The Bankruptcy Court for the E.D. of New York handed down a very unusual opinion early this month. If you are interested the case is Adams v. Giordano, et al. (In re: Clarke, et al), Adv. No. 08-8133. As far as I can figure out from the opinion, an attorney hired a contract legal assistant to prepare bankruptcy petitions. The legal assistant thought that he was doing a first draft of the documents. The documents, instead, were filed as he prepared them and with his electronic signature on them. Although, they wound up being filed pro se by the Debtors. The legal assistant explained some things to the clients, interviewed them, prepared docs, etc. In other words, he did what most legal assistants do. He did not provide bankruptcy petition preparer disclosures, or any other disclosures, to the clients before commencing work.
The UST brought an Adversary Proceeding against the attorney, another entity I don’t recognize and the legal assistant. The UST settled with the other two defendants and proceeded against the legal assistant. The Court found that the legal assistant violated the mandatory disclosure provisions of Sections 110 and 528. In addition, the Court found that the legal assistant had committed the unauthorized practice of law for explaining and summarizing documents for the clients.
There is no mention in the opinion what the settlement terms were for the other defendants, but the legal assistant — who was working for a licensed attorney, albeit on a contract basis, the whole time — was sanctioned more than $5,000.
I can’t help but think that this case would have been decided differently if the legal assistant were a full-time employee working in the lawyer’s office, but this opinion reinforces my decision not to use legal assistants. Although, I do use some contract attorneys; and I might reconsider if I am properly shielding them from any liability under the every sneaky Bankruptcy Code. I think the second area to be wary of is making sure that we are not providing our clients with documents that they can file on their own — with or without our consent.