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Statement by ABA President Alfred P. Carlton, Jr. regarding ABA v. FTC
The Federal Trade Commission's attempt to regulate the ethical conduct of attorneys was struck down yesterday in a 60-page opinion by Judge Reggie Walton of the federal district court for the District of Columbia. Ruling on motions to dismiss by the FTC in suits brought by the American Bar Association and the New York State Bar Association, the court held that Congress did not intend the privacy provisions of the Gramm-Leach-Bliley Act to apply to attorneys who provide legal services, noting in particular those who practice in the fields of real estate settlement, tax planning and tax preparation.
In an April 2002 opinion letter, the FTC had taken the position that the privacy provisions of the Gramm-Leach-Bliley Act applied to lawyers engaged in the practice of law and refused to exempt them. As a result of the FTC's interpretation, hundreds of thousands of practicing lawyers were subject to the Act, which required, among other things, that they send written "privacy notices" to their clients explaining their privacy policies even though these same lawyers were subject to the ethical codes of the states which provide stricter regulation of attorney-client privacy and confidentiality. The ABA and the NYSB Association challenged the FTC's interpretation in court, claiming that the agency exceeded its authority and was arbitrary and capricious.
In rejecting the FTC's motions to dismiss, Judge Walton said that "the absence of any explicit statement by Congress that it intended to legislate in an area that was already regulated by existing state regulatory schemes," was the "most convincing evidence" that Congress did not intend the privacy provisions of the Gramm-Leach-Bliley Act to apply to lawyers engaged in the practice of law. The court further held that it would give "no weight" to the FTC's interpretation, saying it "was made without any degree of deliberation, thoughtful consideration, or comments from the public." Finally, the court observed that the FTC's opinion letter "appears to constitute arbitrary and capricious agency action" under the Administrative Procedure Act.
Since Judge Walton was only asked to rule on the government's motions to dismiss, a final judgment in the cases has not yet been entered. The ABA intends to seek a final judgment invalidating the FTC's interpretation.
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