Workshop on Bankruptcy

May 17–19, 2001
St. Louis, Missouri

Back to Workshop Program

Nancy B. Rapoport¹

1. Context: the bankruptcy course as a capstone course.
   1. Can wrap up secured transactions, negotiations, evidence (sometimes!), and a little statistics and accounting, all in one course.
   2. Usually has more third-year law students in it than it has second-year students.
   3. Opportunity to see bankruptcy law as having both legal and non-legal (“human”) issues.
2. Lawyering skills
   1. How to interview clients (example #1, attached).
   2. What non-legal considerations might go into a decision to file (or not to file)?
   3. Negotiations (e.g., cash collateral stipulations).
   4. Oral arguments (motion for relief from stay).
3. Ethics
   1. Conflicts of interest (example #2, attached).
   2. The lying client.
   3. To whom does the lawyer owe the greater duty: the client or the court? Issues of over-reaching, inequality of competent representation on both sides, honesty….
   4. The giving of non-legal advice.

Example #1: Interviewing a client.

Facts known to the client. Pat (the client) has had a run of bad luck, which has resulted in several outstanding problems:

1. Pat was not paid for some consulting work (marketing) done for Famous Lawyer. In frustration, Pat sent a letter to all members of the Houston Bar Association and to several clients of Famous Lawyer. That letter stated that Famous Lawyer was a cheapskate who refused to pay Pat’s valid bill. Famous Lawyer was “not amused” and has gone after Pat for, among other things, defamation and intentional interference with business relationships. The trial is set for next week, and Pat has not yet hired a lawyer to represent her.

2. Pat has been “living large,” and she has run up huge credit card bills, which total approximately $80,000. She is self-employed and generally averages an annual income of $35,000. She maintains that she needs to look successful to be successful.

3. Pat treasures her grandmother’s engagement ring, which she inherited. Not only does it have sentimental value, but it is worth at least $20,000. She doesn’t want to sell it to pay off some of her debts, and she sure doesn’t want her creditors to get hold of it.

4. Pat also owns a parcel of land outside Houston, which would be worth roughly $250,000 if she sold it tomorrow. Yesterday, she conveyed it to her brother, Shawn, for $1, for “safekeeping” while Pat has credit problems.

Issues for Attorney #1:

A. How do you know if the client’s giving you all of the information you need?

B. How much do you need to check such information as the value of property, the amount of outstanding debts, other issues that might not show up on a checklist?

C. Which exemption rules apply? State or federal? What property can be protected under the operative exemption statute?

D. How do you know if the client is telling the truth?

Assuming that Attorney #1 doesn’t take the case, what do you think that the client will do in talking with Attorney #2? What should Attorney #2 do in the interview, knowing that the client has already consulted with another attorney first?

Example #2: Conflicts of interest.

You are a first-year associate at Large Law Firm. Large Law Firm handles matters ranging from real estate to complex litigation to wills and trusts. In fact, the only department that Large Law Firm doesn’t have is a criminal law department. There are 250 lawyers in Large Law Firm, and there are several thousand clients.

Big Partner comes into your office and tells you that a new matter has come across her desk. She would like you to run a conflicts check and tell her whether Large Law Firm can take on the representation. She gives you her handwritten notes, which read (as best as you can tell) as follows:

Client: CDs On Demand. Sells CD recordings; has a library of several thousand songs; $10,000,000 worth of rights to the songs, according to client’s estimate. $5,000,000 in various types of debt. Owes artists some royalties; possibly a breach of warranty claims for defective CDs (apparently ruins CD players when played); owes Big Two Accounting Firm for yearly audit, but is protesting audit because didn’t get a good report back. Has several CDs in stock for which has gotten pre-payment but hasn’t sent out CDs.

1. Big Two Accounting Firm: Large Law Firm has represented BTAF in a securities fraud case (something about a cover-up of misrepresentations).

2. Muddy Waters, Eric Clapton, B.B. King, and some other musicians: Large Law Firm does their taxes and occasionally represents them in various types of litigation.

3. CDs On Order: This is a new client of the firm, about to go public. Has the equipment to mass-produce CDs but doesn’t have rights to very many songs yet.

4. JVC and Panasonic: Large Law Firm acts as outside counsel on a variety of matters.

5. The Association of CD-Disk Makers: This is a trade organization that sells the raw material that most CD sellers use.

6. Bank of the Large Sums: Not surprisingly, there is a decent chance that BotLS has done some secured lending to CDs on Demand.

7. Two of the partners and one associate at Large Law Firm own stock in CDs on Demand. You’re not sure how much stock (or what type of stock it is).

How would you go about doing a conflicts check? Mark each of the above current clients (and the shareholders) as “definitely adverse”; “potentially adverse”; or “not adverse.”