Terse Explanation For Rejecting Proposed Disbarment
The New Jersey Supreme Court has rejected the conclusion of its Disciplinary Review Board that an attorney engaged in knowing misappropriation, thus foregoing the otherwise obligatory disbarment in favor of a three-year suspension.
The court’s order concludes (but explains in the most summary fashion) that the death of the client in one matter prior to the ethics charges defeated one charge and that its review of the record established only negligent misappropriation.
There is an overlay of father-son tension in that the attorney worked for his difficult, controlling father who handled the firm’s finances.
The attorney inherited the escrow account when father William died.
From the DRB report
As to the first instance of knowing misappropriation, the facts are not in dispute. Respondent admitted issuing the seven checks to himself and/or the Firm and using the funds for business expenses. He also agreed that the outstanding checks he “replaced” represented funds owed to clients and/or third parties. He claims, however, that when he issued the replacement checks, he was not aware that he was invading client funds at that time. Instead, he asserted that he issued the checks based on a “sticky note” William left for him prior to his death. Respondent claimed that, based on his knowledge of the clients’ matters handled by the Firm, he believed that they owed the Firm legal fees. He undertook no investigation or inquiry to confirm that belief.
As the special master so carefully analyzed and determined, respondent’s explanation of blind reliance on a “sticky note” is not credible. He reasoned that, based on William’s controlling nature and his use of dictation, it was improbable that he would have given respondent such direction in this manner. Further, the special master found that if the “sticky note” actually existed and respondent truly believed fees were owed to the Firm, he would have disbursed those funds at once and not as needed over time. Respondent never told the OAE about the “sticky note” because, as the special master found, it did not exist.
The special master further found incredible respondent,s claim of complete ignorance in respect of management of the financial aspects of the Firm. He noted that respondent actively participated in the 2007 audit and never exhibited to the OAE an inability to understand the requirements of handling a trust account.
The special master also unequivocally found that respondent knew the checks were outstanding but made no attempt to review the client ledger cards or otherwise investigate the status of the funds before issuing the “replacement” checks to himself or to the Firm. It was not logical, he found, that those funds represented fees owed because the Firm took its fees promptly. Moreover, respondent provided no bills or documentation to establish that these amounts, indeed, were owed to the Firm.
The DRB found a second instance of misappropriation – the one where the client had died that the court seems to reject out of hand.
When I first got involved in attorney discipline in 1984, New Jersey was the leader in effectively sanctioning lawyer misconduct.
What happened?
Update: A thoughtful email from a reader does merit a clarification of this post. New Jersey has both a strict presumption of disbarment for intentional misappropriation and permanent disbarment.
That does lead to some hard cases like this one and makes the result reached here more understandable. (Mike Frisch)