ETHICS OPINION 278-2-1930

ETHICS OPINION 278-2

NUMBER 278 1930

Question. A firm of attorneys acting for petitioning creditors filed an involuntary petition in bankruptcy against the debtor.

The bankrupt’s estate in the hands of the custodian is not sufficient to pay actual costs. Upon instructions from the referee, and after investigation, the trustee placed matters in connection with the bankruptcy before the District Attorney. As a result, the bankrupt and a brother of the bankrupt were indicted for conspiracy and concealment of assets.

The attorneys for the petitioning creditors were also attorneys for the trustee and performed services in connection with the original investigation and with the work of the District Attorney’s office which resulted in the indictment. There are not sufficient assets to pay them any fee whatever. They have been advised by the United States Attorney that he will look to them in great measure in the preparation of the case for trial.

In these circumstances, may the firm of attorneys in question directly address the creditors for a contribution to them of 10 percent of their claims against the bankrupt’s estate, such 10 percent to be devoted to services and expenses in connection with the estate and as compensation for the work of the attorneys?

Answer. In the opinion of the Committee, such solicitation by the lawyers for their own employment is contrary to the principles of Canon 27 of the American Bar Association in which this Committee concurs.

Where the interest of the petitioning or other creditors demands or justifies appeals to other creditors for cooperation, the approach ought not to be made by the lawyers, nor should such appeal be made a mere cloak or device to obtain employment for the lawyers, (See Opinion 47, V.)