Vicarious Liability For Thieving Partner

The New York Appellate Division for the Third Judicial Department censured an attorney based on stipulated findings

we determined, among other things, that respondent violated his fiduciary obligation to safeguard client funds on deposit in his law firm’s escrow account by abdicating his responsibility to oversee and supervise the account to his former law partner, who unbeknownst to respondent misappropriated $25,000 from the account (Matter of Crane, supra).

Sanction

We have now heard from respondent in mitigation, including his expression of remorse and his submissions from colleagues and clients attesting to his good character. Notably, the individual most directly affected by the subject misappropriation submitted correspondence in which he “strongly recommend[s] leniency” and states that he “would not hesitate to seek [respondent’s] legal counsel again in the future.” We take note that respondent had no venal intent, he did not take any role in nor did he financially benefit from the defalcations by his former law partner, nor were there any “early warning signs” or “red flags” signaling the existence of any such financial improprieties. Moreover, no actual injury was sustained by any clients, respondent has an otherwise unblemished disciplinary history and the misappropriated funds have now been returned. Accordingly, in order to protect the public, maintain the honor and integrity of the profession and, most importantly, emphasize to others the significance of fulfilling their independent fiduciary duty to safeguard client funds (see Uniform Rules for Attorney Disciplinary Matters [22 NYCRR] § 1240.8 [b] [2]), we find that, under the circumstances presented, respondent should be censured.

(Mike Frisch)