Source: http://www.bankruptcylitigationblog.com/archives/us-supreme-court-cases-us-supreme-court-on-justice-holmes-169th-bday-holds-in-milavetz-that-the-bankruptcy-codes-speech-restrictions-on-attorneys-do-not-turn-them-into-ruthless-drones.html
Timestamp: 2013-05-26 07:58:25
Document Index: 391305946

Matched Legal Cases: ['§526', '§ 526', '§ 526', '§ 526', '§ 526', '§ 526', '§ 526', '§ 526']

Bankruptcy Litigation Blog: US Supreme Court on Justice Holmes' 169th B-day Holds in Milavetz that the Bankruptcy Code's Speech Restrictions on Attorneys Do Not Turn Them into Ruthless Drones
Home > US Supreme Court Cases > US Supreme Court on Justice Holmes' 169th B-day Holds in Milavetz that the Bankruptcy Code's Speech Restrictions on Attorneys Do Not Turn Them into Ruthless Drones > Monday, March 8, 2010 | Posted By Steve Jakubowski | 1 Comments | US Supreme Court on Justice Holmes' 169th B-day Holds in Milavetz that the Bankruptcy Code's Speech Restrictions on Attorneys Do Not Turn Them into Ruthless Drones
Back in the good old days when bashing BAPCPA was in vogue, I posited here that BAPCPA's "debt relief agency" provisions "look more like an effort to create a consumer bankruptcy lawyer clone who, much like the ever-multiplying Agent Smith from The Matrix-Reloaded, speaks and does precisely as directed with ruthless efficiency." Today's unanimous opinion from Justice Sonia Sotomayor (with concurrences from Justices Scalia and Thomas) tells us not to worry because while attorneys in fact are "debt relief agents" under the Code, §526(a)(4) "prohibits a debt relief agency only from advising a debtor to incur more debt when the impelling reason for the advice is the anticipation of bankruptcy." Milavetz, Gallop & Milavetz, P.A., v. United States, No. 08-1119 (Op. at 13). As with most bankruptcy decisions from the Supreme Court, the path taken to the holding is more interesting than the actual holding itself. This post examines two aspects of that road:
First, the Court's discussion of the application of the "plain meaning" rule and the relevance of legislative history; and
Second, the Court's recognition of the ethical boundaries of the attorney-client relationship and, in particular, the line where advice crosses into conspiracy. 1. Attorneys as "Debt Relief Agents" and Footnote 3's "Bridge Too Far"
This first conclusion comes as no surprise as the attorneys' arguments "failed to persuade [the Court] to disregard the statute's plain language." (Op. at 7). But rather than stop at plain meaning, the Court dropped a footnote finding support for the plain meaning in BAPCPA's legislative history (Op. at 6, n. 3). This single footnote prompted Justice Scalia to write a separate concurring opinion just so that he could attack the premise of Footnote 3.
In Part II, Section B of my BAPCPA outline, entitled BAPCPA's "Plain Meaning" Not Followed, I reviewed five cases in the first year following BAPCPA's enactment where bankruptcy judges were so confounded by BAPCPA that they felt compelled to deviate from its "plain meaning" in order to avoid virtually nullifying certain of its key provisions. Justice Scalia's concurrence highlights the problem facing bankruptcy lawyers who attempt to rely upon the legislative history of BAPCPA for interpreting an ambiguous statutory provision. He wrote:
The Court acknowledges that nothing can be gained by this superfluous citation (it admits the footnote is “unnecessary in light of the statute's unambiguous language,” ante, at 6, n. 3). But much can be lost. Our cases have said that legislative history is irrelevant when the statutory text is clear. See, e.g., United States v. Gonzales, 520 U.S. 1, 6 (1997); Connecticut Nat. Bank v. Germain, 503 U.S. 249, 254 (1992). The footnote advises conscientious attorneys that this is not true, and that they must spend time and their clients' treasure combing the annals of legislative history in all cases: To buttress their case where the statutory text is unambiguously in their favor; and to attack an unambiguous text that is against them. If legislative history is relevant to confirm that a clear text means what it says, it is presumably relevant to show that an apparently clear text does not mean what it seems to say. Even for those who believe in the legal fiction that committee reports reflect congressional intent, footnote 3 is a bridge too far.
2. § 526(a)(4)'s Narrow Scope Does Not Impair the Attorney-Client Relationship
Here, the Justices unanimously agree that § 526(a)(4)'s prohibition against a debt relief agent's "advis[ing] an assisted person ... to incur more debt in contemplation of" filing for bankruptcy is limited to "advising a debtor to incur more debt because the debtor is filing for bankruptcy, rather than for a valid purpose." (Op. at 13). To the Court, the "controlling question ... is whether the impelling reason for 'advis[ing] an assisted person ... to incur more debt" was the prospect of filing for bankruptcy." Additionally, the Court held, "'load[ing] up' on debt with the expectation of obtaining its discharge ... is abusive per se" (Op. at 14) (emphasis added). (That should seal the fate of those debtors fighting dischargeability under Sections 523(a)(2), (4), and (6) who "loaded up on debt" in advance of the filing).
Equally important for those looking for guidance on the Court's tools of statutory interpretation in bankruptcy is the Court's statement, citing United States v. Granderson, 511 U.S. 39, 55 (1994): "That '[n]o other solution yields as sensible a' result further persuades us of the correctness of this narrow reading." (Op. at 15). The Court reasoned:
It would make scant sense to prevent attorneys and other debt relief agencies from advising individuals thinking of filing for bankruptcy about options that would be beneficial to both those individuals and their creditors. That construction serves none of the purposes of the Bankruptcy Code or the amendments enacted through the BAPCPA. Milavetz itself acknowledges that its expansive view of § 526(a)(4) would produce absurd results; that is one of its bases for arguing that “debt relief agency” should be construed to exclude attorneys. Because the language and context of § 526(a)(4) evidence a more targeted purpose, we can avoid the absurdity of which Milavetz complains without reaching the result it advocates.
For the same reason, we reject Milavetz's suggestion that § 526(a)(4) broadly prohibits debt relief agencies from discussing covered subjects instead of merely proscribing affirmative advice to undertake a particular action. Section 526(a)(4) by its terms prevents debt relief agencies only from “advis[ing]” assisted persons “to incur” more debt. Covered professionals remain free to “tal[k] fully and candidly about the incurrence of debt in contemplation of filing a bankruptcy case.” Brief for Milavetz. Section 526(a)(5) requires professionals only to avoid instructing or encouraging assisted persons to take on more debt in that circumstance. Cf. ABA Model Rule of Professional Conduct 1.2(d) (2009) (“A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law”). Even if the statute were not clear in this regard, we would reach the same conclusion about its scope because the inhibition of frank discussion serves no conceivable purpose within the statutory scheme. Cf. Johnson v. United States, 529 U.S. 694, 706, n. 9 (2000). (Op. at 16) (emphasis in original).
In the end, the Court rightly placed its ruling in the context of the ethical canons and rules that govern our profession. A "full and frank" discussion about the consequences of a client's conduct is always permitted, the Court stated, and § 526(a)(4) "as narrowly construed, presents no impediment to [such] discussions. (Op. at 16, n. 5). Having such discussions, the Court reaffirms, is not the equivalent of providing "advice to incur more debt that is principally motivated [or impelled] by [the expectation of filing for bankruptcy and obtaining a discharge]." (Op. at 18, n. 6). Such advice, the Court concluded, besides being a violation of § 526(a)(4), is a violation of the rules of professional conduct governing attorneys in every State of the Union. In essence, the Court is saying, attorneys never should be giving "impelling" advice to "load up on debt" in advance of a bankruptcy filing anyway, so there's no harm--nor is it inappropriate--for Congress to formally legislate against such advice.
* * * As we are often reminded, the Court is an institution steeped in tradition, so perhaps it is fitting that this opinion on the scope of an attorney's free speech rights is released on the 169th birthday of Justice Oliver Wendell Holmes, Jr., who authored Schenck v. United States, 247 U.S. 47 (1919), perhaps the best known 1st Amendment opinion in history for its hypothetical on the 1st Amendment rights of a person who yells fire in a crowded theater. There, Justice Holmes famously wrote:
We admit that, in many places and in ordinary times, the defendants, in saying all that was said in the circular, would have been within their constitutional rights. But the character of every act depends upon the circumstances in which it is done. Aikens v. Wisconsin, 195 U. S. 194, 205-06 (1904). The most stringent protection of free speech would not protect a man in falsely shouting fire in a theatre and causing a panic. It does not even protect a man from an injunction against uttering words that may have all the effect of force. Gompers v. Bucks Stove & Range Co., 221 U. S. 418, 439 (1911). The question in every case is whether the words used are used in such circumstances and are of such a nature as to create a clear and present danger that they will bring about the substantive evils that Congress has a right to prevent. It is a question of proximity and degree. When a nation is at war, many things that might be said in time of peace are such a hindrance to its effort that their utterance will not be endured so long as men fight, and that no Court could regard them as protected by any constitutional right. It seems to be admitted that, if an actual obstruction of the recruiting service were proved, liability for words that produced that effect might be enforced. In his acclaimed book, Perilous Times: Free Speech in Wartime from The Sedition Act of 1798 to The War on Terrorism, Professor Geoff Stone writes that Justice Holmes' "clear and present danger" rule is a corollary of the "punish the actor, not the speaker" principle that "lies at the very core of the struggle to define the limits of free speech in wartime." (p. 10). In these perilous times, we would be well served to contemplate the issues raised by Professor Stone's book (which is easy to do on Google Books, or can be had for a ridiculously low $1.66 on Amazon). As Professor Stone reminds us in a 2004 interview while promoting the book:
Democracy is always a work in progress. We can never be complacent about our liberties. Just as we are now trying very self-consciously to build a culture of democracy in Iraq, so too must we constantly reaffirm and reinvent American democracy. When the people stop thinking about their rights — and the rights of others — all is lost. An important goal of Perilous Times is to contribute to that ongoing process of national self-discovery and reaffirmation. Finally, here's a link to an excellent 2006 C-Span interview with Professor Stone and Judge Posner on the subject of National Security and Free Speech.
* * * Thanks for reading, and please don't forget to follow me on Twitter for interesting bankruptcy reading that you won't find on this blog. And special thanks to the dedicated, hard-working attorneys at the Milavetz firm for providing much need clarity in this Bramble Bush of a statute (i.e., BAPCPA) that--as this case proves--has more hidden traps than an Indiana Jones movie.
Written By:Knute Rife On April 6, 2010 8:08 PM
I hope Scalia isn't planning on using The Federalist any time soon for constitutional interpretation. It's even farther removed from those he made the law, namely the state ratifying assemblies.