Plasse: Office Disruptions and Lien Uncertainty Do Not Excuse Escrow Misappropriation; One‑Year Suspension for Pattern of Deficiencies and Commingling

Introduction

This commentary examines the Appellate Division, Second Department’s per curiam decision in Matter of Plasse, 2025 NY Slip Op 04907 (Sept. 10, 2025). The court imposed a one-year suspension on attorney Andrew F. Plasse for violations of New York’s Rules of Professional Conduct governing attorney trust (IOLA) accounts. Four charges were sustained: a pattern of misappropriation of client funds, commingling by depositing and retaining earned fees in an escrow account that held client funds, and failure to maintain required escrow bookkeeping records.

The case presents recurring and critical issues for practitioners:

Whether negligent or non-venal mismanagement that leads to escrow shortfalls still constitutes misappropriation under rule 1.15(a).
Whether disruptions such as office moves and technology failures mitigate trust-account breaches.
Whether retaining earned fees in escrow due to uncertainty over liens constitutes impermissible commingling.
How prior discipline influences sanction selection.

The Grievance Committee moved to confirm a Special Referee’s report sustaining all charges; the respondent did not contest liability, offered mitigation, and requested a six-month suspension. The court confirmed the report and imposed a one-year suspension, relying in part on the respondent’s disciplinary history and using Matter of Dave, 205 AD3d 70, as a sanction benchmark.

Summary of the Opinion

The Grievance Committee alleged that between late 2018 and mid-2019, the respondent’s escrow account balance repeatedly fell below the aggregate amount he was required to hold for clients, with deficits ranging from approximately $2,900 to over $16,000 across multiple dates.
The respondent also deposited two checks representing his earned fees into the escrow account while client funds were on deposit and failed, over months, to promptly withdraw earned fees—both constituting commingling in violation of rule 1.15(a).
He failed to maintain and produce accurate, contemporaneous ledgers and other mandated escrow records, violating rule 1.15(d).
At a March 12, 2024 hearing, the respondent admitted the charges and offered mitigation: a lack of venality, loss of ledgers during a residential move, uncertainty over liens on fees, remedial changes in practice, remorse, good character, and pro bono service.
The Special Referee sustained all charges; the Appellate Division confirmed the report, found the mitigation insufficient to reduce the sanction, and emphasized the respondent’s prior public censure (Matter of Plasse, 17 AD3d 33), a 2000 Admonition, and a 2020 Letter of Advisement as aggravating.
Sanction: a one-year suspension commencing October 10, 2025; earliest reinstatement application July 10, 2026, subject to compliance with 22 NYCRR 1240.15, 1240.16, and CLE obligations under 22 NYCRR 691.11(a).

Analysis

Precedents and Authorities Cited

Matter of Plasse, 17 AD3d 33: The court explicitly considered the respondent’s prior public censure as an aggravating factor. That prior matter involved, among other things, a failure to satisfy a judgment for approximately three years and a failure to retain funds for a lien after acknowledging the lien. The recurrence of problems tied to safeguarding funds and lien handling weighed heavily against leniency here.
Matter of Dave, 205 AD3d 70: Cited by the court in calibrating sanction severity. Dave stands as a Second Department benchmark for imposing a one-year suspension under the totality of circumstances in escrow-misconduct cases involving misappropriation through poor accounting and commingling without proven venal intent. The citation signals that a one-year suspension is an appropriate middle-range sanction when the conduct reflects a sustained pattern, implicates core fiduciary duties, and is aggravated by prior discipline.
Rules and procedural authorities:
- 22 NYCRR 1240.8(b)(1): Referral to a Special Referee to hear and report.
- Rules of Professional Conduct 1.15(a): Strict prohibitions on misappropriation and commingling.
- Rules of Professional Conduct 1.15(d): Mandatory escrow bookkeeping and recordkeeping requirements.
- 22 NYCRR 1240.15 and 1240.16: Conditions governing suspended attorneys and reinstatement applications.
- 22 NYCRR 691.11(a): Continuing legal education requirements relevant to reinstatement.

Legal Reasoning

The court’s reasoning proceeds along well-settled fiduciary principles embedded in rule 1.15. Several features of the opinion stand out:

Pattern of misappropriation established by “deficiency” evidence: The court accepted the Grievance Committee’s proof that on multiple dates, the escrow account balance was lower than the sum the respondent was required to hold for identified clients (e.g., December 11, 2018 deficiency of $2,932.44; March 1, 2019 deficiency of $16,433.38; May 23, 2019 deficiency of $6,683.91). Under New York law, once the aggregate escrow balance dips below the total of client entitlements, misappropriation is established—even absent proof of theft, personal enrichment, or client loss. Intent is not an element of the rule 1.15(a) violation; negligent or reckless trust-account management that yields deficits suffices.
Commingling via fee deposits and delayed fee withdrawals: The respondent deposited two checks representing his earned legal fees into the IOLA while client funds were also on deposit and “routinely failed to promptly withdraw” earned fees over a multi-month span. The court sustained these charges without accepting the respondent’s explanation that he feared potential lien obligations might need to be paid from those fees. Uncertainty about liens did not justify placing or keeping personal funds in the client trust account; the rule’s demand for strict segregation and prompt withdrawal of earned fees once the lawyer’s entitlement is fixed remains firm.
Recordkeeping breach stands on its own: Rule 1.15(d) requires contemporaneous, accurate ledgers showing source and ownership of every deposit, current balances for each client matter, and the details of each disbursement. The respondent’s loss of handwritten ledgers and QuickBooks data during a move did not excuse noncompliance, particularly where the misappropriation predated the move. Reconstruction of ledgers from memory is neither a defense nor a substitute for the mandated records.
Mitigation weighed but found insufficient: The court acknowledged remorse, absence of expressed venality, good character, pro bono work, and remedial changes. It nonetheless concluded that the core fiduciary breach, the duration and repetition of escrow deficiencies, and the independent bookkeeping failures demanded a significant suspension. Most importantly, prior discipline—especially the earlier public censure and two other advisories—aggravated the present violations and supported escalation to a one-year suspension rather than the six months requested.
Sanction calibration: By citing Matter of Dave, the court aligned this case with a sanction tier used for sustained trust-account violations arising from mismanagement rather than intent to defraud. The opinion underscores that a pattern of shortfalls across several months, coupled with commingling and poor records, typically warrants at least a one-year suspension when prior discipline aggravates the picture.

Impact and Prospective Significance

Clarification on “prompt” removal of earned fees: The decision reinforces that leaving earned fees in escrow for weeks or months constitutes commingling, even if the lawyer is uncertain about potential lien claims. The safe course is to promptly remove earned fees upon entitlement and separately hold only those portions actually disputed or subject to a known, extant lien claim.
No “technology or moving” defense to rule 1.15: Office disruptions, lost ledgers, and broken computers are not mitigating in the sense of excusing misconduct. If anything, they highlight the need for redundancy and robust backup protocols. The court’s emphasis that misappropriation predated the move further undercuts attempts to link loss of records to the deficits.
Sanction baseline in the Second Department: The case contributes to a line of decisions signaling that in the absence of venal intent but with repeated deficits, commingling, and poor bookkeeping—especially against a backdrop of prior discipline—a one-year suspension is the expected outcome. This will likely guide settlement discussions and sanction advocacy in future disciplinary matters.
Recurrence matters: The opinion’s reliance on the earlier Plasse censure and other advisories confirms that even older discipline weighs heavily when the new misconduct reflects a through-line of disregard for fiduciary controls or lien-handling obligations.

Complex Concepts Simplified

IOLA (Interest on Lawyer Account): A pooled, interest-bearing trust account for client and third-party funds. The interest supports legal services programs, but principal remains client property. Strict segregation applies: client money must never be reduced below the client’s entitlement, and personal or operating funds cannot be mixed into the account.
Misappropriation under rule 1.15(a): Occurs when client funds are used for non-client purposes or the escrow account balance drops below the sum of what should be held for clients. Venal intent or personal gain is not required; negligent bookkeeping that leads to deficits is enough to violate the rule.
Commingling: Mixing personal funds (including a lawyer’s earned fees) with client funds in a trust account. While New York permits depositing minimal amounts to cover bank charges, earned fees should not remain in escrow once the lawyer’s entitlement is fixed and undisputed.
“Prompt” withdrawal of fees: The lawyer must transfer earned fees out of escrow without undue delay once entitlement is clear. Months-long retention of fees in escrow, while other client funds are present, is noncompliant unless the fees themselves are disputed or lawfully restrained.
Liens on settlements or recoveries: Third-party lienholders (e.g., medical providers, governmental payors) may have claims to client funds. Funds genuinely subject to a lien or dispute must remain in escrow pending resolution. That does not justify keeping unrelated earned fees in escrow.
Escrow ledger and three-way reconciliation: Rule 1.15(d) requires detailed, contemporaneous records (client-by-client ledgers, receipts, disbursements). Best practice is monthly three-way reconciliation among the bank statement, the aggregate escrow ledger, and all individual client ledgers.
Special Referee: In attorney discipline, the Appellate Division may refer matters to a Special Referee to hear testimony, receive evidence, and report findings and recommendations to the court.
Mitigation vs. aggravation: Mitigation includes remorse, cooperation, good character, pro bono service, and remedial measures. Aggravation includes prior discipline, pattern or duration of violations, and harm or risk of harm to clients and the system. Here, prior discipline and the pattern of deficits were decisive aggravators.
Suspension and reinstatement (22 NYCRR 1240.15, 1240.16): A suspended attorney must cease all practice, comply with detailed wind-down and notice obligations, and may apply for reinstatement no earlier than three months before the suspension ends, showing full compliance and continued CLE.

Practical Guidance for Practitioners

Segregate funds with discipline. Deposit client/third-party funds into IOLA; deposit earned fees and firm money into your operating account. If a settlement check contains both client funds and fees, promptly transfer the fee portion out of escrow upon entitlement.
Handle liens and disputes precisely. If a portion of funds is subject to a known lien or dispute, hold that portion in escrow. Do not leave unrelated earned fees in the trust account while you resolve lien questions.
Maintain contemporaneous records. Keep client-by-client ledgers, a running escrow balance, and detailed records of each deposit and disbursement. Perform monthly three-way reconciliations and promptly resolve discrepancies.
Build redundancy. Implement automatic, encrypted backups of escrow records (on-site and off-site/cloud). Test data recovery. Retain physical records securely and maintain a chain of custody for any move.
Minimize commingling exposure. Only the minimal amount necessary to cover bank charges may be kept in escrow as firm funds. Do not use escrow to “park” personal or operating monies.
Document fee entitlement and withdrawals. When transferring fees from escrow, contemporaneously document the basis (retainer/settlement statement), amount, and date to the operating account.
Train staff and audit. Ensure all personnel understand trust-account rules. Conduct periodic internal audits; if feasible, engage an outside accountant to review controls and reconciliations.
Act immediately on discrepancies. If a deficiency appears, stop nonessential disbursements, investigate root causes, correct the balance lawfully, and self-report as appropriate.
Treat “non-venal” errors seriously. Good intentions do not prevent discipline for escrow deficits. The standard is strict: client funds must never be at risk or used—even temporarily—for other purposes.

Conclusion

Matter of Plasse fortifies the Second Department’s consistent message: escrow diligence is non-negotiable. The court sustained charges of misappropriation based on repeated trust-account deficiencies, found commingling where earned fees were deposited into and retained in escrow, and sanctioned deficient recordkeeping—despite claims of non-venal error, office disruptions, and remedial steps. The court’s reliance on Matter of Dave underscores a sanction baseline: a one-year suspension is warranted when a lawyer’s pattern of escrow shortfalls, commingling, and recordkeeping failures is aggravated by prior discipline, even absent proof of theft or client loss.

Two practical holdings stand out. First, office upheavals and lost records do not excuse or significantly mitigate misappropriation, especially where deficits predate the disruption. Second, uncertainty over potential liens does not justify retaining earned fees in escrow; “prompt” withdrawal remains the rule unless the fees themselves are disputed. For the bar, the takeaways are clear: maintain meticulous, redundant escrow records; reconcile monthly; separate client and firm monies without exception; and treat any deficiency—no matter how brief or unintended—as a crisis requiring immediate correction. The decision thus serves both as a cautionary tale and as a sanction guidepost for future disciplinary cases in New York.