Clearing the Way for Pro Bono Assistance to Chapter 7 Bankruptcy Filers

In re Opinion No. 17-2012 of the Advisory Committee on Professional Ethics, 220 N.J. 468 (2014).  Chapter 7 bankruptcy is the most common resource of indigent individuals who must file for bankruptcy.  Many Chapter 7 cases are “no-asset cases,” in which the debtor has nothing to distribute to creditors.  As a result, those cases are effectively non-adversarial, since there is literally nothing to fight over.

Chapter 7 debtors often find it hard to get counsel, precisely because they lack assets.  Volunteer Lawyers for Justice (“VLJ”) operates a bankruptcy clinic that represents “no asset” debtors pro bono.  VLJ lawyers are, as the name suggests, volunteers from firms.  Because volunteers’ firms may also represent creditors, if any creditor represented by the VLJ lawyer’s firm appears in a particular matter, the VLJ lawyer is required to withdraw from the case.  But because firms also represent creditors of VLJ clients in matters unrelated to those clients, VLJ asked the Supreme Court’s Advisory Committee on Professional Ethics (“ACPE”) for an opinion on the issue of “whether a volunteer pro bono attorney may represent low-income debtors in seeking relief under Chapter 7 of the Bankruptcy Code even if the attorney’s firm represents creditors of those debtors in unrelated matters.”  The ACPE, citing Rule of Professional Conduct 1.7(a)(2), which states that a conflict of interest is present when “there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client,” ruled that volunteer lawyers must inform both their VLJ client and their firm’s creditor client of the proposed VLJ representation and obtain consent from both clients.  VLJ petitioned the Court for review under Rule 1:19-8.  In a unanimous opinion by Chief Justice Rabner, the Court reversed the ACPE.

The Court found no issue under RPC 1.7, since there was no “significant risk” that any lawyer’s or firm’s representation of either a VLJ client or a creditor could be “materially limited” as a result of the VLJ clinic.  As described above, “no asset” cases rarely involve contested proceedings, or even appearances by creditors, since there is nothing for creditors to claim.  Creditors do get notice of the Chapter 7 filing, and in the rare event that any creditor appears, if that creditor is represented by a VLJ lawyer’s firm, the withdrawal of the VLJ lawyer is thereby automatically triggered.  In short, there was no practical reason to believe that any conflict under RPC 1.7(a)(2) would exist.

The ACPE had referred to ethics opinions elsewhere that it believed supported its view.  Chief Justice Rabner found those opinions inapplicable or unpersuasive.  Instead, he cited opinions from New York and Boston ethics authorities that concluded that programs comparable to VLJ’s posed no problematic risk of conflict.

The Court’s decision was a wise one.  Pro bono service is a valuable resource to the public, especially to those least fortunate and most in need of legal services.  In this particular context, any risk of conflict that would violate RPC 1.7(a)(2) was at most theoretical.  The ACPE did its job in good faith, but missed the forest for the trees.  The Court properly stepped in to restore order.