KENTUCKY AND NEW JERSEY:

Attorneys and Clients; Escrow

Inquiry Commission v John Michael Poole, 4 SW3d 139 (KY 1999).

Facts: Poole organized and operated a corporation called USA Title Company. As an agent of Chicago Title Insurance Company, USA Title Company conducted real estate closings, issued title insurance policies, and disbursed funds deposited in its escrow account to pay off mortgage debts and other expenses related to real estate closings. Evidence indicates that Poole made illegal use of funds from the USA Title escrow account by transferring escrow funds into the company's operating account.

SCR 3.265(1)(a) provides that an attorney may be temporarily suspended if it "appears that probable cause exists to believe that an attorney is or has been misappropriating funds the attorney holds for others to his or her own use or has been otherwise improperly dealing with said funds." Poole argued that the escrow account in question had a positive balance of over $150,000. However, he did not dispute that he authorized the account transfers, nor did he offer any explanation for making these transfers.

Holding: The court found probable cause to believe that Poole misappropriated funds he held for Chicago Title's use. Therefore, the court ordered the Inquiry Commission to initiate disciplinary proceedings against Poole, and temporarily suspended Poole from the practice of law in Kentucky until the merits of the disciplinary proceedings could be finally determined, or until Poole could show good cause why the order of temporary suspension should be amended or dissolved.

In the Matter of Seth Mininsohn, 740 A2d 1074 (NJ 1999).

Facts: Charges of "knowing misappropriation of client funds" against attorney Seth Mininsohn arose from fifteen real estate transactions in which Mininsohn withdrew his legal fee from his trust account before it had been earned, and six occasions on which he disbursed trust account funds to himself when he had insufficient funds on deposit. In nine of the real estate transactions at issue, Mininsohn represented the seller and was the escrowee for the buyer's deposit. He was required to hold in escrow the buyer's deposit until the closing of title, at which time those funds would be paid to the seller. However, he withdrew his legal fees from the escrow funds before closing. In the other six real estate transactions at issue Mininsohn, usually representing buyers, disbursed fees to himself before receipt of funds. Finally, on six occasions Mininsohn disbursed trust account funds to himself when he had insufficient funds on deposit, resulting in a negative balance. The Special Master found clear and convincing evidence that Mininsohn knowingly misappropriated escrow and trust account funds in thirteen of the fifteen real estate transactions. The Disciplinary Review Board (DRB) sustained the Special Master's finding, and additionally found clear and convincing evidence that Mininsohn disbursed trust account funds to himself when he had insufficient funds on deposit. Before the Court in this case was the DRB's recommendation to disbar Mininsohn because of these violations.

Holding: Affirmed. Knowing misappropriation of client funds is an ethical violation under RPC 1.15(a) and (c). The offense consists 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, 506 A2d 722 (NJ 1986). Intent to steal funds from a client is not an element of the offense, and motive of an attorney is generally irrelevant. The only appropriate punishment is disbarment. The proper standard of proof is clear and convincing evidence.

Mininsohn 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 because he did not always withdraw the fees he had earned from other transactions did not absolve him. Therefore the court ordered that he be disbarred.

EDITOR'S NOTE: Under Illinois law, the court would give great deference to the hearing panel's determinations regarding fact-finding judgments. However, disciplinary recommendations of the hearing panel and Review Board are only advisory. Evidence of a dishonest motive on the part of the attorney is appropriate to consider in determining severity of sanctions, but lack of dishonest motive does not preclude imposition of discipline. In determining the appropriate sanction of an attorney to serve the purposes of attorney discipline, Illinois endeavors to achieve uniformity in application of discipline, but also considers each individual case on its own merits. Mitigating factors such as the length of time in practice, previous misconduct, whether and when restitution is made if it is owing, community service, pro bono legal work, and the testimony of character witnesses and professional colleagues are placed on one side of the scale, while the seriousness of the misconduct is placed on the other. In re Robert J Lenz, 108 Ill 2d 445, 453, 484 NE2d 1093, 1097, 92 Ill Dec 238, 242 (Ill 1985). The Court in In re Michael Masaharu Ushijima, 119 Ill 2d 51, 518 NE2d 73, 115 Ill Dec 548 (Ill 1987), held that substantial conversion of clients' escrow funds, compounded by persistent failure to account for the funds, despite repeated requests from clients, and holding client escrow funds as ransom in a fee dispute, warranted an 18-month suspension.

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