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Funny how hordes of lawyers could spend months poring over a piece of legislation without ever realizing, “Hey — this applies to us, too.” But that, of course, was just what happened with the privacy provisions of the Gramm-Leach-Bliley Act. The massive 1999 legislation overhauling the nation’s banking laws required financial service providers to notify customers in writing of their privacy policies by July 1. What no one recognized until just a few weeks before the deadline — oops — was that the rule applied to certain kinds of law firm activities as well. The revelation set off a nationwide scramble as firms with tax, real estate, and trusts and estates clients drafted letters reiterating, “No, we do not sell your personal data. Ever. Period.” “It’s absurd,” fumes D.C.-based Latham & Watkins partner Nicholas Allard. “It’s so unnecessary. It’s expensive, and it could cause confusion.” As Allard and others are quick to point out, lawyers are already bound by ethics rules far more strict on attorney-client privacy than anything contained in Gramm-Leach-Bliley. “We’re not permitted to reveal or trade on information we receive from clients in the course of the professional relationship. It’s absolutely forbidden,” says Daniel Joseph, a partner at Akin, Gump, Strauss, Hauer & Feld. “I hope everyone would understand that when you consult with a lawyer, that’s a confidential relationship.” The Federal Trade Commission, which created the regulation implementing the law, doesn’t dispute this. “We agree there are rules that limit the disclosure for attorneys, but at the moment, all folks who are technically covered by the rules need to comply,” says Loretta Garrison, a lawyer in the FTC’s Bureau of Consumer Protection financial practices division. According to Garrison, lawyers were more or less inadvertently caught up in the regulations, which focus on the kind of financial services provided, not on who is doing the providing. “It never occurred to anybody that law firms might be covered,” she says. Indeed, nowhere in the densely worded May 24, 2000, Federal Register notice does it actually say, “This applies to law firms.” What it does say is that the rule covers “financial institutions” — that is, all entities that engage in “any activity the [Federal Reserve] Board has determined to be a ‘financial activity.’ “ Among the examples cited are “real estate settlement services; providing financial or investment advisory activities including tax planning, tax preparation, and instruction on individual financial management.” In other words, services that lawyers frequently provide. Nonetheless, of the 640 comments the FTC received on the rule, not one raised the issue of law firm applicability. “It’s a shame the ABA didn’t spot it,” Garrison says. “We might have been able to address it at the time.” So where was the American Bar Association? “We weren’t aware of the potential application. [The rule] would appear to be addressed to banks and credit institutions,” says Nancy Slonim, the ABA’s director of national media services. She continues, “It wasn’t something we were monitoring because it wasn’t something we had a policy on. … Certainly, we would have preferred if we had picked up on it. But we don’t look at every bill. We can’t.” Although some individual lawyers no doubt figured out they were obligated to send out privacy notices, Slonim says the issue came to the ABA’s attention after a June 1 conference of lawyers and CPAs, when accountants asked lawyers what they were doing to comply. Slonim says the ABA filed a letter with the FTC the afternoon of June 29 asking for an extension on the July 1 deadline. Ultimately, the ABA wants the agency to exempt lawyers from the requirement. Garrison of the FTC sounds receptive to the proposal. “When we fully understand the scope of our exception authority, I think what we’d like to do is address a series of issues, and attorneys are one of them,” she says. But, she cautions, to do so will require a full-blown rule making, which takes time. As for the July 1 deadline, she says, “Come July 2, we’re not going to be showing up at somebody’s law firm and asking, ‘What have you done in delivering your privacy notice?’ “ In the meantime, firms have been proceeding to send out the notices. Phillip Mann, chairman of tax specialists Miller & Chevalier, says the firm was putting the finishing touches on its privacy letter on June 28. Because the firm doesn’t usually represent individuals, the list of clients requiring notification was not huge, he says. But firm lawyers concluded they were also obligated to send notices to all pro bono clients, regardless of the nature of the service. “I think we’re going to end up getting calls from all of them,” he says. The biggest nuisance, Mann says, was sorting through the files to pick out all the individual — versus corporate — clients requiring notification. “It was a total waste of everyone’s time and money,” he concludes. Wilmer, Cutler & Pickering was also sending notices last week to tax and estate planning clients, says partner Becky Burr. Although Burr has done extensive client counseling on Gramm-Leach-Bliley compliance, she too was caught by surprise. “We’re all bound by ethical rules, so the assumption was [the FTC rules] were not applicable,” she says. Allard of Latham & Watkins says his firm was also sending its notices last week, which he describes as “voluntarily notifying individual clients of our policy regarding private, nonpublic confidential information.” He adds, “This is classic, unnecessary over-regulation. … Whatever gripes the American public might have about lawyers, it’s not that lawyers don’t know how to protect private information.” But Joseph of Akin Gump says that despite the nuisance, sending out the privacy notices might actually give firms a boost in the eyes of their clients. “In a way, it’s an opportunity for us to say, ‘You deal with all these other guys who will sell your underwear size. But we reveal nothing.’ “

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