106 N.J. 529 (1987)
In re Warhaftig is a cornerstone New Jersey attorney-discipline decision that forcefully applies the Wilson rule: a lawyer who knowingly uses client or escrow funds for any unauthorized purpose—no matter how temporary, and regardless of repayment or good character—must be disbarred. The case underscores that fiduciary stewardship of client property is a non-negotiable core of the legal profession, and that bright-line sanctions are necessary to protect the public and maintain confidence in the bar.
Whether an attorney who knowingly uses client or escrow funds from a trust account for personal or office purposes—even temporarily and with the intent and ability to repay—must be disbarred under New Jersey's bright-line rule governing misappropriation of entrusted funds.
Under In re Wilson, the knowing misappropriation of client funds is any unauthorized use by a lawyer of funds entrusted to him, including temporary use, whether or not the lawyer derives a personal benefit or the client is actually harmed. In re Hollendonner extends the same standard to funds held in escrow for third parties. Knowing misappropriation, proven by clear and convincing evidence, mandates disbarment; intent to repay, partial or full restitution, cooperation, good character, and the absence of client loss are not mitigating factors that can avoid disbarment. Only the absence of knowledge (e.g., negligent or inadvertent misuse) takes a case outside the Wilson rule.
The New Jersey Supreme Court found that the respondent knowingly misappropriated client and escrow funds and ordered disbarment, rejecting arguments based on restitution, lack of client loss, personal hardship, and otherwise good character.
Warhaftig is a prime teaching case on fiduciary duties and professional discipline. It cements the New Jersey bright-line approach: knowing misappropriation of client or escrow funds equals disbarment, full stop. The case helps students distinguish among negligent mishandling, sloppy recordkeeping, and deliberate misuse; understand the high standard of proof in disciplinary matters; and appreciate why traditional mitigation carries little weight in this narrow but critical category of misconduct. It is frequently cited with Wilson and Hollendonner to define knowing misappropriation, to show that escrow funds are treated the same as client funds, and to illustrate the profession's uncompromising protection of entrusted property.