Title: In the Matter of Seth Mininsohn, An Attorney at Law

State: new-jersey

Issuer: New Jersey Supreme Court

Document:

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). PER CURIAM This is an attorney disciplinary case. Respondent, Seth Mininsohn was admitted to practice in New Jersey in 1985. In March 1994, Hudson Bank notified the Office of Attorney Ethics (OAE) of an overdraft in Mininsohn's attorney trust account. When the OAE was dissatisfied with his explanation of the overdraft, it conducted an audit of his books and records for the period January 1991 to July 1994. On the basis of that audit, the OAE filed a complaint charging Mininsohn with knowing misappropriation of escrow and trust funds and with recordkeeping violations. The matter was heard by a Special Master. The charges stemmed from nine real estate transactions in which Mininsohn represented sellers and withdrew his legal fees from escrow funds before closing. In addition, in six real estate transactions, usually when he represented buyers, Mininsohn advanced himself legal fees from other clients' funds. In most of the real estate transactions in which Mininsohn disbursed premature fees to himself or fees from the funds of other clients, he made contemporaneous written notations on the checks identifying the relevant client matter. Finally, in six other instances, Mininsohn disbursed funds to himself from his trust account when that account had insufficient funds on deposit. Mininsohn maintained that his misappropriations were the result of negligence and not of any intent on his part to steal from his clients. In that regard, he maintained that his ignorance of trust account bookkeeping was the reason for the negative balance found in his trust account when he disbursed funds to himself. In addition, he maintained that he believed that his trust account had a cushion of his own funds, because he did not always withdraw from that account fees that the had earned from other transactions. He offered no evidence to support that belief. Following the hearing, the Special Master found clear and convincing evidence that Mininsohn had knowingly misappropriated escrow and trust funds in thirteen of the fifteen real estate transactions. On de novo review, the Disciplinary Review Board (DRB) sustained the Special Master's findings in most respects. In addition, the DRB found clear and convincing that Mininsohn had disbursed trust funds to himself when he had insufficient funds on deposit. Thus, the DRB recommended that respondent be disbarred. The matter was before the Court pursuant to R. 1:20-16(a). HELD: The record clearly and convincingly establishes that Mininsohn knowingly misappropriated escrow and trust funds to pay himself unearned legal fees, and that he disbursed trust funds to himself when he had insufficient funds on desposit, for which he is disbarred. 1. Intent to steal from a client is not an element of knowing misappropriation, and the motive of an attorney ordinarily is irrelevant in determining the appropriate discipline for knowing misappropriation. If the evidence clearly and convincingly establishes that an attorney has knowingly misappropriated trust funds, disbarment is the only appropriate discipline. (pp. 13-15) 2. The contemporaneously written notations Mininsohn made on the trust checks support the conclusion that he was aware that he was taking fees prior to earning them. (pp. 15-16) 3. Mininsohn's erroneous belief that he had an equity cushion in his trust account at the time he disbursed funds to himself was unfounded, and he failed to offer evidence to sustain the contention that his belief was reasonable or justifiable. (pp. 16-17) 4. The record contains clear and convincing evidence that Mininsohn knowingly misappropriated escrow and trust funds to pay himself unearned legal fees, for which he is disbarred. (p. 17) CHIEF JUSTICE PORITZ and JUSTICES O'HERN, GARIBALDI, STEIN, COLEMAN, LONG, and VERNIERO join in this opinion. IN THE MATTER OF SETH MININSOHN, An Attorney at Law. Argued September 13, 1999 -- Decided December 3, 1999 On an Order to show cause why respondent should not be disbarred or otherwise disciplined. Nitza I. Blasini, Deputy Ethics Counsel, argued the cause on behalf of the Office of Attorney Ethics. Andrew P. Napolitano argued the cause for respondent (Sills Cummis Radin Tischman Epstein & Gross, attorneys; Mr. Napolitano and Steven R. Rowland, of counsel and on the brief). PER CURIAM This attorney discipline proceeding arose when the Office of Attorney Ethics (OAE) was notified of an overdraft in respondent Seth Mininsohn's attorney trust account. After an investigation by the OAE, a formal complaint was filed against respondent. The complaint was based on fifteen real estate transactions in which respondent withdrew his legal fee from his trust account before it had been earned, and on six occasions on which respondent disbursed trust account funds to himself when he had insufficient funds on deposit. The complaint charged respondent with violating the following Rules of Professional Conduct (RPC): RPC 1.15(a) (knowing misappropriation of client funds); RPC 8.4(c) (conduct involving dishonesty, fraud, deceit and misrepresentation); RPC 1.15(c) (failure to safeguard client funds); RPC 1.15(d) (failure to comply with the provisions of R. 1:21-6). The Special Master found clear and convincing evidence that respondent violated RPC 1.15(a), RPC 8.4(c), RPC 1.15(c), and RPC 1.15(d) because he engaged in knowing misappropriation of escrow and trust account funds in thirteen of the fifteen real estate transactions. The Disciplinary Review Board (DRB) sustained the Special Master's finding that Respondent knowingly misappropriated clients' funds and failed to properly maintain records as required by R. 1:21-6. Additionally, the DRB found clear and convincing evidence in the record demonstrating that respondent disbursed trust account funds to himself when he had insufficient funds on deposit. Pending before the Court is the DRB's recommendation to disbar respondent because of those violations. In response to an Order to show cause why he should not be disbarred or otherwise disciplined, respondent contended that his inexperience and lack of training in managing a trust account led him mistakenly to conclude that he had an equity cushion in his trust account. Respondent believed that his trust account had a cushion because he did not always withdraw the fees that he had earned from other transactions. Respondent insisted that his ignorance of trust account bookkeeping was the reason for the negative balance found in his trust account. Accordingly, respondent contended that he acted negligently, not knowingly, in invading client or escrow funds. Our responsibility in attorney disciplinary matters is to conduct an independent review of the record, R. 1:20-16(c), and to determine whether the charges have been proved by clear and convincing evidence. In re Di Martini, 158 N.J. 439, 441 (1999). We note that both the Special Master and DRB found by clear and convincing evidence that respondent had knowingly misappropriated client funds, and that the DRB found by clear and convincing evidence that respondent had disbursed trust account funds to himself and in the process had invaded client funds. Based on our independent review of the record, we agree with those conclusions. I Respondent was admitted to the New Jersey bar in 1985. On graduation from Hofstra Law School, respondent worked as a junior associate to the in-house counsel of Schiavone Construction Company. While employed by Schiavone, respondent's responsibilities were limited to contract negotiations and resolution of contractor-subcontractor disputes. A On March 29, 1994, Hudson United Bank notified the OAE of an overdraft in respondent's attorney trust account. The OAE informed respondent of the trust account overdraft notice and requested an explanation. In response, respondent wrote four letters to the OAE that tried to explain the overdraft. Dissatisfied with respondent's explanations, the OAE informed him that it would conduct an audit of respondent's books and records for the period from January 1, 1991 to July 1994. On the basis of that audit, the OAE filed a four-count complaint charging respondent with the knowing misappropriation of escrow and trust funds as well as with recordkeeping violations. The charges stemmed from nine real estate transactions in which respondent represented sellers and withdrew his legal fees from escrow funds before closing; six real estate transactions in which respondent, usually representing buyers, advanced himself legal fees from other clients' funds; and six instances in which respondent disbursed funds to himself from his trust account when that account had insufficient funds on deposit. 1 Respondent represented the seller and was the escrowee for the buyer's deposit on nine occasions. Those real estate transactions required respondent to hold in escrow the buyer's deposit until the closing of title, at which time those funds would be paid to the seller. The facts pertinent to the nine occasions on which respondent represented the seller and was the escrowee for the buyer's deposit are as follows: In the Schulte matter, the closing took place on December 31, 1990. The client ledger sheet showed receipt of $1,000 and $17,500 during October 1990. Respondent's bill for the closing was $4,051. The ledger sheet showed a $1,600 disbursement to respondent for fees and disbursements on December 21, 1990. The check was signed by respondent, and included a notation Schulte that was made at the time the check was written. The ledger sheet also showed a $2,451 disbursement for the balance of respondent's fee on December 31, 1990, the date of the closing. The check was signed by respondent and also included the notation Schulte. Respondent testified that he believed he was entitled to take a partial fee when his client signed the deed on December 21, 1990. II A The central issue is whether respondent knowingly or negligently invaded client funds. Knowing misappropriation of client funds is an ethical violation under RPC 1.15(a) and (c). Misappropriation that results in disbarment "consists simply of a lawyer taking a client's money entrusted to him, knowing that it is the client's money and knowing that the client has not authorized the taking." In re Noonan, 102 N.J. 157, 160 (1986). Disbarment is required for the misappropriation of either escrow funds or client trust funds because of the obvious parallel between escrow funds and trust funds. In re Hollendonner, 102 N.J. 21, 28 (1985). Intent to steal funds from a client is not an element of knowing misappropriation. In re Barlow, 140 N.J. 191, 198 (1995). The motive of an attorney ordinarily is irrelevant in determining the appropriate punishment for knowing misappropriation. In re Greenberg, 155 N.J. 138, 156 (1998); Barlow, supra, 140 N.J. at 195; Noonan, supra, 102 N.J. at 160. This Court consistently has applied the long-standing rule that "disbarment is the only appropriate discipline" for knowing misappropriation of client funds. In re Wilson, 81 N.J. 451, 453 (1979). However, clear and convincing evidence is required to prove that respondent knowingly misappropriated client funds. In re Konopka, 126 N.J. 225, 234 (1991) (holding that attorney's careless record-keeping was evidence of negligent misappropriation of client funds). The Wilson rule is not applicable unless there is clear and convincing evidence that respondent knowingly misappropriated client funds. In re Roth, 140 N.J. 430, 444 (1995); Barlow, supra, 140 N.J. at 196 ( Proof of misappropriation, by itself, is insufficient to trigger the harsh penalty of disbarment. Rather, the evidence must clearly and convincingly prove that respondent misappropriated client funds knowingly. ); Hollendonner, supra, 102 N.J. at 29. B Respondent claims that he never would have taken client funds unless he believed that he was legally entitled to those funds as his fee for legal services. However, the record indicates that where respondent represented sellers in real estate transactions he frequently advanced his legal fee to himself from the buyers' deposit funds before closing, even though the underlying contracts required that he retain those deposit funds until the closing. Respondent also advanced fees to himself in certain matters before he had received any funds relating to the matter, thereby invading client funds unrelated to those transactions. Respondent acknowledged his familiarity with the rule that attorneys are not entitled to take fees in a real estate transaction until the transaction has been completed. The contemporaneously written notations on the checks by respondent support the conclusion that he was aware that he was taking fees prior to earning them. That conclusion also is supported by the fact that, in some instances, respondent withdrew a fee at closing that, combined with his previously advanced fee, exactly equaled the fee respondent had established for his services. Respondent also maintained a Ledger in which he kept track of the amount of funds he removed from his trust account. Respondent never knew the running balance in his trust account, but he asserts that he "assumed" that he had extra funds from which he could draw. However, respondent's testimony in support of his assertion that he believed there was a "cushion" in his trust account was vague and unpersuasive. In response to a question from his counsel, respondent testified that on approximately twenty occasions he "accidentally" had omitted to withdraw fees that he had earned from his trust account. Respondent also testified that whenever he withdrew escrow fees in advance of a closing, the withdrawal was based on his assumption that he had an equivalent "cushion" in his trust account. However, respondent did not attempt to offer any specific factual basis for that assumption, and respondent's own expert testified that when he performed a reconciliation of the trust account he determined that "there weren't always sufficient funds on hand, and he was always indeed out of trust." Respondent's erroneous belief that he had an equity cushion was unfounded, and respondent failed to offer evidence to sustain the contention that his belief in the existence of an adequate cushion was reasonable or justifiable. III Respondent contends that he did not intend to steal from his clients, but intent to steal is not required to establish knowing misappropriation. Respondent was fully aware that he was disbursing fees to himself before he had fully earned them. His erroneous belief that he had a cushion in his trust account does not absolve him of knowledge of his misappropriations. The record contains clear and convincing evidence that respondent knowingly misappropriated escrow and trust funds to pay himself unearned legal fees. Accordingly, we adopt the recommendation of the DRB and order that respondent be disbarred. Respondent is ordered to reimburse the Disciplinary Oversight Committee for appropriate administrative costs. IN THE MATTER OF : SETH MININSOHN, : O R D E R AN ATTORNEY AT LAW : It is ORDERED that SETH MININSOHN of HOBOKEN, who was admitted to the bar of this State in 1985, be disbarred and that his name be stricken from the roll of attorneys of this State, effective immediately; and it is further ORDERED that SETH MININSOHN be and hereby is permanently restrained and enjoined from practicing law; and it is further ORDERED that SETH MININSOHN comply with Rule 1:20-20 dealing with disbarred attorneys; and it is further ORDERED that SETH MININSOHN reimburse the Disciplinary Oversight Committee for appropriate administrative costs. WITNESS, the Honorable Deborah T. Poritz, Chief Justice, at Trenton, this 3rd day of December, 1999. /s/ Stephen W. Townsend CLERK OF THE SUPREME COURT NO. D-229 Decided December 3, 1999 Order returnable Opinion by PER CURIAM