MILAVETZ, GALLOP & MILAVETZ, P. A. v. UNITED STATES

Legal Principle at Issue

Are attorneys debt relief agencies? Does the "no-debt" advice rule violate the First Amendment? Do mandatory disclosures violate the First Amendment?

Action

Affirmed and reversed (or vacated) in part and remanded. Petitioning party received a favorable disposition.

Facts/Syllabus

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 amended the Bankruptcy Code to define a class of bankruptcy professionals termed “debt relief" agencies. That class includes, with limited exceptions, “any person who provides any bankruptcy assistance to an assisted person" for payment, "or who is a bankruptcy petition preparer.” The law prohibits such professionals from advising "an assisted person . . . to incur more debt in contemplation" of filing for bankruptcy. It also requires them to disclose in their advertisements for certain services that the services are with respect to or may involve bankruptcy relief, and to identify themselves as debt relief agencies.

The plaintiffs in this litigation — the law firm Milavetz, Gallop & Milavetz, among others — filed a preenforcement suit seeking declaratory relief, arguing they not bound by the law's provisions and therefore can freely advise clients to incur additional debt and need not make any disclosures in their advertising. The District Court found that “debt relief agency” does not include attorneys and that certain sections of the law are unconstitutional as applied to that class of professionals. The U.S. Court of Appeals for the Eighth Circuit affirmed in part and reversed in part, rejecting the District Court’s conclusion that attorneys are not “debt relief agencies” but upholding the law's disclosure requirements to attorneys, and finding unconstitutional the prohibition on debt relief agencies from advising assisted persons to incur any additional debt in contemplation of bankruptcy even when the advice constitutes prudent pre-bankruptcy planning.