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New Jersey Review Board recommends that lawyer be disbarred for misappropriating funds from a $3.5 million judgment from his first trial as a fee and other rule violations

Hello everyone and welcome to this Ethics Alert blog which will discuss the recent New Jersey Disciplinary Review Board opinion recommending disbarment of a lawyer for misappropriating proceeds from a multi-million judgment that he obtained after his first jury trial.  The disciplinary opinion is In the Matter of Feng Li, Supreme Court of New Jersey, Disciplinary Review Board, Docket No. DRB 12-310, District Docket No. XIV-2010-0090E (April 3, 2013).  The disciplinary board’s opinion is online at https://www.judiciary.state.nj.us/drb/decisions/Feng_Li_12_310.pdf.

According to the opinion, which is very long and detailed, the lawyer was admitted to the New Jersey and New York Bars in 2004 and the Pennsylvania Bar in 2005 and he had no disciplinary history in New Jersey.  After graduating from law school, the lawyer received no job offers from law firms and was employed by Net Access performing legal research.  He never worked for a law firm or had his work reviewed by another lawyer.

In brief summary, Alfred and Diana Peng retained the lawyer on January 3, 2005 to file a lawsuit in connection with Mr. Peng’s retirement investments.  Prior to that time, the only legal services that the lawyer had performed involved drafting wills and handling real estate transactions.  Since he had never previously prepared a written fee agreement, the lawyer obtained a retainer agreement from the internet which provided for a contingent fee and tracked the percentages appearing in  the New Jersey Bar rule.

In September 2005, Mr. Peng asked the lawyer to take over the “Sy” litigation which had been pending in New York on behalf of a group of doctors, including himself. In He indicated that the matter involved a real estate dispute pending in a New York court.  The lawyer was not aware of the size or complexity of the litigation and assumed that it involved a minor real estate dispute and he agreed to the representation.  Over the next few days, Mr. Peng told him that there were other plaintiffs, that an October 7, 2005 trial date had been set, and that, although another lawyer was then representing the partners, they all wanted to retain him.

According to the lawyer, Mr. Peng contacted him at home on the evening of September 27, 2005 and said that, because the trial date of October 7, 2005 was approaching, the fee agreement had to be prepared immediately.  The lawyer stated that he wanted to be paid hourly; however, he agreed to a contingent fee and returned to his office, modified the contingent fee agreement that he had used during his prior representation of the Pengs, and faxed the agreement to the partners.  The lawyer did not explain the terms of the contingency fee agreement to the clients or discuss the agreement or whether New York or New Jersey law would apply to the agreement.

A non-jury trial took place in New York from September 17, 2007 through October 22, 2007.  After pre-judgment interest was calculated, the judge awarded approximately $3.5 million to the partners.  Subsequently, although he knew that the clients’ disputed his fee, the lawyer deposited $1,259,942.80 of the settlement funds into bank accounts in the names of his wife and children (who were 9 and 15 years old).  The lawyer admitted that he took his legal fees without his clients’ knowledge or consent and that they had not authorized the amount of the fee that he had taken.

The clients filed a lawsuit against the lawyer in New Jersey in September 2009 and the judge ordered the lawyer to repay the funds into his trust account.  The lawyer said on the record that he would comply with the order; however, he then filed a motion for a restraining order in New York to prevent the New Jersey Order from being enforced.  On January 25, 2010, the New York Appellate Division denied the restraining order and the lawyer filed a bankruptcy petition the next day, naming his clients as creditors.

The disciplinary complaint followed and a special master was appointed.  At the Bar hearing, the lawyer claimed that he had made a mistake by taking the funds without authorization.  The Bar lawyer apparently showed more examples of the lawyer’s misrepresentations which had not been charged in the Bar complaint, including an apparently false affidavit.  The special master recommended that the lawyer be disbarred for the knowing misappropriation of approximately $500.000.00 which were not a result of the litigation in which the lawyer had obtained the verdict. 

The New Jersey Disciplinary Review Board agreed with the special master that the lawyer had knowingly misappropriated funds from the judgment and recommended that he be disbarred for misappropriating the $1.2 million in fees along with a number of other disciplinary rule violations, including failure to follow trust account rules and misrepresentation, fraud, and/or deceit.  One of the board member’s dissented and would have imposed a three month suspension and two others dissented and would have imposed a one year suspension.  The opinion also commented on the lawyer’s inexperience as a factor in its decision.  The New Jersey Supreme Court will now issue a final disciplinary opinion.

Bottom line:  This inexperienced lawyer apparently got in way over his head.  Although he obtained a $3.5 million verdict for the clients, he apparently misappropriated a large amount of client funds claiming that the funds were his fee and violated numerous other Bar rules and he will most likely be disbarred.  The lawyer will also be subject to civil lawsuits and potential criminal prosecution. 

Be careful out there…and don’t do this!

 

Disclaimer: this e-mail does not contain any legal advice and the comments herein should not be relied upon by anyone who reads it.

 

Joseph A. Corsmeier, Esquire

 

Law Office of Joseph A. Corsmeier, P.A.

 

2454 McMullen Booth Road, Suite 431

 

Clearwater, Florida 33759

 

Office (727) 799-1688

 

Fax     (727) 799-1670

 

[email protected]

 

www.jac-law.com

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