United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 15, 2010 Decided March 4, 2011

No. 10-5057

AMERICAN BAR ASSOCIATION,

APPELLEE

v.

FEDERAL TRADE COMMISSION,

APPELLANT

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.
2

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-andcomment 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
3

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 (to be codified at 15 U.S.C.

§ 1681m(e)(4)). 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 (1986) (holding that when intervening

legislation “alters the posture” of a pending case, “it is the duty

of the appellate court” to vacate the judgment of the district

court and dismiss the case as moot) (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
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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.

I. Background

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) (codified at 16 C.F.R. § 681 et seq.). 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 SixMonth 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.
5

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,
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[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 (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 legislation was signed into

law by the President. Clarification Act, Pub. L. No. 111-319,

124 Stat. 3457 (2010).

II. Analysis

A. The ABA’s Claims Have Been Rendered Moot

by the Clarification Act

The mootness doctrine, deriving from Article III,

limits federal courts to deciding actual, ongoing

controversies. Even where litigation poses a live
7

controversy when filed, the doctrine requires a federal

court to refrain from deciding it if events have so

transpired that the decision will neither presently affect

the parties’ rights nor have a more-than-speculative

chance of affecting them in the future.

Clarke, 915 F.2d at 700-01 (quotations omitted). In this case,

the intervening event that ended the ongoing controversy

between the ABA and the FTC was Congress’ enactment of the 

Clarification Act. The portions of the Commission’s Extended

Enforcement Policy that were the subject of the ABA’s

complaint have been effectively vitiated by the Clarification

Act. The ABA’s claims were thus rendered moot by the

intervening legislation. See, e.g., Galioto, 477 U.S. 556

(dismissing challenge to statute denying access to firearms based

on prior mental institutionalization as moot due to intervening

redraft of statute providing an administrative remedy for those

affected); Nat’l Black Police Ass’n v. Dist. of Columbia, 108

F.3d 346 (D.C. Cir. 1997) (finding challenge to voter initiative

capping campaign contribution levels moot due to subsequent

legislation raising the caps above the voter initiative levels);

Defenders of Wildlife, Inc. v. Endangered Species Scientific

Auth., 725 F.2d 726 (D.C. Cir. 1984) (holding that congressional

amendments to Endangered Species Act mooted challenge to

guidelines issued under the previous version of the statute).

There can be no confusion here that the Clarification Act

served to moot the ABA’s claims in this case. The new

legislation is clearly aimed at the precise matter in dispute. 

Before the enactment of the new legislation, a “creditor”

under the FACT Act was defined as

any person who regularly extends, renews, or continues

credit; any person who regularly arranges for the

extension, renewal, or continuation of credit; or any
8

assignee of an original creditor who participates in the

decision to extend, renew, or continue credit,

15 U.S.C. § 1691a(e), and credit was defined as

the right granted by a creditor to a debtor to defer

payment of debt or to incur debts and defer its payment

or to purchase property or services and defer payment

therefor.

Id. § 1691a(d). These provisions were materially altered by the

Red Flag Program Clarification Act.

Under the Clarification Act, a “creditor” is now defined

as follows:

(4) DEFINITIONS.–As used in this subsection, the term

‘creditor’–

(A) means a creditor, as defined in section 702 of

the Equal Credit Opportunity Act (15 U.S.C.

1691a), that regularly and in the ordinary course

of business– 

(i) obtains or uses consumer reports,

directly or indirectly, in connection with

a credit transaction;

(ii) furnishes information to consumer

reporting agencies, as described in

section 623, in connection with a credit

transaction; or

(iii) advances funds to or on behalf of a

person, based on an obligation of the

person to repay the funds or repayable

from specific property pledged by or on

behalf of the person;
9

(B) does not include a creditor described in

subparagraph (A)(iii) that advances funds on

behalf of a person for expenses incidental to a

service provided by the creditor to that person;

and

(C) includes any other type of creditor, as

defined in that section 702, as the agency

described in paragraph (1) having authority over

that creditor may determine appropriate by rule

promulgated by that agency, based on a

determination that such creditor offers or

maintains accounts that are subject to a

reasonably foreseeable risk of identity theft.

Pub. L. No. 111-319, § 2(a), 124 Stat. at 3457 (internal quotation

marks omitted). The Clarification Act thus clarifies that, to be

a “creditor” subject to the Red Flags Rule requirements, one

must not only regularly extend, renew, or continue credit under

§ 1691a(e), but must also “regularly and in the ordinary course

of business,” (i) obtain or use consumer reports, (ii) furnish

information to consumer reporting agencies, or (iii) advance

funds with an obligation of future repayment. Id.

Most importantly, at least with respect to the matters in

dispute in this case, the Clarification Act makes it plain that the

granting of a right to “purchase property or services and defer

payment therefore” is no longer enough to make a person or

firm subject to the FTC’s Red Flags Rule – there must now be

an explicit advancement of funds. In other words, the FTC’s

assertion that the term “creditor,” as used in the Red Flags Rule

and the FACT Act, includes “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,” Extended Enforcement

Policy at 1 n.3, J.A. 76, is no longer viable.
10

The legislative history of the new Clarification Act also

confirms Congress’ intention to bar the regulation of lawyers

based solely on deferred billing practices. Representative John

Adler, who introduced the legislation in the House, stated that

“[w]hen I think of the word ‘creditor,’ dentists, accounting

firms, and law firms do not come to mind . . . . It is clear when

Congress wrote the [FACT Act], they never contemplated

including these types of businesses within the broad scope of

that law.” 156 CONG. REC. H8059 (daily ed. Dec. 7, 2010)

(statement of Rep. Adler). See also 156 CONG. REC. S8289

(daily ed. Nov. 30, 2010) (statement of Sen. Dodd) (“The

legislation also makes clear that lawyers, doctors, . . . an[d] other

service providers will no longer be classified as ‘creditors’ for

the purposes of the red flags rule just because they do not

receive payment in full from their clients at the time they

provide their services, when they don’t offer or maintain

accounts that pose a reasonably foreseeable risk of identity

theft.”) (commenting as chairman of the Senate Banking

Committee regarding “what the Red Flag Program Clarification

Act of 2010 will accomplish”).

The parties’ supplemental briefs to this court trade

arguments as to whether attorneys might be subject to regulation

by the FTC under the amended statute. But this question was

not raised in the ABA’s complaint, nor could it have been. The

complaint focused on the FTC’s Extended Enforcement Policy,

which purported to amplify a rule that was promulgated

pursuant to a statute that has since been amended. In these

circumstances, there is no “live” case or controversy before this

court. Why? Because the policy, rule, and statute that gave rise

to this suit are no longer in the same posture.

It does not matter that the FTC might hereafter pursue

notice-and-comment rulemaking to promulgate new rules

pursuant to which the agency may seek to regulate lawyers and

law firms. Nor does it matter that the agency may pursue a new
11

enforcement policy against lawyers and law firms. These are

merely hypothetical possibilities – indeed, the parties may even

view them as likely possibilities. But they are nothing more

than possibilities regarding regulations and enforcement policies

that do not presently exist. This is not enough to give rise to a

live dispute. “The mootness doctrine, deriving from Article III,

limits federal courts to deciding actual, ongoing controversies.”

Clarke, 915 F.2d at 700-01 (quotation omitted). The case now

before the court is moot.

B. No Exceptions to Mootness Are Present in This

Case

The only remaining question is whether there are any

exceptions to mootness that are applicable to this case.

There are two [principal] exceptions to mootness.

The first pertains to situations in which “the challenged

action was in its duration too short to be fully litigated

prior to its cessation or expiration,” yet there is a

“demonstrated probability that the same controversy will

recur involving the same complaining party.” Murphy

v. Hunt, 455 U.S. 478, 482 (1982) (per curiam).

. . . .

The second exception involves a party’s

“voluntary cessation” of the challenged activity. As a

general rule, a defendant’s “voluntary cessation of

allegedly illegal conduct does not deprive [a court] of

power to hear and determine the case.” County of Los

Angeles v. Davis, 440 U.S. 625, 631 (1979). Voluntary

cessation will only moot a case if “there is no reasonable

expectation . . . that the alleged violation will recur” and

“interim relief or events have completely and

irrevocably eradicated the effects of the alleged

violation.” Id. The defendant carries the burden of

demonstrating “that there is no reasonable expectation
12

that the wrong will be repeated,” and “[t]he burden is a

heavy one.” United States v. W. T. Grant Co., 345 U.S.

629, 633 (1953).

HARRY T. EDWARDS & LINDA A. ELLIOTT, FEDERAL

STANDARDS OF REVIEW – REVIEW OF DISTRICT COURT

DECISIONS AND AGENCY ACTIONS 114-15 (2007) (second and

third alterations in original). Neither exception applies in this

case.

This case does not fall within the “capable of repetition,

yet evading review” exception, Murphy v. Hunt, 455 U.S. 478,

482 (1982) (per curiam), because recurrence of the challenged

activity will not “evade review” should the parties’ dispute

recur. Even if the Commission were to adopt a revised

regulatory scheme under the amended statute that purports to

regulate attorneys, the new regulation will be subject to judicial

review at that time. As we noted in National Wildlife

Federation v. Hodel, 839 F.2d 694 (D.C. Cir. 1988), any new

“regulations [will be] in no danger of expiring before judicial

review is complete[, and i]t would be entirely inappropriate for

this court to . . . issue an advisory opinion to guide the

[agency’s] rulemaking.” Id. at 742 (refusing to find the

Secretary of the Interior’s withdrawal of a challenged regulation

to be an exception to mootness).

Likewise, the “voluntary cessation” exception to

mootness has no play in this case. The FTC’s abandonment of

the Extended Enforcement Policy was not voluntary. The

agency most assuredly did not alter its definition of “creditor”

in order to avoid litigation. Rather, intervening legislation

simply nullified the FTC’s policy statement that all lawyers who

bill their clients after services are rendered are covered by the

Red Flags Rule and the FACT Act. This scenario is not within

the compass of the voluntary cessation exception to mootness.

Cf. Campbell v. Clinton, 203 F.3d 19, 34 n.14 (D.C. Cir. 2000)

(“The President’s cessation of the attack on Yugoslavia was not
13

‘voluntary’ within the [Supreme] Court’s [mootness doctrine]

meaning; the war ended because the United States won, not

because the President sought to avoid litigation.”). 

In sum, this case is moot due to the enactment of

intervening legislation. And no exceptions to mootness are

present in this case.

C. Vacatur of the District Court’s Decision

In United States v. Munsingwear, Inc., 340 U.S. 36, 40

(1950), the Supreme Court noted that vacatur is normally

appropriate once a case is determined to be moot, because it

“clears the path for future relitigation of the issues between the

parties and eliminates a judgment, review of which was

prevented through happenstance.” Thus, in a matter such as

this, in which intervening legislation “alters the posture” of a

pending case, the Court has held that “it is the duty of the

appellate court” to vacate the judgment of the district court and

dismiss the case as moot. Galioto, 477 U.S. at 559-60.

The Supreme Court later clarified that vacatur is an

equitable matter and not automatic in all situations in which a

pending case is rendered moot. U.S. Bancorp Mortg. Co. v.

Bonner Mall P’ship, 513 U.S. 18, 23-25 (1994). Bancorp

indicates that vacatur is usually inappropriate when “the party

seeking relief from the judgment below caused the mootness by

voluntary action.” Id. at 24. The Bancorp presumption is

inapposite here because the FTC – the party who would get

relief from the judgment below – did nothing to render this case

moot. The case is moot because of the congressional enactment

of the new Clarification Act.
14

Furthermore, we have held that the Bancorp presumption

rarely applies in situations when, as here, a case is rendered

moot by intervening legislation.

Clearly, the passage of new legislation represents

voluntary action, and thus on its face the Bancorp

presumption might seem to govern. We believe,

however, that application of the Bancorp presumption in

this context is not required by the Bancorp opinion’s

rationale and would be inappropriate, at least if there is

no evidence indicating that the legislation was enacted

in order to overturn an unfavorable precedent. The

rationale underlying the Bancorp presumption is that

litigants should not be able to manipulate the judicial

system by rolling the dice in the district court and then

washing away any unfavorable outcome through use of

settlement and vacatur. The mere fact that a legislature

has enacted legislation that moots an appeal, without

more, provides no grounds for assuming that the

legislature was motivated by such a manipulative

purpose. The legislature may act out of reasons totally

independent of the pending lawsuit, or because the

lawsuit has convinced it that the existing law is flawed.

In American Library Association v. Barr, 956 F.2d 1178

(D.C. Cir. 1992), we rejected the argument that vacatur

was not appropriate where a case had become moot on

appeal due to Congress’ passage of new legislation,

arguing that Congress’ action “to repair what may have

been a constitutionally defective statute . . . represents

responsible lawmaking, not manipulation of the judicial

process.” Id. at 1187.

. . . .

The presumption of integrity that attaches to legislative

action and the difficulties that separation of powers

creates for attributing one branch’s actions to another
15

support not applying the Bancorp rule to situations

where the party seeking vacatur is the government and

mootness results on appeal because of legislative action.

In this context, absent additional evidence of an

illegitimate motive, we believe the general rule in favor

of vacatur still applies.

Nat’l Black Police Ass’n, 108 F.3d at 351-52, 354 (citations,

quotations, ellipsis, and brackets omitted).

National Black Police Ass’n directly controls the

disposition of this case on the matter of vacatur. We therefore

adhere to the law of the circuit in our decision to vacate the

judgment of the District Court.

III. Conclusion

The judgment and opinion of the District Court is hereby

vacated. The case is remanded to the District Court with

instructions to dismiss the case as moot.