In re Brauer

• Citation: 890 N.E.2d 847,452 Mass. 56
• Decision Date: 28 July 2008
• Docket Number: SJC-09984.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: In the Matter of David P. BRAUER.

890 N.E.2d 847

452 Mass. 56

In the Matter of David P. BRAUER.

SJC-09984.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued April 7, 2008.

Decided July 28, 2008.

Kevin M. Keating, Revere, for the respondent.

Roger Geller, Assistant Bar Counsel.

Present: MARSHALL, C.J., GREANEY, IRELAND, SPINA, CORDY, & BOTSFORD, JJ.

SPINA, J.

The present bar discipline matter is before us on a reservation and report, without decision, from a single justice of this court. The Board of Bar Overseers (board) has recommended that the respondent, David P. Brauer, be indefinitely suspended from the practice of law for, among other things, the conversion of funds held in escrow. For the reasons that follow, we conclude that an indefinite suspension is the appropriate disciplinary sanction.

1. Background. The following facts are drawn from the findings of a special hearing officer, which were adopted by an appeal panel of the board and then by the full board.¹ We have supplemented the hearing officer's findings with undisputed facts contained in the record on appeal.

The respondent was admitted to the practice of law in this Commonwealth on December 15, 1986. At all relevant times, he was a shareholder in Brauer & Brauer, P.C., a legal professional corporation. The respondent's father, formerly an attorney,² was the other shareholder in Brauer & Brauer, in addition to being the sole shareholder officer, and director of Decnos Financial Group, Inc. (Decnos), a Delaware corporation providing business investment and consulting services.

The respondent represented Commonwealth Snack Company (Commonwealth Snack) in a lawsuit brought by Edward Dewey (Dewey) to collect on a note that Commonwealth Snack had given to Dewey in exchange for Dewey's stock in another corporation (Dewey lawsuit). While the respondent was representing Commonwealth Snack, Grand Pacific Finance Corporation (GPFC) entered into a commercial loan transaction with Commonwealth Snack in which GPFC agreed to lend it $5 million. As part of the loan agreement, Commonwealth Snack and GPFC also entered into a depository agreement pursuant to which all funds advanced by GPFC were to be held in an account at the China Trust Bank of New York. The depository agreement provided that the funds advanced to Commonwealth Snack remained GPFC's "sole and exclusive property" and could not be released to Commonwealth Snack except on GPFC's specific direction. GPFC required Commonwealth Snack to resolve the Dewey lawsuit before it would advance any funds under the loan agreement. The respondent was aware of the terms and conditions of the depository agreement between Commonwealth Snack and GPFC.

In the late summer of 1996, the respondent told Commonwealth Snack that the Dewey lawsuit could be settled for a $750,000 payment to Dewey, and he asked Commonwealth Snack for this sum to complete the settlement. On August 21, 1996, the chief executive officer of Commonwealth Snack, Walter Quednau, wrote to GPFC, requesting $750,000 to pay Dewey. He asked GPFC to wire the funds to the Brauer & Brauer client group account, from which the funds then could be wired to Dewey's designated account. Quednau's letter also stated that "[a]ny variance from the $750,000 wired funds and the Dewey settlement will be returned wire transfer to [GPFC] within 24 hours...." Quednau sent the respondent a copy of his August 21 letter to GPFC. The respondent read the letter, did not object to its contents, and understood that he would be receiving $750,000 as escrowee for the settlement of the Dewey lawsuit.

In response to Quednau's request, GPFC agreed to lend Commonwealth Snack $750,000 to pay the Dewey settlement.³ On August 22, 1996, after receiving instructions from GPFC, the China Trust Bank wired $750,000 to the Brauer & Brauer client group account for the sole purpose of funding the Dewey settlement. The respondent was aware of the receipt of these funds in his client account, and he knew that they were to be held in escrow to pay the Dewey settlement. The Dewey lawsuit did not settle promptly after GPFC wired the funds to the respondent's client account. On August 30, 1996, GPFC sent a letter by facsimile transmission to Quednau, asking for the immediate return of the $750,000. The same letter was sent by facsimile transmission to the respondent, who received and read it that day.

By August 30, 1996, the respondent was aware that Commonwealth Snack was in serious financial trouble. At that time, it owed Brauer & Brauer fees of $19,628.90 for legal and consulting services provided by the respondent and his father. The respondent also knew that Decnos was owed approximately $77,000 for consulting work that his father had performed for Commonwealth Snack. Both the respondent and his father were concerned about Commonwealth Snack's ability to pay these outstanding fees.

Around this same time, the respondent told his father about GPFC's request for the return of the escrowed funds, and they began to consider ways that they could use the $750,000 to satisfy Commonwealth Snack's obligations to Brauer & Brauer and to Decnos. Despite his understanding that GPFC's request for the return of the $750,000 was genuine and consistent with the terms under which the funds had been wired into the Brauer & Brauer client group account, the respondent informed Quednau that he would not return the escrowed funds to GPFC unless and until Quednau sent him written instructions to do so. The respondent's purpose in demanding written instructions was intentionally to delay the return of the funds. On September 3, 1996, Quednau sent a letter by facsimile transmission to Brauer & Brauer, stating, "Effective immediately wire the $750,000 for the Dewey escrow to GPFC per Friday's instructions." The respondent received the letter on the same day and intentionally ignored the instructions so as to give Decnos time to sue Commonwealth Snack and obtain an attachment for the money that Decnos was owed.

On September 4, 1996, a lawyer retained by the respondent's father filed a complaint in the Dedham Division of the District Court Department (Dedham District Court) on behalf of Decnos against Commonwealth Snack and against Brauer & Brauer, as trustee. Decnos sought to recover the $77,000 allegedly owed by Commonwealth Snack. Filed along with the complaint was a motion for an ex parte trustee process attachment.⁴ On September 5, 1996, the attorney for Decnos filed a motion for a temporary restraining order to prevent Brauer & Brauer from disbursing $77,000 of the $750,000 that the law firm was holding "for the benefit of Commonwealth Snack." A judge in the Dedham District Court ordered Brauer & Brauer to place $77,000 of the escrowed funds in a separate account, pending further action by the court. On receipt of this order, the respondent neither notified the court that the funds he was holding did not belong to Commonwealth Snack, nor did he challenge the order. Instead, that same day, the respondent transferred $77,000 of GPFC's escrowed funds from the Brauer & Brauer client group account to a separate escrow account for Decnos.

The respondent had no right to use GPFC's escrowed funds to pay past or anticipated future legal and consulting fees owed by Commonwealth Snack to Brauer & Brauer. Nonetheless, the respondent transferred an additional $23,000 of GPFC's escrowed funds to a separate escrow account for Brauer & Brauer to pay $19,628.90 in fees and expenses that Commonwealth Snack owed to the law firm for past work, plus another $3,371.10 to cover anticipated fees for future work. On September 5, 1996, the respondent wired the remaining $650,000 of GPFC's escrowed funds to the China Trust Bank, without explaining the $100,000 shortfall. The next day, the respondent notified GPFC by letter that he had placed $77,000 of its escrowed funds in a separate escrow account pursuant to a court order, and that he had put an additional $23,000 of its escrowed funds in a different escrow account for the payment of legal fees that Commonwealth Snack owed to Brauer & Brauer.

On September 27, 1996, Decnos filed a motion in the Dedham District Court to default Commonwealth Snack for failure to file an answer to Decnos's complaint. A default judgment was entered on November 12, 1996, in the amount of $78,172.09. Again, the respondent did not inform the court about the circumstances in which Brauer & Brauer had received the escrowed funds, or about the fact that the funds were the property of GPFC, not Commonwealth Snack. On November 27, 1996, the respondent's father delivered the execution to the respondent. That same day, the respondent transferred $77,000, plus interest, from the escrow account to Decnos.

GPFC commenced an action in the Superior Court against the respondent, Brauer & Brauer, and Decnos to recover the $100,000 that had not been returned on September 5, 1996. In March, 2000, judgment was entered in favor of GPFC on its conversion claim, and that determination was affirmed on appeal.⁵ See Grand Pac. Fin. Corp. v. Brauer, 57 Mass.App.Ct. 407, 783 N.E.2d 849 (2003).

On March 26, 2004, bar counsel commenced formal proceedings against the respondent by filing with the board a petition for discipline, alleging that the respondent had engaged in misconduct by converting funds belonging to GPFC; colluding with his father in a deceptive scheme to violate the terms of the escrow agreement between GPFC and Commonwealth Snack; disclosing confidential information for the benefit of Decnos and to the disadvantage of Commonwealth Snack; delaying the return of the escrowed funds so that his father could secure an attachment; representing Commonwealth Snack when his personal and professional interests affected his judgment on behalf of his client and without obtaining Commonwealth Snack's informed consent to the conflicts of interest; and failing to inform the Dedham District Court that the escrowed funds did not belong to...