Disciplinary Counsel v. Parnoff

324 Conn. 505

152 A.3d 1222

DISCIPLINARY COUNSEL

v.Laurence PARNOFF

SC 19535

Supreme Court of Connecticut.

Argued September 22, 2016

Officially released December 30, 2016^**

Adam P. Mauriello, counsel, legal services, with whom were Karyl L. Carrasquilla, chief disciplinary counsel, and, on the brief, Suzanne B. Sutton, for the appellant (plaintiff).

Charles W. Fleischmann, with whom, on the brief, was Paul E. Pollock, for the appellee (defendant).

Rogers, C.J., and Palmer, Zarella, Eveleigh, McDonald, Espinosa and Robinson, Js.^*

ESPINOSA, J.

In this appeal, we are asked to decide whether an attorney who knowingly appropriated client funds, but did not intend to do so wrongly, "knowingly misappropriated" those funds and is therefore subject to mandatory disbarment pursuant to Practice Book § 2–47A.¹ The plaintiff, Disciplinary Counsel, appeals from the judgment of the Appellate Court, which affirmed the judgment of the trial court reprimanding the defendant, Laurence Parnoff, rather than disbarring him pursuant to § 2–47A. Disciplinary Counsel v. Parnoff , 158 Conn.App. 454, 482, 119 A.3d 621 (2015). The plaintiff contends that the trial court improperly interpreted § 2–47A to mandate disbarment only if an attorney appropriates client funds knowingly and with the wrongful intent to steal them. Regardless of the defendant's intent, the plaintiff claims, the defendant's knowledge that the funds he appropriated were disputed is sufficient to disbar him. We conclude that § 2–47A mandates disbarment only when an attorney misappropriates a client's funds both knowingly and intentionally—that is, when an attorney steals from his or her client. Accordingly, we affirm the judgment of the Appellate Court.

This disciplinary action originates from a twelve year old fee dispute that resulted in several actions and various appeals. The facts and procedural history underlying these actions are set forth in substantial detail in Disciplinary Counsel v. Parnoff , supra, 158 Conn.App. at 454, 119 A.3d 621, Disciplinary Counsel v. Parnoff , Superior Court, judicial district of Fairfield, Docket No. CV–12–6031943S, 2013 WL 5614736 (September 19, 2013), Parnoff v. Yuille , 139 Conn.App. 147, 57 A.3d 349 (2012), cert. denied, 307 Conn. 956, 59 A.3d 1192 (2013), and Parnoff v. Mooney , 132 Conn.App. 512, 35 A.3d 283 (2011). We summarize those facts and the relevant procedural history reflected in the record that are necessary to an understanding of the present case.

Darcy Yuille had been employed by Bridgeport Hospital (hospital) until a work-related injury led to her termination. Disciplinary Counsel v. Parnoff , supra, 158 Conn.App. at 457, 119 A.3d 621. In 1996, Yuille retained Attorney Laura Mooney to represent her before the Workers' Compensation Commission on a claim for benefits in connection with her injuries. Parnoff v. Mooney , supra, 132 Conn.App. at 514, 35 A.3d 283. During Mooney's representation of Yuille, Mooney observed bad faith conduct by the hospital in its handling of the workers' compensation claim. Id. Mooney attempted to refer Yuille's action against the hospital, which claimed that the hospital had handled Yuille's workers' compensation claim in bad faith, to the defendant. Id., at 514, 35 A.3d 283 n.2. After the defendant "failed to provide a timely response," Mooney decided to undertake the action herself, in addition to undertaking Yuille's workers' compensation claim. Id. The defendant eventually contacted Mooney and Mooney referred Yuille to the defendant for a separate claim against the hospital alleging wrongful discharge. Id.

In 1998, after Mooney brought the bad faith action, Yuille also retained the defendant to represent her in a bad faith and wrongful discharge action against the hospital. Id., at 515, 35 A.3d 283. Mooney was initially unaware of the defendant's representation of Yuille in the bad faith and wrongful discharge action because Mooney believed that he was merely retained to pursue the wrongful discharge claim. Id., at 514–15, 35 A.3d 283. In retaining the defendant, Yuille entered into an agreement that provided the defendant with a contingency fee of 40 percent of gross receipts from the claim. Disciplinary Counsel v. Parnoff , supra, 158 Conn.App. at 457, 119 A.3d 621. On Yuille's behalf, the defendant commenced the action against the hospital in November, 1998. Parnoff v. Mooney , supra, 132 Conn.App. at 515, 35 A.3d 283.

In 2002, the defendant entered into an agreement with the hospital on Yuille's behalf to submit her claim to binding arbitration. Disciplinary Counsel v. Parnoff , supra, 158 Conn.App. at 457, 119 A.3d 621. After learning of the impending arbitration proceeding—and discovering the overlapping representation—Mooney filed an appearance in the action against the hospital, which the defendant had commenced, and appeared at the arbitration proceeding, over the objection of the hospital. Id. Yuille was awarded approximately $1.1 million as a result of the binding arbitration proceeding. Id., at 458, 119 A.3d 621.

In August, 2004, shortly after the arbitration award, Yuille questioned the defendant's fee agreement, claiming that the 40 percent contingency fee was excessive because it violated General Statutes § 52–251c (b),² Connecticut's fee cap statute, and that a portion of the defendant's fee should have been allocated to Mooney. Id., at 458–60, 119 A.3d 621. After receiving the defendant's closing statement indicating that his fee amounted to $438,413.17, Yuille authorized the defendant to take $125,000 toward his fee, and to place the remainder of the 40 percent fee in escrow until they could agree on a resolution. Id., at 458, 119 A.3d 621. After taking $125,000 toward his fee, the defendant made various disbursements in connection with the arbitration, placing $313,413.17—the remainder of the disputed 40 percent contingency fee—into a certificate of deposit account (CD) with Chase Bank as escrow, and paying Yuille the balance of the award. Id., at 460, 119 A.3d 621.

The defendant and Yuille were unable to resolve the fee dispute, and, in January, 2005, the defendant filed an action against Yuille for breach of contract, unjust enrichment, and bad faith. Id. The defendant also filed a separate action against Mooney for, among other claims, tortious interference with his agreement with Yuille. Id., at 459, 119 A.3d 621.

The cases against Mooney and Yuille were consolidated and tried to a jury. Id., at 461, 119 A.3d 621. On May 20, 2010, the jury returned a verdict for the defendant against Yuille on the defendant's breach of contract claims, and against the defendant on all other claims. Id. The court rendered judgment in accordance with the verdict, and awarded the defendant a total of $252,044.27 for compensatory damages, interest, and punitive damages.

The defendant notified Chase Bank not to renew the CD holding the disputed funds, causing it to mature. The defendant then transferred the funds into his personal savings account. Id., at 462, 119 A.3d 621. This redemption occurred on July 26, 2010, approximately five and one-half years after the funds had been placed into escrow. At the time of the transfer, the CD account contained $363,960.87. Id.

During the appeal from the judgment of the trial court, Yuille discovered that the defendant was no longer holding the funds in escrow, and filed a grievance against him, alleging that he had violated the Rules of Professional Conduct by transferring and commingling the funds. Id., at 456, 468, 119 A.3d 621. A reviewing committee of the Statewide Grievance Committee subsequently found by clear and convincing evidence that the defendant had violated rule 1.15 (f) of the Rules of Professional Conduct.³ Id., 456–57. In order to determine what disciplinary action should be taken, the reviewing committee directed the plaintiff to file a presentment with the Superior Court pursuant to Practice Book § 2–47A. Id., at 457, 119 A.3d 621.

During the presentment before the trial court, the defendant testified that he believed he was entitled to the funds because Yuille had no interest in them other than to pay Mooney's legal fee. Id., at 475, 119 A.3d 621. Yuille had testified, as part of her special defense during the breach of contract action, that if the defendant resolved matters with Mooney by paying Mooney a portion of the fee, Yuille would then be willing to give the defendant his fee.⁴ Id., at 461, 119 A.3d 621. At the presentment, the defendant testified that these statements indicated that Yuille's only interest in the escrowed funds was to pay Mooney and, therefore, Yuille had waived any challenge she had to the disputed funds. Id., at 475, 119 A.3d 621. Further, the defendant testified that he believed he was entitled to the funds because Yuille did not pursue a counterclaim or intervening complaint sufficient to entitle her to affirmative relief in the breach of contract action, and her special defense similarly did not entitle her to affirmative relief. Accordingly, the defendant claimed that because he believed Yuille had no interest in the funds other than to pay Mooney, he was entitled to the funds and he was therefore justified in having them moved to his personal account. Notwithstanding the defendant's testimony regarding his subjective belief as to his entitlement to the funds, the plaintiff argued that the defendant violated rule 1.15 (f) of the Rules of Professional Conduct and also was subject to mandatory disbarment because he knowingly misappropriated client funds in violation of Practice Book § 2–47A. Id., at 463, 119 A.3d 621.

The trial court found by clear and convincing evidence that the defendant violated rule 1.15 (f) of the Rules of Professional Conduct by failing to maintain the disputed fee in escrow and that his "belief that Yuille would be satisfied once Mooney was paid was erroneous and unreasonable given the totality of the circumstances." Despite this violation, the trial court also found that the...