Thursday, April 24, 2008

Our Little Secret

The Virginia Supreme Court held last week that a lawyer has no duty to tell opposing counsel his client is about to file for bankruptcy. In McNally v. Rey, Va. No. 070522 (April 18, 2008), the court reversed an award of attorneys fees against a lawyer who filed a bankruptcy petition for a client the night before the trial in a civil case against him was to begin. Sanctions for violation of Virginia's frivolous litigation statute were unwarranted even though the lawyer filed witness and exhibit lists in the civil case, while knowing his client was contemplating a bankruptcy filing. The court held: "To hold otherwise would have a chilling effect upon the rights of litigants and their attorneys when such litigants seek to avail themselves of the statutory rights set forth in the federal Bankruptcy Code."

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