How do you get an original client to cooperate in prosecution of a case they no longer have an interest in?

June 19, 2014

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Your P.I. Client has filed Chapter 7 Bankruptcy- Navigating the Minefields

 

Question:  "This scenario puts the Plaintiff's lawyer in a no win situation. The client now becomes the trustee, and the original client basically is out. How do you get the original client to cooperate in prosecution of a case they no longer have an interest in?"

Answer by James D. Toll: "The question posed is a good one and I would first add a “wrinkle” if you will.  From the perspective of ability to settle a case, it may be easier to do so with the Trustee as the client because his statutory obligations are different than the “original” client.  The client may be unrealistic in his or her expectations.  The Trustee has a fiduciary obligation to the secured creditors, to the plaintiff’s attorney to protect his or her fee and his statutory commission too.

Aside from the standard duty to cooperate which is incorporated in almost all Legal Fee Agreements for Contingent Personal Injury matters, the “debtor” has an incentive to cooperate to the extent that his failure to do so may diminish the “asset” of the Estate, which is the personal injury matter.  Realistically and as a practical matter the “debtor’s” interest in the outcome of the case may very well be influenced by the amount of the secured debt and whether there is money left over once the secured creditors are paid off, attorneys’ fees are collected and the Trustee is paid his commission which again is fixed by statute.

The bankruptcy does pose potential problems and as a corollary to the question posed, it is important that all scenarios are spelled out to the original client in accordance with the Rules of Professional Conduct and the client must sign off on the letter outlining these scenarios, including whether a conflict may at some point arise.

A key question which should be asked at an initial client interview is whether the prospective client has ever filed bankruptcy.  That may very well influence your decision whether or not to take the case in the first instance.  I would also suggest that a search be made of the Bankruptcy filings as a matter of course to determine if the client has filed or is contemplating filing.

In sum, the questioner raises what is a conundrum that all personal injury attorneys must be mindful of- incentive to cooperate is a direct function of how much money is potentially out there from which the debtor can ultimately recover.  As mentioned earlier, there is not too much we, as plaintiffs’ personal injury attorneys can do to ensure cooperation from our clients if they have no financial stake in the outcome.  What may happen is that the Trustee may abandon the claim altogether if he or she determines that at the end of the day it is not worth pursuing.

Key to avoiding the “minefield”:  get as much information as you can at the outset on your potential client."

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This Question and Answer was taken from the Lawline CLE Program entitled "Your P.I. Client has filed Chapter 7 Bankruptcy- Navigating the Minefields" presented by Lawline Faculty members James D. Toll and Stuart Brecher.

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Author Bio

Written by Sigalle Barness

Sigalle Barness is the Vice President of Content and a member of Lawline.com’s Executive Team. Sigalle provides business strategy and leadership to the company and directly manages Lawline’s accreditation, programming and production operations. Sigalle also analyzes market trends and applies insights to develop and execute written and video content including online educational programming, email marketing, social media campaigns, press releases, blog articles and large scale live events. Sigalle graduated summa cum laude from Rutgers University and holds a B.A. in English. She received her J.D. in 2010 from Benjamin N. Cardozo School of Law in New York, NY. Sigalle is admitted to practice in both New York and New Jersey. She is also an active member of the Association for Continuing Legal Education (ACLEA), and is the former Chair of ACLEA’s Programming Special Interest Group (2013 – 2015) and National Provider Special Interest Group (2015 - 2017). Before joining Lawline in March 2012, Sigalle litigated civil claims in areas such as landlord tenant, breach of contract and tax lien and mortgage foreclosures actions. She also handled transactional matters such as drafting residential and commercial leases, demand letters, and client conflict waivers. Sigalle is an avid lover of music, video games, blogging, asking questions and all things food. She is also fluent in Hebrew and enjoys writing fiction, traveling and scuba diving.

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