Title: MATTER OF LaROSEE
Citation: 122 N.J. 298, 585 A.2d 326
Docket Number: N/A
State: new-jersey
Issuer: new-jersey Supreme Court
Date: February 15, 1991

122 N.J. 298 (1991) 585 A.2d 326 IN THE MATTER OF DAVID R. LaROSEE, AN ATTORNEY AT LAW. The Supreme Court of New Jersey. Argued September 10, 1990. Decided February 15, 1991. *299 Paula T. Granuzzo, Deputy Ethics Counsel, argued the cause on behalf of Office of Attorney Ethics. Edward Hunter and David R. LaRosee, pro se argued the cause for respondent. PER CURIAM. In this matter, we consider ten complaints filed against respondent, David LaRosee, in two separate proceedings. In the first proceeding, concerning one complaint (the Sultan matter), the District Ethics Committee found that respondent had engaged in misconduct in the course of representing a client before the United States Immigration and Naturalization Service. The Disciplinary Review Board (DRB) concluded that the District Ethics Committee's findings of unethical conduct were "fully supported by clear and convincing evidence," and recommended a three-year suspension from the practice of law for those ethical violations. In the second proceeding concerning the nine other complaints, a Special Ethics Master recommended that five be dismissed. In the four remaining matters Petitt, DuFour, Bertles, and Sebasto the Special Ethics Master found ethical violations. In the Petitt matter, the Master determined that respondent had failed to advise his clients that he had turned over their file to another attorney when he moved to Massachusetts and ceased to practice law in New Jersey. In the DuFour matter, the Master found that respondent had violated recordkeeping requirements by failing to maintain client ledger cards, and when audited had failed to comply with the auditor's *300 numerous requests for information. In the Bertles matter, the Master determined that respondent had attempted to suborn perjury. In the Sebasto matter, the Special Ethics Master found the second count, alleging misappropriation of clients' trust funds, to have been established, but dismissed the first count, which alleged a conflict of interest.[1] The DRB concurred with the Special Ethics Master that the allegations of unethical conduct in the Petitt, DuFour, Bertles, and Sebasto matters were "fully supported by clear and convincing evidence." The DRB also agreed that the five other complaints and the first count in the Sebasto matter should be dismissed. The DRB recommended that respondent's unethical conduct in the Bertles and Sebasto matters warranted disbarment. On June 7, 1988, this Court temporarily suspended respondent based on the DRB report and recommendation in the Sultan matter. The DRB found the following facts: The DRB found that respondent had been grossly negligent and deceitful in his communications with his client, having materially altered a document from the United States Immigration and Naturalization Service. The DRB concluded that respondent had violated DR 2-110(A)(2), 6-101(A)(1), 1-102(A)(4), and 1-102(A)(5), and recommended public discipline for those violations. As found by the DRB, the facts are as follows: Based on those findings, the DRB concluded that The DRB made the following findings: Based on those findings, the DRB concluded that In late 1981 or early 1982, respondent had represented Timothy Bertles in a criminal matter involving the alleged possession of drugs and another charge. Subsequently, in January 1982, either Bertles or his parents retained a different attorney to represent him in that matter. Respondent has admitted to writing the following letter to Bertles on February 2, 1982: The Special Ethics Master observed that The Special Ethics Master concluded that the letter "indicates a suggestion by respondent that the proper administration of justice be interfered with." He further concluded that disciplinary action is warranted, but deferred to the DRB to recommend *305 the extent of such discipline. The DRB found respondent's conduct "nothing short of atrocious," observing that respondent's letter suggests that his former client pay his co-defendant to lie, the letter acknowledging that such a course of action is probably unethical. The DRB found that "[a] more abominable course of conduct is difficult to fathom," and concluded that respondent "aided and abetted the commission of subornation of perjury," citing N.J.S.A. 2C:2-6 and N.J.S.A. 2C:28-5. In this matter, respondent represented two families, the Fagans and the Brienings. Each of the families owned an interest in a restaurant known as Heavens II and in the underlying property. The restaurant was operated by Mican, Inc., and the land on which it was located was owned by Red Land Realty, a general partnership. The other beneficial owners of the business were Sandra Irish and Joseph Sebasto. In the latter part of 1984, when it became apparent that the business was foundering, a corporate meeting was called to address that problem. The agenda for the meeting included consideration of two options, either selling the business or filing for protection under the Bankruptcy Code. Mrs. Fagans had given respondent a power of attorney, and he attended the meeting as her representative. Heavens II was represented by Edward Bernstein, its corporate counsel. At the meeting, the bankruptcy option was discarded, and the parties agreed to sell the business. The owners retained respondent to sell the business and agreed to pay him a commission when the sale had occurred. Cf. In re Roth, 120 N.J. 665, 675, 577 A.2d 490 (1990) (holding that attorney unlicensed as broker must confine brokerage services to those incidental to practice of law and not receive separate compensation for brokerage services). Some time after the meeting, respondent informed the owners of the business that he had located a buyer. Respondent *306 and Bernstein jointly drafted a Stock Purchase Agreement for Mican and a Purchase and Sale Agreement for Red Land Realty (the contracts), in which the stated purchaser was David R. LaRosee "and/or his assigns." In connection with the contracts, respondent advised the sellers by letter of their right to obtain separate counsel, and the sellers acknowledged that they had expressly waived that right. Respondent testified that he was acting as an agent for undisclosed principals. Bernstein, Sebasto, and Irish, however, testified that they believed respondent was acting in his own behalf. No buyer other than respondent was ever identified to the sellers. Further, respondent admitted that he was to have an "equity position" in the business. The draft contracts provided for a $15,000 down payment. On September 28, 1984, respondent issued a check from his trust account in the amount of $15,000 to Bernstein. Accompanying the check was the following handwritten letter: Respondent testified that he gave Bernstein the check merely to hold, not to deposit. He stated that although he was well aware of the different meanings of "disburse" and "deposit," he and Bernstein had orally agreed that Bernstein was not to deposit the check until "[respondent] gave him the go-ahead." Respondent testified that he told Bernstein not to deposit the check until respondent was satisfied with the agreement and had been authorized by his principal to release the funds. Bernstein, however, testified that he was unsure what respondent had meant by the note accompanying the check. Bernstein testified that in a discussion subsequent to the issuance of the check, he and respondent had agreed that Bernstein would deposit the check after respondent had approved the terms of the contract. *307 Respondent further testified that the undisclosed principals had given him $18,000 in cash, but had never authorized the disbursement of those funds. Respondent claimed to have held the money either at home or in his safe deposit box. Respondent acknowledged that he never had deposited the $18,000 in his trust account or any other account. Thus, the $15,000 check was drawn against trust-account funds belonging to other clients. Bernstein did not deposit the check for a period of time after receiving it. Sometime prior to November 8, 1984, respondent agreed to the terms of the contracts, and Bernstein deposited the $15,000 check. Respondent stated that although he had approved the terms of the contracts, he had never authorized Bernstein to deposit the check. On November 8, 1984, the contracts were executed, and respondent signed the contract as "Purchaser." The contracts provided that Respondent testified that soon after the contracts were executed, he ascertained from his bank statement that Bernstein had deposited the $15,000 check. Respondent claims that immediately thereafter, he called Bernstein and demanded that Bernstein reimburse respondent's trust account. Bernstein communicated with all the sellers and informed them of respondent's demands. Irish testified that respondent also had phoned him at home between 10:30 and 11:00 p.m. According to Irish, respondent was extremely agitated and needed the money back to cover a check. After some negotiation through the night and into the early morning, an agreement was reached whereby the sellers had Bernstein issue a check dated November 10, 1984, for $15,000 to "David LaRosee, Esq., `Trust Account.'" In exchange, respondent agreed to issue a $15,000 check from his business account. The following agreement *308 was executed by the parties at approximately 3:00 a.m. on November 10, 1984: In accordance with the November 10th agreement, respondent issued a $15,000 check to Bernstein dated November 17, 1984, from his business account. On November 20, 1984, respondent sent Bernstein a letter rescinding the contracts and proceeded to stop payment on the November 17th check. Thereafter, the owners of the business brought suit against respondent to enforce the contracts. The Special Ethics Master found that respondent had knowingly misappropriated clients' trust funds. He concluded that even if an undisclosed principal had been originally involved, the undisclosed principal had withdrawn from the transaction by November 8, 1984, leaving respondent as the sole purchaser. The DRB concurred with the finding that respondent had knowingly misappropriated clients' funds. The DRB determined that although respondent's issuance of the check from his trust account without funds to back it up "smacked of dishonesty," that action itself did not constitute a knowing misappropriation. The DRB observed that a knowing misappropriation requires both an intention to use clients' trust funds and an actual invasion of such funds. The DRB determined that respondent should have known that clients' funds would be improperly used if Bernstein deposited the check. The DRB found that the fact that respondent had never deposited funds in his trust account to cover the check, combined with Bernstein's subsequent deposit of the check, constituted a knowing misappropriation in violation of RPC 1.15. Based on our independent review of the record, we concur with the DRB's findings in the Petitt and DuFour matters. We address separately respondent's conduct in the Sultan, Sebasto and Bertles matters. In the Sultan matter, the record provides clear and convincing evidence to support the DRB's finding that respondent provided his client with a fraudulent document purporting to grant the Iqbal Sultan family permanent-resident status. We consider "forgery of public documents [to be] among the more serious offenses an attorney can commit." In re Hughes, 90 N.J. 32, 36, 446 A.2d 1208 (1982). That form of misconduct "demonstrates unfitness to practice law," ibid., because it "severely damage[s] public confidence in the legal system." Id. at 39, 446 A.2d 1208. The DRB correctly observed that respondent's "conduct created a clear potential for harm to his clients." If Sultan had relied on the altered document and had taken no independent action, he and his family might have been threatened with deportation. We have consistently held that conduct similar to respondent's warrants severe discipline. See, e.g., In re Chidiac, 109 N.J. 84, 533 A.2d 704 (1987) (indefinite suspension imposed on attorney who altered inheritance-tax waiver); In re Yacavino, 100 N.J. 50, 494 A.2d 801 (1985) (attorney suspended three years for preparing two fictitious adoption orders); In re Hughes, supra, 90 N.J. 32, 446 A.2d 1208 (attorney disbarred for bribing public official and falsifying federal tax records); In re McNally, 81 N.J. 304, 406 A.2d 1315 (1979) (attorney suspended two years for preparing and recording forged Sheriff's deed). The DRB concluded that in the Sebasto matter, "respondent was guilty of the most serious ethics violation that may be committed by an attorney-at-law," a knowing misappropriation of clients' trust funds. We have consistently held that when an attorney has knowingly misappropriated clients' trust funds, no matter for what purpose, the result will be disbarment. In re *310 Wilson, 81 N.J. 451, 453, 409 A.2d 1153 (1979). Because the sanction for knowing misappropriation is severe and permanent, we must be satisfied by clear and convincing evidence that there was an intentional invasion of clients' funds. In re Perez, 104 N.J. 316, 324, 517 A.2d 123 (1986). The DRB concluded that the $15,000 check issued from respondent's trust account, when deposited, amounted to a knowing misappropriation of clients' trust funds. Respondent contends that he did not intend to misappropriate funds from his trust account. He states that he never authorized Bernstein to deposit the check. It is undisputed, however, that respondent never deposited funds in his trust account to cover the September 28th $15,000 check. His stated reason for not doing so was that he never received authorization from the undisclosed buyers. When respondent delivered the check to Bernstein without explicit written directions not to deposit the check, it is indisputable that he should have known that invasion of trust funds was a possible result. The critical issue, however, is whether respondent intended that the trust-account check be deposited, which would necessarily result in the invasion of clients' trust funds. Some evidence in the record suggests that respondent should have known that Bernstein's deposit of the check was inevitable. Thus, the contracts provided that the $15,000 down payment was to be "held in trust" by the sellers' attorney, language that plainly contemplates that sellers' counsel was required to deposit the down-payment check into their trust account. On the other hand, respondent's conduct when he learned that the check had in fact been deposited did not reflect the state of mind associated with a knowing misappropriation. The undisputed testimony is that respondent was surprised and extremely agitated on learning that the check had been deposited. He immediately commenced negotiations with the sellers and their counsel, the negotiations continuing through the evening and into the early hours of the following morning. The *311 agreement that resulted required sellers' counsel to return the $15,000 to respondent, subject to respondent's promise to replace the funds within a few days. In addition, the sellers' attorney testified that he was not authorized to deposit the check until the contracts had been approved by respondent. According to Bernstein's testimony, although respondent had never specifically authorized the deposit of the check, Bernstein assumed that the approval of the terms of the contract constituted such an authorization. On this record, we are unable to conclude that there is clear and convincing evidence that respondent knowingly misappropriated clients' funds. Nevertheless, respondent's conduct in issuing a check from his trust account to serve as a good-faith deposit for the purchase of a business was both improper and inexcusable. We are satisfied from the evidence in the record that respondent was the actual purchaser in the aborted transaction. RPC 1.15 mandates that clients' funds be maintained separately. By issuing a check from his trust account without corresponding funds on deposit, respondent exposed his clients' funds to an unauthorized risk of withdrawal, in violation of the mandate of RPC 1.15. Moreover, the mere issuance and delivery of the check drawn on his trust account was deceitful in that it constituted a representation by respondent that his trust account contained funds that were available to serve as a down payment, thereby violating RPC 8.4(c), which prohibits "conduct involving dishonesty, fraud, deceit, or misrepresentation." Accordingly, even though we do not find that respondent committed a knowing misappropriation of clients' funds, respondent's conduct in the Sebasto matter warrants severe discipline. In the Bertles matter, the DRB concluded that "respondent aided and abetted the commission of subornation of perjury." In reaching that conclusion, the DRB noted that in respondent's Respondent's letter to Bertles can fairly be read to suggest that Bertles consider paying his co-defendant to perpetrate a fraud on the court. DR 7-102(A)(7) provides that "a lawyer shall not counsel or assist his client in conduct that the lawyer knows to be illegal or fraudulent." We are clearly convinced that respondent's letter forwarding the co-defendant's offer encouraged Bertles to engage in conduct that is both fraudulent and illegal. The DRB, relying on In re Edson, 108 N.J. 464, 530 A.2d 1246 (1987), concluded that respondent's conduct in the Bertles matter warranted disbarment. In Edson, we found that the attorney's fabrication of an extrapolation defense in two drunk-driving prosecutions exhibited a "shocking disregard of professional standards," id. at 472, 530 A.2d 1246, requiring his disbarment. In In re Verdiramo, 96 N.J. 183, 475 A.2d 45 (1984), we held that an attempt to influence a witness's testimony constituted serious misconduct in that it "directly poison[s] the well of justice." Id. at 186, 475 A.2d 45. Since Verdiramo, we have consistently held that conduct that threatens to obstruct the administration of justice warrants severe discipline. See In re Lunn, 118 N.J. 163, 570 A.2d 940 (1990) (three-year suspension for lying under oath); In re Silverman, 113 N.J. 193, 549 A.2d 1225 (1988) (six-year suspension for false swearing); In re Baldino, 105 N.J. 453, 522 A.2d 998 (1987) (disbarment for attempting to subvert member of grand jury); In re Kushner, 101 N.J. 397, 502 A.2d 32 (1986) (three-year suspension for making false certification in court). Respondent violated a fundamental ethical principle when he encouraged his former client to present false testimony. As we observed in In re Rosen, 88 N.J. 1, 3, 438 A.2d 316 (1981), "[a]ttempted subornation of perjury is an inexcusable and reprehensible transgression." In comparing misconduct that affects *313 the administration of justice to a Wilson violation, we have stated: Respondent's misconduct in the Bertles matter was blatant and inexcusable. Dishonesty in the practice of law undermines the administration of justice. In unanimously recommending disbarment, the DRB stated: Similarly, in the Sultan matter, respondent's misconduct in altering a public document and inducing his client to rely on it was egregious and inexcusable. We concur in the discipline recommended by the DRB. We find that respondent's conduct in the Bertles matter, combined with his conduct in the Sebasto, Sultan, Petitt, and DuFour matters, warrants disbarment. Respondent is disbarred. He shall reimburse the Ethics Financial Committee for appropriate administrative costs. So ordered. For disbarment Chief Justice WILENTZ and Justices CLIFFORD, HANDLER, POLLOCK, O'HERN, GARIBALDI and STEIN 7. Opposed None. It is ORDERED that DAVID R. LA ROSEE of TRENTON, who was admitted to the bar of this State in 1973, be disbarred and that his name be stricken from the roll of attorneys of this State, effective immediately; and it is further *314 ORDERED that DAVID R. LA ROSEE be and hereby is permanently restrained and enjoined from practicing law; and it is further ORDERED that respondent comply with Administrative Guideline No. 23 of the Office of Attorney Ethics dealing with disbarred attorneys; and it is further ORDERED that respondent reimburse the Ethics Financial Committee for appropriate administrative costs. [1] Respondent's actions occurred both before and after September 1, 1984, the date on which the Rules of Professional Conduct replaced the Disciplinary Rules. Hence, we refer to either the Disciplinary Rules or the Rules of Professional Conduct, depending on when the misconduct occurred.