On March 15, 2011, the Supreme Court of Montana approved amendments to its Rules of Civil Procedure (MRCP), effective Oct. 15, 2011, to encourage limited scope representation (LSR) in Montana. [2] Rule 11 of the MRCP now allows attorneys to assist pro se litigants and prepare briefs on their behalf without the requirement that the attorney sign the brief. [3] Rules 4.2 and 4.3 of the MRCP were also amended such that an LSR attorney does not need to file an appearance before a Montana court under Rule 5. [4]
The Montana Supreme Court promulgated these rules changes to encourage pro bono and public legal service through LSR. Prior to the adoption of the new rules, the Montana Bar and the State Bar Ethics Committee had weighed in against such changes, fearing that an onslaught of “ghostwriters” would foster substandard representation and dilute lawyer accountability, among other concerns. Addressing these concerns, the concurring Montana Justices reiterated that “limited scope” does not mean “limited competence,” “limited professionalism” or “limited ethics.” [5] An attorney remains obligated under the duties prescribed by the disciplinary rules and ethics codes.
In many cases an attorney’s failure to adhere to his professional responsibilities may result in a court issuing sanctions. In February 2011, in In re Nguyen, an en banc Ninth Circuit Bankruptcy Appellate Panel (BAP) affirmed a Northern District of California Bankruptcy Court’s sanctions against an attorney for “incompetence and shoddy office practices.” [6] In particular, the bankruptcy court found it troubling that schedules prepared by the attorney’s staff did not accurately reflect the debtor’s assets; the attorney’s nonlawyer wife conducted nearly all meetings with the attorney’s primarily non-English speaking clients; the attorney did not speak his clients’ languages, and therefore his wife conducted the client interviews; and the attorney spent little or no time in consultation with the clients.
The issue before the BAP was whether the bankruptcy court’s failure to apply the ABA Standards [7] in accordance with case law precedent when imposing sanctions was reversible error. In the course of affirming the bankruptcy court’s sanctions and modifying its previous holding in In re Crayton, [8] the BAP held that a bankruptcy court was not obligated to strictly apply the ABA Standards when imposing sanctions. Notably, the BAP stated that “the ABA Standards, which were developed primarily for nonfederal, nonbankruptcy courts by unelected and nonjudicial parties, are ill adapted to federal bankruptcy proceedings. The ABA Standards were not drafted to address the distinctive context of bankruptcy where, as here, administrative matters rather than litigation may be the focus of an attorney’s work.” [9] Within the context of a consumer bankruptcy practice, if an attorney’s work focuses on administrative matters, then this holding raises a question of whether under the new MRCP governing LSR or a similar structure, an attorney helping pro se litigants prepare briefs and schedules would be insulated from sanctions similar to those issued and upheld in Nguyen.
Unique Nature of Consumer Bankruptcy Practice
The BAP’s holding acknowledged that a consumer bankruptcy practice creates unique administrative circumstances. These circumstances could lead to issues related to the unauthorized practice of law, and possible sanctions for an attorney who does not comply with his supervisory duties with nonlawyer personnel. Arguably, administration of a chapter 7 or 13 case relies more on the delegation of nonlawyer duties than other practices, and this more intensive delegation exceeds the regular ministerial typing, dictation, or message services in other law firms. Delegation may include initial interviewing of clients, preparation of basic court pleadings and debtors’ schedules, and communicating to clients and the court. [10]
Within a law firm setting, under the ABA Model Rule 5.3, a lawyer is responsible for work delegated to nonlawyer personnel. [11] Consequently, a lawyer may not delegate the task of a lawyer’s professional judgment, nor may the lawyer allow that judgment to be influenced by the nonlawyer’s assistance. [12] In Nguyen and other similar cases, courts tend to focus on the initial consultation time the attorney spends with the client. [13] Once the attorney meets with the client, he may then delegate the preparation of documents while supervising the paralegal or nonlawyer staff. [14]
Under the Montana LSR framework, in a contested matter or an adversary proceeding, if the attorney assisting the pro se debtor relies on information from nonlawyer personnel, that attorney’s accountability remains questionable. In other words, nonlawyer personnel could conceivably perform the administrative tasks without attorney supervision, and presumably the attorney would be unaccountable. Although the Bankruptcy Code addresses a similar circumstance in §§ 526 through 528, [15] which regulate debt relief agencies, it does not specifically regulate an LSR scenario.
The Balance of Interests
As bankruptcy filings rise, so do the number of pro se filers. [16] Unlike criminal law, consumer debtors do not have a constitutional right to representation. [17] Some bankruptcy courts and legal clinics offer limited public services for pro se debtors. However, even with these options, pro se filings can strain the resources of both the judiciary and opposing parties in the case. [18] The Montana Supreme Court considered this when weighing the benefits of offering assistance to self-represented litigants [19] against the potential risks a lack of transparency and accountability would bring to the profession and legal ethics. [20] Bankruptcy law may challenge attorneys who are not trained in this substantive area, let alone pro se debtors trying to navigate the complex laws, rules, and deadlines. Further, bankruptcy practice may involve both state and federal statutes as well as implicate state and federal ethics regulations as well. [21]
Bankruptcy courts have the authority to regulate and discipline attorneys that practice before them. [22] In addition to the courts protecting the integrity of the process sua sponte, the Bankruptcy Code and the Rules of Bankruptcy Procedure impose requirements to protect the public and the process. For instance, Rule 9029 authorizes the adoption of local rules and permits bankruptcy judges to regulate bankruptcy practice in any manner consistent with federal law, the federal rules, official forms, and local rules of the district. [23] The Bankruptcy Code also empowers the court with oversight of the fees a debtor pays an attorney for a bankruptcy case [24] and to some extent, the scope of representation. [25] Some nonlawyers or third parties interact with the initial filing of the bankruptcy petition, and these too are authorized [26] or regulated [27] by the Bankruptcy Code.
Within this regulating infrastructure, though, a conceivable overlap or conflict could arise between the state ethics rules and standards and the bankruptcy system. “Unfortunately, inconsistencies between procedures used in state and federal courts give rise to confusion and inconvenience, but attorneys nevertheless must comply with the orders and rules applicable in the court before which they practice.” [28] In that regard, even in a state with LSR rules like the MRCP, a bankruptcy attorney providing LSR to a debtor would still need to comply with the bankruptcy court’s and the Code’s rules and procedures.
Limiting Scope Is Not Limiting Duty
Rule 9011 of the Bankruptcy Rules, which incorporates Rule 11 of the Federal Rules of Civil Procedure, requires an attorney to sign the petition, pleading, motion, plan and all other papers filed with the court certifying the accuracy of such filings after a reasonable inquiry. [29] Rule 9011 does not specifically address the situation where an attorney prepares or “ghost writes” the pleading for a pro se debtor. Although the practice known as ghostwriting is not favored in many districts (and was argued in opposition to the Montana rules changes), [30] the sanctionable aspect of ghostwriting was the violation of Rule 11 and the violation of an attorney’s duty of candor to the court. [31] As written, the LSR aspect of the MRCP discloses to the court the attorney assistance provided to a pro se. [32] However, providing LSR does not excuse attorneys from their ethical duty to the profession. The sanctions under Nguyen would likely apply when the assistance provided is less than would be required in a full representation.
As courts address the public’s need for access to the judicial system, they will also address issues protecting the public from inadequate representation. Given the systems of checks and balances incorporated into requirements for attorneys to comply with state rules and ethics standards, federal rules, and professional rules of conduct, consumer bankruptcy attorneys would likely have a difficult time avoiding sanctions for substandard representation, even under limited scope representation.
1. None of the statements contained in this article constitute official policy of any judge, court, agency or government official or quasi-governmental agency.
2. See Order on Changes to the Mont. Rules Civ. Proc., No. AF 07-0157 (March 15, 2011).
3. See Mt. R. Civ. P. 11.
4. See Mt. R. Civ. P. 4.2, 4.3 and 5.
5. Order on Changes to the Mt. R. Civ. P., No. AF 07-0157 (March 15, 2011) (Baker, J., concurring).
6. In re Nguyen, 447 B.R. 268, 274 (9th Cir. B.A.P. 2011)
7. The ABA Standards dictate consideration of four criteria:
(1) whether the duty violated was to a client, the public, the legal system, or the profession, (2) whether the attorney acted intentionally, knowingly or negligently, (3) the seriousness of the actual or potential injury caused by the attorney’s misconduct, and (4) the existence of aggravating and mitigating factors.
In re Nguyen, 447 B.R at 277 (internal citation omitted) (citing ABA, Standards for Imposing Lawyer Sanctions (as amended in 1992), Standard 3.0).
8. Peugeot v. U.S. Trustee (In re Crayton), 192 B.R. 970 (9th Cir. B.A.P. 1996).
9. In re Nguyen, 447 B.R. at 277.
10. See generally Gary E. Sullivan, Jeffrey W. Wagnon and David G. Epstein, “The Thin Red Line: An Analysis of the Role of Legal Assistants in the Chapter 13 Bankruptcy Process,” 23 J. Legal Prof. 15 (1999) (providing an overview of complexities of chapter 13 that necessitate administrative nonlawyer assistance).
11. Rule 5.3 Responsibilities Regarding Nonlawyer Assistants
With respect to a nonlawyer employed or retained by or associated with a lawyer:
(a) a partner, and a lawyer who individually or together with other lawyers possesses comparable managerial authority in a law firm shall make reasonable efforts to ensure that the firm has in effect measures giving reasonable assurance that the person’s conduct is compatible with the professional obligations of the lawyer;
(b) a lawyer having direct supervisory authority over the nonlawyer shall make reasonable efforts to ensure that the person’s conduct is compatible with the professional obligations of the lawyer; and
(c) a lawyer shall be responsible for conduct of such a person that would be a violation of the Rules of Professional Conduct if engaged in by a lawyer if:
(1) the lawyer orders or, with the knowledge of the specific conduct, ratifies the conduct involved; or
(2) the lawyer is a partner or has comparable managerial authority in the law firm in which the person is employed, or has direct supervisory authority over the person, and knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.
Model Rules of Prof’l Conduct R. 5.3(2002).
12. See generally Sullivan, Wagnon and Epstein, “The Thin Red Line,” 23 J. Legal Prof. 15 (1999) (providing overview of how chapter 13 process may subject law firm to unauthorized practice of law issues).
13. See, e.g., In re Zuniga, 332 B.R. 760, 790 (Bankr. S.D. Tex. 2005) (emphasizing that passage of Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 requires debtors’ attorneys to “spend as much time as it takes to become well versed in their clients’ financial condition and concerns about their bankruptcy case” to avoid potential pitfalls).
14. See In re Nguyen, 447 B.R. at 282-83; see also In re Bass, 227 B.R. 103, 108 (Bankr. E.D. Mich. 1998) (finding it “necessary for an attorney to meet with the client at the initial consultation, before delegating matters to nonlawyer staff members”); In re Soulisak, 227 B.R. 77, 81 (Bankr. E.D. Va. 1998) (sanctioning attorney to disgorge fees for not personally meeting with clients but allowing unlicensed attorney to consult with new clients).
15. See 11 U.S.C. §§ 526-528.
16. See Annual and Quarterly U.S. Bankruptcy Statistics, available atwww.abiworld.org/Content/NavigationMenu/NewsRoom/BankruptcyStatistics/B… (last visited June 26, 2011) (offering various statistics related to bankruptcy filings).
17. See In re Martin-Trigona, 737 F.2d 1254, 1260-61 (2d Cir.1984), cert. denied, 474 U.S. 1061; accord Nat’l City Bank v. Flowers (In re Flowers), 83 B.R. 953, 954 (Bankr. N.D. Ohio 1988) (holding that debtor was not entitled to appointed counsel in dischargeability proceeding).
18. See, e.g., Haines v. Kerner, 404 U.S. 519 (1972) (interpreting pro se pleadings more liberally than those prepared by counsel). Id. at 520 (holding that pro se’s asserted claims cannot be dismissed for legal insufficiency unless it appears that claimant can prove no set of facts that would entitle the claimant to relief); Laremont-Lopez v. S.E. Tidewater Opportunity Ctr., 968 F.Supp. 1075, 1078 (E.D.Va.1997) (observing pro se pleadings are given more leeway under Rule 11 of the Federal Rules of Civil Procedure than those drafted by attorneys).
19. Order on Changes to the Mont. Rules Civ. Proc., No. AF 07-0157 (March 15, 2011) (Baker, J., concurring).
20. Order on Changes to the Mont. Rules Civ. Proc., No. AF 07-0157 (March 15, 2011) (Nelson, J., concurring and dissenting).
21. See Zuniga, 332 B.R. at 772 (practicing before bankruptcy court requires adherence to obligations of Bankruptcy Code and Rules and of state ethical rules and quoting In re van Dyke, 296 B.R. 591, 594 (Bankr. D. Mass. 2003); cf. Nancy Rapoport, “Our House, Our Rules: The Need for a Uniform Code of Bankruptcy Ethics,” 6 Am. Bankr. Inst. L. Rev. 45 (1998) (advocating for specialization of ethics bankruptcy rules because of unique specialized issues and circumstances involved with bankruptcy law).
22. Chambers v. NASCO Inc., 501 U.S. 32, 43-45 (1991) (holding that federal courts are vested with inherent powers to manage their cases and courtrooms and maintain integrity of judicial system).
23. Fed. R. Bankr. P. 9029; see also Fed. R. Bankr. P. 9010 (governing representation and appearance of parties in case).
24. 11 U.S.C. § 329 (requiring attorney to file fee statement of fees paid by debtor and authorizing court to return such fees if deemed unreasonable); Fed. R. Bankr. P. 2017.
25. See Fed. R. Bankr. P. 2016.
26. See, e.g., 11 U.S.C. § 521 (regarding credit counseling and financial-management requirements).
27. See, e.g., 11 U.S.C. § 110 (regulating petition preparers); see also In re Nieves, 290 B.R. 370 (Bankr. C.D. Cal. 2003) (finding bankruptcy petition preparer engaged in unauthorized practice of law for advising debtors on differences between chapter 7 and 13); 11 U.S.C. §§ 526-528 (regulating debt-relief agencies).
28. In re Merriam, 250 B.R. 724, 735-36 (Bankr. D. Colo. 2000). But see 5 Norton Bankr. Law Adviser 12 (May 1999) (arguing that “the regulation of bankruptcy practice need not be consistent with state law” and although federal law determines practice of bankruptcy law, bankruptcy courts recognize state laws that prohibit unauthorized practice of law, and “[i]n the absence of controlling federal authority, the law of the forum state provides the bankruptcy court with guidance in determining the boundaries of the practice of law in bankruptcy”).
29. Fed. R. Bankr. P. 9011(b); Fed. R. Civ. P. 11(b).
30 See In re Merriam, 250 B.R. at 733 (citing Ellis v. Maine, 448 F.2d 1325, 1328 (1st Cir.1971); Ricotta v. Calif., 4 F.Supp.2d 961, 987 (S.D. Cal. 1998); Laremont B. Lopez, 968 F.Supp. at 1077-78; Somerset Pharm. Inc. v. Kimball, 168 F.R.D. 69, 72 (M.D. Fla. 1996); Johnson v. Bd. of Cty. Comm’rs, 868 F.Supp. 1226, 1231 (D. Colo. 1994), aff’d in part and disapproved in part, 85 F.3d 489 (10th Cir.1996)).
31. In re Merriam, 250 B.R. at 733 (citing Laremont-Lopez, 968 F.Supp. at 1078).
32. See Mt. R. Civ. P. 4.2(a) (requiring notice of limited appearance be “filed and served prior to or simultaneous with the proceeding”).