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

PETITIONER:Milavetz, Gallop & Milavetz, P.A., et al.
RESPONDENT:United States

DOCKET NO.: 08-1119
DECIDED BY: Roberts Court (2009-2010)
LOWER COURT: United States Court of Appeals for the Eighth Circuit

CITATION: 559 US 229 (2010)
GRANTED: Jun 08, 2009
ARGUED: Dec 01, 2009
DECIDED: Mar 08, 2010

G. Eric Brunstad, Jr. – for petitioners in No. 08–1119 and respondents in No. 08–1225
William M. Jay – Assistant to the Solicitor General, Department of Justice, for respondent in No. 08–1119 and petitioner in No. 08–1225

Facts of the case

In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was signed into law. In part, it added a new term to the Bankruptcy Code (“Code”), “debt relief agency,” and both restricted and proscribed actions by those groups falling under the definition. Subsequently, a Minnesota bankruptcy law firm sought a declaratory judgment against the United States, arguing that the BAPCPA did not apply to attorneys and law firms, and was unconstitutional as it applied to attorneys. The federal district court agreed and issued an order declaring that attorneys in the District of Minnesota were excluded from the Code’s definition of “debt relief agency” and that the challenged provisions of the Code were unconstitutional as they applied to attorneys in the District of Minnesota.

On appeal, the U.S. Court of Appeals for the Eight Circuit held that attorneys who provide “bankruptcy assistance” were included within the BAPCPA’s definition of “debt relief agency.” However, it also held that BAPCPA provisions that prohibited a debt relief agency from advising clients to incur debt in contemplation of bankruptcy was overbroad, and thus unconstitutional.


1) Did the Eight Circuit’s interpretation of attorneys as “debt relief agencies” contradict the plain meaning of the BAPCPA?

2) Does the BAPCA constitute a broad, content-based restriction on attorney-client communications that is not adequately tailored to constrain only speech the government has a substantial interest in restricting; and, thus violates the First Amendment?

3) Does the BAPCPA, as applied to attorneys, restrict commercial speech by requiring mandatory disclosures in advertisements, and thus violate First Amendment free speech rights?

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

Audio Transcription for Oral Argument – December 01, 2009 in Milavetz, Gallop & Milavetz, P.A. v. United States

Audio Transcription for Opinion Announcement – March 08, 2010 in Milavetz, Gallop & Milavetz, P.A. v. United States

John G. Roberts, Jr.:

Justice Sotomayor has the opinion this morning in case 08-1119, Milavetz, Gallop, & Milavetz versus All State Insurance and the consolidated case.

Sonia Sotomayor:

With limited exceptions, the bankruptcy abuse Prevention and Consumer Protection Act of 2005 defines the term debt relief agency to include any person who provides bankruptcy assistance to an assisted person for payment or who is a bankruptcy petition for payer.

The Act imposes certain restrictions on professionals who meet that definition.

As relevant to this litigation, the Act prohibits them from advising clients to incur more debts in contemplation of filing for bankruptcy, and it requires them to make certain disclosures in their advertisement.

The plaintiffs in this litigation, a law firm and others, to whom I refer collectively as Milavetz filed a pre-enforcement action seeking declaratory relief.

Milavetz contends that attorneys are not debt relief agencies under the Act and therefore are not bound by its advice and disclosure rules.

In the alternative, Milavetz argues that the advice and disclosure rules are unconstitutional as applied to attorneys.

The District Court granted summary judgment for Milavetz.

The Eighth Circuit affirmed in part and reversed in part.

It agreed with the government that attorneys are debt relief agencies, and that the Act’s disclosure requirements are valid as applied to attorneys.

But it upheld the District Court’s judgment that the advice restrictions broadly prescribed the provisions of probational advice and thus run afoul of the First Amendment.

We granted certiorari to resolve a circuit conflict regarding the scope of the advice provision.

We first conclude that the Act defines debt relief agency to include attorneys.

As the Eighth Circuit found, the bankruptcy assistance that circumscribes the relevant class of professionals, include several services commonly performed by attorneys, including some such as the provision of legal representation with respect to a case of proceeding, that can be performed only by attorneys.

We also find it significant that in enumerating specific exceptions to the definition of debt relief agency, Congress did not list attorneys.

Milavetz counter arguments do not persuade us to disregard the plain language of the definition.

Next, we reject the Eighth Circuit broad reading of the Acts advice restriction.

11 USC code 5026 A4 and conclude that it prohibits debt relief agencies only from advising a debtor to incur more debt because the debtor is filing for bankruptcy rather than for a valid purpose.

We have previously construed the phrase in contemplation of filing for bankruptcy to indicate that the expectation of filing induced or held the conduct in question.

Accordingly we construe 526 A4 to prohibit only implies that it induced or compelled by the prospect of the bankruptcy.

In practice, such advice will generally consist of encouragement to load up on debt with the expectation of obtaining its discharge.

The statutory context supports the conclusion that section 526 A4 primarily targets this type of conduct.

We reject Milavetz arguments in favor of a broader reading of the restriction as well as its claim that the provision as narrowly construed is impermissibly vague.

Finally, we agree with the Eighth Circuit that the Act’s disclosure requirements codified in 11 USC code Section 528 are valid as applied to Milavetz, because those provisions are directed at misleading commercial speech and impose a disclosure requirement rather than affirmative limitation.

We conclude as we did in Zauderer versus Office of Disciplinary Counsel that the requirements need only be reasonably related to the government’s interest in preventing consumer deception.

We find that the challenge disclosure requirements satisfy that standard as applied to Milavetz.

For the reasons summarized here and further elaborated in our opinion.

We affirm the Eighth Circuit judgment as to the definition of debt relief agency, and the validity of the Act’s disclosure provisions, and we reverse as to the scope of the advice provision.

The consolidated cases are remanded for further proceedings consistent with this opinion.

Justices Scalia and Thomas have filed opinions concurring in part and concurring in the judgment.