Legal Ethics

Bankruptcy Judge Properly Fired Debtor's PI Counsel

A Manhattan bankruptcy judge properly fired a debtor’s incompetent and uncooperative personal injury lawyer, a federal appeals court has ruled.

Although Manhattan personal injury lawyer Jeffrey H. Schwartz was initially retained by the debtor with the bankruptcy trustee’s permission, he subsequently hired co-counsel without seeking bankruptcy court approval and made other errors that reflected “at best a lack of understanding of the bankruptcy process and at worst an effort to circumvent its requirements,” the New York City-based 2nd U.S. Circuit Court of Appeals found. Hence, it held, Chief Judge Carla Craig of the Eastern District Bankruptcy Court properly terminated the representation, reports New York Lawyer (reg. req.), in a reprint of a New York Law Journal article.

Initially, the article notes, Craig attempted to get Schwartz and the bankruptcy trustee to work the situation out. But that allegedly resulted in an offer by Schwartz’ co-counsel to an associate of the trustee late last year to “sweeten the pot” (the co-counsel denies he made the offer). At a hearing a few weeks later, Craig removed Schwartz from the case, over his client’s objection, and then, when he and co-counsel refusing to turn over the personal injury file to the bankruptcy trustee, sanctioned them both.

Although she would normally give great weight to a client’s choice of counsel, Craig said in her opinion that she was justified in removing Schwartz and co-counsel because of the personal injury lawyers’ defiance of the court, inattention to ethical obligations and “extraordinary record of … incompetence,” the article states.

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