D.C. Circuit Court of Appeals invalidates FTC attempt to regulate lawyers

David Roll

In a significant victory for the legal profession, the U.S. Court of Appeals for the District of Columbia Circuit on Dec. 6 held that the FTC exceeded its authority when it attempted to regulate the practice of law.

The FTC had issued an opinion letter saying that the privacy provisions of a federal law aimed at financial institutions - the Gramm-Leach-Bliley Act of 1999 - applied to lawyers. The court invalidated the FTC's position, holding that Congress never intended the privacy protection and safeguard provisions of the Act to apply to the legal profession.

The court reasoned that if Congress had intended to cover lawyers engaged in the practice of law it would have explicitly said so. "The states have regulated the practice of law throughout the history of the country; the federal government has not. This is not to conclude that the federal government could not do so. We simply conclude that it is not reasonable for an agency to decide that Congress has chosen such a course of action in language that is, even charitably viewed, at most ambiguous."

Borrowing a colorful metaphor from a Supreme Court opinion by Justice Antonin Scalia, "Congress does not hide elephants in mouseholes," the appeals court said, "[W]e would have to conclude that Congress not only had hidden a rather large elephant in a rather obscure mousehole, but had buried the ambiguity in which the pachyderm lurks beneath an incredibly deep mound of specificity, none of which bears the footprints of the beast or any indication that Congress even suspected its presence."

The ABA brought suit against the FTC not only because the FTC overstepped its authority, but also to reinforce the principle that regulation of the practice of law is the province of the states, not the federal government - a principle that the court expressly endorsed in its opinion. "This ruling underscores that for more than two centuries we have rightly relied on state supreme courts to exercise responsibility for oversight in order to protect and safeguard the confidentiality of attorney-client communications and the public interest," said ABA President Michael S. Greco.

The opinion [PDF] was authored by Judge David B. Sentelle and joined by Chief Judge Douglas H. Ginsburg. John Roberts, now Chief Justice of the United States, was originally a member of the panel that heard oral argument. However, he recused himself after he was nominated to the Supreme Court.

David Roll and Rhonda Bolton of Steptoe & Johnson represented the ABA throughout the litigation in the district court and on appeal. In a companion case filed by the New York State Bar Association, which was consolidated with the ABA case in the appeal, Warren Dennis, now deceased, and Steve Krane of Proskauer Rose represented that association.

Back to top