Opinion
DRB 22-116
12-16-2022
In the Matter of Kendal Coleman An Attorney at Law
Timothy M. Ellis Acting Chief Counsel
District Docket No. XIV-2021-0272E
Timothy M. Ellis Acting Chief Counsel
DECISION
Hon. Maurice J. Gallipoli, A.J.S.C. (Ret.), Chair
To the Honorable Chief Justice and Associate Justices of the Supreme Court of New Jersey.
This matter was before us on a certification of the record filed by the Office of Attorney Ethics (the OAE), pursuant to R. 1:20-4(f). The formal ethics complaint charged respondent with having violated RPC 5.5(a)(1) (unauthorized practice of law - failure to maintain liability insurance while practicing as a professional corporation, as R. 1:21-1A(a)(3) requires) and RPC 8.1(b) (failure to cooperate with disciplinary authorities).
Due to respondent's failure to file an answer to the formal ethics complaint, the OAE amended the complaint to include the RPC 8.1(b) charge.
On September 28, 2022, respondent filed a motion to vacate the default (MVD), which we denied on October 21, 2022. For the reasons set forth below, we determine that a three-month suspension, with a condition, is the appropriate quantum of discipline for respondent's misconduct.
Respondent earned admission to the New Jersey bar in 2000. At all relevant times, he maintained a practice of law in Clifton, New Jersey.
On July 25, 2019, respondent was censured in two consolidated matters, one of which proceeded as a default. In re Coleman, 245 N.J. 264 (2019) (Coleman I). In the default matter, respondent failed to maintain professional liability insurance, as required by R. 1:21-1A(a)(3), and continued to practice law following the revocation of his law firm's corporate status, in violation of RPC 5.5(a)(1). Further, following the revocation of his corporate status, respondent continued to advertise and promote his law practice as a professional corporation on his website, social media, and on his attorney trust and business accounts, in violation of RPC 7.1(a) (false or misleading communications about a lawyer or the lawyer's services) and RPC 8.4(c) (conduct involving dishonesty, fraud, deceit or misrepresentation).
In the second consolidated matter, respondent created a shortage in his attorney trust account (ATA) when, following a bank error, he disbursed to a real estate seller a check exceeding the amount of funds he held on the seller's behalf, in violation of RPC 1.15(a) (negligent misappropriation and failure to safeguard client funds). Respondent was unaware of the error, which persisted for two years, until the OAE conducted a demand audit revealing his recordkeeping violations (RPC 1.15(d)). We acknowledged that the baseline discipline for respondent's misconduct across both matters was a reprimand. However, pursuant to New Jersey disciplinary precedent, we determined that the default status of the matter required an enhancement to a censure. In the Matter of Kendal Coleman, DRB 18-211 and 18-218 (December 14, 2018).
As a condition to the discipline, we also required, and the Court so ordered, that respondent (1) attend the New Jersey State Bar Association Diversionary Continuing Legal Education (CLE) Program and file proof of attendance with the OAE, and (2) attend the New Jersey Institute for CLE New Jersey Trust and Business Accounting Program, or its equivalent, with proof of attendance to the OAE within ninety days. Further, respondent was required to provide the OAE with quarterly reconciliations of his attorney trust account (ATA) for a period of two years.
Effective August 27, 2021, the Court temporarily suspended respondent for failing to provide records and documents to the OAE, as required by the Court's Order in Coleman I. In re Coleman, 248 N.J. 207 (2021). Less than two months later, on October 19, 2021, respondent was reinstated. In re Coleman, 248 N.J. 511 (2021).
On March 14, 2022, respondent again was censured, in a second default matter, for violating RPC 1.5(a) (unreasonable fee); RPC 1.15(d); and RPC 8.1(b). In re Coleman, 250 N.J. 120 (2022) (Coleman II). In that matter, the OAE commenced an audit following an overdraft in respondent's ATA which revealed multiple recordkeeping deficiencies. The OAE's audit also revealed that, in five personal injury matters, respondent improperly had calculated his legal fee based upon the gross, rather than the net, settlement amount. We enhanced the baseline discipline of a reprimand to a censure based upon respondent's default. We determined, however, that greater discipline was not warranted, since respondent's recordkeeping violations in Coleman II had occurred prior to his recordkeeping violations in Coleman I. Thus, the principles of progressive discipline were not applicable. In the Matter of Kendal Coleman, DRB 20-317 (July 28, 2021).
Effective June 27, 2022, the Court declared respondent administratively ineligible to practice law for nonpayment of his annual attorney assessment to the New Jersey Lawyers' Fund for Client Protection. Respondent was removed from the Court's ineligibility list on August 2, 2022, as memorialized in an August 25, 2022 Notice to the Bar.
Turning to the instant matter, service of process was proper. On April 19, 2022, the OAE sent a copy of the formal ethics complaint, by certified and regular mail, to respondent's office address of record. Neither the certified mail nor the regular mail was returned to the OAE.
On May 25, 2022, the OAE sent a letter to respondent at the same office address of record, by certified and regular mail, and also by electronic mail, informing him that, unless he filed a verified answer within five days of the date of the letter, the allegations of the complaint would be deemed admitted; the record would be certified to the us for the imposition of discipline; and the complaint would be deemed amended to charge a willful violation of RPC 8.1(b) by reason of his failure to answer. The certified mail was not returned to the OAE and the United States Postal Service (USPS) tracking indicated delivery on June 1, 2022. Further, the regular mail was not returned to the OAE.
As of June 27, 2022, respondent had not filed an answer to the complaint and the time within which he was required to do so had expired. Accordingly, the OAE certified this matter to us as a default.
On July 25, 2022, Chief Counsel to the Board sent a letter to respondent's home address of record, by certified and regular mail, and also by electronic mail, informing him that the matter was scheduled to be considered by us on September 15, 2022, and that any MVD must be filed by August 8, 2022. On October 18, 2022, the letter sent via certified mail was returned to the Office of Board Counsel (the OBC). The letter sent via regular mail, however, was not returned to the OBC. Delivery to respondent's e-mail address was completed, and the OBC received a delivery notification from the destination server.
Moreover, on August 1, 2022, the OBC published a notice in the New Jersey Law Journal, stating that we would consider this matter on September 15, 2022. The notice informed respondent that, unless he filed a successful MVD by August 8, 2022, his failure to answer would remain deemed an admission of the allegations of the complaint. On September 14, 2022, the OBC adjourned this matter, at respondent's request, requiring that any MVD be filed by September 28. On September 28, 2022, respondent filed an MVD. Following our review, we issued a letter decision denying that motion on October 21, 2022.
We now turn to the allegations of the complaint.
Respondent has operated his law practice as "Kendal Coleman, P.C.," a professional corporation, since July 21, 2004. Although R. 1:21-1A(a)(3) required him to maintain professional liability insurance while operating as a professional corporation and, within thirty days of filing its certification of incorporation, to file a copy of the certification of insurance with the Clerk of the Supreme Court, he failed to do so.
On April 13, 2021, an unrelated law firm requested from the Clerk of the Supreme Court a copy of respondent's certificate of professional liability insurance, along with the declaration page. The law firm's letter did not indicate the basis for the request or provide the period for which it sought insurance coverage information.
On April 16, 2021, the Clerk directed that respondent provide a copy of his insurance certificate. In her letter, the Clerk reminded respondent of his law firm's obligation, as a professional corporation, to maintain professional liability insurance and to file a copy of the certificate of insurance with the Clerk's office within thirty days of initiating the practice. Further, the Clerk stated:
To date, this office has no record of receiving the required documentation from your firm. If you are no longer practicing as a PC, LLC or LLP, please advise this office of such in writing. If the firm is dissolved, you must provide a copy of the proof of dissolution of the legal entity filed with the New Jersey Department of Treasury, Commercial Recording.
Failure to submit the applicable documentation within fourteen (14) days of the date of this letter will result in notification of such non-compliance to the Office of Attorney Ethics.
[CEx1.]
"CEx" refers to exhibits to the April 14, 2022 formal ethics complaint.
Respondent failed to reply.
On May 19, 2021, the Clerk's office contacted respondent by telephone; respondent informed the Clerk's office that he had been sick but would provide the insurance certificate.
On May 24 and July 6, 2021, the Clerk sent respondent follow-up letters, again requesting a copy of his certificate of insurance. Both letters reminded responded that, if he failed to comply, the Clerk would notify the OAE of his non-compliance. Respondent failed to reply. Consequently, on August 13, 2021, the Clerk referred this matter to the OAE.
On September 22, 2021, the OAE provided respondent with the Clerk's referral and directed him to submit to the OAE a written response, along with any relevant documentation, no later than October 7, 2021. Respondent requested a two-day extension to submit his reply, which the OAE granted.
Approximately three months later, on January 11, 2022, respondent appeared for the OAE's demand interview. Although respondent subsequently provided the OAE with information "from his insurer," he failed to provide a certificate of insurance "for the time period in question." Thus, according to the complaint, "respondent failed to maintain the required liability insurance and failed to provide the required [c]ertificate of [i]nsurance to the Clerk of the Supreme Court," despite the Clerk's repeated requests, as R. 1:21-1A requires.
Based on these facts, the OAE charged respondent with having violated RPC 5.5(a)(1).
As previously mentioned, on September 28, 2022, respondent filed an MVD in this matter, supported by his two-page certification and three pages of exhibits. The OAE did not file an opposition brief. In order to successfully vacate a default, a respondent must meet a two-pronged test by offering both a reasonable explanation for the failure to answer the ethics complaint and asserting meritorious defenses to the underlying charges. Here, we determined that respondent failed to satisfy either prong.
Specifically, as to the first prong, respondent failed to offer a reasonable explanation for his failure to file an answer to the formal ethics complaint. Importantly, respondent does not deny having received the complaint or the OAE's May 25, 2022 letter. Instead, he contends that he was ill on three occasions, in 2020 and 2021, circumstances of which he claims to have notified the Clerk of the Court. Further, in January 2021, respondent's paralegal passed away and, according to respondent, the resulting loss caused him to suffer anxiety. Respondent failed, however, to correlate his illness or anxiety with his inability to file an answer that was due, at the very latest, on May 30, 2022, more than a year following his paralegal's death. Moreover, if his anxiety had interfered with his ability to submit a verified answer, he should have contacted the OAE. He does not claim to have done so.
Respondent further asserted that, in May 2021, he was injured in a serious motor vehicle accident, requiring physical therapy. Again, respondent does not explain how his physical injuries or his attendance in physical therapy sessions interfered with his ability to file an answer to the complaint in May of the following year.
Respondent also disclosed that he had lost very close family members and a best friend but, again, does not explain how these losses, on unspecified dates, prevented him from filing his answer or contacting the OAE.
Next, respondent asserted that he was very ill from December 2021 to June 2022; that he did not work during most of the summer of 2022; and that he "did not file an [a]nswer to the [c]omplaint due to illness and other personal issues." Respondent's broad assertion that these events prevented him from filing an answer, however, falls short of satisfying prong one. Respondent does not deny having received the complaint; nor does he deny having received the OAE's May 25, 2022 letter, warning him that his failure to file an answer would result in the matter being certified to us and that the complaint would be deemed amended to include a violation of RPC 8.1(b). Respondent, in his certification, described a series of unfortunate events but failed to provide any explanation how these events, many of which predated the OAE's investigation, affected his ability to file an answer. Further, respondent did not provide us with any documentation to substantiate his assertions. Moreover, if respondent's 2022 illness and other issues prevented him from tending to his professional obligations, such as answering the OAE's complaint, respondent should have notified the OAE, which he does not claim to have done.
In Coleman I, respondent similarly asserted in his unsuccessful MVD that a series of events, including his mother's illness and surgery and his best friend's death, had affected his ability to timely file an answer. Coleman I, at 13. We rejected respondent's position. Specifically, respondent continued to practice law and, thus, we reasoned that respondent had made a choice to not answer the OAE's complaint. Further, the stressful events upon which respondent relied all occurred after his answer was due.
Because respondent has not demonstrated that the events he cited affected his ability to answer the complaint prior to the deadline, respondent's MVD fails the first prong of the analysis. Moreover, given respondent's two prior defaults, and the enhanced sanctions imposed in those matters, he had a heightened awareness of his obligation to file a timely verified answer to the complaint.
Regarding the second prong, respondent failed to assert a meritorious defense to any of the underlying charges. In fact, respondent did not address the allegations of the complaint. Instead, he asserted that he had provided the OAE with the requested documentation, including his certificate of insurance, but that the OAE "felt the need to push its power upon the [r]espondent when all documents and information had been provided." Respondent did not claim to have maintained the required liability insurance during the relevant timeframe, or that he had filed same with the Clerk of the Court, as the Rules require. Instead, respondent provided correspondence with First Indemnity Insurance Group, including an April 7, 2022 written request to change the policy holder name from Kendal Coleman, P.C. to Law Offices of Kendal Coleman. Respondent did not, however, explain the relevancy of this correspondence to his defense of this matter. Certainly respondent's 2021 illness and motor vehicle accident may have coincided with the Clerk's multiple inquiries concerning his professional liability insurance, however, respondent failed to causally connect his illness or physical injuries to his inability to respond to the Clerk's requests. In short, respondent asserted no defenses to any of the charged RPCs and, instead, stated that he "will provide a meritorious defense," presumably, if granted leave to file an answer.
Therefore, respondent failed to assert a meritorious defense to the allegations set forth in the complaint and, thus, failed to satisfy prong two. Accordingly, we determined to deny respondent's MVD.
Moving to our review of the record, we find that the facts recited in the complaint support the allegations that respondent violated RPC 5.5(a)(1) and RPC 8.1(b). Respondent's failure to file a verified answer to the complaint is deemed an admission that the allegations of the complaint are true and that they provide a sufficient basis for the imposition of discipline. R. 1:20-4(f)(1).
Specifically, R. 1:21-1A(a)(3) requires a professional corporation to obtain and maintain in good standing one or more policies of lawyers' professional liability insurance. The Rule provides, in relevant part:
The professional corporation shall obtain and maintain in good standing one or more policies of lawyers' professional liability insurance which shall insure the corporation against liability imposed upon it by law for damages resulting from any claim made against the corporation by its clients arising out of the performance of professional services by attorneys employed by the corporation in their capacities as attorneys.
[R. 1:21-1A(a)(3).]
Further, R. 1:21-1A(b) requires a professional corporation formed to engage in the practice of law to file with the Clerk a certificate of insurance, within thirty days after filing its certificate of incorporation. The Rule also requires the professional corporation to file with the Clerk any amendments to or renewals of the certificate of insurance within thirty days of the effective date of the amendment or renewal. Ibid.
Here, respondent incorporated as a professional corporation - Kendal Coleman, P.C. - on July 21, 2004. Consequently, respondent was required, by Court Rule, to maintain professional liability insurance and to file certificates of insurance with the Clerk. Respondent did neither and, consequently, violated RPC 5.5(a)(1), which prohibits a lawyer from practicing "law in a jurisdiction where doing so violates the regulation of the legal profession in that jurisdiction."
Respondent also violated RPC 8.1(b), which requires an attorney to "respond to a lawful demand for information from . . . [a] disciplinary authority." Here, respondent violated this Rule by failing to file a verified answer to the formal ethics complaint and allowing this matter to proceed as a default.
In sum, we find that respondent violated RPC 5.5(a)(1) and RPC 8.1(b). The sole issue left for our determination is the proper quantum of discipline for respondent's misconduct.
The baseline discipline for practicing law without maintaining the required professional liability insurance is an admonition. In re Lindner, 239 N.J. 528 (2019) (default; for a three-year period, the attorney practiced law as a limited liability corporation without maintaining professional liability insurance; no prior discipline); In the Matter of F. Gerald Fitzpatrick, DRB 99-046 (April 21, 1999) (for a six-year period, the attorney practiced law as a professional corporation without maintaining liability insurance).
If the misconduct is accompanied by other violations or aggravating factors, greater discipline may be warranted. In re Coleman, 245 N.J. 264 (2019) (censure for attorney who, in two consolidated matters, failed to maintain liability insurance while practicing as a professional corporation; attorney also negligently misappropriated client funds (RPC 1.15(a)), violated the recordkeeping rules (RPC 1.15(d)), advertised as a professional corporation despite his corporate status having been revoked (RPC 7.1(a)), and engaged in conduct involving dishonesty, fraud, deceit or misrepresentation (RPC 8.4(c)); in aggravation, we weighed the default status of one matter and, in the second matter, the prolonged shortage in respondent's trust account; no prior discipline); In re Velahos, 220 N.J. 108 (2014) (censure for attorney who failed to maintain liability insurance while practicing as a limited liability corporation; engaged in a partnership with a non-lawyer in the practice of law (RPC 5.4(b)); committed a criminal act (RPC 8.4(b)); and engaged in conduct involving dishonesty, fraud, deceit or misrepresentation in connection with loan modification services he provided with his wife, a nonlawyer; no prior discipline); In re Cavaliere, 216 N.J. 90 (2013) (censure for attorney who failed to maintain liability insurance; misrepresented to a random auditor that his professional liability insurance had expired, knowing that he had not obtained insurance as directed following a previous random audit; and failed to comply with the recordkeeping Rule; no prior discipline); In re Aponte, 215 N.J. 298 (2013) (censure for attorney who failed to maintain professional liability insurance while operating as a professional corporation; engaged in improper fee sharing and formed an impermissible partnership with nonlawyers in connection with mortgage modifications and bankruptcy filings; engaged in lack of diligence (RPC 1.3), gross neglect, and pattern of neglect in handling bankruptcy files (RPC 1.1(a) and (b)); and was guilty of recordkeeping violations; no prior discipline).
When an attorney fails to cooperate with disciplinary authorities, and previously has been disciplined, but the attorney's ethics record is not serious, reprimands have been imposed. See, e.g., In re Howard, 244 N.J. 411 (2020) (the attorney failed to respond to the district ethics committee's four requests for a written reply to an ethics grievance, which alleged that the attorney had failed to prosecute his client's claim for social security disability benefits; the attorney had received a prior censure for similar misconduct in which he had failed to cooperate with disciplinary authorities; in mitigation, the attorney ultimately retained ethics counsel, cooperated with the DEC, and stipulated to some of his misconduct); In re Larkins, 217 N.J. 20 (2014) (default; the attorney did not reply to the ethics investigator's attempts to obtain information about the grievance and failed to file an answer to the formal ethics complaint; although we noted that a single violation of RPC 8.1(b), in a default matter, does not necessitate enhancement of the discipline from an admonition to a reprimand, a reprimand was imposed based on a prior admonition and, more significantly, a 2013 censure, also in a default matter, in which the attorney had failed to cooperate with an ethics investigation).
Based upon the above disciplinary precedent, the baseline discipline for respondent's misconduct, in violation of RPC 5.5(a)(1) and RPC 8.1(b), is a censure. However, to craft the appropriate discipline, we must consider both mitigating and aggravating factors.
There is no mitigation to consider.
In aggravation, we accord significant weight to respondent's disciplinary history. This matter represents respondent's fourth encounter with the disciplinary system in five years, albeit our third decision as the result of the consolidation of two matters in Coleman I. The Court has signaled an inclination toward progressive discipline and the stern treatment of repeat offenders. In such scenarios, enhanced discipline is appropriate. See In re Kantor, 180 N.J. 226 (2004) (disbarment for abandonment of clients and repeated failure to cooperate with the disciplinary system).
In Coleman I, we consolidated two matters (DRB 18-211 and 18-218) for the purpose of imposing discipline; Coleman II involved one matter (DRB 20-317).
Here, progressive discipline is warranted in light of respondent's disciplinary history and, specifically, his failure to learn from his past mistakes. In Coleman I, respondent was censured, in a default matter, for the same misconduct (among other misconduct) as the instant matter - his failure to maintain professional liability insurance. In that matter, respondent filed a motion to vacate the default asserting, in defense of his failure to maintain the required insurance, that he had relied upon information acquired during a continuing legal education class. Coleman I, at 16. In his proposed answer, respondent claimed to have purchased liability insurance in 2017 and, thus, by implication, acknowledged that had not maintained the required insurance prior to 2017, including the timeframe he practiced law as a corporation. Ibid.
We denied respondent's motion to vacate the default in that matter, determining that, among other violations, respondent had failed to comply with the provisions of R. 1:21-1(A)(a)(3) and, therefore, violated RPC 5.5(a). In our decision, we expressly stated:
Under R. 1:21-1A(a)(3), a professional corporation must maintain professional liability insurance and, under subsection (b), within thirty days after filing its certificate of incorporation, "shall file with the Clerk of the Supreme Court a certificate of insurance." Respondent failed to do so in 2004. In 2016, another law firm sought a copy of the certificate from the Clerk. When no copy was on file, the Clerk sent a series of letters prodding respondent to reply. Respondent, however, never replied.
[Id. at 20.]
Thus, respondent was on notice that his failure to comply with R. 1:21-1A would, and indeed did, result in discipline. Yet, to date, respondent has neither obtained the required liability insurance nor filed a certificate of insurance with the Clerk.
It is worth noting that respondent also had a heightened awareness of his obligation to insure his corporation as a result of the four administrative contacts from the Supreme Court, occurring between April 16 and July 6, 2021. His failure to follow the Clerk's explicit direction ultimately necessitated the disciplinary referral.
Thus, respondent's failure to conform his conduct to the Rules, despite his heightened awareness of this obligation, reflects a willful decision on his part to ignore our previous decision and the Court's disciplinary Order, and to place his own financial interests above those of his clients.
Equally concerning is respondent's prior representation to us in Coleman I wherein, in his motion to vacate default, he claimed to have obtained liability insurance in 2017. Given the instant complaint, however, respondent's earlier representation to us was either false at the time it was made or, alternatively, respondent allowed his insurance coverage to lapse, in violation of the Rule. Either alarming scenario is indicative of respondent's disregard of the professional standards to which he is obligated to adhere. Moreover, respondent never provided the Clerk with his certificate of insurance, also in violation of the Rule, despite having been disciplined for his failure to do so.
Respondent's default in this matter has already been considered in determining the baseline quantum of discipline. In re Kivler, 193 N.J. 332, 342 (2008) (citations omitted) ("[A] respondent's default or failure to cooperate with the investigative authorities acts as an aggravating factor, which is sufficient to permit a penalty that would otherwise be appropriate to be further enhanced.") However, we would be remiss if we did not consider the fact that the instant matter represents respondent's third default.
Respondent defaulted in Coleman I, resulting in his censure. In that matter, we acknowledged that a reprimand was the baseline discipline for respondent's misconduct across two consolidated matters, including his negligent misappropriation of client funds; recordkeeping violations; failure to maintain professional liability insurance; misrepresentations regarding the status of his law practice as a professional corporation; and conduct involving dishonesty, fraud, deceit or misrepresentation. Coleman I, at 24, 28. However, we enhanced the discipline to a censure because respondent had allowed one of the two matters to proceed as a default. Coleman I, at 28. At the time, respondent had no prior discipline.
Respondent also defaulted in Coleman II. In that matter, we again acknowledged that a reprimand was the baseline discipline for respondent's recordkeeping violations; failure to cooperate with the ethics investigation; and the improper calculation of his fee based upon the gross, rather than net, settlement amount. Coleman II, at 12. Although we censured respondent based upon his default status, we declined to impose principles of progressive discipline because respondent's misconduct in Coleman II predated his misconduct in Coleman I. Id. at 12.
Here, respondent previously has been disciplined for his failure to maintain the mandatory liability insurance and to file the necessary certificates of insurance with the Clerk. His refusal to conform his conduct to that required by the Rules, in conjunction with his repeated defaults, justifies enhancement of what ordinarily would be a censure to a three-month term of suspension.
Accordingly, we determine that a three-month suspension is the appropriate quantum of discipline necessary to protect the public and preserve confidence in the bar. As a condition precedent to his reinstatement, respondent is required to submit proof to the OAE that he has filed his certificate of insurance with the Clerk or, alternatively, proof that he is no longer obligated to comply with the provisions of R. 1:21-1A.
Vice-Chair Boyer and Member Joseph voted to impose a censure.
Member Menaker was absent.
We further determine to require respondent to reimburse the Disciplinary Oversight Committee for administrative costs and actual expenses incurred in the prosecution of this matter, as provided in R. 1:20-17.
Disciplinary Review Board