Connecticut Bar Association v. United States

2010 WL 3465650 (2d Cir. September 7, 2010)
The Second Circuit affirmed that portion of the district court’s decision that upheld the constitutionality of the disclosure requirements of 11 U.S.C. § 527 and the contract requirements of § 528(a)(1) and (2), and vacated that portion of the district court’s decision that declared 11 U.S.C. §§ 526(a)(4) and 528(a)(3)-(4) and (b)(2) to be unconstitutional as violative of the First Amendment. First, the Court determined that several of the plaintiffs lacked standing and therefore remanded the case with respect to those plaintiffs with instructions to dismiss on that ground. The Court further determined that the U.S. Supreme Court’s decision in Milavetz, Gallop & Milavetz, P.A. v. United States, 130 S. Ct. 1324 (2010), which was decided after briefing and oral argument had been completed in this case, required it to vacate the district court’s declaratory judgment that invalidated § 526(a)(4) on First Amendment overbreadth grounds. The Court further concluded that Milavetz (and other precedents) compelled the application of the rational basis standard of review with respect to each of the plaintiffs’ challenges because the speech at issue is commercial and the code sections compel certain disclosures without suppressing speech. Turning to its substantive review, the Court held that each of the statutes survives rational basis review because each was premised on an established factual predicate of “documented confusion and deception in the bankruptcy process” with regard to consumer debtors. The Court held that the code sections at issue, specifically §§ 527(a) and (b) and 528(a)(1)-(4) and (b)(2), were informed by this legitimate government concern, and were rationally related to the remediation of such concern. The Court further held that §§ 527(a) and (b), which provide consumer debtors with basic information about bankruptcy, do not compel misleading disclosures because of their inherent flexibility, and that such flexibility does not make these sections impermissibly vague. Finally, the Court held that § 528(a)(1)-(2), which prohibits a “debt relief agency” from providing bankruptcy assistance services to a consumer debtor in the absence of a written contract with such debtor setting forth certain specified information, does not violate due process because the debt relief agency’s liability for a violation of § 528(a)(1) is premised not on the inaction of a person outside of its control, but rather on the debt relief agency’s “intentional or negligent provision of bankruptcy assistance to a debtor in the absence of an executed contract.”
Procedural context:
Plaintiffs appealed the district court’s judgment granting, in part, defendants’ motion to dismiss the complaint. Defendants cross appealed the district court’s judgment granting, in part, plaintiffs’ motion for declaratory and injunctive relief.
The case concerns facial challenges to various provisions of the Bankruptcy Code, and thus there is no discussion of facts in the Court’s opinion.
Circuit Judges: Pierre N. Leval, Reena Raggi; District Judge, E.D.N.Y. (by designation): John Gleeson Opinion by Raggi, Circuit Judge

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