SYLLABUS
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interest of brevity, portions of any opinion may not have been summarized.)
In the Matter of Scott P. Sigman, An Attorney at Law (D-126-13) (074489)
Argued September 9, 2014 -- Decided December 18, 2014
PATTERSON, J., writing for a unanimous Court.
In this attorney disciplinary matter, the Court considers the appropriate level of discipline for respondent Scott P. Sigman, who, as a result of misconduct involving the misappropriation of law firm funds, was brought before New Jersey disciplinary authorities on a motion for reciprocal discipline following imposition of a thirty- month suspension in Pennsylvania.
Respondent was admitted to the bars of New Jersey and Pennsylvania in 2001 and, prior to the proceedings that gave rise to his Pennsylvania suspension, had no history of discipline in either jurisdiction. This matter arose from respondent’s employment as an associate in the Philadelphia firm of Bochetto & Lentz, P.C., between July 2005 and March 2009. Under the terms of his employment, respondent could not handle independent client matters or matters not approved by George Bochetto, Esq. Respondent also was prohibited from: (1) referring clients to other attorneys; (2) declining referrals without his employer’s consent; and (3) charging retainers or fees to clients or prospective clients without Bochetto’s approval. Respondent was entitled to certain percentages of the firm’s fees depending on what type of case or fee arrangement existed and whether the client was a referral or had been originated by respondent. For matters referred by an attorney outside the firm, the referring attorney also would receive a percentage of the firm’s fees.
Respondent’s Pennsylvania suspension, and the New Jersey Office of Attorney Ethics’s (OAE) petition for reciprocal discipline, derive from seven allegations of misconduct. Five of the alleged instances of misconduct involved respondent’s violation of his firm’s referral and fee terms. Specifically, respondent allegedly: (1) handled a matter referred by a former firm attorney without Bochetto’s permission and without sharing the $600 fee with the firm; (2) referred a prospective client to a non-firm attorney without Bochetto’s knowledge; (3) instructed a client to pay $5,000 to him personally and then lied to Bochetto about the payment; (4) promised a referring attorney a fee without obtaining Bochetto’s permission and lied to the firm’s bookkeeper that he had originated the client; and (5) referred a client to another attorney without Bochetto’s approval and failed to share the referral fee with the firm. The sixth instance of misconduct arose from respondent’s misrepresentation to Bochetto regarding his role in a real estate purchase, which caused the firm to misstate certain facts in a letter to the property buyers, and respondent’s false testimony in an affidavit and deposition arising from a related insurance dispute. Finally, the seventh instance of misconduct concerned respondent’s disclosure of the firm’s Westlaw password to an acquaintance who accrued over $3,000 in unauthorized charges.
After respondent’s employment with the firm was terminated, he filed a civil lawsuit alleging that the firm had wrongfully retained funds owed to him as referral fees for legal work he had generated. An arbitrator determined that the firm owed respondent $123,942.93. During the disciplinary proceedings, respondent stipulated that the firm lost $25,468.18 as a result of his misconduct and conceded that it was entitled to deduct that amount, as a setoff, from the funds escrowed as part of the arbitration.
The Pennsylvania disciplinary authorities agreed that several mitigating factors applied in respondent’s case, including his admission of misconduct and cooperation with authorities, as well as his remorse, lack of a prior disciplinary history, and active involvement with various professional and community organizations. The Pennsylvania Disciplinary Board recommended a thirty-month suspension, which was imposed by the Pennsylvania Supreme Court on February 28, 2013.
On December 20, 2013, the OAE petitioned the Disciplinary Review Board (DRB) for reciprocal discipline, based on respondent’s admitted violation of Pennyslvania disciplinary rules, and New Jersey RPCs
1 1.15(a), 1.15(b), 3.4(a), 8.4(c), and 8.4(d). Reasoning that respondent’s conduct constituted a lengthy and premeditated fraud in which he misappropriated funds belonging to his employer and falsely testified in legal proceedings, the OAE sought an order of disbarment. Following a de novo review of the record, the DRB accepted as conclusive the Pennsylvania Disciplinary Board’s factual findings, as per Rule 1:20-14(a)(4). A majority of the DRB reasoned that respondent’s knowing misappropriation of law firm funds constituted an offense warranting disbarment under New Jersey law. One dissenting member voted to impose a three-year suspension.
Because of the DRB’s disbarment recommendation, this Court ordered respondent to show cause on September 9, 2014, why he should not be disbarred or otherwise disciplined.
HELD: Respondent’s unethical conduct, consisting of repeatedly breaching the trust that must exist between a law firm and the professionals whom it employs, warrants the imposition of a prospective thirty-month suspension of his license to practice law, as reciprocal discipline under Rule 1:20-14.
1. In attorney disciplinary proceedings, the Court is obligated to conduct an independent review of the record and determine whether the violations found by the DRB have been established by clear and convincing evidence. In the context of reciprocal discipline, the process by which New Jersey applies its ethics rules to an attorney admitted in New Jersey, following the imposition of discipline in an ethics proceeding conducted by a sister jurisdiction, the inquiry is limited and generally results in the same discipline as that imposed in the foreign jurisdiction, unless the matter falls within the five exceptions established in Rule 1:20-14(a)(4). In order to serve the interest of judicial economy and promote the imposition of consistent sanctions for the misconduct of an attorney admitted in multiple states, Rule 1:20-14(a)(5) mandates deference to the factfinding of the foreign jurisdiction. (pp. 15-18)
2. This case does not involve the misappropriation of client funds held in a trust or escrow account, and is therefore not governed by In re Wilson, 81 N.J. 451 (1979) or In re Hollendonner, 102 N.J. 21 (1985). Rather, in several matters in the OAE complaint, respondent admittedly misappropriated law firm funds in violation of New Jersey RPCs 1.15(a) and 8.4(c). These violations unquestionably involve serious misconduct warranting substantial discipline, but the Court disagrees with the DRB’s conclusion that In re Siegel, 133 N.J. 162 (1993) and similar cases mandate disbarment whenever an attorney knowingly misappropriates law firm funds. In both Siegel and In re Greenberg, 155 N.J. 138 (1998), the Court held that knowing misappropriation of funds, whether from a client or one’s partners, will generally result in disbarment. In the wake of those cases, the Court has adopted the DRB’s recommendation of disbarment in several disciplinary matters involving lawyers found to have misappropriated law firm resources. However, the rule of Siegel and Greenberg is not absolute, and, in settings involving significant mitigating factors or disputes with law partners, the Court has imposed discipline short of disbarment, ranging from a reprimand to a six-month suspension. (pp. 19-27)
3. The rule of Siegel and Greenberg does not compel diversion from the discipline imposed by Pennsylvania. Rather, the imposition of discipline consistent with that administered by Pennsylvania is particularly appropriate here. The Pennsylvania disciplinary authorities have significant experience with respect to the adjudication of disciplinary matters involving referral fees, a practice that is generally permitted under Pennsylvania’s ethical rules but authorized only in limited circumstances in New Jersey. Moreover, compelling mitigating factors in the record, including respondent’s lack of a disciplinary history and admission of his wrongdoings, warrant a sanction short of disbarment. Also, there is no allegation or finding that respondent stole client funds, having instead misappropriated referral and legal fees in the context of conflicting payment practices and a deteriorating relationship with his firm. The Court sees no distinction between this case and other cases involving misappropriation from the respondent’s firm in which the Court imposed sanctions other than disbarment. In such cases, the sanction of disbarment should not turn on whether an attorney contends that his misappropriation of firm resources is justified, as a form of self- help in an ongoing dispute with his partners about compensation, or candidly admits that his conduct was wrong. Here, respondent admittedly repeatedly breached the trust that must exist between a law firm and the professionals whom it employs, and his misconduct warrants the imposition of a significant sanction. Consequently, respondent is prospectively suspended for a period of thirty months, as reciprocal discipline under Rule 1:20-14. (pp. 27-30)
So Ordered.
CHIEF JUSTICE RABNER; JUSTICES LaVECCHIA, ALBIN, FERNANDEZ-VINA and SOLOMON; and JUDGE CUFF (temporarily assigned) join in JUSTICE PATTERSON’s opinion.
2 SUPREME COURT OF NEW JERSEY D-126 September Term 2013 074489
IN THE MATTER OF
SCOTT P. SIGMAN,
An Attorney at Law
Argued September 9, 2014 – Decided December 18, 2014
On an Order to show cause why respondent should not be disbarred or otherwise disciplined.
Jason D. Saunders, Deputy Ethics Counsel, argued the cause on behalf of the Office of Attorney Ethics.
Kenneth D. Aita argued the cause for respondent.
JUSTICE PATTERSON delivered the opinion of the Court.
In an ethics proceeding conducted by the Pennsylvania
Office of Disciplinary Counsel (ODC), respondent Scott P. Sigman
admitted to violating several Pennsylvania Rules of Professional
Conduct. Respondent’s disciplinary proceedings arose from his
misappropriation of referral and legal fees that should have
been paid, in whole or in part, to the law firm that employed
him, his misuse of other resources belonging to his employer,
and his false testimony regarding insurance proceeds issued in a
real estate matter. With respondent’s consent, and based on his
1 admissions of wrongdoing, the Supreme Court of Pennsylvania
suspended his license to practice law in that state for a period
of thirty months.
Following the suspension of respondent’s Pennsylvania law
license, the New Jersey Office of Attorney Ethics (OAE) moved
before the Disciplinary Review Board (DRB) for reciprocal
discipline pursuant to Rule 1:20-14(a). A majority of the DRB
recommended disbarment, reasoning that respondent had knowingly
misappropriated law firm funds and that such misconduct mandates
disbarment in New Jersey. A dissenting DRB member voted for a
three-year suspension.
Applying the standard of Rule 1:20-14(a), which governs the
imposition of reciprocal discipline following disciplinary
proceedings conducted by another jurisdiction, we do not find
that respondent’s misconduct warrants “substantially different
discipline” from the sanction imposed by Pennsylvania
authorities for conduct that took place during and after his
employment with a Philadelphia law firm. Notwithstanding our
longstanding rule that a lawyer’s misappropriation from a law
firm may warrant disbarment, we conclude that the circumstances
of this case warrant discipline short of the ultimate sanction
of disbarment. Respondent has presented a significant showing
of compelling mitigating factors, including his prior record of
no disciplinary proceedings, his contribution to the legal
2 profession and his community, his candid admission of
wrongdoing, his cooperation with disciplinary authorities, and
the ongoing business dispute between respondent and his former
law firm, during which his misconduct was reported to
Pennsylvania ethics authorities. We do not find in this case
compelling reasons to depart from the discipline imposed by our
sister jurisdiction.
Thus, in accord with the determination of the Supreme Court
of Pennsylvania, we impose a thirty-month suspension of
respondent’s license to practice law in New Jersey.
I.
We rely on the stipulated summary of the record set forth
in the joint petition in support of discipline on consent, filed
by the ODC before the Disciplinary Board of the Supreme Court of
Pennsylvania, which was the basis for the DRB’s decision and
recommendation in this case. See R. 1:20-14(a)(5).
Respondent was admitted to the bars of New Jersey and
Pennsylvania in 2001. Prior to the proceedings that led to his
suspension in Pennsylvania, he had no history of discipline in
either jurisdiction.
This matter arose from respondent’s employment as an
associate in the Philadelphia law firm of Bochetto & Lentz,
P.C., from July 5, 2005 through March 6, 2009. Although the
record does not reflect that respondent had a written employment
3 agreement, he has admitted that he was aware that certain terms
governed his employment with Bochetto & Lentz. Respondent
understood that he was barred from handling client matters that
were independent of the firm or were not approved by George
Bochetto, Esq. (Bochetto), of Bochetto & Lentz. Respondent was
also aware that he was prohibited from referring actual or
prospective client matters to other attorneys, was not permitted
to decline referrals from other lawyers without his employer’s
consent, and was barred from charging retainers or fees to
clients or prospective clients without Bochetto’s approval.
Respondent understood his obligation to record his time spent on
firm-client matters and non-client activity that was related to
his employment.
The stipulated record includes a summary of the fee-
allocation rules that governed respondent’s arrangement with
Bochetto & Lentz. For purposes of allocating shares of fees,
the law firm evidently considered client matters “originated” by
an associate to be distinct from client matters “referred” to
that associate by attorneys from other firms; it is unclear what
precisely distinguished those two categories. With respect to
cases “originated” by an associate, respondent was entitled to
receive twenty percent of the fees received by the firm if the
matter involved criminal defense or was in the “hourly-paid”
category, and thirty-three and one-third percent of the fees
4 received by the firm if the matter was handled on a contingent-
fee basis. If the matter was referred by an attorney outside
the firm, and the client approved a referral fee arrangement,
the referring attorney typically would receive twenty percent of
the fees received by the firm and respondent would receive eight
percent of the fees. The record does not indicate whether those
billing arrangements were memorialized in writing, or whether
the basic terms were varied for particular cases.
Respondent’s Pennsylvania suspension, and the OAE’s
petition for reciprocal discipline, derive from seven
allegations of misconduct, in violation of several Pennsylvania
Rules of Professional Conduct (Pennsylvania RPCs).1
The first allegation concerns a representation undertaken
by respondent in early 2007. Respondent was retained by a
former Bochetto & Lentz attorney to handle a hearing involving
the suspension of the client’s driver’s license. Respondent
handled the matter without obtaining permission from Bochetto,
and did not share the $600 fee with his firm.2 Respondent
1 Three of the seven Pennsylvania RPCs violated in this case, 3.4(a), 8.4(c), and 8.4(d), are virtually identical to their New Jersey counterparts. Pennsylvania RPC 1.15(c) was not adopted in New Jersey. The remaining three, Pennsylvania RPCs 1.15(b), 1.15(d), and 1.15(e), have no direct New Jersey counterparts but were incorporated, in substance, in different provisions of New Jersey RPC 1.15. 2 Under respondent’s arrangement with the firm, Bochetto & Lentz
was entitled to either $480 generated by the representation if 5 contends that the firm was aware of his representation of the
client because he recorded his time, and notes that only a small
amount of money was at issue. However, as he stipulated in his
Pennsylvania disciplinary proceedings, and as the Pennsylvania
ODC found, respondent’s conduct violated Pennsylvania RPCs
1.15(a) (duty to keep property of others in identified bank
account), 1.15(b) (duty to notify third person of receipt of
funds in which third person has interest), and 8.4(c) (conduct
involving dishonesty, fraud, deceit or misrepresentation).
The Pennsylvania ODC’s second allegation involved
respondent’s September 2007 referral of a prospective client to
another attorney without Bochetto’s knowledge or permission.
Respondent stipulated, and the ODC found, that he violated
Pennsylvania RPCs 1.15(a), 1.15(b), and 8.4(c). Respondent
admits in this proceeding that he referred the client without
notifying his employer, but he contends that the matter was
merely a business dispute between him and his employer.
The third allegation in the Pennsylvania ODC proceedings
against respondent arose from his representation of a client in
three matters in early 2008. In accordance with the firm’s
requirements, respondent recorded his time on the file and
the matter was considered “originated” by him, or $432 if it was considered a “referral” matter.
6 arranged for the initial legal fees to be paid by the client’s
father to Bochetto & Lentz. However, respondent admittedly
instructed the client’s father to write a $5000 check payable to
respondent personally, as payment for a portion of the legal
work performed on the client’s behalf. He deposited the check
in his account and spent the money on personal expenses.
The diversion of the $5000 legal fee was discovered by
Boccheto & Lentz after respondent’s departure from the firm,
when the client’s father requested that the money be refunded.
Confronted by Boccheto about the disputed funds, respondent lied
to his former employer, claiming that the client’s father had
never sent a check for $5000, and then instructed the client’s
father not to contact his former firm. Eventually, respondent
refunded $4000 of the $5000 paid and retained the remaining
$1000, eighty percent of which was payable to Bochetto & Lentz
under the fee arrangements that governed his employment.
Respondent stipulated, and the ODC found, that this conduct
violated Pennsylvania RPCs 1.15(a), 1.15(b), and 8.4(c).
The Pennsylvania ODC’s fourth allegation against respondent
involved another attorney’s referral of a client to respondent
in April 2007. Although respondent obtained Bochetto’s approval
to represent the client, he neglected to advise his firm that he
had promised the referring attorney that the firm would pay a
referral fee. Moreover, respondent represented to the firm’s
7 bookkeeper that he was the originating attorney, entitled to
twenty percent of the firm’s fees, rather than the recipient of
an outside lawyer’s referral, which “typically” entitled him to
only an eight-percent share of the billings. Respondent admits
that, as a result of his misrepresentations to Bochetto & Lentz
regarding the origin of the matter, he received $3,988.18 to
which he was not entitled under the firm’s referral fee
procedures, and the referring attorney did not receive the
referral fee authorized by Pennsylvania RPC 1.5(e). Respondent
stipulated, and the ODC found, that his conduct violated
Pennsylvania RPCs 1.15(a), 1.15(b) and 8.4(c). He asserts in
this proceeding that the referring attorney would not have been
entitled to a referral fee under New Jersey’s RPCs, and that
this incident constituted a business dispute that did not affect
the legal services that he provided on his clients’ behalf.
The Pennsylvania ODC’s fifth allegation arises from yet
another dispute over a referral fee. In June 2007, respondent
consulted with a potential client interested in asserting a
slip-and-fall claim against a Philadelphia hotel and referred
that client to another attorney. Although respondent stipulated
that he did not obtain Bochetto’s approval before referring the
matter to the other attorney, he contends that Bochetto told him
that “it was a bad case” and instructed him to “get rid of” the
case.
8 In April 2009, a month after respondent left his employment
at Bochetto & Lentz, the attorney to whom the slip-and-fall
matter had been referred settled the matter, and paid respondent
$28,800, representing one-third of the legal fee that he had
been paid for his work on the matter, as a referral fee. As
respondent acknowledges, his agreement with Bochetto & Lentz
entitled the firm to $19,200 of that fee. However, respondent
retained the entire $28,800 for his own use. Respondent
stipulated, and the ODC found, that his handling of this
referral fee violated Pennsylvania RPCs 1.15(b), 1.15(d) (duty
to promptly notify third party of receipt of funds), 1.15(e)
(duty to promptly deliver property to which third party is
entitled), and 8.4(c).
The sixth allegation concerned respondent’s representation
of a client whose home in New Jersey had been destroyed in a
fire during a foreclosure, raising the possibility of an
investigation of arson. In an arrangement approved by Boccheto,
respondent and the client agreed in writing in December 2005,
that the client would pay a $5000 non-refundable retainer prior
to any criminal investigation that might be instituted for an
alleged arson. As the originating attorney, respondent was paid
$750 by Boccheto & Lentz. After being retained for purposes of
the arson investigation, Boccheto & Lentz also represented the
9 client in connection with two charges of driving under the
influence.
Following his retention to represent the client in the
arson investigation, respondent communicated with attorneys
representing potential buyers of the property and their lender,
who were attempting to forestall a sheriff’s sale and privately
acquire the property. The buyers purchased the property, paying
off the balance of a mortgage held by a local bank. The real
estate purchase agreement entitled the buyers to any insurance
proceeds obtained as a result of the fire loss.
Following the sale, the insurance company that had provided
coverage for property damage sent to the bank that had held the
mortgage of the property a check in the amount of $130,727.45,
in satisfaction of its obligation to compensate the bank for the
loss of the improvements on the property that had served as
collateral for the mortgage loan. Having no remaining interest
in the property, the bank endorsed the check and sent it to
respondent’s client, who in turn directed that respondent
deposit it in Boccheto & Lentz’s escrow account, evidently
without notifying the property’s new owners that insurance
proceeds had been received.
Several months later, at the client’s direction, respondent
distributed the escrowed funds. In addition to paying the
client’s outstanding tax liability in the amount of $13,498,
10 respondent distributed $60,000 to Bochetto & Lentz in payment
for the firm’s defense of the client’s driving-under-the-
influence charges, and returned the remaining $57,228.62 to the
client. Bochetto & Lentz then paid $12,000 to respondent, who
was the attorney credited with originating the representation of
the client in the driving under the influence charges. The firm
retained the remaining $48,000 of its legal fee. Respondent did
not notify the purchasers of the property that the insurance
proceeds had been received and disbursed.
Thereafter, the property’s new owners asserted a claim to
the disbursed insurance proceeds, based on the purchase
agreement. Despite his prior involvement with the real estate
transaction, respondent claimed that he had not reviewed the
purchase agreement and that he was uncertain whether his client
had been entitled to the insurance proceeds that had been held
in escrow. Following a meeting with respondent, Bochetto
advised the purchasers in writing that respondent had been
unaware of the purchasers’ claim to the insurance proceeds
because he had not reviewed the purchase agreement, and that
respondent’s only legal advice to his client, the seller,
regarding the property was that the pending arson investigation
did not preclude the sale of the property.
Respondent admitted in the Pennsylvania disciplinary
proceeding that he misrepresented to Bochetto his role in the
11 real estate purchase, and that, on the basis of those
misrepresentations, Bochetto’s letter to the property buyers
misstated certain facts. Respondent also admitted that in an
affidavit and a deposition given in litigation arising from the
insurance dispute, he falsely testified regarding the history of
the transaction, his representation of the client and his
disbursement of the insurance proceeds.3 Respondent stipulated,
and the Pennsylvania ODC found, that this conduct violated
Pennsylvania RPCs 3.4(a) (obstruction of access to evidence),
8.4(c) and 8.4(d) (conduct prejudicial to administration of
justice).
The Pennsylvania ODC’s seventh and final allegation
concerned respondent’s disclosure of the Westlaw password
assigned to him by Boccheto & Lentz to an acquaintance, who
accrued unauthorized Westlaw charges in the amount of $3,662.80.
Respondent stipulated, and the Pennsylvania ODC found, that he
violated Pennsylvania RPC 8.4(c).
After his employment with Boccheto & Lentz was terminated,
respondent filed a civil lawsuit in a Pennsylvania court,
alleging that the firm had wrongfully retained funds that were
owed to respondent as referral fees for legal work that he had
3 Respondent later characterized the misstatements in his deposition as the result of his faulty memory, and his counsel sought a further deposition to correct “certain mistakes” in respondent’s testimony. 12 generated as a firm employee. An arbitrator eventually
determined that the firm owed respondent $123,942.93, and the
firm held that amount in escrow. Prior to the arbitration
award, respondent stipulated during the Pennsylvania
disciplinary proceedings that as a result of his misconduct,
Boccheto & Lentz lost a total of $25,468.18. He conceded that
the firm was entitled to deduct that amount, as a setoff, from
the funds escrowed as part of the arbitration; that setoff was
incorporated in the arbitration award.
In the joint petition, the ODC and respondent agreed that
the following mitigating factors applied in respondent’s case:
respondent’s admission of his misconduct and his violations of
the relevant Pennsylvania RPCs; his cooperation with
disciplinary authorities; his remorse for his conduct and
understanding that he should be disciplined; his lack of a prior
disciplinary history; and his active involvement with the
Philadelphia Bar Association, a Philadelphia anti-drug community
group, and various other legal and volunteer organizations. The
joint petition also noted letters written on respondent’s behalf
from members of the local community and by prominent members of
the Philadelphia bar, including a former Philadelphia District
Attorney and a law school dean. In accordance with the
stipulations set forth in the joint petition, the Pennsylvania
Disciplinary Board recommended a thirty-month suspension, and
13 that discipline was imposed by the Pennsylvania Supreme Court by
order dated February 28, 2013.
Following the suspension of respondent’s Pennsylvania
license, his New Jersey disciplinary proceedings commenced. On
December 20, 2013, the OAE petitioned the DRB for reciprocal
discipline based on respondent’s admitted violation of
Pennsylvania disciplinary rules, and New Jersey RPCs 1.15(a),
1.15(b), 3.4(a), 8.4(c), and 8.4(d). The OAE did not advocate
for a suspension corresponding to the discipline imposed in
Pennsylvania. Instead, reasoning that respondent’s conduct
constituted a lengthy and premeditated fraud in which he
misappropriated funds belonging to his employer and testified
falsely in an affidavit and a deposition, the OAE sought an
order of disbarment.
The DRB conducted a de novo review of the record, which
consisted of the joint petition filed in the Pennsylvania
proceedings and the parties’ written submissions, and issued its
recommendations in a Decision dated June 13, 2014. As required
by Rule 1:20-14(a)(4), the DRB accepted as conclusive the
Pennsylvania Disciplinary Board’s factual findings. It
determined that respondent had: failed to promptly notify third
persons upon receiving funds in which the third persons had an
interest, in violation of New Jersey RPC 1.15(b); failed to
separately retain funds in which a third person had an interest
14 pending an accounting and severance of their interests, in
violation of New Jersey RPC 1.15(c); unlawfully obstructed
another person’s access to evidence, in violation of New Jersey
RPC 3.4(a); converted or knowingly misappropriated law firm
funds, in violation of New Jersey RPCs 1.15(a) and 8.4(c); and
engaged in conduct prejudicial to the administration of justice,
in violation of New Jersey RPC 8.4(d).
A majority of the DRB reasoned that, by virtue of his
knowing misappropriation of law firm funds, respondent had
committed an offense mandating disbarment under New Jersey law,
and did not consider the appropriate sanction for the remaining
offenses. A dissenting member of the DRB voted to impose a
three-year suspension, noting a concern that, notwithstanding
the terms of his employment with Bochetto & Lentz, respondent
may have believed that he had a colorable claim to the funds
that he retained.
II.
“Our obligation in an attorney disciplinary proceeding is
to conduct an independent review of the record, Rule 1:20-16(c),
and determine whether the ethical violations found by the DRB
have been established by clear and convincing evidence.” In re
Pena, 164 N.J. 222, 224 (2000) (citing In re Di Martini, 158
N.J. 439, 441 (1999)). Here, that inquiry occurs in the context
of reciprocal discipline, the process by which New Jersey
15 applies its ethics rules to an attorney admitted in New Jersey,
following the imposition of discipline in an ethics proceeding
conducted by a sister jurisdiction.
Our court rules set forth the procedure for reciprocal
discipline. A New Jersey attorney who is disciplined “as an
attorney or otherwise in connection with the practice of law in
another jurisdiction,” must promptly inform the Director of the
Office of Attorney Ethics (Director) of the discipline imposed.
R. 1:20-14(a)(1). The Director is authorized to file with the
DRB, and serve on the respondent, a motion for reciprocal
discipline, supported by proof of the judgment or order imposing
discipline in the other jurisdiction. R. 1:20-14(a)(2).
In contrast to Rules 1:20-3 through -9, which prescribe a
detailed procedure for investigations, formal hearings and
appellate review in attorney ethics matters originating in New
Jersey, our reciprocal discipline rule envisions a limited
inquiry, substantially derived from and reliant on the foreign
jurisdiction’s disciplinary proceedings. Those proceedings
result in the same discipline that the foreign jurisdiction has
imposed, unless the matter is within one of the five exceptions
set forth in Rule 1:20-14(a)(4):
[The DRB] shall recommend the imposition of the identical action or discipline unless the respondent demonstrates, or the [DRB] finds on the face of the record on which the discipline
16 in another jurisdiction was predicated that it clearly appears that:
(A) the [disciplinary order] of the foreign jurisdiction was not entered; (B) the [disciplinary order] of the foreign jurisdiction does not apply to the respondent; (C) the [disciplinary order] of the foreign jurisdiction does not remain in full force and effect as the result of appellate proceedings; (D) the procedure followed in the foreign disciplinary matter was so lacking in notice or opportunity to be heard as to constitute a deprivation of due process; or (E) the unethical conduct established warrants substantially different discipline.
The Rule permits the Director to “argue that the law of
this state or the facts of the case do or should warrant the
imposition of greater discipline than that imposed in” the other
jurisdiction, and assigns to the Director “the burden of
establishing such contentions by clear and convincing evidence.”
R. 1:20-14(a)(4). Absent such a showing, “the discipline
accorded in New Jersey will ordinarily correspond with that
imposed in the other jurisdiction.” In re Kaufman, 81 N.J. 300,
303 (1979); see also In re Harris, 115 N.J. 181, 187 (1989).
Rule 1:20-14(a)(5) mandates deference to the factfinding of
the foreign jurisdiction in reciprocal discipline proceedings,
limited only by the exceptions identified in Rule 1:20-14(a)(4):
17 In all other respects, a final adjudication in another court, agency or tribunal, that an attorney admitted to practice in this state . . . is guilty of unethical conduct in another jurisdiction as an attorney or otherwise in connection with the practice of law, shall establish conclusively the facts on which it rests for purposes of a disciplinary proceeding in this state.
[Rule 1:20-14(a)(5).]
Thus, “[w]hen a New Jersey attorney who also is admitted to
practice in another jurisdiction is disciplined in that
jurisdiction, the other jurisdiction’s findings of misconduct
will be accepted by the New Jersey Supreme Court in a proceeding
under the New Jersey Disciplinary Rules.” In re Pavilonis, 98
N.J. 36, 40 (1984) (citing Kaufman, supra, 81 N.J. at 302); see
also Harris, supra, 115 N.J. at 187. New Jersey’s reliance on
the factual findings of the foreign jurisdiction’s disciplinary
authorities under Rule 1:20-14(a), and its application of
discipline identical to that imposed by the foreign jurisdiction
absent a showing by clear and convincing evidence that an
exception applies, serves the interest of judicial economy and
promotes the imposition of consistent sanctions for the
misconduct of an attorney admitted to practice in multiple
states.
In that setting, we consider whether the OAE has proven by
clear and convincing evidence that New Jersey law or the facts
of respondent’s case warrant the imposition of “greater
18 discipline than that imposed in” Pennsylvania -- in this case,
the sanction of disbarment. R. 1:20-14(a)(4). As respondent
has admitted, by misappropriating funds that belonged to his law
firm as alleged in the first, third, and fifth matters in the
OAE complaint, he violated two New Jersey RPCs: RPC 1.15(a),
which requires a lawyer to “hold property of clients or third
persons that is in a lawyer’s possession in connection with a
representation separate from the lawyer’s own property,” and RPC
8.4(c), which provides that it is professional misconduct for a
lawyer to “engage in conduct involving dishonesty, fraud, deceit
or misrepresentation.” Respondent’s violations of these Rules
unquestionably involved serious misconduct warranting
substantial discipline. The question is whether the sanction
for that misconduct must be disbarment.
This case does not involve the misappropriation of client
funds held in a trust or escrow account, and is therefore not
governed by In re Wilson, 81 N.J. 451 (1979) or In re
Hollendonner, 102 N.J. 21 (1985). However, the OAE contended,
and the DRB concluded, that In re Siegel, 133 N.J. 162 (1993)
and similar cases mandate disbarment in all cases involving an
attorney’s knowing misappropriation of funds owed to his or her
law firm.
The Court first explored the quantum of discipline imposed
on attorneys who misappropriate their employers’ resources in In
19 re Spina, 121 N.J. 378 (1990). There, the respondent, a member
of the New Jersey and District of Columbia bars, was employed by
an academic entity affiliated with the Georgetown University Law
Center. Id. at 379-80. Spina admitted to misappropriating
thousands of dollars in donors’ contributions to his employer to
replenish his chronically low bank balance, using the
misappropriated funds for extravagant personal expenses, and
submitting fraudulent claims for reimbursement. Id. at 380-83,
390. He pleaded guilty to the offense of taking property
without right in violation of the D.C. Criminal Code, the
equivalent of a disorderly persons offense under New Jersey law.
Id. at 379. Accepting the DRB majority’s recommendation of
disbarment, the Court rejected Spina’s psychiatric defense:
The quirk of mind that bedevils respondent, however, did not, by his own admission, prevent him from a full realization that his misuse of ILI’s money was wrong. So flagrant were the ethical violations that we would not hesitate to disbar had the misconduct arisen out of a lawyer-client relationship. Nor do we believe that we should hesitate here, where the relationship was fiduciary in nature. There is no escaping the fact that Spina knowingly misused substantial amounts of his employer’s funds over a two-and-one-half-year period, taking quantities of money when his personal checking account ran low, and then lied when confronted by his employer. No discipline short of disbarment can be justified.
[Id. at 390.]
20 Thus, the respondent in Spina was disbarred for a protracted
scheme by which donors’ intended charitable gifts were diverted
for the attorney’s personal use.
Three years later, the Court considered attorney
misappropriation of funds belonging to a law firm in Siegel,
supra, 133 N.J. at 163. The respondent in Siegel, a partner at
a large law firm, violated RPC 8.4 by submitting to his firm
thirty-four false requests for disbursements in the course of
several years. Id. at 163-64. Rejecting the recommendation of
a majority of the DRB that it impose a three-year suspension,
the Court stated that it was “impressed by the DRB dissent,
which saw no ethical distinction between the prolonged,
surreptitious misappropriation of firm funds and the
misappropriation of client funds.” Id. at 168. The Court
rejected Siegel’s contention that his conduct was justified by
his “[f]rustration and disillusionment with [his] ‘firm[’s]
culture’ and dissatisfaction with [his] pay.” Id. at 172.
Citing Spina as well as authority from other jurisdictions, the
Court held:
These opinions make clear that knowingly misappropriating funds -- whether from a client or from one’s partners -- will generally result in disbarment. Although the relationship between lawyers and clients differs from that between partners, misappropriation from the latter is as wrong as from the former. A plainly-wrong act is
21 not immunized because the victims are one’s partners.
[Id. at 170.]
The Court discussed and refined the principle of In re
Siegel in another matter involving the misappropriation of law
firm funds, In re Greenberg, 155 N.J. 138 (1998). There, the
DRB found that the respondent, Joel Greenberg, signed over two
settlement checks to a client that should have been maintained
in the trust account of Greenberg’s firm. Id. at 141. He then
instructed the client to issue a check payable to Greenberg
personally in payment of legal fees. Ibid. The DRB also found
that Greenberg falsified disbursement requests, using the
proceeds to pay his mortgage and other personal expenses. Id.
at 141-43, 158. Greenberg asserted a psychiatric defense,
contending that he suffered from a form of depression and that
he had not intended to misappropriate his firm’s funds. Id. at
145-47.
Rejecting Greenberg’s argument that mitigating factors
justified a sanction short of disbarment, the Court reaffirmed
its holding in Siegel, which it characterized as an application
of the Wilson rule regarding misappropriation of client funds.
It recognized “‘no ethical distinction between a lawyer who for
personal gain willfully defrauds a client and one who for the
same untoward purpose defrauds his or her partners.’” Id. at
22 153 (quoting Siegel, supra, 133 N.J. at 167). The Court
construed the “Wilson rule, as described in Siegel,” to mandate
the disbarment of lawyers found to have misappropriated firm
funds “‘[i]n the absence of compelling mitigating factors
justifying a lesser sanction, which will occur quite rarely.’”
Ibid. (quoting Siegel, supra, 133 N.J. at 167-68 (citations
omitted)).
In the wake of Siegel and Greenberg, the Court has adopted
the DRB’s recommendation of disbarment in several disciplinary
matters involving lawyers found to have misappropriated law firm
resources. See In re Leotti, 218 N.J. 6 (2014) (ordering
disbarment of attorney who diverted to personal accounts client
payments to his law firm for legal fees in several matters, In
re Leotti, DRB No. 13-344 (Apr. 11, 2014) (slip op. at 4-7)); In
re Denti, 204 N.J. 566, 567 (2011) (ordering disbarment of
attorney who maintained protracted scheme to defraud two law
firms with which he was affiliated, In re Denti, DRB No. 09-346
(Feb. 16, 2011) (slip op. at 2-3)); In re Staropoli, 185 N.J.
401 (2005) (on motion for reciprocal discipline, ordering
disbarment of attorney who personally retained legal fee derived
from settlement proceeds, two-thirds of which belonged to his
firm, In re Staropoli, DRB No. 04-319 (Feb. 25, 2005) (slip op.
at 2-3)); In re Epstein, 181 N.J. 305 (2004) (ordering
disbarment of attorney who diverted for personal use client
23 checks written to law firm in payment of legal bills, In re
Epstein, DRB No. 04-061 (May 19, 2004) (slip op. at 1-3)); In re
Le Bon, 177 N.J. 515 (2003) (ordering disbarment of attorney who
instructed client to pay him personally for legal fees owed to
his firm, In re Le Bon, DRB No. 02-432 (May 2, 2003) (slip op.
at 3)).
The rule of Siegel and Greenberg, however, is not, and has
never been, absolute. Greenberg, supra, 155 N.J. at 153;
Siegel, supra, 133 N.J. at 167-68. The Court has recognized in
other settings that there are cases that warrant discipline
short of disbarment.
For example, the Court reprimanded, rather than disbarred,
the respondent attorney in In re Bromberg, 152 N.J. 382, 383
(1998), despite its conclusion that he had violated RPC 8.4(c).
The attorney in Bromberg, a non-equity partner in a small law
firm, was engaged in a dispute with his partners about the terms
of their financial arrangement and Bromberg’s disappointing
volume of business. In re Bromberg, DRB No. 97-129 (Dec. 16,
1997) (slip op. at 5-7). Experiencing financial pressures due
to the termination of his salary, the attorney instructed a
client to send a payment for legal fees to him personally,
rather than to the law firm. Id. at 7-8. The attorney
intercepted client checks made out to his firm, forged
endorsements, deposited the checks into an attorney business
24 account that he kept separate from the firm’s accounts, and used
the funds to pay personal expenses. Ibid. He did not dispute
that he appropriated the checks without the firm’s permission,
but claimed that he had the right to the checks because of the
firm’s suspension of his salary, which he contended was a breach
of the partnership agreement. Id. at 10.
The DRB found a violation of New Jersey RPCs 1.15(b) and
8.4(c). Id. at 20. However, it cited the confused state of the
partners’ business arrangement as an important factor and
concluded that the attorney’s belief that he owned a partnership
interest in the firm “led him to understand that he was entitled
to receive the checks” from the client. Id. at 19. The DRB
found substantial mitigation under the circumstances of that
case and recommended a reprimand. Id. at 24. The Court
concurred. Bromberg, supra, 152 N.J. at 383.
In another law firm misappropriation matter, In re
Paragano, 157 N.J. 628 (1999), the Court imposed a six-month
suspension on the respondent attorney, who admitted that he
violated New Jersey RPC 8.4(c) when he spent $83,954 in law firm
money on his personal expenses during a dispute with his
partner. In re Paragano, DRB No. 98-093 (Sept. 28, 1998) (slip
op. at 3). The attorney contended that the expenditures were
proper, based on an agreement with his partner when they formed
their firm, and conceded nothing more than that he improperly
25 recorded, as law firm expenses, personal expenditures that he
was authorized to make with firm resources. Id. at 8. Based on
the absence of any concession by the respondent that his conduct
had been improper, the DRB distinguished Siegel and Greenberg,
and declined to disbar the respondent. Id. at 8-10.
In a third case involving misappropriation from a law firm,
In re Glick, 172 N.J. 319, 320 (2002), the Court reprimanded,
but did not disbar, a respondent who violated New Jersey RPC
1.15(b) and RPC 8.4(c) by personally collecting legal fees owed
to his firm as a “form of self-help” following a dispute over
his profit share. In re Glick, DRB No. 01-151 (Jan. 29, 2002)
(slip op. at 4). In reasoning adopted by the Court, the DRB
concluded that the respondent’s conduct in Glick was less
serious than that of the respondent in Bromberg, because Glick
did not forge endorsements on checks or misrepresent the status
of the fees to his firm. Id. at 6. Similarly, in In re
Spector, 178 N.J. 261 (2004) the Court reprimanded, but did not
disbar, an attorney who violated New Jersey RPC 1.15(b), RPC
1.15(c), and RPC 8.4(c) by retaining fees that he had earned
while at his previous firm in the setting of a dispute with his
former partners regarding an employment agreement. In re
Spector, DRB No. 03-041 (Oct. 2, 2003) (slip op. at 2-8).
Finally, in In re Nelson, 181 N.J. 323 (2004), the Court
concurred with the DRB’s recommendation of a reprimand as the
26 appropriate discipline for an attorney who misappropriated law
firm funds in the midst of a dispute with his law partners over
a range of issues, including the partners’ concealment of
malpractice suits from him, improper referral fees, and attempts
to appropriate the lawyer’s clients. In re Nelson, DRB No. 04-
057 (May 19, 2004) (slip op. at 3-6). Notwithstanding his
violations of New Jersey RPC 8.4(c), the respondent in Nelson
retained his license to practice law. Nelson, supra, 181 N.J.
at 323.
Thus, the Court has recognized circumstances that warrant a
lesser sanction than that imposed in Siegel and Greenberg.
III.
In light of the special rules that govern reciprocal
discipline, and the circumstances of this case, we consider
whether the DRB correctly concluded that disbarment was mandated
here. We do not conclude that the rule of Siegel and Greenberg
compels us to diverge from the discipline imposed by our sister
jurisdiction and disbar respondent.
The imposition of discipline consistent with that
administered by Pennsylvania is particularly appropriate in this
case. Much of the misconduct at issue in this case involves the
payment and receipt of referral fees, a practice that is
authorized only in limited circumstances in New Jersey, but is
generally permitted under Pennsylvania’s ethical rules. Compare
27 New Jersey RPCs 1.5(e), 7.2(c), 7.3(d), with Pennsylvania RPCs
1.5(e), 7.2(c), 7.3. Long experienced in the adjudication of
disciplinary matters involving referral fees, the Pennsylvania
disciplinary authorities compared respondent’s ethical
violations with misconduct committed by other Pennsylvania
attorneys in referral-fee matters, and determined that a thirty-
month suspension was the appropriate discipline here.
Our jurisprudence does not compel divergence from the
Pennsylvania authorities’ determination of discipline in this
case. We find “compelling mitigating factors” in this record
that warrant a sanction short of disbarment. Respondent had no
prior history of discipline in either Pennsylvania or New
Jersey. As his supporting letters attest, he has made
significant contributions to the bar and to underserved
communities for many years. He cooperated with disciplinary
authorities and admitted his wrongdoing. There is no
allegation, let alone a finding, that respondent stole funds
belonging to a client. Instead, respondent’s misappropriation
of referral and legal fees occurred in the context of
conflicting fee payment practices and a deteriorating
relationship with his law firm -- a relationship that ended in
litigation over a different referral fee, in which he ultimately
prevailed. Indeed, it was only after respondent’s conflict with
his former firm over referral fees that his misconduct was
28 reported to ethics authorities. These factors distinguish this
case from the circumstances of Siegel and Greenberg.
We do not share the DRB’s view that the misconduct in this
case is fundamentally different from the misconduct found in
Bromberg, supra, DRB No. 97-129 (slip op. at 5-7), Glick, supra,
DRB No. 01-151 (slip op. at 4), Spector, supra, DRB No. 03-041
(slip op. at 2-8), and Nelson, supra, DRB No. 04-057 (slip op.
at 3-6) -- each involving misappropriation from the respondent’s
law firm -- in which we imposed sanctions other than disbarment.
The DRB distinguished this case from those four matters on the
ground that the respondent in each of those cases reasonably
believed that he was justified in converting the firm’s
resources for personal use because he was embroiled in a dispute
with his law firm over compensation issues. The DRB stated that
no such justification was attempted here.
We are not persuaded by that reasoning. We conclude that
the sanction of disbarment should not turn on whether an
attorney contends that his misappropriation of firm resources is
justified, as a form of self-help in an ongoing dispute with his
partners about compensation, or candidly admits to disciplinary
authorities that his conduct was wrong. The underlying
misappropriation at issue in Bromberg, Glick, Spector, and
Nelson is not inherently different from that of respondent here.
Moreover, as in Bromberg, Glick, Spector, and Nelson, the ethics
29 matter in this case arose in a business dispute between the
attorney and his firm. As in those cases, we conclude that
disbarment is not the appropriate sanction for the misconduct at
issue.
Respondent’s misconduct was unquestionably serious. By his
own admission, he repeatedly breached the trust that must exist
between a law firm and the professionals whom it employs. He
diverted referral fees and legal fees that were owed to his
firm, and devoted them to his personal use. His conduct
warrants the imposition of a significant sanction, namely the
thirty-month suspension of his license to practice law, as
reciprocal discipline under Rule 1:20-14. We conclude that this
discipline is sufficient in this matter.
IV.
Based on our independent review of the record, and
consistent with the determination of the Pennsylvania
disciplinary authorities, we prospectively suspend respondent’s
license to practice law in New Jersey for a period of thirty
months. Respondent is also ordered to reimburse the
Disciplinary Oversight Committee for appropriate administrative
costs.
CHIEF JUSTICE RABNER; JUSTICES LaVECCHIA, ALBIN, FERNANDEZ- VINA and SOLOMON; and JUDGE CUFF (temporarily assigned) join in JUSTICE PATTERSON’s opinion.
30 SUPREME COURT OF NEW JERSEY
NO. D-126 SEPTEMBER TERM 2013 APPLICATION FOR Order to Show Cause Why Respondent Should DISPOSITION Not be Disbarred or Otherwise Disciplined
DECIDED December 18, 2014 OPINION BY Justice Patterson CONCURRING OPINION BY DISSENTING OPINION BY
CHECKLIST SUSPEND CHIEF JUSTICE RABNER X JUSTICE LaVECCHIA X JUSTICE ALBIN X JUSTICE PATTERSON X JUSTICE FERNANDEZ-VINA X JUSTICE SOLOMON X JUDGE CUFF (t/a) X TOTALS 7
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