The law should not protect education lenders as they pressure students to accrue exorbitant amounts of non-dischargeable debt, protect law schools as they over-state the return on investment in legal education, and then fail to protect consumers who fall prey to these practices. It is fundamentally unfair; and what is the Law, after all, other than institutionalized fairness.
That said, however, a person cannot fall prey to these practices without taking some level of personal responsibility.
The question raised by a recent Third Department Decision is whether an undesirable financial situation, caused by unwise student loans, is a basis for denying someone admission to the bar.
The Third Department answered yes, and denied admission to the bar for an applicant who had $430,000 in unpaid student loans, dating back to the 1980s, explaining that the applicant had not made any substantial payments and had not been "flexible in negotiating with" his lenders. (Hat-Tip to Sui Generis).
The ABA Journal and Legal Profession Blog coverage of the decision generated a flood of comments, including comments from the applicant himself and others familiar with the situation. These comments explain that the loans date back to the 1980s because the applicant had taken an extended medical deferrment after suffering a leg amputation; the loans appear to have gone into default shortly after graduation, while the applicant was studying for the bar exam; and the loans include more than $200,000 in interest and fees. The applicant also explains that he was raised in a homeless shelter, appears to have had some serious medical problems, and has no significant family support. He argues that it was not him, but his loan provider, Sallie Mae, who acted in bad faith; and complains that the delay in deciding whether to admit him to the bar has left him jobless and ineligable for the loan repayment assistance program he had been counting on.
The legal profession is frequently criticized as a mechanism for reproducing and solidifying the class heirarchy in our society, and a discretionary standard for "character" is an invitation for abuse. (See e.g., Duncan Kennedy's Essays on Legal Education). Whether this decision is an example of such abuse, however, is unclear.
In New York, admission to the practice of law is a two-part process. The first part is "education and ability," which is determined by the bar exam and the education requirements set by the Court of Appeals. The second part is "character and fitness." The character and fitness prong is more nebulous, and is a judgment at the discretion of the Appellate Divisions. See Matter of Anonymous, 78 N.Y.2d 277, 573 N.Y.S.2d 60 (1991).
Further review of the Appellate Division's decision on character and fitness is extremely limited. The "Appellate Division is the fact-finder on issues of character and fitness and its discretion is inclusive; [the Court of Appeal's] review is limited to ensuring that the proceedings have been conducted in accordance with statutory and regulatory requirements, that no right of the petitioner has been violated, and that there is evidence to sustain the decision of the Appellate Division." Anonymous, 79 N.Y.2d 782, 579 N.Y.S.2d 648 (1991).
In this case, the twenty year gap raises questions, but "there is no Court of Appeals rule regarding delay [and] that issue is not for “general fitness” review." Anonymous, 78 N.Y.2d 227, 573 N.Y.S.2d 60 (1991). Thus, the issue in this case would be whether the an extremely large, recently-defaulted, student loan, with a possible unresolved dispute as to fees, is an appropriate issue for character and fitness review.
"Character and fitness," or something similar, is examined in every state, and is, on its face, Constitutional so long as the determination is based upon "dishonorable conduct relevant to the legal profession." Law Students Civil Rights Research Council v. Wadmond, 401 U.S. 154; 91 S.Ct. 720(1971). "Although a court may neither act arbitrarily with respect to those licensed by it nor otherwise violate their constitutional rights,... state courts have traditionally been allowed wide discretion in the establishment and application of standards of professional conduct and moral character to be observed by their court officers." Erdman v. Stevens, 458 F.2d 1205 (2d Cir. 1972).
The Court of Appeals considers financial responsibility relevant to the legal profession and an appropriate matter for consideration by the Appellate Division in deciding upon character and fitness, reasoning that applicants “lacking in the
character necessary to discipline [themsleves] to control [their] standard of living and the amount of [their] indebtedness," demonstrate "a lack of financial
responsibility necessary for an attorney." In Re Anonymous, 74 N.Y.2d 938, 550 N.Y.S.2d 270 (1989)(admission denied where applicant sought to discharge debts in bankruptcy shortly before seeking admission).
Thus, overturning the decision is unlikely. The applicant's best chance for admission is to get his finances in order (whether through negotiation with his lender, or structuring a payment plan for non-dischargeable debt in a Chapter 13 Bankruptcy) and re-apply. With respect to the bankruptcy option, in April, a Houston solo-practitioner was disbarred for failing to pay $67,000 in debt after repeated warnings. (Law.com; hat-tip, Alan Childress, Legal Professions Blog). In its Decision, the Texas Court of Appeals suggests that bankruptcy would have been a viable option, and it was the lack of attention and failing to follow-up on his own representations to the court, rather than the debt itself, that demonstrated a "lack of trustworthiness." See also Long Island Bankruptcy Blog, Lawyers File For Bankruptcy Too (offering the opinion that filing bankruptcy is not, by itself, unethical for lawyers) and Discharging Student Debts.
That said, there has to be a line, and it should not be arbitrary. This is an extreme case, but it is an extreme example of a problem that faces many recent graduates. Nationwide, the average student loan debt for law graduates is more than $75,000, and the median salary for the first several years after law school is only around $60,000. (Law.com; Payscale.com). Also, salaries for recent law graduates do not operate on a bell curve: the top people, at top schools, get top jobs; most other people are near the bottom, and there is no middle ground. (ELS Blog, The Cravath System; Not Every Law Graduate Makes 160K). It is only within the last several years, however, that this problem has been widely spoken about. (Jobs At BigLaw Limited -- Why Is This News; False Advertising in Legal Education).
This guy's "character and fitness" mistake was that he couldn't afford to go to law school; or he should have gone part-time to a public school and worked a full time job to off-set the expenses. How many recent law graduates, however, are now looking at their student loans and, in retrospect, saying the same thing? How many are falling behind? Are lenders going to start making disciplinary complaints as part of their collection efforts? If student loans continue to be a factor in determining whether someone is fit to be a member of the bar, there needs to be a solid articulable standard that prevents abuse, as well as greater oversight of the student loan industry.
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Update: Mr. Anonymous has identified himself as Robert Bowman, and given an interview to the New York Times.
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