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Disciplinary Counsel v. Parnoff

Appellate Court of Connecticut

July 7, 2015


Argued March 4, 2015

Page 622

[Copyrighted Material Omitted]

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Presentment by the plaintiff for alleged professional misconduct by the defendant, brought to the Superior Court in the judicial district of Fairfield and tried to the court, Bellis, J.; judgment reprimanding the defendant and ordering that certain disputed funds remain in escrow; thereafter, the court granted in part the plaintiff's motion to reargue, and the plaintiff appealed to this court; subsequently, the court, Bellis, J., issued an articulation of its decision.



The plaintiff Disciplinary Counsel appealed to this court from the judgment of the trial court reprimanding the defendant attorney for having violated rule 1.15 (f) of the Rules of Professional Conduct, which requires that a lawyer in possession of disputed property must keep it separate until the dispute is resolved. The plaintiff had filed a presentment in the Superior Court, alleging that the defendant misappropriated certain client funds that were the subject of a fee dispute by allowing them to be transferred from an escrow account he had established into his personal bank account. The trial court found that the defendant had not knowingly misappropriated the funds but had done so negligently, in violation of rule 1.15 (f), and, thus, was not subject to disbarment from the practice of law under the applicable rule of practice ([2013] § 2-47A), which codified a rule enunciated in New Jersey law that a knowing misappropriation of clients' money should, without exception, result in mandatory disbarment. On appeal to this court, the plaintiff claimed, inter alia, that the trial court applied an improper legal standard in determining whether the defendant knowingly misappropriated the funds, and abused its discretion by failing to impose a sanction more severe than a reprimand.

Held :

1. The plaintiff could not prevail on her claim that the trial court applied an incorrect standard in determining that the defendant did not knowingly misappropriate funds and, thus, was not subject to mandatory disbarment under § 2-47A: this court concluded that the " knowing" requirement of § 2-47A relates to whether an attorney knew in fact that the property did not belong to him when it was misappropriated, and nothing in § 2-47A or New Jersey law suggested that an attorney acting in good faith is subject to mandatory disbarment as long as he " knowingly" engaged in the conduct; furthermore, the trial court found that the defendant's conduct here did not give rise to a knowing misappropriation under § 2-47A, as he lacked knowledge that the funds belonged to the client and had acted with carelessness, and that court properly considered whether the defendant's actions were done with actual or constructive knowledge of a lack of ownership or whether he acted with a less culpable state of mind.

2. Contrary to the plaintiff's claim, the trial court's factual findings that the defendant had acted negligently rather than wilfully, that the parties had agreed at a prior hearing as to the amount of the disputed fees, and that the defendant had cooperated in the disciplinary proceedings were not clearly erroneous; that court's findings were supported by sufficient evidence in the record, as the defendant's testimony that he believed he no longer was required to keep the disputed funds in escrow was consistent with the court's finding that his belief was unreasonable, the escrow amount of the disputed fees was established by the parties, and the plaintiff did not show a pattern of uncooperative behavior by the defendant.

3. This court could not conclude that the trial court abused its discretion in reprimanding the defendant rather than suspending or disbarring him from the practice of law; the trial court's finding that the defendant failed to keep the disputed funds separate from his personal account and did not knowingly misappropriate the funds, but acted negligently, rationally supported the court's exercise of its discretion to impose a more lenient sanction.

Suzanne B. Sutton, first assistant chief disciplinary counsel, with whom were Beth L. Baldwin, assistant disciplinary counsel, and, on the brief, Patricia A. King, chief disciplinary counsel, for the appellant (plaintiff).

Paul E. Pollock, for the appellee (defendant).

Beach, Prescott and Bear, Js. PRESCOTT, J. In this opinion the other judges concurred.



Page 624

[158 Conn.App. 455] In this attorney presentment proceeding brought pursuant to Practice Book § 2-47, the plaintiff, Disciplinary Counsel,

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appeals from the judgment of the trial court reprimanding the defendant, Laurence Parnoff, for violating rule 1.15 (f) of the Rules of Professional Conduct. Disciplinary Counsel claims that the court (1) applied an incorrect legal standard in [158 Conn.App. 456] determining that the defendant had not knowingly misappropriated his client's funds and, thus, was not subject to mandatory disbarment in accordance with Practice Book § 2-47A; (2) made several clearly erroneous factual findings; and (3) abused its discretion by deciding not to impose sanctions beyond a reprimand. We affirm the judgment of the trial court.

This disciplinary proceeding arises out of a long-standing dispute over attorney's fees between the defendant, his former client, Darcy Yuille, and Attorney Laura Mooney. The fee dispute has spawned several civil actions and prior appeals to this court. See Parnoff v. Yuille, 139 Conn.App. 147, 57 A.3d 349 (2012), cert. denied, 307 Conn. 956, 59 A.3d 1192 (2013); Parnoff v. Mooney, 132 Conn.App. 512, 35 A.3d 283 (2011).

The following procedural history is relevant to the present appeal. On April 23, 2011, Yuille filed a grievance against the defendant alleging that he had violated the Rules of Professional Conduct by improperly taking funds from an escrow account that had been established to safeguard money recovered by Yuille in a civil action until the parties' fee dispute finally could be resolved.[1]

The Fairfield Judicial District Grievance Panel determined that there was probable cause to believe that the defendant had violated the Rules of Professional Conduct. Subsequently, following several days of hearings, a reviewing committee of the Statewide Grievance [158 Conn.App. 457] Committee found by clear and convincing evidence that the defendant had violated rule 1.15 (f) of the Rules of Professional Conduct, which provides in relevant part: " When in the course of representation a lawyer is in possession of property in which two or more persons (one of whom may be the lawyer) claims interests, the property shall be kept separate by the lawyer until the dispute is resolved." The reviewing committee directed Disciplinary Counsel to file a presentment with the Superior Court. Disciplinary Counsel filed the presentment on December 7, 2012.

Following three days of trial, the court rendered the decision that is the subject of the present appeal. In its September 19, 2013 memorandum of decision, the court set forth the following factual findings, which provide a detailed account of the parties' fee dispute:

" [Yuille] had been employed by Bridgeport Hospital as a nurse prior to her termination following a 1994 work-related injury. On December 5, 1998, she signed a contingent fee agreement with Laurence V. Parnoff, P.C. The agreement, which authorized [the defendant] to prosecute a bad faith claim handling of the workers' compensation claim and listed Bridgeport

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Hospital as the defendant, essentially set forth a 40 percent contingency fee arrangement. Yuille did not retain a copy of the agreement and has no recollection of having read it.

" [The defendant] filed suit against Bridgeport Hospital, and thereafter, the parties agreed to go to binding arbitration. Subsequent to that agreement but before the final arbitration award, [Mooney], who represented Yuille in the underlying workers' compensation claim, filed an appearance in the Bridgeport Hospital lawsuit filed by [the defendant]. Over the objection of [the hospital's] counsel, Mooney appeared at the 2004 arbitration hearing, although she was not permitted to [158 Conn.App. 458] participate. The hearing resulted in an arbitration award in favor of Yuille of approximately $1.1 million.

" [The defendant] first learned that Yuille was questioning [their] fee agreement after the arbitration award. Mooney wrote the arbitrators, asking them to open [the award]. Additionally, Attorney William F. Gallagher of the Gallagher Law Firm wrote [to the defendant], requesting that part of the fee from the arbitration award be allocated to Mooney. Finally, Yuille e-mailed defense counsel to the arbitration, instructing them to add Mooney as a payee on all checks related to the arbitration award.

" The relationship between [the defendant] and Yuille began to deteriorate to the point where their communications were reduced to writing. While Yuille had suspected at some point prior to the arbitration that her agreement with [the defendant] called for a 40 percent contingency fee, her suspicions were confirmed when she received the settlement statement from [the defendant]. By letter dated August 18, 2004, and again by e-mail on August 24, 2004, [the defendant] told Yuille to write in and initial the fee amount that she agreed [the defendant] should be paid and to return the signed settlement statement and that he would hold the disputed amount in escrow.

" On August 30, 2004, Yuille signed the statement, crossing out the $438,413.17 in attorney's fees listed in the statement, and authorizing [the defendant] to take $125,000 toward his legal fee and escrow the remaining balance until the fee dispute was resolved. Yuille made clear at that time her position that not only was the 40 percent fee excessive, but that Mooney should share in the fee. Yuille reiterated, in subsequent e-mails to [the defendant], her instructions that the arbitration check should be made payable to [the defendant], Mooney, and Yuille, and that the remaining attorney's fee, [158 Conn.App. 459] exclusive of the $125,000 payment she had authorized to [the defendant], was to be escrowed. [The defendant] received the arbitration award checks on October 18, 2004; by letter on that same date, [the defendant] confirmed to Yuille that he would escrow the disputed fee.

" On August 27, 2004, [the defendant] filed a lawsuit naming Mooney as a defendant, claiming that Mooney had interfered with his handling of the lawsuit he had filed on behalf of Yuille against Bridgeport Hospital. On October 6, 2004, Mooney filed a motion to compel [the defendant] to disburse the settlement proceeds and escrow the disputed fee. In the motion, Mooney represented that she and Yuille took the position that the fee was illegal and excessive, and additionally, Mooney claimed that she was entitled to a portion of the fee. At the November 16, 2004 hearing on the motion to compel, Gallagher, who appeared on behalf of Mooney, asked that the court order that the disputed balance be escrowed. Yuille took the position that [the defendant] was authorized to take only the $125,000, as she

Page 627

thought his fee was excessive. The court, Gilardi, J., requested that Gallagher, on behalf of Yuille, file an appearance, motion to intervene, and intervening complaint. [The defendant's] counsel, Attorney Thomas J. Weihing, represented that the funds would be escrowed, and Yuille believed that [the defendant] would escrow the funds, based on the comments of his counsel at the hearing as well as the prior communications with [the defendant].

" On November 16, 2004, following the court proceeding, an agreement was reached based on the anticipated court order that the funds would be held in escrow, whereby Yuille signed the settlement check at Weihing's office. Yuille had been reluctant to sign the check without court intervention. That same day, [the defendant] signed a trust account application, prepared by Weihing, with Chase Bank. The account was in the name of Laurence V. Parnoff Trustee for Darcy Yuille, with an [158 Conn.App. 460] initial deposit in the amount of $971,032.93. It was Weihing's belief at the time that the court had directed [the defendant] to hold the funds.

" [The defendant] made various disbursements from the Chase account. By letter dated November 18, 2004, [the defendant] informed Yuille that the arbitration check had been deposited and that 'in accordance with [his] letters to [Yuille] and [Yuille's] previous instructions, [the defendant would] soon be able to make both the long agreed payment to [Yuille] and also keep the agreed amount in escrow' . . . .

" On November 27, 2004, [the defendant] confirmed by letter to Yuille that the balance of the fee, in the amount of $313,413.17, remained in escrow. Although indications were that Yuille was going to file a claim against [the defendant], [he] instead brought an action against Yuille. Returnable March 15, 2005, that complaint, filed by Weihing on behalf of [the defendant], alleged breach of contract, unjust enrichment, and bad faith, and specifically made reference to Yuille's objection to the legal fee in excess of 33 percent. The complaint also alleged that [the defendant] `was required, by professional integrity, to agree to hold, and has held, in escrow the sum of $313,413.17.' Yuille filed an answer and special defenses dated April 13, 2005; the special defenses alleged that the contract was unenforceable in that it was unconscionable, and that it violated Connecticut's fee cap statute.

" On December 2, 2004, Weihing, on behalf of [the defendant], filed a pleading with the court in the lawsuit he had filed against Mooney, taking the position that the court had not entered any escrow orders, that Yuille and [the defendant] had reached an agreement in August regarding `deposit, disbursement and escrow' . . . and that Yuille had carried out her part of the [158 Conn.App. 461] agreement by signing the arbitration check on November 16, 2004.

" The 2004 lawsuit filed by [the defendant] against Mooney and the 2005 lawsuit filed by [the defendant] against Yuille were consolidated. As of January 24, 2008, the escrow ...

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