October 15, 2024 – Kearny, New Jersey
On October 15, 2024, the New Jersey Supreme Court issued an order and administrative determination concerning the permanent disbarment of attorneys who knowingly misappropriate client funds. While disbarment remains a mandatory penalty, the Supreme Court has ruled that attorneys should be provided with a path to reinstatement.
In 1979, the Supreme Court issued its ruling in In re Wilson, 81 N.J. 451 (1979), which required permanent disbarment for the knowing misappropriation of client funds. The Wilson standard was intentionally rigid and did not permit for consideration of an attorney’s prior disciplinary record, area of practice or additional factors. It was, for all intents and purposes, a professional death sentence.
In 2022, the New Jersey Supreme Court issued its ruling in In re Wade, 250 N.J. 581 (2022). Wade involved an attorney that admitted to borrowing client funds. The attorney had no prior professional discipline, had a history of pro bono service, provided legal services to an underserved community, fully cooperated with the Office of Attorney Ethics and had returned the borrowed funds. While an order of disbarment was issued in accordance with Wilson, the Supreme Court noted that New Jersey’s permanent disbarment approach was among the minority of jurisdictions, whereas 41 other states provided a “second chance” for disbarred attorneys. A special committee was created by the Supreme Court, which issued a comprehensive report in 2023, recommending a path to reinstatement for some disbarred attorneys.
The Court’s recent order and determination still requires disbarment where an attorney is shown to have knowingly misappropriated client funds. However, there is now a path for some attorneys to seek reinstatement. The Court explained:
Having concluded that there is a viable alternative to the current state of permanent disbarment, the Special Committee recommended the fundamentals of a robust readmission process that would both uphold the protections of the attorney disciplinary system and afford a second chance in appropriate circumstances.
As a result, a disbarred attorney must satisfy ten prerequisites, which include: retaking and passing the New Jersey Bar Examination and Multistate Professional Responsibility Examination; a five- year waiting period before seeking reinstatement; notification to aggrieved clients of an intent to seek reinstatement; and repayment of the misappropriated funds. It is also relevant that a “second chance” not limited only to attorney’s disbarred for knowing misappropriation and may be available for attorneys disbarred for other reasons. As a result of the October 15, 2024 order and determination, disbarred attorneys should not expect reinstatement but, in certain circumstances, now have a path for reinstatement.
Andrew Sayles is chair of Moreira Sayles Ramirez LLC’s Professional Liability practice group. He focuses his practice on professional liability, commercial litigation and personal injury litigation. He is on the Board of Directors for the Professional Liability Defense Federation (PLDF) and serves on DRI’s Professional Liability Committee.