Morrissey, Matter of

• Decision Date: 16 November 1995
• Citation: 217 A.D.2d 74,634 N.Y.S.2d 51
• Parties: In the Matter of Francis X. MORRISSEY, Jr., an attorney and counselor-at-law: Departmental Disciplinary Committee for the First Judicial Department, Petitioner, Francis X. Morrissey, Jr., Esq., Respondent.
• Court: New York Supreme Court — Appellate Division

Page 51

634 N.Y.S.2d 51

217 A.D.2d 74

In the Matter of Francis X. MORRISSEY, Jr., an attorney and counselor-at-law Departmental Disciplinary Committee for the First Judicial Department, Petitioner Francis X. Morrissey, Jr., Esq., Respondent.

Supreme Court, Appellate Division First Department.

Nov. 16, 1995.

Barbara S. Gillers, of counsel (Hal R. Lieberman, attorney), for petitioner.

Peter Fleming, Jr., of counsel (Curtis, Mallet-Prevost, Colt & Mosle, attorneys), for respondent.

Before MURPHY, P.J., and ELLERIN, RUBIN, ROSS and ASCH, JJ.

PER CURIAM.

Respondent, Francis X. Morrissey, Jr., was admitted to the practice of law in the State of New York by the First Judicial Department on October 15, 1973. At all times pertinent to this proceeding respondent has maintained an office for the practice of law within the First Judicial Department.

On June 23, 1993, this Court entered an order pursuant to 22 N.Y.C.R.R. § 603.4(d) and Judiciary Law § 90(2), finding respondent guilty of serious professional misconduct. Applying the doctrine of collateral estoppel to the findings of the United States District Court for the Southern District of New York in Mar Oil v. Morrissey, 782 F.Supp. 899 (S.D.N.Y.1992), aff'd in relevant part, 982 F.2d 830 (2d Cir.1993), this Court concluded that respondent had violated Code of Professional Responsibility DR 1-102(A)(4) (engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation); DR 1-102(A)(6) (now [8] (engaging in conduct that adversely reflects on fitness to practice law); and DR 2-106(A) (which prohibits charging an excessive fee), and referred the matter to the Committee for a hearing on sanction.

The federal courts found that in March 1980, a Spanish corporation, Mar Oil S.A., suffered the loss of a supertanker which was insured for some $42 million. Mar Oil collected from all of its insurers save one, New Hampshire Insurance Company, which had about $10.6 million of the coverage. The claim against New Hampshire was litigated in Spain and in the federal courts in New York. Respondent was the first American lawyer retained by Mar Oil. In his relatively brief career at the bar, respondent had rarely been involved in litigation, and had no maritime insurance litigation experience. As such, he quickly associated an experienced maritime law firm, Healy & Baillie, which did the overwhelming share of legal work.

The matter was finally settled for $8,060,000 which was paid into respondent's escrow account.

In mid-June 1983, at about the time of New Hampshire's settlement payment, respondent requested a fee of $960,000. He claimed that he had provided 5,205 hours of service to Mar Oil. Mar Oil's representative, Monzon, rejected respondent's request for several reasons. Mar Oil paid fees of only $126,250 to Healy & Baillie and the equivalent of $242,500 to its attorneys handling the action in Spain for all of their respective services in connection with the underlying dispute. Monzon considered respondent's demand disproportionate since Healy & Baillie had done virtually all of the litigation work with respect to the New York action and the work of the Spanish attorneys had constituted a vital, if not the major, reason for the ultimate settlement. Monzon demanded an accounting of respondent's time. Respondent never provided one. Instead, in July 1983, respondent simply withdrew $960,000 from the Mar Oil escrow account, made an authorized payment of $34,324.62 to Healy & Baillie, and kept the remaining $925,675.38 for himself.

Respondent testified at trial that he made the withdrawal because a few days after he made his fee demand, Monzon telephoned him from Spain and agreed that Mar Oil would pay him $960,000. Monzon denied this and the district court found "that no such oral agreement was ever made, and that the withdrawals by the defendant for his personal benefit from the escrow account set up for the benefit of the plaintiff, were entirely unauthorized and unjustified as a measure of the fees due defendant." (782 F.Supp., supra, at 906.)

Mar Oil learned of the unauthorized withdrawal in November 1983 and repeatedly demanded that respondent return the money. In response, respondent represented to Monzon that $925,675.38 remained intact pending resolution of the dispute over respondent's fee. The district court found that this representation was false. In fact, respondent expended those funds for his own personal use. Respondent paid $20,000 to his brother-in-law, $10,000 to his secretary, and used the funds to pay his State and City Estimated Taxes for 1983.

On February 2, 1984, Monzon met with respondent twice. At the first meeting they discussed an accounting for respondent's authorized disbursements from the escrow account. They also discussed respondent's contention that he had worked more than 5,000 hours on Mar Oil's behalf. Respondent promised that he would prepare an accounting and propose a compromise with respect to his fee.

The second meeting on February 2 was held briefly in mid-afternoon as Monzon, about to return to Madrid, was rushing to the airport. In this meeting, respondent presented Monzon with a two-page letter with attachment, accounting for deposits to and withdrawals from the Mar Oil escrow account. The first paragraph of the letter stated as follows:

In June of 1983 I received on your behalf checks in the amount of $8,000,000. and $60,000., with your instructions that these funds be deposited in an account at Morgan Guaranty Trust Company in New York. Accordingly, on June 8, 1983 I deposited $60,000. and on June 20, 1983 $8,000,000. in an Escrow Account at Morgan Guaranty. On July 8, 1983, Morgan Guaranty was sent notice to change the account from a Mar Oil Escrow Account to a Non-Resident Alien Account for your benefit which was accomplished on July 11, 1983. On July 11, 1983 I disbursed $960,000. from this account pursuant to your instructions to pay United States fees and costs including Francis X. Morrissey, Jr., Healy & Baillie, and other costs and disbursements, as set forth in the attached statement dated July 11, 1983. (982 F.2d, supra, at 835.)

The second paragraph of the letter began "Pursuant to your instructions to me received from time to time, I made the following disbursements from the Morgan account" and listed in tabular form eight disbursements. (Supra, at 835.) Respondent's $925,675.38 payment to himself was not included in this list.

The second page of the letter included a release clause, holding respondent harmless "against any and all liability ... by reason of my having deposited these funds in the Morgan account and disbursed these funds pursuant to your instructions. This agreement to indemnify and hold me harmless shall include any claim made against me on account of services to you or Mar Oil ..." (Supra, at 835.)

Respondent did not discuss with or point out to Monzon the part of the letter that approved his demand for the additional fees. Further, respondent failed to discuss with Monzon the implications of his signing a letter which recorded $925,675.38 (part of the $960,000) as one of the withdrawals and how this was affected by the release clause also included in that letter.

Monzon testified that he signed the document in haste and that he did not recognize anything in it which purported to approve the claimed fee of $925,675.38.

Respondent did not provide Monzon with a copy of the February 2 letter.

Numerous efforts to persuade respondent to return the $925,675.38 proved unsuccessful, and indeed, despite repeated requests for documents, respondent refused even to provide Mar Oil with a copy of the February 2 letter until 1986. Shortly after receiving that document, Mar Oil commenced the federal lawsuit.

The District Court found that the only agreement between the parties concerning respondent's fee was that of October 31, 1980, calling for an agreed and reasonable compensation based on time spent. The District Court found that respondent, in breach of his fiduciary duty, appropriated to himself $925,675.38 from the escrow account, even before the February 2 letter was signed. This withdrawal was found to be unauthorized and could not be explained by any of the theories advanced by respondent. Moreover, the Court found that respondent used portions of the unauthorized withdrawal for his own personal use.

The District Court concluded that respondent's February 2 letter "overreached the client and was a calculated breach of fiduciary duty in conception and in execution relative to the manner in which it was presented, explained and obtained and the actual withdrawals." (782 F.Supp., supra, at 909.) The Court termed respondent's actions in obtaining the signature "unconscionable". (Supra, at 912.)

The Court concluded that respondent was entitled to compensation only at a reasonable rate on an hourly basis. As to the value of respondent's services, the Court noted that prior to October 1980 respondent had no maritime insurance litigation experience. The Court found that his participation in the New York action was not particularly significant or fruitful. In the New York action, though respondent had drafted an affidavit, read some documents, and attended depositions with Healy & Baillie attorneys, Healy & Baillie, not respondent, had done the overwhelming share of the work, including conducting all of the legal research, preparing legal opinion letters to Mar Oil, preparing all legal memoranda and all other legal documents dealing with the various motions, taking the depositions of all the witnesses, and obtaining and responding to documentary discovery. The District Court found respondent's contention that he had done the "lion's share" of the legal work, to be absurd and concluded that at best respondent merely assisted "in communications[,] controlling costs, as a 'middle man;' and as a 'strategist.' " (Supra, at 903.)

After finding that respondent had spent a total of...