The Federal Trade Commission has no authority to lump lawyers in with creditors in the enforcement of regulations that govern the prevention of identity theft, attorneys for the American Bar Association said in court papers filed in a federal appeals court in Washington.
The ABA brief, filed Aug. 20 in the U.S. Court of Appeals for the D.C. Circuit, respond to FTC papers that lawyers should be held to comply with so-called “red flag” rules that require financial institutions and creditors to develop identity theft prevention programs.
The FTC maintains that lawyers act as creditors when they provide legal services without immediately taking payment. The ABA sued the FTC in August 2009 in federal district court in Washington, winning a favorable ruling. The FTC is challenging the ruling on appeal.
“Here, the Commission is attempting again to foist a regulatory scheme on lawyers without the slightest indication that Congress intended or desired such a result,” the ABA’s brief, signed by Proskauer Rose partner Mark Harris, said. Harris, based in New York, co-heads the firm’s appellate group. Click here for the ABA brief.
The ABA brief said the FTC’s position is “unsustainable” in the D.C. Circuit, which previously ruled, in an unrelated case, that the FTC cannot regulate the practice of law unless Congress provides the commission with an “unmistakably clear” grant of authority.
In the earlier case, which the D.C. Circuit ruled on in December 2005, the ABA challenged regulations controlling the protection of confidential and private customer information maintained by financial institutions.
The D.C. Circuit in a unanimous two-judge vote found the FTC’s interpretation of the law unreasonable. (The third judge who heard oral argument in the case, John Roberts, was confirmed as the chief justice of the U.S. Supreme Court in September 2005, before the D.C. Circuit ruled.)
Lawyers for the ABA said in court papers that the definitions of the statutory language do not apply to lawyers. The definition of “credit” gives a debtor a right to defer payment, a “concept that does not apply to the legal professionally generally.” Lawyers do not “regularly” extend credit, the ABA’s attorneys said. The problem of identity theft in the legal profession was not addressed in the legislative history.
In July, lawyers for the FTC said the D.C. Circuit’s decision in the earlier case did not apply because it was based on different statutory language. ABA lawyers said any differences between the cases are “more apparent than real.”
Numerous groups have already lined up to participate as friends-of-the-court. The American Medical Association, among other groups representing the interest of physicians, is supporting the ABA. Certain medical associations have filed suit against the FTC to block the application of the rules to physicians. The American Institute of Certified Public Accountants, represented by Fried, Frank, Harris, Shriver & Jacobson, is also supporting the ABA.
Lawyers for the FTC will get a chance to file a brief, by Sept. 21, that replies to the court papers the ABA filed last week. No oral argument date has been set.