Maryland Bar
Bulletin
Publications :
Bar Bulletin |
July, 2004 |
Federal Court Supports Gramm-Leach-Bliley
Amendment Backed by MSBA
By Janet Stidman Eveleth
To protect Maryland
lawyers, the Maryland State Bar Association (MSBA) supported an amendment
to the 1999 Gramm-Leach-Bliley Financial Modernization Act in November
2002, exempting them from federal privacy provisions targeting financial
institutions. MSBA sought to exempt lawyers from a Title V provision of
this federal act requiring lawyers to explain their privacy policies to
individual clients and how the client’s personal financial information
would be shared with other businesses. MSBA also supported an ABA lawsuit
to this effect, and the Federal Court has found in favor of the Bar.
Title V also empowered
certain federal agencies, including the Federal Trade Commission (FTC), to
enforce privacy protection regimes within those institutions. As most law
firms can be characterized as financial institutions under this overly
broad definition, the FTC determined in June 2001 that it had the
authority to regulate the ethical duty of confidentiality that lawyers owe
their clients.
Under Subtitle A, the FTC
required all financial institutions, including lawyers and law firms, to
send notices to individual clients explaining their privacy policies. The
Bar sought an exemption for lawyers because they are already governed by
strict ethical rules under each state’s Code of Professional Conduct.
The American Bar
Association (ABA) immediately asked the FTC to exempt lawyers from the
requirements of Title V. The ABA ultimately filed a lawsuit in the U.S.
District Court for the District of Columbia on September 25, 2002, asking
the Court to declare a subtitle of Title V of the Gramm-Leach-Bliley Act
unlawful. MSBA supported the ABA’s lawsuit, believing privacy protections
legally enforced by attorney ethics rules in each state to be much
stronger public protections than these overly broad and unnecessary
notices.
The Federal Court agreed.
On April 30, 2004, the U.S. District Court for the District of Columbia
held that the Federal Trade Commission’s decision to subject lawyers to
these privacy provisions was “beyond the commission’s statutory authority
and constituted an arbitrary and capricious agency action. In a subsequent
letter, the FTC’s General Counsel stated to the parties in the lawsuit
that until the District Court’s Order is reversed the FTC will not bring
any enforcement actions nor conduct any investigations against practicing
lawyers under the provisions of the Gramm-Leach-Bliley Act.
At the same time the ABA
filed suit, Representatives Judy Biggert (R – IL) and Carolyn Maloney (D –
NY), working with the ABA, introduced HR 5457 to clearly exempt lawyers
from Title V, Subtitle A. Known as the Judicial Code of Conduct Privacy
Clarification Act, this proposed legislation clarifies that attorneys
are not subject to the Gramm-Leach-Bliley Act notification provisions. The
organized Bar is working toward passage of this key legislation.
