Matter of Feng Li
149 A.D.3d 238
| N.Y. App. Div. | 2017Background
- Feng Li, admitted in NY (2004) and NJ (2004), represented investors who recovered a ~$3.55M judgment (plus ~$516k Rabine funds) after a 2007 bench trial; funds were deposited in his trust account in 2009.
- Li used a downloaded contingency retainer form (a New Jersey personal-injury style sliding scale that excluded prejudgment interest) that did not reflect the parties’ prior verbal understanding that fees would be one-third of the recovery.
- A fee dispute arose after judgment: Li calculated fees on an assumed one‑third basis (including prejudgment interest and Rabine funds) and withdrew about $1.2M to accounts in his children’s names and wired portions abroad; clients sued and obtained restraining orders and later a $1,040,421.46 judgment against Li.
- New Jersey disciplinary proceedings found Li failed to segregate disputed funds, did not account, permitted a non‑attorney to sign trust checks, and (majority) concluded he knowingly misappropriated client funds; the NJ Supreme Court disbarred him.
- Federal bankruptcy and NJ state courts ruled against Li on related claims (denying discharge, granting summary judgment on fee dispute), and NJ courts confirmed the written retainer governed fee entitlement.
- The Second Department reviewed the NJ record under former 22 NYCRR 691.3 and imposed reciprocal discipline: a three‑year suspension in NY, finding no successful defense to reciprocal discipline and that Li improperly disbursed disputed funds and placed them beyond clients’ reach.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did Li knowingly misappropriate client funds? | Clients/Grievance: Li withdrew disputed funds and transferred them to children/wired abroad despite disputes and court orders, so conduct was knowing misappropriation. | Li: He genuinely believed the fees (one-third) were due; any withdrawal was based on a reasonable good‑faith belief; dispute was over calculation. | Court: Evidence supports knowing misappropriation of Rabine funds and part of the judgment; Li’s defenses failed. |
| Does the written retainer control fee entitlement? | Clients/Grievance: The written NJ-form retainer governs; it did not authorize the $1.2M Li took. | Li: The parties had an oral/common understanding of a one‑third fee; written form was a mistake and should be reformed. | Court: Written retainer governs; despite verbal understanding, Li failed to prevail in litigation to reform it. |
| Are the New Jersey disciplinary proceedings/jurisdiction or notice defenses valid against reciprocal discipline? | Grievance: NJ discipline is valid and enforceable; reciprocal discipline appropriate. | Li: NJ authorities lacked jurisdiction over aspects; he lacked notice/opportunity; reciprocal discipline would be unjust. | Court: Defenses rejected — Li had notice/opportunity and NJ had authority; reciprocal discipline appropriate. |
| What sanction is appropriate in NY for Li’s misconduct? | Grievance: Seriousness of knowing misappropriation warrants severe discipline (NJ disbarment; reciprocal discipline permissible). | Li: Conduct arose from fee dispute and mistakes; mitigation (inexperience, no prior discipline) argues against maximum sanction. | Court: Balancing aggravating/mitigating factors, imposed a three‑year suspension (reciprocal discipline), not disbarment. |
Key Cases Cited
- In re Feng Li, 213 N.J. 523 (N.J. 2013) (NJ Supreme Court disbarment order affirming DRB majority that Li lacked a reasonable good‑faith belief of entitlement)
- In re Rogers, 126 N.J. 345 (N.J. 1991) (standard: reasonable good‑faith belief can defeat knowing misappropriation finding)
- Matter of Wilson, 81 N.J. 451 (N.J. 1980) (disciplinary principles cited by NJ Supreme Court)
- Matter of Shearer, 94 A.D.3d 128 (2d Dep’t 2012) (precedent referenced for suspension sanction in reciprocal discipline context)