An attorney who was disbarred in New Jersey for misappropriating client funds has received a lighter sanction—three years' suspension—in New York, where he is also licensed to practice, for the same incident of misconduct.
At the heart of the disciplinary case against Feng Li, who was licensed to practice in both states in 2004, is a disagreement between him and a group of clients over legal fees that has touched off litigation in state and federal courts on both sides of the Hudson River.
In 2005, Li was retained by a group of clients who were bilked in an investment scheme who had been fighting for 15 years in Queens Supreme Court to recover damages for fraud and breach of fiduciary duty, according to a decision by a panel of the Brooklyn-based Appellate Division, Second Department, which was handed down on Wednesday.
But while the case was being litigated in New York, Li presented to his clients a retainer agreement—which he downloaded from the internet—that was intended for use in New Jersey.
New York law entitles attorneys to collect one-third of any settlement as attorney fees, while Li used a sliding-scale fee structure in which he received a smaller percentage for each $500,000 recovered.
In New Jersey, the structure Li used is mandatory in personal injury matters but not fraud cases, said Paul DePetris, a solo attorney in Cherry Hill, New Jersey.
In 2008, Li won a total of $4 million for his clients in two disbursements. While meeting with the clients to discuss how the funds would be divvied up, a disagreement ensued over Li's contingency fee.
Li argued that his fee should be determined by New York rules, which would entitle him to about $1.1 million. His clients wanted to follow the agreement, which entitled Li to about $325,000.
The parties never reached an agreement on the fee, and Li gave his clients $2.8 million and transferred the rest of the money to trust funds set up for the benefit of his children.
Willard Shih of Wilentz, Goldman & Spitzer in Woodbridge, New Jersey, who now represents Li's former clients, sent letters to Li telling him not to spend the money, according to a 2014 decision by a federal judge in New Jersey. But Li used the funds to pay off debts held by creditors in China.
Shih declined to comment for this article.
The clients sued Li in New Jersey Superior Court in Middlesex County, New Jersey, and Judge Travis Francis ordered Li to account for the money he obtained from the judgment. After a failed attempt to get a New York judge in Westchester County to enjoin the suit, in January 2010, Li filed for Chapter 7 bankruptcy.
During the bankruptcy proceedings, disciplinary proceedings against Li were commenced in both states.
The New Jersey Supreme Court's Disciplinary Review Board voted 4-3 to disbar Li, with the majority finding that Li knowingly misappropriated the funds. (Click to Continue)
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2 States, 2 Levels of Punishment in Attorney Discipline Case
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