Bankruptcy Law Doesn't Restrict Free Speech, Supreme Court says

By Robert Barnes
Washington Post Staff Writer
Tuesday, March 9, 2010
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A federal law that bars attorneys from telling clients who are contemplating bankruptcy to take on more debt is not an unconstitutional restriction on the free-speech rights of lawyers, the Supreme Court decided Monday.

Attorneys may give their clients any advice that does not lead to an abuse of the bankruptcy system, the court ruled unanimously in an opinion written by Justice Sonia Sotomayor.

A small Minnesota law firm had challenged the provision in Congress's broad 2005 bankruptcy overhaul law. The firm's lawyer had told the justices that incurring more debt might sometimes be the prudent thing to do to help the individual and creditors. And, he said, more troubling was the law's potential conflict with the First Amendment and a lawyer's responsibility to give "unfettered, candid advice."

But the court, skeptical of the arguments when it heard the case in December, said, in effect, there was no reason to make a constitutional case out of it. The law could be read narrowly, Sotomayor wrote, and she agreed that sometimes that meant it would be wise to take on more debt.

For instance, she said in a footnote, "Advice to refinance a mortgage or purchase a reliable car prior to filing because doing so will reduce the debtor's interest rates or improve his ability to repay is not prohibited."

She added: "It would make scant sense to prevent attorneys and other debt relief agencies from advising individuals thinking of filing for bankruptcy about options that would be beneficial to both those individuals and their creditors."

The U.S. Court of Appeals for the 8th Circuit in St. Louis ruled in 2008 that the provision was unconstitutional.

But Sotomayor was among those skeptical when the case came before the justices.

Perhaps the law only reinforces rules prohibiting lawyers from giving their clients unethical advice, she suggested.

"What in the First Amendment would otherwise give you that right?" she asked the law firm's lawyer.

The case is Milavetz, Gallop & Milavetz, P.A., v. United States.