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Md. appeals court upholds client protection fund’s denial of $2.6M reimbursement bid

The trustees of the Maryland Bar’s Client Protection Fund validly rejected a man’s request to be reimbursed for the $2.6 million a since-convicted and disbarred attorney bilked from the escrow account the lawyer had managed for him, the state’s second highest court ruled Wednesday.

In its reported 3-0 decision, the Court of Special Appeals said Kevin Sniffen was not acting in the fiduciary role of an attorney when he managed Steven Grebow’s escrow account.

Rather, Sniffen’s contractual obligation was simply to deposit the $3.1 million provided by Grebow in an account and later withdraw the funds for him, a clerical act requiring neither attorney representation nor expertise, the appellate court held in saying Grebow was not entitled to reimbursement from the protection fund.

Sniffen never withdrew the escrow funds for Grebow but pleaded guilty in 2012 to conspiracy to commit wire fraud in an effort to embezzle the money. Sniffen’s co-conspirator Brian McCloskey ⁠— on whose behalf Grebow had deposited the money ⁠— also pleaded guilty.

The Maryland Court of Appeals disbarred Sniffen in 2012.

Grebow recovered about $500,000 through litigation, leaving him with a $2.6 million shortfall that he sought to recover from the protection fund, which was established to reimburse clients whose attorneys had misappropriated client trust accounts.

The trustees denied Grebow’s request, saying reimbursement is reserved for those cheated by an attorney who maintained an escrow account in a fiduciary capacity that is “traditional and customary” to the practice of law in Maryland.

These traditional capacities include managing funds related to litigating or settling claims or in a matter in which the lawyer is serving as an intermediary.

Grebow’s escrow account involved neither litigation, settlement nor a third party but was reserved exclusively for Grebow, the trustees said.

The Baltimore County Circuit Court agreed, as did the Court of Special Appeals.

Sniffen’s sole responsibility was to “safeguard the escrow funds for Mr. Grebow’s benefit, there was no mention in the escrow agreement of any legal services that Mr. Sniffen was required to perform,” Judge Andrea M. Leahy wrote for the Court of Special Appeals. “Under the terms of the escrow agreement, Mr. Sniffen’s role was limited to creating an escrow bank account, which did not qualify as an attorney trust account, and holding the escrowed funds of Mr. Grebow, a non-client, for investment purposes, until he was instructed to give the funds back to Mr. Grebow.”

Douglas M. Bregman, who chairs the protection fund’s board of trustees, hailed the court’s ruling.

“Mr. Sniffen was not acting, from our standpoint, as a fiduciary,” said Bregman, with Bregman, Berbert, Schwartz & Gilday LLC in Bethesda.  “The Court of Special Appeals nailed it.”

Grebow’s appellate attorney, Mark D. Maneche, did not immediately return a telephone message Friday seeking comment on the court’s decision. Maneche is with Pessin Katz Law PA in Towson.

Grebow deposited the $3.1 million through Sniffen at the behest of McCloskey, who said the deposit was needed to show that his business, the McCloskey Group, had cash reserves to secure a U.S. Housing and Urban Development Department loan for a building project. In return for the temporary deposit, McCloskey promised to pay Grebow $2 million, according to the court’s opinion.

McCloskey failed to keep his promise.

The protection fund’s revenue comes from annual dues of $20 assessed on Maryland’s attorneys. The fund is overseen by nine trustees, including eight attorneys, appointed by the Court of Appeals.

Leahy was joined in the opinion by Judges Terrence M.R. Zic and J. Frederick Sharer, a retired jurist sitting by special assignment.

The Court of Special Appeals rendered its decision in Steven J. Grebow v. Client Protection Fund of the Bar of Maryland, No. 1392, September Term 2020.

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