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Greenwood Trust Co. v. Hurley (In re Hurley)
Citations: 215 B.R. 391; 1997 Bankr. LEXIS 2061Docket: BAP No. 97-6058 SI
Court: United States Bankruptcy Appellate Panel for the Eighth Circuit; December 19, 1997; Us Bankruptcy; United States Bankruptcy Court
Greenwood Trust Company and Discover Card Services, Inc. appealed a bankruptcy court's ruling that Discover Card's practice of sending reaffirmation proposal copies directly to debtors represented by counsel violated Iowa’s Consumer Credit Code. The appellate court affirmed the bankruptcy court's decision regarding the violation but reversed the finding that Discover Card's actions were unethical and in violation of the ABA Code of Professional Responsibility. The court reviewed the issues de novo and referenced its prior ruling in Greenwood Trust Co. v. Smith, which deemed Discover Card's reaffirmation practice as a prohibited communication under Iowa law. Discover Card's arguments that such communications do not constitute debt collection and that state laws are preempted by the Bankruptcy Code were previously rejected and reaffirmed. Additionally, the court found that Iowa’s ethical rules, which restrict attorney contact with represented parties, did not apply to Discover Card, as there was no evidence that the company acted through an attorney in sending the communication. The ethical rules aim to protect clients from potential exploitation by attorneys, a concern not relevant to Discover Card's practices. An attorney's involvement is essential for the application of the Code of Professional Responsibility. Discover Card communicated directly with the debtor without an attorney's participation, leading to the conclusion that the bankruptcy court incorrectly applied the Code to Discover Card’s actions. Consequently, the court's finding that Discover Card violated DR 7-104(A)(1) is reversed. The bankruptcy court had also claimed violations of the ABA Model Code and Rules of Professional Conduct, including DR 7-104(A)(1), which prohibits lawyers from communicating with represented parties without consent. Since Discover Card did not act through an attorney, the attorney, rather than Discover Card, would be responsible for any violations. Additionally, while Rule 4.2 of the ABA Rules governs communications with represented persons, it is not applicable to non-lawyer conduct and was not adopted in Iowa. Thus, the overall decision of the bankruptcy court is partially affirmed and partially reversed by Chief Judge Russell J. Hill.