Opinion ID: 205987
Heading Depth: 2
Heading Rank: 1

Heading: The ABA's Claims Have Been Rendered Moot by the Clarification Act

Text: The mootness doctrine, deriving from Article III, limits federal courts to deciding actual, ongoing controversies. Even where litigation poses a live 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, 106 S.Ct. 2683 (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 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; (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. 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 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.