Dep'tal Disciplinary Comm. for the First Judicial Dep't v. Katz (In re Katz)

• Decision Date: 25 June 2013
• Parties: In the Matter of David KATZ, an attorney and counselor-at-law: Departmental Disciplinary Committee for the First Judicial Department, Petitioner, v. David Katz, Respondent.
• Court: New York Supreme Court — Appellate Division

109 A.D.3d 143

969 N.Y.S.2d 8

2013 N.Y. Slip Op. 04753

In the Matter of David KATZ, an attorney and counselor-at-law:Departmental Disciplinary Committee for the First Judicial Department, Petitioner,

v.David Katz, Respondent.

Supreme Court, Appellate Division, First Department, New York.

June 25, 2013.

Jorge Dopico, Chief Counsel, Departmental Disciplinary Committee, New York, (Elisabeth A. Palladino, of counsel), for petitioner.

Michael A. Gentile, for respondent.

PETER TOM, Justice Presiding, RICHARD T. ANDRIAS, DIANNE T. RENWICK, LELAND G. DeGRASSE, and ROSALYN H. RICHTER, Justices.

PER CURIAM.

Respondent David Katz was admitted to the practice of law in the State of New York by the First Judicial Department on May 24, 1982. At all times relevant to this proceeding, respondent maintained an office for the practice of law within the First Department.

On or about November 10, 2010, the Departmental Disciplinary Committee served respondent with a notice and statement of charges alleging nine counts of misconduct. However, after the hearing on liability the Committee withdrew charges one through three. The remainingsix charges alleged that respondent commingled personal funds and client funds in violation of Code of Professional Responsibilities DR 9–102(a) and (b)(1) and (4) (22 NYCRR 1200.46[a], [b][1], [4] ); intentionally converted and misappropriated client funds in violation of DR 1–102(a)(4) (22 NYCRR 1200.3[a][4] ) and DR 9–102(a) (22 NYCRR 1200.46[a] ); failed to keep required escrow account records in violation of DR 9–102(d)(1), (2), and (9) (22 NYCRR 1200.46 [d] [1], [2], [9] ); and engaged in conduct which adversely reflects on his fitness as a lawyer in violation of DR 1–102(a)(7) (22 NYCRR 1200.3[a] [7] ).

Following hearings on liability and sanctions, a Referee appointed by this Court sustained all six charges against respondent. While acknowledging this Court's general practice of imposing a sanction of disbarment for the intentional conversion of client funds, the Referee recommended that respondent be suspended for four years, concluding that exceptionally unusual mitigating circumstances warranted a lesser penalty.

A Hearing Panel heard oral argument and issued a written report affirming the Referee's liability findings but disaffirming his sanction recommendation. The Panel rejected the Referee's view that extremely unusual mitigating evidence warranted departure from the sanction of disbarment.

The Departmental Disciplinary Committee now seeks an order pursuant to Rules of the Appellate Division, First Department(22 NYCRR) § 603.4(d) and § 605.15(e)(2) confirming the Hearing Panel's findings of fact and conclusions of law, including its recommendation that respondent be disbarred. The Committee points out that respondent not only engaged in the intentional conversion of client funds for his own personal use but also misappropriated client funds to pay other clients, thereby creating delays in disbursements of client funds, which he then attempted to conceal by backdating checks and submitting false closing statements to the Office of Court Administration. Further, the Committee does not believe that any compelling or extraordinary mitigating circumstances exist to warrant anything less than disbarment.

By cross motion submitted through counsel, respondent requests that this Court disaffirm the Hearing Panel's findings of fact and conclusions of law sustaining the charges of misappropriation, intentional conversion, and fitness to practice law (charges five, six, and nine) and its recommended sanction of disbarment and, instead, impose a sanction ranging from public censure to no greater than a six-month suspension.¹ Respondent attributes his misconduct to the federal prosecution of a wide-spread insurance fraud involving a number of medical clinics, several of which were his clients, which culminated in the seizure by the Federal Bureau of Investigation (FBI) of funds maintained in one of respondent's escrow account and held on behalf of those clients. According to respondent, the targeted funds had already been disbursed prior to the seizure. Thus, respondent argues, no venal intent has been established and, as such, the intentional conversion charge should have been dismissed. Respondent further takes issue with the two aggravating circumstances found by the Hearing Panel, arguing that it put misplaced emphasis on “these post-hearing, uncharged and mischaracterized afterthoughts.” Finally, respondent contendsthat the Panel gave “short shrift” to the four cases cited by counsel in support of censure or a short suspension ( Matter of Dyer, 89 A.D.3d 182, 931 N.Y.S.2d 585 [1st Dept. 2011];Matter of Fisher, 43 A.D.3d 173, 839 N.Y.S.2d 462 [1st Dept. 2007];Matter of Cohen, 12 A.D.3d 29, 785 N.Y.S.2d 44 [1st Dept. 2004];Matter of Altschuler, 139 A.D.2d 311, 531 N.Y.S.2d 91 [1st Dept. 1988] ).

We begin by observing that all six charges against respondent are amply supported both by the documentary evidence and his own admissions. Standing alone, the commingling, misappropriation, and inadequate record keeping charges warrant a lengthy suspension. However, it is well settled within this Department that, absent “exceptional mitigating circumstances” the intentional conversion of escrow funds mandates disbarment ( see Matter of Kennedy, 99 A.D.3d 75, 77, 950 N.Y.S.2d 32 [1st Dept. 2012];Matter of Squitieri, 88 A.D.3d 380, 929 N.Y.S.2d 238 [1st Dept. 2011];Matter of Crescenzi, 51 A.D.3d 230, 853 N.Y.S.2d 322 [1st Dept. 2008];Matter of Kohn, 31 A.D.3d 203, 817 N.Y.S.2d 251 [1st Dept. 2006];Matter of Kirschenbaum, 29 A.D.3d 96, 812 N.Y.S.2d 54 [1st Dept. 2006];Matter of Schmell, 27 A.D.3d 24, 808 N.Y.S.2d 201 [1st Dept. 2006];Matter of Nitti, 268 A.D.2d 41, 705 N.Y.S.2d 47 [1st Dept. 2000] ). The “venal intent” necessary to support intentional conversion is established where, as here, the evidence shows that the attorney knowingly withdrew client funds without permission or authority and used said funds for his own personal purposes ( see Matter of Kirschenbaum, 29 A.D.3d at 100, 812...