7. ethics and professionalism - nysba

7 ETHICS AND PROFESSIONALISM ___________________________________

563

564

REAL ESTATE ETHICS OPINIONS

Submitted by Anne Reynolds Copps Esq

INDEX

1 Assisting Client in Illegal Conduct 545

2 AttorneyEscrow Agent 532 570 575

3 Closing Clerk Attending 44 677

4 Deed to Secure Legal Fee 550

5 Dual Practice 26 114 135 206 208 244 291 340 493 916 919 933

6 Fees Paid by Borrower and Title Insurer 626

7 Mortgage Brokerage 753

8 Mortgage to Secure Legal Fees 253 550

9 Referrals 467 566 667 694 845

10 Sellerrsquos Concession 817 882 892

11 Spouse as Broker 244 291 340 493

12 Tax Certiorari Proceedings 644 662 705

13 Title abstract company principal in 595 621 731 738 753

14 Title examination 38 111 351 576

15 Conflicts of Interest 8 38 38a 162 199 208 244 291 320

333 340 351 438 450 470 471 493 532 588 611 626 694 807 845 867 916 919

926 933

16 Transactions involving corporate employees 78

565

OPINIONS

1 Assisting Client in Illegal Conduct

Ethics Opinion 545 Topic Employment withdrawal from due to clients unlawful conduct

Digest Lawyer may not assist client in illegal conduct and must withdraw from the

representation if the client persists in such conduct

2 AttorneyEscrow Agent

Ethics Opinion 532

Topic Escrow funds fee agreements conflicts of interest appearance of impropriety

Digest Lawyer escrow agent may not retain interest earned on funds during escrow

Ethics Opinion 570 Topic Fee for legal services advance payment client funds of trust account

Digest Fees paid to lawyer in advance of services refundable to the extent not earned are not

client funds and need not be deposited in trust account any interest earned on fee advances may

be retained by lawyer upon termination of employment lawyer must promptly return to client

unearned portion of fee paid in advance

Ethics Opinion 575

Topic Escrow Funds duties respecting placing in interest-bearing account

Digest A lawyer holding contract deposit as escrow agentattorney should in an appropriate

case request instructions from the contracting parties about placing funds in an interest-bearing

account

3 Closing Clerk Attending

Ethics Opinion 44

Topic Duties of Law Clerk

Digest Law clerks role is that of student and attorney must provide supervision and not permit

clerk be involved in matters involving independent discretion or judgment

Ethics Opinion 677

Topic Delegation of Lawyers Duties to Paralegal

Digest Lawyer may delegate attendance at real estate closing to paralegal under certain

circumstances

566

4 Deed to Secure Legal Fee

Ethics Opinion 550

Topic Mortgage or deed as security for payment of lawyerrsquos fee

Digest Lawyer may take a mortgage but not a deed as security for payment of fees Guidelines

respecting foreclosure or participation in sale of mortgaged property

5 Dual Practice

Ethics Opinion 26

Overruled (in part) by 493

Topic Dual Practice Business Feeder for Law Practice

Digest Improper for lawyer to use his name in real estate business and to conduct both activities

from the same office

Ethics Opinion 114


Topic Indirect advertising

Digest Attorney wishes to conduct real estate and interior decorating business from same office

where he practices law

Ethics Opinion 135

Modified by implication by 206


Topic Real estate office Advertising Insurance agency Dual practice

Digest In advertising a real estate or insurance office in which he is involved a lawyer may not

at the same time advertise that he is engaged in the practice of law

Ethics Opinion 206

Modifies 22 by implication

Modifies 128


Overruled (in part) by 493 494

Topic Dual Practice of Law and Allied Occupations

Digest Conditions under which dual practice is permissible reviewed and modified

Ethics Opinion 208

Topic Dual Practice Conflict of Interest

Digest Lawyer-real estate broker should not act as both a lawyer and as a broker for a client or

party in the same transaction

Ethics Opinion 244



567

Digest Lawyer whose spouse is a real estate broker

(a) Should not share office with spouses firm

(b) Should not accept as client a party to a real estate transaction involving spouses firm

(c) Should not permit unsolicited recommendation by spouses firm to represent a party to a

real estate transaction

(d) May act as attorney for spouses firm to collect commissions earned if attorney did not

represent any party to the real estate transaction

Ethics Opinion 291

Topic Dual practice Conflict of interest

Digest Lawyer may not accept legal fee and brokerage commission from same client in

connection with same transaction if he or his spouse has an interest in brokerage agency

Ethics Opinion 340


Digest Lawyer whose spouse is a real estate salesperson working on a commission basis should

not accept as client a party to a real estate transaction in which lawyers spouse has participated

as salesperson but may act as attorney for clients who have used the brokerage agency

employing the spouse provided spouse has not participated in the transaction or benefitted

therefrom

Ethics Opinion 493

Topic Dual practice real estate broker law office

Digest A lawyer may conduct his law practice and a real estate brokerage business from the

same office but he cannot solicit employment as a lawyer in violation of any statute or court

rule and he cannot act as lawyer and broker in the same transaction

Ethics Opinion 916

Topic Lawyerrsquos provision of free legal services when lawyer is also broker in a real estate

transaction

Digest A lawyer may not offer free legal services as an add-on bonus to a party to a real estate

transaction in which the lawyer is acting as broker even if the lawyer advises the party that the

party may retain separate counsel

Ethics Opinion 919


Digest A lawyer may not act as an attorney for any party to a real estate transaction in which the

lawyer is acting as a broker A lawyer who is employed part time by a real estate office as a

broker may be able to serve as a partyrsquos attorney even if a member of that real estate office is

acting as a broker for one of the parties but the lawyer must comply with Rule 17 If the lawyer

will materially benefit from the closing based on his employment at the brokerrsquos office or is

personally involved with the transaction at that office then his representation of a party to the

transaction is per se prohibited

568

Ethics Opinion 933


Digest A lawyer may conduct a law practice and a real estate brokerage business in the same

office and may advertise them together provided that the advertising is neither false nor

misleading but may not act as lawyer and broker in the same transaction

6 Fees Paid by Borrower and Title Insurer

Ethics Opinion 626

Topic Real estate attorney multiple representation amount of fee

Digest Lawyer representing lender in transaction where fee is paid by borrower must disclose to

borrower that lawyer also will receive compensation from title insurer for representing its

interests at closing lawyer may retain total fees paid by borrower and title insurer so long as

lender-client consents and total amount is not excessive

7 Mortgage Brokerage

Ethics Opinion 753

Topic Ancillary business organizations mortgage brokerage title abstract company conflict of

interest

Digest Where a client is represented by a lawyer and uses an ancillary business owned by the

lawyer the rules applicable to personal conflicts of interest and transactions between clients and

lawyers continue to apply after promulgation of DR 1-106 Under those rules a lawyer owning

mortgage brokerage and title abstract businesses may not even with informed consent represent

buyer or seller and act as mortgage broker in the same transaction or act as title abstract company

with respect to non-ministerial tasks but may where the client consents after full disclosure act

as abstract company with respect to purely ministerial abstract work The lawyer may with

informed consent represent the lender in the same transaction in which the lawyerrsquos company

acts as mortgage broker but may not represent the lender in transactions in which the lawyerrsquos

title abstract company acts in other than a ministerial capacity The lawyer may in certain

circumstances with informed consent represent both the buyerrsquos lender and the seller in the

same transaction or where not required to negotiate terms the buyerrsquos lender and the buyer in

the same transaction

8 Mortgage to Secure Legal Fees

Ethics Opinion 253

Topic Mortgage to secure fee

Digest Circumstances under which lawyer may accept mortgage to secure payment of fee

Ethics Opinion 550


569



9 Referrals

Ethics Opinion 467

Topic Recommendation of professional employment independent professional judgment real

estate

Digest Not per se improper for lawyer to accept repeated referrals from real estate broker

Ethics Opinion 566

Topic Advertisement recommendation or endorsement by third party nondisclosure that

advertisement paid for by attorney

Digest Advertisement improper if paid for endorsement or recommendation by third party to

use attorneys services and misleading if does not appear to be an advertisement but in fact is

paid for by the attorney

Ethics Opinion 667

Topic Referral fees

Digest Attorney may accept a referral fee from a mortgage broker for referring client to broker

provided client consents to arrangement after full disclosure all proceeds thereof are credited to

client if the client requests attorney to do so the aggregate attorneys fees are not excessive and

attorney exercises independent professional judgment on behalf of client

Ethics Opinion 694

Topic Conflict of interest solicitation by real estate broker dual representation of purchaser

and lender

Digest Improper for attorney to participate in Home Buyers Program

Ethics Opinion 845

Topic Lawyerreal estate broker sharing her brokerage commission with lawyers who refer

buyers or sellers

Digest A lawyer who is also a real estate broker may ethically offer to share her brokerrsquos

commission with attorneys who refer buyers or sellers to her if either (a) the referring lawyer is

not representing the buyer or seller in the real estate transaction or (b) the referring lawyer is

representing the buyer or seller in the real estate transaction but remits or credits the referral fee

to the client and obtains the clientrsquos informed consent to the potential conflict arising from the

referral fee

10 Sellerrsquos Concession

Ethics Opinion 817

Topic Lawyerrsquos participation in residential real estate purchase and sale closing that includes a

ldquosellerrsquos concessionrdquo and ldquogrossed uprdquo sale price

570

Digest Participation in residential real estate transaction that includes a ldquosellerrsquos concessionrdquo

and ldquogrossed uprdquo sale price is prohibited unless the transaction is entirely lawful the gross-up is

disclosed in the transaction documents and no parties are misled to their detriment

Ethics Opinion 882

Topic Lawyerrsquos participation in residential real estate transaction that includes both a ldquosellerrsquos

concessionrdquo and an equivalent ldquogross-uprdquo in the sales price

Digest If the sales price in a residential real estate transaction has been ldquogrossed-uprdquo in

exchange for a ldquosellerrsquos concessionrdquo all transaction documents containing the grossed-up sales

price must disclose that the sales price has been increased by a sum equal to the sellerrsquos

concession

Ethics Opinion 892


concessionrdquo and an equivalent ldquogross-uprdquo in the sale price

Digest The fact that the sales price in a residential real estate transaction has been grossed-up

must be expressly disclosed in the transaction documents containing the sales price in addition to

the amount of the sellers concession

11 Spouse as Broker

Ethics Opinion 244










Ethics Opinion 291




Ethics Opinion 340






therefrom

Ethics Opinion 493

571





12 Tax Certiorari Proceedings

Ethics Opinion 644

Topic Unauthorized Practice of Law Sharing Legal Fees with Non-lawyer

Digest Lawyer may not form corporation with non-lawyers to assist homeowners in obtaining

real estate tax reductions where lawyers services are offered by corporation in violation of

Section 495 of Judiciary Law and where legal fees are shared with non-lawyer shareholders

Ethics Opinion 662

Topic Communication with adverse party knowledge of adverse representation

Digest A lawyer may communicate directly with an opposing party when the putative lawyer

for that party fails to respond only after undertaking a complete and thorough inquiry to

determine the ultimate fact of continuing representation

Ethics Opinion 705

Topic Aiding unauthorized practice of law fee splitting with non-attorney acceptance of cases

from non-attorney tax reduction company

Digest Whether it is improper for an attorney to accept cases from a non attorney tax reduction

company that has agreed to engage counsel to conduct judicial proceedings in the event the

company is unsuccessful in securing a reduction of property taxes in administrative proceedings

depends on the specific circumstances the attorney may agree to work for a percentage of the tax

reduction companyrsquos fee which itself is a percentage of the amount by which property taxes are

reduced

13 Title abstract company principal in

Ethics Opinion 595

Topic Conflict of Interest Dual Practice as an Abstract Company

Digest Improper for law firm that represents real estate clients and that has formed and is a

principal in an abstract company to refer clients to the title abstract company except for purely

ministerial title searches

Ethics Opinion 621

Topic Conflict of Interest referral of real estate clients to attorney owned abstract company

Digest Improper for attorney to refer real estate client to abstract company in which he has

ownership interest

Ethics Opinion 731

572

Topic Conflict of interest referral of real estate clients to attorney-owned abstract company

employees of lawyer

Digest Lawyer may not compensate employees for soliciting parties to real estate transaction to

engage services of title insurance agency in which lawyer has ownership interest

Ethics Opinion 738

Topic Conflict of interest referral of clients to title abstract company owned by attorneyrsquos

spouse

Digest Improper for attorney to refer real estate client to title abstract company in which the

attorneyrsquos spouse has an ownership interest for other than purely ministerial work

Ethics Opinion 753


interest














14 Title examination

Ethics Opinion 38 Topic Conflict of Interest Representation of Adverse Parties

Digest Lawyer may not represent both buyer and seller of real estate where there is a clear

instance of conflicting interests

Ethics Opinion 111 Topic Conflict of Interest

Digest Improper for lawyer to represent governmental urban renewal agency in title

examination and related matters while also representing private property owners in

condemnation proceedings commenced by that agency even though full disclosure is made both

to the agency and to the property owners

Ethics Opinion 351

Topic Title Company search and certification fee

573

Digest An attorney may act as title examiner and agent for a title company in a real estate

transaction where he also represents a party if there is full disclosure and consent

Ethics Opinion 576

Topic Real Estate Attorney Agent for title insurer multiple representation

Digest Proper for real estate attorney to act also as title insurance agent provided such conduct

is legal no prohibited conflict exists consent is obtained from all parties after full disclosure

legal fee reduced by remuneration from title company absent express consent to the contrary

from client and legal fee not excessive

15 Conflicts of Interest

Ethics Opinion 08

Topic Conflict of Interest Minimum Fee Schedule Representing Mortgagor and Mortgagee

Digest Under certain circumstances lawyer may properly charge less than minimum fee and

may represent both buyer mortgagor and mortgagee lending institution




Ethics Opinion 38a

Topic Conflict of Interest Representation of Adverse Parties

Digest Consent and full disclosure may permit representation of real estate buyer and seller

Ethics Opinion 162

Topic Dual Representation

Digest An attorney may represent both buyer and seller of real property only when there is no

actual or potential differing interests and there is complete disclosure to and consent by both

clients

It is not proper for a lawyer to represent a client to whom the lawyer is selling his own property

Ethics Opinion 199

Topic Conflicting Interests

Digest Cannot represent mortgagor and mortgagee without express consent after full disclosure

Ethics Opinion 208




Ethics Opinion 244


574









Ethics Opinion 291




Ethics Opinion 320

Topic Title company discount attorney retention

Digest Attorney may not retain title company discount without crediting client unless the client

expressly consents to such retention after full disclosure

Ethics Opinion 333

Topic Conflict of interest

Digest Not improper for associate of special town attorney to represent owners in condemnation

proceedings by condemnors other than the town

Ethics Opinion 340






therefrom

Ethics Opinion 351




Ethics Opinion 438 Topic Attorneyrsquos fees Dividing fees with non-lawyers Conflicting interests

Digest Lawyer representing mortgagee may collect legal fees from mortgagor so long as fees

are not shared with lay corporation Attorney cannot represent mortgagor and mortgagee without

express consent after full disclosure

Ethics Opinion 450

Topic Part-time town attorney Conflict of interest

575

Question May a part-time town attorney or his firm represent private clients in matters relating

to the purchase and sale of real property within the town in which he holds public office when

the clients may be required to obtain building permits zoning variances or other similar licenses

or certificates from the town

Digest Conditions under which part-time town attorney may represent clients in private matters

which may potentially involve conflict with municipality

Ethics Opinion 470 Topic Conflict of interests city attorney urban renewal agency

Digest Part-time city attorney may not appear before urban renewal agency for purpose of

obtaining modification of plan which would enable him to purchase building scheduled for

demolition

Ethics Opinion 471 Topic Partnership conflicting interests fiduciary obligation receiver in mortgage foreclosure

action

Digest Receiver in mortgage foreclosure action may retain his firm to act as his counsel

Ethics Opinion 493





Ethics Opinion 532



Ethics Opinion 588

Topic Conflict of interest County Department of Social Services purchase of client real estate

use of secret information appearance of impropriety

Digest Lawyer employed by the department of social services may not bid on real property

owned by the department

Ethics Opinion 611

Topic Multiple representation real estate transaction seller and lender

Digest Attorney should not represent both the seller and lender in the same transaction except

under unusual circumstances and unless the conditions of DR 5-105(C) are met in the specific

matter

Ethics Opinion 626






576

Ethics Opinion 694


and lender


Ethics Opinion 807

Topic Imputation of conflicts of interest dual representation of buyer and seller of real estate

Digest A part-time associate of a law firm is ldquoassociatedrdquo with the law firm for the purpose of

imputation of conflicts of interest The buyer and seller of residential real estate may not engage

separate attorneys in the same firm to advance each sidersquos interests against the other even if the

clients give informed consent to the conflict of interest

Ethics Opinion 845


buyers or sellers






referral fee

Ethics Opinion 867

Topic Simultaneous representation of lender and seller in residential real estate transaction

Digest Different lawyers in the same law firm may not represent the lender and the seller in a

residential real estate transaction unless the lawyers each satisfy the requirements of Rule 17 and

other applicable Rules

Ethics Opinion 916


transaction




Ethics Opinion 919









577

Ethics Opinion 926

Topic Union-sponsored legal fee reimbursement plan conflicts of interest

Digest A lawyer who belongs to a union (1) may be a lawyer on the panel of a union-

sponsored plan that reimburses legal fees and (2) may represent a fellow employee in a real

estate transaction where the client will ask the plan to reimburse the employee for the lawyerrsquos

fees

Ethics Opinion 933





16 Transactions involving corporate employees

Ethics Opinion 78

Topic Solicitation lay intermediaries corporation furnishing legal service to corporation

employees

Digest Improper for an attorney to accept retainer from corporate client to represent employees

in real estate transaction resulting from corporation personnel transfers

578

OPINIONS

OF THE

NEW YORK STATE BAR ASSOCIATION

COMMITTEE ON PROFESSIONAL ETHICS

Escrow Accounts


Index

1 Escrow funds 90 532 554 570 575 582 600 710 737 764 816907

2 Lawyer as escrow agent 710

3 Use of ATM for deposits 759

4 Use of signature stamp 693

OPINIONS

1 Escrow funds 90 532 554 570 575 582 600 710 737 764 816 907

Ethics Opinion 90

Topic escrow funds

Question May an attorney who is holding clients funds in escrow deposit those funds in an

interest-bearing savings account

Digest Deposit of clientrsquos funds in interest-bearing savings accounts

Ethics Opinion 532



Ethics Opinion 554

Topic Interest on Lawyer accounts

Digest Lawyers may participate in programs to provide financial support for legal services

through deposit in a commingled interest-bearing account of client funds held for a short period

of time or nominal in amount where such funds if not aggregated would not produce income






579

Ethics Opinion 575




account

Ethics Opinion 582

Topic Escrow Funds

Digest Attorney may not retain interest for period between date of deposit and date check clears

paid on checks received on behalf of clients and deposited in escrow account

Ethics Opinion 600

Topic Trust accounts use of attorneys credit to back credit for client

Digest Improper for an attorney to maintain a credit line for clients based on a multiple client

escrow account provided the attorney obtains consent after full disclosure his personal credit

worthiness may be used to provide credit for a client

Ethics Opinion 693

Topic Non-lawyer Employees Escrow Accounts Attorneyrsquos Signature

Digest Attorney may allow paralegal to use attorneyrsquos signature stamp to execute escrow

checks under certain circumstances

Ethics Opinion 710

Topic Lawyer as escrow agent Release of funds in escrow to client

Digest Absent authorization by all parties lawyer who serves as escrow agent may not release

funds to client except as provided in the escrow agreement while lawyer may resign as escrow

agent provision must be made to protect funds in escrow

Ethics Opinion 737

Topic Escrow accounts

Digest A lawyer may not issue a check from an attorney escrow account drawn against a bank

or certified check that has not been deposited or has not cleared

Ethics Opinion 759

Topic Deposits into special accounts

Digest Lawyer may use ATM for making deposits into special account

Ethics Opinion 764

Topic Escrow funds fee agreements conflicts of interest Interest on Lawyer Account

(IOLA)

Digest Lawyer may only accept IOLA account earnings credit with consent of client after

full disclosure

580

Ethics Opinion 816

Topic Advance payment retainer client trust account

Digest A lawyer may ethically accept an advance payment retainer place such funds in the

lawyerrsquos own account and retain any interest earned The Lawyer may require the client to

forward an advance payment retainer to pay for final fees that accrue at the end of the

relationship

Ethics Opinion 907

Topic Protecting anonymity of client

Digest An attorney may agree to make an anonymous donation on behalf of a client and must

protect the confidentiality of the identity of a client when asked by the client to do so provided

the request does not involve the lawyer in prohibited conduct

Question May an attorney may make a charitable donation on behalf of a client and maintain

the clientrsquos anonymity at the clientrsquos request and may the attorney use the attorneyrsquos escrow

account to make the donation

Facts The inquirer is an attorney whose client seeks to make an anonymous donation to a

charity The client would like to place the money in an escrow account under the attorneyrsquos

control and then have the attorney forward the payment of the donation to the recipient The

client has instructed the attorney not to reveal the clientrsquos identity so that the client may remain

anonymous


Ethics Opinion 710






Ethics Opinion 759




Ethics Opinion 693




581

582

IV ETHICS OPINIONS APPLICABLE TO TRANSACTIONS

A ADVICE ON ETHICAL QUESTIONS

An attorney may obtain ethical guidance regarding questions concerning the attorneys own professional conduct by writing to New York Bar Association Committee on Professional Ethics One Elk Street Albany NY 12207 (phone (518) 463-3200 fax (518) 487-5694 Current volumes of ethics opinions issued by the Committee are available for purchase from the NYSBA Publications Department Opinions since 1986 are also available on LEXIS See also Finding Answers to Ethics Questions infra

B SUMMARIES OF SELECTED ETHICS OPINIONS of the

NYSBA COMMITTEE ON PROFESSIONAL ETHICS

8 (1964) Under certain circumstances lawyer may properly charge less than minimum fee and may represent both buyer mortgagor and mortgagee lending institution Former Canons 6 7 12

38 (1966) A lawyer may not represent both buyer and seller of real estate where there is a clear instance of conflicting interests Canon 6

162 (1970) An attorney may represent both buyer and seller of real property only when there is no actual or potential differing interests and there is complete disclosure to and consent by both clients Canon 5 DR 5-105 104 EC 5-1 5-14 to 19

208 (1971) Lawyer-real estate broker should not act as both a lawyer and as a broker for a client or party in the same transaction Implies client cannot consent where conflict so obvious Canon 5 EC 5-1 5-2 DR 2-102(E) 5-101 (A)

244 (1972) Lawyer whose spouse is a real estate broker (a) should not share office with spouses firm (b) should not accept as client a party to a real estate transaction involving spouses firm (c) should not permit unsolicited recommendation by spouses firm to represent a party to a real estate transaction (d) may act as attorney for spouses firm to collect commissions earned if attorney

583

did not represent any party to the real estate transaction Canon 9 EC 5-2 DR 2-l03(B)

291 (1973) Lawyer may not accept legal fee and brokerage commission from same client in connection with same transaction if he or his spouse has an interest in brokerage agency Canon 5 DR 5-101(A) EC 5-1 5-2

340 (1974) Lawyer whose spouse is a real estate salesperson working on a commission basis should not accept as client a party to a real estate transaction in which lawyers spouse has participated as salesperson but may act as attorney for clients who have used the brokerage agency employing the spouse provided spouse has not participated in the transaction or benefitted therefrom Canons 5 9 EC 5-2 9-6 DR 2-103

351 (1974) An attorney may act as title examiner and agent for a title company in a real estate transaction where he also represents a party if there is full disclosure and consent [and credit to the client for any fees unless the client expressly consents to retention of the fee] DR 5-107(A) 5-105(C)

438 (1976) Lawyer representing mortgagee may collect legal fees from mortgagor so long as fees are not shared with lay corporation attorney cannot represent mortgagor and mortgagee without express consent after full disclosure DR 5-105 (C) (D) 5-107 (A) 3-102 EC 2-19

467 (1977) Not per se improper for lawyer to accept repeated referrals from real estate broker Canon 5 EC 5-1 5-21 DR 2-103 (C) ( (D) 5-107 (B)

493 (1978) A lawyer may conduct his law practice and a real estate brokerage business from the same office but he cannot solicit employment as a lawyer in violation of any statute or court rule and he cannot act as lawyer and broker in the same transaction DR 2-101 2-102 2-103

532 (1980) Lawyer escrow agent may not retain interest earned on funds during escrow Canons 5 9 EC 2-17 2-18 5-3 9-5 9-6 DR 2-106 (A) 5-104 (A) 9-102 (A) (B)

556 (1984) A lawyer authorized to issue title insurance for a title insurance company may indicate that

584

fact by placing appropriate information under the title company and agent and lawyers heading in the yellow pages DR 2-10l

566 (1984) Advertisement improper if paid for endorsement or recommendation by third party to use attorneys services and misleading if does not appear to be an advertisement but in fact is paid for by the attorney DR 2-101 (A) (E) 2-103 (A) - (D)

575 (1986) A lawyer holding a contract deposit as escrow agentattorney should request instructions from the contracting parties about placing the funds in an interestshybearing account DR 9-102

576 (1986) It is proper for an attorney representing a seller buyer or mortgagee to act also as a title insurance agent provided such conduct is legal no prohibited conflict exists consent is obtained from all parties after full disclosure the legal fee is reduced by remuneration for the title company absent express consent to the contrary from the client and the legal fee is not excessive DR 1-102 DR 2-106(A) DR 5-105 DR 5-105(C) DR 5-107 DR 6-102(A) DR 7-102 EC 2-17 This opinion notes that the federal Real Estate Settlement Procedures Act and NY Ins Law 6409(d) proscribe unearned fees for referrals

595 (1988) Improper for law firm that represents real estate clients and that has formed and is a principal in an abstract company to refer clients to the title abstract company except for purely ministerial title searches DR 3-103(A) 5-l01(A) EC 5-2

611 (1990) An attorney should not represent both the seller and lender in the same transaction except under unusual circumstances and unless the conditions of DR 5-105(C) are met DR 5-105(C) This opinion notes that Op 38 (1966) states that a lawyer may represent the buyer and seller in carrying out their common desire to close a real estate transaction but only in unusual and very limited circumstances and only after complete disclosure and consent If an actual conflict of interest arises the lawyer must withdraw from representing either party

621 (1991) It is improper for an attorney to refer a client to an abstract company in which the attorney has an ownership interest (see dissent) DR 5-l01(A) DR 5-105(C)

585

626 (1992) A lawyer representing a lender in a transaction where the fee is paid by the borrower must disclose to the borrower that the lawyer also will receive compensation from the title insurer for representing its interests at closing the lawyer may retain the total fees paid by the borrower and title insurer so long as the lender-client consents and the total amount is not excessive DR 2-106(A) DR 4-101 DR 5-107 (A) EC 2-17 This opinion clarifies and amplifies Op 595 (1988)

667 (1994) An attorney may accept a referral fee from a mortgage broker provided the client consents after full disclosure all proceeds thereof are credited to the client if the client so requests the aggregate attorneys fees are not excessive and the attorney exercises independent professional judgment on behalf of the client DR 2-106 (A) DR 5-107 (A) (2) EC 2-21 EC 5-1

677 (1995) A lawyer may delegate attendance at a real estate closing to a paralegal under certain circumstances (if task is merely ministerial) DR 1-104(A) EC 1-8 3-1 3-5 3-6

693 (1997) Attorney may allow paralegal to use attorneys signature stamp to execute escrow checks under certain circumstances DR 1-104 DR 9-102 (A) f (B) DR 9-102(E) EC 3-6 But see Coffey Authorized Signatories on Escrow Accounts Ethics Opinion 693 is Misplaced 26 NY Real Prop LJ 19 (Winter 1998) (arguing that this opinion conflicts with DR 9-102(E) and stating that Opinion 693 will not be followed by many disciplinary committees)

694 (1997) Improper for attorney to participate in Home Buyers Program where real estate brokerage firm and mortgage banker marketed program that offered services of attorney to represent both the purchaser and the lender with a fixed fee to the attorney to be paid by the purchaser that is substantially less that the aggregate amount customarily charged Implicit recommendation of attorney constitutes unethical third-party solicitation under DR 2-103(A) (C) Creates conflict of interest among multiple clients (purchaser and lender and strong interest in success of broker) under DR 5-105(A) (C) Creates conflict with purchaser that may be affected by the lawyers own interests under DR 5-101(A) which is so obvious that conflict cannot be cured by consent

586

705 (1998) Whether it is improper for an attorney to accept cases from a non-attorney tax reduction company that has agreed to engage counsel to conduct judicial proceedings in the event the company is unsuccessful in securing a reduction of property taxes in administrative proceedings depends on the specific circumstances the attorney may agree to work for a percentage of the tax reduction companys fee which itself is a percentage of the amount by which property taxes are reduced DR 2-103 DR 3-101(A) DR 3-102(A) EC 7-7 EC 7-9

710 (1998) Absent authorization by all parties lawyer who serves as escrow agent may not release funds to client except as provided in the escrow agreement while a lawyer may resign as escrow agent provision must be made to protect funds in escrow Escrow held for a number of years to secure purchasers against loss through a possible assessment for a sidewalk violation Where escrow agreement silent escrowee may not disburse funds to seller over objection of purchaser based on advice from representative of municipality that there is no possibility of assessment or on his own notion of fairness DR 9-102

713 (1999) Lawyer should comply with clients instruction to draft deed but forego title searches of parcels to be taken in satisfaction of a preexisting debt even though contrary to lawyers advice Client may limit scope of representation as long as lawyer able to otherwise competently represent the client and the client fully understands the consequences of the limitation NY State 604 (1989) Lawyer may withdraw when client insists that lawyer engage in conduct contrary to the judgment and advice of the lawyer DR 2-110(C) (1) (e) Lawyer would be well advised to memorialize in writing the clients instructions and the lawyers advice DR 2-110(C) (1) (e) 7-101 (B) 7-102 (A) (7) EC 7-1 7-8

731 (2000) Lawyer may not compensate lawyers employees for soliciting clients to engage services of title insurance agency in which lawyer has ownership interest in transactions in which the lawyer represents the lender This follows from NY State 595 and 621 This issue may implicate issues of federal and state law including RESPA and NY Insurance Law that are beyond this Committees jurisdiction and this opinion assumes compliance with all such laws

587

737 (2001) Lawyer may not issue check from attorney escrow account drawn against a bank or certified check that has not been deposited or has not cleared Implicit in such a practice is drawing on cleared funds of other clients in the escrow account to benefit the client for whose benefit the attorneys check is to be drawn In residential real estate closings sometimes open taxes or other liens first appear in a continuation title search in amounts in excess of the already cleared down payment in escrow The opinion discusses and rejects a number of arguments in favor of the proposed practice stating that the client whose funds have already cleared should not bear any risk The opinion recommends that the attorney simply advance his own funds and await a refund from the escrow account when the new checks clear DR 9-102

738 (2001) Improper for attorney to refer client to title abstract company owned by attorneys spouse For the reasons stated in NY state 595 as clarified and amplified in NY State 621 the opinion adheres to the same per se non-consentable result The dual roles of attorney and owner impermissibly require a lawyer as owner to negotiate title issues as counsel for the party in the transaction with itself The same per se result was reached in NY State 208 244 291 and 340 DR 5-101(A) 5-105 (C)

745 (2001) A lawyer who is disqualified from a matter on non-consentable conflict of interest grounds may not receive a referral fee A lawyer with a consentable conflict of interest who nevertheless refers the matter to another attorney may receive a referral fee DR 2-107 (A) and (D) DR g-101

749 (2001) Lawyers may not ethically use available technology to surreptitiously examine and trace e-mail and other electronic documents DR 1-102 (A) (4) DR 1-102(A) (5) DR 4-101 DR 7-102 (A) (8) Canon 4 Canon 7 EC 4-1

752 (2002) Lawyer owning or operating an ancillary business continues to be barred after promulgation of DR 1-106 from providing legal and nonlegal services in the same transaction even with the consent of the client DR 1-106 DR 1-107 DR 5-101(A) EC 1-12

753 (2002) Where client uses ancillary business owned by the lawyer rules applicable to personal conflicts

588

of interest and transactions between clients and lawyers continue to apply after DR 1-106 Under those rules lawyer owning mortgage brokerage and title abstract business may not even with informed consent represent buyer or seller and act as mortgage broker in the same transaction or act as title abstract company with respect to non-ministerial tasks but may where the client consents after full disclosure act as abstract company with respect to purely non-ministerial abstract work DR 1-106 DR 1-107 DR 5-101 (A) Ee 1-14

755 (2002) Provisions of DR 5-104(A) relating to business transactions between lawyer and client should not apply to lawyers recommendation that client employ a distinct lawyer-owned ancillary business (or referral from the business to the lawyer) where lawyer takes steps to ensure that client understands that protections of attorney-client relationship do not apply to the non-legal services (DR 1-106(A) disclaimer) DR 1-102(A) DR 1-106 DR 1-107 DR 2-101 (e) DR 2-102 (A) (B) DR 2-103 (A) (B) DR 5-101(A) DR 5-104(A) Ee 1-9 thru 1-12 Ee 1-14

757 (2002) Public announcement of certification as a specialist (certified as an Elder Law Attorney by the National Elder law Foundation as accredited by the American Bar Association) should contain disclaimer in DR 2-105(e) whether sent to attorneys or clients DR 2-101(A) DR 2-102 (A) (2) DR 2-105 (A) DR 2-105 (e) (2)

759 (2002) Lawyer may use ATM for making deposits to special account if lawyer complies with requirements of DR 9-102

764 (2003) Attorney may only accept earnings credit against bank charges based on lOLA account balances with consent of client after full disclosure distinguishing Opinion 532 DR 5-107 (A) (2)

765 (2003) Lawyer may enter into non-exclusive reciprocal referral agreement or understanding with securities broker or insurance agent and with appropriate disclosure and client consent can refer clients to such broker or agent DR 1-107

817 (2007) Participation in residential real estate transaction that includes a sellers concession and grossed up sale price is prohibited unless the transaction is entirely lawful the gross-up is disclosed

589

in the transaction documents and no parties are misled to their detriment

816 (2007) A lawyer may ethically accept an advance payment retainer place such funds in the lawyers own account and retain any interest earned The lawyer may require the client to forward an advance payment retainer to pay for final fees that accrue at the end of the relationship

783 (2005) If a client deliberately disregards an agreement to pay legal fees and expenses and the letter of engagement or retainer agreement is silent as to interest charges on the delinquency a lawyer may condition continued representation on the clients agreement to prospectively pay interest on any past due balance for services rendered or to be rendered in the future

C OTHER ETHICS OPINIONS

Assn of Bar of City of NY Opinion NYC 1986-5 General discussion of ethical questions that arise when lawyers hold funds in escrow need for carefully drafted escrow agreement client secrets conflicts of interest between client and others and between lawyer and client modes of investing lawyers non-entitlement to income earned participation in lOLA problems of commingling and record-keeping requirements

Assn of Bar of City of NY Opinion NYC 1994-8 attorney who represents buyer of real estate and learns prior to closing that client and seller intend to engage in scheme to pay a portion of the price under the table and file false returns to reduce transfer tax is required to call upon the client to discontinue the scheme If the client refuses the attorney must withdraw If the attorney withdraws he is not required to disclose the scheme to the clients successor attorney or others DR 7-102 (A) (7) DR-102 (B) (2) DR 4-101 (B) (1) DR 4-101 (C) (3)

Assn of Bar of City of NY Opinion NYC 2001-2 Law firm may represent a client whose interests in a corporate transaction are adverse to those of a current client in a separate matter and may represent multiple clients in a single matter with disclosure and informed consent so

590

long as a disinterested lawyer would believe that the law firm can competently represent the interests of each Satisfaction of the ndisinterested lawyer test in this context will depend on an evaluation of the nature and circumstances of the simultaneous representations including those enumerated in the opinion DR 5-105 EC 5-1 EC 5-15 EC 5-16

Assn of Bar of City of NY Opinion NYC 2002-2 Where lawyer who placed client funds in interest-bearing escrow account and retainer agreement did not address interest lawyer must pay any interest earned to the client DR 9-102

Assn of Bar of City of NY Opinion NYC 2002-3 Where a client conceives the idea of communicating directly with an adverse party represented by counsel lawyer may advise the client about the substance of the communication NY City 1991-2 is withdrawn Lawyer may freely advise the client so long as lawyer does not assist the client inappropriately to seek confidential information or invite the nonclient to take action without the advice of counsel or otherwise to overreach the nonclient DR 7-104 EC 7-18

Bar Association of Nassau County Opinion 98-10 Attorney may not represent purchaser and lender in same residential real estate transaction As where attorney acts as both broker and attorney an inherent conflict of interest arises when the attorneys fee from the lender is contingent on closing It is readily apparent that the lender and the purchaser may sometimes have significantly differing interest in the details and structure of the transaction DR 5-105(A) and DR 5-105(C)

Bar Association of Nassau County Opinion 01-1 Unethical for attorney to use printed real estate contract from with legend indicating preparation by bar association that also contains material changes to the approved form unless the changes are clearly pointed out DR 1-102(A) (4) DR 7-102(A (5) EC 7-38 Changes (in same typeface) required purchaser to pay sellers attorney a fee of $350 for attending a closing in New York City limited liability of seller for repairs to $100 and required purchaser to pay the NYS Real Property Transfer Tax

Bar Association of Nassau County Opinion 02-3 Lawyer may utilize paralegals or other non-lawyer personnel to

591

perform real estate closings even if attorney not physically present provided attorney maintains direct relationship with client and properly supervises Compensation may be paid on a piece-meal basis buy may not be based on a percentage of revenue or profit DR 1-104(C) DR 3-102 (A) (3) EC 3-5 EC 3-6

Bar Association of Nassau County Opinion 03-03 lawyer with ownership interest in title abstract company prohibited from referring his clients to that company regardless of whether he obtains clients consent DR 1-106 DR 5-101(A)i DR 5-104(A) EC 5-2

010405

--- ~-------------~--~~~~---------- ~ ~- ~~ ~~ ~---~~----~~~-~---~--~-------~ ~~~ ~-~ ~--------~--- -~~~~~ ~ ~ ~ ~~ ~~ --~~~----~~--~-~~

592

CHAPTER ONE

HANDLING OF ESCROW FUNDS BY ATTORNEYS

Mark S Ochs Esq

Reprinted with permission from Attorney Escrow AccountsmdashRulesRegulations and Related Topics Third Edition Copyright 2010 pub-lished by New York State Bar Association One Elk Street Albany NewYork 12207

593

HANDLING OF ESCROW FUNDS BY ATTORNEYS sect 10

3

[10] I INTRODUCTION

There often is confusion and a lack of awareness of the role and re-sponsibility of an attorney who has received money from a client or thirdparty This chapter addresses the handling of escrow funds by attorneys

[11] II ESCROW ACCOUNTS

An attorney who receives funds on behalf of a client or third party is afiduciary and as such must safeguard those funds in accordance with theNY Rules of Professional Conduct (the ldquoRulesrdquo)1 court rules and theNY Judiciary Law These funds received in the course of the attorneyrsquospractice of law are to be maintained in a special account separate fromany business or personal accounts and separate from any accounts theattorney may maintain as executor guardian trustee or receiver or in anyother fiduciary capacity2

[12] A Location of Account

The escrow account is to be maintained in a New York bank whichagrees to provide reports pursuant to the Dishonored Check ReportingRule3 The account may be maintained in a bank outside of New Yorkonly if that bank complies with the Dishonored Check Reporting Rule andthe attorney has obtained prior detailed written approval from the personto whom the funds belong4 Records for the account are to be available atthe attorneyrsquos principal New York office5

[13] B Title of Account

The account is to be in the name of the attorney or law firm and mustcontain the title ldquoAttorney Special Accountrdquo ldquoAttorney Trust Accountrdquo or

1 NY Rules of Professional Conduct promulgated as joint rules of the Appellate Division of theSupreme Court and set forth in part 1200 of tit 22 of NY Comp Codes R amp Regs(NYCRR)

Editorrsquos note For purposes of simplicity throughout the course of the book reference to theRules of Professional Conduct (22 NYCRR 12000) will be shortened to the particular rule egRule ldquoXrdquo

2 Rule 115(b)(1) In re Bartholomew 195 AD2d 753 600 NYS2d 336 (3d Deprsquot 1993)

3 22 NYCRR sect 1300 Dishonored Check Reporting Rules for Attorney Special Trust and Es-crow Accounts

4 Rule 115(b) In re Weisman 139 AD2d 249 531 NYS2d 255 (1st Deprsquot 1988)

5 Rule 115(i)

594

sect 14 ATTORNEY ESCROW ACCOUNTS

4

ldquoAttorney Escrow Accountrdquo6 Bank statements checks and deposit slipsmust also bear that designation7 The account title may include otherdescriptive language as long as it does not conflict with the required lan-guage For example an attorney may add ldquoReal Estate Accountrdquo or ldquoClos-ing Accountrdquo following the required title A non-escrow account may notbe labeled as an escrow account8

If the escrow account is an IOLA account which most should be anadditional designation is required9

[14] C Only Attorneys in Good Standing May Maintain an Escrow Account

A suspended or disbarred attorney may not continue to maintain or usean escrow account which was in use prior to the attorneyrsquos removal fromthe practice of law10

[15] D Funds of Attorney

Other than an amount sufficient to maintain the account no fundsbelonging to the attorney may be kept in the escrow account11 Escrowaccounts are not to be used to pay personal debts nor are they to be used toshelter an attorneyrsquos funds from judgment creditors or tax liens12

[16] E Deposit

All funds received by an attorney on behalf of a client or third partyshould be deposited into the attorneyrsquos escrow account13 An attorney maynot deposit client funds into a non-escrow account out of fear that an

6 Id Rule 115(b)(2) In re Rabine 253 AD2d 144 687 NYS2d 654 (2d Deprsquot 1999) In re Bol-lettieri 225 AD2d 887 639 NYS2d 504 (3d Deprsquot 1996) In re Holsberger 223 AD2d 920637 NYS2d 322 (3d Deprsquot 1996)

7 In re Scattaretico-Naber 250 AD2d 334 682 NYS2d 67 (2d Deprsquot 1998)

8 In re Connolly 225 AD2d 241 650 NYS2d 275 (2d Deprsquot 1996)

9 See III ldquoInterest on Lawyer Accounts (IOLA)rdquo [sect117]

10 In re Kwiatkowski 275 AD2d 141 714 NYS2d 505 (2d Deprsquot 2000) In re Leff 268 AD2d37 705 NYS2d 603 (2d Deprsquot 2000)

11 Rule 115(b)(3) In re Hammer 253 AD2d 226 687 NYS2d 71 (1st Deprsquot 1999)

12 Rule 115(a) In re Kelligrew 40 AD3d 66 831 NYS2d 471 (2d Deprsquot 2007) In re McCann3 AD3d 5 769 NYS2d 243 (1st Deprsquot 2003) In re Rose 286 AD2d 1 730 NYS2d 161(2d Deprsquot 2001)

13 In re Segal 274 AD2d 127 710 NYS2d 102 (2d Deprsquot 2000)

595


5

escrow account in the attorneyrsquos name will be subject to attachment by acreditor of the attorney or the IRS14 The funds may not be put in a safelocked cabinet or safe deposit box15 They should not be deposited in anaccount in the attorneyrsquos name as trustee or in a certificate of deposit inthe attorneyrsquos name designated ldquoas attorneyrdquo16

An attorney who receives funds on behalf of a client or third party inthe course of legal representation does not do so in the capacity of finan-cial advisor or investment counselor It is the attorneyrsquos duty to safeguardthe funds not to invest them in the hope of obtaining a higher rate ofreturn Specific language permitting deposit into an account other than anldquoidentifiable bank accountrdquo was rejected when DR 9-102 (now Rule 115)was amended in 199017

Where a check is received payable to the attorney and client it is notappropriate for the attorney to deposit the check into an escrow accountby use of a ldquoFor Deposit Onlyrdquo endorsement The client should personallyendorse the check18 An attorney may use a revocable power of attorneyeither in a stand-alone document or as part of a retainer agreement thatauthorizes the attorney to settle a case and to endorse the clientrsquos name tothe settlement check provided the attorney makes full disclosure as to theeffect of such power of attorney and further that (1) the attorney may onlysettle a case on terms indicated in advance by the client or if the settle-ment is submitted to the client for approval and (2) an attorney whoendorses a settlement check on behalf of the client must promptly complywith the notice record keeping and disbursement requirements of Rule11519

However the use of a retainer agreement incorporating an uncondi-tional power of attorney authorizing the attorney to endorse the clientrsquosname to settlement checks received in the course of representation is

14 In re Wagshul 308 AD2d 248 765 NYS2d 47 (2d Deprsquot 2003) In re Projansky 286 AD2d35 730 NYS2d 714 (2d Deprsquot 2001) In re Grubart 152 AD2d 185 547 NYS2d 638 (1stDeprsquot 1989) In re Weisman 139 AD2d 249 531 NYS2d 255 (1st Deprsquot 1988)

15 In re Cox 283 AD2d 85 728 NYS2d 599 (4th Deprsquot 2001) In re Collins 193 AD2d 22602 NYS2d 553 (2d Deprsquot 1993)

16 In re Cissi 202 AD2d 139 617 NYS2d 104 (4th Deprsquot 1994) In re Lewis 159 AD2d 854553 NYS2d 861 (3d Deprsquot 1990)

17 Marjorie E Gross Amendments to the New York Code of Professional Responsibility 1990

18 In re Cerbone 295 AD2d 66 742 NYS2d 110 (2d Deprsquot 2002)

19 NYSBA Committee on Professional Ethics Opinion 760 (2003) (ldquoNYSBA Oprdquo)

596


6

improper and an authorization should only be used in those rare caseswhere the circumstances require it20

Checks which in part or in whole include funds due a client or thirdparty should be deposited into an escrow account in the first instance Thecheck should not be deposited into the attorneyrsquos operating account forthe purpose of separating out the attorneyrsquos fee21

[17] F Notification and Payment to Clients

Clients or third parties should be timely notified by the attorney ofreceipt of funds in which the client or third party has an interest Paymentshould be promptly made22

[18] G Payments From Escrow Account

An attorney may not make disbursements against a deposit until thefunds have been collected23 Funds from an earlier transaction may not beused as a float to cover payments against uncollected funds24 The use ofpost-dated checks is a practice fraught with danger as is giving checks toclients or third parties and asking them to hold the checks until the depositclears25

Escrow accounts may not carry overdraft privileges and the accountmay not be associated or linked with any other account for the purpose ofcovering a shortage

An escrow account may contain sub-accounts for the benefit of individ-ual clients However the attorney should protect against commingling orinadvertent or technical conversion where one of the sub-accounts

20 In re Hausen 108 AD2d 206 488 NYS2d 742 (2d Deprsquot 1985)

21 In re Venezia 219 AD2d 310 640 NYS2d 898 (2d Deprsquot 1996)

22 Rule 115(c)(1)(4) In re Strauss 228 AD2d 782 644 NYS2d 78 (3d Deprsquot 1996) In re Sorid189 AD2d 377 596 NYS2d 125 (2d Deprsquot 1993) In re Murdock 186 AD2d 312 588NYS2d 432 (3d Deprsquot 1992) In re Cholakis 179 AD2d 862 578 NYS2d 671 (3d Deprsquot1992)

23 In re Sukhdeo 47 AD3d 6 845 NYS2d 803 (2d Deprsquot 2007) In re Rosenberg 3 AD3d 52770 NYS2d 405 (2d Deprsquot 2003) In re Rudin 280 AD2d 200 719 NYS2d 919 (4th Deprsquot2001)

24 In re Tepper 286 AD2d 79 730 NYS2d 498 (2d Deprsquot 2001) In re Sullivan 253 AD2d 999678 NYS2d 169 (3d Deprsquot 1998) In re Elefterakis 238 AD2d 7 667 NYS2d 55 (2d Deprsquot1997) In re Joyce 236 AD2d 116 665 NYS2d 430 (2d Deprsquot 1997)

25 In re Ampel 196 AD2d 105 608 NYS2d 438 (1st Deprsquot 1994)

597


7

belongs to the attorney Care must also be taken when transfer to a check-ing sub-account is required in order to disburse funds

Payments from an escrow account may only be made to a named payeeby check or with the prior written approval of the party entitled to theproceeds by bank or wire transfer Checks may not be issued payable tocash26 Cash withdrawals or transactions using an ATM card are also pro-hibited27

Funds due an attorney should be disbursed from an escrow account bycheck payable to the attorney They should not be withdrawn by checkspayable to third parties in satisfaction of personal obligations or businessexpenses unrelated to the particular matter28

It is no defense to a conversion charge that the client for whom anattorney was holding funds would have consented to the attorney takingfunds from the escrow account in the form of a loan29 Similarly it is nodefense that the attorney knew other funds would become available tocompensate the client or that the attorney intended to repay the fundswhen he or she took them or had repaid some of the funds and intendedto return additional amounts30

Where an attorney would disburse funds to a client but for a reasonablebelief that the client may be suffering from diminished capacity whichcould result in substantial financial risk to the client the attorney maytake protective action as provided for in Rule 114(b)31

26 In re McCann 3 AD3d 5 769 NYS2d 243 (1st Deprsquot 2003) In re Rudin 280 AD2d 200 Inre Bishop 235 AD2d 53 663 NYS2d 241 (2d Deprsquot 1997) In re Ocasio 223 AD2d 339646 NYS2d 327 (1st Deprsquot 1996)

27 In re Cronk 52 AD3d 54 856 NYS2d 186 (2d Deprsquot 2008) In re Kelligrew 40 AD3d 66831 NYS2d 471 (2d Deprsquot 2007) In re Williams 290 AD2d 111 735 NYS2d 204 (2d Deprsquot2001) In re Butler 285 AD2d 344 729 NYS2d 744 (2d Deprsquot 2001)

28 In re Friedman 279 AD2d 147 717 NYS2d 240 (2d Deprsquot 2000) In re Nicotera 268 AD2d881 702 NYS2d 425 (3d Deprsquot 2000)

29 In re Neufeld 268 AD2d 1 704 NYS2d 579 (1st Deprsquot 2000) In re Munzer 261 AD2d 87697 NYS2d 49 (1st Deprsquot 1999)

30 In re Abato 51 AD3d 225 853 NYS2d 660 (2d Deprsquot 2008) In re Blau 50 AD3d 240 853NYS2d 18 (1st Deprsquot 2008)

31 Cf NYSBA Op 775 (2004)

598


8

[19] H Attorneyrsquos Fees

New York is in the minority of states that do not consider the advancepayment of legal fees to be client funds Therefore they need not bedeposited into the attorneyrsquos escrow account and any interest earned onthe funds is the property of the attorney32 The attorney is obliged how-ever to promptly return any portion of the fee that is not earned at theconclusion of the attorney-client relationship33

Advance fees are the property of the attorney and their deposit into anescrow account constitutes commingling of personal funds with those ofclients and third parties Under the same reasoning earned legal feesshould not be deposited in an escrow account34

An attorney may chose to treat advance legal fees as client funds inwhich case the funds may not be withdrawn from the account untilearned Further in the event of a dispute over the attorneyrsquos fees the dis-puted portion may not be withdrawn until the dispute is resolved35

Where an attorney deposits funds into an escrow account a portion ofwhich belongs to the client such as in the case of a personal injury settle-ment upon disbursing the clientrsquos share the attorneyrsquos fee should also bedisbursed By the same token there is no reason why payment of an attor-neyrsquos fees should precede payment to the client36 Unearned fees held inan escrow account should be withdrawn promptly when earned Leavingthem in the account for an unreasonable period of time constitutes com-mingling37

The conversion of clientrsquos funds is not excused by the fact that fees inexcess of the amount taken may be due the attorney38

32 See NYSBA Op 816 (2007)

33 Rule 116(e) NYSBA Op 570 (1985) NYSBA Op 816 (2007)

34 In re Williams 290 AD2d 111 735 NYS2d 204 (2d Deprsquot 2001)

35 Rule 115(b)(4)

36 In re Rosenberg 3 AD3d 52 770 NYS2d 405 (2d Deprsquot 2003) In re Allen 308 AD2d 143765 NYS2d 74 (4th Deprsquot 2003) In re Perlman 241 AD2d 203 670 NYS2d 866 (2d Deprsquot1998)

37 In re Cronk 52 AD3d 54 856 NYS2d 186 (2d Deprsquot 2008) In re Friedman 279 AD2d 147704 NYS2d 579 (2d Deprsquot 2000) In re Orseck 262 AD2d 862 692 NYS2d 766 (3d Deprsquot1999)

38 In re Pressment 118 AD2d 270 504 NYS2d 398 (1st Deprsquot 1986)

599


9

[110] I Signatories

Only an attorney admitted in New York may be a signatory on anescrow account Paralegals office managers or other non-attorneys maynot sign escrow account checks39 While an opinion of the New YorkState Bar Association holds that an attorney may allow a paralegal to usea signature stamp to execute escrow checks in connection with a realproperty closing the attorney must supervise the delegated work closelyand exercise complete professional responsibility for the acts of the para-legal40 An attorney may not sign blank checks leaving them for a non-attorney employee to complete41 Under no circumstances should a clientbe given access to the attorneyrsquos escrow account42

All attorneys who are signatories on an escrow account are responsiblefor the activity in that account An attorney is responsible for the actionsof non-attorney employees especially where the attorney is aware that thenon-attorneys are afforded access to the escrow account43

Where client funds are converted by an attorney in a law firm the fail-ure to oversee or review the firmrsquos books and bookkeeping practicesexposes an otherwise innocent partner to discipline44

[111] J Missing Clients

Where funds are payable to a client who cannot be located the attorneyshould apply for an order directing payment of the attorneyrsquos fees and dis-bursements with the balance to be delivered to the Lawyersrsquo Fund for Cli-ent Protection for safeguarding and disbursement45 Where funds are too

39 Rule 115(e) In re Williams 290 AD2d 111 735 NYS2d 204 (2d Deprsquot 2001) In re McMa-hon 251 AD2d 808 674 NYS2d 474 (3d Deprsquot 1998) In re Takvorian 240 AD2d 95 670NYS2d 211 (2d Deprsquot 1998)

40 NYSBA Op 693 (1997)

41 In re Cohen 264 AD2d 94 704 NYS2d 547 (1st Deprsquot 2000)

42 In re Bleecker 242 AD2d 42 672 NYS2d 885 (2d Deprsquot 1998)

43 In re LaMattina 51 AD3d 371 858 NYS2d 222 (2d Deprsquot 2008)

44 In re Glazer 264 AD2d 19 701 NYS2d 656 (2d Deprsquot 2000) In re Ponzini 259 AD2d 142694 NYS2d 127 (2d Deprsquot 1999) reargument granted 268 AD2d 478 701 NYS2d 911 (2dDeprsquot 2000) In re Maroney 259 AD2d 206 694 NYS2d 431 (2d Deprsquot 1999) In re Spencer259 AD2d 218 694 NYS2d 426 (2d Deprsquot 1999) reargument granted 268 AD2d 481 2000WL 104460 (2d Deprsquot 2000) In re Falanga 180 AD2d 83 583 NYS2d 472 (2d Deprsquot 1992)

45 Rule 115(f)

600


10

small to justify seeking a court order funds may be sent with a letter tothe Lawyersrsquo Fund for Client Protection46

[112] K Dissolution of Law Firm

The former partners or members of a dissolved law firm must arrangefor one of them or a successor firm to safeguard the funds and to maintainthe bookkeeping records required under Rule 115(d)47

[113] L Deceased Attorneys

When an attorney who is the sole signatory on an escrow account diesneither the estate representative nor the estate attorney may issue checksfrom the deceased attorneyrsquos escrow account In such a situation an appli-cation needs to be made to supreme court for an order designating a suc-cessor signatory48

[114] M Disabled Attorneys

There are presently no provisions similar to those dealing withdeceased attorneys in the event a sole signatory on an escrow account

46 See chapter 4 ldquoLawyersrsquo Fund for Client Protection of the State of New Yorkrdquo

47 Rule 115(h) See Forms section of the Appendix Attorney General of the State of New YorkModel Form for Escrow Agreement 4 Recordkeeping

48 Rule 115(g) Editorrsquos Note The discussion above is limited as it must be to the event of a law-yerrsquos death However many commentators including the New York State Bar Association theNew York County Lawyersrsquo Association the New York Lawyersrsquo Fund for Client Protectionand Roy Simon in his publication Simonrsquos New York Code of Professional Responsibility 2008ed p 1455 have called attention to the limitations of DR 9-102 (now Rule 115)

The New York State Bar adopted a proposal and submitted it to the Court which essentiallyamended DR 9-102(g) now Rule 115(g) It addressed the problem that the Bar identified as ex-isting where ldquoNew York lawyers have disappeared abandoned their practices become perma-nently or temporarily incapacitated resigned during the pendency of a disciplinary investigationor proceeding or have been disbarred or suspended while remaining signatories of their attorneyescrow trust or special accountrdquo The report noted that there was no current mechanism to applyfor the designation of a successor signatory in such a situation The proposal was supported bythe New York County Lawyersrsquo Association and the Lawyersrsquo Fund for Client Protection Ad-ditionally the Lawyersrsquo Fund for Client Protection and the New York County Lawyersrsquo Asso-ciation adopted and recommended to Judge Kaye a new proposed DR 9-102(k) and amendmentsto related Appellate Division Rules Specifically this proposal focused on safeguarding clientsrsquofunds in trust escrow or special accounts where the attorney was identified as having severe dis-ciplinary problems The four presiding Justices of the Appellate Divisions rejected these propos-als in part on the basis that the disciplinary committees already had the authority being proposedWhether or not these proposals have merit and there is obviously disagreement as to such meritthe reader should be aware of the issues and the current status of the disciplinary rules regardingthese situations

601


11

becomes mentally or physically disabled or abandons his or her practiceand cannot be located

[115] N Sale of Law Practice49

The sale of an attorneyrsquos law practice does not carry with it the sellerrsquosescrow account Funds of clients whose cases are transferred will need tobe released from the selling attorneyrsquos escrow account by check fordeposit into the purchasing attorneyrsquos escrow account Even where anentire practice is purchased the parties may not merely change the titleand signatories on the sellerrsquos escrow account

[116] O Biennial Affirmation of Compliance

The rules of the First and Second Department Appellate Divisionsrequire that attorneys affirm on the biennial registration statement pro-vided by the Office of Court Administration50 that they have read and arein compliance with Rule 11551 This affirmation is available to the griev-ance committee and where an attorney converts or otherwise mishandlesescrow funds a charge may be included that the attorney filed a biennialstatement containing a false affirmation52

[117] III INTEREST ON LAWYER ACCOUNTS (IOLA)

An IOLA account is an unsegregated interest-bearing escrowaccount53 Funds which an attorney would hold in escrow should bedeposited in an IOLA escrow account when in the judgment of the attor-

49 Rule 117

50 Judiciary Law sect 468-a (ldquoJud Lawrdquo) 22 NYCRR sect 1181

51 22 NYCRR sectsect 60315 69112

52 In re Humpherys 291 AD2d 138 738 NYS2d 857 (2d Deprsquot 2002) In re Butler 285 AD2d344 729 NYS2d 744 (2d Deprsquot 2001) In re Gilde 276 AD2d 178 715 NYS2d 751 (2dDeprsquot 2000) In re Steinbach 228 AD2d 88 651 NYS2d 523 (1st Deprsquot 1997)

53 Jud Law sect 497 The complete statute is included in the Appendix

602


12

ney they are not expected to generate sufficient interest to justify theexpense of administering a segregated account The obligation rests withthe attorney to ensure that the IOLA Fund is notified that the account hasbeen established54

Language previously contained in the regulations of the IOLA Fundproviding as a rule of thumb that if a particular deposit is expected to earnless than $150 in interest while in the attorneyrsquos control the money shouldbe deposited in an IOLA account was deleted in 200755

Where the attorney determines that sufficient interest will be earned tojustify a segregated escrow account for the benefit of a particular clientall interest earned on that account is the property of the client56

In spite of the language of Judiciary Law sect 497(4)(b) and (5) effortshave to be made to hold attorneys accountable for failure to deposit fundsin an interest-bearing account for the benefit of a client In Takayama vSchaefer57 Judiciary Law sect 497(5) was relied upon to exonerate an attor-ney who held a $12000 deposit in an IOLA account during four years oflitigation Two dissenting judges concluded that a breach of fiduciary dutyoccurred when the attorney failed to deposit the funds in an interest-bear-ing account when it became evident that the funds would have to remainin escrow pending the outcome of the litigation The majority concededthat there were circumstances where Judiciary Law sect 497(5) would notprovide protection to an attorney employing an IOLA account

In Mann v Skidmore58 where the escrow deposit involved was $85000the court distinguished Takayama and found that the retention of this sumfor a year and a half in an IOLA account exceeded the limits of the statu-tory safe harbor provision On appeal the judgment was reversed and theaction dismissed59 with the court holding that the plaintiffs failed toestablish that the attorney lacked good faith either in depositing the fundsin a non-interest-bearing attorney IOLA account in the first instance or in

54 Jud Law sect 497(6)(a)

55 21 NYCRR sect 700010

56 In re Gross 281 AD2d 67 723 NYS2d 51 (2d Deprsquot 2001) In re Summer 238 AD2d 86667 NYS2d 150 (4th Deprsquot 1997) In re Mattone 195 AD2d 91 606 NYS2d 322 (2d Deprsquot1994) In re Stella 193 AD2d 235 602 NYS2d 636 (2d Deprsquot 1993)

57 240 AD2d 21 669 NYS2d 656 (2d Deprsquot 1998)

58 193 Misc 2d 340 749 NYS2d 379 (Dist Ct Nassau Co 2002)

59 2 Misc 3d 50 774 NYS2d 252 (App Term 2d Deprsquot 2003)

603


13

failing to transfer the funds to an interest-bearing account at some latertime The plaintiffs complained only of the attorneyrsquos poor judgment indepositing the proceeds into an IOLA account This was held to be insuf-ficient to establish a lack of good faith and in fact represented the veryquestioning of professional judgment that Judiciary Law sect 497(5) wasintended to forestall The inquiry into the attorneyrsquos initial determinationas to whether the funds were ldquoqualifiedrdquo was prospective and his assertionthat he expected the funds to be disbursed within two or three months wasunrebutted60

In Bazinet v Kluge61 the court held that a client stated a malpracticeclaim against an attorney who represented her in the sale of cooperativeapartments The claim was based on an allegation that the attorney draftedsales contracts which provided for the deposit of $2730000 in his escrowaccount pending the closings The account was maintained at a relativelysmall Connecticut bank without protection beyond the $100000 peraccount deposit insurance provided by the Federal Deposit Insurance Cor-poration The bank subsequently failed The client also stated a malprac-tice claim based on the allegation that the attorney deposited the funds ina non-interest-bearing IOLA account since such a significant sum did notappear to constitute ldquoqualified fundsrdquo as defined by the IOLA statute Theallegations however did not state a gross negligence claim62 The Appel-late Division First Department reversed63 finding that there was no alle-gation that the attorney violated any statute or regulation much less thathe breached the escrow provisions of the contract The court held therewas no requirement imposed by law that an attorney-escrow agent placeescrow funds in an account fully insured by the FDIC (citing NY General

60 Attorney was not liable for interest on funds placed in escrow in connection with matrimonialaction absent showing that court directed attorney to place funds in interest-bearing accountLafasciano v Lorber 33 AD3d 666 823 NYS2d 427 (2d Deprsquot 2006)

61 196 Misc 2d 231 764 NYS2d 320 (Sup Ct NY Co 2003)

62 Editorrsquos NotemdashAttorneys should be comforted by the fact that as the size of the escrow in-volved in these cases has increased the courts remain undeterred in upholding the immunity pro-vision of Jud Law sect 497 accorded attorneys who place funds in IOLA accounts It is the generalopinion of the editors and contributors that deposits need not be split up so as to achieve protec-tion from depository insurance provisions All funds however must be deposited in institutionsas defined in Rule 115(b) However the editors and contributors feel strongly that considerationshould be given by the attorney to the institution into which a sizable deposit of trust funds is tobe made See discussion at chapter 3 IIIB ldquoFederal Insurancerdquo [sect35]

63 Bazinet v Kluge 14 AD3d 324 788 NYS2d 77 (1st Deprsquot 2005)

604


14

Business Law sect 778-a (GBL)64 and DR 9-102(B)(1) (now in the Rules115(b)(1))) and there were no allegations that the attorney knew the bankwas in danger of closing The proximate cause of the plaintiffrsquos injury ifany was the bankrsquos unforseen demise

An attorney who determines that fund were incorrectly placed in anIOLA account instead of an interest-bearing account for the benefit of theclient may seek a refund of the interest remitted to the IOLA Fund by thebank65

While an attorney may not be held liable for monetary damages or bethe subject of a disciplinary proceeding based upon a good faith decisionto deposit funds into an IOLA account the failure to maintain such anaccount has been held to constitute misconduct66

[118] A Non-Interest-Bearing Escrow Accounts

There should be no such thing as a non-interest-bearing escrow ac-count Funds should be deposited in an interest-bearing escrow accountwith the interest credited to a specific client or into an IOLA accountEven short-term special funding accounts established for mortgage trans-actions on behalf of financial institutions fall within these rules

[119] B Real Estate Brokers Commissions

Attorneys in real property transactions should be aware of the recentamendment to the NY Real Property Law requiring certain sellers or les-sors of residential property to escrow a brokerrsquos commission with thecounty recording officer67

64 GBL sect 778-a(4) provides

Unless the contract provides otherwise an escrow agent shall not be required todeposit the down payment in an interest-bearing bank account If the escrowagent is an attorney admitted to practice in this state a bank account authorizedby section four hundred ninety-seven of the judiciary law shall be a lawful depos-itory for down payments held by the attorney in escrow

65 NY State Finance Law sect 97(10)

66 In re Di Stefano 22 AD3d 951 802 NYS2d 760 (3d Deprsquot 2005)

67 Real Property Law sect 294-b amended effective January 1 2009

605


15

[120] IV REQUIRED BOOKKEEPING RECORDS

Records of all financial transactions must be accurate and made at ornear the time of the events recorded68 These record-keeping requirementsapply to all accounts associated with an attorneyrsquos practice not justescrow accounts For a period of seven years attorneys must maintain thefollowing documentation

A record of all deposits and withdrawals identifying thedate source and description of each deposit and datepayee and purpose of each withdrawal or disbursement

A record for escrow accounts showing the source of allfunds deposited the names of all persons for whom thefunds are held the amount of such funds the descriptionand amounts and the names of all persons to whom suchfunds were disbursed69

All original checkbooks check stubs bank statementsprenumbered canceled checks and duplicate depositslips70

Other non-banking documents relating to the attorneyrsquos representationof a client must also be retained These are detailed in Rule 115(d)

Where copies are permitted an attorney may satisfy the requirement ofmaintaining records through original records photocopies microfilmoptical imaging or any other medium that preserves an image of the docu-ment that cannot be altered without detection71 However copies are notsufficient where the rule requires that original documents be retained72

68 Rule 115(d) In re Panara 241 AD2d 78 670 NYS2d 644 (4th Deprsquot 1998) In re Madsen230 AD2d 275 654 NYS2d 501 (4th Deprsquot 1997) In re Rolnick 171 AD2d 29 574NYS2d 369 (2d Deprsquot 1991)

69 In re Siddiqi 231 AD2d 150 658 NYS2d 668 (2d Deprsquot 1997)

70 In re Ryan 264 AD2d 128 703 NYS2d 247 (2d Deprsquot 2000) In re Connolly 225 AD2d241 650 NYS2d 275 (2d Deprsquot 1996)

71 Rule 115(d)(3) NYSBA Op 758 (2002)

72 Rule 115(d)(1)(viii)

606


16

Attorneys are required to maintain a running balance of trust accountactivity and complete periodic reconciliations73 While an attorney maydelegate bookkeeping activities to non-attorneys the ultimate responsibil-ity and duty to verify that funds are properly preserved rests with theattorney74

All attorneys subject to the jurisdiction of the First and Second JudicialDepartments are required to affirm as part of their biennial registrationthat they have read and are in compliance with Rule 115 This require-ment has formed the basis of an additional charge in a disciplinary pro-ceeding alleging conversion that the attorney made a false affirmation inthe registration statement75

[121] V DISHONORED CHECK REPORTING RULE

The Dishonored Check Reporting Rule76 provides that a report must beissued by a bank whenever a check from an attorneyrsquos escrow account isreturned for insufficient funds

73 In re Warkow 242 AD2d 102 673 NYS2d 437 (2d Deprsquot 1998) In re Capobianco 219AD2d 179 639 NYS2d 242 (4th Deprsquot 1996)

74 In re Rosenberg 3 AD3d 52 770 NYS2d 405 (2d Deprsquot 2003) See also Birnbaum v Cit-ibank NA 97 AD2d 392 467 NYS2d 213 (2d Deprsquot 2003) where the bank mistakenly cred-ited an attorneyrsquos escrow account for $4400 and $250 The attorney could not reconcile hisaccount balance with that reported by the bank but was advised by a bank officer that the errorwas his and not the bankrsquos After four months of being unable to trace the source of the unac-counted for funds the attorney transferred them into another escrow account at another bank soas to segregate the unaccounted for funds

He subsequently received notice that his account was debited in the amounts of $4400 and $250because the account had been credited in error Upon receipt of this notice the attorney notifiedthe bank that he would incur injury and damage if any checks drawn on his escrow account werereturned because of insufficient funds He thereafter received notice escrow account checks hadbeen returned from the bank for insufficient funds

The attorney sued Citibank for $28000000 as a result of its unilaterally debiting his accountThe court denied the bankrsquos motion to dismiss finding that inasmuch as the bank had been noti-fied of the questionable credit but at that time found no error and over a period of time con-tinued to carry the credit on the attorneyrsquos account his reliance on the bankrsquos assurance that thecredit was not erroneous may be justifiable Accordingly under the facts and circumstances pre-sented the complaint stated a cause of action in wrongful dishonor pursuant to UCC sect 4-402

75 In re Humpherys 291 AD2d 138 738 NYS2d 857 (2d Deprsquot 2002) In re Butler 285 AD2d344 729 NYS2d 744 (2d Deprsquot 2001) In re Gilde 276 AD2d 178 715 NYS2d 751 (2dDeprsquot 2000)

76 22 NYCRR sect 1300

607


17

[122] A Compliance With Rule

Escrow accounts may only be maintained in a bank which agrees toprovide reports pursuant to the Dishonored Check Reporting Rule77 AllNew York attorneys are deemed to have consented to the rule and the obli-gation rests with the attorney to make certain that the account is in com-pliance

[123] B Report of Dishonored Check

A report is required from the depository bank whenever a properly pay-able instrument is presented against an escrow account which containsinsufficient available funds and the bank dishonors the instrument This isnot an overdraft rule The check must in fact be dishonored

[124] C Processing of Report

A dishonored check report is mailed to the Lawyersrsquo Fund for ClientProtection within five banking days after the date of presentment TheLawyersrsquo Fund holds the report for ten business days to enable the bank towithdraw the report which may occur only if the report was issued byinadvertence or mistake The curing of an insufficiency by the deposit offunds is not a basis for withdrawing a report In the absence of such awithdrawal after ten days the Lawyersrsquo Fund forwards the report to theappropriate grievance committee for investigation

[125] VI INVESTIGATION BY GRIEVANCE COMMITTEE

[126] A Commencement

Most investigations that result in an audit of an attorneyrsquos escrow ac-count do not begin with a complaint that the attorney has misused or mis-appropriated funds Rather they begin with a complaint that the attorneyneglected the clientrsquos case or failed to respond to requests for information

An investigation will be commenced and an audit is likely to occurwhen a notice is received in accordance with the Dishonored CheckReporting Rule Upon receipt of the notice the grievance committee rou-tinely directs the attorney to provide escrow account records for the pre-ceding six-month period

77 In re Darden 240 AD2d 844 658 NYS2d 718 (3d Deprsquot 1997) In re Teig 235 AD2d 626651 NYS2d 728 (3d Deprsquot 1997)

608


18

[127] B Production of Records

Rule 115(i) requires that an attorneyrsquos escrow account records beavailable to the grievance committee at the principal New York office ofthe attorney and that the records be produced in response to a notice orsubpoena duces tecum All such books and records remain confidentialexcept for the particular proceeding The failure to produce these recordsmay result in suspension from the practice of law until the attorney com-plies78

Where the required records have not been maintained the attorneyupon direction of the grievance committee may be required to securerecords directly from the bank This can be an expensive proposition forthe attorney

Rule 115(j) provides that an attorney who does not maintain requiredrecords or who does not produce them as directed shall be subject to dis-ciplinary proceedings

[128] VII AUDIT PROCESS

[129] A Records

When an audit is conducted the attorney is requested to produce bankstatements canceled checks deposit slips and ledgers for a specifiedperiod of time That time period could be as short as six months or couldencompass years The request is not limited to the records of a specificclient but includes all persons or parties for whom the attorney is or washolding funds Since the records are kept confidential an attorney cannotdecline to provide escrow account records because they contain transac-tions on behalf of clients unrelated to the complaint that gave rise to theaudit

The audit which usually begins with a review of the attorneyrsquos escrowaccount may require the production of operating and personal accounts ifthe tracking of deposits and withdrawals discloses the use of theseaccounts79

78 In re Lazaroni 12 AD3d 17 783 NYS2d 375 (1st Deprsquot 2004) In re Nagoda 238 AD2d667 656 NYS2d 694 (3d Deprsquot 1997) In re Roberts 224 AD2d 801 637 NYS2d 944 (3dDeprsquot 1996)

79 In re Albanese 274 AD2d 284 710 NYS2d 594 (1st Deprsquot 2000)

609


19

[130] B Analysis

Once the records are received an in-depth analysis is undertaken Thisconsists of posting all transactions to a ledger Minimum client balancesare determined for particular dates which in total are compared to theactual balance in the account A negative balance in the account is notrequired to establish a conversion of clientrsquos funds If the minimum clientbalance exceeds the actual balance a prima facie case of conversion hasbeen established

An attorney must be able to establish that on any given day all fundsneeded to be held on behalf of all clients were on deposit in the accountThe ability to pay one client is not sufficient and is commonly character-ized as ldquotaking from Peter to pay Paulrdquo80

Items looked for in the audit include whether

1 All required funds are on deposit

2 Checks have been issued against insufficient funds81

3 The attorney utilized overdraft privileges on the escrow account

4 Funds of one or more clients were used on behalf of another client

5 Funds have been improperly transferred between accounts (checkkiting)82 and

6 Improper or unauthorized wire transfers have occurred83

80 In re Field 200 AD2d 205 613 NYS2d 922 (2d Deprsquot 1994)

81 In re Raphael 216 AD2d 788 628 NYS2d 846 (3d Deprsquot 1995) In re Pantoja 200 AD2d110 613 NYS2d 387 (1st Deprsquot 1994)

82 In re Sanders 152 AD2d 163 547 NYS2d 797 (4th Deprsquot 1989)

83 In re Rapoport 229 AD2d 1 652 NYS2d 607 (1st Deprsquot 1997)

610


20

[131] C Findings

In addition to determining if a shortage has occurred the audit willlook for other violations of Rule 115 such as the following

1 Commingling84

2 Writing checks to cash or making cash withdrawals85

3 Failure to produce or maintain records86

4 Failure to maintain proper or accurate records87

5 Improper signatories

6 Improperly titled accounts

7 Failure to maintain or utilize an IOLA account

8 Issuing payment before the corresponding deposit has cleared88

9 Failure to maintain an account in accordance with the DishonoredCheck Reporting Rule

10 Failure to satisfy liens or improperly satisfying a lien89

84 In re Telemaque 30 AD3d 82 813 NYS2d 180 (2d Deprsquot 2006) In re Silva 28 AD3d 11811 NYS2d 22 (1st Deprsquot 2006) In Silva the respondent deposited personal funds in his es-crow account to conceal and shield them from an Internal Revenue Service lien for unpaid taxestotaling $42959 plus interest and penalties and a judgment creditor that was attempting to en-force a judgment of $7149650 against respondent his former law partner and his former lawfirm Respondent used his escrow account as a personal and business account constituting a fail-ure to maintain a separate account for client funds commingled client funds with respondentrsquosown business and personal funds therein failed to maintain records of deposits and withdrawalsfrom the account and withdrew funds from the escrow account by means of checks payable tocash and other cash withdrawals

85 In re Williams 50 AD3d 157 849 NYS2d 832 (4th Deprsquot 2008) In re Tague amp Tague 33AD3d 233 823 NYS2d 151 (2d Deprsquot 2006)

86 In re Yudenfriend 23 AD3d 4 802 NYS2d 356 (1st Deprsquot 2005) In re Agrillo 194 AD2d16 604 NYS2d 171 (2d Deprsquot 1993)

87 In re Schutz 299 AD2d 41 747 NYS2d 43 (2d Deprsquot 2002) In re Newbould 277 AD2d 697716 NYS2d 126 (3d Deprsquot 2000)

88 In re Jones 7 AD3d 101 777 NYS 2d 504 (2d Deprsquot 2004) In re Rosenberg 3 AD3d 52 770NYS2d 405 (2d Deprsquot 2003)

89 In re Perlman 241 AD2d 203 670 NYS2d 866 (2d Deprsquot 1998) NYSBA Op 717 (1999)

611


21

11 Unnecessary delay in the release of funds to the party entitled toreceive them

12 Payment of the attorneyrsquos fees before funds are released to the cli-ent

13 Whether the attorney had authority to endorse a clientrsquos name to asettlement draft and if the endorsement was in proper form90

14 Withdrawals from escrow account by ATM card91

15 Permitting a non-attorney to maintain the escrow account92

16 Permitting non-attorneys to use a stamp in lieu of attorneyrsquos signa-ture on a systematic basis93

17 Failure to remit interest earned on an interest-bearing escrowaccount94

18 Depositing earned fees or failing to timely withdraw fees whenearned95

19 Personal obligations paid out of escrow account96

20 Improper deposits into escrow account97

Where the analysis of records produced either by the attorney orthrough a subpoena served upon a bank presents uncontroverted evidence

90 In re Dean 147 AD2d 133 541 NYS2d 555 (2d Deprsquot l989)

91 In re Butler 285 AD2d 344 729 NYS2d 744 (2d Deprsquot 2001)

92 In re Sedlis 23 AD3d 1 801 NYS2d 579 (1st Deprsquot 2005) In re Kotch 21 AD3d 55 797NYS2d 303 (2d Deprsquot 2005) In re Duboff 21 AD3d 206 799 NYS2d 92 (2d Deprsquot 2005)

93 In re Duboff 21 AD3d 206

94 In re Litwak 30 AD3d 95 813 NYS2d 468 (2d Deprsquot 2006) In re Redding 46 AD3d 221844 NYS2d (4th Deprsquot 2007)

95 In re Tagu 33 AD3d 233 823 NYS2d 151 (2d Deprsquot 2006)

96 In re Jacobs 34 AD3d 4 820 NYS2d 619 (2d Deprsquot 2006)

97 In re Iaquinta-Snigur 30 AD3d 67 813 NYS2d 170 (2d Deprsquot 2006) In Iaquinta-Snigur therespondent failed to timely investigate account for and return an overpayment of funds wiredinto her escrow account by her client The client erroneously funded a loan closing twice by wir-ing an additional $18516262 into respondentrsquos escrow account Although the client repeatedlyrequested at various times between September 2001 and July 2002 that respondent account forand return the second payment she failed to do so until July 2002

612


22

of conversion the grievance committee may seek the attorneyrsquos immedi-ate suspension from the practice of law pending conclusion of a disciplin-ary proceeding98

[132] VIII CONSEQUENCES OF ESCROW IRREGULARITIES

Where a grievance committeersquos investigation discloses escrow accountirregularities the outcome may be an educational or disciplinary letter ifthe errors are primarily bookkeeping in nature Where however the con-duct goes uncorrected or it involves conversion significant comminglingor other serious misconduct the probable result will be a disciplinary pro-ceeding Needless to say an attorneyrsquos misconduct can be significantlyexacerbated where it is found the false or fraudulent information was pro-vided to the grievance committee99

For disciplinary purposes misconduct by an attorney relating to escrowfunds need not be the same as conduct which would constitute grand lar-ceny under the Penal Law The burden of proof in a disciplinary proceed-ing is a fair preponderance of the evidence not guilt beyond a reasonabledoubt or even clear and convincing evidence100

Although intent may be relevant on the issue of an appropriate sanc-tion it is not a necessary element of a disciplinary charge The absence ofvenal intent is not a defense to a charge of conversion Intent comes intoplay only where a conversion charge is coupled with a charge under Rule84(c) which requires a showing of intent to defraud deceive or misrepre-sent101

While an attorney may not be disciplined solely for asserting the privi-lege against self-incrimination the failure to refute uncontroverted

98 1st Departmentmdash22 NYCRR sect 6034(e)(1) In re Downing 237 AD2d 71 667 NYS2d 49(1st Deprsquot 1997) In re Prounis 230 AD2d 55 654 NYS2d 131 (1st Deprsquot 1997) 2d Depart-mentmdash22 NYCRR sect 6914(l) In re LoPresto 239 AD2d 30 668 NYS2d 215 (2d Deprsquot1998) 3d Departmentmdash22 NYCRR sect 8064(f) In re Van De Loo 225 AD2d 885 639NYS2d 147 (3d Deprsquot 1996) 4th Departmentmdash2 NYCRR sect 102220(e) In re Golkin 218AD2d 375 638 NYS2d 371 (4th Deprsquot 1996)

99 In re Rohrberg 268 AD2d 180 705 NYS2d 50 (1st Deprsquot 2000)

100 In re Capoccia 59 NY2d 549 466 NYS2d 268 (1983)

101 In re Russakoff 79 NY2d 520 524 583 NYS2d 949 (1992) In re Cohen 264 AD2d 94 704NYS2d 547 (1st Deprsquot 2000) In re Semple 225 AD2d 238 650 NYS2d 146 (1st Deprsquot1996) In re Baumgarten 197 AD2d 309 613 NYS2d 361 (1st Deprsquot 1994) In re Altomeri-anos 160 AD2d 96 559 NYS2d 712 (1st Deprsquot 1990)

613


23

evidence of serious escrow violations will likely result in significant disci-pline102

The refusal to provide information in a grievance committeersquos investi-gation which may support a finding of misconduct but which cannot leadto criminal prosecution is impermissible and may by itself result in disci-pline for failure to cooperate with the investigation The privilege againstself incrimination cannot be used as a shield against the production ofbank records103

Failure to cooperate with the grievance committeersquos investigation mayalso result in disciplinary action104 Clearly providing false documenta-tion to a grievance committee is an aggravating factor105 as would be con-ditioning settlement of a civil action seeking the return of escrowed fundson the withdrawal of a complaint filed with the grievance committee106

A claim that a violation of Rule 115 can occur only when client fundsor property are misappropriated and not where partnership fees or fundsare involved will not defeat a conversion charge107

102 Spevack v Klein 385 US 511 (1967) In re Kaye 194 AD2d 99 604 NYS2d l17 (1st Deprsquot1993)

103 Rule 115(i) (j) Zuckerman v Greason 20 NY2d 430 438 285 NYS2d 1 (1967) Shapirov United States 335 US 1 (1948)

104 In re Farrell 218 AD2d 38 636 NYS2d 55 (1st Deprsquot 1996) In re Aaron 207 AD2d 85620 NYS2d 458 (2d Deprsquot 1994) In re Wolfgang 261 AD2d 14 697 NYS2d 27 (1st Deprsquot1999)

105 In re Bax 32 AD3d 88 821 NYS2d 680 (4th Deprsquot 2006) In re Pape 31 AD3d 156 817NYS2d 49 (2d Deprsquot 2006)

106 In re Tartaglia 20 AD3d 81 798 NYS2d 458 (2d Deprsquot 2005)

107 In re Kirschenbaum 29 AD3d 96 812 NYS2d 54 (1st Deprsquot 2006) In Kirschenbaum therespondent who served as administrative partner for his law firm and as a signatory on its attor-ney trust accounts withdrew funds from an IOLA account on five separate occasions and usedthose funds for his personal benefit The evidence indicated that the IOLA account containedboth partnership fees and client funds which were not segregated and in some instances thefunds which respondent referred to as partnership fees were contested by the partners Particu-larly egregious were respondentrsquos actions in giving his brother the account number of the IOLAaccount without his partnersrsquo permission so that his brother could deposit funds into the ac-count and then drawing a check on the account to his brother endorsing the check to himselfand using the proceeds for his own personal expenses

614


24

[133] IX OTHER ATTORNEY ACTIVITIES WITH ESCROW RAMIFICATIONS

Attorneys have been disciplined for the improper handling of fundseven though an escrow account may not have been not involved Thesesituations involved fiduciary responsibilities similar to those attendant toescrow accounts

[134] A Estates

1 Failing to deposit estate funds into an estate account In re Rothen-berg 143 AD2d 479 532 NYS2d 938 (3d Deprsquot 1988) cf In reAbbott 191 AD2d 899 594 NYS2d 855 (3d Deprsquot 1993) wherethe court held there is no explicit requirement in the disciplinary rulesthat estate funds be placed in a separate estate account rather than anescrow account

2 Failing to segregate estate funds and account In re Prunis 250AD2d 155 680 NYS2d 505 (1st Deprsquot 1998)

3 Using estate money to cover conversion of funds from another estateand a cemetery association Forging signature of co-executor tochecks to effectuate conversions In re Cholakis 179 AD2d 862578 NYS2d 671(3d Deprsquot 1992) In re Argentieri 180 AD2d 46583 NYS2d 104 (4th Deprsquot 1992)

4 In attempt to avoid probate imperiling estate assets by comminglingthem with attorneyrsquos own assets and assets of family members failingto establish a separate estate account utilizing a bewildering andunnecessary number of bank accounts and inter-account transfersand improperly relying on an expired power of attorney In re Glavin214 AD2d 803 25 NYS2d 311 (3d Deprsquot 1995)

5 Converting estate funds by affixing the executrixrsquos signature tochecks made payable to the estate without permission of the executrixand depositing these funds into the law office operating account In reDaly 232 AD2d 868 650 NYS2d 811 (3d Deprsquot 1996)

6 Depositing cash proceeds from the sale of a clientrsquos house into anescrow account and failing to transfer the funds into an estate accountwhen attorney is named executor and residuary beneficiary of the ofthe clientrsquos estate In re Cassel 154 AD2d 876 547 NYS2d 427(3d Deprsquot 1989)

615


25

7 Embezzling funds from client and from estate following clientrsquosdeath In re Feely 223 AD2d 78 645 NYS2d 21 (1st Deprsquot 1996)

8 Issuing forged checks drawn on estate account In re Feinman 182AD2d 179 587 NYS2d 652 (1st Deprsquot 1992)

9 Taking legal fee in an estate matter without obtaining court approvalor disclosing same In re Cerbone 295 AD2d 66 742 NYS2d 110(2d Deprsquot 2002) In re Brashich 250 AD2d 71 680 NYS2d 214(1st Deprsquot 1998)

10 Converting $470000 from estate In re Leonard 46 AD3d 113 845NYS2d 225 (1st Deprsquot 2007)

11 Transferring clientrsquos estate funds to attorneyrsquos IOLA account andusing those funds to pay his personal expenses knowing that he didnot have permission to do so established the scienter necessary tosustain a charge of intentional conversion constituting professionalmisconduct even if attorney intended to repay the funds when hetook them and notwithstanding that he apparently had repaid some ofthe funds and intended to return additional amount In re Blau 50AD3d 240 853 NYS2d 18 (1st Deprsquot 2008)

[135] B Escrow Agent

1 Respondent in his capacity as the sellerrsquos attorney received from theproposed purchaser signed contracts of sale and a down paymentcheck in the amount of $31500 payable to him as escrowee Pursuantto the contract of sale the down payment was to be held in escrowuntil the closing or the termination of the contract Respondent failedto turn over any of the $31500 when another attorney assumed repre-sentation of the seller Instead he used it for personal expenses Thetransaction concerned respondentrsquos former marital residence whichhad previously been deeded to his then wife In re Soviero 10 AD3d179 780 NYS2d 500 (2d Deprsquot 2004)

2 Fact that attorney was not acting as counsel for either buyers or sell-ers in real estate transaction did not preclude determination that hishandling of deposit by prospective purchaser was professional mis-conduct In re Van De Loo 225 AD2d 885 639 NYS2d 147 (3dDeprsquot 1996) In re Hahn 195 AD2d 105 606 NYS2d 933 (4thDeprsquot 1993)

616


26

3 Release of escrow funds to client without confirmation of authority todo so or notice to other party or attorney In re Natale 307 AD2d 4761 NYS2d 255 (2d Deprsquot 2003)

4 Respondent deposited a check payable to himself as attorney in theamount of $208394 into his operating account with respect to MrGreen Respondent testified that he believed that a portion of thosefunds belonged to him as fees and the remainder belonged to his cli-ent The check from his client was drawn on the account of RegalAbstract When he received the check respondent knew that MrsGreen was to receive approximately $233000 from the sale ofMonckrsquos Realty and he knew that his client had no assets over$200000 Respondent disbursed approximately $70000 of that sumto Mr Green and used the remainder for personal purposes He knewor should have known that the $208394 check he deposited into hisoperating account was owed to Mrs Green Under these circum-stances respondent had a fiduciary duty to inquire of Regal Abstractas to the reason the check was issued to him In re Davidson 11AD3d 11 782 NYS2d 110 (2d Deprsquot 2004)

5 Department Disciplinary Committee sufficiently demonstrated thatattorney was guilty of misconduct threatening the public interest asrequired to support her immediate suspension from the practice oflaw in disciplinary case bank records showed that attorney misusedclient funds held in escrow and possibly intentionally converted adown payment placed in escrow In re Jobi 56 AD3d 158 866NYS2d 58 (1st Deprsquot 2008)

[136] C Financial Agent

Accepting $300000 from a client to be invested for the client andthereafter commingling said funds with own When the client demanded areturn of her money the attorney failed to do so In re Perlow 97 AD2d492 468 NYS2d 13 (2d Deprsquot 1983) In re Francess 39 AD2d 199333 NYS2d 294 (1st Deprsquot 1972)

[137] D Court-Appointed Receiver

Failure to provide an accounting of funds entrusted to the attorney ascourt-appointed temporary receiver In re Charles 208 AD2d 271 623NYS2d 924 (2d Deprsquot 1995)

617


27

[138] E Guardian ad Litem Conservator or Committee

1 Misappropriating and converting funds entrusted to attorney as suc-cessor committee for incompetent In re McCormick 219 AD2d230 634 NYS2d 731 (2d Deprsquot 1995) In re Casey 196 AD2d 246609 NYS2d 69 (2d Deprsquot 1994)

2 Suspension of attorney was warranted pending conclusion of disci-plinary proceedings based upon attorneyrsquos failure to cooperate withdisciplinary committeersquos investigation of her actions as former guard-ian of individual and uncontested evidence of attorneyrsquos misconductwhich immediately threatened the public interest attorney failed torespond to committeersquos letter and follow-up letter asking her toexplain her withdrawal of funds from guardianship account and sub-sequent document she eventually provided was non-responsive andfinal accounting submitted in pending civil action brought by succes-sor guardian provided uncontested evidence that attorney had at aminimum withdrawn funds from guardianship account as legal feeswithout court permission in violation of professional rules indicatedpossible missing pension deposits and established that no tax returnswere filed while attorney was guardian In re Taylor 48 AD3d 138848 NYS2d 121 (1st Deprsquot 2007)

[139] F Foreclosure Referee

Converting funds in capacity of referee to a foreclosure sale In reParker 180 AD2d 106 584 NYS2d 126 (2d Deprsquot 1992) In re Vetter147 AD2d 75 542 NYS2d 895 (4th Deprsquot 1989)

[140] G Power of Attorney

Misappropriation of the assets of elderly clients through a power ofattorney In re Contino 205 AD2d 1 617 NYS2d 105 (4th Deprsquot1994) In re Kohler 184 AD2d 39 591 NYS2d 119 (4th Deprsquot 1992)In re Gallow 138 AD2d 803 525 NYS2d 921 (3d Deprsquot 1988)

[141] H Trustee

Trustee converting funds from the trust In re Mulderig 182 AD2d 85586 NYS2d 827 (2d Deprsquot 1992) In re Singer 154 AD2d 122 552NYS2d 144 (2d Deprsquot 1990)

618


28

[142] I Government Checks

1 Failure to deposit Social Security checks into an account until attor-ney accumulated a yearrsquos worth of checks In re Glavin 180 AD2d966 580 NYS2d 545 (3d Deprsquot 1992)

2 Mistaken deposit of clientrsquos Social Security and Veterans Administra-tion checks into attorneyrsquos operating account and application of thosefunds to office expenses In re Baker 184 AD2d 9 588 NYS2d502 (4th Deprsquot 1992)

3 Attorneys forging the endorsement of deceased father as payee on 33pension checks issued by the New York State Retirement System Inre Gross 91 AD2d 1145 458 NYS2d 366 (3d Deprsquot 1983)

[143] J Infant Settlements

1 Failure to deposit funds received in settlement of a claim on behalf ofan infant client in an appropriate guardianship trust account In reLeonardo 197 AD2d 59 611 NYS2d 404 (4th Deprsquot 1994) In reSwyer 143 AD2d 462 532 NYS2d 936 (3d Deprsquot 1988)

2 Guardians retained respondent to contest an alleged Medicaid lienclaimed by the Department of Social Services (DSS) against anypotential recovery by their son The action was settled and the courtdirected that $525000 be set aside and held in an interest-bearingescrow account pending a motion and determination of the allegedlien held by the DSS

Respondent deposited that sum into an interest-bearing client sub-account in his law firmrsquos escrow account He thereafter withdrew$25000 without the knowledge and consent of the court or otherinterested parties for a down payment to purchase a home for theson The $25000 was forfeited to the seller pursuant to the term ofthe contract

Respondent submitted a motion to supreme court to utilize the escrowto purchase a home for the guardians and their son In his affirmationin support of the motion the respondent made the representation thatthe $525000 plus interest was in an escrow account The respondentknew or should have known that this statement was misleading in thatit failed to truthfully disclose that $25000 had already been removed

619


29

from the escrow account and used as a down payment In re Robert10 AD3d 96 779 NYS2d 236 (2d Deprsquot 2004)

[144] K Bankruptcy Trustee

Conversion of funds received in connection with bankruptcy proceed-ings In re Dussault 215 AD2d 843 626 NYS2d 319 (3d Deprsquot 1995)

[145] L Law Firm Funds

1 Attorney failed to give prompt notification and delivery of funds to athird party by not turning over to his former law firm a check madepayable to that firm and instead delivering the check to the firmrsquosbank to be applied against the firmrsquos loan in contravention of a courtorder obtained by a former partner prohibiting payments to thefirmrsquos creditors without notice to that partner In re Rosen 57 AD3d157 866 NYS2d 675 (1st Deprsquot 2008)

2 Attorney diverted fees due his firm and provided false closing state-ments In re Allen 274 AD2d 182 710 NYS2d 389 (2d Deprsquot2000)

3 Attorney altered law firm check for services as per diem attorney Inre Torres 290 AD2d 131 736 NYS2d 239 (2d Deprsquot 2001)

4 Attorney submitted falsified expense report and supporting invoicesto law firm for business trip In re De La Rosa 290 AD2d 134 736NYS2d 371 (1st Deprsquot 2001)

5 Respondent over a period of more than four years misappropriatedfunds in the total amount of $60582 from his law firmrsquos operatingaccount by issuing checks drawn on the account made payable to hispersonal credit card account or to petty cash and falsely noting on lawfirm check request forms that the expenditures were for officeexpenses and postage In re Trimboli 304 AD2d 282 762 NYS2d192 (4th Deprsquot 2003)

6 Respondent closed his firmrsquos escrow account and moved it to anotherbank without his partnerrsquos consent and removed funds claiming hewas owed legal fees In re Delio 9 AD3d 160 778 NYS2d 499(1st Deprsquot 2004)

7 Respondent made misrepresentations to his law firm regardingrequests for and receipt of reimbursements from petty cash for work

620


30

related expenses His misuse of the firmrsquos petty cash extended overapproximately ten years and the disbursements were requested insmall increments typically $250 for the alleged purpose of facilitat-ing real estate closings The total amount given to him for such pur-poses was $161383 the substantial part of which was used forpersonal matters In re Kolmar 15 AD3d 8 789 NYS2d 421 (1stDeprsquot 2005)

8 Respondent submitted false and fraudulent expense vouchers in orderto receive reimbursement from his firm for personal expensesThrough a variety of different methods he systematically converted$184000 of client and firm funds for his own personal use over afive-year period which only ended when his acts finally drew suspi-cion and were uncovered In re Pape 31 AD3d 156 817 NYS2d49 (2d Deprsquot 2006)

[146] M Loans

1 Attorney induced a client to loan money which the attorney used topay personal debts by misrepresenting that the funds were to beinvested in dental equipment The attorney testified falsely before thegrievance committee that he had informed this client that the loanwas for his personal use In re Leff 275 AD2d 135 718 NYS2d 18(1st Deprsquot 2000)

2 Suspension from practice of law for period of six months was war-ranted as result of attorneyrsquos failure to pay personal injury settlementowned by client conversion of client funds by allowing balance in hisescrow account to continuously fall below amount he was required tomaintain failure to promptly remit settlement funds to client andengagement in conflict of interest by entering into loan agreementwith client without advising client to seek advice of independentcounsel In re Gebo 19 AD3d 932 798 NYS2d 162 (3d Deprsquot2005)

[147] N Operating or Non-escrow Accounts

1 Respondent over a period of more than four years misappropriatedfunds in the total amount of $60582 from his law firmrsquos operatingaccount by issuing checks drawn on the account made payable to hispersonal credit card account or to petty cash and falsely noting on lawfirm check request forms that the expenditures were for office

621


31

expenses and postage In re Trimboli 304 AD2d 282 762 NYS2d192 (4th Deprsquot 2003)

2 Respondent established a checking account entitled ldquoNew York ElderLaw Group LLPrdquo (an improper trade name) for the deposit of legalfees in an effort to prevent his creditors from locating his assets andexecuting judgments obtained against him In re Wagshul 308AD2d 248 765 NYS2d 47 (2d Deprsquot 2003)

3 Attorneyrsquos conduct amounted to professional misconduct warrantingdisbarment where he failed to maintain required bookkeepingrecords of his attorney operating and escrow accounts he used anautomated teller machine (ATM) card to make cash withdrawals fromhis attorney escrow account and he retained personal funds in a cor-porate bank account in order to conceal those funds and shield themfrom execution by lienholders In re Kelligrew 40 AD3d 66 831NYS2d 471 (2d Deprsquot 2007)

4 Respondent an associate attorney in a law firm authorized the trans-fer of client funds from a trust account held by the law firm and froman escrow account held by a title abstract company owned by a part-ner in the law firm into a business account that respondent hadopened for his title company with a deposit of personal funds therebycommingling client funds with personal funds He authorized thedeposit of client funds and other funds received incident to his lawpractice into an investment account misappropriated the interest anddividends earned on the funds and did not account for or remit to cli-ents the interest and dividends earned on the funds In re Redding 46AD3d 221 844 NYS2d 767 (4th Deprsquot 2007)

[148] O Fraud

1 Attorney fabricated will forged signature with false notary He usedfalse documents to probate estate obtained letters and withdrew$50000 In re Nolan 268 AD2d 164 706 NYS2d 704 (2d Deprsquot2000)

2 Respondent forwarded to an insurance company a general releasebearing his clientrsquos signature and the attorneyrsquos as notary The releasewas in fact not signed by the client He received a $15000 settlementdraft payable to the client and himself which was deposited into hisescrow account The client never signed the settlement draft In reNerenberg 2 AD3d 1 769 NYS2d 53 (2d Deprsquot 2003)

622


32

[149] P Avoiding Creditors

1 A judgment was entered against respondent for approximately$65000 The creditor moved to garnish respondentrsquos personal bankaccount due to his failure to make payment As a result respondentbegan giving his legal earnings to an associate in his law firm whothen provided the funds to him on an as needed basis In re McCann3 AD3d 5 769 NYS2d 243 (1st Deprsquot 2003)

2 Respondent intentionally and deliberately opened two attorneyescrow accounts after his personal bank accounts had been leviedupon by various taxing authorities in order to shield his personalfunds and exclusively utilized these accounts for his business and per-sonal funds for approximately two years In re Goldstein 10 AD3d174 780 NYS2d 348 (1st Deprsquot 2004)

623

624

New York Law Journal Vol~ 210 Number 106

Copyright 1993 by the New York Law Puhlishinq ~any

1lm ln~eBt on La~r ~t laquolOLA) lw1 which f~ over 135 progrutS that pz-ovido civU to pcor persons ecrolls tM state has been hit haM by the lOW short teD Ubt as well as the ~cesliion Dul to these low intlrest ratu and the ruuqq1sh eoonQIIY the fund S lsvenue has plWllmeted from a hign-water wuk of $24 IliUion in 1991 to just $S million in 1993

As a ooault the legal services pro9~ that rely on lOLA lIltOney as a Wljor source of funding are rtel~9 from tWQ COM~tive years of lOLA funding cuts - a 42 MroSlJ the boittd cut in 1993 and an additional 40 percent cut in p~tivQ 1994 grants

rhe ~tic deeline in lOLA lavenUG the direct result of tM drop in inUrMt rates payable on NOW acoounts - the lbanking product ued for taLA ampccounta ~ bottom 1Dtee~t lates gf 15 perceurolnt or l 25 percent are now the noxin COIPared to two years aqo when the statewide aQerage interest rate on NOlf aCCOUlts hove reid azomtl 55 percent _

Dl an tUort to boost its slltqginl1 revenue the New York tOLA md in conjunction with the Office of Court AdlIdnbbation has launqhed a atatawide attomay recwitment drive For the first ~6 attomey ~ thur lieanlle to F~1cG law in New York state will be receiving- a Notice of ~tory Participation in the tnt~st on Lawyer Account (XOIN P~Wlwhich ab attorneys to shoW whether they or their law tm has an IOLA account And gives ~liible but n~ieipating attaxneys an opportunity to open ~ mEA 4ucQUnt by complet1ng the ~llMnt fOnl enelos~ in the regUtration package ~ iUtiele b intemled to help attorneys reapomi to the lOlA survey ~

01A is an a~ for the Intere8t On LIWYGJ Account Jtmd web was established M a VOluntuy progrem by the ~ lork Stllte Lecents1atm1l in 1983 to ftmd ~ofit o~at1Qns praITiding civil 181111 BenicH to the poor and to ~ove the administration of juatice in NiM York [Ml

625

lOLA revenue is derilrlid froil interest IJen-exatEld from client trust accounts colUllistinq of funds wbieh eitMr too small in 8lilQuut or are to be helcl tor too short a of time to genuate enough intltlu$st to offset the CO$i of opening an individual bank account rm2]

Pdcu to the establl~ment of the rotA plOgllimtl nominal or $hort-tetm e11e~t Were generally held in non-interest bearing bahk accounts where only the bank would by its use he ~ P~Ul IteqIliampea attQrneys to pool nominal or Ihort-term depoaits in one aecotmt an rotA account Which then has a principal hIlance sufflciflnt to gGerate interest frm what was prliviOlWly and u~ctirlll money

sine 191ge ~ ~i~latuce Converted the tOLA progr_ fram a volUntary to a Rimdato2Y proqr~ the ~ of lOLA iIlceotmtS w forl to 20000 statewide [mll Ihile the ~arsicn to a pxcgra dgnifiem1tly inCeueC the n~r of accountl it is that only 60 perCllmt of aU eUgible attmnoyampll an parUcipating in the pro~ he remain1ng-40 IOf ell9ible but ~1cipiltin attQmliys eprtlsenUJ I

1008 of mlllicM of doUa18 that could he used to provide n~ lflgu to the poor hefmd l

ranaWld dcivG is at capturing this JlOlley

How DoiiuI ICJlA 01k1

AttQlniillYS ~t1nely lece1 lie ~ froln clients to be held in t~st to COV8r fUtura ~eef to~ e8crow purposes or for other HAIIDnS

As a gmetal lWe if fllnds are lArge in lUllOunt or expected to be held for a lot1g timG the IIfp~nt p8tacn leqlrlr~ta of ~~ ~_ coupled with f1dtuiary prlncliplea- dictate the of the in an intllOlriMt- bearing account fer tha ~efit of elifmt em

lOLA pJOqram aCt change thJs Ule Often howeVe1 lawye~ hold cl1tmi llIGftey in ~t Hhicb iUe eo ~ll or U4lI expGctlld to be hald tor mach bull Gort ~Q4 of tim tbllt it 13 imprlluUclblll Md Im~cal b) invut ttlll money plOductively for the client As ill nault no client arer fltlUQed any in~ from

the lOlA faa in pliilMCft only tbli lawyers tirumcial 1nst1tuUon becauae that 1l1stitut1on was uot obligated to intJlUt ~ the account to the ciient or anyone else ~ ~ loLA -~_ nquiJea attmneya to pool these atheMee

ImProduCUve cllmt dlpQs1ts into III Single interest-bearing NOW

626

actount so that the principal balance is suUlcient to generate interest The client losas nothinq and the public at large

siqnificantly The ifiterdt ea1nld f~ the pooled U)A

account is WlIed to fund legal services to tM poor and to improve in the adminiat~liition of jlUltice

an IOU account is lilmple and maintaining an IQ[A account doaa not any Ildded ~trative burden or coat on partiCipating li1wyers o open an tOlA eeeount (msJ 111 la-wyer simply completa8 a one page ~o~t fo~ ~igns it and retuxns the top portion to the bank and the bottom portion to the IClItA fUJrds office8 Calculations of interest lmd all other ~rd ~ping 18 done hy the ~ not by the lalliyer

iWthemore the taIA fundq not the participating lawyer pays all bank 18rvice charqes that ay be lncurred by the attoxneys use 01 the aeeotmt offiriug tOLl ~ts ~ iMtructed to d~ aU fees anti eharqes fttm the interellt eittned in the mLil ~t before rGmitUng the to the fund

In these daYII of ria1ng- bank Iawyers shOuld be aware that net aU zatA aocounts ~ equal ~ that ~

waive all fees and ~til5 on toU accounts htui if a lawyer opws an talA account in a that has favoHhle ~

more of the interest gerulraled 00 the account will go directly to the proyidcm of civil services Attorneys optIning new llOIJamp accounts ahould fIhcp fer a hWlk that off~rs fnoltabl~ teDII on lQtA accounts

HQst IlttOlneys engaged in the pnvste practice of law bold iquUititldPi c11wt ~ which se~ to the IOJA atatutlll( lli1Uit

hG p~ in an lOlA account U1N6] fhe quidel1ne used to gal~iIlMlLIa wbether a partiwl4u

clients ftmd8 lIAre IOlA qQallfit3d ia Ht at $150 of 1nte~flt

(N71 ~ $150 figure the average oost ot Opwlng ~ an in~8t- bearing escrow account

In other if a 18 to um lllIu thm $150 in mtuut tbtI money OOJ~IJ)f lIIboUM hi placed 1n an lCJLA aCCOtmt _ If III particular to INWl USf) or more in interest it to A~t for the eUipoundlnt an tin to do so

~a lIilQlIt comcn ~l of typu of one would expect to t1nci in an lfJU acoomt ue ~llIl eatate 1njUtY Slltttl~ts real IIlliltata closiJIg eoattJ and ~ey tIHd to pay

~e of Utiqation IlIUCIb all fee aM court

627

the l~ statute cleAr that it is uP to ~ach indiVidual attori1ampY to detlillndne whether putieuJar client WiDIIY should be placed in an lOLA account UNS J

th~ statute explicitly ahi~ds the attorney from any potent1al liability a goOd faith decision to place fUnds in an IOtA l1IIccount rather tMn in an individual iIIIlcrow account 1hWi an attotnIlY canllOt he llIUed for U the result of mibbImly placing ~ 1n an ICUI account 00 can an atto~ey be chUt1eci wlth professional ldseonduet (lligJ

In lIhort no one can aeeoml quus In attorneys wi as to wbather partiwlu are lQLIII qwalified

iinallYu lllOXe if M attorney dDfIs Jl matake plaeu in ih poundOtA ~t funde that eculd have euned for the cliNlt mtA of upon a pOpar SmlIWJl11J of proof t will to Client the appoprlampte 1IWl of money [mnO]

11le QLA statute tIMs xeveftUe be WliKl to

YCU- to poor peIPl bullbull

that at least 15 ~nt of the that provlAtt dirBCt civil

2y etatute the ~1IlIlguampg POJlJQ1l uaslid to such as

CWLJn~JfIWl and the mlmhlly dilliabled flmd projects that provide ~le el~ly tbe phyalcally [002]

he moDlly naver lOU to the itate s copoundfers or to fund wything bUt ~ivil legaJ lIBl~lIIIID tor New Yorkwa neediest citizens

Host often the people ilD~1 assllllltlImce 1llIIampCi Ifllgu repreBmtation from funded with IaLA nVIliltlUti to obtain basic needs SUCh as food hMt

Administntion

the lOLA ilnd i by a 15~t 1~ent Board of mat8GIIil he lOiLA amte IfHlllitll that a ~jcrity cf boaxd ~Il be attoiMIYill IImd u trustees to he lmowledgeable 4md ~ive of the of cifil legal a~iCfiilj to the poor

tach bimrd member sa_a bull teat cf tluee years mthout ~n8ation [rN13J

In reeant year8 I ll~1nlt the baektbop of New York States balloordng deficits too ~ board with the help of the o~bu l)ar he fouqht to the integrity and ~endiinCil of the IOItII fImd fhllt lxllud has thwarted Ittapb to diWirt roLJ la~ to fill the atateSfIiI gap he toLA t~tU ~tted to eruW1ng that ~ Jev~e 13 UI~ onlY tal 1ts atatid 8tatuto~ pwpoe - to provide lIICCtlSIlI to clvil ~ustice to New ~orkar in danger of los~~g their ~at baSic living

628

needs ~ a result New York can tellt 111l1st1Jed that if thfiY open an lOLA IccoWt the account $ intarllst can and will Wlke a difference

00 eMpter is) Law~ of 19f13 bull

bull JUdiciary Law s497(2)~

lrN4 - Proc~es Imd Jittalls 111 Handl nq Clifmt on Profossional Dil~ Association of ~ Su of the City of New Yoldl

~6 o1udieiuy LIjf aU7 (2) bull

fN7 state Finance Law 897-v(4) (I) 21 NYCBl 810010

me JIvlic1uy Law aU7il)(l1) (b)

mg JudicilUY Law 1497 (4Hd) (5) bull

mL2 state ~ Law 897(3) (el

JonatMn G UattxMulu l1iI ~l at~ 1weoo ~tly fcCloy hM suved as cbalrof the ICllAmd soam of Tm8tlles since 1990 and hu aGxvGd on the larA boiUd slnce its inc~pt1on in 1993 1229JmaJ 1 (col 1) DWOr~

629

630

RULE 115

PRESERVING IDENTITY OF FUNDS AND PROPERTY OF OTHERS FIDUCIARY

RESPONSIBILITY COMMINGLING AND MISAPPROPRIATION OF CLIENT

FUNDS OR PROPERTY MAINTENANCE OF BANK ACCOUNTS RECORD

KEEPING EXAMINATION OF RECORDS

(a) Prohibition Against Commingling and Misappropriation of Client Funds or

Property

A lawyer in possession of any funds or other property belonging to another person

where such possession is incident to his or her practice of law is a fiduciary and must not

misappropriate such funds or property or commingle such funds or property with his or

her own

(b) Separate Accounts

(1) A lawyer who is in possession of funds belonging to another person

incident to the lawyerrsquos practice of law shall maintain such funds in a banking

institution within New York State that agrees to provide dishonored check reports

in accordance with the provisions of 22 NYCRR Part 1300 ldquoBanking

institutionrdquo means a state or national bank trust company savings bank savings

and loan association or credit union Such funds shall be maintained in the

lawyerrsquos own name or in the name of a firm of lawyers of which the lawyer is a

member or in the name of the lawyer or firm of lawyers by whom the lawyer is

employed in a special account or accounts separate from any business or personal

accounts of the lawyer or lawyerrsquos firm and separate from any accounts that the

lawyer may maintain as executor guardian trustee or receiver or in any other

fiduciary capacity into such special account or accounts all funds held in escrow or

otherwise entrusted to the lawyer or firm shall be deposited provided however

that such funds may be maintained in a banking institution located outside New

York State if such banking institution complies with 22 NYCRR Part 1300 and

the lawyer has obtained the prior written approval of the person to whom such

funds belong specifying the name and address of the office or branch of the banking

institution where such funds are to be maintained

(2) A lawyer or the lawyerrsquos firm shall identify the special bank account

or accounts required by Rule 115(b)(1) as an ldquoAttorney Special Accountrdquo

ldquoAttorney Trust Accountrdquo or ldquoAttorney Escrow Accountrdquo and shall obtain checks

and deposit slips that bear such title Such title may be accompanied by such other

descriptive language as the lawyer may deem appropriate provided that such

additional language distinguishes such special account or accounts from other bank

accounts that are maintained by the lawyer or the lawyerrsquos firm

(3) Funds reasonably sufficient to maintain the account or to pay account

charges may be deposited therein

(4) Funds belonging in part to a client or third person and in part

currently or potentially to the lawyer or law firm shall be kept in such special

631

account or accounts but the portion belonging to the lawyer or law firm may be

withdrawn when due unless the right of the lawyer or law firm to receive it is

disputed by the client or third person in which event the disputed portion shall not

be withdrawn until the dispute is finally resolved

(c) Notification of Receipt of Property Safekeeping Rendering Accounts

Payment or Delivery of Property

A lawyer shall

(1) promptly notify a client or third person of the receipt of funds

securities or other properties in which the client or third person has an interest

(2) identify and label securities and properties of a client or third person

promptly upon receipt and place them in a safe deposit box or other place of

safekeeping as soon as practicable

(3) maintain complete records of all funds securities and other

properties of a client or third person coming into the possession of the lawyer and

render appropriate accounts to the client or third person regarding them and

(4) promptly pay or deliver to the client or third person as requested by

the client or third person the funds securities or other properties in the possession

of the lawyer that the client or third person is entitled to receive

(d) Required Bookkeeping Records

(1) A lawyer shall maintain for seven years after the events that they

record

(i) the records of all deposits in and withdrawals from the

accounts specified in Rule 115(b) and of any other bank account that

concerns or affects the lawyerrsquos practice of law these records shall

specifically identify the date source and description of each item deposited

as well as the date payee and purpose of each withdrawal or disbursement

(ii) a record for special accounts showing the source of all funds

deposited in such accounts the names of all persons for whom the funds are

or were held the amount of such funds the description and amounts and the

names of all persons to whom such funds were disbursed

(iii) copies of all retainer and compensation agreements with

clients

(iv) copies of all statements to clients or other persons showing the

disbursement of funds to them or on their behalf

(v) copies of all bills rendered to clients

(vi) copies of all records showing payments to lawyers

632

investigators or other persons not in the lawyerrsquos regular employ for

services rendered or performed

(vii) copies of all retainer and closing statements filed with the

Office of Court Administration and

(viii) all checkbooks and check stubs bank statements

prenumbered canceled checks and duplicate deposit slips

(2) Lawyers shall make accurate entries of all financial transactions in

their records of receipts and disbursements in their special accounts in their ledger

books or similar records and in any other books of account kept by them in the

regular course of their practice which entries shall be made at or near the time of

the act condition or event recorded

(3) For purposes of Rule 115(d) a lawyer may satisfy the requirements

of maintaining ldquocopiesrdquo by maintaining any of the following items original records

photocopies microfilm optical imaging and any other medium that preserves an

image of the document that cannot be altered without detection

(e) Authorized Signatories

All special account withdrawals shall be made only to a named payee and not to

cash Such withdrawals shall be made by check or with the prior written approval of the

party entitled to the proceeds by bank transfer Only a lawyer admitted to practice law in

New York State shall be an authorized signatory of a special account

(f) Missing Clients

Whenever any sum of money is payable to a client and the lawyer is unable to locate

the client the lawyer shall apply to the court in which the action was brought if in the

unified court system or if no action was commenced in the unified court system to the

Supreme Court in the county in which the lawyer maintains an office for the practice of

law for an order directing payment to the lawyer of any fees and disbursements that are

owed by the client and the balance if any to the Lawyersrsquo Fund for Client Protection for

safeguarding and disbursement to persons who are entitled thereto

(g) Designation of Successor Signatories

(1) Upon the death of a lawyer who was the sole signatory on an attorney

trust escrow or special account an application may be made to the Supreme Court

for an order designating a successor signatory for such trust escrow or special

account who shall be a member of the bar in good standing and admitted to the

practice of law in New York State

(2) An application to designate a successor signatory shall be made to the

Supreme Court in the judicial district in which the deceased lawyer maintained an

office for the practice of law The application may be made by the legal

representative of the deceased lawyerrsquos estate a lawyer who was affiliated with the

deceased lawyer in the practice of law any person who has a beneficial interest in

633

such trust escrow or special account an officer of a city or county bar association

or counsel for an attorney disciplinary committee No lawyer may charge a legal fee

for assisting with an application to designate a successor signatory pursuant to this

Rule

(3) The Supreme Court may designate a successor signatory and may

direct the safeguarding of funds from such trust escrow or special account and the

disbursement of such funds to persons who are entitled thereto and may order that

funds in such account be deposited with the Lawyersrsquo Fund for Client Protection for


(h) Dissolution of a Firm

Upon the dissolution of any firm of lawyers the former partners or members shall

make appropriate arrangements for the maintenance by one of them or by a successor

firm of the records specified in Rule 115(d)

(i) Availability of Bookkeeping Records Records Subject to Production in

Disciplinary Investigations and Proceedings

The financial records required by this Rule shall be located or made available at

the principal New York State office of the lawyers subject hereto and any such records

shall be produced in response to a notice or subpoena duces tecum issued in connection

with a complaint before or any investigation by the appropriate grievance or departmental

disciplinary committee or shall be produced at the direction of the appropriate Appellate

Division before any person designated by it All books and records produced pursuant to

this Rule shall be kept confidential except for the purpose of the particular proceeding

and their contents shall not be disclosed by anyone in violation of the attorney-client

privilege

(j) Disciplinary Action

A lawyer who does not maintain and keep the accounts and records as specified and

required by this Rule or who does not produce any such records pursuant to this Rule

shall be deemed in violation of these Rules and shall be subject to disciplinary proceedings

Comment

[1] A lawyer should hold the funds and property of others using the care required of a

professional fiduciary Securities and other property should be kept in a safe deposit box except

when some other form of safekeeping is warranted by special circumstances All property that is

the property of clients or third persons including prospective clients must be kept separate from

the lawyerrsquos business and personal property and if monies in one or more trust accounts

85

including an account established pursuant to the ldquoInterest on Lawyer Accountsrdquo law where

appropriate See State Finance Law sect 97-v(4)(a) Judiciary Law sect 497(2) 21 NYCRR

sect 700010 Separate trust accounts may be warranted or required when administering estate

monies or acting in similar fiduciary capacities

[2] While normally it is impermissible to commingle the lawyerrsquos own funds with

634

client funds paragraph (b)(3) provides that it is permissible when necessary to pay bank service

charges on that account Accurate records must be kept regarding which portion of the funds

belongs to the lawyer

[3] Lawyers often receive funds from which the lawyerrsquos fee will or may be paid A

lawyer is not required to remit to the client funds that the lawyer reasonably believes represent

fees owed to the lawyer However a lawyer may not withhold the clientrsquos share of the funds to

coerce the client into accepting the lawyerrsquos claim for fees While a lawyer may be entitled

under applicable law to assert a retaining lien on funds in the lawyerrsquos possession a lawyer may

not enforce such a lien by taking the lawyerrsquos fee from funds that the lawyer holds in an

attorneyrsquos trust account escrow account or special account except as may be provided in an

applicable agreement or directed by court order Furthermore any disputed portion of the funds

must be kept in or transferred into a trust account and the lawyer should suggest means for

prompt resolution of the dispute such as arbitration The undisputed portion of the funds is to be

distributed promptly

[4] Paragraph (c)(4) also recognizes that third parties may have lawful claims against

specific funds or other property in a lawyerrsquos custody such as a clientrsquos creditor who has a lien

on funds recovered in a personal injury action A lawyer may have a duty under applicable law

to protect such third party claims against wrongful interference by the client In such cases

when the third-party claim is not frivolous under applicable law the lawyer must refuse to

surrender the property to the client until the claims are resolved A lawyer should not

unilaterally assume to arbitrate a dispute between the client and the third party but when there

are substantial grounds for dispute as to the person entitled to the funds the lawyer may file an

action to have a court resolve the dispute

[5] The obligations of a lawyer under this Rule are independent of those arising from

activity other than rendering legal services For example a lawyer who serves only as an escrow

agent is governed by the applicable law relating to fiduciaries even though the lawyer does not

render legal services in the transaction and is not governed by this Rule

635

636

126 State Street 6th Flr Albany New York 12207 5184364170 5184361456 (fax) wwwCoppsDiPaolacom FACSIMILE amp EMAIL SERVICE NOT ACCEPTABLE

CD COPPS DIPAOLA PLLC

Anne Reynolds Copps Esq Partner arcoppscoppsdipaolacom Kathleen (ldquoCaseyrdquo) Copps DiPaola Esq Partner kdipaolacoppsdipaolacom Kate Siobhan Howard Esq Associate khowardcoppsdipaolacom Shannon M Wickenden Paralegal swickendencoppsdipaolacom Christine M Wilson-Smith Real Estate Closing Coordinator cwsmithcoppsdipaolacom Brittany L Ericsen Administrative Assistant bericsencoppsdipaolacom Date Client Address Re Dear I appreciate your retaining me with respect to the above-referenced matter (the matter) This letter shall serve as an agreement between us with respect to the delivery direction and procurement of legal services for you in connection with this matter This letter is provided to you in accordance with regulatory requirements of New York If you so desire I recommend that you seek the advice of an attorney not associated with this office before signing this agreement

Retainer Agreement Names and Addresses of Parties entering into the Agreement THIS AGREEMENT FOR LEGAL SERVICES by and between (Law Firm) and (Client) This agreement constitutes a binding and legal contract and should be reviewed carefully Nature of Services to be Rendered This letter confirms that you have retained this firm as your attorney to represent you in connection with the real estate of the contract and negotiation of any issues contained in the contract if the contract requires that you provide title we will order title insurance on your behalf unless you direct otherwise You will be responsible for the payment of the title at the time of closing If you cancel after Title has been ordered you may be charged a cancellation fee by the Title Company We will prepare an early-occupancy agreement if necessary and if specifically requested and agreed to by all parties we will answer and address any questions or concerns you have from the time of entering the contract to the closing If we represent you as Purchaser we will contact your bank and arrange for the closing You as Purchaser will be required to notify us as to who your lender will be so that we can contact them directly We will notify all parties of the closing and attend the closing with you You will satisfy any conditions in your commitment letter We will assist you with satisfying any of said conditions in your commitment only if you shall so request that we do so If you are the seller we will be contacted by the purchaserrsquos attorney who will arrange for the closing with the bankrsquos attorney and we will notify you of the closing date

637

2

The client authorizes the Law Firm to take any steps which in the sole discretion of the firm are deemed necessary or appropriate to protect the clients interest in the matter We shall keep you informed of the status of your case and agree to explain the laws pertinent to your situation the available course of action and the attendant risks We shall notify you promptly of any developments in your case and will be available for meetings and telephone conversations with you at mutually convenient times We do insist that appointments be made for personal visits to our office Copies of all papers will be supplied to you as they are prepared (unless you request to the contrary) It is specifically acknowledged by you that this firm has made no representations to you express or implied concerning the outcome of your matter presently pending or hereafter to be commenced between you and any other party Amount of the Advance Retainer if any and What it is Intended to Cover (a) We will not require an advance retainer fee The amount of our eventual fee will be based upon our flat fee as indicated hereinafter along with any out-of-pocket disbursements (such as messenger services long distance telephone calls telefaxes postage photocopies) which are incurred in your behalf Flat Rate Fee You will be required to pay a flat fee of $________ which includes attending the closing for a period of not more than two hours (not including travel time) In the event that the closing takes place in the County where the subject premises is located and is more than forty-five (45) miles from our office an additional fee of $15000 may be assessed In the event that the closing exceeds the two hour limit an additional flat fee of $15000 may be assessed In the event that we need to prepare a Power of Attorney there will be an additional fee of $10000 for each Power of Attorney prepared In the event that we need to prepare the Contract there will be an additional fee of $10000 In the event that we need to prepare a Note and Mortgage there will be an additional fee of $15000 In the event that additional documents require drafting by this office there will be an additional fee If the contract is cancelled and you do not use us for another closing one half of the fee will be due for services rendered If you do use us for the next closing $15000 will be due for the cancelled contract work In addition to the foregoing your responsibility will include direct payment or reimbursement of this firm for disbursements advanced on your behalf the same may include but not necessarily be limited to copying costs messenger services photocopies telefaxes and postage Said fees shall be paid at the time of closing In the event that said fee is not paid at the time of closing interest will begin to accrue at the rate of 9 per annum and shall be added to the balance due to us Right to Cancel the Agreement You have the absolute right to cancel this retainer agreement at any time Should you exercise this right you will be charged only the fee expenses (time charges and disbursements) incurred within that period based upon an hourly rate of $22500 per hour for time expended by Attorneys in this office and $16500 per hour for the time expended by Paralegals in this office and any disbursements which were incurred on your behalf You are advised that if in the judgment of this firm we decide that there has been an irretrievable breakdown in the attorney-client relationship or a material breach of the terms of this retainer agreement we may withdraw from representation upon written notice to you Should any fees be due and owing to this firm at the time of our discharge we may have the right to seek a judgment against you and collect pursuant to New York State law In the event that any bill from the Law Firm remains unpaid beyond a 120-day period the client agrees that the Law Firm may seek to withdraw its representation In the event that an action is pending and absent your consent an application must be made to the Court for such withdrawal Where the fee is unpaid for the period set forth above the client acknowledges that in connection with any such withdrawal application that the account delinquency may be good cause for withdrawal

638

3

Right to Arbitration We seek to avoid any fee disputes with our clients and rarely have such disputes We shall make every effort to resolve such disputes in an amicable fashion We will participate in voluntary arbitration if you wish through Third Department Program prior to seeking judicial intervention You must notify us of your intention to arbitrate If the foregoing retainer agreement meets with your understanding and acceptance kindly indicate your acceptance by signing the enclosed copy of this letter below where indicated and return it to me together with the initial retainer Please note that because of the inherent properties of internet transmissions and communications this law firm cannot guarantee the confidentiality of e-mail Therefore you are here by cautioned not to send any confidential information via email We look forward to working with you By___________________________

639

4

By signing below I the client acknowledge that I have read this agreement in its entirety have had full opportunity to consider its terms and have had full and satisfactory explanation of same and fully understand its terms and agree to such terms I the client fully understand and acknowledge that there are no additional or different terms or agreements other than those expressly set forth in this written agreement I the client acknowledge that I was provided with and read the Statement of Clients Rights and Responsibilities I HAVE READ AND UNDERSTAND THE ABOVE LETTER HAVE RECEIVED A COPY AND ACCEPT ALL OF ITS TERMS x____________________________ x____________________________ Client ndash Client ndash

640

5

Statement of Clientrsquos Rights and Responsibilities 1 You are entitled to be treated with courtesy and consideration at all times by your lawyer and the other lawyers

and personnel in your lawyerrsquos office 2 You are entitled to an attorney capable of handling your legal matter competently and diligently in accordance

with the highest standards of the profession If you are not satisfied with how your matter is being handled you have the right to withdraw from the attorney-client relationship at any time (court approval may be required in some matters and your attorney may have a claim against you for the value of services rendered to you up to the point of discharge)

3 You are entitled to your lawyerrsquos independent professional judgment and undivided loyalty uncompromised by

conflicts of interest 4 You are entitled to be charged a reasonable fee and to have your lawyer explain at the outset how the fee will

be computed and the manner and frequency of billing You are entitled to request and receive a written and itemized bill from your attorney at reasonable intervals You may refuse to enter into any fee arrangement that you find unsatisfactory

5 You are entitled to have your questions and concerns addressed in a prompt manner and to have your telephone

calls returned promptly 6 You are entitled to be kept informed as to the status of your matter and to request and receive copies of papers

You are entitled to sufficient information to allow you to participate meaningfully in the development of your matter

7 You are entitled to have your legitimate objectives respected by your attorney including whether or not to

settle your matter (court approval is required in some matters) 8 You have the right to privacy in your dealings with your lawyer and to have your secrets and confidences

preserved to the extent permitted by law 9 You are entitled to have your attorney conduct himself or herself ethically in accordance with the Code of

Professional Responsibility 10 You may not be refused representation on the basis of race creed color religion sex sexual orientation age

national origin or disability

641

642

NYSBA NY Real Property Law Journal | Summer 2012 | Vol 40 | No 3 15

of an ideological commu-nity that genteelly resists the lsquocommodifi cationrsquo of its outputmdashresists that is the commercial values of competition innovation consumer sovereignty and the deliberate pursuit of profi t hellipProfessions ad-vance ldquoclaims to esoteric knowledge and unselfi sh servicerdquo5

But change always comes with a price In her book A Nation Under Lawyers Mary Ann Glendon also notes in her introduction that it was the 1960rsquos which fostered much of the change stating ldquo[t]hese develop-ments are instances of a far-reaching transformation of lawyersrsquo beliefs and attitudes that has been quietly underway since the mid-1960srdquo6 Glendon problematically states ldquo[i]n two successive revisions of its rules of ethics the American Bar Association has removed almost all language of moral suasion abandoning the effort to hold up an image of what a good lawyer ought to be in favor of a mini-malist catalogue of things a lawyer must not do Conduct once strictly forbidden is now not only permitted but widely practicedrdquo7

Glendon mentions advertising and then succinctly sets forth the issues

The upheaval in the profession has been sub-stantial enough to raise troubling questions

To what extent will future Americans be able to count on practitioners to subor-dinate self-interest to client representation and public service

proscribe such dual representation] Accordingly the reasoning goes DR 1-106 was simply ineffective to achieve its intended purposemdashthe confl ict rules of Canon 5 prohibits the practice regardless of DR 1-106Rule 57 Not only that those holding this opinion hold it to such an extent that they will not even consider allowing the client to consent after full disclo-suremdashthe practice constitutes a non-consentable confl ict they saymdashthere will be no consumer sovereignty in the State of New York An historical perspective is called for

A General Historical PerspectiveThe gist of the debate centers

on the effect of Disciplinary Rule 1-106 Rule 57 This Rule is the result of the New York State Bar As-sociationrsquos attempt to deal with the changing world lawyers practice in These changes have been discussed in numerous publications articles books etc and probably no where as well and as pointedly as in Richard A Posnerrsquos book Overcoming Law4 This book is largely an economic analysis of the profession but in the fi rst chapter Posner speaks of the philosophy of a pragmatic approach to law He compares the modern day legal profession to a medieval guild and states

We can begin to sense the ideological parallels and to understand their common material basis between the medieval craft guild and the modern legal profession as it stood on the eve of the transfor-mation of the market for legal services that began in about 1960 In both forms of market organi-zation cartelization is facilitated by the creation

The practice of law has in the last 50 years experienced an upheaval if not a discombobulation One area of upheaval is the providing of legal and non-legal services to a client in the same transactionmdashby lawyers from the largest law fi rms in the largest metropolitan areas to the sole practi-tioner on Erie Boulevard in Schenect-ady New York This reality presents an ethical questionmdashare consumers of legal services suffi ciently intelli-gent to understand the dual nature of the representation with appropriate disclosure In the Spring 2010 issue of the NYSBA NY Real Property Law Journal Karl Holtzschue the former Chair of the New York State Real Property Law Section published an article in which he concluded ldquoyesrdquo1 In the Fall of 2010 the same Journal published a second article on the subject which concluded the answer is ldquonordquo2 Karl got it right

On July 23 2001 the Appellate Divisions approved new ldquoMultiple Disciplinary Practice or MDPrdquo rules for New York lawyers by putting in place DR 1-106 and DR 1-1073 This debate focuses on whether or not Disciplinary Rule 1-106 now Rule 57 permits lawyers to provide such dual services in the same transaction In the opinion of this writer there is no question but that DR 1-106 now Rule 57 intended to permit such representation and was adequate to its purpose Many however were opposed to such representation and still are The issue is one of confl icts DR 1-106 did not specifi cally mention Canon 5 which was the old confl icts Canon and so those opposed to the practice argued that even if DR 1-106 intended to permit such representa-tion it was not suffi ciently clear that it overrode the confl ict provisions of Canon 5 [assuming of course in the fi rst place that Canon 5 actually did

NYSBA Ethics Opinions 752 753 and 755mdashWritten by Traditionalists Who Wish to Live in a World That No Longer ExistsBy Peter V Coffey

643

16 NYSBA NY Real Property Law Journal | Summer 2012 | Vol 40 | No 3

every branch of profes-sional life all point to a collective identity crisis of immensemdashif largely unacknowledgedmdashpro-portions11

For an interesting discussion of professionalism see the Decision of Chief Judge Breitel in the case of In Re Freemanrsquos Estate12

Finally how about chucking the whole idea of professionalism Well if not chucking it entirely estab-lishing a middle ground between the professionalism paradigm and the business paradigm which was the conclusion of Professor Russell Pearce Edward amp Marilyn Bellet Chair in Legal Ethics Morality and Religion at Fordham University all as set forth in his article The Profession-alism Paradigm Shift Why Discarding Professional Ideology Will Improve the Conduct and Reputation of the Bar13 As Professor Pearce writes ldquo[t]he crisis presents the legal community with an opportunity to move to a new paradigm offering better service to clients and greater benefi t to the publicrdquo14 In discussing the famous (or infamous) case of Bates v State Bar of Arizona15 case Professor Pearce states

The Courtrsquos analysis squarely rejected the BusinessndashProfession Di-chotomy It declared that ldquothe belief that lawyers are somehow above trade has become an anachro-nism and described the organized barrsquos continued reliance on the dichotomy as hypocritical The Court treated the market for legal services like the market for other business products and services not as a special professional market subject to the invis-ible hand of reputation Contrary to the Profession-alism Paradigm consum-ers in a more open market would be able to make in-formed decisions regard-

sion Anthony T Kronman had the following to say

The inward change of which I am speaking has been brought about by the collapse of the lawyer-statesman ideal For more than a century and a half that ideal has helped to shape the collective aspira-tions of lawyers to defi ne the things they cared about and thought impor-tant to achieve Even thirty years ago10 it was still a potent force in the profes-sion But in the years since as my generation has risen to power the ideal of the lawyer-statesman has all but passed from view Law teachers no longer respect it The most prestigious law fi rms have ceased to cultivate it And judges can no longer fi nd the time amid the press of cases to give its claims their due

That ideal of the lawyer-statesman offered an answer to the question of what a life in the law should be It provided a foundation on which a sense of professional identity might be built And because the founda-tion it provided was rich in human values this ideal was appealing at a per-sonal level too The decline of the lawyer-statesman ideal has undermined that foundation throwing the professional identity of lawyers into doubt It has ceased to be clear what that identity is and why its attainment should be a reason for personal pride This is the great inward change that has over-taken the legal profession in my generation and its outward manifesta-tions which are visible in

What infl uence do the new ways of lawyers have on the ideas habits and manners of their fellow citizens

Are lawyers in the ag-gregate currently promot-ing or undermining the orderly pursuit of digni-fi ed living in these latter- day law-saturated United States With so many of them clambering toward the helm or cavorting on deck what happened to the steady hand on the rudder of the democratic vessel8

Glendon concludes

But one should not under-estimate the resilience of the dynamic legal tradi-tions of craft professional-ism constitutionalism and practical reasoning If we are hopeful why should we not believe that the energies of those fertile traditions can be harnessed to the needs of a modern diverse demo-cratic republic That task will not be accomplished by the sort of traditionalist who wishes to live in a world that no longer exists or by the sort of innovator who begins with a clear slate and an empty head What will count are suffi cient numbers of lawyers who are knowledgeable enough to be at home in the lawrsquos normal science imagina-tive enough to grasp the possibilities in the current situation bold enough to explore them and pains-taking enough to work out the transitions a step at a time9

There were cries almost despair-ing regarding the changes which were afoot In his book The Lost Law-yermdashFailing Ideals of the Legal Profes-

644


tityrdquo of a dynamic legal profession of today

The MacCrate Report sought to determine the advisability of provid-ing multi-disciplinary servicesmdashand how those services could be provided in light of what was actually happen-ing today in the legal marketplacemdashwhile still maintaining a standard of ethical integrity for the profession The Report fl atly recognized the current situation when it stated as follows

3 Ancillary business conducted as law fi rm subsidiariesmdashin addi-tion to instances to which non-lawyer profession-als are employed by law fi rms (or in which indi-vidual lawyers are dual professionals) there are those instances in which law fi rms have created separate wholly-owned entities through which to conduct ancillary busi-nesses A 1992 study by the National Law Journal reported that the nationrsquos 250 largest law fi rms at the time conducted over 50 ancillary businesses in such diverse areas as real estate development man-agement consulting insti-tution consulting federal and state governmental affairs consulting TITLE INSURANCE manage-ment information ser-vices public issues and management internation-al trade consultinghellip20

From the beginning the Mac-Crate Committee recognized that the 250 largest law fi rms in the United States are providing these ancillary services to their clients in transac-tions in which they are representing their clients Note that this is a report of what the 250 largest law fi rms in the country do It is interesting to note that the literature of ethical lawyer regulation is replete with comment that these ethical rules fall

the guilds became a footnote in the history of industrial production

The soul of the legal profession in the State of New York has not been without boldness imagination and hope so as to address the crisis And so in the late 1990s the New York State Bar Association recogniz-ing the crisis turned to a collective group headed by two of its fi nest Robert MacCrate18 and Steven Krane This group addressed in addition to many other issues particularly as it is relevant here the issue of attorneys providing multiple services to a client in the same transaction

B Specifi c Historical Perspectivemdashthe MacCrate Report Addresses the Issue of Ancillary Services

The New York State Bar As-sociation peopled as it is with such outstanding and nationally rec-ognized authorities in ethics and not wishing to be categorized as a ldquomedieval guildrdquo undertook a mas-sive examination of the practice of law specifi cally from the perspec-tive of multi-disciplinary practice A committee appointed by the New York State Bar Association issued a report PRESERVING THE CORE VALUES OF THE AMERICAN LEGAL PROFESSIONmdashThe Place of Multidisciplinary Practice in the Law Governing LawyersmdashReport of the New York State Bar Associa-tion Special Committee on the Law Governing Firm Structure and Opera-tion19 It is dated April 2000 and is generally known as the MacCrate Report named after the Chair of the Special Committee Robert MacCrate In preparation for a New York State Ethics Seminar I spoke on the phone at some length with Robert Mac-Crate regarding the profession To Mr MacCrate the Bar was peopled by lawyers of intelligence integrity and commitment to public service and to their clients It was clear to me that if change needed to be made this was the man with the intelligence and boldness to make the changes so to preserve the ldquoprofessional iden-

ing the purchase of legal serviceshelliprdquo [dare we say consumer sovereignty]16

Pearce sees today as does Glen-don as opposed to Kronman as ldquoa time for hoperdquo He states particularly

The legal profession is on the verge of a radical transformation In the past few years the best and the brightest of the legal world have chronicled the decline of professional-ism and offered prescrip-tions for its revivalhellip[and] this attention is but one result of the loss of faith in the distinction between a business and a profes-sion (Business-Profession dichotomy) at the heart of the existing paradigm that organizes our beliefs and values about the delivery of legal servicesmdashwhat I call the ldquoProfessional-ism Paradigmrdquo But while many commentators describe the current crisis as cause of despair this Article identifi es it as a time for hope The crisis presents the legal commu-nity with opportunity to move to a new paradigm offering better service to clients and greater benefi t to the public17

The world of the legal profession has changed and that is an under-statement It is a clicheacute but there is no going backmdashback to the outmoded ideas and practices of a long-ago time Those who would be tradi-tionalists ldquowishing to live in a world that no longer existsrdquo are directors of the guild tenaciously clinging to outmoded ideas and rulesmdashlacking the imagination and boldness and most particularly hope to face the new world and undertake and accept the changes that are necessary in this new world These traditionalists will render the legal profession a foot-note in the history of the provision of legal services every bit as much as

645


ents retained a lawyer and received great estate and elder law planning But they did not have long-term care insurance and as a consequence the legal services were ultimately fruitless Without the concomitant purchase long-term care insurance so much was lost Steven felt that the lawyer should be able to provide the legal advice and sell long-term care insurance so that the client received a complete representation and was completely protected (Furthermore the idea that the MacCrate Commit-tee had not heard about Canon 5 is dispelled by its specifi c reference to DR 5-107(B))28

C The Specifi c Provisions of DR 1-106Rule 57

Pursuant to the proposal of the MacCrate Committee the four Chief Judges of the Appellate Division effective November 1 2001 put into place DR 1-106 Responsibilities Regarding Non-Legal Services A detailed examination of DR 1-106 shows conclusively that the Rule intended to allow the practice of lawyers providing either through themselves or through a controlled entity legal services and non-legal services in the same transaction And as will be seen subsequently those who challenge the effectiveness of DR 1-106 particularly the New York State Bar Association Committee on Professional Ethics do not take serious issue with that statement Their point is that in proposing DR 1-106 and in enacting it the MacCrate Committee and the four Chief Judges of Appellate Division failed to take into consideration Canon 529 These traditionalists maintain that Canon 5 left intact trumps DR 1-106 and the only real solution is simply to ignore DR 1-106

In any event we proceed with an examination of DR 1-106

DR 1-106 [12005-b] Re-sponsibilities Regarding Nonlegal Services

A With respect to lawyers or law fi rms providing

in the practice of law involvement of both the lawyerrsquos law practice and lawyerrsquos ancillary business enterprise in the same matter does not constitute impermissible fee splitting with a nonlawyer even if nonlawyers have owner-ship interests or exercise management powers in the ancillary [entity]24

Wow In analyzing the conse-quences of this rule the Report states specifi cally ldquo[l]ikewise the lawyer must be mindful of confl icts of inter-est arising out of the activities of the ancillary business obtaining confl ict waivers if necessaryrdquo25 It does not get any clearer than that The provi-sion of ancillary services to a client in the same transaction is permitted as-suming there is the proper disclosure of confl icting interests and consents obtained

The MacCrate Report proposed that proposed Rule 1-106 be based upon the Pennsylvania model Just in case there is any question at all whether or not the MacCrate Report intended that 1-106 permit the pro-viding of ancillary services to clients who are receiving legal services the Report goes on to propose that the advertising rules in DR 2-101 ldquoPub-licity and Advertisingrdquo be amended to provide for the advertising of ldquolegal and non-legalrdquo services the range of fees for legal and non-legal services26 The proposal by the Mac-Crate Committee regarding advertis-ing clearly illuminates its intention in proposing Rule 1-106 The lawyer or law fi rm and a lawyer-controlled entity are permitted to provide legal services and ancillary services [non-legal] to clients in the same transac-tion and advertise the same27 And if there remains any question at all it is noted that Steven Krane who was a Vice-Chairperson of the MacCrate Committee (and whose recent death has caused such a loss to the Bar) was unequivocal in his statement as to what the MacCrate Committee meant when it proposed 1-106 He would tell this story often His par-

most harshly upon small and solo practitioners while permitting large law fi rms to do pretty much as they choose Indeed many commentators indicate that the impetus for ethical regulation for lawyers was kindled by the disdain for the small or solo Jewish and Catholic practitioners21

And so we go to the specifi cs of the discussion of the MacCrate Commission For our purposes there are two subchapters in the Mac-Crate Report which addressed our issue and they are subchapter 3 of Chapter 4 ldquoAncillary Businesses Conducted as Law Firm Subsidiar-iesrdquo and subchapter 1 of Chapter 12 ldquoWith Respect to Ancillary Ser-vices Offered by Lawyers and Law Firmsrdquo An examination of those discussions results in the unequivocal conclusion that the MacCrate Report proposed the providing by a lawyer or a law fi rm either in its own name or through entities totally controlled by the lawyer or law fi rm of legal representation and non-legal services in the same transaction There simply can be no question22 The MacCrate Report then goes on to state ldquo[t]oday there is anecdotal evidence that law fi rms throughout the country con-tinue to own and operate ancillary subsidiaries within the existing legal and ethical framework governing lawyershelliprdquo and gives a few examples showing the extensive provision of additional non-legal services23 The Report extensively discusses the history and the current practice regarding the provision of ancillary services in Chapter 12 Subchapter 1 and states that ultimately in 1992 the ABA adopted a permissive approach to the provision of ancillary services by lawyers or law fi rms

This permissive approach to the conduct of ancil-lary business enterprises is echoed by the American Law Institutersquos Forth Com-ing ldquoRestatement of the Law Governing Lawyersrdquo So long as each enterprise bills separately and so long as the ancillary [en-terprise] does not engage

646


whether or not the Rules of Profes-sional Conduct apply to the provision of non-legal services Where those services are not distinct from legal services the Rules of Professional Conduct apply to both

Subparagraph (2) presents the next scenario Here the non-legal services are distinct from legal ser-vices but if the person receiving the servicesmdashthe clientmdashcould reason-ably believe that in receiving the legal and non-legal services the Rules of Professional Conduct and the lawyer-client relationship still governs then these Disciplinary Rules apply to the lawyer or law fi rm in providing both legal and non-legal services

Subparagraph (3) addresses the situation where the non-legal services are being provided by an entity that is owned or controlled or otherwise affi liated with the lawyer or law fi rm which the lawyer or law fi rm knows to be providing non-legal services The New York State Bar Ethics Com-mittee has maintained there is a major distinction between the lawyer personally providing these non-legal services on the one hand or through another entity which the lawyer or law fi rm owns or controls on the other That distinction was abolished by DR 1-106(A)(3) This subpara-graph allows the lawyer to provide non-legal services through an entity in which the lawyer or law fi rm is an ldquoowner controlling party or agent of or that is otherwise affi liated with an entity that the lawyer or law fi rm knows to be providing non-legal servicesrdquo As they say it does not get any clearer than that However again as was true in subparagraph (2) if the client could reasonably believe that the entity owned or controlled by the lawyer is part of the lawyer or law fi rm so that the lawyer-client relation-ship applies then the Disciplinary Rules apply to the entity controlled by the lawyer or law fi rm It is not the providing of these services both legal and non-legal services to a cli-ent either through the lawyer or law fi rm itself or the entity controlled or owned by the lawyer that is a prob-lem That is basically assumed and

client relationship does not exist with respect to the nonlegal services or if the interest of the lawyer or law fi rm in the entity providing nonlegal ser-vices is de minimis

B Notwithstanding the provisions of DR 1-106(A) a lawyer or law fi rm that is an owner controlling party agent or is otherwise affi liated with an entity that the lawyer or law fi rm knows is providing nonlegal ser-vices to a person shall not permit any non-lawyer providing such services or affi liated with that entity to direct or regulate the professional judgment of the lawyer or law fi rm in rendering legal services to any person or to cause the lawyer or law fi rm to compromise its duty under DR 4-101(B) and (D) with respect to the confi dences and secrets of a client receiving legal services

C For purposes of this section ldquononlegal ser-vicesrdquo shall mean those services that lawyers may lawfully provide and that are not prohibited as an unauthorized practice of law when provided by a non-lawyer30

Paragraph (A) begins with notice that we are talking about lawyers or law fi rms providing non-legal services to clients Subparagraph (1) presents the scenario of a lawyer or law fi rm providing non-legal ser-vices that are not distinct from legal services being provided to the person and calls for the lawyer or law fi rm to be subject to the Rules [Rules of Pro-fessional Conduct] in the provision of both legal and non-legal services It is assumed as you can see that the law fi rm is going to provide legal and non-legal services to the client in the same transaction The question is

nonlegal services to cli-ents or other persons

1 A lawyer or law fi rm that provides nonlegal services to a person that are not distinct from legal services being provided to that person by the law-yer or law fi rm is subject to these Disciplinary Rules with respect to the provision of both legal and nonlegal services

2 A lawyer or law fi rm that provides nonlegal services to a person that are distinct from legal services being provided to that person by the lawyer or law fi rm is subject to these Disciplin-ary Rules with respect to the nonlegal services if the person receiving the services could reasonably believe that the nonlegal services are the subject of an attorney-client relationship

3 A lawyer or law fi rm that is an owner control-ling party or agent of or that is otherwise affi liated with an entity that the lawyer or law fi rm knows to be providing nonlegal services if the person re-ceiving the services could reasonably believe that the nonlegal services are the subject of an attorney-client relationship

4 For purposes of DR 1-106(A)(2) and (A)(3) it will be presumed that the person receiving nonle-gal services believes the services to be the subject of an attorney-client relationship unless the lawyer or law fi rm has advised the person receiv-ing the services in writing that the services are not legal services and that the protection of an attorney-

647


Simon the Reporter for COSAC Mr Simon annually issues what is the ldquoBiblerdquo regarding the Rules of Profes-sional Conduct in the State of New York33 Mr Simon initially explained the purpose of DR 1-106 and stated that its purpose was ldquoto govern situ-ations in which a law fi rm is directly or indirectly providing nonlegal ser-vices to its clients or to members of the general publicrdquo34 Mr Simon goes on to state that subparagraph (A) not only allows the practice but ldquoalso al-lows a law fi rm to escape the reach of most (but not all) Disciplinary Rules when providing nonlegal services if the law fi rm gives a client written no-tice that the nonlegal services are not legal services and lack the protection of the attorney-client relationshiprdquo35 This is all as has been set forth above herein in discussing the specifi cs of the Rule

In discussing DR 1-106 in his analysis Mr Simon states DR 1-106 (and DR 1-107) specifi cally provide that

1 a law fi rm may directly provide nonlegal services that are bound up with (ldquonot distinct fromrdquo) the legal services it is provid-ing to its clients

2 a law fi rm may directly provide nonlegal services that are distinct from legal services it is providing to its clients

3 a law fi rm may provide non-legal services through a separate entity that it owns or controlshellip36

There it is

Without quoting the entire text of Mr Simon there are several examples or discussions given by him which give his opinion as to the intent and ldquospiritrdquo of DR 1-106 First of all Mr Simon talks about a law fi rm that is going ldquoto take advantage of the spirit of DR 1-106 by hiring an ac-countantrdquo37 The accountant provides services to a client by giving account-ing advice in a real estate closing

in de minimis situations It is govern-ing scenarios that involve services that are beyond those that are simply de minimis This is a very important provision because the State Bar Ethics Committee would go in exactly the opposite direction by declaring that where the attorney is providing legal services he she or it may provide non-legal services only where those non-legal services are ministerial tasks [de minimis]31

Rule 57(b) addresses the issue raised by the MacCrate Committee that the lawyer or law fi rm can-not give up control to the non-legal entity The lawyer or law fi rm shall not permit any non-lawyer providing the services to ldquodirect or regulate the professional judgment of the lawyer or law fi rm in rendering legal services to any person or cause the lawyer or law fi rm to compromise its duty under Rule 16(a) and (c) with respect to the confi dential information of a client receiving legal servicesrdquo

Finally Rule 57(c) states ldquo[f]or the purposes of this Rule lsquononlegal servicesrsquo shall mean those services that lawyers may lawfully provide and that are not prohibited as an unauthorized practice of law when provided by a non-lawyerrdquo The fi rst example that comes to mind is a title agency Reported cases show that title insurance companies and title agen-cies have had non-lawyers read title prepare title reports attend closings collect documents etc While a lot of lawyers would like to claim that is the unlawful practice of law that assertion simply is not accepted and for well over 100 years it has been the common practice of non-lawyers to participate in those activities This activity of non-lawyers is the classic example of what subparagraph (c) is talking about32

At this point is it possible to argue that Rule 1-106 did not intend to authorize lawyers to provide legal and non-legal services in the same transactions by setting forth rules governing the practice It is not

The analysis set forth above is consistent with the analysis of Roy

provided for by DR 1-106 The ques-tion addressed by the Disciplinary Rulemdashhaving assumed that legal and non-legal services are going to be provided to the clientmdashis solely under what circumstances the Rules of Professional Conduct apply to the entity owned and controlled by the lawyer or law fi rm which is provid-ing non-legal services

Subparagraph (4) goes on and sets forth further rules regarding situ-ations described in (A)(2) and (A)(3) This subsection says it is presumed that the client understands that the Rules apply and that the client is protected by those Rules ldquounless the lawyer or law fi rm has advised the person receiving the services in writing that the services are not legal services and that the protection of the lawyer-client relationship with respect to the non-legal serviceshelliprdquo is inapplicable So the Rule is that the lawyer or law fi rm can provide notice to the client by saying ldquoas to these non-legal services being provided by our title company the lawyer-client relationship will not applyrdquo Of course at that point the client is able to say ldquoI am sorry I do not buy that type of situationmdashI expect you will be accountable as a lawyer in any eventrdquo in which case it must be addressed and worked out between the lawyer and the client But the cli-ent is put on notice by subparagraph (4) which of course gives the client the opportunity to address the situ-ation and resolve it with the lawyer Again though Rule 1-106 assumes throughout its scenarios that legal and non-legal services are going to be provided by the lawyer or law fi rm to the client in the same transaction As we have read the provisions of the statute this is clear

Rule 57(a)(4) has a very interest-ing provision at the end It provides ldquoor if the interest of the lawyer or law fi rm in the entity providing non-legal services is de minimisrdquo If we have a de minimis situation the Rules simply do not apply at allmdashin this case it is the interest in the non-legal entity which is de minimis but the point is DR 1-106 is not interested

648


provision We know that it accom-plished exactly that So what could be the problem Mr Simon sounded the warning bell when he stated ldquo[w]hether the courts and bar association ethics committees will tolerate the literal meaning of the new rule how-ever is open to question Only time will tellrdquo43

D The Traditionalists Who Wish to Live in a World That No Longer Exists

The members of the New York State Bar Association Committee on Professional Ethics wasted no time in telling of their intolerance

As we have seen 1-106 became effective November 1 2001 and boy oh boy did this upset the gods of the guild particularly the members of the New York State Bar Association Committee on Professional Ethicsmdashthey were not alonemdashMark Ochs former Chief Counsel of the Commit-tee on Professional Standards of the Third Department was particularly vociferous in his dislike of DR 1-106 The members of the Ethics Com-mittee wasted no time and in four months specifi cally on February 22 2002mdashand it must be presumed that the preparation of this opinion started well before that datemdashissued its Opinion 75244 It is fascinating when it is understood that the Ethics Committee was answering a ques-tion no one asked It seems clear that the Committee was rushing to get its own opinion out there because it sim-ply did not like DR 1-106 In essence the Opinion does what it canmdashin a most convoluted waymdashto gut the impact of DR 1-106 Then quickly fol-lowed Opinion 753 which came four days later on February 26 200245 To complete the trilogy we have Ethics Opinion 755 which was issued within two months specifi cally April 10 200246 Wow These Opinions have one common theme and that is we said it before [and the Committee cites numerous opinions given prior to the enactment of DR 1-106] and we will say it againmdashwe will not tolerate the providing of legal and non-legal services in the same transaction to a

DR 1-106 it is what DR 1-106 is all about

In his initial analysis of DR 1-106 back in December 2001 Mr Simon gives another example particularly as it refers to DR 1-106(A)(3)

[Where] the law fi rm becomes the agent for (thus ldquoaffi liated withrdquo) Chicago Title amp Trust as a well known title search company and the fi rmrsquos lawyers and paralegals become authorized to con-duct title searches in the title companyrsquos name The title company provides the services but it does so through the law fi rmrsquos personnel41

It is noted the New York State Bar Association Committee on Profes-sional Ethics consistently condemns the providing by lawyers of title services title insurance and title companies etc to their clients Mr Simon sees no problem as long as proper disclaimer is given as set forth in his analysis above Specifi cally Mr Simon states

When the nonlegal servic-es are being provided by a separate entity outside the law fi rm and the law fi rm has made the rou-tine disclaimer set out in DR 1-106(A)(4) (making it crystal clear that the non-legal services are not legal services and are not sub-ject to an attorney-client relationship) confl icts are never imputed between le-gal and nonlegal services There are two sides of a river and confl icts cannot cross because there is no bridge between them42

We have then DR 1-106 We know its background its history and its development We know what it was intended to domdashpermit lawyers to provide legal and non-legal services to their client in the same transaction and to provide a framework for such

Mr Simon concludes that in this case the provision of legal and nonlegal services cannot be distinguished and that the Disciplinary Rules apply to both the accounting advice and the legal advice38 But the point is the very example given by Mr Simon in-dicates what the ldquospiritrdquo of DR 1-106 is and that is clearly to allow the pro-viding of legal and non-legal services to the client the same transaction

Furthermore Mr Simon goes on to give another example and in that case he states ldquo[t]he risk of confusion is magnifi ed if the separate entity is located near the law fi rmrsquos offi ces sublets space within the law fi rm or uses the law fi rmrsquos name or the law-yerrsquos name as part of the name (eg if the law fi rm of Smith amp Jones owns a subsidiary called lsquoSmith amp Jones Environmental Servicesrsquo or if a sole practitioner named Ralph Ettlinger is a partner in a real estate fi rm called lsquoRalph Ettlinger amp Sons Realtyrsquo) or if the nonlegal services are pro-vided to a client of the law fi rm in connection with the same matter in which the law fi rm is providing legal services to the clientrdquo39 It is clear Mr Simon does not see any problem with providing legal and real estate ser-vices (real estate brokerage services) to the client in the same transaction

Finally in his analysis Mr Simon goes on to discuss a rather complex situation in which a building col-lapses and the law fi rm had provided engineering services The question is whether or not the presumption of DR 1-106(A)(4) is rebuttable Mr Simon argues that it should be but most particularly for our discussion is the basis for Mr Simonrsquos analysis He states that to make the presump-tion non-rebuttable ldquowill defeat the purpose of DR 1-106 which is to encourage law fi rms to meet more of their clientsrsquo needs including the needs for nonlegal servicesrdquo40 Steve Krane would not have said it differently How explicit can one get It is the very purpose of DR 1-106 to encourage attorneys to provide legal and non-legal services in the same or related transactions It is the pur-pose of DR 1-106 it is the spirit of

649


mittee concludes by making the statement for a third time ldquo[t]he prohibitions on acting as a broker and a lawyer in the same transaction or other similar bars on dual roles for the lawyer owning or operating ancillary businesses continues to apply after the promulgation of 1-106rdquo55 We said it before and we are going to say it againmdashyou cannot act in provid-ing a client with legal and non-legal services in the same transaction This conclusion is based not upon a com-prehensive discussion of DR 1-106 but is simply a dismissal of DR 1-106 and a reapplication of the Commit-teersquos previous opinions based upon Canon 5

Opinion 753(A) Essentially Opinion 753 is

merely a reiteration of what the Eth-ics Committee concluded in Opinion 752 for the Opinion states ldquo[i]n NY 752 (2002) we concluded that these decisions and similar opinions limit-ing or barring lawyers from perform-ing dual roles survive the promul-gation of DR 1-106 This is because the decisions were based upon the application of DR 5-101(A) to the legal services not to the nonlegal servicesrdquo56 As shown previously the Committee simply strips the applica-tion of DR 1-106 to the providing of legal services and limits its applica-bility to non-legal services

(B) Opinion 753 further states

As noted this commit-tee has held in a number of opinions that a lawyer cannot act as a real estate broker and as counsel to a party in the same transac-tion NY State 208 291 340 493 The rationale for these opinions is that a lawyer should not have a personal stake in the advice rendered and a broker who is paid only if the transaction closes can-not be fully independent in advising the client as a lawyer57

tion and attempts to strip DR 1-106 of its applicability to such situations

(B) In any event the Committee gets straight to the point stating as follows

This committee has previ-ously [we told you before and we are about to tell you again] held [so what] that in some transac-tionsmdashnotably real estate transactionsmdasha lawyer who also operates certain ancillary businesses may not provide both legal and non-legal services in the same transaction even with the informed consent of the client The question considered in this opinion is the extent to which those earlier opin-ions and the disciplinary rules on which they were based apply after the promulgation of the new rule52

Does anyone have any question what the conclusion is going to be We said it before and we will say it againmdashcanrsquot do it Particularly note the citing and exclusion of real estate transactions and recall that Simon in his analysis at several points brought up real estate transactions as exem-plifying the applicability of DR 1-106 Recall that the MacCrate Committee specifi cally mentioned abstracting as an area of service being provided by major law fi rms to their clients53

(C) The Opinion then rephrases in different words while making the same point that was made in the ini-tial discussion regarding the question as follows ldquo[i]n a number of opinions that this committee has issued over the years we have opined that in certain circumstances a lawyer also engaged in a nonlegal business can-not provide both legal and nonlegal services in the same transaction even with the consent of the clientrdquo54 WOW

(D) Having already made the point twice in Opinion 752 the Com-

client and we do not care what DR 1-106 says We all know as lawyers that if you frame the question in a given way the answer is preordained For a fascinating discussion of the phrasing of the question as presaging the Opinionsrsquo conclusion see Posnerrsquos Cardozo A Study of Reputation47 spe-cifi cally Chapter 3 Cardozorsquos Judicial Technique and particularly Posnerrsquos analysis of two casesmdashPalsgraf v Long Island R Co48 and Hynes v New York Central R Co49 In the Palsgraf case Cardozo describes Mrs Palsgraf as standing on a platformmdashalmost a bystandermdashrather than as a ticketed passenger on a train platform entitled to all of the protection accruing in a carrier-passenger relationship In the Hynes case Cardozo describes the situation as ldquoOn July 8 1916 Harvey Hynes a lad of sixteen swam with two companions from the Manhattan to the Bronx side of the Harlem River or United States Ship Canalrdquo50 So we have Mrs Palsgraf described basical-ly as a bystander and Harvey Hynes described as a lad of sixteen taking a summer swim And of course guess what Bystanders lose and lads of sixteen win which is exactly what the outcome of the Cardozo opinions was It should be noted of course that again Palsgraf was a ticketed passen-ger of a common carrier and Hynes was a trespasser And so a review of the question as framed in the Opin-ions of the New York State Bar As-sociation Committee on Professional Ethics tells us what the opinion of the committee is going to be

Opinion 752(A) In Opinion 752 it is stated

ldquoNew York recently adopted a new disciplinary rule DR 1-106 address-ing the responsibilities of lawyers or law fi rms providing nonlegal services to clients or other personsrdquo51 That is a misstatement of course The rule addressed the issue of providing legal and non-legal services to clients in the same transaction In attempting to limit the application of DR 1-106 to the providing of non-legal services the Committee conveniently supports its opinion that you cannot combine the both of them in the same transac-

650


solely is somewhat irrelevant to our discussion

One aspect of the Opinion that is quite interesting is footnote 3 which refers to the MacCrate Report and comments that the MacCrate Report noted that law fi rms are involved in ldquoa wide range of non-legal businesses that are conducted by law fi rms or by entities owned by law fi rms Among them were lobbying economic or scientifi c expertise appraisal services accounting fi nancial planning real estate and insurance brokerage title insurance various consulting busi-nesses (management human resourc-es environment etc) and private investigationrdquo61 The reference is to Chapter 4 pp 96-106 But there is no reference at all to Chapter 12 of the MacCrate Report as discussed previ-ously in this article

Additionally the following com-ment is contained in the MacCrate Report ldquoLikewise the lawyer must be mindful of confl icts of interest arising out of the activities of the ancillary business obtaining confl ict waivers if necessaryrdquo62 You can do itmdashjust disclose The overriding implication of the Ethics Commit-teersquos trilogy is that in adopting DR 1-10657 nobody paid any attention to Canon 5 and confl icts of interest That implication is unfounded as can be seen by the MacCrate Committee comment

In essence then the Commit-tee did not in its trilogy seriously analyze DR 1-106Rule 57 It merely discussed what it had discussed be-foremdashessentially Canon 5mdashand clung to its previous Opinions It is as if DR 1-106Rule 57 never existed For this reason its conclusions are wrong and without probative value

E The Interaction Between COSAC and the NYSBA Committee on Professional Ethics

In January of 2003 the New York State Bar Association established the Committee on Standards of Attorney Conduct (COSAC) [at this point it should be noted that COSAC submit-

the sky which caused increasing problems to those ldquotraditionalistsrdquo who clung to the idea that the earth was center of the universe In order to support their position in the face of the new developments these ldquotradi-tionalistsrdquo created convoluted rings which crossed over each other all in a last-ditch attempt to support their po-sition that these new discoveries re-ally did not contradict their tradition-alist opinion It is diffi cult not to have the chart of the Ethics Committee bring to mind the convoluted rings of those traditionalists who clung to the position that the earth was the center of the universe

Opinion 755This Opinion deals primarily

with the provision of non-legal ser-vicesmdashin the words of the Opinion ldquo[a]ncillary business organizations transactions between lawyer and client solicitationrdquo59 And to that extent the Opinion is somewhat ir-relevant to our discussion But make no mistake about itmdashthis Opinion is talking about the providing of non-legal services to a client and solely the provision of non-legal services No mixing of legal and non-legal servicesmdashno sir Any question about that is resolved early on in the Opin-ion with a reference to NY State 252 (2002) in which the Opinion states ldquowe concluded that the lawyerrsquos fi nancial interest in certain non-legal businessesmdashsuch as brokeragesmdashcould make it impossible under the rule governing personal confl icts of interest DR 5-101(A) (sic) for the lawyer to render unconfl icted profes-sional services in matters where the non-legal business is involvedrdquo60 Just because the Committee is engaging in a discussion of mechanics of provid-ing non-legal services let us not get the idea it is talking about mixing legal and non-legal services ldquoWe said it before and we said it againmdashainrsquot gonna happenrdquo To the extent the Opinion reiterates the Opinion given in NY State 752 and actually states the Opinion in more absolute terms it is relevant to our discussion To the extent it goes on and discusses the providing of non-legal services

Once again the Committee is standing pat It made its decisions previously it does not like the prac-tice and that is it The Courts can pass all the rules they want but we ainrsquot gonna budge Note that in these pronouncements by the Commit-tee there is no serious discussion of what DR 1-106 actually provides for Opinion 753 continues

As noted in NY State 595 621 and 738 we found that a lawyer could not refer real estate clients to a title abstract company in which the lawyer had an own-ership interest and that would be hired to provide insurance or to perform other than ministerial [de minimis] tasks That con-clusion was based upon DR 5-101(A) See eg NY State 738 (2001) As set forth above these Rules continue to apply after the promulgation of DR 1-106 Our opinion in NY State 595 expressly extended this prohibition to counsel for the lender58

It just does not get any clearer Whatever 1-106 saysmdashwhatever 1-106 meansmdashwhatever 1-106 was intend-ed to do is simply not pertinent to the Committeersquos discussion Just read our previous Opinions and you will understand why you cannot do itmdashignore that man [DR 1-106] behind the curtain

(C) In Opinion 753 the Com-mittee launches into a convoluted dissertation on ldquothe particular dual employments suggested by the inquirerrdquo It appears that even the Committee understands that its dis-sertation is convoluted for at the end of the Opinion it attaches a chart in which they indicate which relation-ships are acceptable and which are not [Of course according to DR 1-106 they are all with proper disclosure and consent acceptable] When great progress was made in optics result-ing in the perfection of the telescope various objects were discovered in

651


tary]hellip[T]hat is there may be cases where a confl ict in this situation is non-consentable but there are not entire categories of transactions (such as law-yer acting also as broker) in which the confl ict is non-consentable68

It is my opinion as someone who was a member of COSAC involved in all of the discussions as far as I can recall the true determination of COSAC was not that these Opinions needed to be ldquooverruledrdquo I believe the term ldquooverrulerdquo is wrong (it is the wrong word to be used and the wrong approach in order to un-derstand COSACrsquos opinion) What really should have been stated was that the COSAC meant to ldquoinstructrdquo It was not intended that subdivi-sion (d) would add substance to DR 1-106Rule 57mdashit was the opinion of COSAC as clearly indicated by the above that DR 1-106 was totally effective It was not DR 1-106 that needed bolstering It was the New York State Bar Association Commit-tee on Professional Ethics that needed instruction and its Opinions which needed correction It was the intent of COSAC to make clear that these opinions were wrong Members of COSAC were most upset by these Opinions and in proposing (d) it used the sledgehammer In inserting subparagraph (d) and the accom-panying Commentsmdashparticularly see Comments 5 6 and 7 as origi-nally proposed [now [5] [5A] [5B] and [5C] in the revised Comments COSAC was instructing the Com-mittee on Professional Ethics as to the errors of its ways The marginal commentary goes on when it gets to Comments 5 6 and 7 and states ldquoComments [5] [6] and [7] are new and relate to new para 57(d)rdquo (Empha-sis supplied) In the Reporterrsquos Notes in the section entitled ldquoChanges from Existing New York Coderdquo it is stated as follows ldquoThis paragraph and the accompanying Comments are meant to overrule NYSBA Ethics Opinions 752 753 and 755rdquo69 (emphasis sup-plied) and again recites there are

regarding the provision of the non-legal services and (ii) the lawyer or law fi rm reasonably believes it can provide competent and diligent representation to each affected client and (iii) the client gives in-formed consent confi rmed in writing66

The purpose in proposing sub-paragraph (d) was explicit At this point it should be noted that COSAC submitted to the Bar Association a complete compilation of all the rules as previously proposed together with COSACrsquos commentary on the Rule followed by the notation of any changes from the existing New York Code Reporterrsquos Notes and cor-responding New York Disciplinary Rules67

COSAC had no tolerance for the New York State Bar Association Committee on Professional Ethics Opinions as discussed above and was explicit in its commentary as to why it adopted new subparagraph (d) [subsequent version of proposed Rule 57 set this subparagraph as (c) but for consistency I will refer only to (d)] Again it should be noted that Steve Krane was Chairman of COSAC and there is no doubt as has been set forth above where he stood on the issue

In the COSAC Commentary particularly to subdivision (d) it is stated

para (d) is new and has no counterpart in either the current New York Code or the Model Rules This para and the accompanying comments are meant to overrule NYSBA Ethics Opinion 752 753 and 755 and to make clear that the provision of legal and non-legal services in the same or substan-tially related matters [is permitted] [as long as compliance is had with the disclosure rules as set forth in this commen-

ted to the New York State Bar Asso-ciation a complete compilation of all the Rules which COSAC was propos-ing together with COSACrsquos commen-tary on the Rules being proposed fol-lowed by the notation of any changes from the existing New York Code Reporterrsquos Notes and corresponding New York Disciplinary Rules]63 Its organizational meeting was held in New York City on January 21 2003 ldquoCOSAC was divided into three sub-committees each chaired by an out-standing individual and each section having the services of three of the most outstanding ethics professors in the country as associate reporters one of whom was assigned to each subcommitteerdquo64 Additionally the Chief Reporter and Vice Chair of the Committee was Roy D Simon prob-ably the most outstanding professor on New York State Ethics The Chair of course was the renowned Steven C Krane The Committee undertook 32 months of work held approxi-mately 50 conference calls each from one to two hours in length and held 11 days of in-person plenary sessions with full day meetings conducted in New York City Albany and Roch-ester Additionally there were other members of the Committee who were nationally recognized experts in the fi eld The efforts of COSAC resulted in a monumental revision of the Rules of Ethical Conduct governing attorneys in the State of New York beginning with the entirely re-format-ting of those rules in accordance with the Model Rules as proposed by the American Bar Association65

For our purposes focusing on old DR 1-106 which became Rule 57 COSAC proposed the addition of a new subparagraph (d) which is as follows

(d) A lawyer or law fi rm shall not whether directly or through an affi liated entity provide both legal and non-legal services to a client in the same matter or in substantially related matters unless (i) the lawyer or law fi rm complies with Rule 18(a)

652


And you should understand that these comments are some of the milder commentary heard within COSAC when the Court came out with its own rules

In any event the Courts elimi-nated the subparagraph (d) (or if you prefer subparagraph (c)) which had been inserted by COSAC Why they did it is a mystery because as Steve Wechsler points out they gave no indication no commentary no expla-nation no nothing The explanation which I have heard most often and is generally circulatedmdashand is in the articlemdashis that DR 1-106 was new (it had been around since only 2001) and the Courts felt it was better to just leave it alone73 Who knows but that seems to be the generally circulated explanation

In any event the Courts did re-move subdivision (d) In understand-ing the following discussion it is im-portant to remember the Reporterrsquos Notes They stated in p 9 under the paragraph entitled ldquoChanges from Existing New York Coderdquo (emphasis in original) of the Reporterrsquos Notes that ldquothis paragraph and the accom-panying comments are meant to overrule NYSBA Ethics Opinions 752 753 and 755rdquo74

The Comments were prepared by COSAC and were based upon the Rules as proposed by COSAC When the presiding Justices of the four Ap-pellate Divisions changed the Rules the Comments had to be appropri-ately changed And so in a good faith effort COSAC sought the guidance of the New York State Bar Association as to how to proceed As Roy Simon stated

At that point pursuant to authority granted to it in a 2007 Resolution by the House of Delegates COSAC reviewed and revised the proposed Comments to conform to the Comments to the of-fi cial Rules by eliminating language in the proposed Comments that was incon-sistent with the Rules as

public comment or public hearings In its hasty se-cret and elite process the Court signifi cantly weak-ened the regulation of client-to-client confl icts70

Mr Simon stated previously ldquoProblems like this could be avoided if the Courts would circulate draft rules for public comment or hold public hearings on them or at least write comments or explanatory memos to illuminate language that they added on their own initiativerdquo71 [How different is the procedure of the Courts from the procedure previously outlined as undertaken by COSAC and the New York State Bar Associa-tion House of Delegates] Stephen Wechsler one of the three associate Reporters of COSAC stated that the COSACrsquos endeavor resulted in what is

Without doubtthe big-gest most fundamental change in the entire history of the regulation of lawyers in New York State The diffi culty in adapting to the new rules is compounded by the way in which the Appellate Di-vision adopted them The new rules fi rst appeared just two weeks before the end of 2008 The Ap-pellate Division did not provide for any discussion or comment In addition the Appellate Division rejected large parts of the work that had been done by the New York State Bar Association [COSAC] in its effort to change the rules That project which ran over fi ve years had produced a large body of commentary and explana-tion The Appellate Divi-sion ignored much of this but did not provide any comparable tools for the Bar to use in adapting to the new rules72

no categories of representation or transactions which are entirely non-consentable Pay particular attention to the Editorrsquos Notes pointing that the ldquoaccompanying commentsrdquo are meant to overrule the NYSBA Ethics Opinions Those Comments play a signifi cant part in the history of this saga Note that when 57(d) disap-peared the Comments remained They were indeed originally meant to accompany 57(d) but again even when 57(d) was removed the Com-ments stayed

There may have been debate in COSACmdashthere was debate on almost everything but for anyone to in any way assert that the position of COSAC pertaining to 1-10657 with or without subparagraph (d) is any-thing other than that legal and non-legal services can be provided for in the same transaction is contradicted by everything COSAC has ever writ-ten on the subject COSACrsquos position is so overwhelmingly documented and consistent as to be beyond cavil

F The Interaction Between the Courts and COSAC

I am not telling tales out of school when I state there was a great deal of tension between COSAC on the one hand and the Courts on the other hand regarding COSACrsquos proposed Rules COSAC issued the report referred to above It was submitted to the House of Delegates of the New York State Bar piecemeal so that each section could be thoroughly vetted if you will before approval Ultimately the New York State Bar Association with some modifi cations approved the work of COSAC which was then submitted to the Courts Roy Simon probably the cheerleader for COSAC was quite pointed in his comments stating in the New York Professional Responsibility ReportmdashMay 2009 in discussing Rule 17

Instead of using one of those models the Courts wrote their own rule on the fl y under tight sched-ule relying on a small (6 person) special commit-tee without the benefi t of

653


the revised Comments to the House of Delegates which adopted them and Comments 5[A] 5[B] and 6 and 7 making these Comments and their contents the offi cial position of the New York State Bar Association on the matter

G The CourtsmdashRound 2As Mr Simon pointed out

COSAC undertook in good faith to revise the Comments it had initially proposed and modify them to the extent they were inconsistent with the Rules as adopted by the Chief Judges of the Appellate Division The Courts were not happy with COSACrsquos efforts It was the feeling of the Courts that COSAC had merely gone through the Comments and revised them in a cur-sory fashion but left intact the Com-ments as they refl ected the Rules as originally proposed by COSAC The feelings became quite acerbic One offi cial of the Courts took the position of attacking the new Comments at every opportunity warning lawyers not to have any reliance upon these Comments as they did not refl ect the changes to the Rules that the Courts had instituted Ultimately the Courts did reach out to the Bar Association The Courts undertook a pervasive review of the revised Comments pro-posed by COSAC specifying every item of disagreement ie every word or punctuation for that matter in the revised Comments which the Courts felt were not consistent with the Rules they adopted And so John W McCo-nnell Chief Counsel to the Offi ce of Court Administration communicated to the Bar Association expressing the position of the Court and setting forth 45 concerns regarding COSACrsquos proposed revised Comments

So what did the Courts have to say about the Comments to Rule 57 particularly Comments [5] [5(A)] [5(B)] [6] and [7] The Courts left these Comments almost untouched They did suggest under Comment [5(A)] that the words ldquomaterially lim-itedrdquo should be removed in essence because ldquothe reference to lsquomaterially limitedrsquo is incorrect as that language was deleted from the fi nal version of

Because this is so crucial to the entire discussion I repeatmdashCom-ments [5] [6] and [7] were preceded by the heading

ldquoProvision of Legal and Non-Legal Services in the

Same Transactionrdquo(Highlighting in original)

And so what did COSAC do in reconsidering Comments [5] [6] and [7] in light of the fact that sub-paragraph (d) had been eliminated (COSAC did not fl inch It reasserted in almost exact terms the Comments it originally proposed) COSAC in-tended the Comments to state in un-equivocal language that the provid-ing of legal and non-legal services in the same transaction was permitted pursuant to DR 1-106 and remains permitted with or without Subpara-graph (d) given the proper disclosure There is no such thing as non-con-sentable situation Most importantly the heading preceding Comments [5] [5A] [6] and [7] remained the same ldquoProvision of Legal and Non-Legal Services in the Same Transactionrdquo COSAC did change the numbering from [5] [6] and [7] to [5] [5A] [5B] [6] and [7] In Comment [6] it took out the reference to ldquoRule 57(d)rdquo and went on with talking about ldquoin the context of providing legal and nonlegal services in the same transac-tionrdquo In Comment [7] again COSAC took out the reference to Rule 57(d) and began Comment [7] with the fol-lowing ldquoIn addition in the context of providing legal and nonlegal services in the same transactionrdquo How many times does COSAC have to say it Rule 57 with or without (d) is speak-ing of providing legal and non-legal services in the same transaction It is beyond my comprehension how anyone can argue that it is not the position of COSACmdashthat a lawyer can represent a real estate client and provide abstract services either in his or her own capacity or through an entity owned by himher or it The importance of this discussion is that COSAC considered the removal of subparagraph (d) explicitly and con-tinued the Comments as originally proposed COSAC then submitted

adopted This project took several months (COSAC did not of course amend the black letter Rules of Professional Conduct in any way)75

These Comments are quite im-portant as stated by Mr Wechsler

The Appellate Division ignored much of this (the explanation and Com-ments of COSAC) but did not provide any tools for the Bar to use in adapting the new Rules obviously no one wants to make a disciplinary blunder On the other hand the new Rules (and their Com-ments) give lawyers guid-ance on handling practical situations and problems that routinely arise in practice In many cases the guidance is clearer and more helpful than that which was provided by the Disciplinary Rules76

Mr Wechsler goes on ldquoThe Com-ments are written in a clear explana-tory style often giving best practices and are much more detailed precise and practice oriented than the ECsrdquo77 (It should be noted that the author was a member of the Subcommittee of COSAC which undertook revision of the Comments after the Courtsrsquo ldquochangingrdquo of COSACrsquos proposed Rules and in fact was Chairman of the Subcommittee to revise Rules 20 to 85 which of course includes Rule 57)

Specifi cally Comments [5] [6] and [7] outlined the recommended procedures lawyers should adopt in providing legal and non-legal ser-vices in the same transaction How do we know thismdashwe know it because the heading in the Comments preced-ing Comments [5] [6] and [7] state as follows



654


See also Beverwyck Abstract LLC ex rel Engels v Gateway Title Agency LLC86 in which the Court discussed the ethi-cal implications of the arrangement of an attorney providing abstract services to hisher client stating ldquoA failure to appropriately disclosure (sic) these various relationships to all interested parties would raise serious issues of professional responsibility (citing Drysdale)rdquo Again it is the fail-ure to disclose not the activity itself

Finally and most recently we have two decisions the fi rst of which is In re Tambini a case in which the attorney was involved in a plethora of ethical problems resulting in his disbarment87 The Court states specifi cally

Charge 21 alleges that respondent is guilty of an impermissible confl ict of interest in violation of Code of Professional Responsibility DR 5-101(a) [hellip] Since 2003 the respon-dent either directly or through Expedient Settle-ment represented lenders in one or more real estate transactions in New York State for which Expedi-ent Title of which the respondent is a principal received fees for title andor abstract services in such transactions The respon-dent failed to obtain the consent of the represented lender after full disclo-sure of his multiple inter-est in such transaction88

In so fi nding that the problem was the failure to obtain consent the Court rejected the charge that the at-torney had engaged in an impermis-sible confl ict It is not impermissible and note the specifi c reference to Canon 5mdashyesmdashthe Court was aware of Canon 5

The second most recent case is In re Woitkowski89 ldquoCharge No 9 alleges that the respondent engaged in an impermissible confl ict of interest in violation of the Code of Professional

Associationmdashand that is in accord with the decisions of the State of New York In re McKinnon the Court dismissed a charge asserted against an attorney for referring matters to his abstract company79 It dismissed the charge on its face stating ldquoWe dismiss Specifi cation 4 which simply alleges that respondent referred real estate clients to an abstract fi rm he controlled An attorney may perform abstract work for a real estate client without necessarily becoming in-volved in impermissible confl icts of interestrdquo80 In the case of In Re Ford the Court is more specifi c81 In that case the attorney was charged with representing seller and buyer which from a reading of the case it may be presumed the Court found impermis-sible However the Court stated ldquo[o]n this record however we decline to fi nd that respondent engaged in a confl ict of interest by referring real es-tate clients to his title abstract compa-nyrdquo82 The Court states further ldquo[i]n mitigation respondent states that he no longer simultaneously represents sellers and buyers of real property and no longer refers clients to his title abstract company without obtaining the written consent after providing them with written disclosurerdquo83 It does not get much clearer than that A lawyer can provide legal and non-legal services as defi ned in 57 as long as you give proper disclosure

In In re Drysdale the attorney was charged with representing over 200 clients in real estate transactions and referring most if not all of them to an abstract company owned by her to provide ldquotitle abstract services and title insurance for those approxi-mately 200 real estate clientshelliprdquo84 [a tad more than diminimus] Was there a problem YesmdashEngaging in an impermissible confl ictmdashNo way The Court explains ldquoRespondent failed to disclose her interest or the implica-tions of her interest in Vision Ab-stract Inc to any of those approxi-mately 200 clientsrdquo85 The Court made no statement whatsoever that the practice of referring clients to Vision Abstract was impermissible It was the failure to give proper disclosure

Rule 17(a)(2)rdquo In short the Courts had no problem with Comment [5A] They just asked that some minor lan-guage be brought in conformity with Rule 17 as adopted by the Courts The Courts expressed no disagree-ment with the heading ldquoProvision of Legal and Nonlegal Services in the Same Transactionrdquo and made no objection whatsoever to the con-stant repetition of that statement in Comment [6] or [7] The Courts were fully aware of the fact that they had removed (d)mdashfully aware of what they had done And yet they had no problem with Comment [5] [5A] [5B] [6] and [7]mdashin short the Courts felt that the elimination of para-graph (d) was insignifi cant as to the effectiveness of 57 in providing for the provision of legal and non-legal services in the same transaction As was stated by Thomas More in A Man for All Seasons ldquoNot so Master Secretary the maxim is lsquoque tacet consentirersquo The maxim of the law is silence gives consent If therefore you wish to construe what my silence lsquobetokenrsquo you must construe that I consented Not that I deniedrdquo78

Accordingly the only proper interpretation that can be given to the matter is that the Courts are perfectly happy with Comments [5] [5A] [5B] [6] and [7] and the practice of provid-ing legal and non-legal services in the same transaction as long as disclo-sure as called for in the Comments is made

H The Courtsrsquo DecisionsIn case after case the Courts

have consistently in case after case declined to object to the practice of an attorney in representing a real estate client also providing abstract and title services if there is proper consent The disciplinary cases are consistent in that attorneys have been disciplined not for engaging in the practice itself but for failure to obtain the consent of the client which is exactly what the Comments talk aboutmdashthe consent of the cli-ent must be obtainedmdashthat was the conclusion of COSACmdashthat is the position of the New York State Bar

655


after the Courts came back and said to COSACmdashyour Comments do not refl ect accurately the changes we made in the Rules The New York State Bar Association House of Del-egates adopted those Comments in the fi rst go-around in the second go-around and in the third go-around But the article then asserts ldquo[w]ithout the inclusion of Proposed Paragraph (c) in the fi nal version of Rule 57 that portion of the Commentary is not germanerdquo98 Germane to what Are we to simply summarily dismiss the Commentary To conclude the Comments are simply irrelevant Not Germane This argumentation is based in part on the fact that because subparagraph (c)(d) is removed there is no difference between DR 1-106 and Rule 57 No question about that But as has been seen DR 1-106 was made to effectuate the very changes the Ethics Committee and the article so vigorously oppose One may oppose the change made by DR 1-10657 from its inceptionmdashbut COSAC does not the Bar Association does not and the Courts do not

Finally the article makes some very interesting comments

1) ldquoInquiries to representatives of the Bar Association COSAC and the Appellate Division as to whether they believe such to have occurred [the dismissal of Opinions 752 753 and 755] were all answered in the nega-tiverdquo We have no idea of whom the article speaks99

2) ldquoMoreover [the opinion of Mr Holtzschue] is not shared by the parties involved in the preparation of the Comments or the adoption of the Rulesrdquo100 Again we do not know of whom the article is speaking of regarding the ldquothe parties involved in the preparation of the Commentsrdquo but as a party intimately involved in the preparation of those Comments I can state that that is wrong and the empirical evidence contradicts that statementmdashevery position taken by COSAC from the time it fi rst dis-cussed 57 and issued its initial Com-ments to its issuance of the current Comments rejects this statement

entrsquo continued to apply following the then recent adoption of DR 1-106rdquo94 2) ldquolsquo[T]he fact that the title abstract agency to which a lawyer refers a real estate client is owned in whole or in part by the lawyerrsquos spouse does not insulate the lawyer from the reach of NY State 595 and NY State 621rsquordquo95 3) ldquoIn determining that the adoption of DR 1-106 did not over-turn its previous [o]pinions fi nding that the provision of certain legal and nonlegal services in the same transac-tion is non-consentable the Ethics Committee concluded that even if the steps described in the aforesaid DR 1-106(A)(4) were followed thereby overcoming the presumption that those non-legal services were subject to the Code the attorney still re-mained subject to those DRrsquos govern-ing the provision of legal servicesrdquo96 In short the articlersquos review of the New York State Bar Ethics Opinions 752 753 and 755 only serves to high-light the error of those Opinions No recitation as to why DR 1-106 did not overrule these OpinionsmdashDR 1-106 is just summarily dismissed as appar-ently an act of pure futility by the Appellate Division presiding justices 4) ldquoThus notwithstanding the adop-tion of DR 1-106 (now Rule 57) it remained the Ethics Committeersquos po-sition as stated in NY State 595 that with respect to the activities which were subject of its prior opinions lsquothe type and kind of confl ict posed is so signifi cant that the provision of consent is inadequate to protect the clientrsquos interests which converge with the law fi rmrsquos business as an abstract companyrsquordquo97

Well what about those Com-ments As shown above COSAC remained adamant in putting forth the Comments to 57 most particular-ly as has been discussed Comments [5] [5A] [5B] [6] and [7] all included under the heading of ldquoProvision of Legal and Non-Legal Services in the Same Transactionsrdquo (Emphasis in original) COSAC essentially without change stayed with those Comments after the Courts removed subpara-graph (c)(d) It continued to assert those Comments in its second review

Responsibility DRs 5-101(a) and DR1-102(a)(7)rdquo90 Again the Court is aware of Canon 5 The Court out-lines that Woitkowski operated Real Abstract PC at the same address as his law offi ce and represented buyers and sellers in real estate transactions ldquoDuring that time respondent pro-cured title abstract services and title insurance for buyers he represented in those transactions through Real Abstractrdquo91 What did the Court have a problem with The fact that this was his practicemdashno The fact that ldquo[t]he respondent failed to dis-close the implications of his personal interest in Real Abstract to those buyersrdquo92 The Court specifi cally cited Canon 5 and reached an entirely different conclusion from that of the Ethics Committee

Accordingly the decisional law of the State of New York is clearmdashproviding legal services for a client and also providing abstract and title insurance services is not an imper-missible confl ict It does require the disclosure as is so clearly set forth in the Comments to 57 adopted by COSAC and the New York State Bar Association and with which the Courts found no problem

I ldquoBecause Rule 57 (c)(d) Was Not Adopted It is Not Consentable for a Lawyer to Refer a Client to the Lawyerrsquos Title Abstract Companyrdquo

This was the title of the article above referred to which appeared in the Fall 2010 issue of the New York Real Property Law Journal93 As stated initially the article takes issue with Mr Holtzschue (unnamed in the ar-ticle) who concluded that the practice is permissible and the elimination of subparagraph (c) meant very little

Specifi cally the article quotes and it is presumed adopts the conclusions of Opinion 752 stating as follows 1) ldquolsquo[t]hat in some trans-actionsmdashnotably real estate transac-tionsmdasha lawyer who also operates certain ancillary businesses may not provide both legal and non-legal services in the same transaction even with the informed consent of the cli-

656


Endnotes1 Karl B Holtzschue NY Rules of Profes-

sional Conduct Make It Consentable for a Lawyer to Refer a Client to the Lawyerrsquos Title Abstract Company NY REAL PROP LJ Spring 2010 at 15

2 Kenneth F Jurist Because Rule 57(c) Was Not Adopted It Is Not Consentable for a Lawyer to Refer a Client to the Lawyerrsquos Title Abstract Company NY REAL PROP LJ Fall 2010 at 23

3 See generally John Caher Multidisciplinary Practice Rules Adopted by State New York Takes Lead on Lawyer-NonLawyer Partner-ships NY LJ July 25 2001 at 24 col 1 (discussing the Appellate Divisionsrsquo adoption of the provisions)

4 RICHARD A POSNER OVERCOMING LAW (1995)

5 Id at 56 (emphasis added)

6 MARY ANN GLENDON A NATION UNDER LAWYERS (1996) at 6

7 Id at p 5

8 Id at p 13

9 Id at p 291 (emphasis added)

10 This is 1995 and would bring the time frame back to that identifi ed by Posner and Glendon

11 ANTHONY T KRONMAN THE LOST LAWYER mdashFAILING IDEALS OF THE LEGAL PROFES-SION (1993) at 354 See Robert MacCrate ldquoThe Lost Lawyerrdquo Regained The Abiding Values of the Legal Profession 100 Dick L Rev 587 (1996) (for a retort to Kronmanrsquos book)

12 34 NY2d 1 311 NE2d 480 355 NYS2d 336 (1974)

13 70 NYU L Rev 1229 (1995) [hereinafter Pearce]


15 433 US 350 (1977)

16 Pearce supra note 13 at 1249 (emphasis added)


18 The same Robert MacCrate who authored the retort to the Kronman book Mr Mac-Crate is one of the most respected and it may well be said beloved lawyers in the United States and certainly in the New York State Bar Association See JulyAugust State Bar News at p 10mdashunder a picture of Mr MacCrate it is stated ldquoVen-erable advocate for legal profession still keeps watchmdashRobert MacCrate marks anniversaries of State Bar ABA Presiden-cies and his 90th birthdayrdquo The article notes that the ldquoState Bar Executive Com-mittee passed a resolution at its June meeting in Cooperstown recognizing MacCratersquos lsquoextraordinary accomplish-ments and legal legacyrsquordquo

19 NEW YORK STATE BAR ASSOCIATION SPECIAL COMMITTEE ON THE LAW GOVERNING FIRM STRUCTURE AND OPERATION Preserving the

for a very minor correction) request any change to Comments [5] [5A] [6] and [7] to Rule 57 it is clear that the Courts are perfectly comfortable with attorneys providing legal and non-legal services in the same transaction Furthermore because the Courts did make that minor revision to the Com-ments of 57 it is beyond challenge that they did not look at Comments [5] [A] [5] and [7] Once again the empirical evidence contradicts this assertion

ConclusionWe are lawyers attempting to

honorably provide services We can-not listen to those who are ldquothe sort of traditionalists who wish to live in a world that no longer existsrdquo Their voice is wrongmdashintellectually legally and practically The legal world is changing and it is that wrong voice which will bring about a ldquocollapserdquo103 of our profession For our clientsmdashwe must be dynamic resilient The prac-tice of law is a professionmdashof which many of us are intensely proud we will not be empty headed We of the New York State Bar Association have been blessed in that we have lawyers ldquowho are knowledgeable enough to be at home in the lawrsquos normal sci-ence imaginative enough to grasp the possibilities in the current situ-ation bold enough to explore them and painstaking enough to work out the transition a step at a timerdquo104 Think of the people we have hadmdashMacCrate Halpern Krane Simon Lieber and a host of others who have examined diffi cult problems within the profession and have led this Bar Association in maintaining its relevancy its vibrancy its integrity That is exactly what the MacCrate Committee did in proposing 57 to the New York State Bar Association which thereafter proposed it to the Courts who adopted it That is ex-actly what COSAC did in reviewing the Rules and proposing again and again the Rule and the Comments necessary to effectuate the change It is time to move on

3) As for the Bar Association it has been seen that the House of Delegates repeatedly adopted the Comments headed by the statement ldquoProvision of Legal and Non-Legal Services in the Same Transactionrdquo That is the offi cial position of the New York State Bar Association adopted according to the By-Laws of the New York State Bar Association The New York State Bar Association Committee on Professional Ethics stated in its Digest preceding Opinion 752 ldquo[in] certain circumstances a lawyer owning or operating an ancil-lary business continues to be barred after the promulgation of DR 1-106 from providing legal and non-legal services in the same transaction even with the consent of the clientrdquo101 The offi cial position of the New York State Bar Association as adopted by its House of Delegates is clear as outlined above These statements are directly contradictory We have the position of the Ethics Committee and the position of the New York State Bar Association They contradict each other Again we do not know who in the Bar Association was talked to but whoever that person was his or her opinion was contrary to the offi cial position of the New York State Bar Association Given the fact that the House of Delegates has offi cially ad-opted the position as set forth in the Comments it is submitted that the New York State Ethics Committee is required to withdraw Opinions 752 753 and 755

4) Finally we have the Courts Again we are told that someone in the Courts advised that ldquothe decision was made that said paragraph [(c)(d)] not be included in the fi nal ver-sion of Rule 57 because the Appellate Division was unwilling to negate Opinions 752 753 and 755rdquo102 First of all that contradicts the articlersquos previous statement that the Appellate Division did not adopt subparagraph (c)(d) because it did not want to play around with the Rule that had been so recently adopted Further-more because the Courtsmdashafter an extraordinarily intensive review of all the Commentsmdashdid not (except

657



80 Id at 807-08 637 NYS2d at 322 (empha-sis added)


82 Id at 871 732 NYS2d at 116

83 Id

84 27 AD3d 196 197 811 NYS2d 97 98 (2d Deprsquot 2006)

85 Id at 198 811 NYS2d at 98

86 24 Misc 3d 1235(A) at 1 n2 (Sup Ct Albany Cnty 2007)


88 Id at 148 904 NYS2d at 181 (emphasis added)


90 Id at 18 932 NYS2d at 77


92 Id

93 Jurist supra note 2 at 23

94 Id (emphasis in original)

95 Id at 24 (quoting NY St Bar Assrsquon Comm on Prof Ethics Op 738 (2001)) (emphasis omitted)



98 Id at 25


100 Id at 24

101 NY St Bar Assrsquon Comm on Prof Ethics Op No 752 (emphasis in original)


103 Kronman supra note 11 at 354

104 Glendon supra note 6 at 291

Peter V Coffey practices law in Schenectady NY and is a partner in the fi rm of Englert Coffey McHugh amp Fantauzzi He is a member of the New York State Bar Association and a past Vice-President of the Associa-tion currently he is a Member of its House of Delegates a Member of the Executive Committee of the Real Property Law Section and is its past Chair Committee on Professional Discipline Committee on Standards of Attorney Conduct (COSAC) Nominating Committee and a Fellow of the New York State Bar FoundationmdashMaryAnn Saccomando Freedman Circle

51 NY St Bar Assrsquon Comm on Prof Ethics Op No 752 at 1

52 Id at 1

53 Supra at fn 19

54 NY St Bar Assrsquon Comm on Prof Ethics Op No 752 at 2 (emphasis added)



57 Id at 5

58 NY St Bar Assrsquon Comm on Prof Ethics Op 753 at 6

59 NY St Bar Assrsquon Comm on Prof Ethics Op 755 at 1 (under the heading ldquoTopicsrdquo)

60 Id at 3

61 Id

62 MacCrate Report supra note 19 at 332

63 Comm on Standards of Attorney Con-duct Proposed New York Rules of Profes-sional Conduct httpwwwnysbaorgAMTemplatecfmSection=Committee_on_Standards_of_Attorney_Conduct_HomeampTemplate=CMContentDisplaycfmampContentID=4786

64 Comm on Standards of Attorney Con-duct Proposed New York Rules of Profes-sional Conduct Introduction

65 Id

66 Comm on Standards of Attorney Con-duct Proposed New York Rules of Profes-sional Conduct Rule 57 Responsibilities Regarding Non-legal Services

67 Id

68 Id (emphasis added)

69 Id

70 Roy Simon Some Interesting Provisions in the New RulesmdashPart 2 Rule 16(b) Through Rule 17 NEW YORK PROFESSIONAL RESPON-SIBILITY REPORT May 2009 at 3

71 Id at p 2

72 In an article for apparently LexisNexis the New York Rules of Professional Conduct which appeared in a booklet of the New York State Bar Association for a program entitled ldquoEthics in the Wake of the New Rules of Professional Conductrdquo


74 See fn 68 discussion of Rule 57 at p 9 (emphasis added)

75 Roy Simon SIMONrsquoS NEW YORK CODE OF PROFESSIONAL RESPONSIBILITY ANNOTATED 4 (2009 ed)

76 Professor Wechsler on the New York Rules of Professional Conduct as set forth in NYSBA CLE Publication ldquoEthics in the Wake of the New Rules of Professional Conductrdquo 2009 at p 9

77 Id at 11

78 Thomas Paprocki Presumption as a Matter of Law and Eternal Salvation 45 J CATH LEG STUD 177 178 (2006)

Core Values of the American Legal Profes-sion 2000 [hereinafter MacCrate Report]

20 Id at 100 (underlining in original empha-sis of ldquoTitle Insurancerdquo added)

21 Id at 326-29 385 n141 see also Pearce supra note 13 at 1247 Glendon supra note 6 at 41-43 JEROLD AUSERBACH UNEQUAL JUSTICE LAWYERS AND SOCIAL CHANGE IN MODERN AMERICA 40-53 (Oxford Univer-sity Press Inc 1976) (harshly criticizing the basis of the legal professionrsquos Canons of Ethics)


23 Id at 101-102



26 Id at 340

27 Id at 336

28 MacCrate Report supra note 19 at 310-15

29 Id

30 Code of Professional Responsibility DR 1-106 (22 NYCRR 12005-b) amended by NY RULES OF PROFESSIONAL CONDUCT RULE 5-7

31 NY St Bar Assrsquon Comm on Prof Ethics Op No 753 (2002)

32 See People v Title Guar amp Trust Co 227 NY 366 (1919) revrsquod 36 NYCrimR 210 180 AD 648 168 NYS 278 (2d Deprsquot 1917) NY RULES OF PROFrsquoL CONDUCT R 57(c)

33 Roy Simon SIMONrsquoS NEW YORK CODE OF PROFESSIONAL RESPONSIBILITY ANNOTATED (2008 Ed)

34 Id at 128

35 Id



38 Id at 130

39 Simon supra note 33 at 132 (emphasis added)


41 Roy Simon Imputed Confl icts Under New DR 1-106 NEW YORK PROFESSIONAL RE-SPONSIBILITY REPORT December 2001 at 1

42 Id at 4





47 RICHARD A POSNER CARDOZO A STUDY IN REPUTATION (1990)

48 248 NY 339 162 NE 99 (1928)

49 231 NY 229 131 NE 898 (1921)

50 Id at 231

658

ATTORNEY DISCIPLINE IN NEW YORK A NUTS AND BOLTS PRIMER

Richard Supple

Hinshaw amp Culbertson LLP

780 Third Avenue

New York NY 10017

212-471-6200

1 What rules govern professional conduct in New York

a On April 1 2009 New York adopted a new set of ethics rules for attorneys --

the New York Rules of Professional Conduct (ldquoRulesrdquo) which supersede the

former Lawyerrsquos Code of Professional Responsibility The Rules are set

forth in Part 1200 of Title 22 of New York Codes Rules and Regulations

(NYCRR)

b The Rules are divided into

i substantive subsections a violation of which can result in formal

discipline and

ii comments which explain and illustrate the scope and purpose of the

Rules

c In addition there are the New York State Standards of Civility (22 NYCRR sect

1200 App A) which establish ldquoprinciples of behavior to which the bar the

bench and court employees should aspirerdquo However the Standards of

Civility are aspirational and do not themselves provide a basis for imposition

of a sanction or disciplinary finding

d Federal courts in New York apply the Rules when considering questions of

attorney misconduct SDNY amp EDNY Local Civil Rule 15(b)(5) In

most instances federal judges will refer allegations of alleged misconduct to

state authorities for investigation and disposition Sometimes however they

will initiate their own disciplinary proceedings which are governed by Local

Civil Rule 15(d)

e When invoked in state or federal litigation courts are not required to read or

apply the Rules literally but instead use them as a guideline to be applied

with due regard for the broad range of interests at stake People v Herr 86

NY2d 638 (1995) Grievance Committee v Simels 48 F3d 640 645 (2d

Cir 1995) and see Matter of Hof 102 AD2d 591 (2d Deprsquot 1984) (holding

that the former Code of Professional Responsibility represents the

acknowledged standards of the profession and courts should not denigrate the

disciplinary rules by indifference)

659

2

2 How is the disciplinary system organized and run in New York

a Pursuant to Judiciary Law sect 90(2) the four intermediate appellate divisions

are authorized to censure suspend from practice or remove from office any

attorney and counselor-at-law hellip who is guilty of professional misconduct

hellip In every other state the highest court is responsible for disciplining

attorneys

b There are eight grievance committees in New York (although some of them

go by the name disciplinary committee or committee for professional

standards) Generally speaking each grievance committee supervises

attorneys who maintain law offices in their respective departments or

districts

i Manhattan supervises attorneys in Manhattan and the Bronx

(1st Department 1

st and 12

th Districts)

ii Brooklyn supervises attorneys in Brooklyn Queens and Staten

Island (2nd

Department 2nd

and 11th

Districts)

iii Syosset LI supervises attorneys in Nassau and Suffolk counties

(2nd

Department 10th

District)

iv White Plains supervises attorneys in Westchester Rockland

Orange Putnam and Dutchess counties (2nd

Department 9th

District)

v Albany supervises all attorneys in all the counties in the Third

Department (3rd

4th

and 6th

Districts)

vi Buffalo supervises attorneys in the eight counties comprising

the 8th

District

vii Rochester supervises attorneys in the eight counties comprising

the 7th

District

viii Syracuse supervises attorneys in the six counties comprising the

5th

District

660

3

c In actual practice each of the four appellate divisions run its own distinct

attorney-discipline system The procedural rules for each department can be

found as follows

i First Department 22 NYCCRR sectsect 603 and 605

ii Second Department 22 NYCCRR sect 691

iii Third Department 22 NYCCRR sect 806

iv Fourth Department 22 NYCCRR sect 1022

d Under Judiciary Law sect 90(10) all disciplinary proceedings are deemed

private and confidential until and unless public discipline is imposed

Nevertheless the appellate divisions can permit to be divulged all or any

part of the papers involved in a disciplinary proceeding upon good cause

shown with or without notice to the affected attorney The attorney who is

the subject of a disciplinary hearing is entitled however to waive the

confidentiality rule Matter of Capoccia 59 NY2d 549 553-54 (1983)

e Attorneys can be disciplined for acts occurring outside the practice of law

eg Matter of Grier 156 AD2d 46 (1st Dept 1990) (forgery in a personal

matter)

f New York is unusual in that it permits discipline of a law firm in addition to

individual attorneys See NY R Prof C 84(a) (a lawyer or law firm shall

not hellip violate the Rules of Professional Conduct) This authority has been

invoked sparingly Eg Matter of Law Firm of Wilens amp Baker 9 AD3d

213 (1st Deprsquot 2004)

3 What rights do attorneys and complainants have and what does a typical disciplinary

proceeding entail

a Attorneys are entitled to due process of law in disciplinary proceedings

which the US Supreme Court has called quasi-criminal in nature An

attorneys rights therefore include the right to notice of charges the right to

be heard the right to cross-examine witnesses the right to counsel and the

right to refrain from self incrimination See Spevack v Klein 385 US 511

(1967) Matter of Ruffalo 390 US 544 (1968) Attorneys do not have a

right however to a speedy trial Matter of Kleinman 107 AD2d 241 (1st

Dept 1985) Unlike most states which have a ldquoclear and convincingrdquo

standard the burden of proof in a New York state disciplinary proceeding is

preponderance of the evidence Capoccia supra

b Anyone can file a complaint against an attorney Grievance committees can

also commence disciplinary investigations sua sponte In a typical

proceeding charges are filed against the attorney and the matter is referred to

a referee who conducts a hearing The referee then makes findings of fact

661

4

and conclusions of law in a written report which the parties can ask the

appellate division to affirm or disaffirm

There are variations amongst the departments however For example in the

First Department a hearing panel reviews and is empowered to modify the

refereersquos report before it goes to the court In the Fourth Department the

parties to a disciplinary proceeding personally appear to argue before the

appellate division while the other departments base their decisions entirely

upon written submissions And in the Second Department the grievance

committees do not make any recommendation as to sanction whereas the

question of sanction is often the most hotly contested issue in a matter

litigated in the First Department

c As a practical matter the Court of Appeals will not entertain an appeal in a

disciplinary case unless the appeal raises constitutional due process issues or

concerns a plainly arbitrary act See eg Matter of Nuey 61 NY2d 513

(1984) (due process requires that appellate divisions explain the basis for an

interim suspension) Matter of Citrin 94 NY2d 459 (2000) (failure to

provide an attorney applying for reinstatement with a copy of his character

and fitness committee report was arbitrary and capricious) Matter of Zalk 10

NY3d 669 (2008) (Dead Manrsquos Statute cannot be invoked to preclude

attorneyrsquos defense in disciplinary action)

4 Sanctions

a Although the nomenclature varies slightly from department to department

generally speaking these are the different types of discipline that can be

imposed

Admonition private discipline imposed without a hearing that is

permanently kept on record While the record is sealed an

Admonition can be cited in aggravation if other charges are sustained

in a subsequent disciplinary case and it must normally be disclosed

when an attorney seeks admission pro hac vice or becomes a

candidate for judicial office

Reprimand Like an Admonition but imposed after a hearing

Censure public discipline set forth in a decision published in the

official reports and The New York Law Journal A censure does not

affect the attorneyrsquos ability to practice

Suspension Lasting anywhere from three months to five years

Disbarment Lasting for at least seven years

662

5

b The Second Third and Fourth Departments also issue ldquoLetters of Cautionrdquo

(and in the Third Department ldquoLetters of Educationrdquo) which do not

constitute formal discipline where an attorneyrsquos misconduct is not serious or

merely warrants comment The First Department abolished Letters of

Caution in the mid-1990s

See 22 NYCRR sectsect 6916 [2d Deprsquot] 8064(c) [3d Deprsquot] 102219(d)(2) [4th

Deprsquot]

5 Special or expedited disciplinary proceedings

The appellate divisions do not always hold plenary hearings before they act

Sometimes they restrain an attorneys ability to practice law before a formal finding

of guilt is rendered In some circumstances the appellate divisions make a finding

of guilt based on prior proceedings in an underlying case or based on proceedings

held in another jurisdiction

a Interim Suspensions

All of the appellate divisions have rules which allow them to immediately

suspend an attorney under certain circumstances pending the completion of

disciplinary proceedings Those circumstances are

i an attorneys failure to respond to a complaint or lawful direction of

grievance committee

ii an attorneys admission of guilt under oath and

iii uncontested or uncontroverted evidence of an attorneys misconduct

See 22 NYCRR sectsect 6034(e) [1st Dept] 6914(1) [2

nd Dept] 8064(f) [3

rd

Dept] and 102219(f) [4th

Dept]

In the First Department an attorneys willful failure to pay a judgment owed

to a client provides another ground for an interim suspension

b Indefinite Suspensions for Mental or Physical Incapacitation

All of the appellate divisions have roughly similar rules which require that an

attorney be suspended indefinitely where he or she is shown to be mentally or

physically incapacitated In the event such a suspension is ordered pending

disciplinary proceedings are held in abeyance The burden of proving the

incapacitation lies with the grievance committee but once ordered a

suspension for a medical or physical disability can only be lifted if the

663

6

attorney shows by clear and convincing evidence that he or she is fit to

reassume the practice of law See 22 NYCRR sectsect 60316 [1st Dept] 69113

[2nd

Dept] 80610 [3rd

Dept] 102233 [4th

Dept]

c Suspension for Failure to Pay Child andor Child and Spousal Support

Under Judiciary Law sect 90(2-a) the appellate divisions are required to

suspend an attorney who is more than 30 days in arrears on his or her child or

childspousal support payments or who has failed to comply with a warrant

summons or subpoena in a paternity or child support proceeding The

suspension will not be lifted until the attorney becomes current on the support

payments or complies with the relevant mandate

d Felony Disbarment

Under Judiciary Law sect 90(4)(a) attorneys who are convicted of a felony

under New York law or a crime in another jurisdiction that would constitute

a felony in New York are automatically disbarred See Matter of Delany 87

NY2d 508 (1996) (disbarment automatic when judgment of felony

conviction entered)

e Serious Crime Proceedings

Under Judiciary Law sect 90(4)(d) a serious crime is defined as a felony

crime in another jurisdiction that is not a felony in New York or any other

crime which contains one of the following as a necessary element

interference with the administration of justice

false swearing

misrepresentation deceit or fraud

willful failure to file income tax returns

bribery

extortion

misappropriation or theft

attempt conspiracy or solicitation of another to commit a serious

crime

An attorney convicted of a serious crime shall be suspended on an interim

basis pending a final sanction unless the appellate division decides there is

good cause not to order a suspension Judiciary Law sect 90(4)(f) The

attorney must then show cause why a final order of censure suspension or

disbarment should not be imposed The attorney cannot relitigate the

underlying crime at a serious crime hearing See 22 NYCRR sectsect 60312 [1st

Dept] 6917 [2nd

Dept] 8067 [3rd

Dept] 102221 [4th

Dept]

664

7

f Restitution

Disciplinary authorities may obtain a restitution order to compensate a

complainantvictim so long as its intent to do so is spelled out in its notice of

disciplinary charges Judiciary Law sect 90(6-a)(a)

g Reciprocal Discipline

All of the appellate divisions have similar rules to determine punishment

when a New York attorney is first disciplined in another jurisdiction When a

grievance committee submits a certified copy of a foreign court order

imposing discipline against a New York attorney to the appellate division

only one or more of the following three defenses may be raised (i) the

attorney was denied due process (ii) there was such a lack of evidence of

misconduct that the appellate division cannot accept the foreign court finding

in good conscience and (iii) the foreign misconduct does not constitute

misconduct in New York See 22 NYCRR sectsect 6033 [1st Dept] 6913 [2

nd

Dept] 80619 [3rd

Dept] 102222 [4th

Dept]

If none of these defenses apply or have merit then the appellate divisions

policy is generally speaking to impose the same discipline as the foreign

court Matter of Pohlmeyer 226 AD2d 52 (1st Dept 1996)

h Collateral Estoppel

The First Department (and increasingly the other departments) has estopped

attorneys from contesting disciplinary charges against them when their guilt

has already been determined for all intents and purposes in the course of a

prior state or federal court proceeding

To establish that the collateral estoppel doctrine applies a grievance

committee has to prove two things (i) that the issues necessarily decided in

the underlying case and the issues presented in the disciplinary case are

identical and (ii) that the attorney had a full and fair opportunity to litigate

the issues in the underlying proceeding Kaufman v Eli Lilly amp Co 65

NY2d 449 455 (1989)

The following cases illustrate situations in which the doctrine has been

applied

Matter of Sylvor 255 AD2d 87 (1st Dept 1996) (application of a federal

court finding of securities fraud)

Matter of Morrissey 217 AD2d 74 (1st Dept 1995) (application of a federal

court finding that an attorney converted escrow monies)

665

8

Matter of Yao 231 AD2d 356 (1st Dept 1997) (application of a state court

finding of extortion)

Matter of Capoccia 272 AD2d 838 (3rd

Dept 2000) (application of state

court findings of frivolous conduct)

Matter of Abady 22 AD3d 71 (1st Deprsquot 2005) (permitting referee to make

collateral estoppel finding)

i Reinstatement

All the appellate divisions have roughly (but not entirely) similar rules

governing reinstatement See 22 NYCRR sectsect 60314 [1st Deprsquot] 69111 [2nd

Deprsquot] 80612 [3rd Deprsquot] 102228 [4th Deprsquot] They all permit attorneys

who have been suspended or disbarred to apply by petition or motion for

reinstatement In the First and Fourth Departments attorneys are required to

use application forms specifically provided in the rules

The burden in a reinstatement proceeding is on the attorney to prove by clear

and convincing evidence that he or she possesses the requisite character to

resume the practice of law

The attorney as part of the application process in each department must

establish that he or she attained a passing score on the Multistate Professional

Responsibility Exam (MPRE) In the First Department the MPRE must be

taken within six months of filing the application In the Second Department

attorneys suspended for less than one year can avoid taking the MPRE if they

complete one CLE credit for each month of their suspension

In the First and Fourth Departments attorneys who were suspended for six

months or less may file less expansive applications that are essentially

affidavits of compliance with their suspension order In the Fourth

Department the attorney is required to personally appear on the return date of

the application (unless the attorney was suspended for six months or less)

The Fourth Department may also require that an attorney retake and pass the

New York State Bar Examination as a condition of reinstatement

666

9

Sources of Ethics Law (from most to least important)

1 New York Rules of Professional Conduct

2 State and Federal case law

3 Comments of New York State Bar Association to the Rules of

Professional Conduct

4 Ethics Opinions (New York State Bar Association New York City

Bar New York County Lawyers Association Nassau County Bar

Association American Bar Association)

5 Secondary Sources (Restatement of the Law Governing Lawyers

Simons Rules of Professional Responsibility Annotated Hazard amp Hodes

The Law of Lawyering)

667

668

Amount of Awards Since 1982By Misconduct $1637 Million

es amp Trusts2M (24)

y Escrow

$665M (41)

Unearned Fe$57M (4)

Settlements$144M (9)

Other Escrow$168M (10)

Collec$69M

Investment$203M (12)

The Lawyersrsquo Fund for Client Protectionof the State of New York

Highlights from the 2012 Annual Report of the Board of Trustees

This Annual Report of the Lawyersrsquo Fund for Client Protectionfocuses on the Fundrsquos activities in calendar year 2012

The Lawyersrsquo Fund is an independent public trust financed by NewYorkrsquos legal profession which reimburses law clients for financiallosses caused by dishonest conduct in the practice of law Noother profession provides such protection to its clients

There are over 298000 registered lawyers in New York State TheTrusteesrsquo experience over 30 years has clearly established that theoverwhelming majority of New Yorkrsquos lawyers are honest and caringand deserving of their clientsrsquo trust In 2012 as in every year sincethe Fundrsquos inception in 1982 a small number of former lawyers areresponsible for the dishonest conduct resulting in the Fundrsquosawards In 2012 60 now suspended disbarred or deceasedlawyers were responsible for the client losses reimbursed by theFund Of these 60 former lawyers 31 appear for the first time inthe Fundrsquos awards

In 2012 the Trustees approved 187 awards reimbursing a total of$54 million to eligible law clients for losses caused by dishonestconduct of attorneys in New York State All eligible law clientsreceived 100 per cent reimbursement for their loss in 2012 Since1982 the Trustees have granted 7255 awards totaling $1637million

The Trustees are proud of New Yorkrsquos legal profession and gratefulfor the financial and other support lawyers in New York Stateprovide to the Lawyersrsquo Fund and its client protection programEach year members of the bar generously donate their time andtalents and assist claimants before the Fund as a public servicewithout legal fee

Amount of 2012 AwardsBy Misconduct $54 Million

Number of Reimbursement Claims Filed 1992 - 2012(Total Number of Reimbursement Claims Filed Since 1982 17029)

Estates amp Trusts$750730 (14)

al Property Escrow

79251 (48)

Unearned Fees$837693 (15)

Settlements$397349 (7)

Other Escrow$279604 (5

Collection$140

Investment$565667 (10)

0

200

400

600

800

1000

1200

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Filed 627 636 598 909 730 1128 812 442 492 548 499 506 627 729 520 454 480 489 820 601 469

ldquoI received your letter stating the Board of Trust-ees has approved (my) award I just wanted to say

thank you I know (my former lawyer) does notreflect the majority of the members and I thank(lawyers in New York) for setting up the Fund tohelp protect those of us trusting the systemrdquo

Message from a Claimant 2012

Num

ber

669

Claims Received and Processed

In 2012 469 claims were filed with the Fund a decrease of 22 percent from 2011 In 2012 there were 209 (45) claimsseeking reimbursement of legal fees and 111 (24) claims involving real property escrows The largest reported losses ($195million) involved investment transactions The second largest reported losses ($79 million) involved real estate losses

The Trustees approved 187 awards in 2012 with documented losses of $54 million Awards totaled $54 million and rangedbetween $100 and $300000 The median loss and award was $5000 All awards since 1982 involve actual client and escrowlosses of $204 million In 2012 100 percent of eligible claimants received full reimbursement of their loss

Of the 187 awards in2012 unearned legalfees were the largestcategory of awards innumber (90) followedby losses in realestate transactions(60) Awards in realestate transactionswere the largestdollar amount ($26million) In 2012 32percent of the awards approved and 48 percent of the amount of reimbursement provided involved thefts of real property escrowsTwenty-seven (27) former lawyers were responsible for the 60 real estate awards Of these 27 former lawyers 11 werefrom the Second Judicial Department It is important to note that there are over 53000 registered lawyers in theSecond Judicial Department Since 1982 final determinations have been reached in 16255 claims 7255 (45) were found toqualify for reimbursement and 9000 (55) were determined to be ineligible

A major concern for the Trustees continues to be the problem of lawyer theft of real estate escrow funds Since 1982 real estateescrow losses are the largest single category of awards from the Fund in both the number of awards approved and amount ofreimbursement provided In 30 years 30 percent of the number of all awards from the Fund and 40 percent of all money paid outby the Fund have reimbursed real estate escrow losses Since 1982 the Trustees have approved 2231 awards totaling $665million for real property losses The Trustees look forward to continuing collaborative efforts with bar leaders to analyze andaddress lawyer theft of real estate escrows and down payments

Court Programs amp Public Information

The Dishonored Check Notice Rule is a client protection deviceinstituted at the request of the Fundrsquos Trustees Under thecourt rules for this program the Lawyersrsquo Fund acts as a

statewide clearing house for reports of bounced checks on attorneytrust special and escrow accounts The majority of bounced checknotices result from innocent mistakes in law office banking prac-tices These reports though have identified upwards of 260 lawyerswho had misused escrow funds

Court rules designate the Lawyersrsquo Fund as a depository for moneyowed to missing law clients and escrow beneficiaries 22 NYCRRPart 1200 (Rule 115 (f)) Deposits of $1000 or less will be acceptedwithout court order in order to prevent the depletion of nominaldeposits The Fundrsquos staff attempts to locate these clients to returnthese monies As of December 31 2012 a total of 1997 depositswere received by the Fund Staff successfully located 210 missingclients and restored $579536

The Fundrsquos internet site at wwwnylawfundorg is a source ofdetailed information about the Fund and helpful advice for consum-ers and the legal community The site contains frequently askedquestions on the Fund and its procedures the Trusteesrsquo Regula-tions reimbursement claim forms recent Annual Reports consumerpublications and press releases

The Fundrsquos Statutory Authorityand the Trusteesrsquo Regulations

The Fund was established by Section 97-t of theState Finance Law This statute also provides forthe management of the Fundrsquos assets as a special

revenue fund by the State Comptroller Section 468-b ofthe Judiciary Law governs the administration of the Fundand provides the Trustees with full authority to administerthe Fund subject to the general supervisory authority ofthe Court of Appeals

The Trusteesrsquo Regulations for administration and claimsprocedures are published in Title 22 of the Official Compi-lation of Codes Rules and Regulations of the State ofNew York (22 NYCRR Part 7200 et seq)

ldquoI want to thank you for all your hard workin this matter and cannot say enoughthanks Really appreciate what your

group of fine Trustees doMessage from a claimant 2012

Dept Number of Awards Amount of Awards 1st 235 165 $13140154 2492nd 1085 764 $36460539 6923rd 36 25 $1508740 294th 65 46 $1578831 30

Totals 1421 100 $52688264 100

Realty Awards 1995-2012 - By Judicial Department

670

$00

$20

$40

$60

$80

$100

$120

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 200 4 2005 2006 2007 2008 2009 2010 2011 2012Amount $73 $75 $76 $57 $99 $69 $59 $34 $105 $53 $57 $58 $51 $81 $71 $70 $68 $56 $85 $69 $54

Lawyers Involved in Awards1982 to 2012

In 30 years 1032 former members of the barhave been responsible for the 7255 awardsgranted by the Fund A complete list of these

former lawyers is available on the Fundrsquoswebsite wwwnylawfundorg There are over298000 registered lawyers in New York StateThe Trusteesrsquo awards in 2012 were attributableto dishonest conduct by 60 now suspendeddisbarred or deceased lawyers Of these 60former lawyers 29 were respondents in awardsfrom prior years and the names of 31 dishonestlawyers appear for the first time in 2012 awards

Most thefts involve sole practitioners themajority of which are male and middle-agedThe apparent causes of misconduct by theselawyers are often traced to alcohol or drugabuse Other causes are economic pressuresmental illness marital professional and medicalproblems and gambling activity

The geographic distribution of these 1032 formerlawyers and the Fundrsquos 7255 awards amongthe statersquos judicial departments is represented inthe bar graphs to the right

Lawyers Involved in All Awards Since 1982

Jud

icia

l D

ep

art

me

nt

Jud

icia

l D

ep

art

me

nt

First Judicial Department

New York and Bronx County

Second Judicial DepartmentKings Richmond QueensNassau Suffolk DutchessOrange Putnam Rocklandand Westchester Counties

Third Judicial DepartmentAlbany Broome Chemung

Chenango Clinton ColumbiaCortland Delaware Essex

Franklin Fulton GreeneHamilton Madison Montgom-

ery Otsego Rensselaer StLawrence Saratoga

Schenectady SchoharieSchuyler Sullivan Tioga

Tompkins Ulster Warren andWashington Counties

Jefferson Herkimer LewisOneida Onondaga

OswegoCayuga LivingstonMonroe Ontario SenecaSteuben Wayne YatesAllegany Cattaraugus

Chatauqua Erie GeneseeNiagara Orleans andWyoming Counties

Fourth Judicial Department

Amount of Awards Approved From 1992-2012 (In Millions $)(Total Amount of Awards Approved Since 1982 $1637 Million)

Number of Awards Approved From 1992-2012(Total Number of Awards Approved Since 1982 7255)

Distribution of Awards Since 1982

154

86

497

295

0 100 200 300 400 500 600

4th

3rd

2nd

1st

0

100

200

300

400

500

600

700

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Num ber 288 318 362 383 381 625 415 161 205 160 187 165 196 227 147 185 130 139 198 253 187

Num

ber

In M

illio

ns ($

)

879

573

4341

1462

0 1000 2000 3000 4000 5000

4th

3rd

2nd

1st

671

Contributions $030 M

Restitution $158 M

Interest $53 M

Sanctions $30 M

Attorney Registration

$1607 M

AdministrativeCosts $159 M

proved aims637 M

Rejected Cla$4399 M

Revenue of the Lawyersrsquo Fund

The biennial attorney registration fee required of every practicing attorneyis the Fundrsquos principal source of revenue Section 468-a of the Judi-ciary Law allots $60 of each $375 registration fee to the Lawyersrsquo Fund

Since April 1 1993 additional revenue from the biennial registration fee hasbeen made available to the Fund

The Lawyersrsquo Fund does not receive any revenue from the Interest onLawyer Account (IOLA) program The Fund also does not receive anytax dollars

Other sources of revenue for the Fund include restitution interest sanctionsand contributions Since 1982 the Fund has received $1607 million fromattorney registration fees $158 million in restitution $53 million in interestincome $30 million in judicial sanction revenue and $301000 in contribu-tions from lawyers and the public The Fundrsquos revenues are annually appro-priated to the Board of Trustees by the State Legislature as one componentof the Judiciary Budget

The Lawyersrsquo Fund is administered by a Board ofTrustees who are appointed by the Court ofAppeals Since 1981 the Board has been com-posed of five members of the bar and two businessand community leaders

The Trustees serve renewable three-year termsThey receive no compensation for their services

The Fundrsquos office is located in Albany The Trusteesare assisted by a five-member staff composed ofTimothy J OrsquoSullivan Executive Director andCounsel Michael J Knight Deputy Counsel JahnelKaczor Administrative Secretary Ray WoodInvestigator and Harriett Tremblay Secretary

As one of the smallest of state agencies the Fundrelies greatly upon the support and kindness ofcolleagues in public service The Trusteesacknowledge our special appreciation to the Courtof Appeals the staffs of the Attorney GrievanceCommittees and District Attorneysrsquo Offices theOffice of Court Administration the AttorneyGeneralrsquos Office and the Office of the State Comp-troller

The Lawyersrsquo Fund for Client Protection

119 Washington Avenue Albany New York 12210 518434ndash1935 or 1ndash800ndash442ndashFUND

wwwnylawfundorg

The Board of Trustees

Former members of the Board of Trustees include the Hon Judith S Kaye former Chief Judgeof the State of New York (1981-1983) Joseph Kelner Esq of Manhattan (1981-1982) Anthony RPalermo Esq of Rochester (1981-1990) John F X Mannion of Syracuse (1981-1992) Ray WManuszewski of Cheektowaga (1981-2002) Theodore D Hoffmann of Hicksville (1990 to 2002)Shirley B Waters of Rome (1992 to 2001) Bernard F Ashe of Albany (1981-2008) Hon CharlesJ Hynes Kings County District Attorney (1982-2009) and Theresa B Mazzullo of Rochester(2002-2012)

Nancy Burner of SuffolkCounty is the Vice-Chairman of the Fundand the founding partnerof Nancy Burner ampAssociates PC inSetauket andWesthampton Beach

Charlotte G Holstein ofSyracuse is a civicleader founder andExecutive Director ofFOCUS GreaterSyracuse a communityinterest group

Recommended Changes in Legal Practice and Policy

Each year the Trustees recommend changes in legal practice and policy in fulfillment of their statutory responsibility to maintainthe integrity of the legal profession and promote public confidence in the administration of justice The full text of these recommen-dations can be found in our complete annual report posted at wwwnylawfundorg

Patricia L Gatling ofManhattan is theCommissioner and Chairof the New York CityCommission on HumanRights

The Fundrsquos Finances Since 1982

Peter A Bellacosa ofManhattan is the FundrsquosTreasurer and a partner inthe litigation group of theKirkland amp Ellis law firm

Eric A Seiff of the Bronxis Chairman of the BoardMr Seiff is a partner in theManhattan law firm ofScoppetta Seiff Kretz ampAbercrombie

Eleanor Breitel Alter ofManhattan is a partner inthe Manhattan law firm ofKasowitz Benson Torresamp Friedman

RevenueSources

Claims andOperations

Anthony J Baynes ofErie County is thefounder and currentChairman of the AJBaynes Group a Buffalobased development andlogistics company

ldquoI have not enough words how to thank youThank you from the bottom of my heart for allyour hard work and not giving up on me God

bless you and give you wisdom and strength tobe able to help people like meMessage from a claimant 2012

672

564



INDEX





5 Dual Practice 26 114 135 206 208 244 291 340 493 916 919 933




9 Referrals 467 566 667 694 845







333 340 351 438 450 470 471 493 532 588 611 626 694 807 845 867 916 919

926 933


565

OPINIONS






Ethics Opinion 532








Ethics Opinion 575




account


Ethics Opinion 44




Ethics Opinion 677



circumstances

566


Ethics Opinion 550




5 Dual Practice

Ethics Opinion 26





Ethics Opinion 114





Ethics Opinion 135






Ethics Opinion 206


Modifies 128





Ethics Opinion 208




Ethics Opinion 244



567








Ethics Opinion 291




Ethics Opinion 340






therefrom

Ethics Opinion 493





Ethics Opinion 916


transaction




Ethics Opinion 919









568

Ethics Opinion 933






Ethics Opinion 626







Ethics Opinion 753


interest















Ethics Opinion 253



Ethics Opinion 550


569



9 Referrals

Ethics Opinion 467


estate


Ethics Opinion 566






Ethics Opinion 667

Topic Referral fees





Ethics Opinion 694


and lender


Ethics Opinion 845


buyers or sellers






referral fee


Ethics Opinion 817



570




Ethics Opinion 882






concession

Ethics Opinion 892






11 Spouse as Broker

Ethics Opinion 244










Ethics Opinion 291




Ethics Opinion 340






therefrom

Ethics Opinion 493

571






Ethics Opinion 644





Ethics Opinion 662





Ethics Opinion 705








reduced


Ethics Opinion 595





Ethics Opinion 621



ownership interest

Ethics Opinion 731

572


employees of lawyer



Ethics Opinion 738


spouse



Ethics Opinion 753


interest























Ethics Opinion 351


573



Ethics Opinion 576







Ethics Opinion 08







Ethics Opinion 38a



Ethics Opinion 162




clients


Ethics Opinion 199



Ethics Opinion 208




Ethics Opinion 244


574









Ethics Opinion 291




Ethics Opinion 320




Ethics Opinion 333




Ethics Opinion 340






therefrom

Ethics Opinion 351








Ethics Opinion 450


575










demolition


action


Ethics Opinion 493





Ethics Opinion 532



Ethics Opinion 588





Ethics Opinion 611




matter

Ethics Opinion 626






576

Ethics Opinion 694


and lender


Ethics Opinion 807






Ethics Opinion 845


buyers or sellers






referral fee

Ethics Opinion 867





Ethics Opinion 916


transaction




Ethics Opinion 919









577

Ethics Opinion 926





fees

Ethics Opinion 933






Ethics Opinion 78


employees



578

OPINIONS

OF THE



Escrow Accounts


Index

1 Escrow funds 90 532 554 570 575 582 600 710 737 764 816907




OPINIONS

1 Escrow funds 90 532 554 570 575 582 600 710 737 764 816 907

Ethics Opinion 90

Topic escrow funds




Ethics Opinion 532



Ethics Opinion 554










579

Ethics Opinion 575




account

Ethics Opinion 582

Topic Escrow Funds



Ethics Opinion 600





Ethics Opinion 693




Ethics Opinion 710





Ethics Opinion 737




Ethics Opinion 759



Ethics Opinion 764


(IOLA)


full disclosure

580

Ethics Opinion 816





relationship

Ethics Opinion 907












anonymous


Ethics Opinion 710






Ethics Opinion 759




Ethics Opinion 693




581

582











583










584








585






586





587







588








589








590







591



010405

--- ~-------------~--~~~~---------- ~ ~- ~~ ~~ ~---~~----~~~-~---~--~-------~ ~~~ ~-~ ~--------~--- -~~~~~ ~ ~ ~ ~~ ~~ --~~~----~~--~-~~

592

CHAPTER ONE


Mark S Ochs Esq


593


3

[10] I INTRODUCTION













5 Rule 115(i)

594


4







[16] E Deposit










595


5











596


6















597


7











31 Cf NYSBA Op 775 (2004)

598


8







32 See NYSBA Op 816 (2007)



35 Rule 115(b)(4)




599


9

[110] I Signatories







40 NYSBA Op 693 (1997)





45 Rule 115(f)

600


10












601


11








49 Rule 117





602


12







55 21 NYCRR sect 700010





603


13







604


14













605


15











71 Rule 115(d)(3) NYSBA Op 758 (2002)

72 Rule 115(d)(1)(viii)

606


16











607


17












608


18






[129] A Records





609


19

[130] B Analysis














610


20

[131] C Findings


1 Commingling84
















611


21




















612


22











613


23











614


24



[134] A Estates







615


25









616


26








617


27








[141] H Trustee


618


28










619


29












620


30



[146] M Loans





621


31





[148] O Fraud



622


32




623

624








625












626
















627












Administntion




628











629

630

RULE 115






Property




her own































631







A lawyer shall














record











clients





632





















(f) Missing Clients



















633




Rule




















privilege





Comment






85






634




























635

636





637

2


638

3


639

4


640

5















641

642














643











Glendon concludes



644














645














646














647







There it is










648















649
















650















651












652















653

















654













655













656









7 Id at p 5

8 Id at p 13




12 34 NY2d 1 311 NE2d 480 355 NYS2d 336 (1974)



15 433 US 350 (1977)










657





82 Id at 871 732 NYS2d at 116

83 Id


85 Id at 198 811 NYS2d at 98





90 Id at 18 932 NYS2d at 77


92 Id






98 Id at 25


100 Id at 24







52 Id at 1

53 Supra at fn 19




57 Id at 5



60 Id at 3

61 Id




65 Id


67 Id


69 Id


71 Id at p 2






77 Id at 11






23 Id at 101-102



26 Id at 340

27 Id at 336


29 Id





34 Id at 128

35 Id



38 Id at 130




42 Id at 4






48 248 NY 339 162 NE 99 (1928)

49 231 NY 229 131 NE 898 (1921)

50 Id at 231

658


Richard Supple


780 Third Avenue

New York NY 10017

212-471-6200






(NYCRR)



discipline and


Rules











Civil Rule 15(d)









659

2






attorneys





districts


(1st Department 1

st and 12

th Districts)


Island (2nd

Department 2nd

and 11th

Districts)


(2nd

Department 10th

District)



Department 9th

District)


Department (3rd

4th

and 6th

Districts)


the 8th

District


the 7th

District


5th

District

660

3



found as follows














matter)







proceeding entail















661

4





















4 Sanctions



imposed













662

5







Deprsquot]












grievance committee




nd Dept] 8064(f) [3

rd


Dept]










663

6



[2nd

Dept] 80610 [3rd

Dept] 102233 [4th

Dept]








d Felony Disbarment





conviction entered)






false swearing



bribery

extortion



crime







Dept] 6917 [2nd

Dept] 8067 [3rd

Dept] 102221 [4th

Dept]

664

7

f Restitution














nd

Dept] 80619 [3rd

Dept] 102222 [4th

Dept]














NY2d 449 455 (1989)


applied





665

8








i Reinstatement























666

9












667

668



y Escrow

$665M (41)

Unearned Fe$57M (4)



Collec$69M












al Property Escrow

79251 (48)




Collection$140


0

200

400

600

800

1000

1200

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Filed 627 636 598 909 730 1128 812 442 492 548 499 506 627 729 520 454 480 489 820 601 469




Num

ber

669


















Totals 1421 100 $52688264 100


670

$00

$20

$40

$60

$80

$100

$120

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 200 4 2005 2006 2007 2008 2009 2010 2011 2012Amount $73 $75 $76 $57 $99 $69 $59 $34 $105 $53 $57 $58 $51 $81 $71 $70 $68 $56 $85 $69 $54







Jud

icia

l D

ep

art

me

nt

Jud

icia

l D

ep

art

me

nt

















154

86

497

295

0 100 200 300 400 500 600

4th

3rd

2nd

1st

0

100

200

300

400

500

600

700

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Num ber 288 318 362 383 381 625 415 161 205 160 187 165 196 227 147 185 130 139 198 253 187

Num

ber

In M

illio

ns ($

)

879

573

4341

1462

0 1000 2000 3000 4000 5000

4th

3rd

2nd

1st

671


Restitution $158 M

Interest $53 M

Sanctions $30 M


$1607 M


proved aims637 M

Rejected Cla$4399 M












wwwnylawfundorg












RevenueSources





672



INDEX





5 Dual Practice 26 114 135 206 208 244 291 340 493 916 919 933




9 Referrals 467 566 667 694 845







333 340 351 438 450 470 471 493 532 588 611 626 694 807 845 867 916 919

926 933


565

OPINIONS






Ethics Opinion 532








Ethics Opinion 575




account


Ethics Opinion 44




Ethics Opinion 677



circumstances

566


Ethics Opinion 550




5 Dual Practice

Ethics Opinion 26





Ethics Opinion 114





Ethics Opinion 135






Ethics Opinion 206


Modifies 128





Ethics Opinion 208




Ethics Opinion 244



567








Ethics Opinion 291




Ethics Opinion 340






therefrom

Ethics Opinion 493





Ethics Opinion 916


transaction




Ethics Opinion 919









568

Ethics Opinion 933






Ethics Opinion 626







Ethics Opinion 753


interest















Ethics Opinion 253



Ethics Opinion 550


569



9 Referrals

Ethics Opinion 467


estate


Ethics Opinion 566






Ethics Opinion 667

Topic Referral fees





Ethics Opinion 694


and lender


Ethics Opinion 845


buyers or sellers






referral fee


Ethics Opinion 817



570




Ethics Opinion 882






concession

Ethics Opinion 892






11 Spouse as Broker

Ethics Opinion 244










Ethics Opinion 291




Ethics Opinion 340






therefrom

Ethics Opinion 493

571






Ethics Opinion 644





Ethics Opinion 662





Ethics Opinion 705








reduced


Ethics Opinion 595





Ethics Opinion 621



ownership interest

Ethics Opinion 731

572


employees of lawyer



Ethics Opinion 738


spouse



Ethics Opinion 753


interest























Ethics Opinion 351


573



Ethics Opinion 576







Ethics Opinion 08







Ethics Opinion 38a



Ethics Opinion 162




clients


Ethics Opinion 199



Ethics Opinion 208




Ethics Opinion 244


574









Ethics Opinion 291




Ethics Opinion 320




Ethics Opinion 333




Ethics Opinion 340






therefrom

Ethics Opinion 351








Ethics Opinion 450


575










demolition


action


Ethics Opinion 493





Ethics Opinion 532



Ethics Opinion 588





Ethics Opinion 611




matter

Ethics Opinion 626






576

Ethics Opinion 694


and lender


Ethics Opinion 807






Ethics Opinion 845


buyers or sellers






referral fee

Ethics Opinion 867





Ethics Opinion 916


transaction




Ethics Opinion 919









577

Ethics Opinion 926





fees

Ethics Opinion 933






Ethics Opinion 78


employees



578

OPINIONS

OF THE



Escrow Accounts


Index

1 Escrow funds 90 532 554 570 575 582 600 710 737 764 816907




OPINIONS

1 Escrow funds 90 532 554 570 575 582 600 710 737 764 816 907

Ethics Opinion 90

Topic escrow funds




Ethics Opinion 532



Ethics Opinion 554










579

Ethics Opinion 575




account

Ethics Opinion 582

Topic Escrow Funds



Ethics Opinion 600





Ethics Opinion 693




Ethics Opinion 710





Ethics Opinion 737




Ethics Opinion 759



Ethics Opinion 764


(IOLA)


full disclosure

580

Ethics Opinion 816





relationship

Ethics Opinion 907












anonymous


Ethics Opinion 710






Ethics Opinion 759




Ethics Opinion 693




581

582











583










584








585






586





587







588








589








590







591



010405

--- ~-------------~--~~~~---------- ~ ~- ~~ ~~ ~---~~----~~~-~---~--~-------~ ~~~ ~-~ ~--------~--- -~~~~~ ~ ~ ~ ~~ ~~ --~~~----~~--~-~~

592

CHAPTER ONE


Mark S Ochs Esq


593


3

[10] I INTRODUCTION













5 Rule 115(i)

594


4







[16] E Deposit










595


5











596


6















597


7











31 Cf NYSBA Op 775 (2004)

598


8







32 See NYSBA Op 816 (2007)



35 Rule 115(b)(4)




599


9

[110] I Signatories







40 NYSBA Op 693 (1997)





45 Rule 115(f)

600


10












601


11








49 Rule 117





602


12







55 21 NYCRR sect 700010





603


13







604


14













605


15











71 Rule 115(d)(3) NYSBA Op 758 (2002)

72 Rule 115(d)(1)(viii)

606


16











607


17












608


18






[129] A Records





609


19

[130] B Analysis














610


20

[131] C Findings


1 Commingling84
















611


21




















612


22











613


23











614


24



[134] A Estates







615


25









616


26








617


27








[141] H Trustee


618


28










619


29












620


30



[146] M Loans





621


31





[148] O Fraud



622


32




623

624








625












626
















627












Administntion




628











629

630

RULE 115






Property




her own































631







A lawyer shall














record











clients





632





















(f) Missing Clients



















633




Rule




















privilege





Comment






85






634




























635

636





637

2


638

3


639

4


640

5















641

642














643











Glendon concludes



644














645














646














647







There it is










648















649
















650















651












652















653

















654













655













656









7 Id at p 5

8 Id at p 13




12 34 NY2d 1 311 NE2d 480 355 NYS2d 336 (1974)



15 433 US 350 (1977)










657





82 Id at 871 732 NYS2d at 116

83 Id


85 Id at 198 811 NYS2d at 98





90 Id at 18 932 NYS2d at 77


92 Id






98 Id at 25


100 Id at 24







52 Id at 1

53 Supra at fn 19




57 Id at 5



60 Id at 3

61 Id




65 Id


67 Id


69 Id


71 Id at p 2






77 Id at 11






23 Id at 101-102



26 Id at 340

27 Id at 336


29 Id





34 Id at 128

35 Id



38 Id at 130




42 Id at 4






48 248 NY 339 162 NE 99 (1928)

49 231 NY 229 131 NE 898 (1921)

50 Id at 231

658


Richard Supple


780 Third Avenue

New York NY 10017

212-471-6200






(NYCRR)



discipline and


Rules











Civil Rule 15(d)









659

2






attorneys





districts


(1st Department 1

st and 12

th Districts)


Island (2nd

Department 2nd

and 11th

Districts)


(2nd

Department 10th

District)



Department 9th

District)


Department (3rd

4th

and 6th

Districts)


the 8th

District


the 7th

District


5th

District

660

3



found as follows














matter)







proceeding entail















661

4





















4 Sanctions



imposed













662

5







Deprsquot]












grievance committee




nd Dept] 8064(f) [3

rd


Dept]










663

6



[2nd

Dept] 80610 [3rd

Dept] 102233 [4th

Dept]








d Felony Disbarment





conviction entered)






false swearing



bribery

extortion



crime







Dept] 6917 [2nd

Dept] 8067 [3rd

Dept] 102221 [4th

Dept]

664

7

f Restitution














nd

Dept] 80619 [3rd

Dept] 102222 [4th

Dept]














NY2d 449 455 (1989)


applied





665

8








i Reinstatement























666

9












667

668



y Escrow

$665M (41)

Unearned Fe$57M (4)



Collec$69M












al Property Escrow

79251 (48)




Collection$140


0

200

400

600

800

1000

1200

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Filed 627 636 598 909 730 1128 812 442 492 548 499 506 627 729 520 454 480 489 820 601 469




Num

ber

669


















Totals 1421 100 $52688264 100


670

$00

$20

$40

$60

$80

$100

$120

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 200 4 2005 2006 2007 2008 2009 2010 2011 2012Amount $73 $75 $76 $57 $99 $69 $59 $34 $105 $53 $57 $58 $51 $81 $71 $70 $68 $56 $85 $69 $54







Jud

icia

l D

ep

art

me

nt

Jud

icia

l D

ep

art

me

nt

















154

86

497

295

0 100 200 300 400 500 600

4th

3rd

2nd

1st

0

100

200

300

400

500

600

700

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Num ber 288 318 362 383 381 625 415 161 205 160 187 165 196 227 147 185 130 139 198 253 187

Num

ber

In M

illio

ns ($

)

879

573

4341

1462

0 1000 2000 3000 4000 5000

4th

3rd

2nd

1st

671


Restitution $158 M

Interest $53 M

Sanctions $30 M


$1607 M


proved aims637 M

Rejected Cla$4399 M












wwwnylawfundorg












RevenueSources





672

OPINIONS






Ethics Opinion 532








Ethics Opinion 575




account


Ethics Opinion 44




Ethics Opinion 677



circumstances

566


Ethics Opinion 550




5 Dual Practice

Ethics Opinion 26





Ethics Opinion 114





Ethics Opinion 135






Ethics Opinion 206


Modifies 128





Ethics Opinion 208




Ethics Opinion 244



567








Ethics Opinion 291




Ethics Opinion 340






therefrom

Ethics Opinion 493





Ethics Opinion 916


transaction




Ethics Opinion 919









568

Ethics Opinion 933






Ethics Opinion 626







Ethics Opinion 753


interest















Ethics Opinion 253



Ethics Opinion 550


569



9 Referrals

Ethics Opinion 467


estate


Ethics Opinion 566






Ethics Opinion 667

Topic Referral fees





Ethics Opinion 694


and lender


Ethics Opinion 845


buyers or sellers






referral fee


Ethics Opinion 817



570




Ethics Opinion 882






concession

Ethics Opinion 892






11 Spouse as Broker

Ethics Opinion 244










Ethics Opinion 291




Ethics Opinion 340






therefrom

Ethics Opinion 493

571






Ethics Opinion 644





Ethics Opinion 662





Ethics Opinion 705








reduced


Ethics Opinion 595





Ethics Opinion 621



ownership interest

Ethics Opinion 731

572


employees of lawyer



Ethics Opinion 738


spouse



Ethics Opinion 753


interest























Ethics Opinion 351


573



Ethics Opinion 576







Ethics Opinion 08







Ethics Opinion 38a



Ethics Opinion 162




clients


Ethics Opinion 199



Ethics Opinion 208




Ethics Opinion 244


574









Ethics Opinion 291




Ethics Opinion 320




Ethics Opinion 333




Ethics Opinion 340






therefrom

Ethics Opinion 351








Ethics Opinion 450


575










demolition


action


Ethics Opinion 493





Ethics Opinion 532



Ethics Opinion 588





Ethics Opinion 611




matter

Ethics Opinion 626






576

Ethics Opinion 694


and lender


Ethics Opinion 807






Ethics Opinion 845


buyers or sellers






referral fee

Ethics Opinion 867





Ethics Opinion 916


transaction




Ethics Opinion 919









577

Ethics Opinion 926





fees

Ethics Opinion 933






Ethics Opinion 78


employees



578

OPINIONS

OF THE



Escrow Accounts


Index

1 Escrow funds 90 532 554 570 575 582 600 710 737 764 816907




OPINIONS

1 Escrow funds 90 532 554 570 575 582 600 710 737 764 816 907

Ethics Opinion 90

Topic escrow funds




Ethics Opinion 532



Ethics Opinion 554










579

Ethics Opinion 575




account

Ethics Opinion 582

Topic Escrow Funds



Ethics Opinion 600





Ethics Opinion 693




Ethics Opinion 710





Ethics Opinion 737




Ethics Opinion 759



Ethics Opinion 764


(IOLA)


full disclosure

580

Ethics Opinion 816





relationship

Ethics Opinion 907












anonymous


Ethics Opinion 710






Ethics Opinion 759




Ethics Opinion 693




581

582











583










584








585






586





587







588








589








590







591



010405

--- ~-------------~--~~~~---------- ~ ~- ~~ ~~ ~---~~----~~~-~---~--~-------~ ~~~ ~-~ ~--------~--- -~~~~~ ~ ~ ~ ~~ ~~ --~~~----~~--~-~~

592

CHAPTER ONE


Mark S Ochs Esq


593


3

[10] I INTRODUCTION













5 Rule 115(i)

594


4







[16] E Deposit










595


5











596


6















597


7











31 Cf NYSBA Op 775 (2004)

598


8







32 See NYSBA Op 816 (2007)



35 Rule 115(b)(4)




599


9

[110] I Signatories







40 NYSBA Op 693 (1997)





45 Rule 115(f)

600


10












601


11








49 Rule 117





602


12







55 21 NYCRR sect 700010





603


13







604


14













605


15











71 Rule 115(d)(3) NYSBA Op 758 (2002)

72 Rule 115(d)(1)(viii)

606


16











607


17












608


18






[129] A Records





609


19

[130] B Analysis














610


20

[131] C Findings


1 Commingling84
















611


21




















612


22











613


23











614


24



[134] A Estates







615


25









616


26








617


27








[141] H Trustee


618


28










619


29












620


30



[146] M Loans





621


31





[148] O Fraud



622


32




623

624








625












626
















627












Administntion




628











629

630

RULE 115






Property




her own































631







A lawyer shall














record











clients





632





















(f) Missing Clients



















633




Rule




















privilege





Comment






85






634




























635

636





637

2


638

3


639

4


640

5















641

642














643











Glendon concludes



644














645














646














647







There it is










648















649
















650















651












652















653

















654













655













656









7 Id at p 5

8 Id at p 13




12 34 NY2d 1 311 NE2d 480 355 NYS2d 336 (1974)



15 433 US 350 (1977)










657





82 Id at 871 732 NYS2d at 116

83 Id


85 Id at 198 811 NYS2d at 98





90 Id at 18 932 NYS2d at 77


92 Id






98 Id at 25


100 Id at 24







52 Id at 1

53 Supra at fn 19




57 Id at 5



60 Id at 3

61 Id




65 Id


67 Id


69 Id


71 Id at p 2






77 Id at 11






23 Id at 101-102



26 Id at 340

27 Id at 336


29 Id





34 Id at 128

35 Id



38 Id at 130




42 Id at 4






48 248 NY 339 162 NE 99 (1928)

49 231 NY 229 131 NE 898 (1921)

50 Id at 231

658


Richard Supple


780 Third Avenue

New York NY 10017

212-471-6200






(NYCRR)



discipline and


Rules











Civil Rule 15(d)









659

2






attorneys





districts


(1st Department 1

st and 12

th Districts)


Island (2nd

Department 2nd

and 11th

Districts)


(2nd

Department 10th

District)



Department 9th

District)


Department (3rd

4th

and 6th

Districts)


the 8th

District


the 7th

District


5th

District

660

3



found as follows














matter)







proceeding entail















661

4





















4 Sanctions



imposed













662

5







Deprsquot]












grievance committee




nd Dept] 8064(f) [3

rd


Dept]










663

6



[2nd

Dept] 80610 [3rd

Dept] 102233 [4th

Dept]








d Felony Disbarment





conviction entered)






false swearing



bribery

extortion



crime







Dept] 6917 [2nd

Dept] 8067 [3rd

Dept] 102221 [4th

Dept]

664

7

f Restitution














nd

Dept] 80619 [3rd

Dept] 102222 [4th

Dept]














NY2d 449 455 (1989)


applied





665

8








i Reinstatement























666

9












667

668



y Escrow

$665M (41)

Unearned Fe$57M (4)



Collec$69M












al Property Escrow

79251 (48)




Collection$140


0

200

400

600

800

1000

1200

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Filed 627 636 598 909 730 1128 812 442 492 548 499 506 627 729 520 454 480 489 820 601 469




Num

ber

669


















Totals 1421 100 $52688264 100


670

$00

$20

$40

$60

$80

$100

$120

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 200 4 2005 2006 2007 2008 2009 2010 2011 2012Amount $73 $75 $76 $57 $99 $69 $59 $34 $105 $53 $57 $58 $51 $81 $71 $70 $68 $56 $85 $69 $54







Jud

icia

l D

ep

art

me

nt

Jud

icia

l D

ep

art

me

nt

















154

86

497

295

0 100 200 300 400 500 600

4th

3rd

2nd

1st

0

100

200

300

400

500

600

700

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Num ber 288 318 362 383 381 625 415 161 205 160 187 165 196 227 147 185 130 139 198 253 187

Num

ber

In M

illio

ns ($

)

879

573

4341

1462

0 1000 2000 3000 4000 5000

4th

3rd

2nd

1st

671


Restitution $158 M

Interest $53 M

Sanctions $30 M


$1607 M


proved aims637 M

Rejected Cla$4399 M












wwwnylawfundorg












RevenueSources





672


Ethics Opinion 550




5 Dual Practice

Ethics Opinion 26





Ethics Opinion 114





Ethics Opinion 135






Ethics Opinion 206


Modifies 128





Ethics Opinion 208




Ethics Opinion 244



567








Ethics Opinion 291




Ethics Opinion 340






therefrom

Ethics Opinion 493





Ethics Opinion 916


transaction




Ethics Opinion 919









568

Ethics Opinion 933






Ethics Opinion 626







Ethics Opinion 753


interest















Ethics Opinion 253



Ethics Opinion 550


569



9 Referrals

Ethics Opinion 467


estate


Ethics Opinion 566






Ethics Opinion 667

Topic Referral fees





Ethics Opinion 694


and lender


Ethics Opinion 845


buyers or sellers






referral fee


Ethics Opinion 817



570




Ethics Opinion 882






concession

Ethics Opinion 892






11 Spouse as Broker

Ethics Opinion 244










Ethics Opinion 291




Ethics Opinion 340






therefrom

Ethics Opinion 493

571






Ethics Opinion 644





Ethics Opinion 662





Ethics Opinion 705








reduced


Ethics Opinion 595





Ethics Opinion 621



ownership interest

Ethics Opinion 731

572


employees of lawyer



Ethics Opinion 738


spouse



Ethics Opinion 753


interest























Ethics Opinion 351


573



Ethics Opinion 576







Ethics Opinion 08







Ethics Opinion 38a



Ethics Opinion 162




clients


Ethics Opinion 199



Ethics Opinion 208




Ethics Opinion 244


574









Ethics Opinion 291




Ethics Opinion 320




Ethics Opinion 333




Ethics Opinion 340






therefrom

Ethics Opinion 351








Ethics Opinion 450


575










demolition


action


Ethics Opinion 493





Ethics Opinion 532



Ethics Opinion 588





Ethics Opinion 611




matter

Ethics Opinion 626






576

Ethics Opinion 694


and lender


Ethics Opinion 807






Ethics Opinion 845


buyers or sellers






referral fee

Ethics Opinion 867





Ethics Opinion 916


transaction




Ethics Opinion 919









577

Ethics Opinion 926





fees

Ethics Opinion 933






Ethics Opinion 78


employees



578

OPINIONS

OF THE



Escrow Accounts


Index

1 Escrow funds 90 532 554 570 575 582 600 710 737 764 816907




OPINIONS

1 Escrow funds 90 532 554 570 575 582 600 710 737 764 816 907

Ethics Opinion 90

Topic escrow funds




Ethics Opinion 532



Ethics Opinion 554










579

Ethics Opinion 575




account

Ethics Opinion 582

Topic Escrow Funds



Ethics Opinion 600





Ethics Opinion 693




Ethics Opinion 710





Ethics Opinion 737




Ethics Opinion 759



Ethics Opinion 764


(IOLA)


full disclosure

580

Ethics Opinion 816





relationship

Ethics Opinion 907












anonymous


Ethics Opinion 710






Ethics Opinion 759




Ethics Opinion 693




581

582











583










584








585






586





587







588








589








590







591



010405

--- ~-------------~--~~~~---------- ~ ~- ~~ ~~ ~---~~----~~~-~---~--~-------~ ~~~ ~-~ ~--------~--- -~~~~~ ~ ~ ~ ~~ ~~ --~~~----~~--~-~~

592

CHAPTER ONE


Mark S Ochs Esq


593


3

[10] I INTRODUCTION













5 Rule 115(i)

594


4







[16] E Deposit










595


5











596


6















597


7











31 Cf NYSBA Op 775 (2004)

598


8







32 See NYSBA Op 816 (2007)



35 Rule 115(b)(4)




599


9

[110] I Signatories







40 NYSBA Op 693 (1997)





45 Rule 115(f)

600


10












601


11








49 Rule 117





602


12







55 21 NYCRR sect 700010





603


13







604


14













605


15











71 Rule 115(d)(3) NYSBA Op 758 (2002)

72 Rule 115(d)(1)(viii)

606


16











607


17












608


18






[129] A Records





609


19

[130] B Analysis














610


20

[131] C Findings


1 Commingling84
















611


21




















612


22











613


23











614


24



[134] A Estates







615


25









616


26








617


27








[141] H Trustee


618


28










619


29












620


30



[146] M Loans





621


31





[148] O Fraud



622


32




623

624








625












626
















627












Administntion




628











629

630

RULE 115






Property




her own































631







A lawyer shall














record











clients





632





















(f) Missing Clients



















633




Rule




















privilege





Comment






85






634




























635

636





637

2


638

3


639

4


640

5















641

642














643











Glendon concludes



644














645














646














647







There it is










648















649
















650















651












652















653

















654













655













656









7 Id at p 5

8 Id at p 13




12 34 NY2d 1 311 NE2d 480 355 NYS2d 336 (1974)



15 433 US 350 (1977)










657





82 Id at 871 732 NYS2d at 116

83 Id


85 Id at 198 811 NYS2d at 98





90 Id at 18 932 NYS2d at 77


92 Id






98 Id at 25


100 Id at 24







52 Id at 1

53 Supra at fn 19




57 Id at 5



60 Id at 3

61 Id




65 Id


67 Id


69 Id


71 Id at p 2






77 Id at 11






23 Id at 101-102



26 Id at 340

27 Id at 336


29 Id





34 Id at 128

35 Id



38 Id at 130




42 Id at 4






48 248 NY 339 162 NE 99 (1928)

49 231 NY 229 131 NE 898 (1921)

50 Id at 231

658


Richard Supple


780 Third Avenue

New York NY 10017

212-471-6200






(NYCRR)



discipline and


Rules











Civil Rule 15(d)









659

2






attorneys





districts


(1st Department 1

st and 12

th Districts)


Island (2nd

Department 2nd

and 11th

Districts)


(2nd

Department 10th

District)



Department 9th

District)


Department (3rd

4th

and 6th

Districts)


the 8th

District


the 7th

District


5th

District

660

3



found as follows














matter)







proceeding entail















661

4





















4 Sanctions



imposed













662

5







Deprsquot]












grievance committee




nd Dept] 8064(f) [3

rd


Dept]










663

6



[2nd

Dept] 80610 [3rd

Dept] 102233 [4th

Dept]








d Felony Disbarment





conviction entered)






false swearing



bribery

extortion



crime







Dept] 6917 [2nd

Dept] 8067 [3rd

Dept] 102221 [4th

Dept]

664

7

f Restitution














nd

Dept] 80619 [3rd

Dept] 102222 [4th

Dept]














NY2d 449 455 (1989)


applied





665

8








i Reinstatement























666

9












667

668



y Escrow

$665M (41)

Unearned Fe$57M (4)



Collec$69M












al Property Escrow

79251 (48)




Collection$140


0

200

400

600

800

1000

1200

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Filed 627 636 598 909 730 1128 812 442 492 548 499 506 627 729 520 454 480 489 820 601 469




Num

ber

669


















Totals 1421 100 $52688264 100


670

$00

$20

$40

$60

$80

$100

$120

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 200 4 2005 2006 2007 2008 2009 2010 2011 2012Amount $73 $75 $76 $57 $99 $69 $59 $34 $105 $53 $57 $58 $51 $81 $71 $70 $68 $56 $85 $69 $54







Jud

icia

l D

ep

art

me

nt

Jud

icia

l D

ep

art

me

nt

















154

86

497

295

0 100 200 300 400 500 600

4th

3rd

2nd

1st

0

100

200

300

400

500

600

700

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Num ber 288 318 362 383 381 625 415 161 205 160 187 165 196 227 147 185 130 139 198 253 187

Num

ber

In M

illio

ns ($

)

879

573

4341

1462

0 1000 2000 3000 4000 5000

4th

3rd

2nd

1st

671


Restitution $158 M

Interest $53 M

Sanctions $30 M


$1607 M


proved aims637 M

Rejected Cla$4399 M












wwwnylawfundorg












RevenueSources





672








Ethics Opinion 291




Ethics Opinion 340






therefrom

Ethics Opinion 493





Ethics Opinion 916


transaction




Ethics Opinion 919









568

Ethics Opinion 933






Ethics Opinion 626







Ethics Opinion 753


interest















Ethics Opinion 253



Ethics Opinion 550


569



9 Referrals

Ethics Opinion 467


estate


Ethics Opinion 566






Ethics Opinion 667

Topic Referral fees





Ethics Opinion 694


and lender


Ethics Opinion 845


buyers or sellers






referral fee


Ethics Opinion 817



570




Ethics Opinion 882






concession

Ethics Opinion 892






11 Spouse as Broker

Ethics Opinion 244










Ethics Opinion 291




Ethics Opinion 340






therefrom

Ethics Opinion 493

571






Ethics Opinion 644





Ethics Opinion 662





Ethics Opinion 705








reduced


Ethics Opinion 595





Ethics Opinion 621



ownership interest

Ethics Opinion 731

572


employees of lawyer



Ethics Opinion 738


spouse



Ethics Opinion 753


interest























Ethics Opinion 351


573



Ethics Opinion 576







Ethics Opinion 08







Ethics Opinion 38a



Ethics Opinion 162




clients


Ethics Opinion 199



Ethics Opinion 208




Ethics Opinion 244


574









Ethics Opinion 291




Ethics Opinion 320




Ethics Opinion 333




Ethics Opinion 340






therefrom

Ethics Opinion 351








Ethics Opinion 450


575










demolition


action


Ethics Opinion 493





Ethics Opinion 532



Ethics Opinion 588





Ethics Opinion 611




matter

Ethics Opinion 626






576

Ethics Opinion 694


and lender


Ethics Opinion 807






Ethics Opinion 845


buyers or sellers






referral fee

Ethics Opinion 867





Ethics Opinion 916


transaction




Ethics Opinion 919









577

Ethics Opinion 926





fees

Ethics Opinion 933






Ethics Opinion 78


employees



578

OPINIONS

OF THE



Escrow Accounts


Index

1 Escrow funds 90 532 554 570 575 582 600 710 737 764 816907




OPINIONS

1 Escrow funds 90 532 554 570 575 582 600 710 737 764 816 907

Ethics Opinion 90

Topic escrow funds




Ethics Opinion 532



Ethics Opinion 554










579

Ethics Opinion 575




account

Ethics Opinion 582

Topic Escrow Funds



Ethics Opinion 600





Ethics Opinion 693




Ethics Opinion 710





Ethics Opinion 737




Ethics Opinion 759



Ethics Opinion 764


(IOLA)


full disclosure

580

Ethics Opinion 816





relationship

Ethics Opinion 907












anonymous


Ethics Opinion 710






Ethics Opinion 759




Ethics Opinion 693




581

582











583










584








585






586





587







588








589








590







591



010405

--- ~-------------~--~~~~---------- ~ ~- ~~ ~~ ~---~~----~~~-~---~--~-------~ ~~~ ~-~ ~--------~--- -~~~~~ ~ ~ ~ ~~ ~~ --~~~----~~--~-~~

592

CHAPTER ONE


Mark S Ochs Esq


593


3

[10] I INTRODUCTION













5 Rule 115(i)

594


4







[16] E Deposit










595


5











596


6















597


7











31 Cf NYSBA Op 775 (2004)

598


8







32 See NYSBA Op 816 (2007)



35 Rule 115(b)(4)




599


9

[110] I Signatories







40 NYSBA Op 693 (1997)





45 Rule 115(f)

600


10












601


11








49 Rule 117





602


12







55 21 NYCRR sect 700010





603


13







604


14













605


15











71 Rule 115(d)(3) NYSBA Op 758 (2002)

72 Rule 115(d)(1)(viii)

606


16











607


17












608


18






[129] A Records





609


19

[130] B Analysis














610


20

[131] C Findings


1 Commingling84
















611


21




















612


22











613


23











614


24



[134] A Estates







615


25









616


26








617


27








[141] H Trustee


618


28










619


29












620


30



[146] M Loans





621


31





[148] O Fraud



622


32




623

624








625












626
















627












Administntion




628











629

630

RULE 115






Property




her own































631







A lawyer shall














record











clients





632





















(f) Missing Clients



















633




Rule




















privilege





Comment






85






634




























635

636





637

2


638

3


639

4


640

5















641

642














643











Glendon concludes



644














645














646














647







There it is










648















649
















650















651












652















653

















654













655













656









7 Id at p 5

8 Id at p 13




12 34 NY2d 1 311 NE2d 480 355 NYS2d 336 (1974)



15 433 US 350 (1977)










657





82 Id at 871 732 NYS2d at 116

83 Id


85 Id at 198 811 NYS2d at 98





90 Id at 18 932 NYS2d at 77


92 Id






98 Id at 25


100 Id at 24







52 Id at 1

53 Supra at fn 19




57 Id at 5



60 Id at 3

61 Id




65 Id


67 Id


69 Id


71 Id at p 2






77 Id at 11






23 Id at 101-102



26 Id at 340

27 Id at 336


29 Id





34 Id at 128

35 Id



38 Id at 130




42 Id at 4






48 248 NY 339 162 NE 99 (1928)

49 231 NY 229 131 NE 898 (1921)

50 Id at 231

658


Richard Supple


780 Third Avenue

New York NY 10017

212-471-6200






(NYCRR)



discipline and


Rules











Civil Rule 15(d)









659

2






attorneys





districts


(1st Department 1

st and 12

th Districts)


Island (2nd

Department 2nd

and 11th

Districts)


(2nd

Department 10th

District)



Department 9th

District)


Department (3rd

4th

and 6th

Districts)


the 8th

District


the 7th

District


5th

District

660

3



found as follows














matter)







proceeding entail















661

4





















4 Sanctions



imposed













662

5







Deprsquot]












grievance committee




nd Dept] 8064(f) [3

rd


Dept]










663

6



[2nd

Dept] 80610 [3rd

Dept] 102233 [4th

Dept]








d Felony Disbarment





conviction entered)






false swearing



bribery

extortion



crime







Dept] 6917 [2nd

Dept] 8067 [3rd

Dept] 102221 [4th

Dept]

664

7

f Restitution














nd

Dept] 80619 [3rd

Dept] 102222 [4th

Dept]














NY2d 449 455 (1989)


applied





665

8








i Reinstatement























666

9












667

668



y Escrow

$665M (41)

Unearned Fe$57M (4)



Collec$69M












al Property Escrow

79251 (48)




Collection$140


0

200

400

600

800

1000

1200

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Filed 627 636 598 909 730 1128 812 442 492 548 499 506 627 729 520 454 480 489 820 601 469




Num

ber

669


















Totals 1421 100 $52688264 100


670

$00

$20

$40

$60

$80

$100

$120

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 200 4 2005 2006 2007 2008 2009 2010 2011 2012Amount $73 $75 $76 $57 $99 $69 $59 $34 $105 $53 $57 $58 $51 $81 $71 $70 $68 $56 $85 $69 $54







Jud

icia

l D

ep

art

me

nt

Jud

icia

l D

ep

art

me

nt

















154

86

497

295

0 100 200 300 400 500 600

4th

3rd

2nd

1st

0

100

200

300

400

500

600

700

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Num ber 288 318 362 383 381 625 415 161 205 160 187 165 196 227 147 185 130 139 198 253 187

Num

ber

In M

illio

ns ($

)

879

573

4341

1462

0 1000 2000 3000 4000 5000

4th

3rd

2nd

1st

671


Restitution $158 M

Interest $53 M

Sanctions $30 M


$1607 M


proved aims637 M

Rejected Cla$4399 M












wwwnylawfundorg












RevenueSources





672

Ethics Opinion 933






Ethics Opinion 626







Ethics Opinion 753


interest















Ethics Opinion 253



Ethics Opinion 550


569



9 Referrals

Ethics Opinion 467


estate


Ethics Opinion 566






Ethics Opinion 667

Topic Referral fees





Ethics Opinion 694


and lender


Ethics Opinion 845


buyers or sellers






referral fee


Ethics Opinion 817



570




Ethics Opinion 882






concession

Ethics Opinion 892






11 Spouse as Broker

Ethics Opinion 244










Ethics Opinion 291




Ethics Opinion 340






therefrom

Ethics Opinion 493

571






Ethics Opinion 644





Ethics Opinion 662





Ethics Opinion 705








reduced


Ethics Opinion 595





Ethics Opinion 621



ownership interest

Ethics Opinion 731

572


employees of lawyer



Ethics Opinion 738


spouse



Ethics Opinion 753


interest























Ethics Opinion 351


573



Ethics Opinion 576







Ethics Opinion 08







Ethics Opinion 38a



Ethics Opinion 162




clients


Ethics Opinion 199



Ethics Opinion 208




Ethics Opinion 244


574









Ethics Opinion 291




Ethics Opinion 320




Ethics Opinion 333




Ethics Opinion 340






therefrom

Ethics Opinion 351








Ethics Opinion 450


575










demolition


action


Ethics Opinion 493





Ethics Opinion 532



Ethics Opinion 588





Ethics Opinion 611




matter

Ethics Opinion 626






576

Ethics Opinion 694


and lender


Ethics Opinion 807






Ethics Opinion 845


buyers or sellers






referral fee

Ethics Opinion 867





Ethics Opinion 916


transaction




Ethics Opinion 919









577

Ethics Opinion 926





fees

Ethics Opinion 933






Ethics Opinion 78


employees



578

OPINIONS

OF THE



Escrow Accounts


Index

1 Escrow funds 90 532 554 570 575 582 600 710 737 764 816907




OPINIONS

1 Escrow funds 90 532 554 570 575 582 600 710 737 764 816 907

Ethics Opinion 90

Topic escrow funds




Ethics Opinion 532



Ethics Opinion 554










579

Ethics Opinion 575




account

Ethics Opinion 582

Topic Escrow Funds



Ethics Opinion 600





Ethics Opinion 693




Ethics Opinion 710





Ethics Opinion 737




Ethics Opinion 759



Ethics Opinion 764


(IOLA)


full disclosure

580

Ethics Opinion 816





relationship

Ethics Opinion 907












anonymous


Ethics Opinion 710






Ethics Opinion 759




Ethics Opinion 693




581

582











583










584








585






586





587







588








589








590







591



010405

--- ~-------------~--~~~~---------- ~ ~- ~~ ~~ ~---~~----~~~-~---~--~-------~ ~~~ ~-~ ~--------~--- -~~~~~ ~ ~ ~ ~~ ~~ --~~~----~~--~-~~

592

CHAPTER ONE


Mark S Ochs Esq


593


3

[10] I INTRODUCTION













5 Rule 115(i)

594


4







[16] E Deposit










595


5











596


6















597


7











31 Cf NYSBA Op 775 (2004)

598


8







32 See NYSBA Op 816 (2007)



35 Rule 115(b)(4)




599


9

[110] I Signatories







40 NYSBA Op 693 (1997)





45 Rule 115(f)

600


10












601


11








49 Rule 117





602


12







55 21 NYCRR sect 700010





603


13







604


14













605


15











71 Rule 115(d)(3) NYSBA Op 758 (2002)

72 Rule 115(d)(1)(viii)

606


16











607


17












608


18






[129] A Records





609


19

[130] B Analysis














610


20

[131] C Findings


1 Commingling84
















611


21




















612


22











613


23











614


24



[134] A Estates







615


25









616


26








617


27








[141] H Trustee


618


28










619


29












620


30



[146] M Loans





621


31





[148] O Fraud



622


32




623

624








625












626
















627












Administntion




628











629

630

RULE 115






Property




her own































631







A lawyer shall














record











clients





632





















(f) Missing Clients



















633




Rule




















privilege





Comment






85






634




























635

636





637

2


638

3


639

4


640

5















641

642














643











Glendon concludes



644














645














646














647







There it is










648















649
















650















651












652















653

















654













655













656









7 Id at p 5

8 Id at p 13




12 34 NY2d 1 311 NE2d 480 355 NYS2d 336 (1974)



15 433 US 350 (1977)










657





82 Id at 871 732 NYS2d at 116

83 Id


85 Id at 198 811 NYS2d at 98





90 Id at 18 932 NYS2d at 77


92 Id






98 Id at 25


100 Id at 24







52 Id at 1

53 Supra at fn 19




57 Id at 5



60 Id at 3

61 Id




65 Id


67 Id


69 Id


71 Id at p 2






77 Id at 11






23 Id at 101-102



26 Id at 340

27 Id at 336


29 Id





34 Id at 128

35 Id



38 Id at 130




42 Id at 4






48 248 NY 339 162 NE 99 (1928)

49 231 NY 229 131 NE 898 (1921)

50 Id at 231

658


Richard Supple


780 Third Avenue

New York NY 10017

212-471-6200






(NYCRR)



discipline and


Rules











Civil Rule 15(d)









659

2






attorneys





districts


(1st Department 1

st and 12

th Districts)


Island (2nd

Department 2nd

and 11th

Districts)


(2nd

Department 10th

District)



Department 9th

District)


Department (3rd

4th

and 6th

Districts)


the 8th

District


the 7th

District


5th

District

660

3



found as follows














matter)







proceeding entail















661

4





















4 Sanctions



imposed













662

5







Deprsquot]












grievance committee




nd Dept] 8064(f) [3

rd


Dept]










663

6



[2nd

Dept] 80610 [3rd

Dept] 102233 [4th

Dept]








d Felony Disbarment





conviction entered)






false swearing



bribery

extortion



crime







Dept] 6917 [2nd

Dept] 8067 [3rd

Dept] 102221 [4th

Dept]

664

7

f Restitution














nd

Dept] 80619 [3rd

Dept] 102222 [4th

Dept]














NY2d 449 455 (1989)


applied





665

8








i Reinstatement























666

9












667

668



y Escrow

$665M (41)

Unearned Fe$57M (4)



Collec$69M












al Property Escrow

79251 (48)




Collection$140


0

200

400

600

800

1000

1200

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Filed 627 636 598 909 730 1128 812 442 492 548 499 506 627 729 520 454 480 489 820 601 469




Num

ber

669


















Totals 1421 100 $52688264 100


670

$00

$20

$40

$60

$80

$100

$120

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 200 4 2005 2006 2007 2008 2009 2010 2011 2012Amount $73 $75 $76 $57 $99 $69 $59 $34 $105 $53 $57 $58 $51 $81 $71 $70 $68 $56 $85 $69 $54







Jud

icia

l D

ep

art

me

nt

Jud

icia

l D

ep

art

me

nt

















154

86

497

295

0 100 200 300 400 500 600

4th

3rd

2nd

1st

0

100

200

300

400

500

600

700

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Num ber 288 318 362 383 381 625 415 161 205 160 187 165 196 227 147 185 130 139 198 253 187

Num

ber

In M

illio

ns ($

)

879

573

4341

1462

0 1000 2000 3000 4000 5000

4th

3rd

2nd

1st

671


Restitution $158 M

Interest $53 M

Sanctions $30 M


$1607 M


proved aims637 M

Rejected Cla$4399 M












wwwnylawfundorg












RevenueSources





672

7. ethics and professionalism - nysba

Documents