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No. 06-628

IN THE

Supreme Court Of The United States

OCTOBER TERM, 2006

IN RE MEGHAN CANNELLA, DEBTOR PAUL HAGE, ESQ.,

Petitioner, v.

MEGHAN CANNELLA,

Respondent.

On Writ of Certiorari to the United States Court of Appeals for the Thirteenth Circuit BRIEF FOR RESPONDENT

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Counsel for Respondent

CERTIFICATE OF INTERESTED PARTIES In order that the members of this Court may determine disqualification and recusal, Respondent certifies that the following is a complete list of parties with an interest in the outcome of this lawsuit:

Petitioner .......................................................................................... Paul Hage, Esq.

Respondent ....................................................................................... Meghan Cannella ________________________ ________________________ ________________________ Counsel for Respondent

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QUESTIONS PRESENTED I. Is the regulation in 11 U.S.C. § 526(a)(4), which prohibits attorneys from giving unethical advice to a client contemplating bankruptcy, a violation of the First Amendment of the Constitution? Does the collection of fees post-petition pursuant to a pre-petition claim created by contract violate the plain language of the automatic stay in 11 U.S.C. § 362?

II.

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TABLE OF CONTENTS Page QUESTIONS PRESENTED ...................................................................................................... i

TABLE OF AUTHORITIES ..................................................................................................... iv STATEMENT OF THE CASE .................................................................................................. SUMMARY OF ARGUMENT ................................................................................................. ARGUMENT ............................................................................................................................. I. THE ATTORNEY ADVICE RESTRICTIONS IN SECTION 526(a)(4) DO NOT VIOLATE THE FIRST AMENDMENT OF THE CONSTITUTION BECAUSE THE GOVERNMENT HAS A LEGITIMATE INTEREST IN REGULATING ATTORNEY SPEECH, THE RESTRICTIONS FURTHER THIS LEGITIMATE INTEREST AND ARE NOT MORE RESTRICTIVE THAN NECESSARY TO SERVE THE GOVERNMENT'S INTEREST. ............................................................. A. Section 526(a)(4) Is an Ethical Rule Which Applies to Debt Relief Agencies and as an Ethical Rule, Is Subject to Intermediate Scrutiny. ............................. 1. Section 526(a)(4) applies to "Debt Relief Agencies," a term which includes bankruptcy attorneys. .................................................... Section 526(a)(4) is an ethical rule designed to promote justice and truthfulness among attorneys. ................................................................ 1 3 5

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2.

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3.

Because Section 526(a)(4) is an ethical restriction, it is subject to the intermediate scrutiny test. ................................................................ 11

B.

Section 526(a)(4) Serves a Legitimate Governmental Interest. ......................... 12 1. The government has a legitimate interest in protecting debtors from being denied bankruptcy relief and protecting creditors from fraud. .... 13 The government has an interest in protecting the integrity of the bankruptcy system. ........................................................................... 14

2.

C.

The Regulation in Section 526(a)(4) Is Narrowly Tailored to Further the Legitimate Interests of the Government and Mr. Hage's Allegations That the Section Is Overbroad Are Without Merit. .................................................... 14 1. The language of Section 526(a)(4), "in contemplation of bankruptcy," renders the statute sufficiently narrowly tailored. .................................. 15

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2.

The government's regulation on speech must be reasonable, but does not have to be a perfect fit. ............................................................ 17 Mr. Hage must rely on a facial challenge to the constitutionality of Section 526(a)(4), but cannot establish such a challenge. ..................... 18

3.

II.

COLLECTION OF FEES INCURRED FOR POST-PETITION SERVICES PROVIDED PURSUANT TO A PRE-PETITION RETENTION AGREEMENT IS A VIOLATION OF THE AUTOMATIC STAY IN SECTION 362. ........................... 19 A. The Contract Between Petitioner and Respondent Gives Rise to a Prepetition Claim; Thus, Collection of Fees Incurred for Services Provided Pursuant to the Contract Constitutes a Violation of the Automatic Stay. .......... 20 1. The signing of the pre-petition retention contract creates a debt, which constitutes a claim; thus, the contract gives rise to a right to payment, satisfying the definition of claim in Section 101(5). .......... 21 The right to payment created is contingent, and contingent rights arise at the signing of the contract; thus, the right to payment is created when the contract is signed, rendering the claim pre-petition and subject to the automatic stay. .......................................................... 22 Cashing a check is an act to collect on a claim, and because the claim is pre-petition, the act is prohibited by the automatic stay of Section 362. ............................................................................................ 24

2.

3.

B.

Because the Language of the Automatic Stay Is Unambiguous, the Court Must Apply the Plain Meaning of the Statute, Which Cannot Be Trumped by Public Policy Arguments. ............................................................................. 25 1. The language of the automatic stay is unambiguous; thus, the Court is required to apply the plain meaning of the statute. ............................ 25 A plain reading of the automatic stay demands the staying of collection actions regardless of public policy concerns. ........................ 26 Section 329 does not create an enumerated exception to the automatic stay; thus, the fees owed pursuant to the contract are stayed by Section 362. ........................................................................... 28

2.

3.

CONCLUSION .......................................................................................................................... 29 CERTIFICATE OF SERVICE .................................................................................................. 30

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TABLE OF AUTHORITIES Page(s) United States Supreme Court Cases: Barnhart v. Sigmon Coal Co., 534 U.S. 438 (2002). ...................................................................................................... 26 Bd. of Governors of the Fed. Reserve Sys. v. MCorp Fin., Inc., 502 U.S. 32 (1991). ........................................................................................................ 20 Bd. of Trs. of the State Univ. of N.Y. v. Fox, 492 U.S. 469 (1989). ................................................................................................ 14, 17 Brown v. Pro Football, 518 U.S. 231 (1996). ...................................................................................................... 27 Burlingham v. Crouse, 228 U.S. 459 (1913). ...................................................................................................... 19 Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n, 447 U.S. 557 (1980). ......................................................................................................

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Chandris, Inc. v. Latsis, 515 U.S. 347 (1995). ...................................................................................................... 20 C.I.R. v. Asphalt Products Co., 482 U.S. 117 (1987). ...................................................................................................... 26 Cohen v. Hurley, 366 U.S. 117 (1961). ...................................................................................................... 10 Conn. Nat'l Bank v. Germain, 503 U.S. 249 (1992). ...................................................................................................... 28 Duncan v. Walker, 533 U.S. 167 (2001). ...................................................................................................... 25 Edward J. DeBartolo Corp. v. Fla. Gulf Coast Bldg. & Constr. Trades Council, 485 U.S. 568 (1988). ...................................................................................................... 16 Gentile v. State Bar of Nev., 501 U.S. 1030 (1991). ......................................................................................... 6, 11, 12

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Green v. Bock Laundry Mach. Co., 490 U.S. 504 (1989), superseded by statute not on point, FED. R. EVID. 609, Pub. L. No. 93-595, 88 Stat. 1935. ................................................................................ 28 Goldfarb v. Va. State Bar, 421 U.S. 773 (1975). .................................................................................................. 7­8 In re R.M.J., 455 U.S. 191 (1982). ............................................................................................. passim In re Sawyer, 360 U.S. 622 (1959). .............................................................................................. 10, 11 Johnson v. Home State Bank, 501 U.S. 78 (1991). .................................................................................................. 22­23 Laime v. U.S. Trustee, 540 U.S. 526 (2004). ................................................................................................ 26­27 Miller v. California, 413 U.S. 15 (1973). .................................................................................................... 5­6 NAACP v. Button, 371 U.S. 415 (1963). ...................................................................................................... 11 N.Y. Times Co. v. Sullivan, 376 U.S. 254 (1964). ................................................................................................ 5­6, 7 Norfolk & W. Ry. Co. v. Am. Train Dispatchers Ass'n, 499 U.S. 117 (1991). ...................................................................................................... 25 Oharalik v. Ohio State Bar Ass'n, 436 U.S. 447 (1978). ...................................................................................................... 10 Ohio v. Kovacs, 469 U.S. 274 (1985). ................................................................................................ 21­22 Penn. Dep't. of Pub. Welfare v. Davenport, 495 U.S. 552 (1990). .................................................................................... 21­22, 23, 24 Pierce v. Underwood, 487 U.S. 552 (1988). ...................................................................................................... 20 Roth v. United States, 354 U.S. 476 (1957). ................................................................................................... 5­6

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Sable Commc'ns of Cal., Inc. v. Fed. Commc'ns Comm'n, 492 U.S. 115 (1989). ...................................................................................................... 17 Sabri v. United States, 541 U.S. 600 (2004). .............................................................................................. 15, 18 Schenck v. United States, 249 U.S. 47 (1919). ........................................................................................................

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Traer v. Clews, 115 U.S. 528 (1885). ...................................................................................................... 19 TRW Inc. v. Andrews, 534 U.S. 19 (2001). ........................................................................................................ 26 Watt v. Alaska, 451 U.S. 259 (1981). ...................................................................................................... 28 Watts v. United States, 394 U.S. 705 (1969). ......................................................................................................

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Federal Circuit Court Cases Bethea v. Robert J. Adams & Assocs., 352 F.3d 1125 (7th Cir. 2003). ..................................................................................... 24 Consumers Union of U.S., Inc. v. Heimann, 589 F.2d 531 (D.C. Cir. 1978). ................................................................................ 25­26 Grady v. A.H. Robbins, 839 F.2d 198 (4th Cir. 1988). ........................................................................................ 22 In re Biggar, 110 F.3d 685 (9th Cir. 1997). ........................................................................................ 29 In re Doser, 412 F.3d 1056 (9th Cir. 2005). ...................................................................................... 19 In re Hines, 147 F.3d 1185 (9th Cir. 1998). ...................................................................................... 23 In re Flicking, 361 F.3d 172 (2d Cir. 2004). .......................................................................................... 28

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In re Fostvedt, 823 F.2d 305 (9th Cir. 1987). ........................................................................................ 22 In re Jastrem, 253 F.3d 438 (9th Cir. 2001). ........................................................................................ 23 In re Jensen, 995 F.2d 925 (9th Cir. 1993). ........................................................................................ 24 In re M. Frenville Co., Inc., 744 F.2d 332 (3d Cir. 1984). .......................................................................................... 23 In re Piper Aircraft Corp., 58 F.3d 1573 (11th Cir. 1995). .............................................................................. 22­23 MBNA Am. Bank, N.A. v. Hill, 436 F.3d 104 (2d. Cir. 2006). ......................................................................................... 19 Rittenhouse v. Eisen, 404 F.3d 395 (6th Cir. 2005). .........................................................................

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Federal District and Bankruptcy Court Cases: Hersh v. United States, 347 B.R. 19 (N.D. Tex. 2006). ................................................................................. 15­16 In re Attorneys at Law & Debt Relief Agencies, 332 B.R. 66 (Bankr. S.D. Ga. 2005). ......................................................................... 8­9 In re Baldwin-United Corp., 57 B.R. 759 (S.D. Ohio 1985). ...................................................................................... 25 In re Briskey, 258 B.R. 473 (Bankr. M.D. Ala. 2001). ................................................................... 24, 25 In re D'Alfonso, 211 B.R. 508 (Bankr. E.D. Pa. 1997). ........................................................................... 19 In re Hessinger & Assocs., 165 B.R. 657 (Bankr. N.D. Cal. 1994), vacated, 192 B.R. 211 (N.D. Cal. 1996). ........ 24 In re Miller, 98 B.R. 110 (Bankr. N.D. Ga. 1989). ............................................................................ 26

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In re Nieves, 246 B.R. 866 (Bankr. E.D. Wis. 2000). ......................................................................... 24 In re Shell, 312 B.R. 431 (Bankr. M.D. Ala. 2004). ................................................................... 21, 24 In re Tredinnick, 264 B.R. 573 (B.A.P. 9th Cir. 2001). ............................................................................. 27 Ins. Co. of N. Am. v. Sullivan, 333 B.R. 55 (D. Md. 2005). ........................................................................................... 7 Milavetz, Gallop & Milavetz P.A. v. United States, 2006 WL 3524399 (D. Minn. Dec. 7, 2006). ................................................................. 15 Olsen v. Gonzales, 350 B.R. 906 (D. Or. 2006). .................................................................................. passim Zelotes v. Martini, 352 B.R. 17 (D. Conn. 2006). ........................................................................................ 15

Statutes and Regulations: 11 U.S.C.S. § 101 (LexisNexis 2006). ............................................................................... passim 11 U.S.C.S. § 301 (LexisNexis 2006). ....................................................................................... 19 11 U.S.C.S. § 329 (LexisNexis 2006). ................................................................................. 20, 28 11 U.S.C.S. § 362 (LexisNexis 2006). ............................................................................... passim 11 U.S.C.S. § 526 (LexisNexis 2006). ............................................................................... passim

Dictionary: BLACK'S LAW DICTIONARY (8th ed. 2004). .......................................................................... 9­10

Secondary Authority: CHARLES J. TABB & RALPH BRUBAKER, BANKRUPTCY LAW PRINCIPLES POLICIES AND PRACTICE (2d ed. 2006). ..........................................................................................

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Erwin Chemerinsky, Constitutional Issues Posed In the Bankruptcy Abuse Prevent and Consumer Protection Act of 2005, 79 AM. BANKR. L.J. 571 (2005). ............................ 18 H.R. REP. NO. 109-31 (2005), as reprinted in 2005 U.S.C.C.A.N. 88. ................................................................

passim

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OPINIONS BELOW The decision of the United States District Court for the Northern District of Bliss is unreported. The opinion of the United States Court of Appeals for the Thirteenth Circuit has not been published, but is set forth in the Record (R. 2­29). STATEMENT OF THE CASE Factual Background In late October, Meghan Cannella, a resident of the State of Bliss, was let go by Northwest Airlines where she had served as a ticket agent (Record at 3). In her time of financial distress, Cannella contacted attorney Paul Hage in order to discuss the possibility of filing bankruptcy (R. at 3). Cannella's employment with Northwest Airlines, who was on the verge of bankruptcy as well, was uncertain (R. at 3). She owned no home or substantial non-exempt assets, and had unsecured debts that greatly exceeded her ability to pay (R. at 3). Mr. Hage determined that a Chapter 7 filing would be preferable to a Chapter 13 filing, but after evaluating Cannella's financial situation under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"), Hage discovered that Cannella would not be able to pass the new "means test" used to determine Chapter 7 bankruptcy eligibility (R. at 3). Under the old law, Canella would not have to overcome the means test in order to be eligible under Chapter 7 (R. at 3). However, having barely missed the filing deadline under the old law, her case had to be evaluated under the BAPCPA, which presented an obstacle to filing under Chapter 7 (R. at 3). Aware that incurring additional secured debt would allow Cannella to pass the means test and file under Chapter 7, Hage advised Cannella to incur additional debt, the purchase of a new car, in violation of Section 526(a)(4) of the Bankruptcy Code (R. at 4). Even though Cannella's vehicle had periodic mechanical breakdowns, it was already fully paid for,

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and Hage testified that had Cannella not been planning to file bankruptcy, he would not have advised her to incur additional debt through the purchase of a new vehicle (R. at 4). Prior to filing Cannella's Chapter 7 bankruptcy case, Hage made Cannella sign a retention agreement in which Cannella agreed to pay $1,000 for Hage's legal representation (R. at 5). Aware of Cannella's financial inability to pay the fee in full, Hage arranged a payment plan in which Cannella would pay Hage's $1,000 fee in five payments (R. at 4­5). Cannella paid Hage $600 in cash prior to the bankruptcy filing and presented Hage with four post-dated checks of $100 each, which were to be cashed after Hage filed Cannella's bankruptcy petition (R. at 5). After filing Ms. Cannella's petition, Hage cashed two of the post-dated checks in violation of the automatic stay in 11 U.S.C. § 362 (R. at 6). Cannella ceased Hage's legal representation after they got into a disagreement regarding a reaffirmation agreement (R. at 5). Hage returned the two remaining post-dated checks (R. at 5­6). Cannella's new legal representation, Mr. Jon Rinelli, evaluated Cannella's case and

immediately took action against Hage for violating Bankruptcy Code Section 526(a)(4) by advising Cannella to incur additional debt in contemplation of bankruptcy and Section 362 by cashing Cannella's post-dated checks in violation of the automatic stay (R. at 6). Cannella sought recovery of all fees paid to Hage, reasonable attorney's fees and costs for this action under Section 526(c)(2), and punitive damages, costs, and attorneys fees pursuant to Section 362(k)(1) (R. at 6­7). Procedural History The United States Bankruptcy Judge for the Northern District of Bliss granted Mr. Hage's summary judgment motion in which he asserted that Section 526 violated his constitutional right to freedom of speech and that Section 362 did not apply to attorney's fees

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rendered post-petition (R. at 7). Ms. Cannella appealed the ruling of the district court. The United States Court of Appeals for the Thirteenth Circuit reversed the decision of the district court on the grounds that Section 526 did not violate the First Amendment of the Constitution and that Hage's cashing of Cannella's post-dated checks violated the automatic stay of Section 362, which applies to attorney's fees rendered post-petition pursuant to a pre-petition contract. This Court granted Petitioner Hage's application for writ of certiorari to consider the constitutionality of Section 526(a)(4) and whether the collection of fees pursuant to a pre-petition retention agreement is a violation of the automatic stay in Section 362. SUMMARY OF ARGUMENT I. THE ATTORNEY ADVICE RESTRICTIONS IN SECTION 526(a)(4) DO NOT VIOLATE THE FIRST AMENDMENT OF THE CONSTITUTION BECAUSE THE GOVERNMENT HAS A LEGITIMATE INTEREST IN REGULATING ATTORNEY SPEECH, THE RESTRICTIONS FURTHER THIS LEGITIMATE INTEREST AND ARE NOT MORE RESTRICTIVE THAN NECESSARY TO SERVE THE GOVERNMENT'S INTEREST. The attorney advice regulation of Section 526(a)(4) does not violate the First Amendment of the Constitution. Section 526(a)(4) of the bankruptcy code serves as an ethical guideline for attorneys, prohibiting them from encouraging clients to incur more debt in contemplation of bankruptcy. As an ethical rule, Section 526(a)(4) is subject to the intermediate scrutiny standard. Under the intermediate standard, the government must show a compelling interest in regulating speech and the regulation must be narrowly tailored to further the compelling interest. Because the regulation passes both elements of the intermediate scrutiny standard, it is constitutional. First, the government has a legitimate interest in protecting debtors from being disqualified for relief under the bankruptcy system, protecting creditors from being defrauded by debtors who have the ability to pay, and preserving the integrity of the bankruptcy process.

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Through the passage of Section 526(a)(4), Congress intended to prevent attorneys, such as Hage, from engaging in unethical speech by advising debtors to abuse the bankruptcy system. Second, the statute is narrowly tailored to achieve the government's legitimate interest. Section 526(a)(4) only applies to attorney advice to incur more debt "in contemplation of" bankruptcy. Hage admitted that he would not have advised Canella to purchase a car on credit if she had not been planning to file bankruptcy. His advice to incur more debt in order to pass the means test was a flagrant violation of the statute and clearly an act in opposition of the government's legitimate interest. Because the government has defined a legitimate interest in protecting debtors and creditors, and in preserving the integrity of the bankruptcy system and because Section 526(a)(4) is narrowly tailored to serve that legitimate interest, Section 526(a)(4) does not violate the First Amendment of the Constitution. II. COLLECTION OF FEES INCURRED FOR POST-PETITION SERVICES PROVIDED PURSUANT TO A PRE-PETITION RETENTION AGREEMENT IS A VIOLATION OF THE AUTOMATIC STAY IN SECTION 362. The post-petition collection of fees provided pursuant to a pre-petition contract violates the automatic stay of Section 362(a), which applies to pre-petition claims and serves to halt acts to collect on those claims. Because the pre-petition retention agreement creates a claim, and the claim arose pre-petition, Hage's cashing of Cannella's post-dated checks is a violation of the automatic stay in Section 362. Furthermore, the statutory public policy and Section 329

arguments raised by the Petitioner do not trump the plain meaning of the statute, which render Hage's act a violation of the stay. First, a claim, as defined in Section 101(5), is a right to payment and includes rights that are contingent. The signing of the contract creates a debt, which gives rise to a claim. Thus, the signing of the contract gives rise to a right to payment, and even though the right is contingent, it

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is still covered under the broad definition of claim in Section 101(5). Furthermore, the right to payment arises at the signing of the contract, which occurred prior to the filing of the Bankruptcy petition. As a pre-petition claim, it is subject to the automatic stay of Section 362. Thus, when Hage cashed Cannella's post-dated checks, seeking to collect on his right to payment, he violated the automatic stay of Section 362. Third, the language of the automatic stay is unambiguous, and when such language is clear, the Court must enforce the provision according to the plain language. Even in situations where strict application may lead to an inequitable result, public policy arguments do not control the statute's ordinary application. Consequently, public policy arguments cannot trump the plain language of the statute, which renders the cashing of post-dated checks pursuant to a pre-petition contract a violation of the automatic stay. In addition, Section 329 does not expressly create an enumerated exception to the automatic stay; thus, its application does not render the post-petition collection of fees an allowed act under the automatic stay. ARGUMENT I. THE ATTORNEY ADVICE RESTRICTIONS IN SECTION 526(a)(4) DO NOT VIOLATE THE FIRST AMENDMENT OF THE CONSTITUTION BECAUSE THE GOVERNMENT HAS A LEGITIMATE INTEREST IN REGULATING ATTORNEY SPEECH, THE RESTRICTIONS FURTHER THIS LEGITIMATE INTEREST AND ARE NOT MORE RESTRICTIVE THAN NECESSARY TO SERVE THE GOVERNMENT'S INTEREST. Although freedom of expression is protected by the First Amendment of the United States Constitution, the extension of this freedom depends on the nature of the speech and the context in which the speech is communicated. Watts v. United States, 394 U.S. 705, 708 (1969) (holding that, taken in context, a statement made during a political debate was a "political hyperbole," which is protected by the First Amendment); Schenck v. United States, 249 U.S. 47, 52 (1919) (establishing the clear and present danger test). Thus, freedom of speech is not

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absolute, but is subject to necessary and narrowly defined exceptions. Miller v. California, 413 U.S. 15, 39 (1973) (stating the standard for determining whether material is obscene and thus, not protected by the First Amendment); N.Y. Times Co. v. Sullivan, 376 U.S. 254, 279­80 (1964) (holding that defamatory statements are not protected by the First Amendment); Roth v. United States, 354 U.S. 476, 485 (1957) (holding that obscenity was not within the area of constitutionally protected speech or press). This Court has emphasized that the state retains some authority to regulate speech, as long as the state asserts a legitimate interest and the interference with speech is in proportion to the interest served. Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n, 447 U.S. 557, 563­64 (1980). The statue in question, 11 U.S.C.S. § 526(a)(4) (LexisNexis 2006), is an ethical rule that applies to debt relief agencies, a term which includes attorneys. As an ethical rule, the statute is subject to the intermediate scrutiny standard. In re R.M.J., 455 U.S. 191, 203­04 (1982). To pass this standard, the government must have a legitimate interest in regulating speech and the means utilized to achieve that interest must be narrowly tailored. Gentile v. State Bar of Nev., 501 U.S. 1030, 1054 (1991). Because the state has asserted a legitimate interest in regulating speech and the means utilized is narrowly tailored to serve that interest, it does not violate the First Amendment. The government has a legitimate interest in protecting creditors and debtors alike and in preserving the overall integrity of the bankruptcy system. § 526(a)(4). In enacting the

Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"), Congress sought to remedy abuse of the bankruptcy process. H.R. REP. NO. 109-31 (2005), as reprinted in 2005 U.S.C.C.A.N. 88, 89. Congress aimed to eradicate consumer's prior practice of acquiring more debt prior to filing bankruptcy and aimed to lower the steadily rising number of bankruptcy petitions filed each year. Id. Congress made the governmental interest very clear by stating that

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the goal of BAPCPA is "to improve bankruptcy law and practice by restoring personal responsibility and integrity in the bankruptcy system and ensuring that the system is fair for both debtors and creditors." Id. Furthermore, the statute is sufficiently narrowly tailored. The language of Section

526(a)(4) does not render the statute overbroad, rather, "in contemplation of bankruptcy" renders the statute narrowly tailored to serve the government's legitimate interest. The regulation on speech does not have to be a perfect fit; however, it must be reasonable. The regulation on attorney speech is reasonable and narrowly tailored; thus, the second element of the intermediate scrutiny standard is met. Because Hage has admitted that he acted in violation of the statute, he must rely on a facial challenge to the constitutionality of Section 526(a)(4), a challenge that is almost impossible to overcome, and one which Petitioner cannot establish (R. at 4). Interpretation of the bankruptcy code is a question of law. Ins. Co. of N. Am. v. Sullivan, 333 B.R. 55, 60 (D. Md. 2005) (stating that "the interpretation of provisions of the bankruptcy code...raise[s] questions of law...."). Thus, this court has the power to review this case de novo and "make an independent examination of the whole record." N.Y. Times Co. v. Sullivan, 376 U.S. 254, 284­86 (1964). A. Section 526(a)(4) Is an Ethical Rule Which Applies to Debt Relief Agencies and as an Ethical Rule, Is Subject to Intermediate Scrutiny.

Section 526(a)(4) is an ethical standard that promotes justice, protects debtors from receiving advice that could result in the denial of relief, and prevents abuse of the bankruptcy system. H.R. REP. NO. 109-31 (2005), as reprinted in 2005 U.S.C.C.A.N. at 103. Section 526(a)(4) applies to "debt relief agencies," a term that includes attorneys. 11 U.S.C.S. §

526(a)(4) (LexisNexis 2006); Olsen v. Gonzales, 350 B.R. 906, 912 (D. Or. 2006). Because attorneys are essential to the primary governmental function of administering justice and have

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traditionally been named officers of the court, they are subject to ethical rules, including Section 526(a)(4). Goldfarb v. Va. State Bar, 421 U.S. 773, 792 (1975). As an ethical rule, Section 526(a)(4) is aimed at securing the integrity of every facet of our justice system including bankruptcy proceedings. H.R. Rep. No. 109-31 (2005), as reprinted in 2005 U.S.C.C.A.N. 88, 89. Hage's suggestion that defendant purchase a new car on the eve of bankruptcy to circumvent the "means test" is precisely the kind of conduct that this statute is aimed at preventing. To determine the constitutionality of an ethical rule, the court applies the intermediate scrutiny test. In Re R.M.J., 455 U.S. 191, 203­04 (1982). Because Section 526(a)(4) contains legitimate, ethical prohibitions on lawyer speech that are narrowly tailored to prevent abuse of the bankruptcy system and the client's dismissal of her Chapter 7 case, the provision is constitutional. 1. Section 526(a)(4) applies to "Debt Relief Agencies," a term which includes bankruptcy attorneys.

Section 526(a)(4) applies to "debt relief agencies." 11 U.S.C.S. § 526(a)(4) (LexisNexis 2006) (stating, "A debt relief agency shall not--advise an assisted person or prospective assisted person to incur more debt in contemplation of such person filing a case under this title or to pay an attorney or bankruptcy petition preparer fee or charge for services as part of preparing for or representing a debtor in a case under this title."). The term "debt relief agency" means "any person who provides any bankruptcy assistance to an assisted person in return for the payment of money or other valuable consideration, or who is a bankruptcy petition preparer under Section 110 . . . ." Olsen v. Gonzales, 350 B.R. 906, 911 (D. Or. 2006). Bankruptcy attorneys assist debtors in filing and preparing bankruptcy petitions and collect a fee for their work. Thus, bankruptcy attorneys are debt relief agencies for purposes of Section 526(a)(4). Although the lower courts are split on this issue, a plain reading of the statute makes clear that this provision is

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intended to apply to attorneys who assist debtors contemplating bankruptcy. 350 B.R. at 911; In re Attorneys at Law & Debt Relief Agencies, 332 B.R. 66, 69 (Bankr. S.D. Ga. 2005). The legislative history also indicates that Congress intended to include bankruptcy attorneys in this provision. H.R. REP. NO. 109-31 (2005), as reprinted in 2005 U.S.C.C.A.N. at 103 (stating that the provision "strengthens professionalism standards for attorneys and others who assist consumer debtors with their bankruptcy cases"). Moreover, Hage concedes that, as an attorney, Section 526 applies to him (R. at 7). "Debt relief agency" is not limited to attorneys, but necessarily includes them because bankruptcy attorneys are frequently involved in providing advice and assistance to persons contemplating bankruptcy. 2. Section 526(a)(4) is an ethical rule designed to promote justice and truthfulness among attorneys.

Section 526(a)(4) is an ethical rule, which does not limit speech more than is necessary to accomplish the legitimate governmental interests. An ethical rule relates to moral obligations and is aimed at promoting justice and encouraging honesty and truthfulness among the members of the legal profession. BLACK'S LAW DICTIONARY 592 (8th ed. 2004). Section 526(a)(4) relates to an attorney's moral obligations, promotes justice, and encourages honestly and truthfulness within the legal profession in the bankruptcy setting. H.R. REP. NO. 109-31 (2005), as reprinted in 2005 U.S.C.C.A.N. 88, 89. Section 526(a)(4) limits attorney speech when the purpose of the speech is to encourage an assisted person to incur more debt immediately prior to filing bankruptcy in order to game the system. Id. Hage's advice to incur debt in order to pass the "means test" and establish eligibility under the more favorable Chapter 7 provisions is contrary to justice and honest (R. at 3­4). The means test is designed to "deny access to Chapter 7 relief for those individual consumer debtors who have sufficient excess income to repay at least $100 a month on their debts over five years under a Chapter 13 plan." CHARLES J. TABB & RALPH

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BRUBAKER, BANKRUPTCY LAW PRINCIPLES, POLICIES,

AND

PRACTICE 121 (2d ed. 2006). If a

debtor has at least $100 a month of disposable income, a "presumption of abuse" arises under the "means test" and the debtor is forced out of Chapter 7 into Chapter 13 unless the debtor can prove "special circumstances." Id. Attorneys are subject to ethical rules such as that of Section 526(a)(4) because they are "an intimate, trusted and essential part of the machinery of justice, an officer of the court in the most compelling sense." In re Sawyer, 360 U.S. 622, 666­68 (1959). Attorneys are not only advocates for their clients, but are an indispensable part of our justice system and thus, are held to a very high standard of professionalism. Hage is regarded as "an [assistant] to the court in search of a just solution to disputes." Oharalik v. Ohio State Bar Ass'n, 436 U.S. 447, 460 (1978); Cohen v. Hurley, 366 U.S. 117, 124 (1961). Yet, Hage acted adversely to our judicial system and instead of working toward a just resolution to the financial disputes at issue, he chose to defraud Meghan Cannella's creditors of the remuneration they were entitled to and she was able to remit (R. at 4). Hage's speech is precisely the kind of speech this statute is aimed at curtailing. H.R. REP. NO. 109-31 (2005), as reprinted in 2005 U.S.C.C.A.N. 88, 89. Hage counters that the restriction of Section 526(a)(4) is not an ethical restriction; rather he argues that it is a content-based regulation of attorney speech subject to strict scrutiny. Olsen v. Gonzales, 350 B.R. 906, 915 (D. Or. 2006). However, Attorney Hage is not permitted to avoid his professional responsibilities in the name of freedom of speech. In re Sawyer, 360 U.S. 622, 646­47 (1959). Congress has the authority to impose reasonable and necessary restrictions on attorney speech even when those restrictions affect First Amendment rights.

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In In re Sawyer, this Court stated that an attorney's "obedience to ethical precepts may require abstention from what in other circumstances might be constitutionally protected speech." Id. In Sawyer, the Court reviewed an order affirming the suspension of an attorney for her attack on the fairness and impartiality of a judge. Id. at 624­25. Justice Stewart, who joined in the plurality opinion reversing the sanction, stated that he could not join in any "intimation that a lawyer can invoke the constitutional right of free speech to immunize himself from even handed discipline for proven unethical conduct." Id. at 646. Applying that principle to this case, Hage should not be permitted to escape his ethical duties to his client and to the Court by asserting his First Amendment right to free speech. The ethical precept of 526(a)(4) requires abstention from what might be constitutionally protected speech if the client were not "in contemplation of" bankruptcy. 3. Because Section 526(a)(4) is an ethical restriction, it is subject to the intermediate scrutiny test.

Because the restriction contained in Section 526(a)(4) is an ethical rule that limits attorney speech, the constitutionality of the restriction is measured using the less stringent "intermediate scrutiny" standard. In re R.M.J., 455 U.S. 191, 203­04 (1982). Under the

intermediate scrutiny standard, reasonable regulations on attorney speech are acceptable when they are narrowly tailored to achieve a legitimate governmental interest. Gentile v. State Bar of Nev., 501 U.S. 1030, 1054 (1991). Hage argues that Section 526(a)(4) limits professional speech and is, therefore, subject to strict scrutiny. NAACP v. Button, 371 U.S. 415, 429 (1963). Under the strict scrutiny standard, speech may only be regulated when the government has a compelling interest and utilizes the least restrictive means to further that compelling interest. However, Hage is mistaken because the regulation on attorney speech in Section 526(a)(4) does not restrict the manner in which an

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attorney may advocate for his client or the arguments the attorney may advance on behalf of his client. The regulation in Section 526(a)(4) merely prohibits lawyers from encouraging clients to incur more debt in contemplation of bankruptcy in order to prevent abuse of the bankruptcy system and to protect the debtor from the risk of being denied bankruptcy protection. Thus, the regulation does not limit professional speech. Hage completely abandoned his duty to the judicial process by acting in complete defiance to the government's legitimate interest in preventing abuse of the bankruptcy system. Hage advised Cannella to purchase a new car on credit based on the fact that Cannella was contemplating filing bankruptcy and would not pass the "means test" unless she increased her pre-petition secured debt; therefore, his unethical conduct violated Section 526(a)(4) of the BAPCPA. Although Hage alleges that this section violates his First Amendment right to

freedom of speech, he cannot invoke his constitutional right of free speech to shield himself from unbiased regulation of unethical conduct. B. Section 526(a)(4) Serves a Legitimate Governmental Interest.

The government may impose ethical restrictions on attorney speech when the government has a legitimate interest in so doing and when the government chooses to regulate speech, it must do so only to further the identified substantial governmental interest. Gentile v. State Bar of Nev., 501 U.S. 1030, 1075 (1991). In this case, the government has proven a substantial interest in regulating attorney speech and Section 526 (a)(4) imposes a rational restraint on attorney speech. The regulation is carefully drafted and critical in frustrating attempts to avoid the "means test" and protecting debtors from being denied relief for following unethical advice.

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1.

The government has a legitimate interest in protecting debtors from being denied bankruptcy relief and protecting creditors from fraud.

The government has a legitimate and substantial interest in protecting creditors and debtors alike. First, fraud against creditors is contrary to justice and equity and the government has a duty to protect creditors from bankruptcy fraud. Congress has chosen to accomplish this end by deterring debtors from "gaming" the "means test" through an inappropriate increase in pre-petition debt, thereby diluting the assets of the bankruptcy estate otherwise available to creditors. Second, the government has a substantial interest in protecting vulnerable debtors from attorneys who advise them to participate in abusive practices, which could ultimately result in a denial of their discharge of debts under the Bankruptcy Code. Congress has chosen to

accomplish this end by preventing attorneys from giving their clients advice to increase debt "in contemplation of" bankruptcy. 11 U.S.C.S. § 526(a)(4) (LexisNexis 2006). The government has a legitimate interest in ensuring that Meghan Cannella is not unjustly denied relief based on her reliance on Hage's unethical advice. Hage had a duty to zealously represent his client but failed when he put Cannella at a risk of losing her right to discharge under the bankruptcy system by advising her to incur more debt.. The government has a legitimate interest in protecting debtors such as Cannella. It would be unjust to punish Cannella for following the guidance of her attorney, a trusted professional charged with knowledge of the law and its parameters. Cannella is an inexperienced, vulnerable debtor who depended on Hage to navigate her through the bankruptcy system so she could obtain a prompt discharge. Hage, however, sullied his duty to Cannella and his duty to the justice system. Even though Cannella has the right to file a malpractice claim, she also has another superior, more effective remedy under the BAPCPA. 11 U.S.C.S. § 526(c)(1) (LexisNexis 2006). The

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BAPCPA is far more extensive than a malpractice claim because it is designed to prevent injury by imposing a penalty on those who give unethical advice. Id. A bankruptcy attorney who violates the statute is subject to forfeiture of fees and a punitive damage recovery whether or not the client suffers actual injury. Id. The "private attorney general" structure of BAPCPA is similar to the structure of the Deceptive Trade Practices Act; both were drafted to protect consumers and ensure veracity in the legal relations between buyers and sellers and debtors and creditors. 2. The government has an interest in protecting the integrity of the bankruptcy system.

The government has a substantial interest in preserving the integrity of the bankruptcy system and curtailing chronic abuse of the debt relief available through the Bankruptcy Code. Meghan Cannella followed the advice of Hage and purchased a new car so that she could subvert the "means test." In purchasing a new car, she deprived her creditors of their entitlement to the money that she would have been able to pay as a Chapter 13 debtor. This conduct defiles the integrity of the system. The government has a legitimate interest in preventing abuse analogous to the abuse in this case, where an attorney advises his client to take unfair advantage of the bankruptcy process. C. The Regulation in Section 526(a)(4) Is Narrowly Tailored to Further the Legitimate Interests of the Government and Mr. Hage's Allegations That the Section Is Overbroad Are Without Merit.

Section 526(a)(4) does not impose a blanket prohibition on advice to increase pre-petition debt in advance of bankruptcy, but merely prohibits advice to incur additional debt "in contemplation of" bankruptcy. § 526(a)(4). In addition, it is not required that the government's regulation on speech be a perfect fit. Bd. of Trs. of the State Univ. of N.Y. v. Fox, 492 U.S. 469, 480 (1989). As long as the fit is reasonable, the regulation will be upheld as constitutional. Id.

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Finally, because Hage's conduct was the exact conduct Congress sought to prevent through the enactment of the BAPCPA, in order to prevail, he must assert a facial challenge, which is almost impossible to successfully assert. Sabri v United States, 541 U.S. 600, 604 (2004). Because Section 526(a)(4) is tailored narrowly enough to pass the intermediate scrutiny test set forth by this Court, Section 526(a)(4) is constitutional. 1. The language of Section 526(a)(4), "in contemplation of bankruptcy," renders the statute sufficiently narrowly tailored.

Section 526(a)(4) is not overbroad as Hage alleges. It does not create an absolute bar on giving advice to incur more debt when doing so furthers an active bankruptcy petition, but merely creates a bar on giving such advice when the client is contemplating filing bankruptcy. § 526(a)(4). An attorney who gives his client advice to incur additional debt after the

bankruptcy petition has already been filed in furtherance of the process is not a violation of the statute. However, an attorney who gives his client advice to take on more debt "in

contemplation of" a bankruptcy petition in order to "game" the "means test" is in violation of the statute and has disregarded his ethical responsibilities. Id. Hage argues that, "by prohibiting lawyers from advising clients to take lawful, prudent actions as well as abusive ones, Section 526(a)(4) is overbroad and restricts attorney speech beyond what is `narrow and necessary' to further the governmental interest." (R. at 11); Zelotes v. Martini, 352 B.R. 17, 25 (D. Conn. 2006). Hage proposes several situations where the advice to incur additional debt would not be abusive such as refinancing at a lower rate to reduce payments or taking on secured debt such as a loan on an automobile that would survive bankruptcy and also enable the debtor to continue to get to work and make payments to creditors (R. at 11); Milavetz, Gallop & Milavetz P.A. v. United States, 2006 WL 3524399 at *4 (D. Minn. Dec. 7, 2006); Zelotes, 352 B.R. at 24; Hersh v. United States, 347 B.R. 19, 25 (N.D.

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Tex. 2006); Olsen v. Gonzales, 350 B.R. 906, 916 (D. Or. 2006) (all holding that Section 526(a)(4) is unconstitutionally overbroad). The conclusion that Section 526(a)(4) is

unconstitutional is the result of a misreading of the statute. The statute does not apply to situations in which debt is increased in order to advance the bankruptcy process; rather, the provision is narrowly tailored to only apply to situations in which the advice to increase debt is given solely because the debtor is planning to file bankruptcy. The key to accurately

understanding this provision is a proper interpretation of the phrase "in contemplation of" and this phrase should be construed to avoid constitutional challenge. Edward J. DeBartolo Corp. v. Fla. Gulf Coast Bldg. & Constr. Trades Council, 485 U.S. 568, 575 (1988). Congressional intent is also the benchmark for interpretation of this provision. As

previously stated, Congress enacted the BAPCPA "to improve bankruptcy law and practice by restoring personal responsibility and integrity in the bankruptcy system and ensure that the system is fair for both debtors and creditors." H.R. REP. NO. 109-31 (2005), as reprinted in 2005 U.S.C.C.A.N. 88, 89. In light of Congress' intent, the proper interpretation of the "in

contemplation of" language of the statute is that it prevents an attorney from giving a client advice to incur more debt when the client is planning to file bankruptcy in the near future and when such advice is aimed at encouraging the debtor to pile on enough debt to avoid the presumption of abuse under the means test. Section 526(a)(4) does not generally prohibit an attorney from giving a client advice to incur more debt; rather, it specifically prohibits advice to incur more debt solely because the debtor intends to file for bankruptcy and is therefore, a sufficiently narrow regulation. 11 U.S.C.S. § 526 (a)(4)(LexisNexis 2006). Hage's advice was intended to deliberately undermine the means test, a test designed to ensure that debtors in bankruptcy who have the capacity to pay are required to do so and are not

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given the opportunity to defraud or escape their creditors. H.R. REP. NO. 109-31 (2005), as reprinted in 2005 U.S.C.C.A.N. 88, 89. Hage's actions defile the integrity of the bankruptcy system and his unethical advice that Cannella purchase a new 2005 Nissan Sentra in contemplation of bankruptcy is speech Congress may lawfully proscribe. Section 526(a)(4) narrowly applies to attorney's advice when the bankruptcy filing is the sole reason for advising a client to increase pre-petition debt. Hague admits that he would not have advised Cannella to purchase a new, expensive car had she not planned to file bankruptcy. Thus, his conduct is in violation of Section 526(a)(4), which is sufficiently narrowly tailored. 2. The government's regulation on speech must be reasonable, but does not have to be a perfect fit.

The government has shown that it has a substantial interest in preventing abuse of the bankruptcy system and protecting the integrity of this judicial process. H.R. REP. NO. 109-31 (2005), as reprinted in 2005 U.S.C.C.A.N. 88, 89. However, "it is not enough to show that the Government's ends are compelling; the means must be carefully tailored to achieve those ends." Sable Commc'ns of Cal., Inc. v. Fed. Commc'ns Comm'n, 492 U.S. 115, 126 (1989). The government is not required to show that the regulation is the least restrictive control, only that the regulation is "a means narrowly tailored to achieve the desired objective." Bd. of Trs. of the State Univ. of N.Y. v. Fox, 492 U.S. 469, 480 (1989). This Court has required that the "fit between the legislature's ends and the means chosen to accomplish those ends [be] a fit that is not necessarily perfect, but reasonable...one whose scope is in proportion to the interest served." In re R.M.J., 455 U.S. 191, 203 (1982). Within the parameters that this Court has set forth, the legislature is left to determine the most appropriate method of control that best serves the governmental interest. Therefore, even if there are some rare situations in which Section

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526(a)(4) restricts speech that is not intended to abuse the bankruptcy system or subvert the means test, those exceptional situations do not make the provision unconstitutional. 3. Mr. Hage must rely on a facial challenge to the constitutionality of Section 526(a)(4), but cannot establish such a challenge.

Hage must rely on a facial challenge to the constitutionality of Section 526(a)(4), which requires a showing that the law can never be applied constitutionally. Sabri v. United States, 541 U.S. 600, 604 (2004). "A facial challenge to a legislative Act is, of course, the most difficult challenge to mount successful, since the challenger must establish that no set of circumstances exists under which the Act would be valid." Erwin Chemerinsky, Constitutional Issues Posed In the Bankruptcy Abuse Prevent and Consumer Protection Act of 2005, 79 AM. BANKR. L.J. 571, 579 (2005). Hage cannot establish a facial challenge because the facts of this case illustrate the very unethical conduct that Congress intended to prevent by enacting Section 526(a)(4), and consequently, present a set of circumstances under which the Act is valid. Hage cannot rely on an "as applied" challenge to attack the constitutionality of this statute because his advice that Cannella purchase a new car immediately prior to filing bankruptcy in order to "game" the "means test" is exactly the type of unethical speech Congress sought to prevent. Section 526(a)(4) was enacted to close loopholes in the bankruptcy system, to decrease the exponentially rising number of consumer bankruptcy filings, and to discourage chronic abuse. H.R. REP. NO. 109-31 (2005), as reprinted in 2005 U.S.C.C.A.N. 88, 89. Section 526(a)(4) does not violate the First Amendment rights of attorneys because it imposes reasonable and ethical limitations and is carefully drafted to prevent manipulation of the bankruptcy system and to protect debtors and creditors. In straying from his ethical duty to the bankruptcy system and the court, Hage placed his client at great risk of being deprived of relief on the basis that she

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committed bankruptcy abuse when all she did was follow his advice. Thus, Section 526(a)(6) can be applied constitutionally to protect debtors such as Cannella; therefore, Hage cannot establish a facial challenge to the regulation in Section 526(a)(4). II. COLLECTION OF FEES INCURRED FOR POST-PETITION SERVICES PROVIDED PURSUANT TO A PRE-PETITION RETENTION AGREEMENT IS A VIOLATION OF THE AUTOMATIC STAY IN SECTION 362. This Court has long recognized bankruptcy's two fundamental goals: (1) converting the estate of the bankrupt into cash to distribute among the debtor's creditors and (2) providing the bankruptcy debtor a fresh start. Burlingham v. Crouse, 228 U.S. 459, 473 (1913). The voluntary filing of a Chapter 7 bankruptcy petition marks the commencement of the case and constitutes an order of relief. 11 U.S.C.S. § 301(b) (LexisNexis 2006). More importantly, the filing triggers the automatic stay of Section 362. 11 U.S.C.S. § 362 (LexisNexis 2006); In re Doser, 412 F.3d 1056, 1062 (9th Cir. 2005). The automatic stay serves the same function as a preliminary injunction, staying collection actions on debts and liabilities in order to give the debtor a fresh start. Traer v. Clews, 115 U.S. 528, 541 (1885); In re D'Alfonso, 211 B.R. 508, 513 (Bankr. E.D. Pa. 1997) (holding that the automatic stay generally stays all actions to exercise control or seek possession of property of the estate). The automatic stay serves the second fundamental goal of bankruptcy by protecting the debtor's advancement towards a fresh start. MBNA Am. Bank, N.A. v. Hill, 436 F.3d 104, 109 (2d Cir. 2006). Once a petition is filed, any pre-petition debt, barring an exception, is subject to the automatic stay. The Thirteenth Circuit Court of Appeals correctly held that Mr. Hage's cashing of Cannella's post-dated checks constituted an act to collect on a pre-petition claim in violation of the automatic stay for two reasons. First, the contractual fee agreement entered into by the parties created a debt, which gives rise to a claim as defined in Section 101(5). 11 U.S.C.S. §

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101(5) (LexisNexis 2006). The claim arose pre-petition, at the signing of the contract, and because no applicable exceptions apply to bar the stay, Hage's claim is subject to the automatic stay of Section 362. 11 U.S.C.S. § 362 (LexisNexis 2006). Second, because Congress' intent is clear, public policy arguments cannot trump the plain meaning of a statute. Congress writes the Bankruptcy Code and the courts cannot graft new legislation onto the statutes' plain language or use Section 329 to create an implied exception to the automatic stay. 11 U.S.C.S. § 329 (LexisNexis 2006). For these reasons, Hage's collection of fees incurred for post-petition

services provided pursuant to a pre-petition retention agreement violated Section 362(a)(6). Determining whether Hage's collection of fees incurred for post-petition services provided pursuant to a pre-petition retention agreement constitutes a violation of the automatic stay requires interpretation of statutory terms and their meanings, which is a question of law. Chandris, Inc. v. Latsis, 515 U.S. 347, 369 (1995). Inquires designated as questions of law are reviewable de novo. Pierce v. Underwood, 487 U.S. 552, 558 (1988). A. The Contract Between Petitioner and Respondent Gives Rise to a Pre-petition Claim; Thus, Collection of Fees Incurred for Services Provided Pursuant to the Contract Constitutes a Violation of the Automatic Stay.

The automatic stay provides temporary relief for claims arising prior to the filing of the bankruptcy petition. Bd. of Governors of the Fed. Reserve Sys. v. MCorp Fin., Inc., 502 U.S. 32, 40 (1991). Section 362 prevents "any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title." 11 U.S.C.S. § 362(a)(6) (LexisNexis 2006) (emphasis added). The contract between Hage and Canella created a debt, which gives rise to a claim, which is a right to payment as defined in Section 101(5). 11 U.S.C.S. § 101(5) (LexisNexis 2006). If the pre-petition contract agreement constitutes a claim arising prior to the filing of bankruptcy, collection of fees pursuant to the contract is subject to

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the protections of the automatic stay. Although the right to payment is contingent, it still falls within the broad statutory definition of claim in Section 101(5). Id. As a contingent right to payment, when that right is created is important to determine whether the claim is pre-petition. The right to payment arose at the signing of the contract, rendering the claim pre-petition and subject to the automatic stay of Section 362. Hage's cashing of Cannella's checks constitutes an act to collect against Cannella. Thus, because the contract gives rise to a claim that arose prior to the bankruptcy filing, the cashing of the checks pursuant to the contract constitutes an act to collect against the debtor in violation of the automatic stay. 1. The signing of the pre-petition retention contract creates a debt, which constitutes a claim; thus, the contract gives rise to a right to payment, satisfying the definition of claim in Section 101(5).

The signing of a contract creates a claim. When a lawyer enters into an agreement with his client, a debt comes into existence at the execution of the agreement. In re Shell, 312 B.R. 431, 435­36 (Bankr. M.D. Ala. 2004). Accordingly, Section 101(12) of the Bankruptcy Code defines debt as "liability on a claim." 11 U.S.C.S. § 101(12) (LexisNexis 2006); Ohio v. Kovacs, 469 U.S. 274, 278 (1985). Because debt is liability on a claim, the creation of debt necessarily creates a claim. As the Court further explained, the terms "debt" and "claim," as defined by the Bankruptcy Code, are used interchangeably. Penn. Dep't. of Pub. Welfare v. Davenport, 495 U.S. 552, 558 (1990) (stating the "definition reveals Congress' intent that the meanings of "debt" and "claim" be used coextensively"). Consequently, because a debt exists at the signing of a contract, and the existence of a debt necessitates a claim, it is logical to conclude that a claim arises at the signing of the contract. The term "claim," as defined by the Bankruptcy Code, means "a right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent,

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matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured." 11 U.S.C.S. § 101(5)(A). It is apparent that Congress desired a broad definition of a "claim" and knew how to limit the application of a provision when it desired to do so. 469 U.S. at 279. The plain meaning of "right to payment" is nothing more or less than an enforceable obligation. 495 U.S. at 559. Therefore, because the signing of the contract creates a debt and a debt is liability on a claim and claim is defined as a right to payment, a right to payment arises at the signing of the contract. 2. The right to payment created is contingent, and contingent rights arise at the signing of the contract; thus, the right to payment is created when the contract is signed, rendering the claim pre-petition and subject to the automatic stay.

Petitioner contends that because the attorney is not entitled to payment until the services are actually performed, the right to payment arises post-petition. However, while Petitioner's right to payment may not mature until the services are performed, mere contingency does not render the right to payment post-petition. "Contingent" means: "Possible but not assured;

doubtful or uncertain; conditioned upon some future event which is itself uncertain or questionable." Grady v. A.H. Robbins, 839 F.2d 198, 202 (4th Cir. 1988). A debt, and

consequently a right to payment, is contingent if payment is only due on the happening of an extrinsic event. In re Fostvedt, 823 F.2d 305, 306 (9th Cir. 1987). This perfectly describes Canella's obligation to pay future fees pursuant to the contractual fee agreement: Canella agreed to make payments, but payment was due only upon the happening of an extrinsic event, continued legal service of Hage. Thus, the right to payment pursuant to contract is a contingent right. Contingent rights are covered under the broad definition of a claim in Section 101(5). 11 U.S.C.S. § 101(5) (LexisNexis 2006); Johnson v. Home State Bank, 501 U.S. 78, 83 (1991)

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(holding a "claim" to have the broadest definition available); In re Piper Aircraft Corp., 58 F.3d 1573, 1576 (11th Cir. 1995) (stating that the legislative history of the Code suggests broad interpretation, so that all legal obligations of the debtor, no matter how remote or contingent, will be able to be dealt with). The automatic stay only applies to claims that arise "before the commencement of the case." 11 U.S.C.S. § 362(a)(6); In re M. Frenville Co., Inc., 744 F.2d 332, 336 (3d Cir. 1984). Having determined that contingent claims are still "claims" as defined by 11 U.S.C. § 101(5), the critical issue lies in determining when the claim arises. The contingent right to payment is not created when the services are performed; rather, this right arises at the signing of the contract. Petitioner contends that the fees were not earned until the post-petition work was performed; however, this Court's analysis does not hinge upon when the fees were earned, or even when they were paid. Penn. Dep't. of Pub. Welfare v. Davenport, 495 U.S. 552, 558 (1990). We are only concerned with when the enforceable obligation was created, not when they are enforced. Id. Holding that a claim arises only when there is an enforceable right to payment is not in line with the broad definition of claim. In re Jastrem, 253 F.3d 438, 442 (9th Cir. 2001). The definition of claim was drafted to ensure that all legal obligations, no matter how remote or contingent, will be dealt with within the bankruptcy case. Id. The Ninth Circuit, in its decision in Hines, mischaracterized the pre-petition fee agreement by bifurcating a Chapter 7 debtor's liability on a single contract into pre-petition and post-petition claims. In re Hines, 147 F.3d 1185, 1188­91 (9th Cir. 1998). Hines held that a Chapter 7 debtor's liability on a pre-petition fee agreement with counsel is bifurcated into liability for pre-petition services subject to the automatic stay and post-petition services not subject to the automatic stay. Id. If the Court is to adopt the decision rendered by the Ninth

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Circuit Court of Appeals, a single contract would essentially give rise to two or more claims, not one. This logic is inconsistent with the precedent of the Court; a right to payment is nothing more nor less than an enforceable obligation. Penn. Dep't. of Pub. Welfare v. Davenport, 495 U.S. 552, 559 (1990). One contract gives rise to one claim. Bethea v. Robert J. Adams & Assocs., 352 F.3d 1125, 1128­29 (7th Cir. 2003) (stating that if a claim does not accrue until the work is performed, a claimant could possibly have multiple claims, for every month, day, or even hour). It is well established that a lawyer who provides pre-petition bankruptcy services and who is not paid for such services, has a pre-petition claim, not multiple bifurcated claims. In re Nieves, 246 B.R. 866, 872 (Bankr. E. D. Wis. 2000). In addition, to say that payment arises only when payment is due would ignore the breadth of the statutory definition of claim. In re Jensen, 995 F.2d 925 (9th Cir. 1993). 3. Cashing a check is an act to collect on a claim, and because the claim is pre-petition, the act is prohibited by the automatic stay of Section 362.

Cashing post-dated checks is a clear attempt to collect on a claim against the debtor, which violates the automatic stay. After the filing of a bankruptcy petition, any effort to collect a debt or claim that arose prior to the date of filing frustrates the debtor's fresh start and is stayed by operation of law. 11 U.S.C.S. § 362(a) (LexisNexis 2006); In re Briskey, 258 B.R. 473 (Bankr. M.D. Ala. 2001). Presentment of a post-dated check for payment is an act to collect a pre-petition debt, an act expressly prohibited by the automatic stay. 11 U.S.C.S. 362(a)(6); In re Hessinger and Assocs., 165 B.R. 657, 659 (Bankr. N.D. Cal. 1994), vacated, 192 B.R. 211 (N.D. Cal. 1996). Furthermore, presentment cannot, in any way, circumvent the prohibitions of the automatic stay. In re Shell, 312 B.R. 431, 435 (Bankr. M.D. Ala. 2004). In this case, the check was not only presented, but was also cashed. If presentment is sufficient to serve as a violation,

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cashing is more than adequate. Thus, presenting and cashing post-dated checks violates the express provision of Section 362(a)(6). B. Because the Language of the Automatic Stay Is Unambiguous, the Court Must Apply the Plain Meaning of the Statute, Which Cannot Be Trumped by Public Policy Arguments.

When the language of a statute is clear, the Court applies the plain language of the statute. Norfolk & W. Ry. Co. v. Am. Train Dispatchers Ass'n, 499 U.S. 117, 128 (1991). Because the language of Section 362 is clear, Petitioner's public policy arguments do not trump the language of the statute. In addition, Petitioner's contention that Section 329 creates an exception to the automatic stay is without merit in light of Congressional intent to the contrary. 1. The language of the automatic stay is unambiguous; thus, the Court is required to apply the plain meaning of the statute.

Statutory construction begins with the language of the statute itself. Duncan v. Walker, 533 U.S. 167, 172 (2001). The court begins with the language of the statute, and if the intent of Congress is clear, the Court must give effect to the expressed intent. Norfolk & W. Ry. Co. v. Am. Train Dispatchers Ass'n, 499 U.S. 117, 128 (1991). The language of Section 362 is clear, providing in relevant part that "any act to collect, assess, or recover a claim against a debtor that arose before the commencement of the case under this title" is prohibited. 11 U.S.C.S. § 362(a)(6) (LexisNexis 2006) (emphasis added). With use of the word "any," Congress clearly intended for the automatic stay to be broad in application. 11 U.S.C.S. § 362(a)(6); In re Baldwin-United Corp., 57 B.R. 759, 763­64 (S.D. Ohio 1985). In keeping with the principle of providing the debtor a fresh start, the automatic stay is broad in scope so that the debtor may reorganize his affairs and pay his creditors. In re Briskey, 258 B.R. 473, 477 (Bankr. M.D. Ala. 2001). When this expansive language is viewed in conjunction with the broad statutory

definition of claim, it follows that when Congress intentionally drafted a particularly broad, all-

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inclusive definition in a statute, it is not the function of the court to undermine that effort. Consumers Union of U. S., Inc. v. Heimann, 589 F.2d 531, 533 (D.C. Cir. 1978). Generally, all pre-petition claims are subject to the automatic stay, unless the claim is covered by one of the specific exemptions to the stay as listed in Section 362(b). 11 U.S.C.S. § 362(b) (LexisNexis 2006); In re Miller, 98 B.R. 110, 113 (Bankr. N.D. Ga. 1989). Attorney's fees are not included in the list of specific enumerated exemptions to the automatic stay. 11 U.S.C.S. § 362(b). When Congress exclusively enumerates certain exceptions to a general prohibition, additional exceptions are not to be implied. TRW Inc. v. Andrews, 534 U.S. 19, 23 (2001). Thus, this Court must hold that no applicable exception exists. By the plain language of the statute, Congress intended the cashing of post-dated checks pursuant to a pre-petition agreement, an act to collect on pre-petition debt, to constitute a violation of the automatic stay. 2. A plain reading of the automatic stay demands the staying of collection actions regardless of public policy concerns.

Petitioner contends that valid public policy considerations such as attorney participation and payment, demand that attorney's fees be excluded from the automatic stay. However, as noted above, the automatic stay provision does not expressly provide an exception for attorney's fees. 11 U.S.C.S. § 362(b) (LexisNexis 2006). The Court is required to enforce the words of the statute and where these words are clear, "judicial inquiry is complete." Barnhart v. Sigmon Coal Co., 534 U.S. 438, 461­62 (2002). Judicial perception that a particular result would be

unreasonable may enter into construction of ambiguous statutory provisions, but cannot justify disregarding what Congress has intentionally provided. C.I.R. v. Asphalt Products Co., 482 U.S. 117, 120 (1987). For an example, we look to this Court's decisions. In Lamie v. United States Trustee, the court had to determine whether it was appropriate to correct Congress's failure to include attorney in the list of professionals entitled to receive

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compensation from the bankruptcy estate, an alleged Congressional oversight. 540 U.S. 526 (2004) (hereinafter "Lamie"). Even though this decision dealt with another provision of the Bankruptcy Code, its lesson can be directly applied to the handling of post-petition services earned pursuant to a pre-petition contract. In Lamie, strong public policy arguments were raised that disallowing attorneys would lead to an inequitable result where attorneys could not get paid by the estate. Id. at 533­35. The Court held that despite public policy arguments, even awkward and ungrammatical language did not make the statute unambiguous or absurd and ultimately enforced the statute according to its terms. Id. at 534. This decision highlights the importance placed on the plain language interpretation of a statute and provides guidance relevant to the interpretation of the automatic stay. When this holding and its principles are applied to the facts at hand, the pre-petition claim must be stayed by the Bankruptcy Code. The public policy arguments presented include the arguments that: (1) if the debt is deemed pre-petition, the benefits of bankruptcy will not be available to those who cannot afford to pay attorney fees in advance, those who need it most and (2) Chapter 7 attorneys must have a way to seek payment. Rittenhouse v. Eisen, 404 F.3d 395, 397 (6th Cir. 2005); In re Tredinnick, 264 B.R. 573, 576­77 (B.A.P. 9th Cir. 2001). Although these public policy arguments may have merit, much like the policy arguments presented in Lamie, they merely raise public policy questions which are more properly addressed to Congress, not the Court. 404 F.3d at 397. Congress, not the judiciary, is the body that should declare public policy. Brown v. Pro Football, 518 U.S. 231, 236 (1996).

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3.

Section 329 does not create an enumerated exception to the automatic stay; thus, the fees owed pursuant to the contract are stayed by Section 362.

Petitioner contends that Section 329, which monitors debtor's transactions with attorneys, is a specific rule governing agreements to provide post-petition services, to the exclusion of Section 362. 11 U.S.C.S. § 329 (LexisNexis 2006). This court has stated that a general statutory rule should only govern when there is no specific rule. Green v. Bock Laundry Mach. Co., 490 U.S. 504, 524 (1989), superseded by statute not on point, FED. R. EVID. 609, Pub. L. No. 93-595, 88 Stat. 1935. However, the specific only controls the general when a positive repugnancy exists between the statutes, such that they are irreconcilable. Conn. Nat'l Bank v. Germain, 503 U.S. 249, 253 (1992). Even though Section 329 does apply to attorney fee agreements with debtors, the statute is merely a disclosure provision designed to protect bankruptcy creditors and is not a substantive provision mandating existence of a compensation agreement between the debtor and attorney. 11 U.S.C.S. § 329 (LexisNexis 2006). Section 329 is a stand-alone provision that does not address nor implicate the automatic stay provision. Id. Thus, where two statutes are capable of coexistence, the Court has a duty to regard each as effective. Watt v. Alaska, 451 U.S. 259, 267 (1981). Section 362 continues to govern the applicability of claims, including claims for attorney's fees, whereas Section 329 continues to govern the reasonableness of fees, and does not serve as an exception to Section 362. With respect to Chapter 7 bankruptcies, even when pre-petition attorney's fees are subject to the automatic stay, the disclosure provision of Section 329 still has purpose and effect. In re Flicking, 361 F.3d 172, 177 (2d Cir. 2004). For example, even if pre-petition claims are stayed and subsequently discharged, the judge can still order that the debtor be recouped for unreasonable attorney's fees paid prior to bankruptcy. Rittenhouse v. Eisen, 404 F.3d 395, 397

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(6th Cir. 2005).

Petitioner would assert that the automatic stay and disclosure provisions

conflict; however, the provisions do not conflict because the disclosure provision of Section 329 applies to Chapter 11 and 13 plans in addition to Chapter 7 petitions. In re Biggar, 110 F.3d 685, 688 (9th Cir. 1997). Also, the disclosure provision is used to determine the reasonableness of attorney's fees in situations of reaffirmed debts. 404 F.3d at 397. Therefore, the provisions do not conflict, and holding pre-petition retention agreements subject to the automatic stay of Section 362 does not render Section 329 of the Bankruptcy Code without merit. CONCLUSION For the foregoing reasons, Respondent respectfully requests that the Court affirm the decision of the Thirteenth Circuit Court of Appeals. Respectfully submitted, ____________________________________ ____________________________________ ____________________________________ COUNSEL FOR THE Respondent

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CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the foregoing Brief for the Petitioner was mailed by certified mail, return receipt requested, and properly submitted in accordance with Official Rules, Article X, Rule (a) on February 5, 2007.

__________________________________

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