An attorney who knowingly misappropriates funds from a client is subject to disbarment


Law Lessons from In the Matter of Frank J. Cozzarelli, __ N.J. __ (2016), Nos. D-151 September Term 2013, May 2, 2016:

In this State, two rules in attorney misconduct matters are applied, virtually without exception. First, disbarment is permanent. R. 1:20-15A(a)(1); see also In re Breslin, 171 N.J. 235, 237 (2002) (noting that “in New Jersey disbarment invariably is permanent”). Second, an attorney who knowingly misappropriates funds from a client is subject to disbarment, In re Wilson, 81 N.J. 451, 453 (1979), without any practical prospect of consideration of mitigating factors, id. at 457-60, or restoration upon a showing of reformation, id. at 460 n.5 (noting that “research reveals only three orders of reinstatement following disbarment over the past hundred years”); see also In re Greenberg, 155 N.J. 138, 151 (1998) (“We accept as an inevitable consequence of the application of th[e Wilson] rule that rarely will an attorney evade disbarment in such cases.”).

Misappropriating attorneys claiming to be afflicted with identifiable disorders, including mental illness or related conditions, have not swayed the Court from imposing the grave discipline of disbarment. See Greenberg, supra, at 150, 157-58.

In In re Jacob, 95 N.J. 132 (1984), the Court considered, as part of the defense to a knowing-misappropriation-of-client-funds case, a medical report by the physician of the respondent that addressed certain physical and mental health conditions, including depression, suffered by the attorney. 95 N.J. at 134-35, 137. The Court spoke sympathetically to the lawyer’s plight but nevertheless rejected the argument that the medical evidence served to “exculpate [the] misappropriations.” Id. at 136. The Court explained that the medical proofs did not demonstrate that the condition from which the respondent suffered “was an exclusive or major cause of his ethical derelictions.” Id. at 137. The Court emphasized that it was looking for a demonstration of a causal connection between the medical condition and the financial misdeed. Ibid. The Court closed with the following restatement of its reasons for rejecting the proffered defense:

The report does not furnish any basis grounded in firmly established medical facts for a legal excuse or justification for respondent’s misappropriations. There has been no demonstration by competent medical proofs that respondent suffered a loss of competency, comprehension or will of a magnitude that could excuse egregious misconduct that was clearly knowing, volitional and purposeful.

[Ibid.]

Although the Court’s closing comments referred to legal excuse or justification, and mentioned “loss of competency, comprehension or will,” a standard that traces language used in diminished capacity analyses, several subsequent cases in which a so-called Jacob defense was advanced collapsed the standard into shorthand in which it is described essentially as an ability to discern right from wrong. See In re Hein, 104 N.J. 297, 302 (1986); see also In re Romano, 104 N.J. 306, 311 (1986) (concluding that “respondent has failed to demonstrate that a disease of the mind rendered him unable to tell right from wrong or to understand the nature and quality of his acts”). The DRB decision in this matter discusses subsequent cases that have attempted to argue for mitigation of penalty based on “loss of competency, comprehension or will” language that was used in Hein, explaining that the language actually originated from Jacob and requires loss of competency, comprehension or will of a magnitude that would excuse conduct that is otherwise knowing or purposeful. (Citing In re Steinhoff, 114 N.J. 268, (1989)). Most specifically, the Court in In re Roth, 140 N.J. 430, 448 (1995), addressed mental illness in the context of whether an attorney lacked volitional capacity to perform his duties. The Court equated the loss of competency, comprehension or will as requiring an inability to distinguish right from wrong and concluded that the depression from which the respondent was suffering did not suffice to excuse his conduct under that standard. Ibid.

In another case, Greenberg, supra, 155 N.J. 138, our Court was asked to consider whether depression caused the respondent to suffer a substantial impairment of judgment that, when combined with other mitigating factors, should permit the attorney to avoid disbarment for stealing law firm funds. In rejecting the defense, our Court tied its rationale again to the lawyer’s failure to demonstrate that “he was unable to appreciate the difference between right and wrong or the nature and quality of his acts.” Id. at 157. The lawyer’s mental illness, although severe, did not eviscerate the lawyer’s knowledge that he was taking the firm’s funds and that his firm had not authorized the taking. Id. at 158-59; see also In re Tonzola, 162 N.J. 296, 307 (2000) (noting “the debilitating and overpowering effects of respondent’s illnesses,” but acknowledging respondent’s expert’s opinion that respondent “may have been aware” that clients’ funds were being misappropriated).

The Jacob standard requires an inability to distinguish between right and wrong or to understand the nature and quality of one’s acts. Those two expressions of understanding can be likened to the standard for legal insanity, under the M’Naghten test [M’Naghten’s Case, 8 Eng. Rep. 718 (H.L. 1843); see also State v. Breakiron, 108 N.J. 591, 616 (1987) (“[T]he insanity defense as modified in New Jersey is strictly limited to the M’Naghten principle of whether or not the defendant was either unable to know the nature and quality of the act he was doing … or, if he did know it, that he did not know that what he was doing was wrong.”)], and the standard for diminished legal responsibility under principles of diminished capacity or the statutory defense of intoxication. See N.J.S.A. 2C:4-1 (insanity); see, e.g., State v. Worlock, 117 N.J. 596, 603 (1990) (“Directed at defendant’s ability to `know,’ the M’Naghten test is essentially one of cognitive impairment. Sometimes described as the `right and wrong’ test, its purpose is to determine whether the defendant had sufficient mental capacity to understand what he was doing when he committed the crime.”); N.J.S.A. 2C:4-2 (diminished capacity); see, e.g., State v. Taylor, 387 N.J. Super. 55, 61-62 (App. Div. 2006) (stating that, once affirmative defense of diminished capacity is raised, State must prove beyond reasonable doubt that, despite evidence of defendant’s mental disease or defect, she nonetheless “knew” that she was committing the relevant offense); N.J.S.A. 2C:2-8 (intoxication); see, e.g., State v. Mauricio, 117 N.J. 402, 418 (1990) (stating that “self-induced intoxication is a defense to a purposeful or knowing crime”). The Jacob standard may not be a model of clarity, but the point to Jacob is that it expressed the Court’s willingness to consider defenses that would negate the mental state to act purposely. A mental illness that impairs the mind and deprives the attorney of the ability to act purposely or knowingly, or to appreciate the nature and quality of the act he was doing, or to distinguish between right and wrong, will serve as a defense to attorney misconduct. The aforesaid defenses are ones that can and should be considered in connection with excusing wrongful conduct by an attorney, or when mitigation of the disciplinary penalty is appropriate to consider under our disciplinary jurisprudence addressing the quantum of punishment.

The Court has previously noted the importance of establishing a causal connection between mental illness and the acts of misappropriation. See Jacob, supra, 95 N.J. at 137.

In Wilson, supra, the Court explicitly stated that “maintenance of public confidence in this Court and in the bar as a whole requires the strictest discipline in misappropriation cases. That confidence is so important that mitigating factors will rarely override the requirement of disbarment.” 81 N.J. at 461. The Court also has been unswayed by the assertion that a respondent is unlikely to continue to misappropriate funds in the future. “[T]he unlikelihood of subsequent misappropriation [is] irrelevant in these cases.” Id. at 460 n. 4. The Court has not suggested that a low risk of re-offense is, in itself, “sufficient to warrant lesser discipline,” because it is “almost universally present in these matters.” Ibid.

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