HARRISBURG, Pa. — The state Supreme Court said yesterday it was sufficiently troubled by the role two judges at the center of a juvenile-justice scandal played in a defamation case to overturn a $3.5 million verdict against a northeastern Pennsylvania newspaper and order a new trial.

The high court said the appearance of judicial impropriety was enough to justify its actions in the case that involved reporting in 2001 by The Citizens’ Voice of Wilkes-Barre of raids by state police and IRS agents on the home and business of Thomas A. Joseph.

Joseph was never charged. His lawsuit against the paper, its parent company, the Scranton Times LP, and former reporter Edward Lewis claimed he had been defamed by anonymous sources that connected him to suspected illegal activity.

Joseph and his direct-mail marketing firm, AcuMark Inc., won the verdict after Luzerne County Judge Michael T. Conahan assigned the case to fellow Judge Mark A. Ciavarella, who issued the multimillion-dollar verdict following a bench trial in 2006.

The state Superior Court upheld the award last year, saying the articles were inaccurate and the paper failed to follow its own anonymous-sourcing rules.

Conahan’s relationship with reputed mobster William D’Elia, a childhood friend of Joseph, was a factor in their decision, the justices wrote. D’Elia’s home was searched the same day as Joseph’s, and the paper claimed D’Elia and Conahan had fixed the case.

Ciavarella said at a July hearing on the matter that he never spoke with the two men about the case, but Conahan and D’Elia asserted their Fifth Amendment rights against self-incrimination.

“The inherently troubling nature of Conahan’s and Ciavarella’s compromised positions as jurists is enhanced, in this case, given that the subject matter of this defamation lawsuit concerned newspaper articles reporting on the undisputed fact of a federal criminal investigation into D’Elia’s and Joseph’s alleged ties to organized crime activities,” the court ruled.

Tim Hinton, the newspaper’s lawyer, said Joseph never proved the articles were false.

Hinton expects to push for dismissal of the case once it is assigned to a county judge.

“We’re very pleased with this decision,” Hinton said. “I think the Supreme Court is making great strides in rectifying the damage caused by Conahan and Ciavarella.”

Conahan and Ciavarella are awaiting trial in federal court on charges that they took more than $2 million in kickbacks to place children in privately run juvenile facilities, the so-called “kids for cash” scandal.

The two former judges pleaded guilty earlier this year to fraud and tax evasion, but the presiding judge refused to accept their pleas, saying they had not adequately accepted responsibility for their actions.

Last week, the state Supreme Court dismissed thousands of juvenile convictions issued by Ciavarella between 2003 and 2008 because of doubts the defendants received fair hearings.

Joseph’s attorney, George Croner, told the Associated Press in April that he had “no doubt” the stories defamed his client. He did not return a phone message seeking comment yesterday.