As we are taught in law school, and as some members of the public find hard to believe, attorneys are held to the highest ethical standards. One of the surest ways for an attorney to secure his or her disbarment is to misappropriate funds. In a December 18, 2014 decision, however, the New Jersey Supreme Court drew a bright line between misappropriation of client funds held in trust and misappropriation of other types of funds – the former mandating disbarment and the latter providing for more flexibility in punishment. In Re Sigman, decided December 18, 2014.

While employed by a law firm in Pennsylvania as an associate, Scott P. Sigman, among other conceded wrongs, kept client fees for himself rather than sharing them with his employer firm as required by the terms of his employment. The Pennsylvania Disciplinary Board recommended a 30-month suspension for this and other violations of the disciplinary rules, and that discipline was subsequently imposed by the Pennsylvania Supreme Court.

The New Jersey Office of Attorney Ethics (OAE) subsequently sought reciprocal discipline based on the respondent’s admitted violation of Pennsylvania disciplinary rules. However, the OAE sought a much harsher penalty – disbarment – due primarily to the attorney’s misappropriation of funds. A majority of the New Jersey Disciplinary Review Board agreed that disbarment was the appropriate penalty and was mandated by prior cases.

However, after an independent review of the record, the New Jersey Supreme Court disagreed with the Board that disbarment was the only option available to it. The Court first distinguished precedent mandating disbarment for the misappropriation of client funds held in a trust or escrow account, explaining that this case instead involved wrongful handling of funds owed to the firm. The Court then waded through some muddy case history filled with mixed messages, finally concluding that rules expressed in the past seemingly mandating disbarment for misappropriation of firm funds “[are] not, and [have] never been, absolute.”

Having concluded that it was not bound by any precedent that would mandate disbarment, the Court ultimately decided to impose the same 30-month suspension as administered by Pennsylvania, both deferring to that state’s expertise in this disciplinary area and affording a favorable view to the attorney’s mitigating factors.

This case shows that at least two states do not require disbarment even if there is evidence of theft. Attorneys who play fast and loose with any funds – whether belonging to a client, to the attorney’s law firm partners or to anyone else – are clearly treading on particularly thin ice. This case, however, presents an important inroad in the defense of disciplinary proceedings relating to misappropriation and could spare an attorney from the ultimate disciplinary sanction.