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Court disbars veteran creditors' rights attorney for mishandling funds.

Byline: Heather Cobun

The state's highest court disbarred a Baltimore County debt collection attorney Wednesday formishandling client funds and failing to diligently represent client interests.

The Court of Appeals disbarred Stuart R. Blatt for violating the Maryland Lawyers' Rules of Professional Conduct by failing to meet basic standards of competence, diligence, communication and safeguarding client property. The court also concluded that Blatt failed to supervise his subordinates and make sure clients were protected from incompetence or lack of diligence.

Blatt did not answer a call seeking comment Thursday.

Blatt was "for many years a respected member of the bar and a leader in the field of creditors' rights and debt collection," according to the opinion written by Judge Robert N. McDonald.

"However, during the past decade his practice fell on hard times and, in what must have seemed a cruel twist of fate, he became one of those he sued and otherwise pursued for a living a defaulting debtor," McDonald wrote. "As a result, he made unfortunate choices that violated the ethical rules governing attorneys for example, using legal process to collect a debt on behalf of a client by garnishing wages earned by the debtor, but diverting the proceeds to pay his firm what it had not earned."

The court determined Blatt's conduct was not "the product of a grand fraud scheme" but rather an attempt to get out of personal and professional financial distress.

"Nevertheless, in carrying out our charge to protect the public from errant lawyers, we must disbar Mr. Blatt from the practice of law in Maryland," the court concluded.

Blatt denied that his conduct violated the rules in any way, has not made restitution to his clients, and declined to suggest an alternative sanction to the court, according to the opinion.

A member of the Maryland bar since 1972, Blatt served as in-house counsel to a credit card company and then to a department store chain, according to the court's summary of the facts. He opened his own firm, briefly worked for another firm and then, in the 1990s, opened his own firm again.

A health scare in 2000 motivated Blatt to merge his practice with the general practice firmMargolis, Pritzker and Epstein, P.A. in Towson. Blatt eventually became a principal and the creditors' rights practice came to dominate the firm's business.

The firm later struggled, after its largest client reduced the number of law firms it used for collections and ceased using the Margolis firm. After losing additional clients, the firm reduced staff and transferred its business to a smaller bank. By the summer of 2014 it could not pay its bills and was evicted from its Towson offices.

Blatt attempted to move his creditors' rights practice to another firm, but the firm became concerned that Blatt was not being transparent. The arrangement fell through by May 2015.

While the Margolis firm was in decline, Blatt mismanaged and misappropriated funds from accounts at the firm, according to the opinion. The financial manager for the firm testified that Blatt and others directed her to "borrow" money from client accounts to pay firm bills and that, as a result, a general account used to make monthly payments to clients sometimes had insufficient funds. Blatt also later moved funds to an outside account to avoid one of the firm's creditors.

Testimony and evidence also showed several instances when clients were harmed by Blatt's conduct, or by the conduct of attorneys he supervised. The firm garnished thousands of dollars in wages from a debtor without sending the proceeds to the client, failed to file lawsuits before the statute of limitations expired, and failed to remit amounts collected from a debtor. Some of the incidents occurred during or after the closure of the Margolis firm, a development unknown to clients, who were unable to contact Blatt.

Blatt testified that he had medical issues during the decline of the Margolis firm that limited his oversight of its practices. He argued he was not responsible for problems with the firm, but the hearing judge did not find his testimony credible in light of other evidence that showed he was actively involved in the firm's collections practice.

"As a supervising attorney, Mr. Blatt had the duty to ensure that his firm took basic measures to make certain that the firm's attorneys conformed their conduct to the ethical rules governing attorneys," the court found. "Here, it is apparent that Mr. Blatt failed to establish adequate controls to ensure that cases were timely filed and that clients received appropriate status updates about their cases."

Bar Counsel Lydia Lawless was not immediately available for comment Thursday.

The case isAttorney Grievance Commission v. Stuart R. Blatt, No. 42, Sept. 2017.

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Publication:Daily Record (Baltimore, MD)
Geographic Code:1U5MD
Date:May 23, 2019
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