Sunday, March 13, 2011

Individual debt purchasers must be represented by counsel says Bankruptcy Judge

Patrick Bulmer purchased a pre-petition debt and obtained a default judgment in state court.  He now wishes to have the judgment fulfilled in the bankruptcy court.  The debtor moved to dismiss stating that Mr. Bulmer could not pursue the claim because he was not an attorney.  Bankruptcy Judge Alan Jaroslovsky agreed:
The court finds that, notwithstanding the form of the agreement, Bulmer is a collection agent and the agreement is an assignment for collection. He is therefore barred from prosecuting this action without a lawyer by 28 U.S.C. § 1654. That statute provides: “In all courts of the United States the parties may plead and conduct their own cases personally or by counsel as, by the rules of such courts, respectively, are permitted to manage and conduct causes therein.” The key phrase is “their own cases”; a non-lawyer may not appear nominally on his own behalf if the outcome might benefit third parties. C.E. Pope Equity Trust v. U.S., (9th Cir. 1987).
Here the affected third party is the assignor of the debt who stands to gain a contingent interest from Mr. Bulmer's proceeds.  After this ruling, the Bankruptcy Appellate Panel published Judge Edward D. Jellen's decision In Re Brooms (N.D. Cal. Bankr. 2010) which dealt with a similar issue.  Mr. Bulmer thought this re-tilted the scales in his favor.  Judge Jaroslovsky disagreed.  From Brooms:
Under these rules, in federal courts an individual who is not an attorney may appear in propria persona in his or her own behalf. 28 U.S.C. § 1654. But an individual who is not an attorney may not appear to represent others. 28 U.S.C. § 1654; [C.E. Pope Equity Trust].

And significantly for present purposes, litigants may not circumvent the foregoing rules through a purported assignment of claims.
Judge Jaroslovsky explained there was no change in the law.
In Brooms, the bankruptcy court had dismissed an adversary proceeding brought by an assignee of a judgment because the assignee was not a lawyer and had refused to prove that the assignor had no residual interest in the judgment. The Appellate Panel affirmed, holding that where the assignor retained any sort of interest in the judgment or its proceeds the assignee can pursue the judgment in federal court only by an attorney. That is the same conclusion the court has reached in this case.
Judge Jarosolvsky affirmed his previous dismissal of the claim.

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