REPRESENTING CREDITORS

• Jurisdiction: Washington

§16.10 REPRESENTING CREDITORS

Representation of individual creditors in a bankruptcy case does not generally raise any particular ethical issues. Creditors' lawyers are, of course, subject to otherwise applicable principles and duties to the court and to their clients, but the fact that the representation involves a bankruptcy proceeding does not affect those duties as long as the lawyer represents only one creditor involved in the bankruptcy. That analysis can change significantly when there are multiple clients with interests in the bankruptcy—regardless of whether the lawyer represents such other clients in the proceeding.

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(1) Multiple creditor clients—disclosure

Fed. R. Bankr. P. 2019 requires any attorney who represents multiple creditors (other than those in the same corporate family) "acting in concert to advance their common interests" to file a "Rule 2019 Statement" disclosing such multiple representation. The requirement is applicable only to Chapter 9 and Chapter 11 cases. Fed. R. Bankr. P. 2019(b) allows the court to refuse to permit appearance by anyone who violates it and to grant other appropriate relief. The reasoning behind Fed. R. Bankr. P. 2019 is somewhat obscure, and its provisions are often ignored. Nevertheless, the provisions are quite clear and the experienced practitioner will comply with the minimal burden imposed by the rule.

(2) Multiple creditor clients—conflicts

A potential conflict of interest exists whenever a lawyer represents more than one creditor in a bankruptcy proceeding, unless it is clear from the start that all of the lawyer's clients will be paid in full. Absent full payment, the clients are chasing the same limited pot, and when one increases its claim, all others are disadvantaged. Accordingly, it can be argued the attorney should comply with RPC 1.7(b)(4) and obtain written consent from each client after disclosure of material facts and an explanation of the implications of the common representation. However, that practice is not universally followed. Many bankruptcy lawyers do not perceive this as the kind of conflict that rises to the level of those described elsewhere in this chapter, absent a more direct adversity such as one of the clients claiming a security interest or large administrative priority, or when two clients are claiming a security interest in the same collateral. In those cases, virtually all lawyers will require written waivers from all of the...