Alan Milavetz remembers how his mother, “in typical Jewish-mother fashion,” always urged him to be a doctor, lawyer or engineer when he grew up. “She didn’t say doctor, debt relief agency or engineer,” recalled the personal injury lawyer.
For Milavetz and a number of lawyers across the country, a 2005 federal law requiring them to advertise as a debt relief agency — regardless of whether they offer sporadic or regular bankruptcy advice to clients — irritates like a pair of ill-fitting shoes.
That requirement is in the Bankruptcy Abuse Prevention and Consumer Protection Act, a comprehensive package of reform measures. However, it is not the only reason Milavetz, Gallop & Milavetz, a small general practice firm in Edina, Minn., has fought the inclusion of lawyers in the law’s debt relief agency provisions all the way to the U.S. Supreme Court.
In particular, a red flag soared in the mind of the firm’s Barbara Nevin when she read the law’s restriction on the kind of advice that a lawyer may give to someone who may be contemplating bankruptcy. The restriction prohibits them from advising persons of certain limited means to incur additional debt.
Nevin, who handles bankruptcy cases among other work, and firm founder Robert Milavetz saw a huge potential ethical conflict there for all types of lawyers. The restriction, together with the law’s advertisement and disclosure requirements, they believed, also struck at the heart of fundamental First Amendment values. “It’s a huge challenge for any firm to litigate against the federal government, but especially for us,” said Robert’s son, Alan Milavetz, noting the firm has 10 lawyers. “But there comes a point when if you think you’re right — and we do — you move on it.”
The firm’s four-year odyssey culminates on Dec. 1 in the Supreme Court when the justices hear arguments in Milavetz, Gallop & Milavetz v. U.S. “This is an evil law prohibiting speech, and among the least powerful people, interfering with their right to get reasonable advice,” Robert Milavetz said. “If we don’t get a judgment that this law is unconstitutional, I have said we will handle no more consumer bankruptcy cases, and we think no true lawyer can handle them as well.”
FIRST AMENDMENT CRUSADER
Law firms are rather rare name parties in Supreme Court cases. A rough look over the past two decades reveals only five, three of which involved major firms such as O’Melveny & Myers, then-Swidler Berlin and then-Milberg Weiss Bershad Hynes & Lerach.
The Milavetz law firm, founded nearly 50 years ago in Edina, a suburb of Minneapolis, is not as unlikely a First Amendment crusader as might appear at first glance. That’s primarily because of Robert Milavetz. From the time he was 13 years old and discovered the injustice of McCarthy-era loyalty oaths, he has been passionate about the First Amendment. After putting himself through law school while working as a prison guard and raising three children, Milavetz became a legal aid lawyer until he opened his own practice in 1963. First Amendment cases have always been part of his legal work.
“He probably knows more about the First Amendment than anyone I know,” said his son, who joined the firm 25 years ago. “My guess is it had something to do with needing to take the business available in the 1960s. The Vietnam War was going on, and there were an awful lot of people with legitimate bases for not serving. There also were many societal changes going on, raising issues involving obscenity, freedom of religion, flag burning.”
Those kinds of cases, often unpopular, normally would not be handled by large corporate law firms, he added, but by someone like his father, with a personal interest in them and the ability to do them. “I’ve taken on the U.S. government many times since I began practicing law in many different First Amendment issues,” said the elder Milavetz. “I’ve won over 100 First Amendment cases, including the first where a jury in a criminal case found hard-core pornography protected under the First Amendment.”
In the 1970s, the firm began to grow; the type of cases expanded and became more traditional. The firm’s work now includes bankruptcy, personal injury, family law, workers’ compensation and criminal defense. And the door is always open to First Amendment problems. “My father has never shied away from taking on a case that is challenging, difficult, time-consuming or expensive,” said Alan Milavetz, adding that the case now in the Supreme Court “certainly fits the bill.”
MAKING THE CASE
Shortly after the 2005 law took effect, Nevin recalled, she sat down with Robert Milavetz to discuss what she viewed as its problems. Milavetz, she said, immediately saw the First Amendment issues and started planning their attack. She and Milavetz, along with two clients, became plaintiffs in the constitutional challenge that they filed one month after the law became effective.
They were not alone. A number of other challenges were filed, mostly unsuccessful, and some challenges are still pending. All raise issues that the Supreme Court will hear in the Milavetz case.
In the high court, the firm — reluctantly but confidently, according to its lawyers — handed the case to G. Eric Brunstad Jr. of Dechert, a veteran high court practitioner and bankruptcy lawyer who also teaches at Yale Law School. Brunstad, who is handling the case pro bono, focuses on three areas.
First, he makes a statutory argument that Congress did not include lawyers under the definition of debt relief agency — someone who provides bankruptcy help to an “assisted person” for compensation. If it had intended to do so, he contends, it would have done so expressly as it did in other bankruptcy code sections. The district court agreed, but the U.S. Court of Appeals for the 8th Circuit did not.
If the justices find that lawyers are not included in the definition, then they will not have to face the constitutional issues raised by the other provisions, Brunstad said.
If they are included, then there are ethical and constitutional problems with forbidding debt relief agencies from advising assisted persons (defined according to the amount of their assets) to incur more debt if they are contemplating bankruptcy, he argues. The prohibition impermissibly interferes with a lawyer’s ethical obligation to truthfully advise a client about entirely lawful conduct, and it unconstitutionally interferes with a client’s right to receive the attorney’s advice. The district court and the 8th Circuit agreed.
And, finally, Brunstad challenges as unconstitutional the act’s requirement that debt relief agencies that advertise about bankruptcy-related services must include in the ads the disclosure: “We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.” That is the impermissible regulation of the content of truthful, nondeceptive advertising, he said. The district court agreed; the 8th Circuit did not.
Robert Milavetz contends that Congress’ debt relief agency provisions were intended to target bankruptcy petition preparers who, in his words, “mindlessly” file bankruptcies. Lumping lawyers with them, he said, is “an affront to all lawyers.”
The government counters that Congress, after “extensive hearings,” determined that misconduct by bankruptcy professionals, including attorneys, was a source of abuse of the bankruptcy system. But it is the restriction on attorney advice that evokes the most passionate reaction from Milavetz because of the potential harm to clients. It may also be the most successful argument in the high court, said bankruptcy ethics scholar Nancy Rapoport of the William S. Boyd School of Law at the University of Nevada, Las Vegas.
“Lawyers, especially bankruptcy lawyers, think in terms of what makes the most economic sense for people,” she said, “and sometimes that means incurring more debt in the short term. Sometimes businesses or people just need a little extra breathing space. They don’t have to file for bankruptcy. Putting a gag order on what lawyers can say, which might actually keep people out of bankruptcy, is yet again another unintended consequence.”
The government contends that the advice prohibition is limited to advice intended to abuse the bankruptcy system. But that language is not in the statute.
The bankruptcy challenge has been an “enormous investment” by the firm, which has had at least one or two people working almost full-time on it since 2005, Alan Milavetz said.
An investment, but never a burden, added his father. The law’s potential harm to clients from the advice restrictions and the potential liability for lawyers who can be sued by creditors if they violate the law’s restrictions, he said, create a “land mine” for both.
Marcia Coyle can be contacted at firstname.lastname@example.org.