Part of Debt Relief Agency Provisions Held Unconstitutional by Minnesota District Court

Although I would like to focus this blog mostly on Ninth Circuit decisions, I can’t ignore a decision that has garnered so much attention. By now, hopefully most of you may have heard of this Minnesota District Court decision – Milavetz, Gallop & Milavetz, et. al. v. United States of America, Case No. 05-CV-2626, 2006 WL 3524399.

In this decision, the district court held that 11 U.S.C. § 526(a)(4) (the provision relating to not giving advice on incurring more debt), 11 U.S.C. § 528(a)(4) (the provision requiring certain statement in advertising), and 11 U.S.C. § 528(b)(2) (another advertisement provision) unconstitutionally restricts attorney’s speech.

In analyzing § 526(a)(4), the district court held that the section regulates content of the attorney’s speech and that it does not relate to any “ethical rules.” Thus, the district court applied strict scrutiny. The district court then concluded that the provision is not narrowly tailored and does not enforce a compelling state interest.

In analyzing § 528(a)(4) and (b)(2), the district court applied intermediate scrutiny because it reasoned that the section regulates truthful, as well as false, advertisement. The district court concluded that the provisions failed to advance government’s substantial interest and that they are not narrowly tailored.

Thus, the court concluded that all three provisions are unconstitutional as applied to attorneys and that the debt relief agency provisions are inapplicable to attorneys.

It will be interesting if the rest of the cases filed in various parts of the country will adopt this court’s rationale or not.