In re Brauer

890 N.E.2d 847, 452 Mass. 56, 2008 Mass. LEXIS 554
CourtMassachusetts Supreme Judicial Court
DecidedJuly 28, 2008
StatusPublished
Cited by25 cases

This text of 890 N.E.2d 847 (In re Brauer) is published on Counsel Stack Legal Research, covering Massachusetts Supreme Judicial Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Brauer, 890 N.E.2d 847, 452 Mass. 56, 2008 Mass. LEXIS 554 (Mass. 2008).

Opinion

Spina, J.

The present bar discipline matter is before us on a reservation and report, without decision, from a single justice of this court. The Board of Bar Overseers (board) has recommended that the respondent, David P. Brauer, be indefinitely suspended from the practice of law for, among other things, the conversion of funds held in escrow. For the reasons that follow, we conclude that an indefinite suspension is the appropriate disciplinary sanction.

1. Background. The following facts are drawn from the findings of a special hearing officer, which were adopted by an appeal panel of the board and then by the full board.1 We have supplemented the hearing officer’s findings with undisputed facts contained in the record on appeal.

The respondent was admitted to the practice of law in this Commonwealth on December 15, 1986. At all relevant times, he was a shareholder in Brauer & Brauer, PC., a legal professional corporation. The respondent’s father, formerly an attorney,2 was the other shareholder in Brauer & Brauer, in addition to being the sole shareholder, officer, and director of Decnos Financial Group, Inc. (Decnos), a Delaware corporation providing business investment and consulting services.

The respondent represented Commonwealth Snack Company (Commonwealth Snack) in a lawsuit brought by Edward Dewey (Dewey) to collect on a note that Commonwealth Snack had given to Dewey in exchange for Dewey’s stock in another corporation (Dewey lawsuit). While the respondent was representing Commonwealth Snack, Grand Pacific Finance Corporation (GPFC) entered into a commercial loan transaction with Commonwealth Snack in which GPFC agreed to lend it $5 million. As part of the loan agreement, Commonwealth Snack and GPFC [58]*58also entered into a depository agreement pursuant to which all funds advanced by GPFC were to be held in an account at the China Trust Bank of New York. The depository agreement provided that the funds advanced to Commonwealth Snack remained GPFC’s “sole and exclusive property” and could not be released to Commonwealth Snack except on GPFC’s specific direction. GPFC required Commonwealth Snack to resolve the Dewey lawsuit before it would advance any funds under the loan agreement. The respondent was aware of the terms and conditions of the depository agreement between Commonwealth Snack and GPFC.

In the late summer of 1996, the respondent told Commonwealth Snack that the Dewey lawsuit could be settled for a $750,000 payment to Dewey, and he asked Commonwealth Snack for this sum to complete the settlement. On August 21, 1996, the chief executive officer of Commonwealth Snack, Walter Quednau, wrote to GPFC, requesting $750,000 to pay Dewey. He asked GPFC to wire the funds to the Brauer & Brauer client group account, from which the funds then could be wired to Dewey’s designated account. Quednau’s letter also stated that “[a]ny variance from the $750,000 wired funds and the Dewey settlement will be returned wire transfer to [GPFC] within 24 hours . . . .” Quednau sent the respondent a copy of his August 21 letter to GPFC. The respondent read the letter, did not object to its contents, and understood that he would be receiving $750,000 as escrowee for the settlement of the Dewey lawsuit.

In response to Quednau’s request, GPFC agreed to lend Commonwealth Snack $750,000 to pay the Dewey settlement.3 On August 22, 1996, after receiving instructions from GPFC, the China Trust Bank wired $750,000 to the Brauer & Brauer client group account for the sole purpose of funding the Dewey settlement. The respondent was aware of the receipt of these funds in his client account, and he knew that they were to be held in escrow to pay the Dewey settlement. The Dewey lawsuit did not settle promptly after GPFC wired the- funds to the respondent’s client account. On August 30, 1996, GPFC sent a letter by fac[59]*59simile transmission to Quednau, asking for the immediate return of the $750,000. The same letter was sent by facsimile transmission to the respondent, who received and read it that day.

By August 30, 1996, the respondent was aware that Commonwealth Snack was in serious financial trouble. At that time, it owed Brauer & Brauer fees of $19,628.90 for legal and consulting services provided by the respondent and his father. The respondent also knew that Decnos was owed approximately $77,000 for consulting work that his father had performed for Commonwealth Snack. Both the respondent and his father were concerned about Commonwealth Snack’s ability to pay these outstanding fees.

Around this same time, the respondent told his father about GPFC’s request for the return of the escrowed funds, and they began to consider ways that they could use the $750,000 to satisfy Commonwealth Snack’s obligations to Brauer & Brauer and to Decnos. Despite his understanding that GPFC’s request for the return of the $750,000 was genuine and consistent with the terms under which the funds had been wired into the Brauer & Brauer client group account, the respondent informed Qued-nau that he would not return the escrowed funds to GPFC unless and until Quednau sent him written instructions to do so. The respondent’s purpose in demanding written instructions was intentionally to delay the return of the funds. On September 3, 1996, Quednau sent a letter by facsimile transmission to Brauer & Brauer, stating, “Effective immediately wire the $750,000 for the Dewey escrow to GPFC per Friday’s instructions.” The respondent received the letter on the same day and intentionally ignored the instructions so as to give Decnos time to sue Commonwealth Snack and obtain an attachment for the money that Decnos was owed.

On September 4, 1996, a lawyer retained by the respondent’s father filed a complaint in the Dedham Division of the District Court Department (Dedham District Court) on behalf of Decnos against Commonwealth Snack and against Brauer & Brauer, as trustee. Decnos sought to recover- the $77,000 allegedly owed by Commonwealth Snack. Filed along with the complaint was a motion for an ex parte trustee process attachment.4 On September [60]*605, 1996, the attorney for Decnos filed a motion for a temporary restraining order to prevent Brauer & Brauer from disbursing $77,000 of the $750,000 that the law firm was holding “for the benefit of Commonwealth Snack.” A judge in the Dedham District Court ordered Brauer & Brauer to place $77,000 of the escrowed funds in a separate account, pending further action by the court. On receipt of this order, the respondent neither notified the court that the funds he was holding did not belong to Commonwealth Snack, nor did he challenge the order. Instead, that same day, the respondent transferred $77,000 of GPFC’s escrowed funds from the Brauer & Brauer client group account to a separate escrow account for Decnos.

The respondent had no right to use GPFC’s escrowed funds to pay past or anticipated future legal and consulting fees owed by Commonwealth Snack to Brauer & Brauer. Nonetheless, the respondent transferred an additional $23,000 of GPFC’s escrowed funds to a separate escrow account for Brauer & Brauer to pay $19,628.90 in fees and expenses that Commonwealth Snack owed to the law firm for past work, plus another $3,371.10 to cover anticipated fees for future work. On September 5, 1996, the respondent wired the remaining $650,000 of GPFC’s es-crowed funds to the China Trust Bank, without explaining the $100,000 shortfall.

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Cite This Page — Counsel Stack

Bluebook (online)
890 N.E.2d 847, 452 Mass. 56, 2008 Mass. LEXIS 554, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-brauer-mass-2008.