David Gross, one of New Jersey's prominent litigators, is facing possible disbarment for making a big mistake and two little ones.
First, he took $50,000 from a client in 1998 and didn't share it with his partners. Second, he confided in his secretary about what he did. Third, he got on the secretary's wrong side, and she squealed to the firm four years later.
In an opinion made public on Tuesday, the New Jersey Disciplinary Review Board recommended disbarment for Gross, a leading product liability practitioner and former president of the Association of the Federal Bar of New Jersey.
By a 5-2 vote, the board found Gross' failure to share the $50,000 with his firm at the time, Budd Larner in Short Hills, N.J., was an act of willful misappropriation.
Such acts are punishable by automatic and permanent disbarment in New Jersey, even for lawyers with glittering reputations and unblemished ethics records, like Gross. What's more, a 1993 Supreme Court decision says there is no distinction, for punishment purposes, between lawyers who filch funds from clients and those who misappropriate firm money.
"In this case, respondent had a fundamental obligation not to 'pick his partners' pockets,' " the board said.
The case now goes to the state Supreme Court for a final decision, and Gross, 74, now a partner at 58-lawyer Saiber in Florham Park, N.J., can only hope that the justices agree with the two dissenting board members.
The dissenters said Gross had a reasonable belief that he was entitled to the money; one voted for censure, the other for a one-year suspension. There was evidence that the client intended the $50,000 to be a personal gift, particularly because it was over and above $5 million in fees the client paid the firm.
Other members of the firm had accepted valuable presents without telling partners, Gross argued.
His lawyer, Justin Walder of Walder, Hayden & Brogan in Roseland, N.J., said on Tuesday he is confident the Supreme Court will realize the DRB made a mistake, particularly its "unprecedented" disregard of stipulated evidence that the firm permitted its partners to accept gifts from clients without sharing.
Gross, as managing partner of Budd Larner from 1970 to 2002, was one of the state's leading product liability rainmakers, particularly in the field of asbestos litigation.
The client at the center of the case, the Keene Creditors Trust, was formed to compensate asbestos disease claimants of the bankrupt Keene Corp. The trust hired Gross to handle a fraudulent conveyance suit and an insurance dispute. It was a lucrative representation. Budd Larner received $5 million in fees on the two matters.
But the client also wanted to give Gross something special for himself. The Office of Attorney Ethics, which prosecuted Gross, stipulated that the Keene trustees decided in 1998 to give him $100,000 "over and above" the fees paid to Budd Larner. Gross told the trustees to give half to his New York co-counsel, so he got $50,000.
Enter Claudette McCarthy. She had been Gross' secretary for many years and they had a good relationship. She enjoyed working for him and he gave her glowing evaluations, according to the discipline board.
McCarthy testified that she typed the letter setting up the Keene payment and the letter advised the Keene trustee to send the check to Gross in an envelope marked "personal and confidential." Letters not marked that way would be opened in the mailroom and the check would have automatically been set aside for deposit in the firm account, according to testimony.
Gross instructed McCarthy to remove the letter from her computer and told her not to tell anyone in the firm about it. And she didn't ... until 2002, when she decided to get even because Gross had begun treating her badly, she testified.
She said she started getting the cold shoulder in 1999 after she refused to take time from a busy schedule to do some work for Gross' wife, Heidi Gross, a lawyer in the firm. There were other incidents, one of which ended with Gross calling her a "fucking idiot," McCarthy told the disciplinarians.
In 2002, not long after Gross scrawled "no" across her vacation request and threw it into a wastebasket, McCarthy told members of the firm about the 1998 check.
"She admitted that she wanted him to feel embarrassed and humiliated because she felt that he had demeaned, degraded, and abused her, and had ruined her reputation at the firm," the board said.
Partner Mark Larner testified that Gross denied receiving the check, but later acknowledged it and refused to reimburse the firm. Other partners testified that Gross said he felt he deserved the money because his compensation from the firm didn't reflect his value -- a statement he denied making.
Still, he refused to pay, the firm sued him and they settled for an undisclosed amount.
The key issue for the discipline board in deciding whether it was a permissible gift or a misappropriation was whether Budd Larner had a policy requiring attorneys to tell the partnership about such payments and receive approval before keeping them.
By the firm's reckoning, a 1980 partnership agreement required Gross to give the $50,000 to the firm. "Everything you receive belongs to the firm, unless otherwise agreed upon," is how partner Susan Winters described the policy in testimony.
Winters said, for example, that she disclosed the receipt of a diamond necklace from a client and a $100 gift certificate as well.
Gross countered that it was his understanding that there was no such policy and that at a time when he was a head of the firm he so advised another lawyer who had been offered a $65,000 Mercedes-Benz from a client.