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Attorneys May Be “Debt Collectors” and “Debt Relief Agencies”

Below, Stanford Law School’s Keisha Stanford recaps Tuesday’s consolidated oral arguments in Milavetz, Gallop & Milavetz, P.A. v. United States (08-1119) and United States v. Milavetz. Gallop & Milavetz, P.A. (08-1225). Check the Milavetz SCOTUSwiki page for additional updates.

At Tuesday’s oral argument in Milavetz, Gallop & Milavetz, P.A. v. United States and United States v. Milavetz, Gallop & Milavetz, P.A., the Court grappled with the question whether attorneys are “debt relief agencies” (DRAs) for purposes of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), and, if so, whether the challenged sections of the Act are unconstitutional.  Background on the case is available here.

When oral argument began, the Court quickly steered the discussion toward whether the statute would be constitutional if it were narrowly drawn and confined to unlawful activity.  Looming heavy in the background was the Court’s ruling in ­­­­­­Heintz v. Jenkins (1995), which held that attorneys who regularly engaged in consumer debt-collection litigation on behalf of creditor clients were “debt collectors” under the Fair Debt Collection Practices Act.  Specifically, comments by Justices Ginsburg and Sotomayor suggested that the Court might be leaning toward a similar outcome in this case.  In fact, none of the Justices’ statements indicated that the Court was seriously contemplating a construction of the statute that would exclude attorneys from the definition of DRAs. For example, Justice Breyer specifically highlighted the definitional portions of the statute, which enumerate certain tasks traditionally only performed by attorneys.

Instead, the Court focused on how best to achieve constitutional avoidance.  Justice Ginsburg questioned whether importing the abuse standard from Section 707(b) – a standard with which attorneys are already familiar – would cure the perceived constitutional difficulty.  Similarly, Justice Kennedy suggested that the statute might be properly limited by construing the statute to prohibit only unethical conduct (which is currently proscribed by state laws).  Justice Sotomayor’s comments reinforced this position, inquiring whether the First Amendment would protect an attorney’s right to give unethical advice. Justices Alito and Scalia focused on the meaning of “in contemplation of bankruptcy,” with Justice Scalia questioning whether the implicated action must be taken because the client is about to file a bankruptcy petition.  Only Chief Justice Roberts displayed any inclination to share petitioners’ concerns regarding the possible chilling effects of Section 526:  he inquired about the difficulty of discerning what advice the statute would proscribe.  The Chief Justice also probed whether the statute regulated lawyers in an attempt to pursue an unrelated substantive objective: policing debtors’ behavior.

The Justices also questioned petitioners’ arguments challenging Section 528’s advertising disclosure requirements, noting that First Amendment standards for commercial transactions have always been more lenient than other First Amendment contexts.  The Government emphasized that nothing in the statute precludes the advertisement from indicating that the individual is an attorney, and that the requirements only attach to advertisements directed to the public that specifically advertise the attorney’s “debt relief” services.