A divided state Supreme Court on Wednesday reprimanded two lawyers and admonished a third for entering into a post-settlement agreement in a landlord-tenant case, in which one of them voluntarily agreed to not represent clients against a particular defendant.

The court, in a 4-1 ruling reprimanded Charles Gormally, a partner, and admonished Sean Smith, an associate, at Roseland’s Brach Eichler. The court also reprimanded Jersey City solo Cathy Cardillo, the attorney who agreed to the post-settlement restriction.

All three were charged with violating Rule of Professional Conduct 5.6(b), which bars a lawyer from offering or making an agreement that limits a lawyers right to practice as part of a case settlement.

But in an unusual dissent, Justice Jaynee LaVecchia thought the discipline untoward, observing that the lawyers were being punished for essentially following the format of an agreement previously used to resolve a judicially recognized conflict and trying to avoid future conflicts of the same type.

“I am not convinced that it is fair or appropriate to discipline these respondents with respect to the conflict agreement that was executed here, in light of the factual history and past judicial experiences about which these attorneys were aware in respect of the conflict they were attempting to address,” she said.

Brach Eichler represented landlord Bloomfield 206 Corp. in a rent dispute with Cardillo’s clients who alleged they were overcharged by about $150,000. They sued under the Consumer Fraud Act for treble damages and legal fees.

Gormally and Smith moved to disqualify Cardillo, claiming she had a conflict because of her prior representation of Bloomfield 206 principals. The case settled for $150,000 in cash and rental credits on Aug. 28, 2007, before the motion was decided.

In a separate confidential agreement negotiated at the same time and signed the next day, Bloomfield 206 and its principals waived any conflict by Cardillo in the rent case and she agreed not to represent anyone adverse to them or take a position adverse to them in any future action.

Cardillo later claimed the restrictions “made no difference” to her because she was planning to retire soon and was not aware they were unethical, though she raised the possibility of an RPC 5.6 violation in an email to Smith during the negotiations.

She claimed she learned of the problem from American Bar Association materials, prompting her to return to court seeking to void the agreement on the ground it was unenforceable as a matter of public policy.

Gormally argued in opposition that the agreement with Cardillo was separate from the settlement and intended to resolve future conflicts.

Hudson County Assignment Judge Maurice Gallipoli granted Cardillo’s request. He found the two agreements were intertwined and said: “You’d have to be deaf, dumb and blind not to appreciate” that the agreement violated RPC 5.6. The Appellate Division affirmed in 2010 and Gallipoli, who has since retired and now sits on the DRB, referred the matter to ethics authorities.

The case created something of a power struggle between the Office of Attorney Ethics and the Disciplinary Review Board.

The DRB, saying that since Smith was acting as a subordinate, ordered him into a diversionary program instead of being disciplined. Diversion involves a non-disciplinary handling of charges for minor unethical conduct and typically requires lawyers to take specific remedial steps. If the lawyer fails to do so, the ethics case goes forward.

The OAE, however, said it had the ultimate authority to determine admission into a diversionary program and that Smith could not be admitted because he has steadfastly refused to admit wrongdoing, which is a requirement for entry.

The court did not address that dispute when it admonished Smith.

During oral arguments in October, a lawyer representing Gormally and Smith said the two had done nothing improper.

“The idea of having to avoid conflicts of interest issues was an attractive alternative,” said Michael Griffinger, of Gibbons inn Newark. “Nothing was withheld from the court. This was all done in good faith. Nothing was hidden. Nothing was kept secret.”

Cardillo, for her part, admitted to making an ethics violation.

“I accept responsibility, and I’ve done it all the way through. I accept discipline. This will never happen again,” she told the court.

Added LaVecchia: “Applying a clear and convincing standard, I cannot find a knowing violation of the Rules of Professional Conduct by the respondents and, therefore, would not impose discipline on any respondent, not even Ms. Cardillo, notwithstanding her willingness to admit a violation and to accept discipline.”

The three, she said, were merely following a prior trial court ruling in which such an arrangement was permitted.

Gormally says it would have been helpful if the court had issued an opinion instead of just an order. “If there is no further opinion, then I’m disappointed that the court didn’t provide more robust guidance to practitioners that find themselves in this situation,” he says.

Smith again acknowledged her error. I opened up the issue and I accept responsibility,” she says. As for LaVecchia’s dissent, “I see that as a mitigating factor, not an excuse,” says Cardillo. “I truly think the majority is correct. There were mitigating circumstances, but nobody paid attention to RPC 5.6.”

Smith and Griffinger did not return telephone calls.

Chief Justice Stuart Rabner, Justice Helen Hoens and Appellate Division Judges Anthony Parrillo and Mary Catherine Cuff, both temporarily assigned, acquiesced in the order, while Justices Barry Albin and Anne Patterson recused in the three cases: In the Matters of Charles Gormally, D-36-11, Sean Alden Smith, A-98-11, and Cathy Cardillo, D-37-11.