Milavetz, Gallop & Milavetz, P. A. v. United States

MILAVETZ, MILAVETZ, GALLOP & P. A., et al. v.

UNITED STATES Argued 1, 2009 08-1119. No. December March 2010* Decided Milavetz, 08-1225, Gallop & Mila *Together with No. United States A, al., vetz, et to the court. P. also certiorari same Sotomayor, J., opinion Court, in which Roberts, delivered the Auto, JJ., and Stevens, Kennedy, Ginsberg, Breyer, J., joined, C. Scaua, J., joined 3, except and in which J., which for footnote Thomas, joined except J., post, p. Thomas, J., for Part Scaua, III-C. p. concurring filed post, opinions concurring in the judgment. Eric Brunstad,

G. Jr., the cause petitioners argued 08-1119 and 08-1225. him No. No. With on respondents Michael J. Udell, Collin O’Connor Newman, were the briefs pro se. Richards, Milavetz, and Alan Joshua S. JayM.

William cause for the United States in argued Solicitor General were both cases. With him the brief Deputy Kagan, Attorney West, Assistant General Solicitor Elliott, D. Stern, B. Ramona Stewart, Mark General and Sutko† P. Matthew Sotomayor opinion delivered Court.

Justice Prevention enacted Abuse Bankruptcy and Congress Act) (BAPCPA or of to cor- Protection Act Consumer were filed for of amici reversal No. 08-1119 urging †Briefs curiae Lamm, Lisa Hill Carolyn Fenning, B. by Bar Association American Goldblatt; League by of America Commercial Law Craig and for the and Schorling. H. William National in both cases for the Associa- of curiae filed

Briefs amici were Massey, al. Jonathan S. Bankruptcy Attorneys et tion Consumer of et al. by for Public Good Nepveu; and Feigenbaum, and Julie Barry S. Seth E. Mermin. system. perceived bankruptcy Among

rect abuses of the implemented are a the reform measures the Act number provisions regulate agen- conduct of “debt relief professionals provide bankruptcy cies]” e., who assist- —i. (12A). §§101(3), consumer ance to S. C. debtors. See U. question present These threshold consolidated cases attorneys agencies they pro- relief when whether are debt agree qualifying Because we with vide services. Court they Appeals that we must also consider whether the are, agencies’ provisions governing advice cli- debt relief Act’s 526(a)(4), requiring to make certain them dis- ents, 528(a) (b)(2), §§ in their violate advertisements, closures attorneys. Concluding rights the First Amendment expansively, Appeals too the Court construed judgment provision is we reverse its that the unconstitu- Appeals, tionally uphold we Like the Court of overbroad. §528’s requirements applied in these disclosure consoli- dated cases.

I practice, improve order to law Con provisions gress through enacted the BAPCPA a number bankruptcy professionals. directed at the conduct of Some apply the broad class of these measures ” category agencies]. professionals That termed “debt provides “any person exceptions, who includes, limited any bankruptcy person in return for assisted assistance payment... bankruptcy petition preparer.” or is a ... § who , 101(12A).1 goods “Bankruptcy refers or assistance” to ser- agency” any definition relief “of from the of “debt Congress excluded person provides [bankruptcy] of a ficer, director, agent or who employee, assistance”; exempt is from taxation any “nonprofit organization 1986”; 501(c)(3) Code of “a Internal creditor under section Revenue any “to helping person restructure person” who is [an] assisted institution”; creditor”; depository author, or “an “a debt owed ... to the copyright protection to subject of works publisher, distributor, or seller 101(12A)(A)~(E). §§ capacity.” acting in such under title when vices to an assisted “provided with the or person express implied purpose information, providing advice, counsel, document or preparation, or filing, attendance a credi- tors’ or in a or meeting case appearing behalf proceeding of another or providing representation to legal respect a case or §101(4A). proceeding” An “as- bankruptcy. sisted person” someone with limited nonexempt property whose debts consist 101(3). § of consumer primarily debts. The BAPCPA relief debt subjects number of agencies restrictions as set forth in requirements, §§526,527, As 526(a) § 528. relevant here, establishes several rules of conduct for professional as debt persons qualifying relief them, § agencies. states that Among a debt relief shall not an agency “advise assisted ... person incur more debt in contemplation such a case person filing under this title or to or pay attorney bankruptcy petition preparer fee or for services charge performed preparing or a debtor in a case representing under this title.”

Section 528 requires qualifying professionals include certain disclosures their (a) advertisements. Subsection that debt provides relief must agencies “clearly and con- disclose spicuously any advertisement as- bankruptcy sistance services or the benefits of bankruptcy directed to .. . that services benefits general public are with relief 528(a)(3). § under this title.” respect bankruptcy It also them to include “or requires a sub- following, similar statement”: “We are a debt relief stantially agency. We file relief under help people the Bank- (b) 528(a)(4). ruptcy Code.” Subsection essen- requires the same disclosures in tially advertisements “indicating assistance with agency provides respect credit defaults, mortgage foreclosures, eviction proceedings, debt, debt collection or inability excessive pressure, pay 528(b)(2). debt.” Debt relief consumer ad- agencies such services must disclose “that the assistance vertising and must relief,” 528(b)(2)(A), involve may as themselves as relief identify required by “debt agenc[ies]” 528(a)(4), 528(b)(2)(B). II The firm Milavetz, this law Gal- plaintiffs litigation —the P. Milavetz, Milavetz; & Robert J. lop A.; firm’s president, firm, Nevin; Barbara Nilva and attorney Milavetz) (collectively two firm’s clients pre- —filed enforcement suit in Court Federal District declara- seeking relief with to the Act’s tory debt-relief-agency provi- respect to hold that it is sions. Milavetz asked the court not bound these and thus advise clients provisions may freely incur additional debt and as a identify need not itself relief in its advertisements. agency are “debt

Milavetz first that not relief argued attorneys in the as that term used BAPCPA. agenc[ies]” 526(a)(4) alternative, §§ that and sought judgment (b)(2) as to attor are applied unconstitutional The with Milavetz neys. District Court agreed not term “debt include attorneys, relief does agency” App. A-15, but after 08-1119, only to Pet. find p. Cert. No. §§ expressly only 526 and ing provisions applicable 528— to debt unconstitutional applied relief agencies —are this class of professionals. affirmed in Eighth

The for the Circuit Appeals Court of F. 3d 785 reversed part. Relying court unanimously rejected on the language, Act’s plain are “debt attorneys the District Court’s conclusion the Act. Court meaning within the agenc[ies]” the District Court concern ways also Appeals parted the dis of 528. constitutionality Concluding consumer deception closures prevent are intended interest, the court upheld “reasonably related” requirements attorneys. §528’s disclosure application Zauderer Id., Disciplinary at 796-797 (citing Office of Ohio, 626, 651 (1985)). 471 U. S. Court Counsel Supreme agreed majority panel, Eighth however, Circuit A 526(a)(4) § District that is invalid. Deter- Court the 526(a)(4) § prohibits “broadly a debt mining that relief person agency advising ... to incur from an assisted person is contemplating debt when the assisted additional prudent bankruptcy,” pre- that even when advice constitutes bankruptcy planning bankruptcy not intended to abuse the 526(a)(4) § majority 3d, 793, F. the held laws, could scrutiny. or withstand either strict intermediate In dis- 526(a)(4) Judge argued Colloton should be sent, read narrowly prevent only bankruptcy sys- advice to abuse the noting that this construction would avoid tem, most constitu- id., (opinion concurring at 799 tional difficulties. See dissenting part). light among Appeals,2 of a conflict the Courts we §526(a)(4)’s granted question certiorari resolve scope. agreed 556 U. S. 1281 We also to consider question attorneys provide threshold whether who persons assistance to assisted are “debt relief §101(12A) agencies]” meaning within the and the re- §528’s question requirements lated whether disclosure constitutional.

III A agency” consider the term We first whether “debt relief attorneys. not, includes If it does we not reach need §§526 questions presented, govern only other and 528 agencies, challenges conduct debt relief validity provisions application of those based their attorneys. contends “debt Government (CA8 2008) (case below), with Hersh 541 F. 785, 3d Compare Mukasey, (CA5 2008) (hold ex rel. United States 553 F. 3d narrowly only prohibit can be construed to ing that advice to that, bankruptcy system construed, manipulate so abuse or it is constitutional). urges attorneys, while Milavetz plainly includes

agency” has the bet- Government We conclude not. it does view. ter agency “any person who already a debt relief noted,

As person” any bankruptcy to an assisted provides assistance §101(12A). By payment. “bank- definition, in return commonly per- services ruptcy several includes assistance” by attorneys. forms of Indeed, some formed legal representa- of] including “provision assistance, § 101(4A),may proceeding,” respect be tion with to a case 110(e)(2) (prohibiting by attorneys. provided only See advice). providing legal bankruptcy petition preparers from enumerating specific exceptions to defini- the Moreover, gave agency, Congress no indication that of debt relief tion 101(12A)(A)-(E). §§ attorneys. See it intended exclude clearly statutory the text as the contends, Government Thus, they agencies attorneys are debt relief when that indicates persons.3 provide qualifying services to assisted understanding advocating term, of that a narrower Mi- 101(12A) § heavily does not ex- on the fact lavetz relies attorneys. pressly contrast, omission stands in That include explicit “bankruptcy provision’s argues, inclusion of it to the professionals petition preparer[s]” category of that ex- —a 110(a)(1). attorneys But Mila- staff, and their cludes 3 unnecessary in history light of the legislative Although reliance on support that provides note the record language, we unambiguous statute’s Report of Statements in a the House Com reading. for the Government’s purpose indicate Judiciary regarding the Act’s concern with on mittee the bankruptcy well by attorneys as as other undertaken practices abusive (herein (2005) 109-31, p. 5 pt. See, g., Rep. H. R. No. e. professionals. record elsewhere legislative And documents Rep.). H. R. after on H. R. See, g., Hearings 3150 before the attorneys. by e. misconduct Law of the House and Administrative on Commercial Subcommittee (1998) Sess., Ill, pt. Cong., p. 105th 2d Judiciary, Committee (While (hereinafter Hearings preceded the 1998 Hearings). years, they form record cited by BAPCPA’s enactment several 7.) Rep., H. See R. Report. the 2005 House credibly, only profes- could it contend, nor vetz does expressly in the definition included sionals relief professional reading, agencies. no other than a On qualify bankruptcy petition preparer implausible would —an reading given agency” that the statute defines “debt relief “any person provides who assistance person peti- who is a to an assisted ... or §101(12A) added). (emphasis provi- preparer.” tion regarding attorneys thus avails sion’s silence Milavetz little. (1995) (holding Jenkins, Heintz U. S. Cf. Fair Debt

“debt collector” as used Collection Practices 1692a(6), attorneys 15 U. Act, S. C. includes notwithstand- express ing lawyers lack of an reference definition’s litigation). excluding arguments attorneys other Milavetz’s simi- larly persuade disregard plain fail to us to the statute’s lan- 526(d)(2)’s guage. Milavetz contends that 11 S.U. C. in- §§ and 528 should not 526, 527, struction “be deemed to authority to limit or curtail” “determine and States’ enforce practice qualifications against of law” counsels read- attorneys, agency” include “debt as the surest way protect regulating legal profes- role in States’ professional is to make the sion BAPCPA’s conduct rules 526(d)(2) § lawyers. inapplicable supports to We find opposite Congress conclusion, as would have had no provision debt-relief-agency provi- if the to enact that reason attorneys. apply did not to Milavetz’s broader sions claim §101(12A) reading attorneys impermissibly to include regulation an area of traditional state trenches also bankruptcy Congress long courts merit. and have lacks aspects attorney conduct in this area of overseen substan- g., Rubin Conrad, tial federal concern. e. & Lesser See, v. (1933) (finding 289 U. 477-479 broad authori- Pender, S. 96(d) (1934 ed.) 1978) § (repealed in former zation courts prepetition a examine the reasonableness of debtor’s at- to fees). torney’s 101(12A)’s any § exception for argues next

Milavetz person pro- employee, agent who director, “officer, revealing for its failure assistance is vides” 101(12A)(A). § “partners.” light of that omis- In include agencies treating attorneys debt relief contends, as sion, it obligate comply 527, and §§526, will entire law with firms partner, single 528 based on the while conduct typically employees agencies agents of debt relief require- organized partnerships from those are shielded unique partnership is not that the structure ments. Given why firms, unclear the exclusion however, to law it only Congress’ respect revealing be intent would “per- attorneys. partnerships are themselves event, §101(41), qualify son[s]” and can BAPCPA, under the they agencies]” the criteria set as “debt relief when meet §101(12A). employees partnership’s Moreover, forth 101(12A) § way agents exempted the same are from employees agents organizations. To the of other as the subject debt-relief-agency partners may to the extent that be provisions by is consistent with the that result association, partnership typically joint responsibilities flowfrom Strang 555, 561 Bradner, S. structure, cf. U. significance Accordingly, Milavetz we decline to attribute 101(12A)(A)’s partners among § suggests to include failure exempted actors.4 abandoned, amici contend that Reviving argument an 101(12A) reading it re 527(b) because undermines the Government’s right person to hire an assisted of his to inform quires agency a debt relief attorneys provide require attorney, would be nonsensical and it Bankruptcy of Consumer Association for National such notice. See Brief Curiae 34. et al. as Amici fails on its own argument This Attorneys contends, §101(12A) attorneys, as Milavetz excluded if terms. Even its amici complain, as that 527(b) the result which produce would still persons that assisted agency to inform requires a debt provision also “ pre bankruptcy petition from a localities they get help in some ‘can preparers petition question that no parer,”’ and there is It is in requirement. subject to that agencies and thus relief debt All else failing, urges canon of constitu- tional avoidance us to read “debt requires relief agency” in order to forestall serious attorneys doubts as to exclude §§526 validity 528. avoidance canon, how- ever, “is tool for between choosing competing in- plausible text.” Clark v. Martinez, of a terpretations statutory (2005). tool, U. S. In we will applying consider “ those constructions of a only statute are ‘fairly possi- ” Security ble.’ United States Industrial Bank, U. S. For the reasons already discussed, the text §101(12A) context of foreclose statutory reading “debt relief that excludes agency” attorneys. Accordingly, hold that we who attorneys provide assistance bankruptcy to assisted relief debt persons within agencies mean- BAPCPA.

B Having concluded that attorneys are debt relief agencies when we they services, next provide qualifying address the 526(a)(4). validity scope Characterizing statute broad, as a content-based restriction on com- attorney-client that is not munications tailored constrain adequately only the Government has a substantial interest speech restrict- Circuit found the rule ing, Eighth over- substantially broad. 541 F. and n. 10. For the 3d, 793-794, reasons we follow, that conclusion. reject relief from

Section a debt “ad- prohibits agency an assisted either “to incur more vis[ing] person” debt of” “or to an attor- contemplation filing pay fee or for serv- ney bankruptcy petition preparer charge ices” the first of performed preparation filing. Only correctness these issue. debating prohibitions decision, first parties of the Court Appeals’ dispute agencies attorneys or require event absurd —whether prospective petition preparers op- inform clients their —to obtaining bankruptcy-assistance services. tions for scope. Appeals provision’s of concluded that the The Court 526(a)(4)broadly agency “§ prohibits from advis- a debt person any ing an assisted incur additional debt when ... bankruptcy.” person contemplating Id., at the assisted is reading, attorney prohibited Under that from 793. providing if the all manner of advice—even advice “beneficial help filing person bankruptcy for the assisted avoid could altogether.” Ibid.

Agreeing Appeals, with the Court of Milavetz contends 526(a)(4) agency prohibits advising from a debt relief any considering client to incur new while whether to provision bankruptcy. Construing broadly more the file 526(a)(4) only still, Milavetz contends that forbids af- any advantages, firmative but of the advice also discussion incurring disadvantages, legality Like of more debt. the panel majority’s, reading primarily Milavetz’s rests on its ordinary meaning phrase contempla- the “in view of given bankruptcy encompasses tion of” advice to a might with the file bank- debtor awareness he soon ruptcy, even if the advice to obviate the need seeks file. §if were construed Milavetz also maintains that urged by narrowly, more dissent as Government vague inevitably pro- chill some below, it be so as to would speech. tected narrower con

The continues advocate a Government reading urging that Milavetz’s is un statute, struction of the misplaced. vagueness tenable concerns and that 526(a)(4)’s restriction advice Government contends contemplation bankruptcy “in of” is most to incur more debt only naturally to undertake actions to to forbid advice read Focusing provi system. on the first abuse indicating points to sources text, sion’s the Government long contemplation phrase has been, of” “in conduct. For with abusive be, associated and continues to (8th 2004) (herein Dictionary ed. instance, Law Black’s Black’s) bankruptcy” “[t]he “contemplation of after defines thought declaring bankruptcy inability because operations, coupled current financial often continue ac designed to thwart the tion distribution assets in bank ruptcy proceeding.” phrase of the Use Members of Con g., gress e. S. coupling. illustrates that Rep. See, traditional (1983) p. practice (discussing “'loading No. 98-65, up’ contemplation bankruptcy”); [on debt] Report Bankruptcy Commission on Laws the United States, (“[T]he (1973) pt. p. H. R. Doe. No. 93-137, I, 11 most serious of abuse consumer is the number of instances in purchased quantity goods which individuals have a sizable of contempla on credit on the and services eve of in obtaining discharge”). points tion of a The Government also early judicial English American and decisions to cor contemplation its roborate contention that “in of” bank g., e. ruptcy Pearce, signifies re See, abusive conduct. 19 (No. (D 1843); Morgan 10,873) Brundrett, F. 50, Cas. 53 Vt. v. (K. 1833) Eng. Rep. & 5 B. Ad. 288, 296-297, 798, B. J.). (Parke,

To bolster textual claim, Government relies on 526(a)(4)’s § According immediate context. to the Govern- 526(a) § designed ment, three the other subsections protect practices by from debtors abusive debt relief 526(a)(1) agencies: requires agencies debt Section relief 526(a)(2) § perform promised prohibits all them services; making advising misleading to make from debtors false or 526(a)(3) § bankruptcy; prohibits in statements and them misleading regarding the debtors costs or from benefits of 526(a)(4) § bankruptcy. in is read context When these debtor-protective provisions, argues, con- the Government prevent giving struing agencies from it to debt relief advice and their that is both debtors creditors seems beneficial particularly nonsensical.

Finally, contends BAPCPA’s the Government 526(a)(4) § similarly corroborate its for remedies violations 526(c)provides reading. for a remedies Section narrow § § or 528. violation of agency’s Among sue authorized, actions a remit- may attorney debtor actual tal of and reasonable fees fees, attorney’s damages, costs; and state sue for a resident’s general may attorney abuse actual court intentional damages; may and a finding 526(c). civil Govern- impose appropriate penalty. Hersh also relies ment on the Fifth Circuit’s decision ex States Mukasey, United rel. 553 F. 3d (2008), for the observation Colloton’s dissent below “Con- Judge section on actual violations emphasis gress’s damages viewed that sec- strongly Congress suggests at if followed tion as aimed advice to debtors which would Id., at the debtor.” harming 760; have risk significant 3d, see 541 F. dissent- concurring (opinion advice that By contrast, part). “legal appropriate be First Amendment, yet prohibited would protected by 526(a)(4), cause no broad should damage reading Ibid.; Hersh, 3d, 553 F. at 760. all.” sources the Government’s actually Milavetz contends its claim “in undermine of” phrase contemplation to refers abusive conduct. bankruptcy necessarily Specifi- Milavetz authorities illustrate that these cally, argues “in of” is a neutral phrase bankruptcy contemplation to an conduct when attached additional, abusive only implies the is states, As Black's phrase term. proscriptive “often to thwart the distribution of action coupled designed added), Black’s 336 but it (emphasis assets” in bankruptcy, In carries no connotation of abuse. of support independent Pender, on our decision relies conclusion, Milavetz “in that we U. S. construed contending contempla- 289 to in that case describe “conduct with a tion of” bankruptcy and nothing to a more.” filing view probable bankruptcy Brief for 61. we are persuaded

After these claims, competing reviewing 526(a)(4) sounder, §of although that a narrower reading the view the Government advo- we do not adopt precisely the cates. show that Government’s sources “in phrase commonly of” has so contemplation been associ- abusive be ated with conduct that it may readily understood § to used in 526(a)(4), however, abuse. As prefigure we think the refers a phrase to of misconduct specific de- type to the signed manipulate protections bankruptcy sys- Pender, In of our and in light tem. decision context of 526(a)(4) of Code, other sections the we conclude pro- a debt a hibits from agency only advising debtor incur more the debtor is for because filing bankruptcy, than for a rather valid purpose.

Pender addressed the of 96(d), former which meaning au- thorized reexamination debtor’s of payment attorney’s “in the fees contemplation filing petition.” Recogniz- “ 'the debtor to deal too ing temptation failing liberally ” with his counsel him,’ property protect employing Henderson, In re Wood & S.,U. U. (quoting S. 246, . (1908)), we read “in . contemplation of. in that filing” context the have require portended bankruptcy “in- the issue, S., transfer at 289 U. understand- duce[d]” inducement of abuse. con- suspicion so engender the statute, we identified the struing “controlling question” “whether was thought as impelling Ibid. substantial cause of transaction.” Given the sim- 96(d) §§ between we think control- 526(a)(4), ilarities under latter is likewise whether question provision ling assisted ... “advis[ing] person reason impelling more debt” incur was the prospect bankruptcy. filing between there relevant differences sure, pro- To be and the one now under review. Pender at issue in vision in Pender payments was Most notably, inquiry whereas the eve of bankruptcy, regards made on with that to debts. Consistent dif- incur additional advice 96(d) was § that a made under a ference, finding payment a threshold of” resolved only inquiry filing “in contemplation of the reasonableness pay- further review triggering but an inference of abuse thus ment; finding supported to contrast, advice By did not it. establish conclusively as by incur more debt prohibited because bankruptcy, § to on 526(a)(4), will consist of advice “load up” generally discharge e., debt expectation obtaining —i. per se. conduct that is abusive

The the conclusion statutory context supports 526(a)(4)’s § this of abuse. prohibition targets type primarily Code to sought BAPCPA provisions predating already on debt to prevent loading prior filing. practice up 523(a)(2), the attendant risk instance, Section for addressed of debts ob- manipulation by discharge preventing false debts tained for pretenses purchases by making or luxury goods presumptively nondischargeable. services ed.). 523(a)(2)(A) (C) (2000 in- §§ See BAPCPA creased the risk of new abuse, however, by such providing to Pur- ability repay. mechanism for debtor’s determining (2006 707(b)(2)(D) ed.), § to the a debt- tes[t],” suant “means (and or’s 7 relief abusive petition Chapter presumed to structured may therefore be converted dismissed 13) if the current repayment Chapter under debtor’s plan allowed income his expenses, exceeds monthly statutorily more than a debt, by pre- secured including payments 707(b)(2)(A)(i)-(iv). §§ amount. The test pro- scribed See incentives motes debtor but also enhances accountability incur on secured debt prior filing, payments additional the formula. monthly income under debts offset a debtor’s reflect a con- the BAPCPA Other amendments effected by amended instance, Congress cern For practice. with this discharge 523(a)(2) lowering the exceptions expand a debtor must assume of new debt threshold amount and it 523(a)(2)(C), of abuse under trigger presumption § 310,119 window. See Stat. extended the relevant prefiling understood provide 84. is best In context, loading up the practice additional safeguard against to filing. prior

245 arguments provide Government’s contextual addi- 526(a)(4) § support that for the view meant was tional type companion pro- prevent this of conduct. The rules of 526(á)(l)-(3) §§ conduct in and the remedies fessional 526(c) § Congress indicate that their violation was con- with actions that threaten to harm debtors cerned or credi- Eighth the the tors. Unlike reasonable financial advice Cir- proscribe, reading would cuit’s broad advice incur more presents bankruptcy debt because a substantial risk of injury to both debtors and creditors. Hersh, See 553 F. 3d, Specifically, the incurrence such at 760-761. debt stands prepetition a if to harm debtor his a conduct leads court to § nondischargeable, 523(a)(2), hold debts see his convert his chapter, altogether, 707(b), it case to another or dismiss thereby defeating bankruptcy his effort to obtain relief. If although manipulatively timely debt, incurred, is iden- discharged, abusive tified as and therefore is creditors will discharge consequent as a the suffer harm result of By prudent contrast, dilution estate. Eighth that advice view of the statute Circuit’s forbids likely benefit debtors would both and creditors and at very id., least should cause no harm. See 760; F. 3d, (Colloton, concurring dissenting part). J., 526(a)(4) prohibits these conclude For all of we reasons, agency only advising person debt relief from assisted impelling more debt when the reason for the incur advice is anticipation bankruptcy. “[njo yields as a” That other solution sensible result fur- persuades reading. narrow ther us correctness this Granderson, United States v. U. S. It prevent attorneys scant would make sense to and other advising thinking agencies filing from relief individuals options about would be beneficial to both and their creditors. That those individuals construction Bankruptcy purposes of none of the Code serves through the enacted BAPCPA. Milavetz amendments itself 526(a)(4) acknowledges view of would expansive one bases for absurd of its results; arguing produce at- “debt should be construed to exclude agency” §of Because the and context ev- torneys. language idence more can avoid the we targeted absurdity purpose, of the it which Milavetz without result reaching complains advocates.

For the same we Milavetz’s reason, reject suggestion 526(a)(4) § from dis- debt relief broadly agencies prohibits covered of af- cussing merely instead subjects proscribing firmative advice a action. Section particular undertake 526(a)(4) its from terms debt relief by agencies only prevents “advisjmg]” “to incur” more debt. Cov- assisted persons ered professionals remain free fully candidly “tal[k] about the in of a incurrence of debt contemplation filing 526(a)(4) case.” Brief for Milavetz 73. Section to avoid or requires professionals only instructing encourag- assisted take on persons to more circum- 1.2(d) stance. Cf. ABA Model Rule of Professional Conduct (2009) (“A a lawyer shall not counsel client or as- engage, a client, sist the knows criminal or conduct lawyer fraudulent, but a the may legal consequences discuss lawyer a of of conduct with client course proposed may counsel or assist client to make faith effort deter- good law”). mine meaning validity, scope, application if we Even the statute were not clear this would regard, about because the in- scope reach same conclusion no serves conceivable hibition frank discussion purpose States, v. United scheme. Cf. Johnson statutory within (2000).5 S. n. 694, 706, U. 526(a)(4) seriously advocates, would If read undermine as Milavetz Term, acknowledged we relationship. Earlier this attorney-client protecting attorney-client privilege as means of the importance Industries, See Mohawk robust discussion. relationship fostering we Finally, reject Milavetz’s contention that, narrowly construed, is impermissibly vague. urges concept abusive prefiling conduct is in- too definite to withstand constitutional scrutiny and that uncer- of the tainty regarding scope prohibition will chill pro- tected speech. We disagree.

Under our reading statute, course, the prohibited advice is not defined in terms of abusive prefiling conduct but rather the incurrence of additional debt when the impel- reason is the ling anticipation bankruptcy. Even if the test depended the notion of upon abuse, however, Milavetz’s claim would be other undermined fatally provisions of the Bankruptcy Code, to which that is no concept stranger. As above, discussed the Code authorizes a court to decline to fraudulent debts, discharge 523(a)(2), or to dismiss a case or convert it to a case under another if it finds that chapter relief would granting constitute abuse, 707(b)(1). § and other Attorneys who professionals give debtors advice must know of bankruptcy these provisions and their for a who consequences debtor in bad faith incurs additional debt 707(b)(4)(C) prior Indeed, § filing. states that an on attorney’s signature “shall bankruptcy filings con- a stitute certification that the has” attorney determined that the “does not filing 707(b)(1)].” constitute an abuse under [§ this it is hard to see Against how a backdrop, rule that nar- rowly prohibits attorney from affirmatively cli- advising ent commit this of abusive conduct type prefiling could chill the attorney or inhibit speech attorney-client relation- 526(a)(4) Our construction of ship. § advice prevent only motivated the of further principally by prospect bankruptcy ensures cannot run professionals afoul unknowingly of Carpenter, Inc. significance 558 U. Reiterating S. the 526(a)(4), narrowly construed, § dialogue, presents of we note as such Ibid, (quoting Upjohn impediment to “‘full frank’” no discussions. States, (1981)). v. United Co. 449 U. S. prohibition scope the is the of Because proscription.6

its by own reference on its terms adequately defined, both vague- reject provisions, we Milavetz’s other the Code’s ness claim. language foregoing of the shows, statute,

theAs purpose, of makes together with this other evidence 526(a)(4) reading § merely plausible interpre- of narrow Accordingly, reject we tation but the natural one. more Eighth and hold that a debt relief Circuit’s conclusion only impetus agency violates when the of the expectation filing incur for advice more debt bankruptcy obtaining the attendant relief. Because our reading supplies ground of the statute sufficient revers- Appeals’ the Court of because decision, and Milavetz challenges constitutionality statute, narrowed, only vagueness grounds, we need not further consider whether the so construed withstands First statute Amend- scrutiny. ment

C Finally, validity challenged 528’s we address disclo- requirements. resolving question sure task this Our first Although is to determine the contours Milavetz's claim. hypothetical posits questions regarding Milavetz the permissibility circumstances, incur in certain of advice to see Brief for 48-51, easily expectation reference to answered whether (and obtaining a filing discharge) impelled advice. We emphasize possibility is insufficient awareness 526(a)(4)’s Instead, provision proscribes trigger prohibition. only principally by to incur that is motivated that advice more debt likelihood. purchase Thus, mortgage prior to or a car advice reliable refinance filing because will reduce the debtor’s interest rates or doing improve so promise of enhanced ability repay prohibited, his financial is impelling anticipated is the prospects, filing, rather cause. than the Ad buy pay bills, groceries, to incur medical vice additional debt or make “reasonably necessary support for the purchases other maintenance of §523(a)(2)(C)(ii)(II), debtor,” dependent the debtor or a is simi larly permissible. challenge entirely

the nature of its is not clear from the briefing or below, decisions counsel for Milavetz insisted at argument challenge; oral this is “not facial it’s an as- applied challenge.” Árg. approach Tr. of Oral 26. We will question consistent with Milavetz’s characterization.7 scrutiny applicable

We next consider the standard of requirements. parties agree, 528’s disclosure The as do challenged provisions regulate only that the we, commercial speech. Milavetz contends that our decision in Central Corp. Hudson Gas Elec. & v. Public Serv. Comm’n N. of Y. (1980),supplies proper U. S. standard for review requirements. these in Court that case held that nonmisleading speech restrictions on regarding commercial activity lawful scrutiny must withstand intermediate —that they “directly advanc[e]” governmental is, must a substantial “n[o] interest and necessary be more extensive than is Contesting serve Id., interest.” at 566. Milavetz’s premise, the Government maintains that 528 is directed at misleading speech. commercial For that reason, and be challenged provisions impose cause the require a disclosure ment speech, rather than an affirmative limitation on exacting scrutiny Government contends that the less de governs agree. scribed Zauderer our review. We validity professional Zauderer addressed the of a rule of required attorneys contingency- conduct that who advertised losing fee services to disclose in their advertisements might litigation responsible client still be for certain fees and Noting protection costs. Amendment First for com- justified large by speech mercial the information’s attorney’s value consumers, Court concluded §528's doing, ability In so we note that our to evaluate validity as developed applied to Milavetz is constrained the lack of a record. Be or other evidence to parties ground cause the have introduced no exhibits analysis, challenge only by this guided preenforcement our we are Mila e., status—i. general attorney as a claims about vetz’s law firm or —and nature of its advertisements. 250 providing re-

constitutionally protected the in not interest at 651. S., “minimal.” U. information is quired factual requirements unduly disclosure Unjustified burdensome protected speech, by chilling First the Amendment offend adequately rights protected as are “an advertiser’s but reasonably requirements long related as disclosure deception preventing of consumers.” interest the State’s Ibid. challenged provisions the fea- share essential As in that case, of the rule issue in Zauderer.

tures at §528’srequired prob- the disclosures are intended combat inherently misleading lem of commercial advertisements— specifically, promise any the debt relief without reference possibility filing bankruptcy, which has inherent only Additionally, entail costs. the disclosures an accurate identifying legal and the statement advertiser’s status they provided, prevent character of assistance do conveying any agencies debt relief like Milavetz from addi- information. tional §528 analogous

The same characteristics of make it distinguish it the rule in Zauderer from those at serve (1982), R. J., issue in In re 455 U. to which the M. S. scrutiny applied Court the intermediate Central Hudson. attorneys prohibited The ethical in R. rules addressed M. J. advertising practice from other their areas terms than prescribed by Supreme those the State Court and from an- they practice. nouncing the courts which were admitted to Finding at 197-198. that the restricted state- S., See 455 U. inherently misleading were not State ments appellant’s had failed to show that advertisements were likely consumers, id., to mislead at themselves scrutiny applied Hudson’s intermediate Court Central insufficiently tailored to invalidated restrictions In so interest, S., substantial U. 205-206. hold- state authority ing, emphasized that retain States Court regulate misleading particularly inherently advertisements, through requirements, disclosure it and noted advertise- professional special pose decep- ments for services risk id., tion, See 207. makes

Milavetz much of the fact that the Government in these consolidated cases has adduced no evidence that misleading. are its advertisements Zauderer forecloses that argument: possibility deception “When the is as self- require in evident as it is this we need not case, to State survey public [may] ‘conduct a of the ... before it determine ” tendency [advertisement] that the had to mislead.’ (quoting Colgate-Palmolive atS.,U. 652-653 FTC v. Co.,380 (1965)). congressional 391-392 U. S. Evidence in the demonstrating pattern record of advertisements that hold promise of alerting out the debt relief without consumers to potential Hearings, its pt. cost, Ill, at 86, 90-94, is adequate to deception establish that the likelihood of in these hardly speculative “is cases one,” S., 471 U. at 652. alternatively argues Milavetz that the term “debt relief agency” confusing misleading requiring and that its inclusion “reasonably advertisements cannot be related” preventing the Government’s interest decep- consumer requires. Zauderer tion, as Id., at 651. This contention preference amounts to little more than a on Milavetz’s referring something to itself as other than a “debt agency” g., attorney or a law firm. For several rea- —e. preference we sons, conclude that this lacks constitu- First, tional basis. Milavetz no support offers evidence to confusing. §528 by its claim that the label is Because only applies agencies, terms to debt relief the disclosures necessarily Only agen- are accurate to that extent: debt relief identify must cies themselves as such in their advertise- provides ments. This statement interested observers with pertinent information about advertiser’s cli- services and obligations. ent may

Other information that must or Milavetz include in bankruptcy-assistance pro- its advertisements services will not misunder- additional assurance that vides consumers that the advertiser the term. statement stand “ The required ” meaningful file for relief’ people gives ‘help[s] And to the Milavetz context relief agency.” term “debt attorney. further firm or Section itself as a law may identify also tailor disclosures Milavetz gives flexibility state- as the its individual as circumstances, resulting long the statutory examples. ments similar” “substantially (b)(2)(B). §§ §528 is not we

Finally, reject argument Milavetz’s because interest it related reasonably any governmental creditors, who equally attorneys represent applies disclosures, Mila- sometimes does. The required contends, misleading would be counterfactual vetz an untenable read- that context. This claim is premised the definition the think it from of statute. We evident the of in terms of person’s “assisted is stated person” —which 101(3) text structure the from and debts, see the —and 527, and 528 that §§526, in debt-relief-agency provisions §528’s disclosure requirements, those provisions, including serv- bankruptcy-related who offer only govern professionals 528 is itself expressly ices consumer debtors. Section to “bankruptcy with pertaining concerned advertisements “excessive “the benefits services,” bankruptcy,” assistance con- inability pay pressure, debt collection debt, (b)(2). like Moreover, the and debt,” §§ sumer is that section codified in other debt-relief-agency provisions, du- entitled “debtor’s Code of the Bankruptcy subchapter context, II. C., 5, subch. U. S. ch. ties and benefits.” at creditors aimed §528 advertisements reading govern which com- as the result as would be anomalous invitation to adopt decline Milavetz’s we Once again, plains. its contrary plain meaning is a view of the statute result. an absurd and would produce that Milavetz itself identify Because requirements 528’s certain information about include as a debt agency and related services are bankruptcy-assistance “reason- the ably related to interest [Government’s] de- preventing Zauderer, ception consumers,” S., 651, U. we uphold those to Milavetz. provisions applied

IV the reasons, For the foregoing the Court of judgment for the §§101(12A) Eighth Circuit is affirmed as to Appeals and 528 and reversed as to 526(a)(4), and cases are re- manded for further consistent with this proceedings opinion.

It is so ordered. concurring concurring Scalia, Justice judgment.

I for footnote which opinion Court, except join that the notes what legislative history statute supports The Court first before us is a its text was statute law because approved by Senate, vote of the the House and and was signed majority the President. Even the extravagant by indulging assump- tion that Members of the House other than members of its (and on the the read further Judiciary Report Committee it), that the Mem- agreed extravagant assumption they have read since it it, bers of the Senate could not possibly Abuse not when the Senate passed Bankruptcy did exist Act 2005. And the Protection Prevention and Consumer to do. had more President surely important things truly history legislative is other source of The footnote’s legislative proposition record “the that mystifying. For the attorneys” by which was documents misconduct elsewhere repro Congress, cites a the Court presumably the concern of (1) that was an attach of a tasteless advertisement duction (2) hearing in witness, of a written to the statement ment (3) passage, years prior before statute’s to this held seven considering a con House a Subcommittee different passed.* that never “Else reform bill sumer where” indeed. by nothing gained acknowledges can be that

The Court (it superfluous admits the footnote is “unneces citation this light unambiguous language,” sary ante, of the in statute’s 3). can be lost. Our cases have said 236, But much n. statutory legislative history irrelevant when the text is g., Gonzales, 1, e. States v. 520 U. S. See, is clear. United (1997); Germain, 249, 254 U. S. Nat. Bank v. Connecticut (1992). attorneys conscientious The footnote advises they spend time and their true, is and that must this legislative history combing the annals of clients’ treasure statutory text is their case where all cases: to buttress unambiguous unambiguously an attack favor; in their history legislative against If is them. relevant text that is says, presum it it is a clear text means what confirm apparently ably clear text does not to show relevant say. Even those who believe it seems mean what reports congressional legal reflect that committee Action bridge far. is a too intent, footnote 3 “part hearing was the earlier record protests *The Court ante, page cites, n. 3. Report,” it cited House place, earlier hearing that the took however, nothing more than note does we to 109-31, Are believe that this pt. p. Rep. R. No. see H. (much less of whole of the Committee Con- brought to the attention of one of at that testimony to the witnesses gress) an attachment history legislative what not. That shows course long-ago hearing? Of reality. no support requiring fiction “Congress” intended Justice Thomas, in and concurring part in concurring the judgment.

I concur in the and all but Part judgment join III-C of the Court’s I opinion. Court agree U. S. C. §528’s disclosure advertising survive requirements First Amendment on the scrutiny record before us. I write sepa- because rately different reasons lead me that conclusion. I have never been there is persuaded that basis any in the First Amendment for the relaxed this scrutiny Court applies to laws that commercial suppress nonmisleading speech. Liquormart, Inc. v. Rhode Island, 517 U. S. 484, See H (1996) 522-523 (opinion concurring concurring judg Corp. ment) Central Hudson Elec. Gas & v. Pub (discussing Y., lic Serv. Comm’n (1980)). 447 U. S. 557 case, this of N. the Court a still lower standard of applies scrutiny review speech law that e.,—i. compels disclosure of commercial articulated in Zauderer Disciplinary rule v. Office of Supreme Counsel Court Ohio, U. S. 626 (1985), that laws that the disclosure of factual require information in commercial so be advertising may upheld long as they are “reasonably related” to the interest government’s prevent id., at 651. consumer ing deception, on which Zauderer

I am skeptical rests— premise in the that, “the context, First Amend- commercial-speech ment interests disclosure implicated by requirements weaker than at stake when substantially those speech id., id., (cit- at 14; n. see actually suppressed,” “material differences between disclosure requirements have We outright prohibitions refused in speech”). other contexts to attach “constitutional significance” to the difference that eompel protected between regulations g., Riley e. See, that restrict it. speech regulations C., Inc., National Federation Blind N. 487 U. S. 781, 796-797 I no reason that difference should why constitutional because merely acquire significance regu- Glickman See lations issue involve commercial speech. Inc., Elliott, Brothers Wileman 457, & 521 U. 480-481 S. v. that “commercial (Souter, J., (1997) dissenting) (arguing . . . principle: is First Amendment subject [this] speech as compelling officially just suspect that cognizable speech same level it, suppressing subject is typically id., cf. United of scrutiny”); J., dissenting); 504 (Thomas, Inc., States v. United Foods, (2001) 419 405, 533 U. S. that com- J., concurring) regulations (stating (Thomas, “must be advertising subjected commercial pel funding Amendment scrutiny”). most First stringent to reexamine Zauderer I would Accordingly, willing be case determine and its in an whether progeny appropriate First these sufficient Amendment precedents provide protec- tion disclosures.1 Because against government-mandated here, however, no asks us to so I with the agree do party Zauderer of that the standard our review Court governs law firm §to 528 challenge brought by Milavetz). (hereinafter other in this action plaintiffs Zauderer, Yet en even we “have not under presumptively dis dorsed” of laws the use requiring “government-scripted 1 I that are false quarrel have no with the that advertisements principle transaction, may proscribed. propose or be misleading, illegal an (1996) Island, 484, (opinion Liquormart, Inc. Rhode v. U. 520 See 517 S. Furthermore, I ac concurring judgment). concurring assumption longstanding this Court’s consumer-fraud knowledge factual information in compels the disclosure of certain regulation on First Amendment in may significantly less advertisements intrude that have the outright prohibition an on all advertisements terests than Pharmacy Virginia g., Virginia Bd. See, v. potential e. mislead. of Council, Inc., (1976); Zauderer 748, 771-772 Citizens Consumer 425 U. S. Ohio, 471 U. S. Supreme Counsel Court Disciplinary of of Office C., Inc., Blind Riley v. National (1985); Federation 651-652, n. 14 of N. Corp. & Elec. v. Public Central Hudson Gas (1988); 781, 796, n. 487 U. S. Y., But even that as if Serv. Comm’n N. 447 U. S. entirely different standard correct, justifies an doubt that it sumption is I commercial compel, suppress, rather than regulations review for speech. advertising. Borgner

claimers” in commercial See v. Flor Dentistry, Bd. ida U. S. (2002) 1080, 1082 (Thomas, J., certiorari). dissenting upheld from denial of Zauderer imposition against attorney of sanctions under a rule professional required conduct that advertisements contingency-fee losing services to might disclose that clients litigation responsible for be fees and costs. See S., 471 U. Importantly, however, Zauderer’s advertisement 650-653. misleading was regulation found be face, and the specific that case did mandate the form or text of the disclosure. Ibid. Thus, Zauderer does not stand for the proposition government that the constitutionally compel can scripted any a the use of disclaimer in circumstance in which preventing deception its interest might plausi consumer bly be at stake. other a by bare words, assertion government requirement a disclosure is “intended” to prevent deception, standing consumer alone, is not sufficient uphold requirement applied speech to all that falls sweep. ante, within its See at 250. precedents regulations

Instead, our make clear that aimed misleading permissible at false or only advertisements are particular advertising inherently where “the likely to de particular ceive or where record indicates that form or advertising deceptive.” method of has been In re fact (1982) (emphasis added); J., R. M. U. 191, 455 S. 202 see supra, (“recognizing] unjustified Zauderer, at 651 unduly requirements might burdensome disclosure offend Amendment”). require the First Therefore, disclosure passes only ment constitutional muster to the extent that it possess at is aimed their advertisements that, nature, supra, these traits. See R. M. at 202; Ibanez J., v. Florida Dept. Regulation, Business and Bd. Ac Professional countancy, U. S. 136, 143, 146-147 opinion

I do not read to hold Court’s otherwise. See Accordingly, ante, at 250. and with understanding, §to 528’s Milavetz’s question challenge whether I turn survives Zauderer on the scrutiny requirements disclosure us. before record challenge the Court Milavetz’s

As notes, posture ante, review See of its Amendment claim. inhibits our First be- constitutionality n. Milavetz 528’s 249, 7. challenged fore the any statute had ever enforced been against to chal- firm's advertisements. Although purports §528 own lenge only advertising, to its “‘as-applied’” ante, 248-249, it did not evidence or exhibits introduce court has seen a sam- Thus, substantiate claim. no or even a declaration de- Milavetz’s advertisements pling their and the media which Mila- scribing contents through vetz seeks transmit them. As Milavetz’s consequence, nominal similar strikingly “as-applied” challenge appears a facial challenge.

We of such because generally challenges they disapprove “often rest on courts speculation” require engage of statutes on the basis of “‘premature interpretation ” Washington Grange State records.’ v. factually barebones Washington Party, Republican State S. U. States, 541 U. Sabri United (2008) S. (quoting (2004)). claim Milavetz’s invites same Mila- problems. vetz 528’s are uncon- disclosure requirements alleges to its advertisements adver- stitutional as because applied the disclaimer tisements are not because misleading than reduce, §528 will rather confusion create, required by for That well be true. may Milavetz’s clients. potential Milavetz’s advertise- But record evidence of because no we review, can only speculate ments exists to our guide to be Mila- about the in which the statute might applied ways vetz’s speech. of a statute constitutionality to

When forced determine the law if we will conjecture, based on such uphold solely can which it be en- there is manner any “conceivable]” Washington Amendment. forced with the First consistent

259 Grange, supra, State ease, 456. this both parties agree §528’s disclosure at a requirements cover, minimum, de- advertisements out’” promise debts ceptive ‘“wipe without as means of mentioning bankruptcy accomplish- this Brief for goal.2 82, 86; Milavetz Brief United States 60-62. As there is at one result, least set of on which statute facts constitutionally could be applied. I Thus, Court that Milavetz’s agree challenge to must fail. argument, At oral counsel Milavetz’s declined describe Milavetz’s challenge daim, Arg. 25-26, Tr. to 528 as a facial of Oral overbreadth viewing briefs no such But Milavetz’s make contention. even Milavetz’s §528 fadally it argument applies as a claim that overbroad because services, nonmisleading bankruptcy-related advertisements such an First, §528 noted, acknowledges must argument fail. constitutionally applied bankruptcy-related be adver deceptive can and, thus, exists least one “set circumstances under tisements Salerno, U. United States valid.” v. S. [§ 528] which would be Second, argue that 528’s uncon attempt Milavetz does not judged number when rela applications are “substantial” in stitutional Washington Grange State legitimate “plainly sweep.” this tion 449-450, Washington Party, U. and n. 6 Republican State S. (internal (2008) omitted). marks quotation notes unambiguously says. statements on in the of the House Report Committee Judiciary “indi- cate concern abusive undertaken attor- practices Ante, n. but neys.” only 3. concern Perhaps, the author of the statements tell us Report. Such nothing (1) about what the statute since we do not means, know that (2) members of the Committee read the it is al- Report, (that most certain that not vote on they did the Report (3) even if read and vote practice), they did not, were after those who made this law. it, all, they

Case Details

Case Name: Milavetz, Gallop & Milavetz, P. A. v. United States

Court Name: Supreme Court of the United States

Date Published: Mar 8, 2010

Citation: 559 U.S. 229

Docket Number: 08-1119

Court Abbreviation: SCOTUS