Bankruptcy Court Denies Disqualification of Creditor’s Counsel/Co-Defendant in Adversary Proceeding for Violation of the Automatic Stay

Bankruptcy Court Denies Disqualification of Creditor’s Counsel/Co-Defendant in Adversary Proceeding for Violation of the Automatic Stay

The debtor filed a chapter 13 bankruptcy case the day before the foreclosure sale of his residence. The debtor notified creditor’s counsel of the filing but counsel proceeded with the foreclosure sale regardless. Creditors’ counsel believed the residence was not property of the estate based on the local land records.

The debtor filed an adversary proceeding against counsel, the condominium association, the company managing the condominium association and the auctioneer, to have the sale declared void and for damages for violation of the automatic stay. Counsel represents himself and the condominium association.

The condominium association and counsel filed a joint motion to dismiss the adversary proceeding. The debtor then filed a motion to disqualify counsel from representing the condominium association arguing that counsel would violate Rule 3.7(a) of the D.C. Rules of Professional conduct which provide

A lawyer shall not act as an advocate at a trial in which the lawyer is likely to be a necessary witness except:

(1) The testimony relates to an uncontested issue,

(2) The testimony relates to the nature and value of legal services, or

(3) Disqualification of the lawyer would work substantial hardship on the client.

Counsel argued that the defendants have conceded all the facts alleged by the debtor and therefore there would be no reason for counsel to testify. Further counsel argued that his disqualification would result in a substantial hardship to his client.

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