Can a lawyer who is a bankruptcy trustee in one division represent a creditor in other divisions, and what duties does a lawyer-trustee owe?

Plain-English summary

The committee addressed a lawyer who serves as a bankruptcy trustee in one division of the Bankruptcy Court and wishes to represent a creditor in other divisions, assuming the lawyer never represents the creditor in the division to which he is assigned as trustee and that the trustee has no judicial or quasi-judicial duties. It was also asked whether a lawyer-trustee owes any duty as an attorney to debtors or creditors of the estate, and whether he could be sued or disciplined as an attorney for neglecting trustee duties.

On the first question, the committee said an attorney is not required to decline representation of a creditor in other divisions when he is a trustee in one division and never represents the creditor in that division; he should comply with Rule 1.7(b). The committee recognized that the trustee's duties will sometimes require positions adverse to his creditor client, so the lawyer must first subjectively determine whether he can undertake the representation without adverse effect on his role as trustee, and if he reasonably concludes it will not be adversely affected, he must consult with the client and disclose the potential for conflict; if the client still wishes to retain him, the rule appears to permit the representation to continue (and the committee flagged that a quasi-judicial reading of the trustee role might change the answer).

On the second question, the committee drew on bankruptcy cases distinguishing the role of trustee from that of attorney for the trustee. It concluded that an attorney functioning solely as a trustee assumes no duty as an attorney to creditors or debtors of an estate while remaining within the trustee role, but a person authorized to practice law is still bound by the Rules, and a lawyer who takes on the dual role of attorney and trustee also owes a duty as an attorney. The committee emphasized that attorneys are subject to discipline for matters not related to the practice of law, and that an attorney in any role is subject to discipline for illegal acts involving moral turpitude or conduct involving fraud, deceit, or misrepresentation, or conduct adversely reflecting on fitness to practice.

Currency note

This opinion was issued in 1991, before the South Carolina Bar's adoption of the 2005 revisions to the Rules of Professional Conduct. Subsequent rule amendments 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: Can a lawyer who is a bankruptcy trustee in one division represent a creditor in other divisions?

A: The committee said yes, provided he never represents the creditor in his own division and complies with Rule 1.7(b) by reasonably concluding his trustee role will not be adversely affected and obtaining the client's consent after disclosure.

Q: Does a lawyer acting only as a trustee owe duties as an attorney to the estate's creditors or debtors?

A: The committee said no; an attorney functioning solely as a trustee assumes no attorney duty to creditors or debtors while within that role, though he remains bound by the Rules of Professional Conduct.

Q: Can a lawyer-trustee still be disciplined as a lawyer?

A: The committee said yes; attorneys are subject to discipline for matters not related to practice and for illegal acts involving moral turpitude, fraud, deceit, or misrepresentation, or conduct reflecting on fitness to practice.

Background and rules framework

The opinion applies Rule 1.7(b) (material-limitation conflicts), corresponding to Model Rule 1.7, to the dual role of trustee and creditor's counsel, and invokes the discipline standards (conduct involving moral turpitude, fraud, deceit, or misrepresentation), which correspond to Model Rule 8.4. The committee distinguished the trustee role from the attorney role, relying on bankruptcy case law.

Citations and references

Rules of Professional Conduct:

• South Carolina RPC 1.7(b) / Model Rule 1.7: a lawyer shall not represent a client if the representation may be materially limited by responsibilities to a third person, absent reasonable belief and consent.
• South Carolina RPC 8.4 / Model Rule 8.4: misconduct, including conduct involving dishonesty, fraud, deceit, or misrepresentation.

Cases:

• In re Oliveri, 45 F. Supp. 32 (D.C.N.Y. 1942), the trustee should administer the estate impartially.
• In re Orbit Liquor Store, 439 F.2d 1351 (5th Cir. 1971), a trustee acting as his own attorney may claim attorney fees only for attorney work.
• In re Tedder, 296 S.C. 500, 374 S.E.2d 294 (1988), attorneys are subject to discipline for matters not related to the practice of law.

See also

• SC Bar Ethics Op. 91-24: When a Partnership's Lawyer Also Represents the General Partner
• SC Bar Ethics Op. 92-12: Lawyer Named as Personal Rep

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-advisory-opinion-91-34/

Original opinion text

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

UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.

Ethics Advisory Opinion 91-34

Is a lawyer who is a Bankruptcy Trustee in one division of the Bankruptcy Court prohibited form representing a creditor in all divisions of the Bankruptcy Court in South Carolina when the creditor appears in cases pending in the division to which the lawyer is assigned as trustee? (Assume that the attorney never represents the creditor in the division of the Bankruptcy Court in which he has been appointed trustee.) Does a Bankruptcy Trustee, who is also practicing attorney, owe any duty as an attorney to debtors or creditors of the estate which the trustee is administering? Could a trustee, who is also an attorney, be sued by a debtor or creditor for neglect of duty as an attorney, or be subject to disciplinary action as an attorney.

It is assumed for these purposes of this inquiry that the trustee has no judicial or quasi-judicial duties.

Summary:

1. An attorney is not required to decline representation of a creditor in other divisions of the Bankruptcy Court when he is a trustee in one division and never represents the creditor in that division. The attorney should simply comply with the provisions of Rule 1.7 (b) of the South Carolina Rules of Professional Conduct.

2. An attorney who is appointed as a Bankruptcy Trustee owes no specific duty as an attorney to the creditors or debtors as long as he is performing the functions of a trustee, but attorneys are subject to discipline for matters not strictly related to the practice of law. Additionally, if the trustee who is also an attorney commits illegal acts which involve moral turpitude, or engages in conduct involving fraud, deceit or misrepresentation or conduct which adversely reflects on the attorney's fitness to practice, the attorney is subject to discipline under the Rules of Professional Conduct.

Opinion:
(Question 1) South Carolina Rule of Professional Conduct 1.7 (b) provides that a lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person,... unless: (1) the lawyer reasonably believes the representation will not be adversely affected: and (2) the client consents after consultation. It is clear that under certain circumstances the lawyer's duties as trustee will require him to take positions that could be adverse to his client as creditor in a bankruptcy proceeding.

The trustee's concern is the bankruptcy estate which he should administer impartially. In re Oliveri, 45 F. Supp. 32 (D.C.N.Y. 1942). Therefore, the attorney is required to comply with the provisions of Rule 1.7(b) before undertaking representation. First, the attorney must subjectively determine whether he can reasonably undertake the representation without adverse effect on his role as trustee. The attorney must look to the potential for conflict or the possibility that his role as trustee could erode his relationship with the client. Secondly, after weighing these considerations and arriving at the conclusion that the representation will not be adversely affected, the attorney must consult with the client and give the client full disclosure of the possibilities for conflict to arise. If, after disclosure of the potential conflict, the client still wishes to retain the attorney, it appears that the rule would permit such representation to continue. (If the role of the trustee is interpreted as quasi-judicial, this opinion may differ.) (Question 2.) Cases decided under the Bankruptcy Code draw a distinction between the functions of a trustee and an attorney for a trustee. It has been held that when a trustee functions as his own attorney, he can only claim attorneys fees for his efforts as an attorney. In re Orbit Liquor Store, 439 F.2d 1351 (5th Cir. 1971). Also, see In re Knapp, ___ F.2d ___ (4th Cir. 1991), where the court drew a distinction between the role of trustee and role of an attorney. It follows logically that an attorney functioning solely as a trustee assumes no duty as an attorney to the creditors or debtors of an estate while that attorney remains within the role of trustee, but an attorney, by the fact of being authorized to practice law, is still bound by the Rules of Professional Conduct. Additionally, when an attorney undertakes the dual role of an attorney and trustee he also owes a duty as an attorney and is subject to discipline as such.

While it is not within the purview of this Committee of offer opinions on disciplinary procedures as set forth in Rule 413, SCACR, it must be emphasized that the attorneys are subject to discipline for matters not related to the practice of law. See In re Tedder, 296 S.C. 500, 374 S.E. 2d 294 (1988). Furthermore, an attorney is subject to discipline if the attorney, no matter what the role, commits illegal acts which involve moral turpitude, or engages in conduct involving fraud, deceit or misrepresentation or conduct which adversely reflects on the attorney's fitness to practice. See In re Gregory, Opinion No. 23510 (S.C. Sup. Ct. filed Nov. 12, 1991) (Davis Adv. Sh. No. 26).