WPC@ yn'PbTne)ua;zQ=j\2=e\ \c-OWw 40'+|NIZm)q)(S!n 05Ti{SHa$M%%@( E‡bWH%NdF+c7LոzJ+M (_22   &hhp x &23  ..  5+ ` hp x 5  *;+M (_21   #p x #23  ..  5+ ` hp x 5  *8+M (_20  h  p x 23  ..  5+ ` hp x 5   ' ` *5+M (_19   pp x 23  ..  5+ ` hp x 5  *2+M (_18    x 23  ..  5+ ` hp x 5  * (_1723  Ԁ*GM (_16   /%` ` hp x /23  Ԁ  5+ ` hp x 5  *DM (_15   ," hp x ,23  Ԁ  5+ ` hp x 5  *AM (_14  ` ) hp x )23  Ԁ  5+ ` hp x 5  *>M (_13   &hhp x &23  Ԁ  5+ ` hp x 5  *;M (_12   #p x #23  Ԁ  5+ ` hp x 5  *8M (_11  h  p x 23  Ԁ  5+ ` hp x 5  *5M (_10   pp x 23  Ԁ  5+ ` hp x 5  (2M &_9    x 23  Ԁ  5+ ` hp x 5  ( &_823  (GM &_7   /%` ` hp x /23   5+ ` hp x 5  (DM &_6   ," hp x ,23   5+ ` hp x 5  (AM &_5  ` ) hp x )23   5+ ` hp x 5  (>M &_4   &hhp x &23   5+ ` hp x 5  (;M &_3   #p x #23   5+ ` hp x 5  (8M &_2  h  p x 23   5+ ` hp x 5  (5M &_1   pp x 23   5+ ` hp x 5  &2M $_    x 23   5+ ` hp x 5  (3$ !   g $  =]XXdd=    10    _Thepartieshavenotbriefedwhichsidehastheburdenof  proofonthisissue.Themajorityviewisthattheburdenrests Z withCambridge. X]XXXSeeUnitedStatesv.ColumbusCountryClub,915 0 F.2d877,88182(3dCir.1990);UnitedStatesv.LansdowneSwim  Club,894F.2d83,85(3dCir.1990);_ Quijano_ v.Univ.Fed.Credit X Union,617F.2d129,132(5thCir.1980);_ Nesmith_ v.YMCA,397F.2d . 96,101(4thCir.1968)#X]XX X]e# X]XXX].Butthereiscontraryauthority.See  EEOCv.ChicagoClub,86F.3d1423,1429(7thCir.1996#X]XX X]y# X]XXX]).Wedo ^  nottakeapositiononthisquestionbecause,evenifthe 4  plaintiffsshouldertheburdenofproof,theircomplaintis    adequateformotiontodismisspurposes.#X]XX X]A# !  _TRY,3'X3' Letter 3' Letter3'T ? * !Xg)XXXXXg)     /,S  [ UnitedStatesCourtofAppealsP  FortheFirstCircuit  jP X]X j  A') ` dE< ` A   No.042039 u  @0 0 ANDREWZIMMERMAN,KELLYZIMMERMAN ! q @TT OnbehalfofThemselvesandAllOthersSimilarlySituated,  G  @Plaintiffs,Appellants,      `    @tt)v. O  @CAMBRIDGECREDITCOUNSELINGCORP.,CAMBRIDGE/BRIGHTON K  @BUDGETPLANNINGCORP.,CAMBRIDGECREDITCORP.,BRIGHTON ! @CREDITCORP.,BRIGHTONCREDITCORP.OFMASSACHUSETTS,  @\ \ JOHN_PUCCIO_,RICHARD_PUCCIO_, } @Defendants,Appellees. )y A') ` dE<` A % @ APPEALFROMTHEUNITEDSTATESDISTRICTCOURT   @0 0 FORTHEDISTRICTOFMASSACHUSETTS f @` ` [Hon.MichaelA._Ponsor_,U.S.DistrictJudge] b A') ` dE<` A  @'Before     @@((Howard,CircuitJudge, O " Cyr,andStahl,SeniorCircuitJudges. !K$ A') ` dE<#` A #&       DavidJ._Vendler_,withwhomRichardH.Nakamura,MaureenM. $( Home,Morris_Polich_Ԁ&_Purdy_,_LLP_,StephenG.Hennessy,_Garrett_ԀM. b% ) Smith,GaryW.Kendall,_Michie_,_Hamlett_,_Lowry_,_Rasmussen_Ԁ&_Tweel_, 8&!* PC,andGregoryS.Duncan,wereonbrief,forappellants. '^"+   PaulM.Kaplan,withwhomMichaelJ._Tuteur_,LawrenceM. '4#, _Kraus_,StephenD._Riden_andEpsteinBecker&Green,P.C.,wereon ( $- briefforappellees. )$. *'ddd Xdd Xdd X(#(#,( dd ,( dd ,( dd +  <+&0<+&   SI+&1 @38502@S_ May31,2005 v,'3 _ RHCL-(4" @38502 @ R ," +&5 ? ,/, /' `  /  X]XX X]  Z8]XXdd8*,X` XX* "8US ,  (:!&)US , 8Ԁ0 ` HOWARD,CircuitJudge .TheCreditRepairOrganizations` (#` (# Act(_CROA_Ԁor*!theAct)createsacauseofactionforconsumers  harmedbytheunscrupulousbusinessandadvertisingpracticeson ; thepartofcreditrepairorganizations.See15U.S.C.1679et  B seq.ButtheActdoesnotpermitlawsuitsagainst"anynonprofit   organizationwhichisexemptfromtaxationundersection501(c)(3)" `   oftheInternalRevenueCode.See15U.S.C.1679a(3)(B)(i).The g  questionwefaceiswhetheranInternalRevenueService(IRS)   determinationthatanentityistaxexemptundersection501(c)(3)   issufficienttobringtheentitywithinthestatutoryexclusion < setforthin1679(a)(3)(B)(i). C   I.     ` Saddledwithsubstantialdebt,theplaintiffs,Andrewand ~ KellyZimmerman,soughtassistancefromCambridgeCreditCounseling 5 Corporation(Cambridge)neartheendof2001. #  1      ׀Theplaintiffshad < seenadvertisingfromCambridgeclaimingthatitcouldhelpdebtors  obtainlowerinterestrates,eliminatefees,reagedebt,and Z   otherwiseassistindebtmanagementefforts.Theplaintiffssay "a" thattheyweredrawntoCambridgebecauseitidentifieditselfas #$ anonprofitorganization.Thisledtheplaintiffstobelievethat % & Cambridgewouldchargelowfeesforitsservices.Cambridgeis 6'"( _ organizedasacharitableorganizationunderMassachusettslaw,see  Mass.Gen.Lawsch.180,andhasobtainedanIRSdeterminationthat g itistaxexemptundersection501(c)(3)oftheInternalRevenue n Code,see26U.S.C.501(c)(3). #  2        %  ` Inearly2002,theplaintiffsenrolledwithCambridge.   Forafeeof$948permonth,Cambridgedevelopedacustomizeddebt C   managementprogramforthem# X]XXX]K#X]XX X].Severalmonthslater,theplaintiffs J  cancelledtheircontractwithCambridgeaftertheybecame   dissatisfiedwithitsservices.Atthetimeofcancellation,the h  plaintiffsowedmoremoneyandhadworsecreditscoresthanbefore o contractingwithCambridge.Believingthattheyhadbeenswindled, & theplaintiffssuedCambridge,itsownersJohnandRichardPuccio,  andseveralrelatedentitiesforviolationsoftheCROA. #  3      ׀They D allegedthatCambridgewassubjecttosuitundertheActbecause K  itsclaimednonprofitstatuswasasham.   ` Thedefendantsmovedtodismissthecomplaintonthe   groundthatCambridgewasasection501(c)(3)taxexempt g organizationandthereforewithintheexclusionspecifiedin15 n U.S.C.1679a(3)(B)(i).Thedistrictcourtagreedanddismissed  % theCROAclaim.SeeZimmerman,322F.Supp.2dat99101.The   courtfoundtheCROAexclusionapplicablebecausetheIRShad C   determinedthatCambridgequalifiedforsection501(c)(3)tax J  exemptstatus.Seeid.󀀀Thecourtbaseditsinterpretation   principallyonapolicyrationale.Itconcludedthatpermitting h  courtsto"gobehindtheIRS'sdesignationandproceedtomake o theirownindependentdeterminations,onacasebycasebasis,of & anentity'ssubstantiveclassificationaccordingtosection  501(c)(3)"wouldcreateexcessiveuncertaintyconcerningthe D validityofanentity'staxexemptstatus,andthatthis K uncertaintycoulddestabilizetheoperationofthenonprofit  sector.Seeid.at100.Theplaintiffstimelyappealed. i   II.  p     ` Ourreviewofthedistrictcourt'sgrantofthemotionto !D" dismissisdenovo. #  4      ׀SeeGoldingsv.Winn,383F.3d17,21(1st #$ Cir.2004).Atissueisthereachof15U.S.C.1679a(3)(B)(i), b% & whichprovidesthat"acreditrepairorganizationdoesnotinclude  anynonprofitorganizationwhichisexemptfromtaxationunder g section501(c)(3)"oftheInternalRevenueCode.15U.S.C. n 1679a(3)(B)(i).Theplaintiffsarguethattheexclusionrequires  % (1)thatthecreditrepairorganizationactuallyoperatesasa   nonprofitentityand(2)thatthecreditrepairorganizationmeets C   theeligibilityrequirementsininsection501(c)(3)ofthetax J  code.Thedefendantsrespondthatthephrase"exemptfromtaxation   undersection501(c)(3)"defines"nonprofitorganization." h  Therefore,thedefendantscontendthatacreditrepairorganization o mustonlyhavereceivedsection501(c)(3)fromtheIRStoqualify & fortheexclusion.     ` "Asinanycaseofstatutoryconstruction,ouranalysis D beginswiththelanguageofthestatute."HughesAircraftCo.v. K Jacobson,525U.S.432,438(1999)(internalquotationmarksand  citationomitted).TheActqualifiesalargegroupofentitiesfor i theexclusionallnonprofitorganizationsandthenlimitsthe  p  excludedgrouptoasmallergroupofnonprofitorganizations"which !'" aretaxexemptundersection501(c)(3)...."15U.S.C. #$ 1679a(3)(B)(i).Themostnaturalreadingofthetextisthatit E% & establishestworequirements.Thenonprofitlanguageexcludessome &L"( entitiesfromeligibility(namely,profitmakingentities),andthe ($* "taxexempt"languagedistillstheexcludedgrouptothekindsof j*%, organizationsidentifiedinsection501(c)(3)(e.g.,charitableor !,q'. educationalorganizations)whichare,infact,taxexempt.Readin  thisway,theActdoesnotdefine"nonprofitorganization"asan g entitywithsection501(c)(3)statusbutratherestablishestwo n independentcriteriafortheexclusion:nonprofitstatusand  % section501(c)(3)status.󀀀    ` Thisplainreadingoftheexclusionissupportedbythe C   surroundingtext.SeeMassachusettsv.Morash,490U.S.107,115 J  (1989).Inadditiontoexcludingnonprofitorganizationswith   section501(c)(3)status,theCROAexcludescreditorsand h  depositoryinstitutions.Butastotheselatterexclusions, o Congressdefinedtheexcludedentitiesbyreferencetoanother & sectionoftheUnitedStatesCode.See15U.S.C.1679a(3)(B)(ii)  (excluding"anycreditor(asdefinedinsection1062ofthis D title)");15U.S.C.1679a(3)(B)(iii)(excluding"anydepository K institution(asthattermisdefinedinsection1813ofTitle  12)").HadthedraftersoftheCROAintendedtodefine"nonprofit" i simplybyreferencetosection501(c)(3)oftheInternalRevenue  p  Code,theyhadattheirdisposalamethodfordoingso !'" unambiguouslyamethodtheyemployedforotherexclusionsunder #$ theCROA.SeeKingv.St.Vincent'sHosp.,502U.S.215,22021 E% & (1991). &L"(  ` Thisdraftingchoicecannotbeconsideredaccidental ($* becausetheUnitedStatesCodeisrepletewithstatueswhich j*%, clearlydefinea"nonprofitorganization"asanentitythatistax !,q'. exemptundertheInternalRevenueCode.Indeed,severalstatutes  expresslydefineanonprofitorganizationtomeananorganization g describedundersection501(c)oftheInternalRevenueCode.See, n e.g.,5U.S.C.3102(a)(3)(statingthat"'nonprofitorganization'  % meansanorganizationdeterminedbytheSecretaryoftheTreasury   tobeanorganizationdescribedinsection501(c)oftheInternal C   RevenueCodeof1986");16U.S.C.1447a(5)(similar);29U.S.C. J  2703(4)(similar);42U.S.C.1485(w)(1)(B)(similar);42U.S.C.   1760(d)(5)(similar);42U.S.C.5603(23)(similar). #  5      ׀This h  constructionlinksthedefinitionalterm"nonprofit"directlyto o theorganization'sfederaltaxexemptstatus.Wemayassumethat, & whendraftingtheCROA,Congresswasawareofthisarchetypal  languageforequatingnonprofitstatuswithfederaltaxexempt D status.SeeS.Dakotav.YanktonSiouxTribe,522U.S.329,351 K (1998).YetCongresschoseadifferentformulationfortheCROA.  ThisisstrongevidencethatCongressdidnotintendtoconflate i nonprofitstatuswithsection501(c)(3)taxexemptstatus.%f #  6        p   ` Theplaintiffs'interpretationoftheexclusionalso !'" honorstheprinciple"that'[a]llwordsandprovisionsofstatutes #$ areintendedtohavemeaningandaretobegiveneffect,andno  constructionshouldbeadoptedwhichwouldrenderstatutorywords g orphrasesmeaningless,redundant,orsuperfluous.'"UnitedStates n v.VenFuel,Inc.,758F.2d741,75152(1stCir.1985)).The  % defendantsreadtheexclusionasifitsaidonlythattheCROA   excludesanyorganization"whichistaxexemptundersection C   501(c)(3)..."Theyhaveascribednoindependentmeaningtothe J  term"nonprofit."    ` Additionally,theplaintiffs'readingisconsonantwith h  therulefavoringthenarrowconstructionofexclusionsinremedial o statutes.SeeHogarAguaYVidaEnElDesierto,Inc.v.Suarez & Medina,36F.3d177,182(1stCir.1994).Congressenactedthe  CROAtoremedyabusesinthecreditrepairindustry.TheAct D includesafindingbyCongressthat"[c]ertainadvertisingand K businesspracticesofsomecompaniesengagedinthebusinessof  creditrepairserviceshaveworkedafinancialhardshipupon i consumers,particularlythoseoflimitedeconomicmeansandwhoare  p  inexperiencedincreditmatters."15U.S.C.1679(a)(2).The !'" CROA'sexpressedpurposeisto"toprotectthepublicfromunfair #$ ordeceptiveadvertisingandbusinesspracticesbycreditrepair E% & organizations."15U.S.C.1679(b)(2).Itsremedialgoalisthus &L"( unmistakable.SeeFed.TradeComm'nv.Gill,265F.3d944,94950 ($*  (9thCir.2001). j*%,  ` Ifacreditrepairorganizationonlyneededtoobtaina   section501(c)(3)designationtoqualifyfortheexception,the g exceptionmightwellevisceratetheliabilitycreatingprovisions. n SeegenerallyMartaLugonesMoakley,CreditRepairOrganizations  % AfterRegulation,77AUGFla.B.J.28,33(2003)(describingthe   increaseincreditrepairorganizationsseekingsection501(c)(3) C   statusafterthepassageoftheCROA).Afterall,theIRSusually J  grantssection501(c)(3)statusbasedsolelyonrepresentations   madebytheapplyingentity.SeeIRSForm1023.Infact,theIRS' h  subsequentnotificationthatanentityhasqualifiedfortaxexempt o statuscontainsadisclaimerstatingthattheIRShasmadeits & determinationbasedsolelyonrepresentationsprovidedtoitbythe  partyseekingthestatus.SeeLetterfromIRSDistrictDirectorto D CambridgeCreditCounselingCorp.of2/12/98at1(statingthat K section501(c)(3)statusisgranted"basedoninformation  supplied,andassuming[that]operationswillbeasstatedinyour i applicationforrecognitionoftheexemption").And# X]XXX]Y#X]XX X]the  p  determinationisnotbindinginsubsequentlitigationchallenging !'" theapplyingentity'staxexemptstatus.See26U.S.C. #$ 6110(k)(3)(statingthat"awrittendetermination[fromtheIRS] E% & maynotbecitedasprecedent").Congresscannothaveintended &L"( unscrupulouscreditrepairorganizationstohavesucheasyaccess ($* toCROAimmunity.# X]XXX]I#X]XX X]ԀCf.Edsenv.BankofBoston,229F.3d154,177 j*%, (2dCir.2000)("AnerroneousrulingbyanIRSkeydistrict !,q'. director,especiallywhenprocuredbysubmissionoflimitedor  confusinginformation,cannotdefeattheexpressstatutoryrights g of[consumers].Theadjudicationofthoserightsisforthe n federalcourts,notthefieldofficesoftheIRS.").# X]XXX]L#X]XX X]Ԁ  %  ` Thedistrictcourtrejectedtheplaintiffs'   interpretationoftheexclusionoutofunderstandableconcernthat C   permittingacourttodecidewhetheranentityisactually J  operatingasanonprofitorganizationwillsubstantially   destabilizethenonprofitsector.SeeZimmerman,322F.Supp.2d h  at99100.Theconcernistwofold.First,itwillunsettlethe o expectationsofthetaxexemptorganizationandthoseinteracting & withitifsection501(c)(3)statuscanbelostinnontaxrelated  litigation.Second,subjectinganonprofitorganizationto D litigationoveritsstatuswillsignificantlyraiseitscostof K doingbusiness.Tworesponsestotheseconcernsimmediately  suggestthemselves. i  ` First,adeterminationthatanorganizationisnot  p  operatingasanonprofitforpurposesoftheCROAwillnotdirectly !'" impacttheorganization'staxexemptstatusundersection #$ 501(c)(3).Whetheranentityisentitledtofederaltaxexempt E% & statusisadeterminationthatiscommitted,inthefirstinstance, &L"( totheIRS.SeeBobJonesUniv.v.UnitedStates,461U.S.574, ($* 59697(1982).True,adeterminationundertheCROAthatacredit w*%, repairorganizationisnotoperatingasanonprofitwilllikely .,~'. catchtheattentionoftheIRS.Buttherearealreadyprocesses  foralertingtheIRStoimprovidentgrantsoftaxexemptstatus. g ThereisaprocedurefortheIRStofieldcomplaintsaboutan n entity'sabuseofitstaxexemptstatus.See  % 4& #O  5  www.irs.gov/compliance/enforcement(lastvisitedMay5,2005).6=V#OQV  7 #V   Moreover,Congressitselfoccasionallyholdshearingsonthe C   matter.) #  7      ׀Thus,afindingthatacreditrepairorganizationisnot J  operatingasanonprofitforpurposesoftheCROAwillbejust   anothersourceofinformationfromwhichtheIRScandecideto h  targetaparticularcreditrepairorganizationforreview.But o suchafindingwillnotmeanthatacreditrepairorganization & losesitstaxexemptstatuswithoutfurtheractionbytheIRS.  #  8      # X]XXX]3N#X]XX X]   ` Second,itisalreadycommonforcourtsand D administrativeagenciestoexaminewhetheranentityactually K operatesasanonprofit,irrespectiveofitstaxexemptstatus.  Forexample,theFederalTradeCommission,whichdoesnothave g jurisdictionovernonprofitorganizations,see15U.S.C.44& n 45(a),determines,withoutreferencetoatargetorganization's  % taxexemptstatus,whethertheorganizationinfactoperatesasa   nonprofitandisthereforebeyonditsjurisdiction.SeeInreOhio C   ChristianColl.,80F.T.C.815,84849(1972).Similarly,state J  courtsfrequentlyinquireintowhetheranentityactuallyoperates   asanonprofittodeterminewhethertheentityisentitledtotax h  exemptionsreservedfornonprofits.See,e.g.,W.Mass.Lifecare o Corp.v.Bd.ofAssessors,747N.E.2d97,103(Mass.2001)("The & merefactthattheorganization...hasbeenorganizedasa  charitablecorporationdoesnotautomaticallymeanthatitis D entitledtoanexemptionforitsproperty.Rather,the K organizationmustprovethatitisinfactsoconductedthatin  actualoperationitisapubliccharity.")(internalquotation i marksandcitationsomitted). #  9      ׀  p   ` # X]XXX]>Z#X]XX X]ԀInsum,tobeexcludedfromtheCROAunder15U.S.C.  1679a(3)(B)(i),acreditrepairorganizationmustactuallyoperate g asanonprofitorganizationandbeexemptfromtaxationunder n section501(c)(3).Havingreachedthisconclusion,wemust  % identifythestandardtobeappliedindecidingwhetheranentity   satisfiesthe"nonprofit"componentoftheexclusion. C    ` WhereCongressleft"nonprofit"undefinedinanexclusion J  fromanotherstatutoryscheme,weconcludedthat"nonprofit"status   dependedprimarilyonproofthattheentitydid"notdistribute h  profitstostockholdersorothers."SeeTownofBrooklinev. o Gorsuch,667F.2d215,221(1stCir.1981).# X]XXX]=a#X]XX X]Thisisconsistent & withthestandarddefinitionoftheterm:anonprofitcorporation  is"acorporationorganizedforsomepurposeotherthanmakinga D profit."Black'sLawDictionaryat367(8thed.1999);seealso K BruceHopkins,TheLawofTaxExemptOrganizations5(8thed.2003)  (A"nonprofitorganization...isnotpermittedtodistributeits i profits...tothosewhocontrolit....").Here,weapply  p  thestandarddefintion. !'"  ` Formotiontodismisspurposes,theplaintiffs'complaint #$  sufficientlyallegesthatCambridgewasnot,infact,operating_ as E% &  S [       anonprofitorganization._ K #  10      _ # X]XXX] e#X]XX X]ԀThecomplaintstatesthat,while   Cambridgeclaimedthatitspurposewas"toprovidedirectaidto ; financiallydistresseddebtors,"inreality"Cambridge'sprimary n purposewastomakemoneyforitsownersandoperators,Johnand % Richard_ Puccio_ ."Thecomplaintfurtherclaimsthatthe_ Puccios_  `  neverintendedtooperateCambridgeasanonprofit,butrather    intendedtouseit"toenrichthemselvesandtheirkeyexecutives  J  bypermittingthemtosiphonoffcorporateassetsoftheirbusiness   throughhugecompensationpackages."Insupportofthis <  allegation,thecomplaintallegesthatthe_ Puccios_ Ԁandtheirkey o executiveshavereceivedexorbitantsalariesfromCambridge.These & allegations,iftrue,couldsupportafindingthatCambridgewas a notactuallyoperatingasanonprofitorganizationandistherefore  subjecttothe_ CROA_ . K   III.      ` Forthereasonsstated,we vacate thejudgmentand remand  Z forproceedingsconsistentwiththisopinion. .   ` Soordered.# X]XXX]zi#   a"