Hughes Justice Complex, Trenton, New Jersey

*Editor's note: A prior version of this story misstated the authorship of this opinion. It is a per curiam decision.

Pointing to “evidence of a business dispute” with his law firm, the Supreme Court ruled that it cannot disbar an attorney who received 150-day suspension in Utah for what authorities in that state determined was knowing misappropriation of law firm funds.

The court ruled that Joseph Peter Barrett, charged with accepting construction work to his home in Utah as payment for his firm's legal services, couldn't be disbarred under New Jersey's clear and convincing evidence standard for lack of evidence. And so the suspension he received in Utah—a “sister jurisdiction” that applies only a preponderance of the evidence standard and recognizes no business dispute defense in ethics proceedings—should be the same punishment he gets in New Jersey, the court said.

“We conclude that in this case, Rule 1:20-14(a), which governs reciprocal discipline, does not permit 'substantially different discipline' from that imposed in Utah,” the unanimous court said in a per curiam decision.

“While a lawyer's misappropriation of law firm funds may warrant disbarment in some cases, In re Sigman, 220 N.J. 141, 153 (2014), we determine that the New Jersey Office of Attorney Ethics (OAE) did not demonstrate that the record of proceedings in Utah establishes by clear and convincing evidence that the circumstances here warrant respondent Joseph Peter Barrett's disbarment,” he wrote.

“Therefore, like the Utah Supreme Court, we impose a 150-day suspension of respondent's license to practice law in New Jersey, which we apply retroactively,” he said.

John McGill III of Edgewater Park, who represented Barrett, praised the ruling.

“I believe the Supreme Court decision and analysis vindicate Mr. Barrett's position for good cause shown in the interest of justice,” McGill said by phone Monday. “The opinion speaks for itself.”

OAE director Charles Centinaro, who argued the case, could not be immediately reached for comment. MaryAnn Spoto, a spokeswoman for the Administrative Office of the Courts, said in an email, “as with all its cases, the OAE does not comment on decisions.”

According to the decision, there were two separate ethical proceedings in Utah involving Barrett, who was accused of trading legal fees earned by and owed to his law firm for construction work performed at his home in Utah.

Barrett, according to the court, made the arrangement without the knowledge or consent of his law firm and in violation of his law firm's employment contract. His alleged actions deprived his law firm of more than $20,000 in legal fees.

The decision provided little detail of the arrangement.

In hearings before Utah's District Court, Barrett, in order to explain and justify his conduct, sought to testify about a business dispute he had with his law firm. The Utah court determined the evidence was relevant only to the motive and credibility of testifying law firm partners. At the hearing's conclusion, the Utah judge found by a preponderance of the evidence that Barrett had knowingly misappropriated law firm funds and imposed a 150-day suspension. The Utah Supreme Court affirmed the 150-day suspension, according to the decision.

The OAE then moved before the Disciplinary Review Board for reciprocal discipline, but urged for Barr's disbarment. The DRB recommended disbarment.

Last year, the Supreme Court dismissed without prejudice the OAE's motion for reciprocal discipline, noting that “the findings of the tribunal in Utah were based on a preponderance of the evidence standard instead of the clear and convincing standard applicable to New Jersey disciplinary proceedings.”

The OAE filed a motion for reconsideration, which the court granted.

The case was argued before the court on June 11.

On Monday, the court said it should impose the same discipline as in a sister jurisdiction unless the matter falls within one of five enumerated exceptions. One of the exceptions, according to the court, is that “the unethical conduct established warrants substantially different discipline” under Rule 1:20-14(a)(4)(E).

“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[],' the Director of the OAE must 'establish[] such contentions by clear and convincing evidence,” the court said, quoting from the rule, and the OAE failed to meet that standard.

The 150-day suspension was imposed retroactively.

The courts noted that, under the 1993 decision In re Siegel, an attorney accused of knowingly misappropriating funds from a client or from law partners “will generally result in disbarment.” But Siegel “is not, and has never been, absolute,” and the court “has recognized in other settings that there are cases that warrant discipline short of disbarment,” the court said.

“The only evidence produced by the OAE in support of sanctions greater than a 150-day suspension is the record of proceedings before the Utah court,” the court said. “Importantly, in New Jersey disciplinary proceedings, evidence of a business dispute may be a defense to the misappropriation of law firm funds.

“Utah has no such business dispute defense, the Utah record lacks facts necessary to establish a business dispute defense, and evidence of the existence of a business dispute would be integral, in New Jersey, to defending against a charge of knowing misappropriation of law firm funds,” the court added.

The court also said Barrett's incentive to produce evidence of a business dispute before the Utah court was far different from what his motivation to produce such evidence in New Jersey would have been.

“Any such evidence that may have been available during the Utah proceedings remains in Utah, outside of respondent's and the OAE's reach,” the court said. “It would therefore be fundamentally unfair and contrary to established rules to disbar respondent in New Jersey … based only upon the record of proceedings in Utah.”

According to the decision, the Utah Office of Professional Conduct appealed Barrett's 150-day suspension to the Utah Supreme Court, and requested that Barrett be disbarred—the presumed penalty for knowingly misappropriating client funds, though not for knowingly misappropriating law firm funds, in that jurisdiction.

The Utah Supreme Court clarified that “not all misappropriation is created equal,” and declined the request “to hold that disbarment is the appropriate sanction whenever an attorney misappropriates firm funds.”

Barrett contended that the Utah court deprived him of the opportunity to fully develop facts supporting his claimed business dispute with the law firm.

The DRB acknowledged that Utah has no bright-line rule mandating disbarment for the knowing misappropriation of law firm funds, but it still recommended disbarment based on Siegel.

“Here, the OAE bears the burden of proving by clear and convincing evidence that respondent knowingly misappropriated law firm funds,” the court said. “Respondent is entitled to produce evidence that the purported misappropriation was, in fact, a business dispute. We must then determine whether the OAE has proven by clear and convincing evidence that the facts of the case warrant the imposition of 'greater discipline than that imposed in' Utah—namely, the sanction of disbarment.

“Here, evidence of a business dispute militates against disbarment, notwithstanding an attorney's misappropriation of law firm funds in violation of RPC 8.4(c).”

Added the court: “Our constitutional responsibility is to determine the fitness of lawyers to practice law in New Jersey. In doing so, 'we cannot ignore relevant information that places an attorney's conduct in its true light,'” the court said, quoting from case law.

“Here—as in every disciplinary matter before this Court—respondent, the OAE, and members of the public 'are entitled to a disciplinary review process in which a full, undistorted picture is the basis for disciplinary sanctions,'” the court added.