Just one day after oral arguments concluded in the matter of In re Lucid, Disciplinary Action D-141-20, the New Jersey Supreme Court issued a swift resolution to censure an attorney who was recommended for disbarment for knowing misappropriation of trust funds. The New Jersey State Bar Association (NJSBA) submitted an amicus curiae brief urging a clarification of the automatic disbarment rule for knowing misappropriation of a client’s trust funds established in In re Wilson, 81 N.J. 451 (1979), known as the Wilson rule. NJSBA Past Presidents Robert B. Hille and Miles S. Winder III authored the brief.
In this case and a second case—In re Wade—the NJSBA urged the Court to clarify that the Wilson rule is applicable only where there is clear and convincing evidence of “knowing” action coupled with purposeful conduct that results in actual theft or fraud committed against a client in connection with property held in trust for that client. The NJSBA further argued that all facts should be considered in analyzing a disciplinary matter where the Wilson rule may apply, including motive and intent, to determine if they are consistent with a finding of conduct tantamount to theft or fraud.
“While couched in terms of knowing misappropriation, those cases where Wilson has been applied invariably involved knowing conduct intentionally directed against a specific client or clients that was tantamount to stealing or fraud,” said the NJSBA in its brief. “By contrast, negligent misappropriation recognizes there are situations where the act which led to the misappropriation was knowing, but it was not intended. Otherwise, any conscious act relating to a trust account that resulted in a negative impact to a client would compel disbarment. Such a distorted or overreaching interpretation of the term ‘knowing’ poses a real risk of over-zealous application.”
In re Lucid, Karina Pia Lucid was issued a censure for what the Court deemed a negligent misappropriation of funds, overruling the Disciplinary Review Board (DRB), which recommended disbarment for knowing misappropriation. The matter emanates from an overdraft of Lucid’s trust account of less than $400, which was a result of fees she thought were being charged to another account. Further investigation by the Office of Attorney Ethics uncovered a transaction from over a year earlier where Lucid issued a settlement check that was cashed before the client’s funds were cleared in her trust account. Lucid admitted to writing the check in order to avoid upending a settlement, which cleared the trust account before the client’s check cleared in the trust account a week later.
In a personal appeal to the Court, Lucid reiterated that the particular incident occurred during a snowstorm during which she was homebound with power outages and her husband had seriously injured himself. No check bounced, as sufficient funds were in the trust account. Lucid argued that while she may have been negligent in this transaction, the action did not rise to the level of knowing misappropriation warranting disbarment.
The District XIII Ethics Committee recommended a censure, but the DRB recommended disbarment, stating it was “bound by the bright line rule of Wilson regarding the unauthorized use of client funds....” The decision by the DRB was split, with five voting to disbar, three voting for a three-month suspension, and one voting for censure. The Court’s two-page order found that Lucid violated the Rules of Professional Conduct 1.15(a) by negligently misappropriating funds and that “censure is the appropriate quantum of discipline for respondent’s unethical conduct.”
The NJSBA took no position on the facts or findings, but pointed out that they “illustrate the critical need for clarity sought by the NJSBA.”
“It is time to eliminate the attractive incentive to push the limits of what knowing misappropriation is beyond Wilson’s focus, addressing thievery and fraud against clients, to any conscious act by a lawyer that results in an adverse impact to a trust account,” said the NJSBA in its brief.
In re Wade, Disciplinary Action D-132-30, is still being considered by the Court, which concluded oral arguments at the end of September.
This is a status report provided by the New Jersey State Bar Association on recently passed and pending legislation, regulations, gubernatorial nominations and/or appointments of interest to lawyers, as well as the involvement of the NJSBA as amicus in appellate court matters. To learn more, visit njsba.com.