Does a bankruptcy debtor's lawyer have to handle a later adversary proceeding, and what must the lawyer do on learning the petition contained false information?

Plain-English summary

A lawyer asked about the scope of representing a Chapter 7 debtor: whether the representation extends past the filing and creditors' meeting to a later adversary proceeding, and what the lawyer must do on learning that information on the petition is false or fraudulent.

On scope, the opinion concluded that an adversary proceeding is a real possibility in bankruptcy practice, and that MRPC 1.2(b) (limiting objectives only with the client's informed consent), 1.4(b) (explaining matters so the client can make informed decisions), and 1.5(b) (communicating the basis of the fee, preferably in writing) read together place the burden on the lawyer to specify any exclusion. The opinion drew on R-11 and RI-162 for the principle that a silent or ambiguous fee agreement is construed in the client's favor, because MRPC 1.5(b) makes communicating the fee basis the lawyer's duty. So if the retainer is silent or ambiguous about representing the debtor in adversary proceedings, the lawyer must provide that representation, though subject to MRPC 1.16 the lawyer may withdraw with the tribunal's consent.

On the false petition, the opinion concluded the lawyer must first counsel the client and urge correction under MRPC 1.2(c). Under MRPC 3.3(a)(4), a lawyer who has offered material evidence and learns of its falsity must take reasonable remedial measures. If the client refuses to correct the information, the lawyer must correct it under MRPC 3.3(a)(2), and under MRPC 3.3(b) that duty continues to the conclusion of the proceeding even if it requires disclosing information otherwise protected by Rule 1.6, consistent with RI-151.

Currency note

This opinion was issued in 1994, before later amendments to the Michigan Rules of Professional Conduct. MRPC 1.5, 3.3, and the related rules have since been amended, and subsequent rule changes or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Does representing a bankruptcy debtor include a later adversary proceeding?

A: Yes, unless excluded. The opinion concluded the adversary proceeding is within the scope unless the representation agreement unambiguously excludes it.

Q: Who bears the risk of an ambiguous retainer about the scope of bankruptcy work?

A: The lawyer. The opinion concluded that under MRPC 1.5(b) communicating the fee basis is the lawyer's duty, so a silent or ambiguous agreement is read in the client's favor and the lawyer must provide the representation.

Q: What must the lawyer do on learning the petition contains false information?

A: The opinion concluded the lawyer must counsel the client to correct it (MRPC 1.2(c)), and if the client refuses, the lawyer must rectify it with the court under MRPC 3.3(a)(2) and (a)(4).

Q: Can the lawyer just withdraw instead of dealing with the false information?

A: The lawyer may withdraw with the tribunal's consent under MRPC 1.16, but the opinion (following RI-151 and MRPC 3.3(b)) treats the duty to rectify as continuing to the conclusion of the proceeding.

Background and rules framework

The opinion applied Michigan's scope, communication, fee, withdrawal, and candor rules. MRPC 1.2(b) and (c) (Model Rule 1.2) govern limiting the objectives of representation and not assisting fraud. MRPC 1.4(b) (Model Rule 1.4) requires explaining matters so the client can make informed decisions. MRPC 1.5(b) and (c) (Model Rule 1.5) govern communicating the fee basis and written contingent-fee agreements. MRPC 1.16 (Model Rule 1.16) governs withdrawal. MRPC 3.3(a)(2), (a)(4), and (b) (Model Rule 3.3) govern candor to a tribunal and the continuing duty to take remedial measures. The opinion relied on R-11 and RI-162 (ambiguous fee agreements construed for the client) and RI-151 (duty to rectify false statements to a tribunal).

Citations and references

Rules of Professional Conduct:

• MR 1.2 / MRPC 1.2(b), (c) (scope; not assisting fraud)
• MR 1.4 / MRPC 1.4(b) (explaining matters)
• MR 1.5 / MRPC 1.5(b), (c) (communicating the fee; written contingent fees)
• MR 1.16 / MRPC 1.16 (withdrawal)
• MR 3.3 / MRPC 3.3(a)(2), (a)(4), (b) (candor toward the tribunal)

Other opinions cited:

• Michigan R-11: whether a contingent-fee case includes appeals
• Michigan RI-162: calculating a contingent fee in installment recovery
• Michigan RI-151: duty to rectify a client's false statements to a tribunal

See also

• Mich Ethics Op. RI-151: duty when a client's filed pleadings are false
• Mich Ethics Op. RI-13: duty when a client gave false deposition testimony
• Mich Ethics Op. RI-160: lawyer duties when the client becomes a fugitive

Source

• Landing page: https://www.michbar.org/opinions/ethics/numbered_opinions?OpinionID=1054&Type=6

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

RI-184

January 19, 1994

SYLLABUS

A bankruptcy adversary proceeding is within the scope of a lawyer's representation of a bankruptcy debtor client unless the lawyer's representation agreement with the client unambiguously excludes the adversary proceeding.

If a lawyer knows that information provided by a bankruptcy client was false, and the client refuses to correct the false information, the lawyer must rectify the false information with the bankruptcy court.

References: MRPC 1.2(b) and (c), 1.4(b), 1.5(b) and (c), 1.16, 3.3(a)(2), (a)(4) and (b); RI-151.

TEXT

A lawyer has inquired about the ethical considerations concerning the scope of representation of a debtor client in a Chapter 7 bankruptcy proceeding. The lawyer is concerned about the question of the extent of the representation required after the filing of the bankruptcy petition and the meeting of creditors in the event of a later adversary proceeding, and the obligations of the lawyer who learns that information provided by the client and listed on the bankruptcy petition is fraudulent or illegal.

MRPC 1.2(b) states:

"A lawyer may limit the objectives of the representation if the client consents after consultation."

Further, the Comment to MRPC 1.5 states in relevant part:

"An agreement may not be made whose terms might induce the lawyer improperly to curtail 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. Otherwise, the client might have to bargain for further assistance in the midst of a proceeding or transaction . . . ."

The Committee has argued in previous opinions that when a contingent fee agreement, which is required to be in writing by MRPC 1.5(c) and MCR 8.121, is silent or ambiguous, the terms should be interpreted to the advantage of the client. See R-11, whether contingent fee case includes appeals; RI-162, how contingent fee in installment recovery is to be calculated. The basis of those decisions is not merely whether the agreement is in writing, but the fact that MRPC 1.5(b) places the duty upon the lawyer to affirmatively communicate the basis of the fee; a silent or ambiguous agreement, whether written or verbal, means that the lawyer has not communicated the basis of the fee.

It seems clear that a bankruptcy adversary proceeding, in this day and age, is not beyond the pale of real possibility. The policies underlying MRPC 1.2(b) [scope of representation], 1.4(b) [explaining matters to an extent reasonably necessary to permit the client to make informed decisions] and 1.5(b) [basis of the fee to be communicated "preferably" in writing], particularly when read together, lead to the conclusion that if the lawyer intended to exclude representation of the debtor in bankruptcy adversary proceedings, the lawyer should have so specified and given the client the opportunity to seek counsel who may offer representation on other terms. It is not the client's responsibility to know, without it being explained, that adversary proceedings may occur and the consequences arising from them. Therefore, if the retainer agreement is silent or ambiguous on the subject of representing a debtor client in bankruptcy adversary proceedings, the lawyer would be required to provide that representation.

It should be noted, however, that subject to other requirements of MRPC 1.16, a lawyer may withdraw from representation with the consent of the tribunal. MRPC 1.16(c).

As to information received from the client and included on the bankruptcy petition which the lawyer later discovers to be false or fraudulent, whether in the context of an adversary proceeding or otherwise, the lawyer must first counsel the client and urge correction of the false information. MRPC 1.2(c).

Under MRPC 3.3(a)(4):

"(a) A lawyer shall not knowingly:

". . .

"(4) offer evidence that the lawyer knows to be false. If a lawyer has offered material evidence and comes to know of its falsity, the lawyer shall take reasonable remedial measures."

If the client refuses to correct the information, the lawyer must correct it pursuant to MRPC 3.3(a)(2), "A lawyer shall not knowingly . . . fail to disclose a material fact to a tribunal when disclosure is necessary to avoid assisting a criminal or fraudulent act by the client." RI-151.

MRPC 3.3(b) states:

"The duties stated in paragraph (a) continue to the conclusion of the proceeding, and apply even if compliance requires disclosure of information otherwise protected by Rule 1.6."