Appellate Division: Second Judicial Department

M127832

E/ct

A. GAIL PRUDENTI, P.J.

WILLIAM F. MASTRO

REINALDO E. RIVERA

PETER B. SKELOS

MARK C. DILLON, JJ.

2011-09575 In the Matter of Joel A. Grossbarth, an attorney and counselor-at-law, admitted as Joel Allann Grossbarth. Grievance Committee for the Ninth Judicial District, petitioner; Joel A. Grossbarth, respondent. (Attorney Registration No. 2586618)

DECISION & ORDER ON MOTION

Motion by the Grievance Committee for the Ninth Judicial District for an order: (1) suspending the respondent from the practice of law, pursuant to 22 NYCRR 691.4(l)(1)(i),(ii), and (iii), upon a finding that he is guilty of professional misconduct immediately threatening the public interest based upon his failure to cooperate with the lawful demands of the Grievance Committee, substantial admissions under oath that he committed acts of professional misconduct and/or other uncontroverted evidence of professional misconduct; (2) authorizing the Grievance Committee to institute and prosecute a disciplinary proceeding based upon the allegations set forth in a verified petition dated June 15, 2011; and (3) referring the issues raised to a Special Referee to hear and report. The respondent was admitted to the Bar at a term of the Appellate Division of the Supreme Court in the Second Judicial Department on March 23, 1994, under the name Joel Allann Grossbarth.

Upon the papers filed in support of the motion and the papers filed in opposition thereto, it is

ORDERED that the motion is granted; and it is further,

ORDERED that pursuant to 22 NYCRR 691.4(l)(1)(I), (ii), and (iii), the respondent, Joel A. Grossbarth, admitted as Joel Allann Grossbarth, is immediately suspended from the practice of law in the State of New York, pending further order of the Court; and it is further,

ORDERED that the respondent, Joel A. Grossbarth, admitted as Joel Allann Grossbarth, shall promptly comply with this Court's rules governing the conduct of disbarred, suspended, and resigned attorneys (see 22 NYCRR 691.10); and it is further,

ORDERED that pursuant to Judiciary Law § 90, during the period of suspension and until further order of this Court, the respondent, Joel A. Grossbarth, admitted as Joel Allann Grossbarth, is commanded to desist and refrain from (1) practicing law in any form, either as principal or agent, clerk, or employee of another, (2) appearing as an attorney or counselor-at-law before any court, Judge, Justice, board, commission, or other public authority, (3) giving to another an opinion as to the law or its application, or any advice in relation thereto, and (4) holding himself out in any way as an attorney and counselor-at-law; and it is further,

ORDERED that the Grievance Committee for the Ninth Judicial District is hereby authorized to institute and prosecute a disciplinary proceeding in this Court against Joel A. Grossbarth, admitted as Joel Allann Grossbarth, based on the verified petition dated June 15, 2011; and it is further,

ORDERED that Gary L. Casella, Chief Counsel, Grievance Committee for the Ninth Judicial District, Crosswest Office Center, 399 Knollwood Road, Suite 200, White Plains, N.Y. 10603, is hereby appointed as attorney for the petitioner in such proceeding; and it is further,

ORDERED that within 20 days after service upon him of a copy of this decision and order on motion, the respondent, Joel A. Grossbarth, admitted as Joel Allann Grossbarth, shall serve an answer upon the Grievance Committee and the Special Referee, and file the original with this Court; and it is further,

ORDERED that the issues raised by the verified petition and any answer thereto are referred to the Honorable John M. Perrone, 210 Boston Post Road, Larchmont, N.Y. 10538, as Special Referee to hear and report, together with his findings on the issues, and to submit a report within 60 days after the conclusion of the hearing or the submission of post-hearing memoranda; and it is further,

ORDERED that if the respondent, Joel A. Grossbarth, admitted as Joel Allann Grossbarth, has been issued a secure pass by the Office of Court Administration, it shall be returned forthwith to the issuing agency and the respondent shall certify to the same in his affidavit of compliance pursuant to 22 NYCRR 691.10(f).

We find, prima facie, that the respondent is guilty of professional misconduct immediately threatening the public interest based upon his failure to cooperate with the lawful demands of the Grievance Committee for the Ninth Judicial District (hereinafter the Grievance Committee), substantial admissions he made under oath that he committed acts of professional misconduct, and other uncontroverted evidence of professional misconduct.

The instant motion emanates from the Grievance Committee's investigation of a single complaint of professional misconduct filed by Rudolph Gregus on behalf of himself and his wife.

In or about July 2000, Mr. and Mrs. Gregus sustained physical injuries when their automobile was struck from behind by a delivery van in Manhattan, prompting them to retain attorney Jeffrey Adams, to seek damages on their behalf. By April 2005, Mr. Adams had recovered settlements totaling $115,000. However, Mr. and Mrs. Gregus were unhappy with perceived delays in Mr. Adams's resolution of issues pertaining to the satisfaction of medical liens. Thus, they discharged Mr. Adams and retained the respondent. Following his discharge, Mr. Adams delivered his firm's escrow check for the sum of $50,199.04 to the respondent, representing the balance of funds Mr. Adams was still holding in connection with the matter. In September, 2005, the respondent deposited the check into the Tognino & Grossbarth, LLP, Escrow Management Account (hereinafter T & G EMA).

By letter dated July 29, 2010, the Grievance Committee asked the respondent to account for his handling of the Gregus funds which, Mr. and Mrs. Gregus alleged, the respondent had unduly delayed in disbursing. At or about that time, the Grievance Committee also subpoenaed and obtained records from Capital One Bank for the period September 2005 through March 2010, relative to the T & G EMA. Those records revealed that the check delivered by Mr. Adams, in the amount of $50,199.04, was deposited by the respondent into the T & G EMA in September 2005. The balance of funds maintained on deposit in the T & G EMA fell below $50,199.04, to as low as $10,245.24 in May 2007. The respondent admitted to numerous deficiencies in the T & G EMA between September 2005 and October 2007, both in his written answer and during a subsequent examination under oath at the offices of the Grievance Committee. On or about November 15, 2007, the respondent disbursed $1,897.52 to Mr. and Mrs. Gregus via escrow check number 1412. Thereafter, he was required to maintain $48,301.52 on behalf of Mr. and Mrs. Gregus in the T & G EMA. However, the balance in the account fell to $8,440.17, and then to $647.66, by the end of November 2007. Following a deposit into the T & G EMA on behalf of Mr. and Mrs. Gregus in the sum of $74,500 on or about December 11, 2007, the respondent should have maintained a balance on deposit in the T & G EMA of $122,801.52 on behalf of Mr. and Mrs. Gregus. However, on December 17, 2007, the account balance was only $29,920.76. On or about January 31, 2008, the respondent disbursed $45,175.34 to Mr. and Mrs. Gregus, via escrow check number 1438. Subsequently, the respondent should have maintained a balance on deposit in the T & G EMA of $77,626.18. However, the balance fell to $13,351.79, and then to as low as $2,045 in May 2008. On or about May 22, 2008, the respondent disbursed $3,000 on behalf of Mr. and Mrs. Gregus, via escrow check number 1447, to satisfy a judgment concerning a medical lien. Thereafter, the respondent should have maintained a balance on deposit in the T & G EMA of approximately $74,000 on behalf of Mr. and Mrs. Gregus. However, the monthly balances in the T & G EMA fell to as low as $42,667.50 in October 2008 and $21,480.83 in November 2008.

During 2009, prior to any other related disbursement, the balance in the T & G EMA dropped to as low as $15,084.60 (in January) and $2,664.30 (in December); in the interim, the balances were $58,148.07 (in March); $35,433.74 (in April); $24,382.74 (in May); $55,400.55 (in September); $6,210.22 (in September); $32,489.30 (in October); and $12,164.30 (in November). According to the Grievance Committee, the respondent retained enough funds on deposit only when he deposited the funds of other clients.

At the end of January 2010, the respondent had a closing balance in the T & G EMA of $2,483.30. However, he was still required to maintain a balance of approximately $74,000 on behalf of Mr. and Mrs. Gregus. In February 2010, the respondent made two unrelated deposits totaling $222,500 into the T & G EMA. From these funds, the respondent disbursed $50,199.04 to Mr. and Mrs. Gregus in or about March 2010, the precise amount the respondent received from Jeffrey Adams, in 2005. The respondent's accompanying transmittal letter, dated March 1, 2010, asserted that this disbursement represented the return of all funds being held by his firm. However, the respondent never accounted for his handling of the Gregus funds and/or identified the legal fees he took relative to representing them, if any.

Upon receipt of the Gregus complaint (in or about July 2010), the respondent's counsel instructed the Grievance Committee to send the complaint to her. By letter dated July 29, 2010, the respondent was directed to:

"specifically account for your handling of any and all funds that came into your possession, in which Mr. and/or Mrs. Gregus had an interest. Please provide copies of any and all written settlements, transcripts, placing settlement terms on the record in open court, signed releases and/or any other settlement documents. Please indicate the dates that any and all checks payable to Mr. and/or Mrs. Gregus were issued by any insurance company or other responsible entity; please provide copies of the fronts and backs of any and all such checks along with deposit slips evidencing your handling of said funds. Please provide copies of the fronts and backs of any and all checks you issued to disburse settlement funds [on behalf of] Mr. and/or Mrs. Gregus.

You are also requested to produce monthly statements for your escrow account . . . from the date you first deposited any funds in which Mr. and/or Mrs. Gregus had an interest, to the date you finally disbursed the last of any such funds, demonstrating that such funds were preserved."

The respondent was asked to provide his answer, and the above materials, no later than August 23, 2010. On or about August 16, 2010, the respondent's counsel advised that she was burdened by a conflict and could not continue to represent the respondent in connection with the Gregus matter. She requested a one-month adjournment, to give the respondent time to retain new counsel. The respondent's time to submit an answer was adjourned to September 15, 2010. On September 10, 2010, the respondent's counsel advised, by telephone, that she would, in fact, be able to handle the Gregus complaint on the respondent's behalf, inasmuch as the conflict could be waived. She advised that the Gregus file was in storage, but that, if the respondent could retrieve it quickly, he might still be able to submit an answer by September 15, 2010. Ultimately, that did not happen. On October 4, 2010, the respondent's counsel advised that the Gregus file could not be found by the storage facility. Thus, the respondent needed to go there personally to look for it. This necessitated an additional adjournment of his answer. However, as of November 19, 2010, the respondent 's counsel advised that the respondent had not yet had a chance to go to the storage facility.

On December 1, 2010, the respondent's counsel advised that the respondent's answer would be delivered by December 10, 2010, and an e-mailed copy was received on that date. However, a covering letter indicated that the answer was primarily drawn from the respondent's memory, inasmuch as he had been unable to locate his file in the Gregus matter following an office move. In his answer, the respondent explicitly acknowledged an escrow shortage regarding the Gregus funds:

"With respect to the bank statements [the respondent] recognizes that the balance in his escrow account fell below the amount necessary to maintain the Gregus's funds in 2007, but...the Gregus's...received all the money to which they were entitled. Indeed, no client or person has ever lost money as a result of the insufficient escrow balance."

At that time, the respondent failed to address escrow account insufficiencies beyond 2007. Moreover, he failed to offer any explanation for the admitted insufficiencies. The respondent also failed to produce all relevant bank statements, as requested by the Grievance Committee's letter dated July 29, 2010. Rather, he produced bank statements for the limited period of September 2005 through November 2007, allegedly due to his busy trial schedule. The respondent's counsel pledged that the balance of the records requested by the Grievance Committee would be produced as soon as the trial was over.

Thereafter, upon further consideration, the respondent's counsel advised that the aforementioned conflict could not be waived and that she would be forced to withdraw. The respondent was advised that the Grievance Committee would be conducting a full audit of his escrow account for the period September 2005 through March 2010. He was requested to provide the balance of his records by no later than January 4, 2011. The respondent was explicitly directed to provide opening balance information, setting forth the sums attributable to each client with funds on deposit as of September 2005.

Attached to a cover letter dated January 3, 2011, the respondent provided additional bank records, ostensibly for the period December 2007 through March 2010. However, the December 2007 statement was omitted. The respondent also supplied copies of letters to Mr. and Mrs. Gregus, from 2009 and 2010, which, he stated, were kept in files separate from the file he was allegedly unable to locate in storage. However, the respondent neither supplied opening balance information as requested, nor referred to this omission in his letter to the Grievance Committee. The respondent promised a further submission upon retaining new counsel.

By letter dated January 4, 2011, the Grievance Committee reminded the respondent, inter alia, that he still owed the opening balance information necessary to conduct an audit of his escrow account. He was directed to supply the information by January 20, 2011.

Attached to a cover letter dated January 20, 2011, the respondent suppled copies of two banks statements purportedly missing from his prior submission; in fact, those statements had been provided. Further, the respondent asked for a two-week adjournment to submit the remaining information requested of him, including the opening balance information.

By letter dated January 21, 2011, the respondent's request for a further adjournment was granted. He was given until February 7, 2011, to produce the requested items.

On February 4, 2011, during a telephone conversation regarding an unrelated matter, the respondent orally advised Grievance Committee counsel that he would not be retaining new counsel.

On February 7, 2011, Grievance Committee counsel telephoned the respondent to inquire about the status of the requested opening balance information. The respondent advised that he would call back with a firm date.

On February 8, 2011, the respondent called Grievance Committee counsel to report that he would be providing the opening balance information by February 18, 2011, although he claimed that he was still waiting for additional records from his bank. The respondent also agreed to appear for an examination under oath at the Grievance Committee's offices on March 15, 2011. He was reminded of his obligation to supply the outstanding bank records and that the examination under oath would proceed regardless. The February 8, 2011, telephone call was memorialized by Grievance Committee counsel in a letter.

On March 15, 2011, the respondent appeared at the offices of the Grievance Committee for his examination under oath. He testified, inter alia, about the Gregus funds that passed through his escrow account. Although he had been asked to provide a breakdown of the opening balance in the T & G EMA as of September 2005 (which was $104,346.16), the respondent failed to bring this information. Nevertheless, in response to direct inquiries, the respondent was able to attribute $104,000 to specific clients, leaving only $346 unaccounted for. The respondent also failed to produce his check registers, as requested. He was asked to supply his "carbon ply" records for the period September 2005 through July 2010, as well as his QuickBooks records for the same period. Additionally, the respondent was requested to provide information about additional client transactions - Spolin; Palumbo and Brenner; Hall; Peckler; Schwartz; Hatjygeorge; Lucarelli; and LaKormes - as well as information relevant to a $5,500 transfer from his escrow account in January 2009.

As in his written answer, the respondent acknowledged shortfalls in his escrow account in 2007. However, at his examination under oath, the respondent also acknowledged escrow shortfalls in 2006, 2008, 2009 and 2010. At the conclusion of his examination under oath, the respondent was requested to provide the Grievance Committee with all outstanding items by the end of March 2011. However, he failed to do so.

By letter dated April 5, 2011, the Grievance Committee declared the respondent in default of its requests for documentation. The Grievance Committee requested that the respondent provide additional information relative to specific client transactions so as to undertake an audit of the T & G EMA to determine whether funds, other than those attributable to Mr. and Mrs. Gregus had been misappropriated. In conjunction with that request, the respondent was given an opportunity to review preliminary reports prepared by the Grievance Committee, based upon existing information. However, the respondent failed to provide any evidence to controvert them or to identify any errors.

By letter dated April 15, 2011, the respondent characterized the Grievance Committee's declaration of his default as disingenuous as he had not been provided with the transcript of the examination under oath. The respondent reported that he had hired an accountant to assist him with an audit. However, based upon the accountant's tax-season workload, the respondent estimated that he could not be responsive to the Grievance Committee's requests for two to three weeks.

The respondent's estimated submission within two to three weeks of April 15, 2011, was due by May 6, 2011, at the latest. To date, however, the respondent has failed to submit any of the materials requested and remains in default of his obligation to fully comply with the Grievance Committee's inquiry. Moreover, the respondent has failed to contact the Grievance Committee to explain his failure to produce, or to request an extension of time to produce, the documentation requested and/or the work product of his purported accountant.

The Grievance Committee posits that the respondent's failure to cooperate constitutes circumstantial evidence of guilt of the misappropriation of other clients' funds, more specifically: Bodak; Campbell; Coelho (Alexandre); Coptic Orthodox Church; Hall (Stephen); Lucarelli; Peckler; Schoonmaker (Joseph); Schwartz (Sonia). According to the Grievance Committee, the respondent has failed to controvert any of the foregoing, despite being provided with an opportunity to do so.

Compounding the respondent's failure to account for his handling of the foregoing funds, escrow account statements for September 2005 through July 2010 show that the respondent made approximately 120 unidentified electronic transfers, totaling over $1,000,000 from his escrow account to his operating account. In Matter of White (80 AD3d 194), this Court held that such electronic transfers from an attorney escrow account to an attorney's business account violated Code of Professional Responsibility DR 9-102[E] (22 NYCRR 1200.46([e], now rule 1.15(e) of the Rules of Professional Conduct (22 NYCRR 1200.0).

Although the respondent opposes an interim suspension, and denies any failure to cooperate with the Grievance Committee and/or conversion of clients' funds, he admits that the balance in his escrow account fell below what he was required to maintain for Mr. and Mrs. Gregus.

Based upon the foregoing, the motion is granted, the respondent is immediately suspended from the practice of law, pursuant to 22 NYCRR 691.4(l)(1)(i), (ii), and (iii), pending further order of this Court, the Grievance Committee is authorized to institute and prosecute a disciplinary proceeding against him, and the matter is referred to a Special Referee to hear and report.

PRUDENTI, P.J., MASTRO, RIVERA, SKELOS and DILLON, JJ., concur.

ENTER:

Matthew G. Kiernan

Clerk of the Court