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3. It is not uncommon, unfortunately, for prospective chapter 11 clients
to seek counsel just before a foreclosure or other deadline requiring immediate action. That situation has been held not to excuse the attorney from asking probing questions and demanding full and reasonably corroborated responses. As the Ninth Circuit BAP stated: The importunities of a desperate client do not relieve an attorney of the affirmative duty of reasonable inquiry imposed by Rule 9011. The evident warning flags and the inadequate time available to make such inquiry should have impelled [the attorney] to consider the ever-present option of declining a questionable engagement.
4. The attorney is to explain legal requirements to the extent reasonably necessary to permit the client to make informed decisions. But the lawyer may not follow client instructions if they would operate to defraud, and may not knowingly make or affirm a false statement of material fact or law to others or fail to disclose a material fact necessary to avoid defrauding others. A disclosure statement, motion to approve a settlement or sale, or the like may well entail an evaluation of facts and law for use by third persons often unrepresented themselves. Counsel is to disclose any limitations on information used in making the valuation, and not state or imply that the lawyer is disinterested rather than the advocate of her DIP client. The lawyer's duties to third parties and malpractice liability to them in this context may be judged by the standards applicable to other attorney evaluations for unrepresented third parties, such as opinions given in tax shelter and securities offering contexts.
5. Despite her diligence, an attorney nonetheless may discover that her
This outline is adapted from Chapter 27, Ethical Responsibilities, Norton Bankruptcy Law & Practice 2d (Thomson-West 2005)
