N os. 08-5901-cv (Con), 09-0015-cv (X A P)
C onnecticut Bar Association v. U nited States
UNITED STATES COURT OF APPEALS
F OR THE S ECOND C IRCUIT
August Term, 2009
(Argued: September 24, 2009 Decided: September 7, 2010)
Docket Nos. 08-5901-cv (Con), 09-0015-cv (XAP)1
C ONNECTICUT B AR A SSOCIATION, N ATIONAL A SSOCIATION OF C ONSUMER
B ANKRUPTCY A TTORNEYS, C HARLES A. M AGLIERI, E UGENE S.
M ELCHIONNE, W AYNE A. S ILVER, IRA B. C HARMOY, J EFFREY M. S KLARZ,
G ERALD A. R OISMAN, B ROWN & W ELSH PC, A NITA J OHNSON,
Plaintiffs-Appellants-Cross-Appellees,
—v.—
U NITED S TATES OF A MERICA, E RIC H. H OLDER, J R., A TTORNEY G ENERAL
OF THE U NITED S TATES, D IANA G. A DAMS, U NITED S TATES T RUSTEE,
Defendants-Appellees-Cross-Appellants.2
1
The appeal in docket no. 08-4797-cv was withdrawn by stipulation on January 21,
2009.
2
Pursuant to Federal Rule of Appellate Procedure 43(c)(2), Attorney General Eric H.
Holder, Jr., is automatically substituted for former Attorney General Michael B. Mukasey.
The Clerk of the Court is directed to amend the caption to read as shown above.
1
Before:
L EVAL, R AGGI, Circuit Judges, and G LEESON, District Judge.3
Cross-appeals from a judgment of the United States District Court for the District of
Connecticut (Christopher F. Droney, Judge), granting in part and denying in part defendants’
motion to dismiss plaintiffs’ facial First Amendment and due process challenges to various
provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub.
L. No. 109-8, 119 Stat. 23 (2005), see 11 U.S.C. §§ 526(a)(4), 527(a) and (b), 528(a)(1)-(4)
and (b)(2); and granting in part and denying in part plaintiffs’ motion to enjoin defendants’
enforcement of the challenged provisions.
A FFIRMED in part, V ACATED and R EMANDED in part, and injunction D ISSOLVED.
B ARRY S. F EIGENBAUM (Jonathan S. Massey, Massey & Gail LLP,
Washington, D.C., on the brief), Rogin Nassau LLC, Hartford,
Connecticut, for Plaintiffs-Appellants-Cross-Appellees.
M ARK B. S TERN (Tony West, Assistant Attorney General, Mark R. Freeman,
Attorney, Civil Division, United States Department of Justice, on the
brief), on behalf of Nora R. Dannehy, Acting United States Attorney
for the District of Connecticut, for Defendants-Appellees-Cross-
Appellants.
3
District Judge John Gleeson of the United States District Court for the Eastern
District of New York, sitting by designation.
2
R EENA R AGGI, Circuit Judge:
Plaintiffs, the Connecticut Bar Association; the National Association of Consumer
Bankruptcy Attorneys; the law firm of Brown & Welsh P.C.; attorneys Charles Maglieri,
Eugene S. Melchionne, Wayne A. Silver, Ira B. Charmoy, Jeffrey M. Sklarz, and Gerald A.
Roisman; and debtor Anita Johnson, sued defendants, the United States, the Attorney General
of the United States, and United States Trustee Diana G. Adams, in the United States District
Court for the District of Connecticut (Christopher F. Droney, Judge) for a judgment declaring
unconstitutional various provisions of the Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005, Pub. L. No. 109-8, 119 Stat. 23 (2005) (“BAPCPA”), and enjoining
their enforcement. Plaintiffs now appeal from a November 7, 2008 judgment that granted
in part defendants’ motion to dismiss the complaint. See Connecticut Bar Ass’n v. United
States, 394 B.R. 274, 280 (D. Conn. 2008). Defendants, in turn, cross-appeal the judgment
insofar as it granted in part plaintiffs’ motion for declaratory and injunctive relief.
We review these cross-appeals with a benefit not available to the district court: the
Supreme Court’s decision in Milavetz, Gallop & Milavetz, P.A. v. United States, 130 S. Ct.
1324 (2010), which clarified the construction of some of the statutory sections here at issue.
Following Milavetz, and for the reasons stated in this opinion, we affirm that part of the
judgment ordering dismissal and vacate that part of the judgment ordering declaratory relief.
We dissolve the injunction and remand the case for further proceedings consistent with this
opinion.
3
I. Background
A. BAPCPA
In 2005, Congress enacted BAPCPA, intended as a comprehensive reform measure
to curb abuses and improve fairness in the federal bankruptcy system. See id. at 1329-30;
see also H.R. Rep. No. 109-31, reprinted in 2005 U.S.C.C.A.N. 88, 89 (describing purpose
of BAPCPA as “to improve bankruptcy law and practice by restoring personal responsibility
and integrity in the bankruptcy system and ensure that the system is fair for both debtors and
creditors”). The BAPCPA provisions here at issue, codified at 11 U.S.C. §§ 526-528, govern
the conduct of “debt relief agencies,” defined at 11 U.S.C. § 101(12A) as “any person who
provides any bankruptcy assistance to an assisted person 4 in return for the payment of money
or other valuable consideration, or who is a bankruptcy petition preparer.” Certain persons
and entities are specifically excluded from this definition. Attorneys are not among them.5
4
Title 11 U.S.C. § 101(3) defines an “assisted person” as “any person whose debts
consist primarily of consumer debts and the value of whose nonexempt property is less than
$175,750,” an amount to be periodically adjusted for inflation, see id. § 104.
5
Section 12A states that “[t]he term ‘debt relief agency’ . . . does not include” the
following: (A) “an officer, director, employee or agent” of a debt relief agency; (B) a tax-
exempt “nonprofit organization”; (C) “a creditor of [a person receiving bankruptcy
assistance], to the extent the creditor is assisting such assisted person to restructure any debt
owed by such assisted person to the creditor”; (D) a “depository institution” or “credit
union,” as defined by specified federal law, or the affiliate or subsidiary of such an
institution; or (E) “an author, publisher, distributor or seller of works” subject to federal
copyright protection, “when acting in such capacity.” 11 U.S.C. § 101(12A).
4
B. Plaintiffs’ Constitutional Challenge
Plaintiffs submit that any construction of “debt relief agency” that includes attorneys
renders certain provisions of BAPCPA unconstitutional. Specifically attacked as facially
violative of the First Amendment’s guarantee of free speech are the following sections of
Title 11: (1) § 526(a)(4), which prohibits debt relief agencies from advising their clients “to
incur more debt in contemplation of [bankruptcy] or to pay an attorney or bankruptcy petition
preparer fee or charge for services performed as part of preparing for or representing a
debtor” in a bankruptcy case;6 (2) § 527(a) and (b), which require a debt relief agency to
provide an assisted person with certain notices;7 (3) § 528(a)(1)-(2), which require a debt
6
Section 526 states in pertinent part:
(a) A debt relief agency shall not –
...
(4) advise an assisted person or prospective assisted person to incur
more debt in contemplation of such person filing a case under this title
or to pay an attorney or bankruptcy petition preparer fee or charge for
services performed as part of preparing for or representing a debtor in
a case under this title.
11 U.S.C. § 526(a)(4).
7
Although plaintiffs’ complaint references § 527 generally, their arguments to this
court address only § 527(a)(2)(C) and (b). In the district court, plaintiffs expressly limited
their challenge to § 527(a)(2) and (b). See Pls.’ Reply Mem. Supp. Mot. Prelim. Inj. at 27.
Accordingly, any challenge to other provisions of § 527 is waived. See In re Enron Corp.,
419 F.3d 115, 126 (2d Cir. 2005) (noting that “federal appellate court will generally not
consider an issue or argument not raised in the district court” (alteration and internal
quotation marks omitted)). The challenged provisions of § 527 state as follows:
(a) A debt relief agency providing bankruptcy assistance to an assisted person
5
shall provide –
...
(2) to the extent not covered in the written notice described in
paragraph (1), and not later than 3 business days after the first date on
which a debt relief agency first offers to provide any bankruptcy
assistance services to an assisted person, a clear and conspicuous
written notice advising assisted persons that –
(A) all information that the assisted person is required to provide
with a petition and thereafter during a case under this title is
required to be complete, accurate, and truthful;
(B) all assets and all liabilities are required to be completely and
accurately disclosed in the documents filed to commence the
case, and the replacement value of each asset as defined in [11
U.S.C. §] 506 must be stated in those documents where
requested after reasonable inquiry to establish such value;
(C) current monthly income, the amounts specified in [11 U.S.C.
§] 707(b)(2), and, in a case under chapter 13 of this title,
disposable income (determined in accordance with [11 U.S.C.
§] 707(b)(2)), are required to be stated after reasonable inquiry;
and
(D) information that an assisted person provides during their
case may be audited pursuant to this title, and that failure to
provide such information may result in dismissal of the case
under this title or other sanction, including a criminal sanction.
(b) A debt relief agency providing bankruptcy assistance to an assisted person
shall provide each assisted person at the same time as the notices required
under subsection (a)(1) the following statement, to the extent applicable, or
one substantially similar. The statement shall be clear and conspicuous and
shall be in a single document separate from other documents or notices
provided to the assisted person:
“IMPORTANT INFORMATION ABOUT BANKRUPTCY ASSISTANCE
6
SERVICES FROM AN ATTORNEY OR BANKRUPTCY PETITION
PREPARER.
“If you decide to seek bankruptcy relief, you can represent yourself, you can
hire an attorney to represent you, or you can get help in some localities from
a bankruptcy petition preparer who is not an attorney. THE LAW REQUIRES
AN ATTORNEY OR BANKRUPTCY PETITION PREPARER TO GIVE
YOU A WRITTEN CONTRACT SPECIFYING WHAT THE ATTORNEY
OR BANKRUPTCY PETITION PREPARER WILL DO FOR YOU AND
HOW MUCH IT WILL COST. Ask to see the contract before you hire
anyone.
“The following information helps you understand what must be done in a
routine bankruptcy case to help you evaluate how much service you need.
Although bankruptcy can be complex, many cases are routine.
“Before filing a bankruptcy case, either you or your attorney should analyze
your eligibility for different forms of debt relief available under the
Bankruptcy Code and which form of relief is most likely to be beneficial for
you. Be sure you understand the relief you can obtain and its limitations. To
file a bankruptcy case, documents called a Petition, Schedules and Statement
of Financial Affairs, as well as in some cases a Statement of Intention need to
be prepared correctly and filed with the bankruptcy court. You will have to
pay a filing fee to the bankruptcy court. Once your case starts, you will have
to attend the required first meeting of creditors where you may be questioned
by a court official called a ‘trustee’ and by creditors.
“If you choose to file a chapter 7 case, you may be asked by a creditor to
reaffirm a debt. You may want help deciding whether to do so. A creditor is
not permitted to coerce you into reaffirming your debts.
“If you choose to file a chapter 13 case in which you repay your creditors what
you can afford over 3 to 5 years, you may also want help with preparing your
chapter 13 plan and with the confirmation hearing on your plan which will be
before a bankruptcy judge.
“If you select another type of relief under the Bankruptcy Code other than
7
relief agency to execute a written contract with an assisted person;8 and (4) § 528(a)(3)-(4)
and (b)(2), which mandate language to be included in debt relief agency advertisements.9
chapter 7 or chapter 13, you will want to find out what should be done from
someone familiar with that type of relief.
“Your bankruptcy case may also involve litigation. You are generally
permitted to represent yourself in litigation in bankruptcy court, but only
attorneys, not bankruptcy petition preparers, can give you legal advice.”
11 U.S.C. § 527(a)(2), (b).
8
The contract provisions of § 528 state as follows:
(a) A debt relief agency shall –
(1) not later than 5 business days after the first date on which such
agency provides any bankruptcy assistance services to an assisted
person, but prior to such assisted person’s petition under this title being
filed, execute a written contract with such assisted person that explains
clearly and conspicuously –
(A) the services such agency will provide to such assisted
person; and
(B) the fees or charges for such services, and the terms of
payment;
(2) provide the assisted person with a copy of the fully executed and
completed contract . . . .
11 U.S.C. § 528(a)(1)-(2).
9
The advertising provisions of § 528 state as follows:
(a) A debt relief agency shall –
...
(3) clearly and conspicuously disclose in any advertisement of
8
Plaintiffs also contend that the contract requirements of § 528(a)(1)-(2) violate the Fifth
Amendment’s Due Process Clause.
C. The District Court Decision
In considering these arguments on plaintiffs’ motion for declaratory and injunctive
relief and defendants’ motion for dismissal, the district court construed the term “debt relief
bankruptcy assistance services or of the benefits of bankruptcy directed
to the general public (whether in general media, seminars or specific
mailings, telephonic or electronic messages, or otherwise) that the
services or benefits are with respect to bankruptcy relief under this title;
and
(4) clearly and conspicuously use the following statement in such
advertisement: “We are a debt relief agency. We help people file for
bankruptcy relief under the Bankruptcy Code.” or a substantially
similar statement.
...
(b)
...
(2) An advertisement, directed to the general public, indicating that the
debt relief agency provides assistance with respect to credit defaults,
mortgage foreclosures, eviction proceedings, excessive debt, debt
collection pressure, or inability to pay any consumer debt shall –
(A) disclose clearly and conspicuously in such advertisement
that the assistance may involve bankruptcy relief under this title;
and
(B) include the following statement: “We are a debt relief
agency. We help people file for bankruptcy relief under the
Bankruptcy Code.” or a substantially similar statement.
11 U.S.C. § 527(a)(3)-(4), (b)(2).
9
agency” broadly to include attorneys representing not only consumer debtors but any person
who met the statutory definition of “assisted person,” whether or not a bankruptcy
proceeding concerned that person’s own debts. See Connecticut Bar Ass’n v. United States,
394 B.R. at 280 (citing Erwin Chemerinsky, Constitutional Issues Posed in the Bankruptcy
Abuse Prevention and Consumer Protection Act of 2005, 79 Am. Bankr. L.J. 571, 576-77
(2005)). The district court proceeded to hold that (1) § 526(a)(4)’s proscription on certain
advice to assume debt was an unconstitutionally overbroad restriction on speech, see id. at
281-84; (2) the disclosure requirements of § 527 did not violate the First Amendment, see
id. at 284-87; (3) § 528(a)(1)-(2)’s contract requirements did not violate either the First
Amendment or the Due Process Clause, see id. at 287-88; and (4) the advertising mandates
of § 528(a)(3)-(4) and (b)(2) violated the First Amendment, but only insofar as they applied
to attorneys representing persons other than consumer debtors, see id. at 288-91. The district
court dismissed those parts of plaintiffs’ complaint found not to allege constitutional
violations and granted plaintiffs’ motion for a pre-enforcement injunction with respect to
those provisions of §§ 526 and 528 found to violate the First Amendment. Both sides
appealed.
D. The Milavetz Decision
After briefing and oral argument in this appeal, the Supreme Court decided Milavetz,
Gallop & Milavetz, P.A. v. United States, 130 S. Ct. 1324, which resolved a number of the
questions here at issue. Specifically, the Supreme Court held that the term “debt relief
10
agency” does apply to attorneys, see id. at 1331-32, but only those assisting consumer
debtors contemplating bankruptcy, see id. at 1341.
The Supreme Court also construed § 526(a)(4)’s prohibition on advising clients to
take on debt “in contemplation of” bankruptcy to apply only to “advising a debtor to incur
more debt because the debtor is filing for bankruptcy, rather than for a valid purpose.” Id.
at 1336. The Court explained that such advice “will generally consist of advice to ‘load up’
on debt with the expectation of obtaining its discharge – i.e., conduct that is abusive per se.”
Id. The Court concluded that when the section was so construed, it raised no First
Amendment overbreadth or vagueness concerns. See id. at 1337-38.
Further, the Supreme Court rejected a First Amendment challenge to the advertising
requirements of § 528(a)(3)-(4) and (b)(2). Concluding that the requirements pertained to
speech that was commercial in nature and compelled only disclosures, the Court determined
that the appropriate standard of review was the rational basis test set forth in Zauderer v.
Office of Disciplinary Counsel, 471 U.S. 626 (1985). The Court held that the advertising
requirements passed this test because they “govern only professionals who offer bankruptcy-
related services to consumer debtors,” and, as such, reasonably relate to the government’s
interest in preventing deception of consumer debtors contemplating bankruptcy. See
Milavetz, Gallop & Milavetz, P.A. v. United States, 130 S. Ct. at 1341.
II. Discussion
Plaintiffs submit that the district court erred in construing the term “debt relief
11
agency” in 11 U.S.C. § 101(12A) to include attorneys; and in dismissing their constitutional
challenges to § 527(a) and (b) and § 528(a)(1)-(2) in their entirety, and to § 528(a)(3)-(4) and
(b)(2) to the extent those provisions apply to attorneys advising consumer debtors
contemplating bankruptcy. Defendants, in turn, fault the district court for declaring
unconstitutional § 526(a)(4)’s prohibition on advice to assume debt, as well as the advertising
requirements of § 528(a)(3)-(4) and (b)(2) to the extent those requirements apply to attorneys
providing bankruptcy assistance to persons other than consumer debtors. We review
constitutional challenges to a federal statute de novo. See United States v. Dhafir, 461 F.3d
211, 215 (2d Cir. 2006).
A. Attorneys Providing Bankruptcy Assistance to Consumer Debtors Qualify as
“Debt Relief Agencies”
At its core, plaintiffs’ complaint sought a judicial declaration that the challenged
statutes do not apply to attorneys, either because the term “debt relief agency” does not
include attorneys, or because, if the term does include attorneys, the statutes violate the
Constitution. Plaintiffs’ first argument is now foreclosed by Milavetz, Gallop, & Milavetz,
P.A. v. United States, 130 S. Ct. at 1333, which holds that attorneys representing consumer
debtors can qualify as debt relief agencies.
The Supreme Court observed that the term “debt relief agency” was statutorily defined
as “‘any person who provides any bankruptcy assistance to an assisted person’ in return for
payment.” Id. at 1332 (quoting 11 U.S.C. § 101(12A)). While the statute specifically
12
excludes a variety of persons, attorneys are not among them. See id.10 In fact, the Court
noted that the definition of “bankruptcy assistance” includes a service, “the ‘provi[sion of]
legal representation with respect to a case or proceeding,’ § 101(4A),” that “may be provided
only by attorneys.” Id. (citing also 11 U.S.C. § 110(e)(2) (prohibiting bankruptcy petition
preparers from providing legal assistance)).11
The Court, nevertheless, determined that use of the term “assisted person” in the
§ 101(12A) definition of “debt relief agency” signaled that not all attorneys providing
bankruptcy assistance qualified as debt relief agencies. “Assisted person” is statutorily
defined as “any person whose debts consist primarily of consumer debts and the value of
whose nonexempt property is less than $175,750.” 11 U.S.C. § 101(3). From this definition,
“stated in terms of the person’s debts, . . . and from the text and structure of the debt-relief-
agency provisions in §§ 526, 527, and 528 . . . , including § 528’s disclosure requirements,”
the Supreme Court deemed it “evident” that §§ 526-528 “govern only professionals who
offer bankruptcy-related services to consumer debtors.” Milavetz, Gallop & Milavetz, P.A.
v. United States, 130 S. Ct. at 1341.
10
See supra at n.3 for persons statutorily excluded from definition of “debt relief
agency.”
11
The full definition of “bankruptcy assistance” is as follows: “any goods or services
sold or otherwise provided to an assisted person with the express or implied purpose of
providing information, advice, counsel, document preparation, or filing, or attendance at a
creditors’ meeting or appearing in a case or proceeding on behalf of another or providing
legal representation with respect to a case or proceeding under this title.” 11 U.S.C.
§ 101(4A).
13
Following this holding, we review plaintiffs’ constitutional challenge to the statutes
at issue with the understanding that the only attorneys qualifying as debt relief agencies are
those advising consumer debtors contemplating bankruptcy.
B. Standing
Before undertaking that constitutional review, we consider Milavetz’s effect on
plaintiffs’ standing to mount the instant pre-enforcement challenge. Although defendants did
not appeal the district court’s rejection of their standing challenge to attorney plaintiffs who
did not represent consumer debtors, see Connecticut Bar Ass’n v. United States, 394 B.R.
at 279, we remain obliged to ensure that an appeal presents a proper case or controversy, see
DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 340-41 (2006); New York Pub. Interest
Research Group v. Whitman, 321 F.3d 316, 324-25 (2d Cir. 2003).
With Milavetz clarifying that §§ 526-528 apply “only [to] professionals who offer
bankruptcy-related services to consumer debtors,” 130 S. Ct. at 1341, we are now compelled
to conclude that the plaintiff law firm of Brown & Welsh, which represents only creditors,
and attorney plaintiff Gerald Roisman, who also does not represent debtors in bankruptcy,
lack standing to pursue this case. Neither can demonstrate the requisite “actual and well-
founded fear” that the challenged statutes will be enforced against them. American
Booksellers v. Dean, 342 F.3d 96, 101 (2d Cir. 2003) (internal quotation marks omitted); see
Global Network Commc’ns, Inc. v. City of New York, 562 F.3d 145, 152 (2d Cir. 2009)
(holding standing lacking where unlicensed plaintiffs challenged regulations “affect[ing] only
14
entities operating under a license”). Accordingly, we vacate the declaratory judgment and
dissolve the injunction entered in favor of these plaintiffs, and we remand with directions to
dismiss the complaint as to them for lack of jurisdiction. See Warth v. Seldin, 422 U.S. 490,
498 (1975).
No such standing concern arises, however, with respect to either the remaining
attorney plaintiffs, who do represent consumer debtors in bankruptcy, or the institutional
plaintiffs, whose membership includes such attorneys. See id. at 511; Building & Trades
Council of Buffalo v. Downtown Dev., Inc., 448 F.3d 138, 144-50 (2d Cir. 2006).12 Debtor
plaintiff Anita Johnson also has standing as she asserts that the challenged laws interfere with
her “right to receive information and ideas.” Board of Educ., Island Trees Union Free Sch.
Dist. No. 26 v. Pico, 457 U.S. 853, 866-67 (1982); see also Virginia State Bd. of Pharmacy
v. Va. Citizens Consumer Council, Inc., 425 U.S. 748, 756-57 (1976) (recognizing First
12
It is not clear on the present record whether this conclusion applies to attorney
plaintiff Wayne Silver, who alleges that he has discontinued his representation of consumer
debtors based on a belief that the challenged statutory provisions conflict with his ethical
obligations. Allegations of a “subjective ‘chill’” are generally “not an adequate substitute
for a claim of specific present objective harm or a threat of specific future harm.” Laird v.
Tatum, 408 U.S. 1, 13-14 (1972); see Bordell v. Gen. Elec. Co., 922 F.2d 1057, 1060-61 (2d
Cir. 1991) (discussing plaintiff’s obligation to “substantiate his claim that the challenged
conduct has deterred him from engaging in protected activity”); accord Brooklyn Legal
Servs. Corp. v. Legal Servs. Corp., 462 F.3d 219, 226 (2d Cir. 2006). For the reasons
discussed with respect to plaintiffs whose standing is established, dismissal of the complaint
as to Silver would be warranted in any event, with the possible exception of a challenge to
§ 526(a)(4)’s attorney’s fee provision for reasons discussed infra n.13. Should Silver pursue
such a claim on remand, the district court should first determine his standing consistent with
this opinion.
15
Amendment right to receive information in context of commercial speech).
Accordingly, we proceed to the merits of these plaintiffs’ constitutional challenges.
C. First Amendment Challenge to § 526(a)(4)
Title 11 U.S.C. § 526(a)(4) prohibits a debt relief agency from advising an assisted
person “to incur more debt in contemplation of [bankruptcy] or to pay an attorney or
bankruptcy petition preparer fee or charge for services performed as part of preparing for or
representing a debtor” in a bankruptcy case. In the district court, plaintiffs submitted that
these prohibitions ran afoul of the First Amendment’s overbreadth doctrine. See Virginia v.
Hicks, 539 U.S. 113, 118-19 (2003) (holding that law is unconstitutionally overbroad if it
punishes “substantial” amount of protected free speech, when considered in relation to its
“plainly legitimate sweep” (internal quotation marks omitted)). Focusing on the statute’s “in
contemplation of” provision, the district court agreed, specifically rejecting defendants’
argument that the language should be construed as limited to “advice aimed at allowing the
debtor to take unfair advantage of debt discharge (by running up debt primarily because it
will not be repaid).” Connecticut Bar Ass’n v. United States, 394 B.R. at 283-84 (observing
“there is no indication in the statute that this prohibition is limited to advice to take on such
fraudulent debt”).
In Milavetz, however, the Supreme Court determined that the “in contemplation of”
provision warranted precisely that narrow construction. The Court construed the phrase to
“refer[] to a specific type of misconduct designed to manipulate the protections of the
16
bankruptcy system,” that is, “advice to incur more debt because of bankruptcy,” generally
consisting of “advice to ‘load up’ on debt with the expectation of obtaining its discharge,”
conduct that is abusive per se. Milavetz, Gallop & Milavetz, P.A. v. United States, 130 S.
Ct. at 1336. Having so construed the provision, the Court ruled that its proscription was not
unconstitutionally overbroad. See id. at 1334. Following Milavetz, this court similarly
rejected a pending facial overbreadth challenge to the “in contemplation of” provision of §
526(a)(4). See Adams v. Zelotes, 606 F.3d 34, 2010 WL 1960188, at *2 (2d Cir. 2010).
These binding precedents compel us to reach the same conclusion here. Accordingly,
we vacate the challenged declaratory judgment invalidating § 526(a)(4), and we dissolve the
injunction barring enforcement of that provision. On remand, we direct the district court to
dismiss plaintiffs’ constitutional challenge to the “in contemplation of” provision of
§ 526(a)(4).13
13
Although the district court’s judgment appears to prohibit enforcement of
§ 526(a)(4) in its entirety, the court did not discuss the “attorney’s fee” provision of that
statute as distinct from the “in contemplation of” provision. Nor have the parties emphasized
that part of the statute. Indeed, it was not until their reply brief on appeal that defendants
even referenced the attorney’s fee provision, challenging plaintiffs’ attempt to distinguish the
two § 526(a)(4) prohibitions in their responsive brief. See Reply Brief of Defendants-
Appellees at 20 (“Plaintiffs do not suggest that the district court analyzed the second clause
of section 526(a)(4), and their efforts to supply their own analysis provide no basis for
invalidating the statute.”).
On this record, we do not think the constitutionality of the attorney’s fee provision of
§ 526(a)(4) is properly before us on appeal. Issues raised for the first time in a reply brief
are generally deemed waived. See Norton v. Sam’s Club, 145 F.3d 114, 117 (2d Cir. 1998).
Here, we think the issue is not so much waived as insufficiently developed by the parties in
either the district court or this court. This is perhaps understandable given that the parties’
17
D. First Amendment Challenges to §§ 527 and 528
1. The Standard of Review
Plaintiffs assert that provisions of §§ 527 and 528 violate the First Amendment in
compelling debt relief agencies to provide certain written notices to their bankruptcy clients,
see 11 U.S.C. § 527(a) and (b); to execute written contracts with such clients, see id.
§ 528(a)(1)-(2); and to make particular disclosures in public advertising of bankruptcy
services, see id. § 528(a)(3)-(4) and (b)(2). In considering the parties’ cross-appeals from
the district court’s rulings on these First Amendment challenges, we must first identify the
applicable standard of review. Plaintiffs urge us to apply strict scrutiny, see Citizens United
v. Fed. Election Comm’n, 130 S. Ct. 876, 898 (2010) (explaining that strict scrutiny “requires
the Government to prove that the [challenged speech] restriction furthers a compelling
interest and is narrowly tailored to achieve that interest” (internal quotation marks omitted)),
arguing that the disclosures mandated by the challenged statutory provisions “are not
commercial speech” in that “they do not propose a commercial transaction. Rather, they
filings and arguments all pre-dated the Milavetz decision. Milavetz does not address the
constitutionality of the attorney’s fee provision of § 526(a)(4). See 130 S. Ct. at 1334 (noting
that only “in contemplation of” provision was there at issue); see also Adams v. Zelotes,
2010 WL 1960188, at *1 n.1 (same). Nevertheless, any First Amendment challenge to that
provision might appropriately consider Milavetz’s discussion of the statute’s structure and
purpose. In these circumstances, although we vacate the declaratory judgment and injunction
prohibiting enforcement of § 526(a)(4), our remand directive with respect to the attorney’s
fee provision of the statute is not for dismissal but is without prejudice to plaintiffs seeking
the district court’s further consideration of their constitutional challenge to this distinct part
of the statute.
18
relate to the operation of the bankruptcy system,” Brief of Plaintiffs-Appellants (“Pls.’ Br.”)
at 19. Alternatively, plaintiffs submit that if the mandated disclosures constitute commercial
speech, the appropriate standard of review is intermediate scrutiny, as identified in Central
Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447 U.S. 557, 566
(1980), not rational basis review, as specified in Zauderer v. Office of Disciplinary Counsel,
471 U.S. at 626, and as applied by the district court in this case, see Connecticut Bar Ass’n
v. United States, 394 B.R. at 286-87, 290.14
We conclude that the speech regulated by the challenged statutes is commercial.
Further, because the regulations compel disclosure without suppressing speech, Zauderer,
not Central Hudson, provides the standard of review.
a. The Challenged Provisions Regulate Commercial Speech
(1) Identifying Commercial Speech
The propriety of distinguishing commercial from noncommercial speech in evaluating
a First Amendment claim derives from Supreme Court precedents affording the former only
“a limited measure of protection, commensurate with its subordinate position in the scale of
14
As the Supreme Court explained in Zauderer, to pass the rational basis test, a
mandated disclosure must be “reasonably related to the State’s interest in preventing
deception of consumers” in circumstances otherwise likely to be misleading. 471 U.S. at
651. By contrast, for “restrictions on nonmisleading commercial speech regarding lawful
activity,” to pass intermediate scrutiny, the restrictions must “directly advance a substantial
governmental interest and be no more extensive than is necessary to serve that interest.”
Milavetz, Gallop & Milavetz, P.A. v. United States, 130 S. Ct. at 1339 (internal quotation
marks and alterations omitted) (explaining Central Hudson test).
19
First Amendment values.” Ohralik v. Ohio State Bar Ass’n, 436 U.S. 447, 456 (1978); accord
Milavetz, Gallop & Milavetz, P.A. v. United States, 130 S. Ct. at 1339; United States v. Edge
Broad. Co., 509 U.S. 418, 426 (1993). The Supreme Court has explained that
[t]wo features of commercial speech permit regulation of its content. First,
commercial speakers have extensive knowledge of both the market and their
products. Thus, they are well situated to evaluate the accuracy of their
messages and the lawfulness of the underlying activity. In addition,
commercial speech, the offspring of economic self-interest, is a hardy breed
of expression that is not particularly susceptible to being crushed by overbroad
regulation.
Central Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n of N.Y., 447 U.S. at 564 n.6
(internal quotation marks and citation omitted); see Clear Channel Outdoor, Inc. v. City of
New York, 594 F.3d 94, 104 n.11 (2d Cir. 2010) (explaining that commercial speech is
“more durable” and “less central to the interests of the First Amendment than other forms of
speech” (internal quotation marks omitted)).15
15
This court has noted the existence of “doctrinal uncertainties left in the wake of
Supreme Court decisions from which the modern commercial speech doctrine has evolved.”
Bad Frog Brewery, Inc. v. N.Y. State Liquor Auth., 134 F.3d 87, 94 (2d Cir. 1998). These
pertain not only to the distinction drawn between commercial and noncommercial speech,
but also to the principle that disclosure requirements implicate First Amendment interests to
a lesser degree than does suppressed speech. See, e.g., Milavetz, Gallop & Milavetz, P.A.
v. United States, 130 S. Ct. at 1342-44 (Thomas, J., concurring in part and concurring in the
judgment) (questioning constitutional basis for applying relaxed scrutiny to disclosure
mandates respecting commercial speech); 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484,
517 (1996) (Scalia, J., concurring in part and concurring in the judgment) (expressing
“discomfort with the Central Hudson test”); Rubin v. Coors Brewing Co., 514 U.S. 476, 493-
94 (1995) (Stevens, J., concurring in the judgment) (criticizing “misguided” approach of
Central Hudson to commercial/noncommercial distinction); Zauderer v. Office of
Disciplinary Counsel, 471 U.S. 626, 657 (1985) (Brennan, J., concurring in part, concurring
20
While the “core” notion of commercial speech is “speech which does ‘no more than
propose a commercial transaction,’” Bolger v. Youngs Drug Prods. Corp., 463 U.S. 60, 66
(1983) (quoting Virginia State Bd. of Pharmacy v. Va. Citizens Consumer Council, Inc., 425
U.S. at 762), the Supreme Court has also defined commercial speech as “expression related
solely to the economic interests of the speaker and its audience,” Central Hudson Gas & Elec.
Corp. v. Pub. Serv. Comm’n of N.Y., 447 U.S. at 561. Moreover, it has held that speech
does not cease to be commercial merely because it alludes to a matter of public debate. See
Bolger v. Youngs Drug Prods. Corp., 463 U.S. at 67-68 (reviewing advertisements for
contraceptives as commercial speech “notwithstanding the fact that they contain[ed]
discussions of important public issues”); Central Hudson Gas & Elec. Co. v. Pub. Serv.
Comm’n of N.Y., 447 U.S. at 562 n.5 (rejecting suggestion that any link between product
offered for sale and current public debate transformed commercial speech into
noncommercial speech). In Riley v. National Federation of the Blind, 487 U.S. 781 (1988)
(holding charitable fundraising not commercial speech because financial motivation was
“inextricably intertwined with otherwise fully protected speech”), the Supreme Court
explained that a court’s “lodestars” in distinguishing commercial from noncommercial
in the judgment in part, and dissenting in part) (expressing view that Central Hudson scrutiny
should apply to “regulation of commercial speech – whether through an affirmative
disclosure requirement or through outright suppression”). We need not pursue these matters
further, however, because we are bound by precedent distinguishing commercial and
noncommercial speech and applying different standards of review to laws mandating
commercial speech disclosures and laws restricting commercial speech.
21
speech “must be the nature of the speech taken as a whole and the effect of the compelled
statement thereon,” id. at 796.
(2) The Statutory Provisions at Issue
With these principles in mind, we consider plaintiffs’ argument that the challenged
provisions of §§ 527 and 528 regulate noncommercial rather than commercial speech.
(a) Section 528(a)(3)-(4) and (b)(2)
We start with § 528(a)(3)-(4) and (b)(2) because plaintiffs’ argument that those
advertising requirements do not regulate commercial speech is now foreclosed by Milavetz.
The Supreme Court examined these exact statutory provisions and determined that they
“regulate only commercial speech.” Milavetz, Gallop & Milavetz, P.A. v. United States, 130
S. Ct. at 1339. We necessarily reach the same conclusion.
(b) Section 528(a)(1)-(2)
As for § 528(a)(1)-(2), these provisions require a debt relief agency to prepare and
execute a written document disclosing the services to be provided to the debtor, the fee the
debtor will pay for those services, and the terms of payment. Such speech is reasonably
viewed as the debt relief agency’s “propos[al of] a commercial transaction” to the consumer
debtor. Bolger v. Youngs Drug Prods. Corp, 463 U.S. at 66 (internal quotation marks
omitted). The debt relief agency details the services it will provide in return for specified
remuneration. When the debtor manifests acceptance by signing the document, the proposed
transaction becomes an enforceable contract. See, e.g., Omega Eng’g, Inc. v. Omega, S.A.,
22
432 F.3d 437, 444 (2d Cir. 2005) (noting basic principle of Connecticut law that contract is
binding when parties mutually assent). Accordingly, we conclude that the contract
requirements of § 528(a)(1)-(2) qualify as commercial speech. See generally Zauderer v.
Office of Disciplinary Counsel, 471 U.S. at 651 (treating required attorney notification to
clients of potential costs of litigation as commercial speech).
(c) Section 527(a) and (b)
The disclosures required by § 527(a) and (b) provide consumer debtors with basic
information about bankruptcy. Such speech is by its nature commercial. First, it provides
a consumer debtor with information about what to expect in a commercial transaction with
a debt relief agency providing bankruptcy assistance. Second, the speech is situated in the
federal bankruptcy system, a creature of law pervaded by commerce. That system allows
debtors to refashion commercial transactions in order to discharge debt obligations. In this
sense, the speech at issue may be understood as facilitating the debtor’s proposal of any
number of new commercial transactions to his creditors. The government’s power to regulate
these commercial transactions justifies its concomitant power to regulate commercial speech
linked to the transactions. See generally 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484,
499 (1996) (collecting cases). Third, the regulated speech is grounded in a commercial
assumption that is itself the basis for debt relief agencies’ “procurement of remunerative
employment,” Ohralik v. Ohio State Bar Ass’n, 436 U.S. at 459, i.e., that the information
provided by debt relief agencies can assist debtors to navigate the bankruptcy system to their
23
economic advantage. The requirements imposed by § 527 reinforce the assumption by
detailing the minimum disclosures that a debt relief agency must make to permit debtors to
make informed bankruptcy choices. Thus, we conclude both from the mandated disclosures
and the context in which they are made that § 527(a) and (b) regulate commercial speech.
See generally Riley v. Nat’l Fed’n of the Blind, 487 U.S. at 796 (signaling that overall
“nature” and “effect” of speech determine whether it is commercial or noncommercial).
The plainly commercial nature and effect of the mandated disclosures are not diluted
by the fact that bankruptcy and the process attending it are frequent subjects of “public
debate.” Bolger v. Youngs Drug Prods. Corp., 463 U.S. at 68 (internal quotation marks
omitted). Nothing in § 527(a) or (b) limits or impedes a debt relief agency’s ability to
communicate its own views on public issues associated with the bankruptcy system. Much
less do those provisions require the expression of such views to be “intertwined” with the
mandated disclosures. Cf. Riley v. Nat’l Fed’n of the Blind, 487 U.S. at 796. Indeed, the
written disclosure required by § 527(b) can simply be handed to the debtor, after which the
debt relief agency may pursue whatever avenue of discussion professional judgment
warrants.
Further, our conclusion that § 527 regulates only commercial speech comports with
this court’s prior treatment of similar disclosure requirements. See, e.g., New York State
Restaurant Ass’n v. N.Y. City Bd. of Health, 556 F.3d 114, 131-32 (2d Cir. 2009) (treating
required restaurant posting of nutritional information as commercial speech); National Elec.
24
Mfrs. Ass’n v. Sorrell, 272 F.3d 104, 113 (2d Cir. 2001) (treating required labeling as to
mercury content of light bulbs as commercial speech).
b. Because the Challenged Statutes Mandate Disclosures but Do
Not Suppress Speech, They Are Properly Subject to Rational
Basis Review
Plaintiffs submit that, even if the challenged §§ 527-528 provisions regulate
commercial speech, their First Amendment claims warrant at least the intermediate scrutiny
identified in Central Hudson Gas & Electric Corp. v. Public Service Commission of New
York, 447 U.S. at 566. Because Milavetz holds otherwise, we are compelled to reject this
argument. In discussing § 528(a)(3)-(4) and (b)(2) in Milavetz, the Supreme Court
concluded that because those statutory provisions are “directed at misleading commercial
speech” and “impose a disclosure requirement rather than an affirmative limitation on
speech,” the appropriate standard of review is the rational basis test stated in Zauderer.
Milavetz, Gallop & Milavetz, P.A. v. United States, 130 S. Ct. at 1339 (emphasis in original).
The circumstances informing Milavetz’s decision to conduct rational basis review
of a First Amendment challenge to § 528(a)(3)-(4) and (b)(2) pertain equally to § 527(a) and
(b) and § 528(a)(1)-(2). Each of these provisions is directed at misleading commercial
speech. Each requires debt relief agencies to disclose specific information about the
bankruptcy process to consumer debtors whose frequent ignorance and confusion on that
subject could otherwise subject them to easy deception. See infra at Part II.D.2.a.1. None
suppresses speech. Accordingly, following Milavetz, we apply rational basis review to
25
plaintiffs’ First Amendment challenges to these statutes. Indeed, our own earlier precedent
would have pointed us to that conclusion. See National Elec. Mfrs. Ass’n v. Sorrell, 272
F.3d at 115 (applying rational basis review to regulation intended “to better inform
consumers” because “Zauderer, not Central Hudson . . . , describes the relationship between
means and ends demanded by the First Amendment in compelled commercial disclosure
cases,” while “[t]he Central Hudson test should be applied to statutes that restrict commercial
speech” (emphasis in original)); cf. Bad Frog Brewery, Inc. v. N.Y. State Liquor Auth., 134
F.3d 87, 97 (2d Cir. 1998) (reviewing state attempt to suppress offensive labels under
commercial speech standards outlined in Central Hudson).16
2. The Challenged Statutory Sections Satisfy Rational Basis Review
a. Section 527(a) and (b)
(1) The Mandated Disclosures Are Supported by a Sufficient
Factual Predicate
Plaintiffs contend that the disclosures mandated by § 527(a) and (b) cannot pass even
rational basis review because they are unsupported by a “factual predicate.” Pls.’ Br. at 23.
16
International Dairy Foods Association v. Amestoy, 92 F.3d 67 (2d Cir. 1996), cited
by plaintiffs, is not to the contrary. The statute at issue in that case required dairies to
disclose on their labels when products were derived from cows treated with growth
hormones, even though no state interest appeared to support the requirement. This court
subjected the statute to intermediate scrutiny but, as we subsequently explained, that holding
“was expressly limited to cases in which a state disclosure requirement is supported by no
interest other than the gratification of consumer curiosity.” National Elec. Mfrs. Ass’n v.
Sorrell, 272 F.3d at 115 (internal quotation marks omitted).
26
We disagree.17
Certain facts relevant to our review are self-evident. Specifically, in providing
bankruptcy assistance, a debt relief agency does not engage in a merely private commercial
transaction with its client. Its activities implicate the nation’s bankruptcy system, a uniquely
federal arena, see U.S. Const. Art. I, § 8, cl. 4; International Shoe Co. v. Pinkus, 278 U.S.
261, 265 (1929), through which tens of billions of dollars of debt are discharged annually
through millions of restructured financial transactions, see H.R. Rep. No. 109-31, reprinted
in 2005 U.S.C.C.A.N. 88, 90-91 (indicating discharge of more than $44 billion of debt in
1997). The government’s significant interest in avoiding confusion and deception in the
operation of this system is self-evident. Considerable record evidence indicates that, in the
years before the challenged statutes were enacted, such confusion and deception were
sufficiently widespread to undermine the fairness and efficacy of the federal bankruptcy
system.
In late 1990s congressional hearings, judges, scholars, and debtors provided evidence
indicating that these problems derived largely from consumer debtors’ inadequate access to
information about the bankruptcy process. Fifth Circuit Judge Edith Hollan Jones, a member
of the National Bankruptcy Review Commission, testified that debtor ignorance and
17
Although plaintiffs present their “factual predicate” argument in the section of their
brief challenging § 527, it appears to extend to the challenged provisions of § 528 as well.
Thus, we begin our rational basis review with § 527, because our rejection of plaintiffs’
factual predicate challenge to that statute applies equally to § 528.
27
confusion were pervasive: “Most debtors never see a judge. Many bankruptcy lawyers
never talk to their clients. The first time they see their clients often is when they are in a herd
of people in bankruptcy courts and the lawyer raises a hand, and says, ‘Anyone who’s my
client needs to step forward right now.’” Bankruptcy Reform Act of 1998: Part I, Hearing
on H.R. 3150 Before House Judiciary Comm., 105th Cong. 15 (1998) (testimony of Hon.
Edith H. Jones). This view was reinforced by a survey of debtors conducted by Dr. Tahira
K. Hira of Iowa State University, see Consumer Bankruptcy Reform Act: Seeking Fair and
Practical Solutions to the Bankruptcy Crisis, Hearing on S. 1301 Before Senate Judiciary
Comm., 105th Cong. 28-34 (1998) (testimony of Dr. Tahira K. Hira), as well as by anecdotal
evidence, see Bankruptcy Reform Act of 1998: Part I, Hearing on H.R. 3150 Before House
Judiciary Comm., 105th Cong. 94 (1998) (testimony of Nicholl J. Russell) (recounting that
bankruptcy attorney never advised debtor witness of availability of chapter 13 filing or credit
counseling). Bankruptcy Judge Carol J. Kenner explained how such ignorance and confusion
made for easy deception, with debtors persuaded to reaffirm their debts in “intimidating
circumstances,” “without understanding the legal effect of what they are doing” and “without
understanding their alternatives.” Bankruptcy Reform: Joint Hearing before House Judiciary
Comm. and Senate Judiciary Comm., 106th Cong. 35 (1999) (testimony of Hon. Carol J.
Kenner).
Plaintiffs do not dispute this factual record. Rather, they contend that the cited
testimony raises concerns not addressed by BAPCPA and not contemporaneous to that
28
statute’s 2005 enactment. Neither argument merits lengthy discussion. While some of the
measures advocated in the cited hearings differ from those embodied in the challenged
BAPCPA provisions, the testimony uniformly supports defendants’ contention that Congress
enacted BAPCPA against a backdrop of documented confusion and deception in the
bankruptcy process and a manifest need for more information. As to contemporaneity,
plaintiffs themselves confirm the persistence of the identified concern when they state that
for the “[m]any Americans fac[ing] bankruptcy as a result of the recent economic downturn,”
sound legal advice “can make the difference between a satisfactory outcome and financial
disaster.” Pls.’ Br. at 5-6. Thus, once the government demonstrated that ignorance,
confusion, and deception infected the bankruptcy process in the late 1990s, the persistence
of such problems was sufficiently evident that no subsequent surveys were required to
support congressional action in 2005 mandating information disclosure to consumer debtors.
Such a conclusion is, in fact, consistent with precedent holding that, while the First
Amendment precludes the government from restricting commercial speech without showing
that “the harms it recites are real and that its restriction will in fact alleviate them to a
material degree,” Edenfield v. Fane, 507 U.S. 761, 770-71 (1993), it does not demand
“evidence or empirical data” to demonstrate the rationality of mandated disclosures in the
commercial context, see New York Restaurant Ass’n v. N.Y. City Bd. of Health, 556 F.3d
29
at 134 n.23.18 Indeed, in Milavetz, the Supreme Court rejected an argument that § 528’s
advertising requirements could not withstand scrutiny in the absence of evidence that
plaintiffs’ advertisements were “misleading.” 130 S. Ct. at 1340. Milavetz held that “[w]hen
the possibility of deception is . . . self-evident . . . we need not require the State to conduct
a survey of the . . . public before it [may] determine that the [advertisement] had a tendency
to mislead.” Id. (quoting Zauderer v. Office of Disciplinary Counsel, 471 U.S. at 652-53)
(internal quotation marks omitted; alterations in Milavetz).
Accordingly, we reject plaintiffs’ factual basis challenge as without merit.
18
Cases cited by plaintiffs are not to the contrary. In Ibanez v. Florida Department
of Business and Professional Regulation, 512 U.S. 136 (1994), the Supreme Court considered
a First Amendment challenge to a disclosure requirement for attorney advertising so detailed
as to equate to a restriction on speech. Applying intermediate scrutiny, the Supreme Court
noted the government’s failure to show a harm that was “potentially real” as opposed to
“purely hypothetical,” id. at 146, and observed that it had “never sustained restrictions on
constitutionally protected speech based on a record so bare as the one” presented, id. at 148
(emphasis added). By contrast, the harms addressed by § 527 are more than hypothetical.
As the record demonstrates, they have actually been experienced by litigants and observed
by courts. More important, the disclosures mandated by § 527 do not impose any restriction
on speech.
Planned Parenthood of Southeastern Pennsylvania v. Casey, 505 U.S. 833 (1992), also
provides no support for plaintiffs’ factual basis challenge to § 527. In Casey, the Supreme
Court considered the factual basis for a law requiring doctors to make certain disclosures to
patients seeking abortions and concluded that it passed strict scrutiny, but it reached this
conclusion in analyzing a claimed injury to the due process rights of patients, not the First
Amendment rights of doctors. See id. at 883-85 (plurality opinion). The Court dispensed
with the doctors’ First Amendment argument summarily, offering only the terse observation
that a “physician’s First Amendment rights not to speak [we]re implicated [by the challenged
law], but only as part of the practice of medicine, subject to reasonable licensing and
regulation by the State.” Id. at 884 (citation omitted).
30
(2) Section 527 Does Not Compel Misleading Disclosures
In urging us to conclude that § 527 lacks a rational basis, plaintiffs devote
considerable effort to arguing that the statute compels inaccurate or misleading disclosures,
which cannot relate to a legitimate government interest. For example, plaintiffs complain
that § 527(b) requires them to advise assisted persons that, if they choose to file for
bankruptcy under chapter 13, they “may want help preparing [their] chapter 13 plan[s]”
without requiring a further statement that “attorneys are the only ones authorized by law to
provide such help.” Reply Brief of Plaintiffs-Appellants (“Pls.’ Reply”) at 22. In fact,
§ 527(b) does require a further disclosure that “only attorneys, not bankruptcy petition
preparers, can give you legal advice.” In any event, nothing in § 527 precludes an attorney
from providing an assisted person with more information than is contained in the mandated
disclosures to ensure accurately informed choice. For the same reason, i.e., that § 527’s
disclosures do not purport to be exhaustive, we identify no merit in plaintiffs’ complaint that
the statute is unconstitutional because it fails to identify all the documents that a debtor might
be required to file in a bankruptcy proceeding. See Pls.’ Br. at 28.
As for plaintiffs’ complaint that § 527(b) erroneously refers to the bankruptcy trustee
as a “court official,” see id., the argument is foreclosed by our decision in United States v.
Crispo, 306 F.3d 71 (2d Cir. 2002), which, in upholding a criminal conviction for obstruction
of justice, see 18 U.S.C. § 1503 (proscribing corruption of “officer in or of any court of the
United States”), determined that Congress itself had placed bankruptcy trustees in the
31
category of conventional court officers, see United States v. Crispo, 306 F.3d at 81
(discussing Bankruptcy Act of 1898, 30 Stat. 44, which defined “officer” to include “clerk,
marshal, receiver, referee, and trustee”).
Plaintiffs further complain that § 527 is misleading in implying that certain
requirements apply uniformly to all bankruptcy debtors. We need not discuss these
requirements individually because plaintiffs’ concern is adequately assuaged by § 527(b)’s
mandate for the following preliminary disclosure: “The following information helps you
understand what must be done in a routine bankruptcy case to help you evaluate how much
service you need. Although bankruptcy can be complex, many cases are routine.” 11 U.S.C.
§ 527(b) (emphasis added). Further, because § 527(b) allows debt relief agencies to make
the disclosures required by that subsection using language “substantially similar” to that
specified and, in any event, requires disclosures only “to the extent applicable,” plaintiffs are
not, in fact, compelled to provide misleading information to consumer debtors seeking their
assistance. See Hersh v. United States, 553 F.3d 743, 767 (5th Cir. 2008) (noting that
§ 527(b) requires disclosures only “to the extent applicable” in rejecting First Amendment
challenge); see generally Milavetz, Gallop & Milavetz, P.A. v. United States, 130 S. Ct. at
1341 (noting, in rejecting First Amendment challenge to mandatory advertising disclosures
in § 528, that statute affords “flexibility to tailor the disclosures to . . . individual
circumstances, as long as the resulting statements are ‘substantially similar’ to the statutory
32
examples” (quoting § 528(a)(4) and (b)(2)(B))).19
Finally, plaintiffs suggest that the very flexibility afforded by § 527(b) renders the
statute impermissibly vague. Pls.’ Reply at 26.20 The due process requirement that statutory
prohibitions be defined “with sufficient definiteness that ordinary people can understand
what conduct is prohibited” and “in a manner that does not encourage arbitrary and
discriminatory enforcement,” is chiefly applied to criminal legislation, and requires “less
exacting scrutiny” in the civil context. Arriaga v. Mukasey, 521 F.3d 219, 222-23 (2d Cir.
2008). Plaintiffs’ vagueness argument is patently meritless. The provisions provide explicit
notice of the disclosures required, and, to the extent the statute affords some flexibility, it
imposes no greater burden on attorneys’ exercise of professional judgment than plaintiffs
already carry. See Conn. R. Prof. Conduct 1.4(b) (2010) (“A lawyer shall explain a matter
to the extent reasonably necessary to permit the client to make informed decisions regarding
19
While § 527(a), unlike § 527(b), does not expressly authorize debt relief agencies
to tailor the mandated disclosures to specific circumstances, nothing in the statute precludes
a debt relief agency, after providing the disclosures required, from exercising professional
judgment as to whether a particular debtor’s circumstances might fall outside the routine case
generally referenced in the disclosure. In these circumstances, we cannot conclude that
Congress lacked a rational basis for requiring that debt relief agencies begin by advising
every assisted person of what information must be provided in a routine case and how it must
generally be calculated. See 11 U.S.C. § 527(a)(2)(C); see also Greater New Orleans Broad.
Ass’n, Inc. v. United States, 527 U.S. 173, 192-93 (1999) (noting that challenged regulation
had to be evaluated in context of overall statutory scheme, rather than in isolation).
20
Although plaintiffs included a general allegation of vagueness in their complaint,
see Compl. ¶ 45, they did not argue vagueness on appeal until their reply brief, making it
doubtful that the issue is properly before us, see Norton v. Sam’s Club, 145 F.3d at 117.
Nevertheless, for the reasons stated in text, we conclude that the claim is without merit.
33
the representation.”); see also N.Y. R. Prof. Conduct 1.4(b) (2009) (same); Model R. Prof.
Conduct 1.4(b) (1995) (same). Thus, the attorney plaintiffs can hardly complain of
inadequate notice.
In sum, we conclude that the disclosure requirements of § 527(a) and (b) do not
violate plaintiffs’ First Amendment rights, and we affirm the district court’s dismissal of
plaintiffs’ complaint insofar as it challenges this statute.
34
b. Section 528(a)(1)-(2)
For reasons stated supra at Part II.D.1.a.2.b, we conclude that the requirements of
§ 528(a)(1)-(2), like those of § 527(a) and (b) and § 528(a)(3)-(4) and (b)(2), regulate only
commercial speech, and therefore plaintiffs’ First Amendment challenge to this provision
warrants only rational basis review. In urging us to view this statute differently, plaintiffs
submit that § 528(a)(1)-(2)’s contract requirements impose an “affirmative consent”
condition on communication between attorneys and clients, thereby burdening protected
speech. Pls.’ Br. at 45.21 We are not persuaded.
The cases plaintiffs cite apply strict scrutiny to restrictions on the sort of speech
traditionally accorded the fullest First Amendment protection. For example, Lamont v.
Postmaster General, 381 U.S. 301 (1965), invalidated a consent requirement to the receipt
of “communist political propaganda,” a form of political speech, id. at 302. Martin v.
Struthers, 319 U.S. 141 (1948), struck down a statute fining Jehovah’s Witnesses for
leafletting, a form of religious speech. Denver Area Educational Telecommunications
21
Although plaintiffs contend that the § 528(a)(1)-(2) contract requirements also
violate their clients’ First Amendment right of access to the courts, they did not raise this
argument in the district court. A footnote in plaintiffs’ memorandum in support of their
preliminary injunction motion, stating that “[b]ecause [§ 528(a)(1)-(2)] implicate the client’s
right of access to court, these provisions must be subjected to strict scrutiny,” Pls.’ Mem.
Supp. Mot. Prelim. Inj. at 45 n.18, is not sufficient to have preserved the issue for our review,
cf. United States v. Restrepo, 986 F.2d 1462, 1463 (2d Cir. 1993) (holding that arguments
mentioned only in footnote to appellate brief do not “adequately raise[] or preserve[]” issue
for review).
35
Consortium, Inc. v. FCC, 518 U.S. 727 (1996), held that certain restrictions on “patently
offensive” television programming survived strict scrutiny despite the law’s generally
expansive view of artistic speech. In Riley v. National Foundation of the Blind, 487 U.S.
781, the Supreme Court concluded that charitable solicitations also fell within the range of
speech accorded strict First Amendment protection.
The Supreme Court takes a different view of attorney communications, particularly
with respect to the procurement of employment, the subject of regulation by § 528(a)(1)-(2).
The Court has stated that “[a] lawyer’s procurement of remunerative employment is a subject
only marginally affected with First Amendment concerns. It falls within the State’s proper
sphere of economic and professional regulation.” Ohralik v. Ohio State Bar Ass’n, 436 U.S.
at 459; cf. Planned Parenthood of Se. Pa. v. Casey, 505 U.S. 833, 884 (1992) (plurality
opinion) (rejecting First Amendment challenge to state law requiring physicians to provide
patients with specific information and observing that physicians’ First Amendment rights are
“implicated, but only as part of the practice of medicine, subject to reasonable licensing and
regulation by the State” (citation omitted)). Accordingly, we conclude that plaintiffs fail to
make a case for strict scrutiny of the contract requirements of § 528(a)(1)-(2).
Plaintiffs do not – and cannot – contend that a different rational basis conclusion is
warranted for § 528(a)(1)-(2) than for § 527(a) and (b). Both statutes are informed by the
same legitimate government concern: minimizing the ignorance, confusion, and deception
that too often infect consumer debtors’ decisions in pursuing bankruptcy proceedings. See
36
supra at Part II.D.2.a.1. Further, as the district court observed, these statutes impose no
heavy burden on plaintiffs subject to Connecticut’s Rules of Professional Conduct, which
already require attorneys to communicate to their clients the “basis or rate of the fee, whether
and to what extent the client will be responsible for any court costs and expenses of
litigation, and the scope of the matter to be undertaken . . . in writing, before or within a
reasonable time after commencing the representation.” Connecticut Bar Ass’n v. United
States, 394 B.R. at 288 (quoting Conn. R. Prof. Conduct 1.5); accord N.Y. R. Prof. Conduct
1.5 (2009).
Because we conclude that the contract requirements of § 528(a)(1)-(2) are supported
by a rational basis, we affirm the district court’s dismissal of plaintiffs’ First Amendment
challenge to this statute.
c. Section 528(a)(3)-(4) and (b)(2)
Plaintiffs’ rational basis challenge to the advertising requirements of § 528(a)(3)-(4)
and (b)(2) mirrors their challenge to the disclosure requirements of § 527(a) and (b). The
district court sustained plaintiffs’ challenge to the extent that it construed “debt relief
agency,” as used in the statute, to include attorneys soliciting clients other than consumer
debtors contemplating bankruptcy. In all other respects, however, the district court dismissed
this claim.
Our review of the parties’ cross-appeal challenges to these rulings is controlled by the
Supreme Court’s holding in Milavetz. As noted supra at Part I.D, the Court there construed
37
the term “debt relief agency” as used in §§ 526-528 to reference “only professionals who
offer bankruptcy-related services to consumer debtors.” Milavetz, Gallop & Milavetz, P.A.
v. United States, 130 S. Ct. at 1341. Thus, any constitutional concerns identified by the
district court with respect to the statute’s possible broader application are unwarranted.
To the extent plaintiffs persist in challenging the application of § 528(a)(3)-(4) and
(b)(2) to attorneys representing consumer debtors, Milavetz compels rejection of the
argument. The Supreme Court concluded that § 528(a)(3)-(4) and (b)(2) were “reasonably
related” to the government’s legitimate interest in “combat[ing] the problem of inherently
misleading commercial advertisements – specifically, the promise of debt relief without any
reference to the possibility of filing for bankruptcy, which has inherent costs.” Id. at 1340.
The Court also rejected the suggestion that the statute compelled misleading disclosures,
citing the flexible requirement for a “substantially similar” statement. Id. at 1341 (internal
quotation marks omitted).
Following Milavetz, we necessarily conclude that plaintiffs’ First Amendment
challenge to § 528(a)(3)-(4) and (b)(2) is entirely without merit. Accordingly, we affirm the
district court’s judgment to the extent it dismissed this claim in part, and we vacate so much
of the judgment as declared the statute invalid in part and enjoined its operation. The statute
simply does not apply in the circumstances identified by the district court.
E. Due Process Challenge to § 528(a)(1)-(2)
In addition to their First Amendment challenge to §§ 526-528, plaintiffs contend that
38
the contract requirements of § 528(a)(1)-(2) violate due process by subjecting debt relief
agencies to “strict liability” whenever a client fails to sign a contract. Pls.’ Br. at 51.
Strict liability generally raises due process concerns with respect to criminal, not civil,
statutes. See, e.g., Lambert v. California, 355 U.S. 225, 229-30 (1957) (“Where a person did
not know of the duty to register [residency with city authorities] and where there was no
proof of the probability of such knowledge, he may not be convicted consistently with due
process.”). Due process does not absolutely prohibit strict liability crimes. See Morrisette
v. United States, 342 U.S. 246, 256-58 (1952) (recognizing small category of regulatory
measures where strict criminal liability may be imposed without violating due process,
particularly where penalties are relatively small and no great damage done to reputation).
Rather, it commands respect for a presumption, derived from common law, that “injury can
amount to a crime only when inflicted by intention.” Id. at 250. Thus, courts will not readily
assume from a criminal statute’s failure to reference knowledge or intent that no proof of
mens rea is required to convict. See id.; accord United States v. U.S. Gypsum Co., 438 U.S.
422, 438 (1978). Rather, absent clear indication in the language or legislative history of a
contrary congressional purpose, mens rea is presumed to be an element of any federal crime.
See Liparota v. United States, 471 U.S. 419, 425 (1985).
Due process dictates no similar presumption with respect to civil statutes. In
Morrisette v. United States, Justice Jackson noted that the heightened risks of modern
industrial society have increased regulations imposing duties, “many of [which] are
39
sanctioned by a more strict civil liability.” 342 U.S. at 253-54. He cited Workmen’s
Compensation Acts as an obvious example. See id. at 254 n.13. Plaintiffs, nevertheless, urge
us to hold that the contract requirements of § 528(a)(1)-(2) violate due process because they
expose plaintiffs to strict civil liability based on the inaction of a person outside their control,
specifically, a consumer debtor who fails to execute a written contract.
The premise underlying plaintiffs’ argument is meritless. It is not a consumer debtor’s
failure to execute a service contract that exposes debt relief agencies to liability for money
damages for violating § 528(a)(1)-(2). Rather, it is a debt relief agency’s intentional or
negligent provision of bankruptcy assistance to a debtor in the absence of an executed
contract. See § 526(c)(2)(A).22 Nor can plaintiffs claim that such intentional or negligent
conduct by a debt relief agency does not represent a departure from a “known standard.” See
Southwestern Tel. & Tel. v. Danaher, 238 U.S. 482, 490 (1915).23 Much less can they claim
22
Title 11 U.S.C. § 526(c)(1) states that a contract that fails to comply with that
section, § 527, or § 528 “shall be void and may not be enforced.” But a consumer debtor
may not recover damages for a violation of any of these sections except on a showing that
the debt relief agency itself violated the section “intentionally or negligently.” See id.
§ 526(c)(2)(A). This mens rea requirement is reasonably understood to extend to a state’s
actions on behalf of its residents to establish liability pursuant to § 526(c)(2)(A). See id.
§ 526(c)(3)(B).
23
Plaintiffs’ reliance on Danaher is misplaced. The Supreme Court there held that due
process did not permit a telephone company to be liable in damages for impartially enforcing
a payment regulation that it had no reason to expect would subsequently be declared
unreasonable. See 238 U.S. at 489-91. It was in that context that the Court stated: “There
was no intentional wrongdoing, no departure from any prescribed or known standard of
action, and no reckless conduct.” Id. at 490. By contrast, BAPCPA’s contract requirements
are stated with specificity in § 528(a)(1)-(2).
40
that a damages award for a violation of § 528(a)(1)-(2) would be based solely on the actions
of persons over whom they had “no control.” See Peisch v. Ware, 8 U.S. (4 Cranch) 347,
365 (1807).24 Thus, the contract provisions of § 528(a)(1)-(2) do not violate due process, and
we affirm the dismissal of this claim.
III. Conclusion
To summarize, we reach the following conclusions:
1. Consistent with the Supreme Court’s holding in Milavetz, Gallop & Milavetz, P.A.
v. United States, 130 S. Ct. at 1341, the term “debt relief agency” as used in 11 U.S.C.
§§ 526-528 is properly construed to apply only to those persons assisting consumer debtors
contemplating bankruptcy.
2. Because attorney plaintiffs Brown & Welsh, P.C., and Gerald Roisman do not
represent consumer debtors in bankruptcy, they lack standing to pursue this action
challenging the constitutionality of 11 U.S.C. §§ 526-528. Accordingly, any judgment in
their favor is vacated and any accompanying injunction pertaining to them is dissolved. The
case is remanded with directions to dismiss the complaint as to these plaintiffs for lack of
24
Peisch is no more helpful to plaintiffs’ due process claim than Danaher. Therein,
Chief Justice Marshall construed a federal law providing for the forfeiture of goods not
bearing proper certificates of importation as “not intend[ed] to comprehend wrecked goods,”
8 U.S. at 362, or “to forfeit the property of owners or consignees, on account of the
misconduct of mere strangers, over whom such owners or consignees could have no
controul,” id. at 365. A debt relief agency can certainly control whether it provides
bankruptcy assistance in the absence of a contract conforming to § 528(a)(1)-(2).
41
jurisdiction.
3. Plaintiffs’ overbreadth challenge to the first prong of 11 U.S.C. § 526(a)(4),
prohibiting debt relief agencies from advising assisted persons to assume more debt “in
contemplation of” bankruptcy, is foreclosed by Milavetz, which construed that provision to
reference only abusive conduct. To the extent judgment was entered in favor of plaintiffs on
this claim, the judgment is vacated, the accompanying injunction dissolved, and the case
remanded with directions to dismiss plaintiffs’ challenge to the “in contemplation of” prong
of § 526(a)(4) for failure to state a claim. The decision to vacate is without prejudice to the
parties seeking the district court’s further consideration of a First Amendment challenge to
the second prong of § 526(a)(4), which prohibits a debt relief agency from advising an
assisted person “to pay an attorney or bankruptcy petition preparer fee or charge for services
performed” in connection with a bankruptcy proceeding, a claim that was not the focus of
the parties’ or the district court’s attention in the proceedings leading to judgment.
4. The disclosure requirements of 11 U.S.C. § 527(a) and (b) regulate commercial
speech and are reasonably related to a legitimate state interest in minimizing ignorance,
confusion, and deception in the bankruptcy process. As such, they do not violate the First
Amendment, and we affirm the judgment insofar as it dismissed this challenge for failure to
state a claim.
5. The contracting requirements of 11 U.S.C. § 528(1)-(2) also regulate commercial
speech and are reasonably related to the aforementioned legitimate state interest and do not
42
violate the First Amendment. Nor do those requirements, whose violation may support civil
liability for damages only when accompanied by a showing of mens rea, offend the Fifth
Amendment Due Process Clause. We affirm the dismissal of these challenges for failure to
state a claim.
6. Following Milavetz’s holding that the advertising rules of 11 U.S.C. § 528(a)(3)-
(4) and (b)(2), as requirements for commercial speech reasonably related to a legitimate state
purpose, do not violate the First Amendment, we affirm the judgment insofar as it dismissed
this challenge. To the extent the district court held the statute invalid based on a broader
construction of the term “debt relief agency” than the Supreme Court applied in Milavetz,
we vacate that part of the judgment and dissolve the injunction.
The judgment of the district court is A FFIRMED in part and V ACATED in part, and the
related injunction is D ISSOLVED. The case is R EMANDED for further proceedings consistent
with this opinion.
43