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.

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Publications : Bar Bulletin: July, 2004

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