DISCIPLINARY COUNSEL v. LAURENCE PARNOFF, SC 19535

Judicial District of Fairfield

 Attorney Discipline; Whether Appellate Court Properly Upheld Determination that Attorney had not Engaged in “Knowing Misappropriation” of Client’s Funds Under Practice Book § 2-47A.  Darcy Yuille hired the defendant attorney to represent her in a civil action.  Yuille entered into a contingency fee agreement with the defendant, which provided that the defendant would be entitled to retain forty percent of any amount that Yuille recovered.  After Yuille was awarded over $1 million, she claimed that the defendant’s fee was excessive.  The defendant responded that he would hold the disputed amount in an escrow account.  The funds were held in escrow for several years until the defendant failed to renew the certificate of deposit that contained the funds, which caused the money to be transferred to his personal savings account.  The plaintiff subsequently brought this presentment action, alleging that the defendant knowingly misappropriated the funds.  The trial court determined that the defendant violated rule 1.15 (f) of the Rules of Professional Conduct, which provides that when an attorney is in possession of disputed property, the property must be kept separate until the dispute is resolved.  It also found, however, that the defendant merely acted negligently in allowing the disputed funds to be commingled with his personal funds based on his unreasonable belief that he was no longer required to maintain the funds in the escrow account.  The court therefore rejected the plaintiff’s claim that the defendant’s violation of rule 1.15 (f) constituted a violation of Practice Book § 2-47A, which provides that an attorney who has “knowingly misappropriated” a client’s funds must be disbarred.  The plaintiff appealed, claiming that, in determining whether the defendant knowingly misappropriated the funds, the trial court improperly considered whether he acted negligently rather than focusing on whether he knowingly took the money.  The Appellate Court (158 Conn. App. 454) disagreed and affirmed the judgment, finding that Practice Book § 2-47A would apply only if the defendant actually knew that the funds did not belong to him when they were misappropriated.  It determined that it was entirely proper for the trial court to consider whether the defendant’s actions were done with knowledge of his lack of ownership or whether he merely acted negligently.  Accordingly, it concluded that the trial court applied the correct legal standard when it found that the defendant did not knowingly misappropriate the funds in that he simply acted carelessly.  Noting that Practice Book § 2-47A codified the New Jersey Supreme Court’s holding in In re Wilson, 409 A.2d 1153 (1979), the Appellate Court went on to find that the trial court’s decision was consistent with Wilson.  It explained that, under Wilson, a knowing misappropriation occurs when a lawyer takes a client’s money with the knowledge that it belongs to the client and that the client has not authorized the taking.  It therefore concluded that a knowing misappropriation does not occur where, as here, an attorney negligently takes a client’s funds.  The plaintiff appeals, and the Supreme Court will decide whether the Appellate Court properly upheld the trial court’s determination that the defendant had not engaged in the “knowing misappropriation” of a client’s funds as contemplated by Practice Book § 2-47A.