First Amendment and Lawyers

Sometimes even the best lawyers find the law
difficult to follow if it conflicts with their
fiduciary duty to the client. This case is before
the Supreme Court, and while it involves bankruptcy,
it clearly shows how laws can have unintended
consequences.

December 2, 2009
Federal Law Limiting Legal Advice Draws Particular Interest at the Supreme Court

By ADAM LIPTAK
WASHINGTON — Several justices seemed convinced on Tuesday that a federal law restricting the advice bankruptcy lawyers may offer was a bad idea. But they had differing ideas about what the Supreme Court should do about it.

“It’s a stupid law,” Justice Antonin Scalia said. “Where is the prohibition of stupid laws in the Constitution?”

Chief Justice John G. Roberts Jr., on the other hand, appeared receptive to the argument that the law violated the First Amendment by intruding into the relationship between lawyers and clients.

The justices, all of whom are lawyers, seemed to take particular interest in the case, presumably because it concerns lawyers’ free speech rights.

“Congress often forgets about the First Amendment,” Justice Anthony M. Kennedy said, “but lawyers don’t.”

The law forbids advising clients “to incur more debt in contemplation of” a bankruptcy filing. Piling on debt just before filing for bankruptcy in the hope that it will not have to be repaid is, all concerned agreed, an abuse of the system and may amount to fraud. But state ethics rules already forbid lawyers to advise their clients to break the law.

On the other hand, some new debt is both legal and prudent. It may be a good idea to refinance a mortgage to pay down credit card debt or to take out a loan to buy a car to get to work. The 2005 law seems to forbid lawyers to give advice about that second sort of action.

Justice Ruth Bader Ginsburg asked about medical expenses. Suppose, she said, that a woman was “just told by her doctor that she has a serious cancer that needs operation and radiation and she is at the end of the line on resources.” Could the woman’s lawyer advise her to take on more debt to treat the cancer?

It depends, said William M. Jay, a lawyer for the government. Lawyers may not advise clients to add debt in two situations, he said: in an effort to abuse the bankruptcy system or to defraud creditors.

That answer did not satisfy Chief Justice Roberts. “Under your construction,” he told Mr. Jay, “it seems to me that a lawyer trying to give correct, legal, ethical advice has got to pause before every sentence” and worry about whether the advice will later be seen as a violation of the law.

The case, Milavetz, Gallop & Milavetz v. United States, No. 08-1119, was brought by a Minnesota law firm that objected to three parts of the law. In addition to the core First Amendment challenge, the firm argued that Congress had not meant to cover lawyers in the first place. That argument did not seem to gain much traction with the justices.

The firm also objected to a requirement in the law that its advertising include this statement or something like it: “We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”

Justice Samuel A. Alito Jr. said he was troubled by that requirement. “A prospective client looks at that,” he said, “and they say, ‘Well, I don’t want a debt relief agency, I want a lawyer.’ “

Mr. Jay said the firm was free to add to and clarify the statement. “There is no restriction on what content goes in the ad,” he said, “only that it include this disclaimer.”

As for the part of the law restricting legal advice, Mr. Jay said it should be narrowed rather than struck down.

The law, the government said in a brief, should be read to bar “only advice to take on debt with an intent to abuse the bankruptcy laws, such as advice to charge a vacation, concert tickets or some similar purchase to a credit card, knowing that the purchaser will enjoy the full benefit of the purchase and then shed most or all of the debt in bankruptcy.”

But G. Eric Brunstad Jr., a lawyer for the Minnesota law firm, said the law “whipsaws the attorneys who are trying to apply it.” State ethics rules “say you have to give unfettered, candid advice to your client,” he said, while the federal law says “you must give truncated advice.”


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