                                                     SYLLABUS

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the
convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the
interest of brevity, portions of any opinion may not have been summarized).

 In the Matter of Opinion No. 17-2012 of the Advisory Committee on Professional Ethics (A-22-13) (072810)

Argued April 1, 2014 -- Decided July 2, 2014

RABNER, C.J., writing for a unanimous Court.

         In this appeal, the Court considers whether a volunteer pro bono attorney may represent a low-income
debtor in a no-asset Chapter 7 bankruptcy matter even if the attorney’s firm represents one or more of the debtor’s
creditors in unrelated matters.

          Volunteer Lawyers for Justice (VLJ) created a bankruptcy clinic to assist low-income debtors who have no
assets to distribute. VLJ enlisted the help of lawyers in the bankruptcy department at Lowenstein Sandler, a large
New Jersey law firm that also represents institutional creditors in matters unrelated to VLJ’s cases. VLJ and the
firm implemented various safeguards to screen for potential conflicts. VLJ first examines each debtor’s finances
and turns away anyone with assets available for distribution to creditors or an annual income of about $27,500 or
more. For debtors who qualify, VLJ gathers the relevant documents, including the names of attorneys or collection
agencies that creditors may have hired, and sends the information to a volunteer attorney. The volunteer attorney
then conducts a conflict check on each relevant person or entity in the client file before contacting the debtor,
confirms that the debtor has no assets available for distribution, and asks the debtor additional questions that may
identify conflicts. Attorneys decline to take the case if the firm represents or has represented one of the debtor’s
creditors in a matter related to the debtor, or if a creditor the firm represents has brought a lawsuit or collection
action against the debtor in an unrelated matter. Otherwise, the attorneys generally accept the representation, even if
the firm represents one or more of the debtor’s creditors in unrelated matters. The firm prepares an engagement
letter informing the debtor that the firm will withdraw from representation if a conflict of interest arises and of the
scope of the firm’s representation. Among other things, the firm prepares and files the debtor’s Chapter 7
bankruptcy petition and represents the debtor at a meeting of the creditors, sometimes referred to as a “section 341
meeting,” which takes place before any debts may be discharged and gives creditors an opportunity to question the
debtor under oath. See 11 U.S.C.A. § 341(a). VLJ represents that no creditors have appeared at the section 341
meetings of any pro bono clients.

          Because potential volunteer attorneys were hesitant to participate in the clinic due to possible conflict
issues, VLJ sent a formal inquiry to the Advisory Committee on Professional Ethics (ACPE) asking “whether a
volunteer pro bono attorney may represent low-income debtors in seeking relief under Chapter 7 of the Bankruptcy
Code even if the attorney’s firm represents creditors of those debtors in unrelated matters.” The ACPE responded in
the form of a written opinion. Because this situation does not involve a direct conflict of interest under RPC
1.7(a)(1), the ACPE focused on RPC 1.7(a)(2), which provides that a conflict of interest exists when “there is a
significant risk that the representation of one or more clients will be materially limited by the lawyer’s
responsibilities to another client.” The ACPE could not “find, as a categorical matter, that in all cases there would
be no material limitation on the lawyer’s representation.” The ACPE therefore concluded that volunteer lawyers
must inform both clients “of their participation in the program and obtain consent.” The Court granted VLJ’s
petition for review under Rule 1:19-8. 216 N.J. 12 (2013).




                                                          1
HELD: VLJ’s pro bono bankruptcy program does not present a conflict of interest under RPC 1.7. With appropriate
safeguards, a volunteer attorney can represent a low-income debtor in a no-asset Chapter 7 bankruptcy matter even if
the attorney’s firm represents one or more of the debtor’s creditors in unrelated matters.

1. Chapter 7 of the Bankruptcy Code provides a statutory framework to discharge an individual debtor’s unpaid
debts and to distribute any non-exempt assets among creditors in an equitable way. Many Chapter 7 cases -- like the
ones VLJ handles -- are “no-asset” cases in which the debtor has no property to distribute and the creditor may
receive nothing. In a typical Chapter 7 case, the debtor files a petition for bankruptcy listing his debts or creditors,
which constitutes an order for relief, and the court notifies the debtor’s creditors of the order. Within a reasonable
amount of time, a trustee convenes a section 341 meeting. The meeting is not a formal judicial proceeding; it is not
conducted in court, and the bankruptcy judge may not attend. See 11 U.S.C.A. § 341(c). Although a creditor can
file a complaint and object to the discharge of debt, unless a debtor has committed a prohibited act listed in the
statute, the discharge is not discretionary. See 11 U.S.C.A. § 727(a). Most Chapter 7 cases, as a result, are
straightforward and non-adversarial. (pp. 10-14)

2. A conflict of interest exists under RPC 1.7(a)(2) if there is a “significant risk” that a volunteer lawyer’s
representation of an indigent client in a Chapter 7 proceeding “will be materially limited by the lawyer’s
responsibilities” to a creditor the firm represents in an unrelated matter, or vice versa. Because the Court adopted
the ABA Model Rules of Professional Conduct, the official ABA comments to those rules can assist in interpreting
them. Those comments explain that the “mere possibility of subsequent harm does not itself require disclosure and
consent”; instead, there must be “a significant risk that a lawyer’s ability to consider, recommend or carry out an
appropriate course of action for the client will be materially limited as a result of the lawyer’s other responsibilities
or interests.” Model Rules of Prof’l Conduct R. 1.7 cmt. 8 (2013). To identify such a risk, “[t]he critical questions
are the likelihood that a difference in interests” will arise, and “if it does, whether it will materially interfere with the
lawyer’s independent professional judgment in considering alternatives or foreclose courses of action that
reasonably should be pursued on behalf of the client.” Ibid. (pp. 14-16)

3. Advisory ethics committees in New York and Boston have found that pro bono Chapter 7 bankruptcy programs
similar to VLJ’s program do not give rise to a conflict of interest. Those decisions noted, among other things, that
unlike traditional adversarial lawsuits, Chapter 7 cases proceed by automatic operation of statute to discharge debt
absent a creditor’s objection, that volunteer lawyers do not represent debtors if a creditor objects to the discharge of
a debt or takes some other action against the debtor, and that the volunteer programs utilize procedures to screen out
cases that could create a conflict. See The Ass’n of the Bar of the City of N.Y. Comm. on Prof’l and Judicial Ethics,
Formal Op. 2005-01 (2005); Bos. Bar Ass’n Ethics Comm., Op. 2008-01 (2008). Ethics opinions from other
jurisdictions are distinguishable or do not consider the issue in detail. (pp. 16-21)

4. VLJ’s program does not present a conflict of interest under RPC 1.7. The Chapter 7 pre-determined statutory
process does not become adversarial unless a creditor files a complaint and objects, which triggers withdrawal of the
VLJ volunteer lawyer. The VLJ program screens out directly adverse interests at the outset, and the volunteer
lawyers later pose questions designed to root out conflicts. The program also undertakes a thorough effort to ensure
that prospective clients are truly indigent and have no assets available for distribution to creditors. As a practical
matter, in the “no-asset” cases the clinic handles, there are no non-exempt assets for a debtor to try to shield or a
creditor to receive. In addition, the firm notifies debtors at the outset that it will withdraw if a conflict arises, and
creditors receive notice that the law firm represents a debtor. The Bankruptcy Court also sends a notice, which
identifies the debtor’s lawyer, to all creditors listed on the Chapter 7 petition. Fed. R. Bankr. P. 2002(a)(1).
Moreover, in an analogous context, the Bankruptcy Code allows court-appointed trustees to hire “disinterested”
attorneys for assistance, and expressly states that such attorneys are not disqualified “solely because of [their]
employment by or representation of a creditor,” unless another creditor or the trustee objects and “there is an actual
conflict of interest.” 11 U.S.C.A. § 327(a), (c). Under the facts presented in this matter, the Court does not find a
“significant risk” that a volunteer lawyer’s representation of a Chapter 7 debtor in a no-asset case will be “materially

                                                             2
limited” by the firm’s responsibilities to creditors in unrelated matters, or that representation of those creditors will
be “materially limited” by the firm’s obligations to the debtor. See RPC 1.7(a)(2). To the extent the ACPE
articulated a different standard, the Court does not follow it. Finally, although VLJ advises that no creditor has yet
appeared at a section 341 meeting to question the debtor, because that circumstance could strain the lawyer’s duty of
loyalty to either client, even if the creditor chose not to object, the Court finds that another attorney from outside the
firm should be substituted to assist the debtor under those circumstances. (pp. 21-24)

5. Because the Court enacted the RPCs in the public interest, the strong policy in favor of pro bono legal services
also informs the Court’s decision. Low-income New Jersey residents facing civil legal challenges are often unable
to get legal help. In the Chapter 7 bankruptcy context, a technical area not designed for the layperson, the number of
self-represented bankruptcy filings has grown in the wake of the recession, and self-represented litigants have been
less successful in getting their debts discharged. The Court commends the lawyers in this and other pro bono
initiatives who offer their assistance at a time of need and help bridge the justice gap that leaves many low-income
residents in New Jersey without legal services. (pp. 24-28)

         The final action of the ACPE is REVERSED.

     JUSTICES LaVECCHIA, ALBIN, PATTERSON, and FERNANDEZ-VINA and JUDGES
RODRÍGUEZ and CUFF (both temporarily assigned) join in CHIEF JUSTICE RABNER’s opinion.




                                                            3
                                       SUPREME COURT OF NEW JERSEY
                                         A-22 September Term 2013
                                                  072810

IN THE MATTER OF
OPINION NO. 17-2012
OF THE ADVISORY COMMITTEE
ON PROFESSIONAL ETHICS


         Argued April 1, 2014 – Decided July 2, 2014

         On petition for review of a decision of the
         Supreme Court Advisory Committee on
         Professional Ethics.

         Catherine Weiss argued the cause for
         appellant Volunteer Lawyers for Justice
         (Lowenstein Sandler, attorneys; Ms. Weiss
         and Joseph A. Fischetti, on the briefs).

         Michael C. Walters, Assistant Attorney
         General, argued the cause for respondent
         Advisory Committee on Professional Ethics
         (John J. Hoffman, Acting Attorney General of
         New Jersey, attorney; Melissa H. Raksa,
         Assistant Attorney General, of counsel).

         Susan A. Feeney argued the cause for amicus
         curiae New Jersey State Bar Association
         (Ralph J. Lamparello, President and McCarter
         & English, attorneys; Ms. Feeney, Emily B.
         Goldberg, and Judah Skoff, on the brief).

         Steven R. Marino argued the cause for amici
         curiae Pro Bono Institute, Jessica Kitson,
         and Jill Friedman (DLA Piper, attorneys).


    CHIEF JUSTICE RABNER delivered the opinion of the Court.

    This case involves people who have incurred debts, have no

assets to repay them, and want to discharge those debts in

bankruptcy court.   In the years since the recent downturn in the

                                 1
economy, tens of thousands of New Jersey residents have found

themselves in that situation.   Because they do not have enough

money to pay for a lawyer, too many people have been forced to

represent themselves as they navigate the technical field of

bankruptcy law.

    In response, Volunteer Lawyers for Justice (VLJ), a legal

services organization, created a bankruptcy clinic to assist

low-income debtors who have no assets to distribute.    VLJ and

the volunteer lawyers who work with the group screen potential

clients in an effort to avoid conflicts of interest.

    A number of volunteer attorneys work at a law firm that

also represents large, institutional creditors in unrelated

matters.    VLJ represents that other potential volunteers are

reluctant to participate in the clinic because of possible

ethical objections.

    VLJ therefore turned to the Advisory Committee on

Professional Ethics (ACPE) for guidance and posed the following

question:    can a volunteer lawyer represent a low-income debtor

in a Chapter 7 bankruptcy proceeding if the lawyer’s firm

represents one or more of the debtor’s creditors in unrelated

matters?    In other words, if a potential pro bono bankruptcy

client owes thousands of dollars in credit card debt to a bank,

and the bank is a client of the firm in an entirely different



                                  2
legal matter, can a lawyer at the firm volunteer to represent

the debtor in bankruptcy court?

    The ACPE concluded that both clients must be informed and

“decide whether they consent to waive the conflict.”

Particularly in light of the nature of Chapter 7 bankruptcy

proceedings, and the standards that govern the clinic and pro

bono counsel, we do not agree.    We do not believe that

participation in the program poses a conflict of interest under

the Rules of Professional Conduct (RPC).    See RPC 1.7(a)(2).   As

a result, we conclude that this valuable pro bono effort can

continue to operate with appropriate safeguards.

                                  I.

                                  A.

    VLJ provides free legal services to low-income residents of

New Jersey on a wide range of civil issues.    Since the start of

the recent recession, a growing number of people have sought

help to discharge debts they cannot pay.    To address part of the

problem, VLJ and Merck, a pharmaceutical company with an in-

house legal staff, established a volunteer bankruptcy clinic in

2009 to assist low-income people prepare and file bankruptcy

petitions and to represent them at hearings.    The clinic serves

indigent clients in Bergen, Essex, Hudson, Morris, Passaic,

Sussex, and Union Counties.



                                  3
    In 2010, VLJ and Merck enlisted the help of lawyers in the

bankruptcy department at Lowenstein Sandler, a large New Jersey

law firm.   The firm also represents institutional creditors in

matters unrelated to VLJ’s cases.

    To screen for potential conflicts, VLJ and the firm

implemented various safeguards, following the lead of ethics

committees in New York City and Boston.   Both committees had

approved similar pro bono bankruptcy programs that are discussed

below.

    The clinic operates in the following way.    When a debtor

considering filing for bankruptcy contacts VLJ, the group

initially determines if the person qualifies for its help.      The

clinic only represents low-income individuals with “no assets”

for purposes of Chapter 7 bankruptcy cases.   VLJ thus examines

each debtor’s finances and turns away anyone with assets

available for distribution to creditors or an annual income of

about $27,500 or more.   VLJ sometimes refers debtors with

minimal assets to other pro bono attorneys outside the clinic.

    For debtors who qualify, VLJ collects the documents needed

to file a Chapter 7 petition, including a list of outstanding

debts; gathers the names of attorneys or collection agencies

that creditors may have hired; and sends the information to a

volunteer attorney.   Both attorneys and paralegals at VLJ

conduct the initial screening.

                                 4
    Once volunteer attorneys at the firm receive the

information, they conduct a conflict check on each relevant

person or entity in the client file before contacting the

debtor.   Potential conflicts involving other matters handled by

the firm are identified in that way.      The firm, like VLJ, also

confirms that the debtor has no assets available for

distribution.

    Attorneys decline to take the case if the conflict check

reveals that the firm represents or has represented one of the

debtor’s creditors in a matter related to the debtor.       If a

creditor the firm represents has brought a lawsuit or collection

action against the debtor in an unrelated matter, the attorneys

also decline the debtor’s case.       Otherwise, the attorneys

generally accept the representation, even if the firm represents

one or more of the debtor’s creditors in unrelated matters.

    When volunteer attorneys meet with debtors, they confirm

the above conditions.   Consistent with the recommendations of

ethics panels in New York City and Boston, the attorneys also

ask whether

          the case involves only one creditor; the
          client has granted any new liens or made any
          non-routine payments in the past ninety
          days; any of the debts to be discharged is
          of a sufficient size that it is likely to
          have a material impact on the creditor’s
          bottom line; other facts suggest an unusual
          or disproportionate impact on any particular
          creditor; and other forms of bankruptcy

                                  5
            relief or alternatives to bankruptcy warrant
            consideration.

Answers to those questions may identify additional conflicts.

    After the conflict check is completed, the firm prepares an

engagement letter for the debtor to sign.    The letter informs

the debtor that the firm will withdraw from representation if a

conflict of interest arises, including if a creditor the firm

represents objects to the bankruptcy petition or starts an

adversary proceeding against the debtor.

    The letter also informs the debtor of the scope of the

firm’s representation.    Among other things, the firm will

prepare and file the debtor’s Chapter 7 bankruptcy petition and

represent the debtor at a meeting of the creditors under the

Bankruptcy Code, sometimes referred to as a “section 341

meeting.”   That meeting takes place before any debts may be

discharged and gives creditors an opportunity to question the

debtor under oath.    VLJ represents that no creditors have

appeared at the section 341 meetings of any pro bono clients.

    As of December 2012, more than fifty volunteer attorneys

had represented approximately one hundred pro bono clients

through the clinic.    VLJ had approached additional lawyers at

other firms to recruit them as volunteers.   It represents that

those attorneys were hesitant to participate in the clinic




                                  6
because they represent creditors in unrelated matters and were

concerned about possible conflicts of interest issues.

                                 B.

    To clarify the issue, VLJ sent a formal inquiry to the ACPE

on December 2, 2012.   The ACPE is a committee of the Supreme

Court that addresses questions about the “proper conduct” of

lawyers under the RPCs.   R. 1:19-2.   VLJ asked the Committee

“whether a volunteer pro bono attorney may represent low-income

debtors in seeking relief under Chapter 7 of the Bankruptcy Code

even if the attorney’s firm represents creditors of those

debtors in unrelated matters.”

    The ACPE responded in the form of a written opinion dated

May 10, 2013.   It concluded that “lawyers need to inform

creditor clients of their participation in the program and

obtain consent” before they can represent a debtor who “has

obligations to the creditor client.”

    The ACPE recognized that a lawyer’s representation of a

debtor in a “no-asset” Chapter 7 bankruptcy case did not create

a direct conflict of interest with a creditor.    See RPC

1.7(a)(1).   The ACPE’s opinion letter focused on RPC 1.7(a)(2)

instead, which provides that a conflict of interest exists when

“there is a significant risk that the representation of one or

more clients will be materially limited by the lawyer’s

responsibilities to another client.”

                                 7
    The Committee observed that although these cases presumably

involve small amounts of money, a creditor may object based on

“loyalty concerns or other non-monetary interests.”    According

to the ACPE, therefore, the lawyer “could be materially limited

by obligations to the creditor client and a conflict would

arise.”   The Committee could not “find, as a categorical matter,

that in all cases there would be no material limitation on the

lawyer’s representation.”    It noted that “an unreasonable client

may have inflated expectations of loyalty”; “that not all

clients would be content if their lawyer represents debtors in

such proceedings”; and that even if adverse interests are

indirect, “there is a risk that the representation will be

materially limited.”   It thus directed volunteer lawyers to

inform both clients “of their participation in the program and

obtain consent.”

    We granted VLJ’s petition for review of the ACPE’s final

action under Rule 1:19-8.    216 N.J. 12 (2013).   We also granted

motions from the New Jersey State Bar Association as well as the

Pro Bono Institute, along with two individuals who direct public

interest programs at Rutgers School of Law-Newark and -Camden,

to appear as amici curiae.

                                 II.

    VLJ argues that the ACPE misapplied RPC 1.7(a)(2).      The

group contends that the ACPE erred in finding a conflict under

                                  8
the rule because there is no “significant risk” that an

attorney’s pro bono representation of a low-income Chapter 7

debtor will “materially limit” his or her representation of one

of the debtor’s creditors in an unrelated matter.    According to

VLJ, the risk of a conflict of interest is remote.    VLJ also

maintains that the ACPE effectively revived the “appearance of

impropriety” standard and failed to take account of the

safeguards in the clinic’s screening measures and conflicts

checks.   VLJ points to other ethics opinions in New York City

and Boston that have approved nearly identical programs.     In

addition, VLJ argues that attorneys serve an important public

interest when they provide specialized legal services to low-

income debtors on a pro bono basis.

    The Attorney General, appearing on behalf of the ACPE,

argues that the Committee’s opinion is correct.   The Attorney

General notes that the interests of a creditor and debtor in a

Chapter 7 bankruptcy may be indirectly adverse and that, in some

instances, there may be a significant risk that the lawyer’s

representation will be materially limited.   In addition, the

Attorney General suggests that opinions from jurisdictions that

require consent from both clients in comparable bankruptcy

matters should be given more weight than rulings by ethics

committees in New York City and Boston.



                                 9
    The New Jersey State Bar Association (NJSBA) argues that

the standard the ACPE articulated is inconsistent with the plain

meaning of RPC 1.7(a)(2).    The NJSBA also contends that the ACPE

failed to consider relevant bankruptcy rules that permit court-

appointed trustees to hire lawyers who may represent creditors

in unrelated matters.    The NJSBA presents other arguments that

echo VLJ’s position.    Among other points, the NJSBA stresses

that the ACPE’s opinion will have a negative effect on pro bono

efforts that are needed to help low-income residents in New

Jersey.

    The Pro Bono Institute, a non-profit organization that

provides research and assistance to legal groups seeking to help

the poor and others, and two individuals who oversee public

interest programs at Rutgers School of Law-Newark and –Camden,

presented a combined brief as amici.   They document the need for

pro bono representation, nationally and in New Jersey, and the

recent increase in pro se Chapter 7 filings.    Like VLJ and the

NJSBA, amici argue that this lack of representation creates a

gap in the administration of justice, which pro bono programs

can help close.

                                III.

    We briefly review certain features of federal bankruptcy

law to provide context for this matter.



                                 10
    “The principal purpose of the Bankruptcy Code is to grant a

‘fresh start’ to the ‘honest but unfortunate debtor.’”        Marrama

v. Citizens Bank of Mass., 549 U.S. 365, 367, 127 S. Ct. 1105,

1107, 166 L. Ed. 2d 956, 961-62 (2007) (citation omitted).

Chapter 7 of the Bankruptcy Code provides a straightforward

framework (a) to discharge an individual debtor’s unpaid debts,

to the extent the law allows, and (b) to distribute any non-

exempt assets among creditors in an equitable way.       Collier on

Bankruptcy ¶ 1.07[1][a][i] (Alan N. Resnick & Henry J. Sommer

eds., 16th ed.).      Chapter 7 outlines a mechanism to take control

of a debtor’s property, sell it, and distribute the proceeds to

creditors.    Id. at ¶ 1.07[1][a].      But many Chapter 7 cases --

like the ones VLJ handles -- are “no-asset” cases in which the

debtor has no property to distribute and the creditor may

receive nothing.      Id. at ¶ 1.07[1][a][1], –[1][f].

    In a typical Chapter 7 case, “the debtor files a petition

for bankruptcy in which he lists his debts or his creditors;

[and] the petition constitutes an order for relief.”        Tenn.

Student Assistance Corp. v. Hood, 541 U.S. 440, 447, 124 S. Ct.

1905, 1910, 158 L. Ed. 2d 764, 775 (2004) (citations omitted).

The court clerk, in turn, “notifies the debtor’s creditors of

the order.”   Ibid.

    Within a reasonable amount of time, a trustee then convenes

and presides over a “meeting of creditors,” in accordance with

                                   11
section 341 of the Bankruptcy Code.       11 U.S.C.A. § 341(a).    The

debtor must attend the section 341 meeting and “submit to

examination” under oath by any creditors that choose to attend.

Collier, supra, ¶ 1.07[1][c].   The meeting is not a formal

judicial proceeding; it is not conducted in court, and the

bankruptcy judge may not attend.       See 11 U.S.C.A. § 341(c).

    A creditor can file a complaint and object to the discharge

of debt.   See Daniel R. Cowans, Bankruptcy Law & Practice § 5.5

at 68-70 (7th ed. 1998).   The grounds for objection, though, are

limited by statute.   See 11 U.S.C.A. § 727(a) (listing, among

other grounds, when debtor has transferred, destroyed, or

concealed property with intent to defraud, or has knowingly made

false oath in bankruptcy case).    In most cases, creditors do not

object, see Cowans, supra, § 5.3 at 62; it “can be expensive” to

do so, and “not overly productive” to collect from a debtor

whose discharge is denied, id. at § 5.4 at 65.

    Unless a debtor has committed a prohibited act listed in

section 727, the discharge of debt is not discretionary.

Rather, “the debtor is entitled to a full discharge and release

from all [dischargeable] debts.”       Collier, supra, ¶

1.07[1][a][i] (emphasis added) (citations omitted); see also 11

U.S.C.A. § 727(a) (providing that “court shall grant the debtor

a discharge,” absent listed circumstances (emphasis added)).



                                  12
    Most Chapter 7 cases, as a result, are straightforward and

non-adversarial.   The structured proceedings, guided by federal

law, can be resolved quickly and without disputes.    See Berliner

v. Pappalardo (In re Puffer), 674 F.3d 78, 80 (1st Cir. 2012).

As one bankruptcy judge observed in the context of reviewing a

fee application, “the services required in a Chapter 7 case,

i.e., the filing of papers and attendance at a § 341 meeting for

about five minutes, are, like those performed in an uncontested

divorce, among the simplest of non-adversarial legal problems

which any lawyer will encounter.”     In re Patronek, 121 B.R. 728,

734 (Bankr. E.D. Pa. 1990).

    Most debtors seek bankruptcy relief under Chapter 7.

Collier, supra, ¶ 1.07[1].    In New Jersey, about seventy-five

percent of all bankruptcy filings are submitted by individuals

under Chapter 7.   See Admin. Office of the U.S. Cts., U.S.

Bankr. Cts. -- Bus. and Nonbusiness Cases Commenced, by Ch. of

the Bankr. Code During the 12-Month Period Ending Mar. 31, 2014,

Table F-2, www.uscourts.gov/uscourts/statistics/

bankruptcystatistics/bankruptcyfilings/2014/0314_f2.pdf (last

visited June 5, 2014).

    A far smaller number of debtors proceed under Chapter 13 of

the Bankruptcy Code, ibid., which provides for a very different

approach.   Under Chapter 13, debtors with a regular income can

hold onto their assets and pay off their debt to creditors over

                                 13
time.   Collier, supra, ¶ 1.07[5][c].   Debts are only discharged

once a repayment plan has been completed.    Id. at ¶ 1.07[5][e].

Thus, although Chapter 7 and 13 proceedings have similar aims,

they “are poles apart in the means employed” to achieve them.

Id. at ¶ 1300.02.

                                IV.

    We consider the question presented -- whether volunteer

lawyers who represent low-income persons in “no asset” Chapter 7

bankruptcy matters have a conflict if their firm represents a

creditor in an unrelated matter -- in light of RPC 1.7.    Because

the Court has plenary authority to regulate the legal profession

in New Jersey, we review this issue de novo.    See N.J. Const.

art. VI, § 2, ¶ 3; In re Sup. Ct. Adv. Comm. on Prof’l Ethics

Op. No. 697, 188 N.J. 549, 554 (2006); In re LiVolsi, 85 N.J.

576, 585 (1981).

    RPC 1.7 provides as follows:

          (a) Except as provided in paragraph (b), a
          lawyer shall not represent a client if the
          representation    involves  a    concurrent
          conflict of interest. A concurrent conflict
          of interest exists if:

               (1)   the representation of one client
               will be directly adverse to another
               client; or

               (2)   there is a significant risk that
               the representation of one or more
               clients will be materially limited by
               the    lawyer’s  responsibilities   to
               another client, a former client, or a

                                14
                  third person or by a personal interest
                  of the lawyer.

            (b)    Notwithstanding the existence of a
            concurrent   conflict  of  interest  under
            paragraph (a), a lawyer may represent a
            client if:

                  (1)     each  affected   client   gives
                  informed consent, confirmed in writing,
                  after full disclosure and consultation
                  . . . .

    The parties do not suggest that representation of a low-

income debtor is “directly adverse” to a creditor that the firm

represents in an unrelated matter.     Our focus, therefore, is on

section (a)(2).    That clause outlines the proper framework for

analysis:    a conflict exists if there is a “significant risk”

that a volunteer lawyer’s representation of an indigent client

in a Chapter 7 proceeding “will be materially limited by the

lawyer’s responsibilities” to a creditor the firm represents in

an unrelated matter, or vice versa.     RPC 1.7(a)(2).

    The Court adopted the ABA (American Bar Association) Model

Rules of Professional Conduct in 1984 “to harmonize New Jersey’s

standards with the Model Rules and to provide clear, enforceable

standards of behavior for lawyers.”     State v. Rue, 175 N.J. 1,

14 (2002).   The official ABA comments to the RPCs can assist in

interpreting them.    Introduction to Rules of Professional

Conduct, Kevin H. Michels, New Jersey Attorney Ethics, Appendix

A2 at 1257 (2014).


                                  15
    Comment 8 to the relevant model rule addresses what

constitutes a significant risk of a material limitation.        See

Model Rules of Prof’l Conduct R. 1.7 cmt. 8 (2013).       The comment

explains that the “mere possibility of subsequent harm does not

itself require disclosure and consent.”     Ibid.    Instead, there

must be “a significant risk that a lawyer’s ability to consider,

recommend or carry out an appropriate course of action for the

client will be materially limited as a result of the lawyer’s

other responsibilities or interests.”     Ibid.     To identify such a

risk, “[t]he critical questions are the likelihood that a

difference in interests” will arise, and “if it does, whether it

will materially interfere with the lawyer’s independent

professional judgment in considering alternatives or foreclose

courses of action that reasonably should be pursued on behalf of

the client.”   Ibid.   For example, an attorney “asked to

represent several people seeking to form a joint venture is

likely to be materially limited in the lawyer’s ability to

recommend or advocate all possible positions that each might

take because of the lawyer’s duty of loyalty to the others.”

Ibid.

    Lawyers are called upon to make the above determination

whenever they consider representing a new client with a

connection to another client.    RPC 1.7 requires counsel to

exercise professional judgment about the possibility of a

                                 16
concurrent conflict under the circumstances; the rule does not

require attorneys to notify a client and get consent unless

there is a significant risk that one client’s interests will

materially limit the lawyer’s obligations to the other.

                                 V.

    Advisory committees in other states have considered

comparable programs, and two of them have approved pro bono

Chapter 7 bankruptcy initiatives similar to the clinic’s

efforts.

    In New York City, the Bar Association’s Committee on

Professional and Judicial Ethics considered a nearly identical

pro bono program.    See The Ass’n of the Bar of the City of N.Y.

Comm. on Prof’l and Judicial Ethics, Formal Op. 2005-01, 1

(2005).    It concluded that, under certain conditions, volunteer

lawyers from large commercial law firms could simultaneously

represent both low-income debtors in Chapter 7 bankruptcy cases,

and their creditors in unrelated matters, without giving rise to

a conflict of interest.    Id. at 1, 8.

    The opinion observed that Chapter 7 proceedings are

“[u]nlike the commencement of litigation -- which by definition

is brought directly against one or more parties on behalf of

another party with an adverse interest.”    Id. at 5.   “[A]

typical Chapter 7 case,” by contrast, “is an in rem proceeding

that triggers the automatic operation of a statutory framework

                                 17
for marshaling and distributing assets and discharging debt.”

Ibid.    Absent an objection, debts are discharged “by automatic

operation of statute.”    Ibid.   The committee noted that “there

is no adversity between debtor and creditor” under the relevant

ethical rules “unless and until a creditor objects.”       Id. at 6.

It also considered “adversity of an indirect nature.”       Ibid.

    The committee explained that its analysis might be

different under other circumstances:    if the prospective client

were involved in litigation or a dispute with a client of the

firm; if the firm represented institutional clients in consumer

collection actions; if the debtor “had no non-exempt assets and

only a single creditor” that the firm represented, in which case

the filing of a Chapter 7 petition could appear to be “more

directly aimed at that particular creditor”; if the debtor “had

granted new liens . . . or made nonroutine payments within the

past 90 days”; or if the “client’s personal circumstances made

it advisable for him or her to consider . . . forms of

bankruptcy relief” other than Chapter 7.     Id. at 6-7.   As noted

above, VLJ’s clinic seeks to avoid handling those types of

cases.

    In addition, the committee concluded that if a creditor

objects to the discharge of a debt, or takes some other action

against the debtor, the volunteer lawyer “cannot represent the



                                  18
debtor” without getting “any necessary consent.”     Id. at 8.    The

clinic follows that approach as well.

    Three years later, the Boston Bar Association’s Ethics

Committee approved a similar pro bono bankruptcy initiative.

Bos. Bar Ass’n Ethics Comm., Op. 2008-01, 1 (2008).     The

committee found that, “[a]bsent special circumstances, . . . the

proposed representation does not give rise to a conflict of

interest” under a rule comparable to RPC 1.7.    Id. at 10.

    Like the New York opinion, the Boston committee remarked

that “in ordinary circumstances a Chapter 7 Petition is not

directed ‘against’ any particular creditor.   Thus [it] is not

like filing a lawsuit on behalf of one creditor against another

creditor” or “a debtor against a creditor.”     Id. at 5.   The

committee also compared volunteer lawyers to attorneys appointed

by a bankruptcy trustee “‘who have multiple representations

involving creditors and the debtor’” in unrelated matters.        Id.

at 6-7 (quoting 1 Collier on Bankruptcy ¶ 8.03[9][b] (Alan N.

Resnick & Henry J. Sommer eds., 15th ed. rev.) (citing 11

U.S.C.A. § 327)).

    In addition, the committee credited the initiative for

taking “appropriate steps to identify and avoid any special

circumstances where the lawyer’s ability to act could be

materially limited.”   Id. at 9-10.   Under Boston’s program,

volunteer lawyers are to ask questions to screen new clients for

                                19
possible conflicts.   Ibid.   VLJ’s initiative requires this as

well.

    Other ethics opinions are distinguishable or do not

consider the issue in detail.     The North Carolina Bar, for

example, does not permit attorneys to represent a debtor in a

Chapter 13 bankruptcy case if they represent a lender in other

matters, without the consent of both clients.      See N.C. State

Bar, Formal Ethics Op. 11 (2010).      But Chapter 13 proceedings,

which seek to preserve the debtor’s assets and involve

potentially lengthy repayment plans between debtors and

creditors, present different concerns than Chapter 7 cases do.

    The Oregon State Bar Association has opined that a lawyer

may not simultaneously represent a debtor and creditor in the

same bankruptcy proceeding.   Or. State Bar Ass’n, Formal Op. No.

2005-40 (2005).   It also stated that a lawyer would need consent

from both clients to represent the debtor in bankruptcy court if

the creditor was a client in an unrelated matter.      Ibid.    The

opinion offers no analysis and does not identify the type of

bankruptcy proceeding involved.

    Finally, New York’s Suffolk County Bar Association opined

in 1991 that lawyers could not represent a debtor in an

unspecified type of bankruptcy proceeding if the lawyer also

represented a creditor in an unrelated case.      Suffolk Cnty. Bar

Ass’n, Op. 91-1 (1991).   The brief opinion also contains little

                                  20
analysis and refers, in part, to an outdated standard:    the need

to avoid an appearance of impropriety.   Id. at 1; see also In re

Op. 697, supra, 188 N.J. at 552.

                                VI.

    We consider VLJ’s program in light of RPC 1.7.     We conclude

that the program does not present a conflict of interest under

the rule for a number of reasons.

    To begin with, the nature of Chapter 7 proceedings makes it

less likely that a difference of interests between debtors and

creditors will develop.   Model Rules of Prof’l Conduct R. 1.7,

supra, cmt. 8.   As discussed earlier, a Chapter 7 proceeding is

not a lawsuit between a debtor and creditor.    When a Chapter 7

petition is filed on behalf of a debtor, that triggers a pre-

determined statutory process to liquidate assets and discharge

outstanding debts.   See Cowans, supra, § 5.3 at 62.   The process

does not become adversarial unless someone -- in particular a

creditor -- files a complaint and objects.     See id.; Patronek,

supra, 121 B.R. at 734.   If that happens, a volunteer lawyer in

the VLJ program withdraws from assisting the debtor if the

lawyer’s firm also represents the creditor.

    The safeguards built into VLJ’s initiative also minimize

the risk of a conflict of interest.   The program screens out

directly adverse interests at the outset, such as when a firm

represents a creditor in a matter related to the bankruptcy, or

                                21
the creditor has brought a lawsuit or collection action against

the debtor in an unrelated case.      Volunteer lawyers also pose

questions designed to root out cases that may be of particular

importance to a creditor.   They screen for cases that involve

only one creditor or debts that are sufficiently large that they

would likely have a material impact on a creditor’s bottom line.

       In most cases, those concerns do not surface.    For large

institutional creditors, like banks or cell phone service

providers, the amount of debt in a typical Chapter 7 case is not

significant to the company as a whole.      For smaller creditors as

well, it often costs more than the value of the debt to send a

representative to a section 341 meeting or challenge the

discharge.   See Cowans, supra, § 5.4 at 65.

       Another important part of the screening process is a

thorough effort to ensure that prospective clients are truly

indigent.    VLJ only represents people with an income up to 175%

of the federal poverty level -- about $27,500 for a family of

two.   VLJ also screens out individuals who have assets available

for distribution to creditors.   Volunteer attorneys at the firm

conduct the same review a second time.

       The issue before the Court relates only to “no-asset”

Chapter 7 bankruptcy filing.   We do not address Chapter 7

petitions in which there are assets to distribute or proceedings

under any other chapter of the Bankruptcy Code.      As a practical

                                 22
matter, in the “no-asset” cases the clinic handles, there are no

non-exempt assets for a debtor to try to shield or a creditor to

receive.

    There are also two forms of notice to clients.      The firm

tells debtors at the outset that it will withdraw if a conflict

arises, for example, in the unlikely event a creditor it

represents objects to the petition.      Creditors also receive

notice that the law firm represents a debtor.     The Bankruptcy

Court sends a notice, which identifies the debtor’s lawyer, to

all creditors listed on the Chapter 7 petition.      Fed. R. Bankr.

P. 2002(a)(1).   We do not suggest that this type of notice, by

itself, constitutes a waiver in this or other contexts.

    In addition, we note that the Bankruptcy Code, in an

analogous context, allows court-appointed trustees to hire

“disinterested” attorneys to help carry out the trustee’s

duties.    11 U.S.C.A. § 327(a).   The Code expressly states that

attorneys are not disqualified “solely because of [their]

employment by or representation of a creditor,” unless another

creditor or the trustee objects and “there is an actual conflict

of interest.”    11 U.S.C.A. § 327(c).    As one authoritative

treatise has noted, the “Bankruptcy Code contemplates that

attorneys will, in unrelated matters, have multiple

representations involving creditors and the debtor.”      Collier,

supra, ¶ 8.03[9][b] (discussing 11 U.S.C.A. § 327(c)).

                                   23
    To be sure, some creditors who are clients of the firm may

be less than pleased by a lawyer’s volunteer activities on

behalf of a debtor.   But that is not the standard to determine

whether a conflict of interest exists.     See RPC 1.7(a)(2).   The

“mere possibility” of harm, let alone displeasure, does not

require consent.   Model Rules of Prof’l Conduct R. 1.7, supra,

cmt. 8.   Under the facts presented in this matter, we do not

find a “significant risk” that a volunteer lawyer’s

representation of a Chapter 7 debtor in a no-asset case will be

“materially limited” by the firm’s responsibilities to creditors

in unrelated matters, or that representation of those creditors

will be “materially limited” by the firm’s obligations to the

debtor.   See RPC 1.7(a)(2).   To the extent the ACPE articulated

a different standard, we do not follow it.

    VLJ reports that in the four-year history of the clinic, no

creditor has objected to the discharge of a client’s debt in the

one hundred cases handled so far.     Once again, if a creditor

were to object to the discharge, VLJ would arrange for another

volunteer attorney outside the firm to handle the case.     Just

the same, VLJ advises that no creditor has yet appeared at a

section 341 meeting to question the debtor.    If that happened,

it could strain the lawyer’s duty of loyalty to either client,

even if the creditor chose not to object.     As a result, we find



                                 24
that another attorney from outside the firm should be

substituted to assist the debtor under those circumstances.

                                VII.

    This Court “enacted the RPCs with the public interest as a

paramount consideration.”    Borteck v. Riker, Danzig, Scherer,

Hyland & Perretti, LLP, 179 N.J. 246, 259 (2004).     The strong

policy in favor of pro bono legal services therefore informs our

decision as well.

    Volunteering one’s time and expertise to help people who

need legal services that they cannot afford is in keeping with

the finest traditions of the practice of law.     See In re

Guardianship of G.S., III, 137 N.J. 168, 175 (1994); Madden v.

Delran, 126 N.J. 591, 595 (1992).      That noble tradition spans

centuries.

    During the Reconstruction Era, the Freedmen’s Bureau

arranged for private lawyers from the District of Columbia and

some southern states to assist poor African-Americans in

criminal and civil cases.    Jeremy Miller with Vallori Hard, Pro

Bono: Historical Analysis and a Case Study, 21 W. St. U. L. Rev.

483, 488 (1994).    In 1876, the first legal aid society in

America, later known as the New York Legal Aid Society, began to

assist poor German immigrants in landlord-tenant disputes and

other civil matters.    See Marlene Coir, Pro Bono and Access to

Justice in America: A Few Historical Markers, 90 Mich. B.J. 54,

                                 25
54 (2011).   During the civil rights movement more than seventy-

five years later, local bar associations worked with legal aid

groups to help offer services.    See id. at 55.    And in recent

years, large, private law firms “have become crucial drivers” of

pro bono efforts, as this appeal shows.    Scott Cummings &

Rebecca Sandefur, Beyond the Numbers: What We Know--and Should

Know--About American Pro Bono, 7 Harv. L. & Pol’y Rev. 83, 84

(2013) (noting that pro bono hours at two hundred largest law

firms have increased nearly eighty percent from 1998 to 2005).

    New Jersey’s Rules of Professional Conduct specifically

address pro bono service.   RPC 6.1 declares that

         [e]very    lawyer    has    a    professional
         responsibility to render public interest
         legal service.   A lawyer may discharge this
         responsibility   by  providing   professional
         services at no fee or a reduced fee to
         persons of limited means or to public
         service     or    charitable     groups    or
         organizations, by service in activities for
         improving the law, the legal system or the
         legal profession, and by financial support
         for   organizations   that    provide   legal
         services to persons of limited means.

This obligation has even greater meaning today.     Low-income

residents in New Jersey who face civil legal challenges are

often unable to get legal help.    Legal Services of New Jersey,

New Jersey’s Civil Legal Assistance Gap 4 (2012), available at

www.lsnj.org/PDFs/NJ_Civil_Legal%20Assistance_Gap_2012.pdf

(reporting that fewer than one in six low-income residents can


                                  26
secure needed legal assistance for civil problems).     In mortgage

foreclosure cases, evictions, immigration matters, and other

areas, too many people have to respond to important legal

challenges without the help of a lawyer.

    The same is true for the growing number of bankruptcies in

the wake of the recession.    More than 1.3 million bankruptcies

were filed nationwide during the one-year period ending March

31, 2012.   United States Courts, President Signs Temporary

Bankruptcy Judgeships Extension Act (May 31, 2012),

http://news.uscourts.gov/president-signs-temporary-bankruptcy-

judgeships-extension-act.     That amounted to more than 400,000

additional filings compared to the same period in 2008.     Id.

The growth in self-represented filings has been even greater.

During the five-year period from 2006 to 2011, pro se Chapter 7

filings increased 208% nationally.     United States Courts, By the

Numbers--Pro Se Filers in the Bankruptcy Courts (Oct. 2011),

www.uscourts.gov/news/TheThirdBranch/11-10-01/By_the_Numbers--

Pro_Se_Filers_in_the_Bankruptcy_Courts.aspx.

    Chapter 7 of the Bankruptcy Code is a technical area not

designed for the layperson.    Not surprisingly, self-represented

litigants are less successful in getting their debts discharged

under Chapter 7 than debtors who are represented by lawyers.       A

survey of Chapter 7 filings in 2007 revealed that “17.6 percent

of unrepresented debtors had their cases dismissed or converted”

                                  27
but “only 1.9 percent of debtors with lawyers met this fate.”

Angela Littwin, The Affordability Paradox: How Consumer

Bankruptcy’s Greatest Weakness May Account for its Surprising

Success, 52 Wm. & Mary L. Rev. 1933, 1971-72 (2011).

    Programs like VLJ’s clinic help address this crisis, as

volunteer lawyers try to pave the way for debtors to recover

financially.   We commend the lawyers in this and other pro bono

initiatives who offer their skill and help at a time of need.

By doing so, they help bridge the justice gap that leaves many

low-income residents in New Jersey without legal services.

                               VIII.

    For the reasons stated above, we reverse the ACPE’s final

action.   We conclude that volunteer attorneys can continue to

represent low-income debtors in no-asset Chapter 7 bankruptcy

matters consistent with the principles outlined above.

     JUSTICES LaVECCHIA, ALBIN, PATTERSON, and FERNANDEZ-VINA
and JUDGES RODRÍGUEZ and CUFF (both temporarily assigned) join
in CHIEF JUSTICE RABNER’s opinion.




                                28
             SUPREME COURT OF NEW JERSEY

NO.   A-22                               SEPTEMBER TERM 2013

DISPOSITION On petition for review of a decision of the
Supreme Court Advisory Committee on Professional Ethics




IN THE MATTER OF
OPINION NO. 17-2012
OF THE ADVISORY COMMITTEE
ON PROFESSIONAL ETHICS




DECIDED           July 2, 2014
             Chief Justice Rabner     PRESIDING
OPINION BY       Chief Justice Rabner
CONCURRING OPINION BY
DISSENTING OPINION BY


 CHECKLIST                                REVERSE
 CHIEF JUSTICE RABNER                        X
 JUSTICE LaVECCHIA                           X
 JUSTICE ALBIN                               X
 JUSTICE PATTERSON                           X
 JUSTICE FERNANDEZ-VINA                      X
 JUDGE RODRIGUEZ (t/a)                       X
 JUDGE CUFF (t/a)                            X
 TOTALS                                      7




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