The Supreme Court of New Jersey made the legal news this month with its opinion In the Matter of Dionne Larrel Wade, an Attorney at Law, N.J. Supreme Court No. 085931 (June 7, 2022), where it permanently disbarred Ms. Wade from practicing law in the State of New Jersey in a "clear case of knowing misappropriation of client and escrow funds." "From 2002 to 2017, [Ms. Wade] knowingly and repeatedly borrowed money from clients, without their knowledge or approval, to cover the needs of other clients and for her personal use." Opinion, p. 1. Following the brightline rule established by In re Wilson, 81 N.J. 451, 453, 461 (1979), the New Jersey court automatically disbarred Ms. Wade for her knowing misappropriation of client funds, notwithstanding "remarkable personal and professional accomplishments," "no prior disciplinary history" and "no clients  harmed." Further, "[u]nder New Jersey's longstanding disciplinary rules, disbarment is permanent and marks the end of a person's ability to practice law." (Opinion, pp. 2-3) (emphasis added).
The New Jersey Supreme Court, however, also decided that because it was in the minority of states that hold disbarment to be permanent, it would "reevaluate the current approach to permanent disbarment" by creating a "broad-based committee to analyze whether disbarment for knowing misappropriation should continue to be permanent" or if some attorneys should be given "a second chance" for reinstatement some years later. (Opinion, pp. 3-5, 32-37). To be clear, however, the sanction of automatic disbarment for misappropriation in New Jersey is not changing or subject to discussion. In re Wade did not change In re Wilson's rule – if an attorney misappropriates a client's funds, that attorney will be automatically disbarred in New Jersey. Rather, the only matter for debate is whether disbarment should be permanent.
Ohio is one of only 8 states in the country that currently make disbarment permanent. Ohio Supreme Court Gov. Bar Rule V Section 12(B) (The other seven states are New Jersey, Indiana, Kentucky, Nevada, New Mexico, Oregon, and Tennessee).
Although disbarment in Ohio is permanent, however unlike New Jersey, Ohio has no brightline rule mandating disbarment as the sanction for misappropriating a client's money. In Ohio, "disbarment is [only] the presumptive disciplinary measure for acts of misappropriation." Disciplinary Counsel v. Kelly, 121 Ohio St.3d 39, 2009-Ohio-317, 901 N.E.2d 798, ¶ 17. Accord: Disciplinary Counsel v. Burchinal, 163 Ohio St.3d 436, 2021-Ohio-774, 170 N.E.3d 855, ¶ 34; Disciplinary Counsel v. Harter, 154 Ohio St.3d 561, 2018-Ohio-3899, 116 N.E.3d 1255, ¶ 33. Because disbarment for misappropriation is just a presumptive sanction, it "may be tempered with sufficient evidence of mitigation or extenuating circumstances." In re Burchinal, 2021-Ohio-774 at ¶ 39. Justice Sharon Kennedy pointed out in her concurrence in Columbus Bar Ass'n v. Davis, Slip Opinion No. 2022-Ohio-1286, ¶ 29, that no presumptive sanction has "been formally adopted in the Rules for the Government of the Bar. And one might question the utility of establishing presumptive sanctions when the sanction actually imposed remains dependent on the unique facts and circumstances of each disciplinary case based on the fact that we are not limited to the factors enumerated in the rules, but may consider all relevant factors in determining the appropriate sanction for an attorney's misconduct." (Internal quotations and citation omitted).
Indeed, there are many cases in Ohio where an attorney has been given a suspension instead of being disbarred for misappropriation because of the weighing of the various "aggravation" and "mitigation" factors (Gov.Bar R. V Section 13) and because each case is treated as unique. See, e.g., Davis, 2022-Ohio-1286 at ¶ 23-24; Disciplinary Counsel v. Nagorny, 105 Ohio St.3d 97, 2004-Ohio-6899, 822 N.E.2d 1233, ¶ 10-15; Disciplinary Counsel v. Buttars, 159 Ohio St.3d 600, 2020-Ohio-1511, 152 N.E.3d 293, ¶ 18-24; Trumbull Cty. Bar Ass'n v. Dull, 151 Ohio St.3d 601, 2017-Ohio-8774, 91 N.E.3d 739, ¶ 10-16; Disciplinary Counsel v. Joltin, 147 Ohio St.3d 490, 2016-Ohio-8168, 67 N.E.3d 780, ¶ 18-22; Cincinnati Bar Ass'n v. Britt, 133 Ohio St.3d 217, 2012-Ohio-4541, 977 N.E.2d 620, ¶ 23-32; Disciplinary Counsel v. Claflin, 107 Ohio St.3d 31, 2005-Ohio-5827, 836 N.E.2d 564, ¶ 14-16.
Given that under Ohio law, disbarment is only a presumptive sanction for misappropriation of client funds, unlike the absolute automatic disbarment under New Jersey law, let's take a look at Ms. Wade's conduct and circumstances and consider what may have happened had she been practicing in Ohio when she misappropriated her clients' money. (Interesting side note: Ms. Wade received her law degree from Ohio Northern University).
Ms. Wade was admitted to the New Jersey bar in 2002, and from that time until the events that led to her disbarment she was a solo practitioner. On June 15, 2017, the Office of Attorney Ethics ("OAE") conducted a random audit of her financial records. The day before that audit, Ms. Wade "deposited $12,000 she borrowed from a friend into her attorney trust account." (Opinion, p. 5). The audit initially covered two years from 2015 to 2017 and it uncovered multiple problems including "commingling and extensive shortages in client trust funds totally more than $11,000." (Opinion, p. 6). "In response to the audit, [Ms. Wade] admitted that she borrowed client and escrow funds in two matters, without permission from her clients, because she needed money and had no one else to turn to for a loan." (Id.)
The audit was later extended to cover 7 years, leading to allegations of misappropriation involving three clients: (1) Reverend Eason and the Grace of God Church, (2) the Estate of Felix Anderson, and (3) Vivian Clayton. With respect to Reverend Eason and the church, Ms. Wade was given $21,000 to put into escrow to pay down the church's property tax, but Ms. Wade repeatedly transferred funds from the trust account to her business account creating a shortfall of over $11,000. (She deposited that $12,000 the day before the audit to cover this shortfall).
With respect to the Anderson Estate matter, Ms. Wade "admitted borrowing a total of $5,000 without permission. About two years later, she returned $3,100. On a ledger card [Ms. Wade] prepared after the random audit, she noted that she borrowed the $5,000. She later stated that the notation was inaccurate; that she withdrew $3,000 to hire a detective to locate a lost heir and returned the $3,100 when she decided not to do so; and that she took $2,000 for her fee. [Ms. Wade] also claimed she overpaid two beneficiaries about $1,000 each." (Opinion, p. 9) (emphasis added). She admitted that she borrowed these funds to pay bills because she was broke. "She conceded she used client funds without permission to pay various expenses but claimed she did not know it was wrong to borrow money until the OAE investigator told her so." (Opinion, p. 10).
With respect to Vivian Clayton, the seller in a real estate transaction, Ms. Wade "accepted $4,000 from the buyers in June 2014 and was obligated to hold the funds in escrow until the closing the next month. Without permission, she made a number of withdrawals, transfers, and deposits in the intervening time, and the escrow balance dropped to $3,750 at one point. [Ms. Wade] later asserted that the shortfalls resulted from her failure to pay attention to the books. She replenished the money – to exactly $4,000 – in time for the closing." (Opinion, p. 9).
Ms. Wade insisted that she had no idea her actions were wrong and she never intended to steal or keep the funds taken. (Opinion, p. 7). She also said she had no understanding of basic accounting principles. (Opinion, p. 8). However, Ms. Wade "was aware of the danger in borrowing from clients. She noted for example, that she had not touched another $123,000 in client funds because she knew she could not 'pay that back.' [Ms. Wade] drew the line at $12,000—a self-imposed limit." (Opinion, p. 10). Ms. Wade admitted, with counsel present, in a 2018 interview that "she considered client funds as a 'line of credit' she could use, without permission, as long as she made the client whole…." She also admitted "using funds from one client to pay for another client's needs – known as 'lapping.'" (Opinion, p. 11). "[S]he conceded that her use of client funds was 'absolutely' wrong but stemmed from 'ignorance.'" (Id.). "She never intended to steal from clients and intended to pay the money back at all times." (Opinion, p. 11).
After the OAE filed a complaint against her, in her answer to the complaint, Ms. Wade
"moved away from some of her earlier admissions. She admitted that she 'did not maintain the appropriate recordkeeping procedures' but denied having 'committed a knowing misappropriation.' [Ms. Wade] stated that she 'did not intentionally take client funds.' Although she conceded that she made certain admissions, she 'denied that what was stated is actually what occurred.' She also asserted that her prior statements to the OAE 'were made due to [her] embarrassment over not having maintained proper records in [her] practice.'" (Opinion, p. 12).
During the hearing on the matter, Ms. Wade offered several witnesses to testify on her behalf. One witness "described the 'disarray' in [Ms. Wade's] law office; she saw 'a hundred plus unopened envelopes' that contained financial records and tried to help [Ms. Wade] organize them. [Ms. Wade] herself admitted that she let bank statements pile up without opening them." (Id.). Ms. Wade's expert testified that "[her] poor recordkeeping and commingling of funds meant 'she could not have known she was using client funds.'" (Opinion, p. 14).
Other witnesses testified to Ms. Wade's character. "Several relatives testified about Ms. Wade's upbringing and devotion to family. She "was born to a sixteen-year-old mother who struggled with substance abuse" and her father was absent from her life. She moved several times as a child and when her mother was in rehab, she lived with a cousin. She helped take care of her brother's children when he was in prison from drug distribution. When Ms. Wade's uncle became ill, Ms. Wade offered to donate a kidney for transplant. (Opinion, p. 28). "Other witnesses testified about [Ms. Wade's] extensive involvement with her church" including conducting free legal seminars. (Opinion, p. 29). Other witnesses "spoke of her work as a lawyer" including that she active participant in providing pro bono services, and in 2017 received an award from Legal Services for that work. Even Vivian Clayton, one of the clients from whom Ms. Wade misappropriated money, testified on her behalf, describing Ms. Wade as "kind, intelligent, truthful, and a hard worker with a 'servant's heart.'" (Opinion, pp. 29-30).
After the hearing, Ms. Wade submitted a post-hearing submission. In that submission, Ms. Wade continued to distance herself from her earlier admissions. "She claimed that any misappropriations were negligent, not knowing; that her bookkeeping practices were deficient and accounted for various errors and shortfalls; that she believed she transferred earned legal fees and not Reverend Eason's money; that the notation she had 'borrowed' funds in the Anderson matter was inaccurate; and that she was ignorant of 'checking accounting principles' and recordkeeping rules." (Opinion, p. 13).
The Special Master issued a report, recommending that she be disbarred for misappropriation. In doing so, the Special Master discounted Ms. Wade's expert's testimony that her "poor recordkeeping and commingling of funds meant 'she could not have known she was using client funds'" finding that "her 'repeated and consistent repayment of all amounts borrowed' belied the testimony." Ms. Wade made a 'conscious return' of borrowed funds in time to cover any shortfalls." "Sloppy bookkeeping did not cause [Ms. Wade] to unknowingly borrow client funds. She knowingly did so, and she paid back what she borrowed." (Opinion, p. 14). Ms. Wade's "'improper practice caused [her] to be repeatedly out of trust which she thought [was] excusable so long as she made up the shortage when needed.'" (Opinion, p. 13).
In June 2021, after a de novo review of the record, the DRB unanimously upheld the Special Master's findings.
"Like the Special Master, the DRB acknowledged [Ms. Wade] was 'a remarkable person who had overcome tremendous personal obstacles, through diligence and perseverance, to become a pillar of her church and local community'…. Despite evidence of her 'stellar personal reputation', however, the DRB found the record was 'replete with overwhelming evidence that she repeatedly and knowingly misappropriated client and escrow funds, from 2002 through 2017.' The DRB also pointed to [Ms. Wade's] multiple admissions that she 'borrowed client and escrow funds, for the entirety of her career….without the knowledge or permission of her clients.' According to the DRB, [Ms. Wade's] behavior constituted textbook 'lapping,' – 'robbing Peter to pay Paul,' but always making certain that 'Peter's funds' were replenished when it was time to repay him.
The DRB recited [Ms. Wade's] admissions in detail, noted her attempt 'to distance herself from' them, and 'viewed that sea change with skepticism.' The Board also addressed and rejected defenses that she raised. It found that neither an intent to replace client funds nor ignorance of the ethics rules was a defense to a Wilson violation. The Board equated [Ms. Wade's] lack of an accounting system for fifteen years with willful blindness." (Opinion, pp. 15-16).
In upholding the DRB and Special Master's findings of knowing misappropriation and recommendation of permanent disbarment, the New Jersey Supreme Court repeated that Ms. Wade's personal and professional history does not provide a defense to knowing misappropriation and the automatic disbarment that follows -- even in this case, where none of Ms. Wade's clients apparently lost money, where Ms. Wade apparently took remedial measures after the audit and cooperated with the OAE, and where she was "contrite about her failure to maintain financial records properly." Opinion, p. 31.
But, again, what if all of this happened in Ohio?
Gov.Bar R. V provides the rules for disciplinary procedure in Ohio. Under Rule V Section 12(A), sanctions for misconduct include disbarment, indefinite suspension, suspension for period of 6 months to 2 years, probation, and public reprimand. Rule V Section 13 states:
"(A) In General. Each disciplinary case involves unique facts and circumstances. In striving for fair disciplinary standards, the Board shall give consideration to specific professional misconduct and to the existence of aggravating or mitigating factors. In determining the appropriate sanction, the Board shall consider all relevant factors, precedent established by the Supreme Court of Ohio, and the aggravating and mitigating factors set forth in this section.
(B) Aggravation. The following shall not control the discretion of the Board, but may be considered in favor of recommending a more severe sanction:
(1) Prior disciplinary offenses;
(2) A dishonest of selfish motive;
(3) A pattern of misconduct;
(4) Multiple offenses;
(5) Lack of cooperation in the disciplinary process;
(6) The submission of false evidence, false statements, or other deceptive practices during the disciplinary process;
(7) A refusal to acknowledge wrongful nature of conduct;
(8) The vulnerability of and resulting harm to victims of the misconduct;
(9) A failure to make restitution.
(C) Mitigation. The following shall not control the discretion of the Board, but may be considered in favor of recommending a less severe sanction:
(1) The absence of a prior disciplinary record;
(2) The absence of a dishonest or selfish motive;
(3) A timely, good faith effort to make restitution or to rectify consequences of misconduct;
(4) Full and free disclosure to the Board or cooperative attitude toward proceedings;
(5) Character or reputation;
(6) Imposition of other penalties or sanctions;
(7) Existence of a disorder….
(8) Other interim rehabilitation;
(9) In the case of an elected or appointed judge, a voluntary resignation from judicial office prior to the commencement of the judge's disciplinary hearing before the Board." (Emphasis added).
In Ms. Wade's case, she knowingly misappropriated client funds throughout the entirety of her law career (15 years). Disbarment would be the presumptive sanction. In looking at the "aggravation" factors, Ms. Wade had no prior offenses but did appear to have a selfish motive. She exhibited a pattern of misconduct throughout her law career, although only investigated one time for it, and there were multiple offenses. Ms. Wade appeared to cooperate with the investigation; however, she did attempt to distance herself from her admissions about knowingly taken her clients' funds and instead tried to blame it on her admittedly poor record-keeping practices, which tends to demonstrate that she perhaps was refusing to recognize the wrongful nature of her actions. Finally, while the victims that we know about were vulnerable – a pastor and his church, the estate of a deceased person, and a seller in a real estate closing, none appeared to have been harmed as Ms. Wade was careful to replenish any funds that she took from these clients. So, of the 9 aggravation factors, arguably 5 of those were present.
Looking at the mitigation factors, while there are 9 of them, only 6 would apply in this case, and as for those 6, Ms. Wade would probably be given the benefit of them all. She has no prior disciplinary record; she timely tried to rectify the consequences of her actions by replenishing any funds that she took from clients so that none were harmed; she appeared to cooperate with the investigation and make full and free disclosure, but again her attempts to distance herself from admissions gives one pause; she had multiple witnesses testify to her stellar reputation and character; and there were no other sanctions or penalties given to her.
In weighing all the factors, had Ms. Wade been practicing in Ohio, in this author's opinion, she probably would not have been disbarred. She probably would have been given an indefinite suspension or suspension for a set amount of time, both of which would have allowed her to apply for reinstatement (either after the suspension time ended or, for indefinite suspension, two years after the suspension began. Rule V Sections 24 and 25).
While New Jersey may be contemplating whether the sanction of disbarment should be permanent or not, regardless, misappropriation of client funds is worthy of disbarment – no matter where you practice. So, don't not steal from your clients – no matter where you practice.