for respondent's violations of RPC 1.15(b) (failure to promptly deliver funds or other property belonging to the client); RPC 1.15(d) and R. 1:21-6 (recordkeeping); and RPC 8.4(c) (conduct involving dishonesty, fraud, deceit or misrepresentation).

         This case involves misconduct that the Board perceives as increasingly common in transactional real estate matters. Thus, in addition to imposing discipline on respondent for his conduct in this matter, and to address this troublesome practice, the Board recommends that the Court consider the issuance of a Notice to the Bar announcing more stringent treatment of conduct that involves the purposeful, systematic, and unauthorized retention of excess recording fees, or the implementation of other deceptive, income-generating practices. Such treatment may include an analysis of the conduct under the principles of In re Wilson, 81 N.J. 451 (1979), and its progeny (knowing misappropriation of client and/or escrow funds).

         From 2009 through 2016, in connection with his transactional real estate practice, respondent systematically collected inflated, "flat" recording fees from his clients, and then improperly retained the excess recording fees, in addition to his agreed fee listed on the HUD-1 form, in violation of RPC 1.15(b). Respondent did not have his client's authorization to retain the excess recording fees. Thus, respondent should have promptly returned those funds to his clients, rather than systematically retaining them as income. During that period, respondent knowingly overcharged 738 clients for recording costs totaling $119, 660.

         In all of those transactions, respondent knew that the final HUD-1 was not an accurate account of the transaction and that the settlement funds were not disbursed in accordance with the final HUD-ls. Yet, respondent adopted the HUD-ls in these transactions, in violation of RPC 8.4(c).[1]

         In addition, from 2009 through 2016, respondent charged other improper fees to his clients, described in the HUD-1's as "title binder review fees" of $100 and "legal documentation and notary fees" of $50. Respondent admitted, however, that those costs, totaling $66, 450, were excessive and were included in the flat legal fee he charged the clients for these transactions.

         Finally, in connection with the OAE's audit, respondent admitted that he had committed multiple recordkeeping infractions, in violation of RPC 1.15(d) and R. 1:21-6.

         As noted, respondent's misconduct is the latest example in a disturbing trend of disciplinary cases involving the improper retention of inflated recording fees in real estate transactions, deceptive fees practices, and misrepresentations on HUD-l's and to clients. In the past, however, fact patterns similar to this case have not been viewed through the lens of knowing misappropriation. Rather, they have been primarily analyzed as violations of RPC 1.15(b) and RPC 8.4(c).

         Cases involving an attorney's failure to promptly deliver funds to clients or third persons, in violation of RPC 1.15(b), generally result in the imposition of an admonition or reprimand, depending on the circumstances. See, In the Matter of Raymond Armour, DRB 11-451, DRB 11-452, and DRB 11-453 (March 19, 2012) (admonition imposed on attorney who, in three personal injury matters, did not promptly notify his clients of his receipt of settlement funds and did not promptly disburse their share of the funds; the attorney also failed to promptly communicate with the clients; the Board considered that the attorney had no prior discipline); In the Matter of Jeffrey S. Lender, DRB 11-368 (January 30, 2012) (admonition; in a "South Jersey" style real estate closing in which both parties opted not to be represented by a personal attorney in the transaction, the attorney inadvertently over-disbursed a real estate commission to MLS Direct, neglecting to deduct from his payment an $18, 500 deposit for the transaction; he then failed to rectify the error for over five months after the over-disbursement was brought to his attention; violations of RPC 1.3 and RPC 1.15(b); the attorney had no prior discipline); and In re Dorian, 176 N.J. 124 (2003) (reprimand imposed on attorney who failed to use escrowed funds to satisfy medical liens and failed to cooperate with disciplinary authorities; attorney previously was admonished for gross neglect, failure to communicate, failure to withdraw, and failure to cooperate with disciplinary authorities, and reprimanded for gross neglect, lack of diligence, and failure to communicate).

         Even when the RPC 1.15(b) violation is accompanied by other infractions, an admonition may still result. See, e.g., In theMatter of Brian Fowler, DRB 12-036 (April 27, 2012) (after the attorney had been retained to represent an estate, he was to collect funds due on a note given to the estate; for a three-year period, he collected the funds but failed to deposit at least nineteen checks and did not supply an accounting as required; he also failed to reply to more than a dozen inquiries from the client about the funds; violations of RPC 1.4(b) and RPC 1.15(b); the attorney's psychological/psychiatric difficulties, which had impeded his ability to represent his clients, were considered in mitigation; although the attorney had received two prior admonitions, an admonition was still imposed, in light of the mitigating factors); In the Matter of David J. Percely, DRB 08-008 (June 9, 2008) (for three years, attorney did not remit to client the balance of settlement funds to which the client was entitled, a violation of RPC 1.15(b); the attorney also lacked diligence in the client's representation, failed to cooperate with the investigation of the grievance, and wrote a trust account check to "cash," violations of RPC 1.3, RPC 8.1(b), and R. 1:21-6(c) (1) (A); significant mitigation presented, including the attorney's unblemished twenty years at the ...


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