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U.S. District Court of Massachusetts Shoots Down MA Attorney General Moratorium On Dunning Phone Calls By Debt Collectors During COVID 19 Emergency

This past Wednesday, May 06, 2020, Judge Stearns issued a twenty-nine-page Opinion allowing ACA International's request to enjoin the Attorney General's Emergency COVID-19 Debt Collection Ban, in ACA International v Maura Healy, CIVIL ACTION NO. 20-10767-RGS (USDC Mass)

The Attorney General's regulation placed a ban on all phone calls to delinquent debtors as well as a ban on all lawsuit filings. Notably, Persons seeking to collect mortgage debts, tenant debts, or debts for telephone, gas, or electric utility companies may file lawsuits and resort to their existing remedies. See 940 CMR 35.03(2)-(3).

Judge Stearns went into a detailed discussion regarding ACA International's claim that the Regulation offends First Amendment protection for commercial speech, as well as the right to access the courts.

I have personally experienced that the USDC can be somewhat hostile to debtor claims, however, Judge Stearns does make a thorough analysis to support his position, although respectfully submitted I am not in complete agreement with the ruling.

There clearly was ill-advised language in the emergency regulation exempting mortgage collection and tenant collection communications from being restricted. The regulation's exemption of mortgage and tenant collectors was not well thought out, as this group of the debtors are the most vulnerable of those contemplated to be helped. Such omission clearly left the door open for the instant ruling. The preceding may also provide further evidence of the power of the financial lobby.

The ruling is an interesting read for those seeking a better understanding of the fundamentals of how the 1st Amendment operates with regard to commercial speech.

However, where Judge Stearns found that the instant case was only due "intermediate scrutiny", there was still in place an alternate avenue of expression (mail)

"Content-based restrictions on expressive speech in traditional public fora are “presumptively invalid” under the First Amendment, R.A.V. v. City of St. Paul, Minn., 505 U.S. 377, 382, 394 (1992), while “time, place, [and/]or manner” restrictions which are content-neutral are, on the other hand, subject to intermediate scrutiny, Nat’l Amusements, Inc. v. Town of Dedham, 43 F.3d 731, 736, 741 (1st Cir. 1995). The test of content-neutrality “is whether government has adopted a regulation of speech because of disagreement with the message it conveys.” Globe Newspaper Co. v. Beacon. Hill Architectural Comm’n, 100 F.3d 175 (1st Cir. 1996), quoting Nat’l Amusements, 43 F.3d at 737."
Case 1:20-cv-10767-RGS Document 28 Filed 05/06/20 Page 10-11 of 29

Where intermediate scrutiny pertains, restrictions on the time, place, or manner of protected expression “are valid provided that they are justified without reference to the content of the regulated speech, that they are narrowly tailored to serve a significant governmental interest, and that they leave open ample alternative channels for communication of the information.” Clark v. Cmty. for Creative Non-Violence, 468 U.S. 288, 293 (1984).".Case 1:20-cv-10767-RGS Document 28 Filed 05/06/20 Page 11 of 29

However, Judge Stearns rightly turned to the Hudson test in his analysis

"Under the Hudson test, “[a]t the outset, [a court] must determine whether the expression is protected by the First Amendment.” Id. If the answer is “yes,” there are three more questions to be answered: (1) is the asserted governmental interest substantial; (2) does the disputed regulation advance that governmental interest; and (3) is the regulation no more extensive than necessary to serve that interest."Case 1:20-cv-10767-RGS Document 28 Filed 05/06/20 Page 13 of 29

"In turning to the first of the Hudson tests, it is apparent that 940 CMR 35.00 is not a “time, place, and manner” regulation; rather, it imposes a flat ban on a particular medium of speech (telephone communications) involving a particular subject matter (the solicitation of payment of a debt) by a particular subset of those persons (debt collectors) who engage in that type of speech. Thus, the question is whether the commercial speech at issue falls under the umbrella of that which is actually false, deceptive, or misleading, or proposes an unlawful activity, or instead is of the kind that has only a “potential” to mislead. In re R.M.J., 455 U.S. 191, 203 (1982).".Case 1:20-cv-10767-RGS Document 28 Filed 05/06/20 Page 13 of 29

"The Attorney General invokes three separate governmental interests as substantial: “(1) shielding consumers from aggressive debt collection practices that wield undue influence in view of the coronavirus pandemic; (2) protecting residential tranquility while citizens have largely had to remain at home during the coronavirus pandemic; and (3) temporarily vouchsafing citizens’ financial wellbeing during the coronavirus pandemic.” Def.’s Opp’n (Dkt #24) at 14-15." Case 1:20-cv-10767-RGS Document 28 Filed 05/06/20 Page 14 of 29

"As for the first asserted interest, the Attorney General offers no empirical support for the proposition that consumers are more susceptible to undue influence exerted by debt collectors during a pandemic than would ordinarily be the case. The gist of the counterargument is that “the mere suggestion of physical contact with other persons – including in connection with repayment of a debt – is fraught with real and perceived danger.” Id. at 15. There is nothing offered, however, that suggests that debt collectors are more prone than other commercial entities to defy the social distancing rules decreed by the Governor by chasing down debtors in person. Nor is it clear why consumers would not think it more likely to be confronted in person by their landlords or mortgage holders (who are expressly exempted from the Attorney General’s ban).Case 1:20-cv-10767-RGS Document 28 Filed 05/06/20 Page 14-15 of 29

Here, I respectfully disagree with Judge Stearns. However, in defense of Judge Stearns, the Attorney General wrongly concentrated its opposition upon "social distancing" and failed to even consider the fact that the unprecedented COVID 19 emergency creates an environment of fear and stress never encountered in any of our lifetimes. Indeed, under the pandemic, there are many consumers that are under a tremendous amount of stress, from a family member's illness or death, and/or the loss of employment. Therefore during the unprecedented COVID 19 emergency, the debtor may not be able to think clearly in undertaking phone discussions /negotiations with a debt collector and thus be subject to undue influence. An apt example would be a personal injury attorney being allowed to roam the halls of the hospital in search of injury victims and then directly solicit them to solicit legal services. Clearly, an injured person may not be able to think clearly in discerning which attorney to hire, hence the ethical prohibition from doing so. It could be argued that Judge Stearns misses the mark as he apparently also failed to appreciate the unprecedented emergency we currently face, however, the Attorney General failed to press this argument.

"The third of the asserted state interests, vouchsafing the financial wellbeing of Massachusetts residents, seems to have little to do with the prohibition of only one form of communication facilitating collection of payment on a debt, that is, a telephone call. While the Regulation promises some relief from unwanted telephone calls, it does not pretend to offer any relief from the debt itself or the obligation to repay it in full. The supporting cases cited by the Attorney General, Yakus v. United States, 321 U.S. 414 (1944), and Block v. Hirsh, 256 U.S. 135 (1921), are not concerned with debt relief or debt collection but with the legality of wartime rent control and price control regimes that weigh directly on landlords and purveyors, not debtors. More importantly, these cases have nothing to do with the suppression of speech. The case that appears most on-point, Home Building & Loan Ass’n v. Blaisdell, 290 U.S. 398 (1934), which upheld a Minnesota state law permitting mortgagees to delay foreclosure on their homes, also does not involve any issue of speech. Moreover, it has even less pertinence as the Attorney General’s Regulation explicitly exempts the collection of mortgage and tenant debts from the telephone ban.The second asserted governmental interest – preserving domestic tranquility – stands on somewhat firmer ground, as a “residential privacy” interest has been recognized by several lower courts in rejecting analogous First Amendment challenges to the restrictions on consumer contacts set out in the Telephone Consumer Protection Act. See, e.g., Moser v. Fed. Communications Comm’n, 46 F.3d 970, 974 (9th Cir. 1995). I will assume for present purposes that preserving domestic tranquility is a sufficiently significant state interest for the Regulation to pass muster under the second prong of Hudson.Case 1:20-cv-10767-RGS Document 28 Filed 05/06/20 Page 15-16 of 29

"At the third step in Hudson, the Attorney General must show that the Regulation advances the interest in preserving domestic tranquility to a “material degree.” 44 Liquormart, 517 U.S. at 505. At the fourth step, she must show that the restriction on speech imposed by the Regulation in safeguarding that interest is not more extensive than necessary, Central Hudson, 447 U.S. at 564, or phrased differently, that the government could not have achieved its interest in preserving domestic tranquility “in a manner that does not restrict speech, or that restricts less speech.” Thompson v. Western States Med. Ctr., 535 U.S. 357, 371 (2002). As Chief Judge Saylor aptly observed in Mass. Ass’n of Private Career Sch., 159 F. Supp. 3d at 202, these final two steps of Central Hudson are complementary. Here the Attorney General’s rationale fails." Case 1:20-cv-10767-RGS Document 28 Filed 05/06/20 Page 16-17 of 29

Unfortunately, this ruling will take away (temporarily at least) the recent protections provided to the citizens of the Commonwealth.

We will keep you posted if there are any new developments on this ruling

Stay safe

Glenn