Attorneys in North Carolina and every other jurisdiction were granted a well-deserved reprieve on April 30, 2004, when a decision handed down by the U.S. District Court for the District of Columbia relieved attorneys from having to comply with the privacy provisions of the Gramm-Leach-Bliley Act of 1999.
The American Bar Association, backed by twenty-six other bar associations, challenged the decision by the FTC on various grounds: first, that attorneys are bound by an ethical duty of confidentiality to their clients and by contractual agreements that prohibit any such use of client information, which impose higher standards than the Act; second, that all states regulate the legal profession and impose stricter guidelines than the Act regarding confidentiality; third, that enforcement of the Act would infringe significantly on the attorney-client relationship and could actually destroy attorney-client privilege in some circumstances; and fourth, that imposing the rules would unduly burden small firms and sole practitioners.
The ABA also made clear in its lawsuit that it supports the spirit of the Act, but that imposing the disclosure requirements on attorneys would do nothing to promote consumer protection or privacy.
The U.S. District Court agreed with the ABA, holding that the FTC’s decision to impose the requirements of the Act on attorneys was beyond its statutory authority and constituted arbitrary and capricious agency action. The FTC has 60 days within which to file an appeal, and it has not announced whether it will appeal. The FTC has agreed that attorneys who choose not to comply with the Act within the time frame for filing an appeal will not be subject to penalties if the District Court ruling is overturned.