Milavetz, Gallop & Milavetz, P.A. v. United States (edited excerpt concerning disclosure provisions)

Justice Sotomayor delivered the opinion of the Court

Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA or Act) to correct perceived abuses of the bankruptcy system. Among the reform measures the Act implemented are a number of provisions that regulate the conduct of "debt relief agenc[ies]"--i.e., professionals who provide bankruptcy assistance to consumer debtors. See 11 U. S. C. §§101(3), (12A). These consolidated cases present the threshold question whether attorneys are debt relief agencies when they provide qualifying services. Because we agree with the Court of Appeals that they are, we must also consider whether the Act's provisions governing debt relief agencies' advice to clients, §526(a)(4), and requiring them to make certain disclosures in their advertisements, §§528(a) and (b)(2), violate the First Amendment rights of attorneys. Concluding that the Court of Appeals construed §526(a)(4) too expansively, we reverse its judgment that the provision is unconstitutionally overbroad. Like the Court of Appeals, we uphold §528's disclosure requirements as applied in these consolidated cases.

In order to improve bankruptcy law and practice, Congress enacted through the BAPCPA a number of provisions directed at the conduct of bankruptcy professionals. Some of these measures apply to the broad class of bankruptcy professionals termed "debt relief agenc[ies]." The BAPCPA subjects debt relief agencies to a number of restrictions and requirements, as set forth in §§526, 527, and 528. As relevant here, §528 requires qualifying professionals to include certain disclosures in their advertisements. Subsection (a) provides that debt relief agencies must "clearly and conspicuously disclose in any advertisement of bankruptcy assistance services or of the benefits of bankruptcy directed to the general public ... that the services or benefits are with respect to bankruptcy relief under this title." §528(a)(3). It also requires them to include the following, "or a substantially similar statement": "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code." §528(a)(4). Subsection (b) requires essentially the same disclosures in advertisements "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." §528(b)(2). Debt relief agencies advertising such services must disclose "that the assistance may involve bankruptcy relief," §528(b)(2)(A), and must identify themselves as "debt relief agenc[ies]" as required by §528(a)(4), see §528(b)(2)(B).

We address the validity of §528's challenged disclosure requirements. Our first task in resolving this question is to determine the contours of Milavetz's claim. Although the nature of its challenge is not entirely clear from the briefing or decisions below, counsel for Milavetz insisted at oral argument that this is "not a facial challenge; it's an as-applied challenge." We will approach the question consistent with Milavetz's characterization.

We next consider the standard of scrutiny applicable to §528's disclosure requirements. The parties agree, as do we, that the challenged provisions regulate only commercial speech. Milavetz contends that our decision in Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n of N. Y. supplies the proper standard for reviewing these requirements. The Court in that case held that restrictions on nonmisleading commercial speech regarding lawful activity must withstand intermediate scrutiny--that is, they must "directly advanc[e]" a substantial governmental interest and be "n[o] more extensive than is necessary to serve that interest." Contesting Milavetz's premise, the Government maintains that §528 is directed at misleading commercial speech. For that reason, and because the challenged provisions impose a disclosure requirement rather than an affirmative limitation on speech, the Government contends that the less exacting scrutiny described in Zauderer governs our review. We agree.

Zauderer addressed the validity of a rule of professional conduct that required attorneys who advertised contingency-fee services to disclose in their advertisements that a losing client might still be responsible for certain litigation fees and costs. Noting that First Amendment protection for commercial speech is justified in large part by the information's value to consumers, the Court concluded that an attorney's constitutionally protected interest in not providing the required factual information is "minimal." Unjustified or unduly burdensome disclosure requirements offend the First Amendment by chilling protected speech, but "an advertiser's rights are adequately protected as long as disclosure requirements are reasonably related to the State's interest in preventing deception of consumers." 

The challenged provisions of §528 share the essential features of the rule at issue in Zauderer. As in that case, §528's required disclosures are intended to combat 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. Additionally, the disclosures entail only an accurate statement identifying the advertiser's legal status and the character of the assistance provided, and they do not prevent debt relief agencies like Milavetz from conveying any additional information.

The same characteristics of §528 that make it analogous to the rule in Zauderer serve to distinguish it from those at issue in In re R. M. J. to which the Court applied the intermediate scrutiny of Central Hudson. The ethical rules addressed in R. M. J. prohibited attorneys from advertising their practice areas in terms other than those prescribed by the State Supreme Court and from announcing the courts in which they were admitted to practice. Finding that the restricted statements were not inherently misleading and that the State had failed to show that the appellant's advertisements were themselves likely to mislead consumers, the Court applied Central Hudson's intermediate scrutiny and invalidated the restrictions as insufficiently tailored to any substantial state interest. In so holding, the Court emphasized that States retain authority to regulate inherently misleading advertisements, particularly through disclosure requirements, and it noted that advertisements for professional services pose a special risk of deception.

Milavetz makes much of the fact that the Government in these consolidated cases has adduced no evidence that its advertisements are misleading. Zauderer forecloses that argument: "When the possibility of deception is as self-evident as it is in this case, 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.' " Evidence in the congressional record demonstrating a pattern of advertisements that hold out the promise of debt relief without alerting consumers to its potential cost, see 1998 Hearings, pt. III, at 86, 90-94, is adequate to establish that the likelihood of deception in this case "is hardly a speculative one." 

Milavetz alternatively argues that the term "debt relief agency" is confusing and misleading and that requiring its inclusion in advertisements cannot be "reasonably related" to the Government's interest in preventing consumer deception, as Zauderer requires. This contention amounts to little more than a preference on Milavetz's part for referring to itself as something other than a "debt relief agency"--e.g., an attorney or a law firm. For several reasons, we conclude that this preference lacks any constitutional basis. First, Milavetz offers no evidence to support its claim that the label is confusing. Because §528 by its terms applies only to debt relief agencies, the disclosures are necessarily accurate to that extent: Only debt relief agencies must identify themselves as such in their advertisements. This statement provides interested observers with pertinent information about the advertiser's services and client obligations.

Other information that Milavetz must or may include in its advertisements for bankruptcy-assistance services provides additional assurance that consumers will not misunderstand the term. The required statement that the advertiser " 'help[s] people file for bankruptcy relief' " gives meaningful context to the term "debt relief agency." And Milavetz may further identify itself as a law firm or attorney. Section 528 also gives Milavetz flexibility to tailor the disclosures to its individual circumstances, as long as the resulting statements are "substantially similar" to the statutory examples. §§528(a)(4) and (b)(2)(B).

Finally, we reject Milavetz's argument that §528 is not reasonably related to any governmental interest because it applies equally to attorneys who represent creditors, as Milavetz sometimes does. The required disclosures, Milavetz contends, would be counterfactual and misleading in that context. This claim is premised on an untenable reading of the statute. We think it evident from the definition of "assisted person"--which is stated in terms of the person's debts, see §101(3)--and from the text and structure of the debt-relief-agency provisions in §§526, 527, and 528 that those provisions, including §528's disclosure requirements, govern only professionals who offer bankruptcy-related services to consumer debtors. Section 528 is itself expressly concerned with advertisements pertaining to "bankruptcy assistance services," "the benefits of bankruptcy," "excessive debt, debt collection pressure, or inability to pay any consumer debt," §§528(a)(3) and (b)(2). Moreover, like the other debt-relief-agency provisions, that section is codified in a subchapter of the Bankruptcy Code entitled "debtor's duties and benefits." In context, reading §528 to govern advertisements aimed at creditors would be as anomalous as the result of which Milavetz complains. Once again, we decline Milavetz's invitation to adopt a view of the statute that is contrary to its plain meaning and would produce an absurd result.

Because §528's requirements that Milavetz identify itself as a debt relief agency and include certain information about its bankruptcy-assistance and related services are "reasonably related to the [Government's] interest in preventing deception of consumers," Zauderer, 471 U.S. at 651, we uphold those provisions as applied to Milavetz.