New guidance on bankruptcy fees for adversary proceedings

tiedtotracksCan a bankruptcy judge force a lawyer to represent a client in an adversary proceeding?

Stopping just short of deciding the answer to that question should be “yes,” Massachusetts bankruptcy judge Melvin Hoffman recently suggested that what an attorney can’t do is to refuse to handle adversaries as a matter of course.

The Alaya case involves an attorney whose fee agreement contained a blanket exclusion from representing a client in an adversary proceeding (which is basically a separate lawsuit filed in conjunction with a bankruptcy case). The judge found that “bringing a debtor into bankruptcy and then letting her fend for herself in an adversary proceeding, often the most complicated and critical aspect of the bankruptcy process, is an abdication of an attorney’s duty to represent a client zealously.”

Lawyers, are not however, bound to perform services without getting paid. The judge also wrote that “while an engagement agreement may not contain an absolute exoneration of an attorney’s obligation to represent the client in any aspect of the bankruptcy matter, it may provide that such representation is conditioned upon satisfactory payment for services and that the failure of the client to render payment will entitle counsel to seek to withdraw from the matter.”

Requests by an attorney to withdraw will be handled on a case-by-case basis.

The upshot is that now would be an excellent time for all Massachusetts lawyers to rewrite their bankruptcy fee agreements so that they don’t run afoul of the professional responsibility rules, while still giving them the opportunity to get paid a fair fee for services rendered.

 

By Doug Beaton