Am. Bar Ass'n v. Fed. Trade Comm'n
| Decision Date | 04 March 2011 |
| Docket Number | No. 10–5057.,10–5057. |
| Citation | 636 F.3d 641 |
| Parties | AMERICAN BAR ASSOCIATION, Appelleev.FEDERAL TRADE COMMISSION, Appellant. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
OPINION TEXT STARTS HERE
Appeal from the United States District Court for the District of Columbia (No. 1:09–cv–01636).Michael D. Bergman, Attorney, Federal Trade Commission, argued the cause for appellant. With him on the briefs were Willard K. Tom, General Counsel, and John F. Daly, Deputy General Counsel for Litigation.Mark D. Harris argued the cause for appellee. With him on the brief was James F. Segroves.
Jack R. Bierig was on the brief for amici curiae American Medical Association, et al. in support of appellee.Matthew M. Wright was on the brief for amici curiae State and Local Bar Associations in support of appellee.Daniel E. Loeb was on the brief for amicus curiae American Institute of Certified Public Accountants in support of appellee.Before: ROGERS and GRIFFITH, Circuit Judges, and EDWARDS, Senior Circuit Judge.Opinion for the Court by Senior Circuit Judge EDWARDS.EDWARDS, Senior Circuit Judge:
The Fair and Accurate Credit Transactions Act of 2003 (“FACT Act”), Pub.L. No. 108–159, 117 Stat.1952, amended the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., and authorized the Federal Trade Commission (“FTC” or “Commission”) to promulgate regulations requiring financial institutions and creditors to establish internal procedures to prevent identity theft. In November 2007, following notice-and-comment rulemaking, the FTC adopted Identity Theft Rules (the “Red Flags Rule” or “Rule”), 16 C.F.R. § 681 et seq. , requiring financial institutions and creditors to implement and maintain programs to protect consumers from identity theft. Id. § 681.1. The Red Flags Rule incorporated, without amplification, the FACT Act's definitions of “credit” and “creditor.” See id. § 681.1(b)(4) & (5). Neither the Rule nor the statute indicated whether lawyers or law firms were covered.
In April 2009, in response to some public confusion over the Rule's coverage, the FTC issued an Extended Enforcement Policy, explaining that “professionals, such as lawyers or health care providers, who bill their clients after services are rendered,” would be considered “creditors” under the statute and, therefore, subject to the Rule's requirements. FTC, FTC Extended Enforcement Policy: Identity Theft Red Flags Rule, 16 CFR 681.1 (“Extended Enforcement Policy” or “Policy”) at 1 n.3 (Apr. 30, 2009), reprinted in Joint Appendix (“J.A.”) 76. In August 2009, appellee American Bar Association (“ABA”) filed suit in the District Court challenging the Commission's Extended Enforcement Policy. The ABA claimed that the Commission had “intruded upon an area of traditional state regulation,” Compl. ¶ 57 (Aug. 27, 2009), reprinted in J.A. 22–23, and that the Policy was unlawful absent “a clear statement from Congress” authorizing federal regulation over the practice of law, id. ¶ 41, J.A. 19. The District Court agreed with the ABA and enjoined the FTC from enforcing the Red Flags Rule against lawyers. ABA v. FTC, 671 F.Supp.2d 64 (D.D.C.2009). The FTC appealed to this court.
Oral arguments were heard by this court on November 15, 2010. Shortly thereafter, Congress passed the Red Flag Program Clarification Act of 2010 (“Clarification Act”), Pub.L. No. 111–319, 124 Stat. 3457 (). On December 18, 2010, the President signed the act into law. The Clarification Act expressly amended the FACT Act, changed the definition of “creditor,” and made it clear that a creditor's allowance of deferred payments alone could not trigger the identity theft protection requirements.
The enactment of the Clarification Act moots this case. It is well established that a case must be dismissed as moot if new legislation addressing the matter in dispute is enacted while the case is still pending. See, e.g., Dep't of Treasury v. Galioto, 477 U.S. 556, 559–60, 106 S.Ct. 2683, 91 L.Ed.2d 459 (1986) () (quotation omitted); Clarke v. United States, 915 F.2d 699 (D.C.Cir.1990) (en banc) (same). In its current posture, this case concerns: (1) the enforcement of statutory provisions in the FACT Act that have been amended; and (2) a complaint that challenges an agency policy statement that purports to interpret a rule that was promulgated before the statute was amended. Because the new legislation has clearly altered the posture of the case, there is no longer a live “case or controversy” before this court. Accordingly, we are constrained to vacate the District Court's judgment and opinion, and remand the case to the District Court with directions to dismiss the case as moot.
Congress enacted the FACT Act to “prevent identity theft, improve resolution of consumer disputes, improve the accuracy of consumer records, [and] make improvements in the use of, and consumer access to, credit information.” Pub.L. No. 108–159, 117 Stat.1952, 1952. As noted above, the FACT Act amended the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., and, among other things, authorized the FTC to “prescribe regulations requiring each financial institution and each creditor to establish reasonable policies and procedures” to prevent identity theft. 15 U.S.C. § 1681m(e)(1)(B). Acting pursuant to its delegated authority under the FACT Act, the FTC conducted notice-and-comment rulemaking proceedings, which resulted in the agency's promulgation of the Red Flags Rule. Identity Theft Red Flags and Address Discrepancies Under the Fair and Accurate Credit Transactions Act of 2003, 72 Fed.Reg. 63,718 (Nov. 9, 2007) (). The Red Flags Rule did not address whether lawyers or law firms were covered by the statute or the Rule.
The FTC initially set November 1, 2008, as the deadline for compliance with the Red Flags Rule. This deadline was extended to May 1, 2009, due to uncertainty regarding the Rule's coverage. Press Release, FTC, FTC Will Grant Six–Month Delay of Enforcement of ‘Red Flags' Rule Requiring Creditors and Financial Institutions to Have Identity Theft Prevention Programs (Oct. 22, 2008), reprinted in J.A. 70–71. In April 2009, the FTC issued the Extended Enforcement Policy to explain the Rule's coverage and delayed the compliance deadline to August 1, 2009. Extended Enforcement Policy, J.A. 76–78. The Extended Enforcement Policy stated that, in the agency's view, the term “creditor,” as used in the Red Flags Rule and the FACT Act, included “all entities that regularly permit deferred payments for goods or services,” including professionals “such as lawyers or health care providers, who bill their clients after services are rendered.” Id. at 1 n. 3, J.A. 76. This amplification of the statute and the Rule was never the subject of notice-and-comment rulemaking.
The ABA filed a three-count complaint against the FTC in the District Court, seeking injunctive and declaratory relief against the Commission. In Count I, the ABA alleged that the Extended Enforcement Policy was unlawful under the “clear statement doctrine,” because “the regulation of the practice of law is traditionally the province of the [S]tates” unless Congress grants the agency regulatory authority through clear and unambiguous statutory language. See Compl. ¶¶ 55–59, J.A. 22–23 (alteration in original) (quoting ABA v. FTC, 430 F.3d 457, 471 (D.C.Cir.2005)). Count II sought an injunction on the grounds that the FTC's action was arbitrary and capricious. Count III sought a declaratory judgment. The ABA moved for summary judgment on Count I, urging the trial court to “set aside the Extended Enforcement Policy to the extent the FTC purports to apply the Red Flags Rule to lawyers engaged in the practice of law, as well as any other application of the Red Flags Rule to lawyers engaged in the practice of law.” Id. ¶ 60, J.A. 23.
The District Court granted the ABA's motion for summary judgment. ABA v. FTC, 671 F.Supp.2d 64 (D.D.C.2009). Following the ABA's voluntary dismissal of Counts II and III, the District Court issued a final judgment enjoining the Commission from enforcing the Red Flags Rule “against lawyers engaged in the practice of law.” Judgment at 1, J.A. 218. The District Court found that,
[g]iven the plain-meaning and statutorily assigned definitions of the terms interpreted by the Commission, the aim of the legislation, and the ill-adapted application of these terms to the legal profession, it becomes clear that the intent of Congress is unambiguous: it did not grant to the Commission the broad authority to exercise regulatory control over attorneys pursuant to the FACT Act, and accordingly the Red Flags Rule similarly cannot be properly promulgated in such a broad manner.
ABA, 671 F.Supp.2d at 82. The District Court further noted that, even if the statutory language were ambiguous, the agency's broad interpretation of “creditor” as including any lawyer who bills clients on a monthly basis would be unreasonable, “and therefore not ‘entitled to respect’ because it lacks the ‘power to persuade.’ ” Id. at 83 (footnote omitted) (quoting Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 89 L.Ed. 124 (1944)).
The FTC appealed the judgment of the District Court, and oral arguments were heard by this court on November 15, 2010. On November 30, 2010, the United States Senate passed the Red Flag Program Clarification Act, S. 3987, 111th Cong. (2010), to amend section 1681m(e)(4) of the FACT Act. 156 Cong. Rec. S8289 (daily ed. Nov. 30, 2010). The same bill was passed by voice vote in the House of Representatives on December 7, 2010. 156 Cong. Rec. H8060 (daily ed. Dec. 7, 2010). On December 18, 2010, the...
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