Wednesday, January 27, 2010

Analysis of Court Ruling Overturning FTC Red Flag Rules for Law Firms

Hinshaw & Culbertson has posted an excellent analysis of the court ruling that barred the FTC Red Flag rules from extending to law firms (American Bar Association v. Federal Trade Commission, __ F.Supp.2d __, 2009 WL 4289505 (D.D.C. 2009).

The basis of the ruling asserted that Congressional intent is required for a federal agency to have the power to regulate lawyers in the context of their relationship with clients. Excerpts from the complete article:
  • The court found that nothing in the legislative history or the administrative record, which never considered the subject of regulating lawyers, indicated that the FACT Act or the Red Flags Rule applied to the legal profession. The court held that Congress unambiguously did not intend the FACT Act to apply to attorneys.
  • The court also noted that, even if Congress’ intent was ambiguous, the FTC’s construction of the FACT Act was unreasonable, completely arbitrary, post-hoc without any inquiry or fact-finding, and thus impermissible and entitled to no deference.

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