Constitutional Challenge to BAPCPA:

The American Bankruptcy Institute reports that a Minnesota firm has filed a constitutional challenge to the bankruptcy reform legislation:

The law firm Milavetz, Gallop & Milavetz P.A. is challenging the constitutionality of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) for allegedly violating the First and Fifth Amendment rights of attorneys and consumers. The declaratory judgment petition challenges BAPCPA's ability to limit attorneys' advice to clients and would stop classifying attorneys as "debt relief agencies." The complaint alleges that the vagueness and overbreadth of the new law creates a chilling effect on the public's right to receive information and advice from attorneys and limits the freedom of expression of attorneys, among other grounds, according to the firm.

The Complaint is available here.

I have not yet had a chance to dig into the First Amendment issues here, so for now I will leave it to others to hash out the strength of the claim.

Nobody (mail):
seems like a slam dunk.
11.16.2005 10:22am
Jimwa (mail):
The banking industry has little respect for the U.S. Constitution, and Congress seems to avert their eyes. Even the President is shredding the effectiveness of the U.S. Constitution.

Not sure how far this lawsuit will go. The Supreme Court seems to have been REinterpreting the U.S. Constitution for decades. They'd probably find a way to make limiting attorney's advice to clients constitutional if hard pressed. Why not? They effectively nullified state usury laws with the 1978 decision "Marquette National Bank of Minn. v. First National Bank of Omaha" showing a lack of concern for existing law and abdicating to Congress to deal with the usury issue. (They prioritized the rights of a corporation over the natural person.) Yet Congress is heavily influenced by the banking industry, and was, and is, unlikely to do something to offend their largest campaign contributors.
11.16.2005 11:12am
Dick King:
I am neither an attorney nor a debt relief agent. However, this case seems bizairre to me.

There are lots of things we don't let our attorneys say to their clients already, for a lot of reasons. For example, we don't let our attorneys advise their clients to purjure themselves, even when that's their best strategy in a particular case because the lawyer believes that the perjury cannot be discovered or will not be prosecuted. Is this a first amendment issue?

Furthermore, just because a person is an attorney doesn't mean that he is exempt from the requirements of other roles when he is acting in that role.

11.16.2005 12:29pm
Nobody (mail):
Dick King, the issue here, as set out in the complaint, is that the bankruptcy law prohibits lawyers from advising their clients to do certain things that are perfectly LEGAL. We're not talking about advising a client to perjure himself. We're talking about advising a client to LEGALLY order his affairs in advance of filing bankruptcy. An example given in the complaint (which I don't have in front of me, but which I read this morning) is that a lawyer can't advise his client to refinance an existing mortgage in advance of filing bankruptcy. It's perfectly legal for the client to refinance, but the lawyer can't tell him that. If the client can't obtain advice from his own lawyer as to what is legal, then where can he obtain it?
11.16.2005 1:00pm
Nobody (mail):
Or should lawyers have a monopoly on knowing what the law is and what it permits?
11.16.2005 1:03pm
VFB (mail):
The first amendment protects the free speech rights of non-attorneys as well as attorneys. Thus, the rule that non-attorneys cannot give legal advice is itself a violation of the first amendment. The plaintiffs in this action are asking the court to declare that the first amendment only applies to attorneys, and not “debt relief agencies” whose members are not admitted to the bar.
11.16.2005 1:31pm
Nobody (mail):
Conveniently, no such law exists. Non-lawyers are free to give legal advice, and do so every day. They are not permitted to practice law. The phrase "the first amendment only applies to attorneys" appears nowhere in the complaint.

Why are you lying?
11.16.2005 1:50pm
VFB (mail):

--- Non-lawyers are free to give legal advice, and do so every day. They are not permitted to practice law. ---

The “practice of law” is defined to include the giving of legal advice. Thus, you are making a distinction that does not exist. See, “Various acts… constitute the practice of law, and the persons performing them, without being admitted, are guilty of the unauthorized practice of law. Such activities include … conferring with clients regarding topics that were of a legal nature.” 7 C.J.S. Attorney &Client § 30.
11.16.2005 3:12pm
Nobody (mail):
What does this have to do with the constitutionality of the Bankruptcy Code? And where in the complaint does it say that the first amendment applies only to attorneys?
11.16.2005 3:34pm
Dilan Esper (mail) (www):
The issue of whether talking about what the law constitutes "giving legal advice" that can subject one to prosecution for unauthorized practice of law is beyond the scope of this discussion (and really doesn't have anything to do with the claims by the plaintiffs in this case, which assert that the Bankruptcy law precludes lawyers from giving advice to their clients).

But just for everyone's edification, the Supreme Court has never really tackled the issue of to what extent unauthorized practice of law statutes are subject to constitutional limitations. There have been lower court cases-- involving such things as the book "How to Avoid Probate" and the publications of Nolo Press, as well as the activities of legal document assistant services such as We the People. And there has been a movement in some states to clarify the law so as to define certain sorts of activities (including writing about the law or providing assistance with legal documents) as not constituting the practice of law.

But nobody really knows whether the First Amendment actually permits the government to restrict nonlawyers from talking about the law, and if so, how broadly such restrictions may sweep. And there's enough litigation in this area that I think the Supreme Court ought to take a case and clarify this.
11.16.2005 3:45pm
VFB (mail):
The first paragraph of the complaint states, "the BAPCPA's restrictions … if applied to attorneys, illegally restricts the public’s right to receive information from attorneys, presumptively protected under the First Amendment of the United States Constitution.” (Emphases added.) I think it is pretty clear that their position is that there is a greater first amendment right being violated because attorneys are being limited in what they can say than non-attorneys. Further, page 13, para. 3 of the prayer for relief requests that “attorneys shall be excused from compliance with those requirements and provisions. Thus, the plaintiff is stating that attorneys have greater first amendment rights than others to give legal advice.
11.16.2005 3:54pm
Nobody (mail):
No, the plaintiff, a law firm, is asserting its own constitutional rights. It has no standing to assert the constitutional rights of others. The plaintiff is bringing a limited challenge to the law. If others want to bring their own challenge, they're free to do so.
11.16.2005 4:05pm
VFB (mail):

--- No, the plaintiff, a law firm, is asserting its own constitutional rights. It has no standing to assert the constitutional rights of others. ---

Actually since this is an action for declaratory judgment, by its very nature it applies to others similarly situated.

If the court finds the provision unconstitutional, it can result in one of three possibilities, depending on how the court arrives at its conclusion.

1. The BAPCPA's restrictions are unconstitutional as applied to Milavetz, Gallop and Milavetz, but no one else.
2. The BAPCPA's restrictions are unconstitutional as applied to attorneys, but not non-attorneys.
3. The BAPCPA's restrictions are unconstitutional as applied to everyone.

I assume you would agree that the first possibility is out. Each law firm would not have to file a separate action to ensure that the provision applies to it. This is because declaratory relief applies to those similarly situated, even if they are not a party to the action.

The complaint implies that the court should state the second rule over the third. The only reason to go with the second rule over the third is if you believe that non-attorneys are not similarly situated to attorneys under the first amendment. The first amendment gives no greater rights to attorneys than non-attorneys, thus the position advocated by the plaintiff is wrong.
11.16.2005 4:56pm
Toquam (mail):
The "bright line" seems to be "do you offer advice about filing a bankruptcy proceeding"?

A not-for-profit credit counseling agency is limited to an accomodation with your creditors that looks a lot like a Chapter 13 plan.

A "debt relief agency" or bankruptcy lawyer (or non-lawyers who can prepare papers, etc. - the statute seems to be open) might add, "I can help you file a chapter 7 or a Chapter 13." Whic seems to mean, "I am admitted to practice before the local bankruptcy court and subject to legal ethics, malpractice, etc."

The problem for bankruptcy lawyers is the serious limits on a Chapter 7, plus holding the lawyer liable for closely checking the details of the client's financial disclosure. Many talk about dropping individual clients or boosting fees.

If this is speech, it looks like all the other legal speech which is regulated. You must be admitted to bring a case. E.g., your negligent speech can be called malpractice, and not disclosing a conflict of interest may make you liable even if your speech (advice) was valid.

If you compare this to the SEC ethics rule or Spiegel, I'd say the new regime makes good sense.

Myself, I'd let the credit counselors check the financial disclosure, let either the credit counselor or lawyer apply the relatively simple Chapter 7 eligibility, and then let the debtor make up her or his mind.
11.16.2005 7:58pm