Case Title: Matter of Youmans

Citation: 118 N.J. 622, 573 A.2d 899

Docket Number: 

State: new-jersey

Court: New Jersey Supreme Court

Date: 1990-05-18T00:00:00Z

Document:
118 N.J. 622 (1990) 573 A.2d 899 IN THE MATTER OF LOUIS B. YOUMANS, AN ATTORNEY AT LAW. The Supreme Court of New Jersey. Argued January 30, 1990. Decided May 18, 1990. *624 Paula T. Granuzzo, Deputy Ethics Counsel, and Richard J. Engelhardt, Assistant Ethics Counsel, argued the cause on behalf of Office of Attorney Ethics. Louis B. Youmans argued the cause pro se. PER CURIAM. This attorney-disciplinary proceeding arises out of two presentments filed by the District VII Ethics Committee (Ethics Committee) concerning six separate complaints lodged against respondent, Louis B. Youmans. Following a determination by the Ethics Committee, the Disciplinary Review Board (DRB or Board) concluded that respondent had engaged in unethical conduct. The Board unanimously recommended that respondent's license to practice law be suspended for a period of two years. Pending final resolution of the matter, the Office of Attorney Ethics petitioned this Court for an order seeking temporary *625 suspension of respondent. That petition was prompted by respondent's failure to comply with various Fee Arbitration Committee determinations directing him to refund monies to clients, and by an intervening indictment charging Youmans with one count of conspiracy to commit theft by deception and five counts of bad-check offenses. We granted the order seeking temporary suspension. Our independent review of the record leads us to conclude that respondent's ethical violations have been established by clear and convincing evidence. We further conclude that the period of suspension recommended by the Board appropriately reflects the seriousness of respondent's misconduct. Respondent was admitted to the bar of this State in 1977. In 1983, Mr. Youmans formed a professional corporation for the purpose of practicing law, in which he was the sole shareholder. By February of 1985, Youmans' law practice was beset with financial difficulties. On May 29, 1985, the corporation filed a voluntary petition for reorganization pursuant to Chapter 11 of the Federal Bankruptcy Act, 11 U.S.C.A. § 301 (1979). In January 1986, a trustee was appointed to take over the operation of the firm, and the Chapter 11 proceeding was converted to a Chapter 7 Bankruptcy, 11 U.S.C.A. § 1112 (1979). Thereafter, respondent began an unincorporated sole practice in Shrewsbury. Respondent later moved his office to Manasquan. Respondent's financial problems led to the complaints filed against him by several clients and a former associate of the Youmans firm. The DRB reviewed the findings of the Ethics Committee, which were summarized in the following manner: The DRB concluded that the determinations of the Ethics Committee, finding respondent guilty of unethical conduct in the Puckett, Basaman, Hopkins, Pugh, and Hayakawa matters, were fully supported by clear and convincing evidence. We agree. Specifically, respondent's conduct in these matters constituted violations of RPC 8.4(c), RPC 1.1(a), RPC 1.3, and RPC *633 1.15. With respect to the Caprario matter, the Committee concluded that there was not clear and convincing evidence that respondent engaged in unethical conduct. The Board did not disturb the Committee's determinations concerning the Caprario matter, nor do we. Likewise, we leave undisturbed the Board's conclusion that there is insufficient evidence that respondent engaged in a pattern of neglect. In the Puckett and Basaman matters, Youmans solicited and obtained unsecured loans from clients, at a time when his ability to repay those loans was seriously in doubt. Respondent failed to advise the lender-clients to seek independent counsel, and failed to disclose the rapidly deteriorating financial condition of his law firm. This Court has recently reaffirmed the well-settled principle that an attorney is ethically required to advise clients to obtain independent counsel before making a loan to that attorney. In re Pascoe, 113 N.J. 229, 549 A.2d 1247 (1988). Indeed, we have recognized that as a general rule an attorney should refrain from engaging in transactions with a client who has not obtained independent legal advice on the matter in question. See, e.g., In re Hurd, 69 N.J. 316, 354 A.2d 78 (1976). As Justice Jacobs observed, "[a]n attorney who enters into business ventures with his client does not, in the eyes of his client or the public generally, shed in chameleon fashion his professional standing and obligation * * *." In re Carlsen, 17 N.J. 338, 346, 111 A.2d 393 (1955). Thus, it is clear that attorneys who enter into loan transactions with clients are "held to a higher standard than that of the market place * * * [and their] conduct must measure up to the high standards required of a member of the bar even if [their] duties in a particular transaction do not involve the practice of law." In re Reiss, 101 N.J. *634 475, 488, 502 A.2d 560 (1986). In this case, respondent's personal interest in obtaining loans from Mrs. Puckett and Mr. Basaman overcame his ethical obligation to advise the lenders to seek outside counsel. Had Mrs. Puckett or Mr. Basaman consulted independent counsel, there is a high probability that the unsecured loans would not have been made. Clearly, a lawyer exercising ordinary care to protect the interests of these lender clients would have sought security for the loans made to respondent. Youmans' misconduct was not confined to the failure to advise Mrs. Puckett and Mr. Basaman to seek independent counsel in connection with the loans made to respondent. Rather, we agree with the Board's finding that Youmans' failure to disclose fully the firm's status in the bankruptcy proceedings to these clients at the very outset of the loan transactions constituted misrepresentation and deceit contrary to RPC 8.4(c). (RPC 8.4(c) provides that "[i]t is professional misconduct for a lawyer to [] engage in conduct involving dishonesty, fraud, deceit or misrepresentation.) The omission of such highly pertinent facts severely prejudiced these clients. Both clients made clear that had they been informed of the true extent of respondent's financial situation, the loans would not have been extended to Youmans. Respondent also acted deceitfully in his dealings with Ms. Hopkins and Mrs. Pugh, thereby committing additional violations of RPC 8.4(c). Ms. Hopkins hired Youmans to represent a friend in a criminal appeal. The parties agreed to a fee of $2,500. When Ms. Hopkins tendered a check for that amount, respondent informed her that an additional $1,200 would be required to obtain necessary transcripts of the proceedings below. Ms. Hopkins informed respondent that she was unable to afford this additional sum, and requested that Youmans return the $2,500 check already tendered. Respondent not only improperly refused to return the check, but compounded the situation by conveying to Ms. Hopkins a thinly *635 veiled threat of criminal prosecution on learning that she had stopped payment on the check. As a result of that threat, Ms. Hopkins continued in her relationship with Youmans. Respondent's conduct was clearly unethical. With respect to the Pugh matter, in his attempt to receive his fee expeditiously, respondent signed his client's settlement check contrary to her stated desire to sign it herself. We agree with the DRB's conclusion that respondent's conduct in this regard constituted fraud and misrepresentation to the insurance company issuing the check, and deceit toward Mrs. Pugh. Moreover, with respect to the Basaman matter, the Board concluded that respondent's handling of that client's federal Title VII action constituted gross negligence, contrary to RPC 1.1(a), and failure to use diligence in the representation of a client in violation of RPC 1.3.[1] That conclusion is amply supported by the evidence and comports with the requisite clear-and-convincing standard applicable in attorney-disciplinary matters. In April 1985, Mr. Basaman retained respondent to represent him, inter alia, in a Title VII discrimination action against the United States Postal Service and fourteen other defendants. Respondent did not file the complaint until October 1985. Respondent also failed to make any efforts toward the procurement of injunctive relief on behalf of Mr. Basaman. Further, by the time Mr. Basaman filed an ethics complaint against respondent, Youmans had served only nine of the fifteen named defendants in the Title VII action. Ultimately, the client's *636 cause of action was dismissed as untimely under the relevant statute of limitations. The record clearly indicates that Youmans obtained a substantial non-refundable retainer from Mr. Basaman, and thereafter made little or no effort to obtain redress for the client's employment-related complaints. It is clear on these facts that respondent breached the duty owed to Mr. Basaman to pursue that client's interest with diligence. See, e.g., In re Cullen, 112 N.J. 13, 19-20, 547 A.2d 697 (1988); In re Smith, 101 N.J. 568, 571, 503 A.2d 846 (1986); In re Schwartz, 99 N.J. 510, 518, 493 A.2d 1248 (1985). Without addressing the merits of Mr. Basaman's Title VII discrimination claims, we find, as did the DRB, that respondent's superficial handling of the matter, which ultimately resulted in the loss of the opportunity to litigate those claims, constituted gross negligence in violation of RPC 1.1(a). Finally, in the Hayakawa matter, the Board concluded that respondent's failure to deposit pre-paid unearned legal fees, received pursuant to a written retainer agreement with a client, into a trust account to be drawn upon when services were performed on behalf of the client violated RPC 1.15, which requires an attorney to hold the property of his client separately from his own. Instead, Youmans used the money to pay bills. The Board was unable to conclude, however, that respondent knowingly misappropriated the Hayakawa retainer funds. It is well settled that when an attorney knowingly and without authorization uses a client's money as his or her own, disbarment is the appropriate discipline. In re Noonan, 102 N.J. 157, 506 A.2d 722 (1986); In re Wilson, 81 N.J. 451, 409 A.2d 1153 (1979). There is no logical distinction between misappropriating funds from a trust account and failing to deposit funds into the appropriate trust account when there is an obligation to do so. Our careful review of the record leads us to agree with the Board's determination that there was insufficient *637 evidence to show that respondent knew of the retainer agreement between Ms. Hayakawa and the client. Although there was no knowing misappropriation in this case, we conclude that Youmans conduct constituted a technical violation of RPC 1.15 and was improper. This Court has previously disciplined attorneys who fail to keep client property separate from the lawyer's own property although such conduct does not rise to the level of a knowing misappropriation. Cf. In re Grabler, 114 N.J. 1, 552 A.2d 596 (1989) (discipline warranted where attorney lost track of client funds as a result of inefficient bookkeeping and accounting practices); accord In re Gill, 114 N.J. 246, 553 A.2d 1337 (1989). Discipline is warranted in the present matter as well. Having concluded that respondent has been guilty of numerous ethical infractions, the only issue left to consider is the quantum of discipline. The Board unanimously recommended that respondent be suspended from the practice of law for a period of two years. The Board cited respondent's lack of candor before the Ethics Committee and a private reprimand administered to respondent as aggravating factors it considered in reaching its recommendation. See In re Gavel, 22 N.J. 248, 125 A.2d 696 (1956). (Respondent was privately reprimanded on October 2, 1985 for conduct involving deceit under DR 1-102(A)(4) and (6).) The Board was unpersuaded that evidence of respondent's financial difficulties mitigated the severity of his unethical conduct. In this regard, the Board made clear that the public's confidence in the integrity of the bar would be undermined by treating leniently an attorney who "exhibited a willingness to close his eyes to accepted standards of professional conduct in order to protect his own financial success." We are in accord with the findings of the DRB and its recommendation. In view of the severity of the multiple ethical violations committed by respondent, we order that respondent *638 be suspended from the practice of law for a period of two years. In addition, we adopt the Board's recommendation directing that the Office of Attorney Ethics conduct a further audit of respondent's accounts. Finally, we note that respondent is under investigation by the Office of Attorney Ethics with respect to other matters. Supra at 625. Restoration to practice shall be dependent on the disposition of those matters. Respondent shall also reimburse the Ethics Financial Committee for administrative costs. So ordered. For suspension Chief Justice WILENTZ and Justices CLIFFORD, HANDLER, POLLOCK, O'HERN, GARIBALDI, and STEIN 7. Opposed None. It is ORDERED that LOUIS B. YOUMANS of MANASQUAN, who was admitted to the bar of this State in 1977, be suspended from the practice of law for a period of two years, effective immediately and until further Order of this Court; and it is further ORDERED that LOUIS B. YOUMANS reimburse the Ethics Financial Committee for appropriate administrative costs; and it is further ORDERED that LOUIS B. YOUMANS be restrained and enjoined from practicing law during the period of his suspension; and it is further ORDERED that LOUIS B. YOUMANS comply with Administrative Guideline Number 23 of the Office of Attorney Ethics dealing with suspended attorneys. [1] The full text of RPC 1.1(a) reads that "[a] lawyer shall not [h]andle or neglect a matter entrusted to the lawyer in such a manner that the lawyer's conduct constitutes gross negligence." RPC 1.3 requires a lawyer to "act with reasonable diligence and promptness in representing a client."