Report from Governmental Affairs

Case Closed

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After five years, the organized bar can declare victory in its fight against the Federal Trade Commission’s efforts to apply financial reporting provisions of the Gramm-Leach-Bliley Act to lawyers.

Despite favorable rulings in the federal courts in consolidated lawsuits by the ABA and the New York State Bar Association, that victory did not become final until March, when the FTC let the deadline pass for filing an appeal of the latest decision to the U.S. Supreme Court.In December, the U.S. Court of Appeals for the Dis­trict of Columbia Circuit affirmed a 2004 district court ruling that the FTC’s attempt to regulate lawyers under the Gramm-Leach-Bliley Act was inconsistent with the intent of Congress, and was an “arbitrary and capricious” violation of the Administrative Procedure Act.

Title V of the act requires financial institutions to inform customers in writing about their privacy protection policies.

After the law was passed, the FTC issued regulations indicating that it would consider law firms to be “financial institutions” under the act if they were “significantly engaged in financial activities,” such as tax preparation and planning services, financial advisory services, debt collection and real estate settlement services.

The ABA, through its Gramm-Leach-Bliley Task Force, requested that the FTC grant an exemption from the act for practicing attorneys. The ABA contended that the act’s legislative history made it clear that Congress did not intend for the law to apply to lawyers. The association further maintained that professional conduct rules in every state and the District of Columbia impose stringent confidentiality requirements on attorneys that protect the privacy of clients far more effectively than provisions in the act.

The FTC concluded, however, that lawyers were covered by the law and declared that it lacked authority to exempt them from the privacy requirements of Title V. In 2002 the ABA, represented by Washington, D.C., lawyer David L. Roll, and the New York State Bar As­so­ciation filed lawsuits seeking declaratory judgments that the FTC lacked authority to regulate lawyers under Gramm-Leach-Bliley. Both the district court and the D.C. Circuit Court of Appeals supported the contention of the bars that there was no basis for the FTC to regulate lawyers as financial institutions in either the language of the act or its legislative history.

Giving States Their Due

ABA President Michael S. Greco of Boston applauds the ruling as “a significant victory for legal clients and lawyers.” As a result, confusion among clients will be avoided and attorneys will be spared the inappropriate burden of complying with a law intended to apply only to financial institutions such as banks and credit card companies.

More important, says Greco, the decision reaffirms the principle, as stated by the court in its ruling, that “the regulation of the practice of law is traditionally the province of the states.”

The Gramm-Leach-Bliley Task Force began in 2001 as an informal working group and then expanded to include representatives from several ABA sections and the New York State Bar Association.

In addition to representing the ABA before the FTC, the task force worked with other bars and individual lawyers in urging Congress to provide a legislative exemption to the legal profession. Reps. Judy Biggert, R-Ill., and Carolyn B. Ma­loney, D-N.Y., introduced a bipartisan bill to clarify that the law was not intended to include lawyers. In light of the D.C. Circuit’s ruling, however, no further consideration of the legislation by Congress is expected. Task force chair George C. Howell III of Richmond, Va., says the courts validated all of the ABA’s arguments against the FTC’s plans to regulate lawyers under Gramm-Leach-Bliley.

“They adopted our views almost verbatim in their opinions,” says Howell, “which validated common sense that lawyers are not financial institutions.”


This column is written by the ABA Governmental Affairs Office and discusses advocacy efforts by the ABA relating to issues being addressed by Congress and the executive branch of the federal government.

Rhonda McMillion is editor of Washington Letter, an ABA Governmental Affairs Office publication.

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