Testing the Limits on Unbundled Limited Representation
Testing the Limits on Unbundled Limited Representation
This article does not attempt to explore all the nuances of, justifications for or arguments against limited representation. It accepts that limited representation is not only inevitable in the context of consumer bankruptcies, but may very well be in the best interests of debtors and the "system." The discussion is divided into four discrete areas: (1) basic rules governing limited representation, (2) a brief summary of the current status of "unbundling" in some states that permit unbundling, (3) ghostwriting and (4) representation limited to discrete tasks.
Basic Rule
As with any other aspect of the attorney-client relationship, one must refer to the rules governing the conduct of an attorney. Rule 1.2(c) of the Model Rules of Professional Conduct, as amended in 2002, provides: "A lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances and the client gives informed consent." Limited representation must pass both parts of a two-pronged test: (1) reasonable under the circumstances and (2) informed consent by the client.
What is reasonable generally boils down to a question of whether the lawyer's limited scope of responsibility would amount to a violation of the lawyer's ethical or legal obligations—a factual, situation-specific determination. There is one caveat: Even if it may be outside the scope of the limited representation, an attorney has a continuing ethical obligation to respond to or forward to the debtor, as may be appropriate, any subsequent inquiries or information that the attorney receives. For example, an attorney whose limited representation does not include reaffirmation must nevertheless forward to the client any proposed reaffirmation agreements received and advise the creditor of the fact that the debtor is unrepresented.
Informed consent, on the other hand, is a more generic or universal standard. The attorney must clearly explain the limitations of the representation, including what services are not being provided and the probable effect of limited representation on the client's rights and interests. Disclosure to a pro se litigant should include a warning that the litigant may be faced with legal matters he or she may not understand. In the context of a consumer bankruptcy case, this should include, as a minimum, identification of those matters that appear to be likely to arise based on the facts disclosed by the client—for example, attending the §341 meeting, cooperation with and turnover of assets to the trustee, reaffirmation/redemption/ surrender (including appearing at the hearing), non-dischargeable debts, matters related to the automatic stay (violations/ requests for relief), utility deposits under §366 and, in a chapter 13 case, the formulation and confirmation of a chapter 13 plan.
State Action on Unbundling
Several states have officially sanctioned limited representation in litigation. The following highlights in summary form some steps taken to date.
Alaska: Proposed amendments adopt a modification of the 2002 version of Model Rule 1.2(c) and will permit limited representation in all civil cases.
California: In perhaps the most radical shift from the traditional full-service approach, it not only blesses limited representation but also permits an attorney ghostwriting in family law cases to not disclose his or her involvement in the process.
Colorado: Ghostwriting is permitted, but it requires that the attorney be identified and sign the document; although signing does not constitute an appearance, it does subject the attorney to the same sanctions as if the attorney had appeared in the action. By district court general order, the change to the Colorado rules does not apply in the bankruptcy court in adversary actions or contested matters governed by Rule 9014; however, it may be applied to the main case. See In re Merriam, 250 B.R. 724, 735-36 (Bankr. D. Colo. 2000).
New Mexico: The state adopted the 2002 version of Model Rule 1.2(c).
Washington: The state adopted, with modification, the 2002 version of Model Rule 1.2(c) and generally permits limited representation in both civil and criminal cases.
Wyoming: The state adopted a modified version of Model Rule 1.2(c) (2002), limiting it to nonprofit limited legal service programs under Model Rule 6.5.
Several other courts have initiated or commissioned studies of the issue of limited legal representation. Additional information on limited representation may be found on the internet at www.unbundledlaw.org. In October 2003, the ABA released a 155-page Handbook on Limited Scope Legal Assistance, accessible at http://www.abanet.org/litigation/taskforces/modest/home.html.
Ghostwriting
Should an attorney be permitted to limit the services rendered to assisting in preparing the schedules in a chapter 7 case? If unbundling is to be permitted at all, it probably should permit the attorney to limit the services rendered to preparing the petition and the accompanying schedules and statements in a chapter 7. The schedules and statement of financial affairs are the heart of every consumer bankruptcy proceeding, from the simplest to the most complex. It is the schedules and financial affairs from which the trustee and other interested parties, i.e., the creditors, obtain information concerning the debtor's assets and liabilities as well as certain pre-petition transactions. Schedules that are properly, completely and accurately prepared materially assist the trustee and creditors in identifying those areas that warrant further exploration at the §341 creditors' meeting. It has been my experience over the past 20+ years that a substantial percentage, if not a majority, of the problems that arise in consumer cases could have been avoided by adequate schedules.
Attorney Signature Requirements
Assuming that limiting representation to preparation of schedules is permitted, should the attorney nevertheless be required to sign the petition? In my opinion, the answer is "yes." An attorney who is paid to assist the debtor in preparing the petition and schedules should not be held to a lesser standard than that imposed by §110 on bankruptcy petition preparers. Many attorneys who ghostwrite documents do not want to be identified. However, it is almost impossible for an attorney to be a true "ghostwriter" unless the attorney assists in preparation of the schedules on a pro bono basis or more than a year preceding the filing. The debtor is required to disclose all compensation paid in the year preceding the filing for bankruptcy counseling. In addition, an attorney who represents a debtor "in connection with such a case" is required to file the disclosure statement required by §329(a) ("in contemplation of or in connection with such a case") and Rule 2016(b). These eliminate the ability to remain anonymous.
Attorneys in this situation also may fear becoming the attorney of record, and if listed as the attorney of record, interested parties may mistakenly serve the attorney instead of the debtor. This objection may be overcome by adopting the approach set forth in Merriam: include a specific statement in the §329(a)/Rule 2016 disclosure that the attorney is not appearing on behalf of the debtor. The debtor would be shown as appearing pro se, and interested parties would not mistakenly believe they must go through the attorney.
Requiring the attorney who assists in the preparation of the schedules to sign the petition removes any question of whether the attorney is subject to Rule 9011. Some may argue that may not be necessary because the court has in its arsenal §329(b), which permits the court to order disgorgement. On the other hand, an attorney who assists a debtor in preparing the petition and accompanying schedules should still be required to certify to the court and all interested parties, including the debtor, that the attorney has made a reasonable investigation of the debtor's affairs and the petition is filed in good faith. Signing the petition, which is covered by Rule 9011, fulfills this requirement.
Ghostwriting in the context of a chapter 13, is probably contraindicated. The economic basis for unbundling is not the same in chapter 13 as it is in chapter 7. While many chapter 7 debtors are true "economic basket-cases," if a debtor has the financial wherewithal to fund a chapter 13 plan, the debtor can afford representation. Indeed, the reverse is likely true: The debtor cannot afford to forego representation.
Contested Matters and Adversary Actions
In a chapter 13 case, the required minimum services should be expanded to include formulation and confirmation of the chapter 13 plan. Anything less than that, and a debtor may as well be appearing pro se throughout.
With 1.5 million consumer filings a year, if only 30 percent are pro se, there will be 450,000 pro se filings a year. The majority of those are likely to be individuals who cannot afford "full service" representation. For them, limited representation is, perhaps, their sole source of any legal assistance.
Unbundling Under the FRBP
Assuming that unbundling is permissible under the otherwise applicable rules governing the attorney-client relationship, should there be any limitation on the ability of an attorney to limit representation? First, we must recognize that unbundling is already recognized, at least implicitly, by the Federal Rules of Bankruptcy Procedure (FRBP). Under the FRBP, a bankruptcy case is divided into three separate component parts: the main case, contested matters under Rule 9014, and adversary actions under Rule 7001, et seq. Almost all agree that adversary actions are separate actions, but many will question the separation of contested matters. Rule 9014 specifically provides that service of a contested matter is governed by Rule 7004. Service under 7004 is made on the party, not the attorney for the party. It is only the service of subsequent documents to which Rule 5(b), F.R.Civ.P. applies. There is no requirement in the FRBP that a contested matter be served on the attorney for any party, including the debtor. Service on an attorney for a party to a contested matter is either a requirement of local rule, custom or practice, or a matter of professional courtesy. Logically, if the FRBP deemed the opposing party in a contested matter to be represented by counsel appearing in the main case, service of the motion would be under Rule 5(b), not Rule 7004. In addition, Form B203, "Disclosure of Compensation of Attorney for Debtor," and the accompanying instructions promulgated by the Judicial Conference clearly indicate that "unbundling" is contemplated.
To what extent then should unbundling, other than ghostwriting schedules discussed above, be permitted? It is suggested that an attorney who appears in a case on behalf of a debtor, other than in a contested matter or adversary proceeding, must provide certain minimum services in addition to preparing and filing the schedules. The attorney who appears of record for the debtor should, as a minimum, be required to attend the §341 creditors' meeting, represent and assist the debtor in carrying out the debtor's duties under §521 and Rule 4002, and assist and counsel the debtor with respect to reaffirmations and redemptions.
The situation is different for contested matters and adversary actions. An attorney should be permitted to either exclude contested matters and/or adversary proceedings, or limit representation to a particular contested matter or adversary proceeding. Quite frequently a debtor can handle the main case pro se, especially a no-asset case, but when it comes to a contested matter—e.g., relief from stay—or an adversary action—e.g., a challenge to discharge or dischargeability—a pro se debtor can, figuratively speaking, "get creamed." Some jurisdictions permit an attorney to limit representation in litigation to a particular segment of the litigation—e.g., discovery, a single motion or the trial itself. While that might be workable in the context of a complex adversary action, given the nature of most contested matters, it is of questionable practicality.
Conclusion
The extent to which unbundling is permitted is a subject that must be addressed on a district-by-district basis, not by a set of national rules. First, state rules of professional conduct governing limited representation are not uniform. Second, there is a marked difference in the situations confronting the bench and bar; the approach in one district may not work in another. In some districts a laissez-faire approach may be appropriate, in others a complete prohibition, and in yet others something in between. But whatever approach is taken, in those states where unbundling is permitted under the rules of professional conduct, the court should adopt local rules delineating the extent, if any, to which limited representation is permissible in bankruptcy cases. In fairness to the bar and the consumer, the rules must be set in advance; the determination cannot be on an ad hoc basis.
Is limited representation inevitable in consumer bankruptcies? The answer is "probably yes." With 1.5 million consumer filings a year, if only 30 percent are pro se, there will be 450,000 pro se filings a year. The majority of those are likely to be individuals who cannot afford "full service" representation. For them, limited representation is, perhaps, their sole source of any legal assistance. An integrated solution has several component parts: bankruptcy petition preparers (discussed in the March 2003 Consumer Corner), pro bono representation, limited representation or a combination. This will take a concerted effort by the bench, bar and, necessarily, Congress. For example, where the case involves issues beyond the capability of a pro se debtor, a sliding-scale fee arrangement where the attorney is paid in part and provides the balance on pro bono may be appropriate. The bench should take a hard look at permitting limited representation so that available pro bono hours can be more effectively allocated. Congress should re-examine its attitude toward petition preparers. Unless all components work together, the system is destined to become clogged with pro se debtors, and far too many individuals will not receive the relief to which the law says they are entitled because they are unaware of what the law provides or how to make it work for them.
Footnotes
1 Board-certified in business and consumer bankruptcy by the American Board of Certification. Return to article