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In re Phillips

Supreme Court of New Jersey

October 26, 2018

In The Matter Of Jack Barry Phillips An Attorney At Law

          District Docket No. XIV-2017-0501E

          Ellen A. Brodsky Chief Counsel.

          DECISION

          Bonnie C. Frost, Chair.

         To the Honorable Chief Justice and Associate Justices of the Supreme Court of New Jersey.

         This matter was before us on a certification of the record, filed by the Office of Attorney Ethics (OAE), pursuant to R, l:20-4(f). The two-count formal ethics complaint charged respondent with the knowing misappropriation of "at least $65, 146.84" in trust funds, a violation of RPC 1.15(a) (failure to safeguard funds) and the principles established in In re Wilson, 81 N.J. 451 (1979); RPC 1.15(c) (failure to keep disputed funds separate and intact until the dispute was resolved); RPC 8.4(b) (committing a criminal act that reflects adversely on the lawyer's honesty, trustworthiness, or fitness as a lawyer in other respects); RPC 8.4(c) (conduct involving dishonesty, fraud, deceit or misrepresentation; and RPC 8.1(b) (failure to cooperate with disciplinary authorities).

         We recommend respondent's disbarment for his knowing misappropriation of the funds at issue.

         Respondent was admitted to the Florida bar in 1999 and to the New Jersey bar in 2001. At some point, he maintained an office for the practice of law in Haddonfield, New Jersey. Presently, he resides in Arizona.

         Respondent has no disciplinary history in New Jersey. In October 2009, he was disbarred in Florida for abandoning a client and failing to reply to inquiries from state disciplinary authorities.

         In 2016, respondent became ineligible to practice law due to nonpayment of the annual attorney assessment to the New Jersey Lawyers' Fund for Client Protection. He retired from the New Jersey bar in 2017.

         Service of process was proper. Although the OAE had first attempted service in May 2017, the United States Postal Service returned all of the OAE's mailings, prompting the OAE to withdraw the certification of the record. Subsequently, on August 31, 2017, the OAE re-filed the disciplinary matter under a new docket number and, once again, attempted to serve respondent with the complaint.

         On September 8, 2017, Deputy Ethics Counsel HoeChin Kim telephoned respondent after she had learned that he was in "retired" status with the Judiciary. Presumably, Kim asked respondent for a valid address for service of the complaint, but he stated that he was "still working on an address," and that he was currently residing in Florida. Respondent stated that he would provide an address.

         Later that day, respondent left a voicemail message, stating that, because he had no address in Florida, the OAE should direct its written communications to P.O. Box 91 in Haddonfield. Respondent further stated that he would return to Haddonfield "after Hurricane Irma."[1]

         On September 11, 2017, the OAE sent respondent a copy of the formal ethics complaint to the Haddonfield post office box address, by regular and certified mail, return receipt requested. On October 17, 2017, the certified letter was returned to the OAE, marked "unclaimed," "unable to forward," and "return to sender." The letter sent by regular mail was not returned. Respondent did not file an answer.

         On October 20, 2017, the OAE sent a letter to respondent, at the same Haddonfield post office box address, by regular and certified mail, return receipt requested. The letter informed respondent that, unless he filed an answer within five days, the allegations of the complaint would be deemed admitted, the record would be certified directly to us for the imposition of a sanction, and the complaint would be deemed amended to include a violation of RPC 8.1(b).

         On November 9, 2017, respondent sent an e-mail to Kim, in which he detailed his history of physical and mental health problems and homelessness. He claimed that, due to these issues, he was unable to participate in his defense and requested that the matter be continued until he could find a lawyer to represent him. Because of respondent's homelessness, he stated that "maybe the best place to communicate" with him was the Haddonfield post office box address.

         Kim replied to respondent's e-mail about three hours later. She informed him, among other things, that a packet containing the complaint was awaiting his pick-up at the post office. She also informed respondent that, unless the OAE received notice, by December 1, 2017, that he had retained counsel or had applied for the appointment of pro bono counsel, the OAE would certify the record to us. The OAE heard nothing further from respondent.

         On December 13, 2017, the United States Postal Service returned to the OAE the certified mailing of the November 9, 2017 service packet, marked "return to sender" and "unable to forward." On December 21, 2017, the same service packet sent by regular mail was returned to the OAE with the same markings.

         On March 5, 2018, the OAE served respondent with notice of the complaint via publication of a notice in the New Jersey Law Journal and the Courier-Post.

         As of March 29, 2018, respondent had not filed an answer to the complaint. Accordingly, on that date, the OAE certified this matter to us as a default.

         We turn to the facts alleged in the complaint. On June 28, 2010, respondent's former wife, Deborah Catherine Peck, [2] signed articles of organization for CJ-VJ Realty Associates (CJ-VJ), which were filed with the Florida Secretary of State. On that same date, Peck signed an enabling resolution, which authorized respondent "to take such action as is necessary to authorize and execute documents."

         On June 29, 2010, Peck signed the CJ-VJ operating agreement, which identified Peck as the initial member and represented that she had made a $50, 000 capital contribution to CJ-VJ. In addition, the agreement identified the ownership percentages of CJ-VJ as follows: 39% to Peck, 30% to Catherine Peck-Phillips (Catherine), 30% to Virginia Peck-Phillips (Virginia), and 1% to respondent.

         Among other things, paragraph 15 of the operating agreement identified and described the fiduciary duties of CJ-VJ's members. In respect of the duty of loyalty, the agreement states, in pertinent part:

A member's and manager's duty of loyalty to CJ-VJ REALTY ASSOCIATES, LLC is limited to the following:
(a) To account to CJ-VJ REALTY ASSOCIATES, LLC and to hold as trustee for it any property, profit, or benefit derived by the member or manager in the conduct or winding up of CJ-VJ REALTY ASSOCIATES, LLC's business or derived from a use by the member of the LLC's property, including the appropriation of a LLC's opportunity
[C¶18;Ex.11.][3]

         On June 28, 2010, Peck signed an enabling resolution that empowered respondent to "authorize and execute documents." On an unspecified date, respondent replaced Peck as the LLC's managing member.

         On September 27, 2013, the Florida Secretary of State administratively dissolved CJ-VJ, for failure to file an annual report or to pay the filing fee. On February 26, 2014, Peck filed a voluntary Chapter 7 petition in the United States Bankruptcy Court for the Southern District of Florida (bankruptcy court), which was consolidated with thirty-three other pending cases. Deborah C. Menotte, Esq., was appointed trustee for the group.

         In Peck's bankruptcy petition, she represented that she owned a 39% interest in CJ-VJ, which, in turn, owned certain real property in Palm Beach County, Florida (Palm Beach property). Nearly a year later, on February 4, 2015, Oleg Ruddy and respondent, as the managing member of CJ-VJ, entered into an "'AS IS' Residential Contract For Sale And Purchase" of the Palm Beach property.

         On February 17, 2015, respondent sent the following e-mail to the title agent and real estate broker, who had inquired about an operating agreement for CJ-VJ:

Statement regarding operating agreement. Florida does not require an operating agreement, and since this is just an LLC within the family, we never made one. Deborah Peck is my ex ...

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