Victory for ABA and NY State Bar

Steptoe obtained a significant victory for the American Bar Association in its challenge to the Federal Trade Commission's attempt to regulate the ethical conduct of attorneys under the Gramm-Leach-Bliley Act.

Ruling on the government's motions to dismiss suits brought against the FTC by the American Bar Association and the NY State Bar, Judge Reggie Walton held that Congress did not intend the privacy provisions of the Gramm-Leach-Bliley Act to apply to attorneys who provide legal services, contrary to a previously issued FTC opinion letter on this matter.  Represented by Steptoe attorneys Dave Roll and Rhonda Bolton, the ABA took a giant step toward obtaining a declaratory judgment invalidating the government's attempt to regulate attorneys as "financial service providers."

In its 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.

In rejecting the FTC's motions to dismiss, Judge Walton said in his 60-page opinion 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 obtain a final judgment invalidating the FTC's interpretation.

In addition to Dave Roll and Rhonda Bolton, the Steptoe team included invaluable advice and assistance from Sheldon Hochberg and Bob Jordan.

This case has been widely reported in the news media, including coverage in Newsday, Houston Chronicle, Seattle Post-Intelligencer, San Jose Mercury News, Newark Star-Ledger, Atlanta Journal-Constitution, and on ABC News.