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Ethics Opinion

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RI-348

July 26, 2010

SYLLABUS

    A lawyer may limit the scope of the representation of a client so long as the limitations do not violate the Michigan Rules of Professional Conduct or other law and the lawyer can provide competent representation to the client in light of the proposed limitations.

    The client has the ultimate authority to determine the objectives to be served by the representation; however, if the lawyer believes that the client's actions are repugnant or imprudent, the lawyer may withdraw from the representation.

    References: MRPC 1.1, 1.2(a) and (b), 1.4(b), 1.6, 1.7, 1.16(b)(3), 3.3, and RI-184.

TEXT

Several lawyers (the "requestors") practicing in the Eastern District of Michigan Bankruptcy Court have inquired about the ethical implications of limiting the scope of the lawyers' representation of individual debtors in Chapter 7 "fresh start" bankruptcy proceedings. Specifically, the requestors wish to know if they can exclude representation with respect to reaffirmation agreements, which are voluntary agreements between a debtor and the holder of a claim that allow the debtor to assume personal liability for a debt that would otherwise be dischargeable in the bankruptcy case.

By way of background, the Bankruptcy Code provides a checklist of requirements that must be met in order to have an enforceable reaffirmation agreement.[1] In certain circumstances, the debtor's lawyer must sign the reaffirmation agreement. The lawyer's signature acts as a certification that the reaffirmed debt will not impose an undue hardship on the debtor or the debtor's dependents.[2]

The requestors ask whether the representation of a debtor client may be limited in any of the following ways: (1) the lawyer will not sign reaffirmation agreements under any circumstances; (2) although the lawyer may sign some reaffirmation agreements, the lawyer will not attend a hearing related to the reaffirmation, including hearings for reaffirmation agreements the lawyer has signed; (3) the lawyer will not sign a reaffirmation agreement if the lawyer does not believe it is in the best interest of the client.

The requestors also ask: (1) what are the lawyer's ethical duties in advising a client regarding a reaffirmation agreement that the lawyer believes is not in the best interest of the client; and (2) should the lawyer not attend hearings on reaffirmation agreements where the lawyer believes the agreement is not in the client's interest because the lawyer may have to take a position adverse to his client.

MRPC 1.2(a) provides that a lawyer shall seek the lawful objectives of a client through reasonably available means permitted by law and the Rules of Professional Conduct. Subject to the requirements of law[3] and other Rules of Professional Conduct, MRPC 1.2(b) permits a lawyer to limit the objectives of the representation if the client consents after consultation.[4] Comment to MRPC 1.2 cautions that "[a]n agreement concerning the scope of representation must accord with the Rules of Professional Conduct and other law. Thus, the client may not be asked to agree to representation so limited in scope as to violate MRPC 1.1, or to surrender the right to terminate the lawyer's services or the right to settle litigation that the lawyer might wish to continue."

MRPC 1.1 provides "[a] lawyer shall provide competent representation to a client." Accordingly, a lawyer wishing to limit the scope of representation in the manner described above must determine objectively whether the client would be competently represented in light of the proposed limitations.[5] In RI-184[6], this Committee previously addressed the subject of the scope of representation based on an agreed-upon legal fee in a Chapter 7 proceeding, stating that "[a]n agreement may not be made whose terms might induce the lawyer improperly to curtail the services for the client or perform them in a way contrary to the client's interest. For example, a lawyer should not enter into an agreement whereby services are to be provided only up to a stated amount when it is foreseeable that more extensive services probably will be required, unless the situation is adequately explained to the client."

To determine whether as a matter of legal ethics the limitations proposed by the requestors may be agreed upon, the lawyer must first ascertain whether a lawyer could conclude that the client could agree to the limitation and be competently represented in a Chapter 7 bankruptcy proceeding with those restrictions on the scope of representation in place. If the limitation is acceptable within the framework of the applicable law[7], then the lawyer must also obtain the client's consent after adequate consultation about the potential effects of these limitations. In this context, adequate consultation means "communication of information reasonably sufficient to permit the client to appreciate the significance of the matter in question." MRPC 1.0, Comment. At a minimum, adequate consultation must include an explanation of the risks to the client that the proposed limitations would create.

If a disinterested lawyer would conclude that the debtor would be competently represented with the proposed limitations in place and the client consents after consultation, the limitations do not violate the Michigan Rules of Professional Conduct.

The requestors also inquire about the ethical duties arising from advising clients regarding reaffirmation agreements the lawyer believes are not in the client's best interest. In this scenario, the lawyer is representing the client on the reaffirmation agreement, but the lawyer disagrees with the client's decision to reaffirm the obligation. Under MRPC 1.4(b), the lawyer is responsible for explaining the technical aspects and legal ramifications of a reaffirmation agreement so that the client can make an informed decision about whether to enter into a reaffirmation agreement; but the client has the ultimate authority to decide whether or not to enter into such an agreement. Ordinarily, where the issue is one of disagreement about what is in the client's best interests, the lawyer's obligation is to abide by the client's wishes in seeking the lawful objectives of the client through reasonably available means permitted by law and the Rules, notwithstanding the lawyer's judgment and advice, with several exceptions. For example, if the client insists on pursuing a course of action that the lawyer considers repugnant or imprudent, the lawyer may seek to withdraw from the representation under MRPC 1.16(b)(3).

Beyond the question of concern about the best interests of the client, MRPC 1.2(c) provides that a lawyer may not counsel a client to engage in, or assist a client, in conduct the lawyer knows is fraudulent. If a lawyer knows that the client commits a fraudulent act by signing the reaffirmation agreement, then the lawyer must counsel the client about the client's fraudulent conduct and the lawyer's duty of candor to the tribunal under MRPC 3.3(a). Where the client persists in the signing and submission of a reaffirmation agreement under circumstances the lawyer reasonably believes to be criminal or fraudulent, the lawyer may seek to withdraw under MRPC 1.16(b)(1).

Where the signing of a reaffirmation agreement does not constitute a fraudulent act but the lawyer believes that its execution is not in the client's best interest, and assuming that the communications between the lawyer and the client on that topic are confidences or secrets under MRPC 1.6, the lawyer could not reveal the lawyer's beliefs to the court without the client's consent. If the lawyer feels strongly that it is not in the client's best interest to execute the reaffirmation agreement, the lawyer may choose to seek to withdraw under MRPC 1.16(b)(3) rather than assisting the client to achieve the result; but the fact of withdrawal would not negate the lawyer's obligations to maintain confidences and secrets under MRPC 1.6. However, when disclosure by the lawyer of fraud by the client is required under MRPC 3.3(a), the duty to the tribunal to make the disclosure overcomes confidentiality, as provided in MRPC 3.3(b).

In conclusion, we believe that the limitation excluding representation as to reaffirmation, if permissible under applicable law, which may vary among jurisdictions, would not of itself result in a violation of Rule 1.1 and is permitted under Rule 1.2(b). In seeking to so limit the scope of the representation, the lawyer will need to obtain the client's consent after consultation, and in connection with obtaining consent must explain the material risks of reaffirmation and available alternatives, as required by Rule 1.4.


[1] 11 USC 524 provides comprehensively for procedural and substantive aspects of reaffirmation agreements, and incorporates specific instructions for represented and unrepresented debtors.

[2] A lawyer would not ordinarily be expected to render an opinion to third persons about the client's financial ability. The responsibility of a lawyer to do so in the context of a reaffirmation agreement is statutorily based.

[3] Comment to Rule 1.0 under Scope notes that the Rules of Professional Conduct are within a larger legal context that includes court rules and statutes, and substantive and procedural law in general. See note 7.

[4] The counterpart ABA Model Rule (2003) restates this as permitting the lawyer to limit the "scope of the representation," to recognize that the client determines the objectives of the representation while the lawyer should consult with the client about the means of the representation. Model Rule 1.2 also requires that the limitation of scope must be "reasonable under the circumstances." As we advised in our Informal Opinion RI-347 (April 23, 2010), at note 6, this requirement of reasonableness of the limitation on scope of services should be read into Michigan's Rule as well.

[5] Comment to Rule 1.7 provides guidance for this inquiry in the context of conflict of interest, stating that, "when a disinterested lawyer would conclude that the client should not agree to the representation under the circumstances, the lawyer involved cannot properly ask for such agreement or provide representation on the basis of the client's consent." The Committee believes that application of a disinterested lawyer perspective is appropriate in this context as well. A "disinterested lawyer" is a hypothetical, objective lawyer. Simon's New York Code of Prof'l Responsibility Annotated, 554-55 (2003), see also Fairfax Savings Bank, FSB v. Weinberg & Green, 685 A2d 1190, 1214 (MD Ct. App. 1996) (A disinterested lawyer must apply an objective test in determining whether a client can consent to a conflict).

[6] Informal Opinion RI-184 (January 19, 1994).

[7] In making this determination, the lawyer would need to have considered applicable law or court rule in determining whether to propose such a limitation. Although discussion of applicable law is beyond the scope of the Committee's charge, the Committee notes that at least two bankruptcy courts have found that a lawyer may not exclude reaffirmation agreements from the scope of representation of a Chapter 7 debtor. In re Minardi, 399 BR 841, 847-848 (ND OK 2009) (holding that lawyer cannot provide competent representation of a Chapter 7 debtor if reaffirmation agreements are excluded from the scope of representation and that the Bankruptcy Code "lays the responsibility for advising a debtor about the reaffirmation process and evaluating the effect of each agreement at the feet of debtor's counsel."), see also In re Collmar, 417 BR 920, 922 (ND IN 2009) (same). But See LBR 4008-1(d) for the Bankruptcy Court for the Eastern District of Michigan, for example, which appears to specifically contemplate a represented debtor entering into a reaffirmation agreement without assistance of the debtor's counsel.

 
     

 

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