Georgia's Bankruptcy Courts Split on Whether to Hold Sua Sponte that Attorneys Are Not "Debt Relief Agencies" under BAPCPA
As reported here, on October 17, 2005, the day BAPCPA went effective, Judge Lamar W. Davis, Chief Bankruptcy Judge of the Bankruptcy Court for the Southern District of Georgia, ruled sua sponte that attorneys who are members of the bar of that court, as well as those admitted pro hac vice, are not "debt relief agencies" within the meaning of BAPCPA so long as their activities fall within the scope of the practice of law and do not constitute a separate commercial enterprise. In re Attorneys at Law and Debt Relief Agencies, 332 B.R. 66 (Bankr. S.D. Ga. 2005).
As then reported, Judge Davis's surprise ruling raised interesting "case or controversy" issues, as it wasn't clear what specific situation the Court was addressing, other than the obvious theoretical one. It also left many wondering whether the Court's proactive style would catch on elsewhere.
Well, about 165 miles up the road from Judge Davis sits Judge Robert F. Hershner, the Chief Bankruptcy Judge for the Bankruptcy Court for the Middle District of Georgia. Two weeks after Judge Davis issued his ruling, a local bankruptcy attorney, John K. James, presented Judge Hershner with this "Motion to Determine Attorney Status" following his post-petition employment by joint pro se chapter 7 debtors. In the motion, Mr. James asked the court to hold -- as Judge Davis had -- that attorneys who practice in the Middle District of Georgia are not "debt relief agencies" under Section 101(12)(A) of the Bankruptcy Code.
According to the Court, James raised three grounds justifying relief:
(1) the debt relief agency provisions of BAPCPA, as applied to attorneys who practice before this Court, violate the First Amendment of the United States Constitution;
(2) the statutory structure of BAPCPA indicates that an attorney is not a debt relief agency; and
(3) the legislative history indicates that Congress did not intend the term debt relief agency to include an attorney.
Judge Hershner denied the motion on the basis that no "case or controversy" existed, yet remarkably didn't even once cite to Judge Davis's opinion. In re McCartney, 2006 WL 75306 (Bankr. M.D. Ga. 1/12/06). He wrote:
A fundamental jurisdictional consideration for any federal court, including Article I courts, is whether the plaintiff has constitutional standing. The inquiry is a reflection of the concern that there be an actual "case or controversy" before the court. The litigant must show, "first and foremost, 'an invasion of a legally protected interest' that is 'concrete and particularized' and 'actual or imminent.' " In the absence of standing the court has no jurisdiction to decide the merits of a claim.
Three elements must be present for a plaintiff to satisfy the "case or controversy" requirement of constitutional standing. First, the plaintiff must demonstrate "actual injury." Second, the plaintiff must establish a casual link between the injury and the challenged conduct. Third, it "must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision."
In the case at bar, no party has threatened to enforce against Movant the debt relief agency provisions of BAPCPA. Movant has not sustained any real, actual, or direct harm or injury. Movant has not shown that he is in danger of sustaining any immediately impending harm or injury.
The Court can only conclude that Movant has failed to satisfy the case or controversy requirement. The Court is persuaded that Movant's motion must be dismissed.
If you're a front-line attorney representing consumer debtors in BAPCPA's austere world, you'll surely agree that the most alarming part of this entire matter is the US Trustee's hardline position that attorneys are "debt relief agencies" under BAPCPA's "plain meaning" and that Congress intended to treat them as such (even if BAPCPA's onerous provisions regarding "debt relief agencies" extend well beyond what's professionally required of them under state rules of professional responsibility). Presently, the top slot of the Executive Office for the US Trustees is vacant. Whoever is nominated to serve as Executive Director should be asked his or her views on this important issue. Should the views of the US Trustee for the Middle District of Georgia come to represent the official position of the Executive Office for the US Trustees (and hence the position of all US Trustees nationwide), then a lot of consumer bankruptcy attorneys may soon wish they had become doctors or professional musicians instead.
© Steve Jakubowski 2006
Debt collection attorneys have been subject to the Fair Debt Collection Practices Act because they are defined by the act as "debt collectors". Collection attorneys are required to comply with a statute that was primarily designed for non attorney debt collectors. The result has been exposure to consumer attorney lawsuits for technical violations of the Act. Why should consumer bankruptcy attorneys be exempt from congressional regulation?
Thanks for posting. I think the difference is that FDCPA doesn't regulate the relationship between the debt collection attorney and its client, whereas BAPCPA does, and in a very severe way. That's the biggest problem with the regulation, in my view.