|Court Holds That State Laws Requiring Opt-In
For Information Sharing Among Affiliated Financial Institutions Are Preempted
7/29. The U.S. District Court (NDCal)
issued its Order on
Cross Motions for Summary Judgment [23 pages in PDF] in Bank
of America v. Daly City,
regarding whether municipal and county ordinances regulating the sharing of
information among affiliated financial institutions is preempted by various
The District Court wrote, "The Court declares that the ordinances at issue
are preempted under federal law to the extent that the ordinances restrict the
sharing of confidential consumer information between financial institutions and
their affiliates. The Court enjoins enforcement of the ordinances to that
extent. The Court upholds the ordinances’ restrictions on the sharing of
information between financial institutions and non-affiliated third parties."
The Bank of America
(BA) is a bank that does business, among other places, in California. It
affiliates include Banc of America Investment Services, Inc., and Bank of
America Insurance Services, Inc. These affiliates use BA's customer information
to conduct business and to sell credit card, securities and other products to BA
customers. Wells Fargo Bank, and its
affiliates, also do business in California. They similarly share information.
The City of Daly City
is a city of 100,000 people in northern San Mateo County, California, near San
Francisco. It passed an ordinance that bars financial institutions operating in
Daly City from disclosing or sharing confidential consumer information to
either affiliates or non-affiliated third parties without first providing written notice to the
consumer, and obtaining a consent acknowledgment from the consumer.
That is, the ordinance requires financial institutions to obtain
a consumer's consent, or opt-in, prior to releasing confidential information
about the consumer, as opposed to requiring financial institutions to allow
consumers to opt-out of such information disclosures.
San Mateo County and Contra Costa County also passed
substantially similar ordinances.
The Bank of America, and its affiliates, and the Wells Fargo Bank, and its affiliates,
filed a complaint in the District Court against Daly City, San Mateo County and
Contra Costa County, challenging their consumer privacy ordinances as
preempted under federal law.
They sought a declaration that the ordinances are preempted by
the Fair Credit Reporting Act (FCRA), 15 U.S.C. §§ 1681 et seq., the Gramm Leach
Bliley Act (GLBA), 15 U.S.C. §§ 6801 et seq., and the National Bank Act (NBA), 12
U.S.C. §§ 21 et seq. They also sought injunctive relief barring
the defendants from enforcing their ordinances.
FCRA. First, the Court found that the ordinances are
preempted by the FCRA, which provides, at 15 U.S.C. §
1681t(b)(2) that "No requirement or prohibition may be imposed under the laws of
any State ... with respect to the exchange of information among persons
affiliated by common ownership or common corporate control ..." Daly City and
the other defendants argued that this applies to consumer reports. However, the
Court concluded that "``information,´´ as used in § 1681t(b)(2), encompasses the
confidential consumer information that is the subject of the ordinances."
GLBA. Second, the Court addressed the GLB Act. The defendants
relied upon §§ 6807(a) and (b).
§ 6807(a) provides that "This subchapter and the amendments made to this
subchapter shall not be construed as superseding, altering, or affecting any
statute, regulation, order, or interpretation in effect in any State, except to
the extent that such statute, regulation, order, or interpretation is
inconsistent with the provisions of this subchapter, and then only to the extent
of the inconsistency."
§ 6807(a) provides that "For purposes of this section, a State statute,
regulation, order, or interpretation is not inconsistent with the provisions of
this subchapter if the protection such statute, regulation, order, or
interpretation affords any person is greater than the protection provided under
this subchapter and the amendments made by this subchapter ..."
But, the Court concluded, the subchapter referred to in these
clauses regulate only the disclosure of nonpublic personal information to a
nonaffiliated third parties. The present case pertains to disclosure to
affiliated parties. The Court therefore concluded that "States and local governments are
free to enact law affording some protection to consumer privacy greater than
that provided by federal law, but not with regard to the disclosure of
information to affiliates."
BA and Wells Fargo also argued that the ordinances are preempted
by the GLBA. However, the Court concluded that, "having concluded that the
ordinances are preempted by the FCRA with regard to affiliate disclosures, it
need not consider this argument."
NBA. BA and Wells Fargo also argued that the ordinances
are preempted by the National Banking Act (NBA). Here again, the Court concluded
that "Having concluded that the ordinances are preempted by the FCRA to the
extent that they restrict such affiliate disclosure, the Court need not consider
Plaintiffs’ arguments regarding the NBA."
Hence, the Court granted summary judgment for BA and Wells
Fargo, and their affiliates, on the question of preemption of the ordinances, to
the extent that they purport to regulate information sharing among affiliates.
However, the Court granted summary judgment to Daly City and the counties on the
question of those portions of the ordinances that regulate information sharing
among non-affiliated entities.
The Electronic Privacy
Information Center (EPIC) characterized the order as "a serious setback to
privacy rights". It elaborated that "The ordinances were intended to supplement
the federal Gramm Leach Bliley Act (GLBA), which sets weak, opt-out standards
for information sharing among non-affiliates, and does not allow any choice in
regards to affiliate sharing. The court invalidated opt-in requirements for
affiliate sharing, but upheld an opt-in standard for non-affiliate information
sharing. The court's decision is likely to be appealed, as Congress clearly
intended to allow states to regulate information sharing in passing the GLBA."
This case is Bank of America, et al. v. Daly City, et al, D.C. Nos. 02-4343 CW
and 02-4943 CW, Judge Claudia Wilken presiding.
|DOJ Files Brief with Appeals Court in
Challenge to Consent Judgment in Microsoft Case
8/6. The Department of Justice's (DOJ)
Antitrust Division filed its
brief with the
U.S. Court of Appeals (DC) in U.S. v. Microsoft.
This brief pertains to the appeal of the
Computer & Communications Industry Association
(CCIA) and the Software and Information Industry
Association (SIIA) of the entry of the consent decree in the government's antitrust case
against Microsoft. On December 20, 2003, the CCIA and SIIA filed a
motion and memorandum
[25 pages in PDF] with the U.S. District
Court (DC) seeking leave to appeal the
November 12, 2002 Final Judgment. The pertinent fact is that neither the CCIA
nor the SIIA are parties to the case. The District Court denied the motion. This
The DOJ brief states that the issues on appeal are "Whether the district
court abused its discretion in denying appellants' motion for leave to intervene
for purposes of appeal of the entry of a consent judgment" and "If the Court
reversed the denial of appellants' motion, two additional issues would be presented:
A. Whether the district court abused its discretion in determining that there
were no procedural obstacles to entry of the consent decree; and B. Whether the
district court abused its discretion in concluding that entry
of the consent decree was in the public interest."
The DOJ brief argues that the District Court, in approving the consent
judgment, "conducted a careful and comprehensive Tunney Act review of the proposed
consent decree in this government antitrust enforcement action, painstakingly
reviewing massive quantities of information, including this Court's prior
decision, the government's submissions, Microsoft's submissions, amici's
submissions, and an unprecedented number of public comments."
It continues that "Appellants, private trade associations representing many of Microsoft's
rivals, nonetheless seek to intervene for the purpose of pursuing their own
vision of relief. In so doing, they ignore the legal standards governing
intervention and distort the purpose of the Tunney Act."
The brief argues that the District Court "properly exercised its discretion
in denying permissive intervention for purposes of appeal", that "the
government fully complied with Tunney Act procedural requirements",
and that the District Court "properly found the decree to be in the public
See also, stories titled "CCIA and SIIA Seek to Appeal as Amici in Microsoft
Case" in TLJ Daily
E-Mail Alert No. 573, December 23, 2002; "DOJ Opposes CCIA and SIIA Attempt
to Appeal in Microsoft Antitrust Case" in
TLJ Daily E-Mail
Alert No. 577, January 7, 2003.
This is District Court Civil Action No. 98-1232 (CKK), and Appeals Court No.
|EC Releases Statement About Its Microsoft
8/6. The European Union (EU) issued a
regarding the European Commission (EC) antitrust investigation of Microsoft. It
states that the EC "has gathered additional evidence from a wide variety of
consumers, suppliers and
competitors. This evidence confirms and in many respects bolsters the
Commission's earlier finding that Microsoft is leveraging its dominant position
from the PC into low-end servers and that Microsoft's tying of Windows Media
Player to the Windows PC operating system weakens competition on the merits,
stifles product innovation, and ultimately reduces consumer choice."
The EU also stated that the EC "invites Microsoft to submit its comments
on a series of remedies
it intends to impose in order to bring the antitrust infringements it has
identified to an end. As this complex investigation draws to a close, the
Commission will continue to ensure a meticulous respect of due process.
Therefore, the Commission has addressed to Microsoft a final Statement of
Ed Black, P/CEO of the Computer &
Communications Industry Association (CCIA), stated in a release that "The
Commission’s statement today should also lay to rest any doubt that Mario Monti
is committed to ending Microsoft’s illegal abuse of its interlocking
monopolies." He also stated that the EC should require
Microsoft to make a version of Windows XP
with Media Player, and mandate "interface disclosure requirements to ensure
interoperability of competitors products with Windows in the low-end server
Black added that "The European Commission
now has the opportunity to adopt remedies which can actually break Microsoft’s
monopoly stranglehold on consumers, PC manufacturers and software developers,
something no other competition authority anywhere has yet managed to do".
|Thursday, August 7
The House is in recess until September 3. Senate is in recess until
September 2. The Supreme Court is in recess.
10:00 AM. The U.S. Court of Appeals
(FedCir) will hear oral argument in Microsoft v. Multi-Tech Systems, No. 03-1138,
and Multi-Tech Systems v. Net2Phone, No. 03-1139.
This is an appeal from the U.S.
District Court (DMinn) in a patent infringement case involving data
communications technology. Location: Courtroom 201, 717
Madison Place, NW.
10:00 AM - 12:00 NOON. The Federal Communications
Commission (FCC) Office of Engineering
and Technology (OET) will sponsor a tutorial titled "Fiber to the Home
Technology". Location: FCC, 445 12th Street, SW,
Room TW-C05 (Commission Meeting Room). See,
|Friday, August 8
Deadline to submit comments to the Federal
Communications Commision (FCC) in response to its
notice of proposed rulemaking (NPRM) [7 pages in PDF] regarding the
draft Nationwide Agreement [28 pages in PDF] of the FCC, the Advisory
Council on Historic Preservation, and the National Conference of State
Historic Preservation Officers, regarding undertakings for communications
facilities, including communications towers and antennas, under the
National Historic Preservation Act (NHPA). This proceeding is titled "In the
matter of Nationwide Programmatic Agreement Regarding the Section 106 National
Historic Preservation Act Review Process". It is WT Docket No. 03-128. For
more information, contact Frank Stilwell at 202 418-1892 or
firstname.lastname@example.org. See, story titled
"FCC Announces NPRM Regarding Communications Facilities and the National
Historic Preservation Act" in TLJ Daily E-Mail Alert No. 677, June 10, 2003.
notice in the Federal Register, July 9, 2003, Vol. 68, No. 131, at Pages
40876 - 40887.
|Monday, August 11
2:00 - 3:30 PM. The American Enterprise
Institute (AEI) will host a panel discussion titled "Trade
Agreements and Capital Controls". The speakers will be John Taylor
(Treasury Department) and Jagdish Bhagwati (Columbia University). See,
Location: AEI, 12th Floor, 1150 17th Street, NW.
Deadline to submit comments to the General
Services Administration's (GSA) Office of Electronic Government and
Technology regarding its draft policy titled "Draft E -- E-Authentication for
Federal Agencies". See,
notice in the Federal Register, July 11, 2003, Vol. 68, No. 133, at Pages
41370 - 41374.
|Tuesday, August 12
Deadline to submit comments, or requests to speak at the September 2, 2003
public hearing, on the Treasury Department's
and the Internal Revenue Service's (IRS) notice of
proposed rulemaking (NPRM)
regarding regulations that "affect certain taxpayers who participate in the
transfer of stock pursuant to the exercise of incentive stock options and the
exercise of options granted pursuant to an employee stock purchase plan
(statutory options)." See,
notice in the Federal Register, June 9, 2003, Vol. 68, No. 110, at Pages 34344 - 34370.
|Thursday, August 14
Deadline to submit comments to the National
Institute of Standards and Technology (NIST) regarding its
document [12 pages in PDF] titled "Draft Federal Information Processing
Standard (FIPS) 199 on Standards for Security Categorization of Federal
Information and Information Systems". The NIST states that this document
"defines requirements to be used by Federal agencies to categorize information
and information systems, and to provide appropriate levels of information
security according to a range of risk levels." For more information,
contact Ron Ross at 301 975-5390 or
notice in the Federal Register, May 16, 2003, Vol. 68, No. 95, at
Pages 26573 - 26574.
|People and Appointments
8/6. Ann Malester was named Deputy Director of the
Federal Trade Commission's (FTC) Bureau of
Competition. She has been Assistant Director for Mergers I, which has reviewed
proposed mergers in the pharmaceutical, biotechnology, medical device, and
defense and aerospace industries, since 1991. Steven Bernstein will
replace Malester as Assistant Director for Mergers I. He has been a FTC staff
attorney for 12 years. See, FTC
8/6. Michelle Dennedy was named Chief Privacy Officer of
Sun Microsystems. See, Sun
8/6. The Federal Trade Commission (FTC)
notice in the Federal Register in which it announced that it has authorized
the Director of the FTC's Bureau of Consumer Protection to share certain
non-public information (consumer complaint information from the Identify Theft
Data Clearinghouse and Consumer Information System databases) with consumer
reporting agencies. See, Federal Register, August 6, 2003, Vol. 68, No. 151, at
8/6. The Executive Office of the
President's (EOP) Office of Science and
Technology Policy's (OSTP)
National Science and
Technology Council's (NSTC) Subcommittee on Research Business Models
notice in the Federal Register stating that it "is undertaking a review of
policies, procedures, and plans relating to the business relationship between
federal agencies and research performers with the goal of improving the
performance and management of federally sponsored basic and applied scientific
and engineering research. As part of that effort, the Subcommittee will hold a
series of regional workshops in the Fall of 2003 to solicit input and feedback
from the research performer community. This notice is intended to collect data
that will assist the Subcommittee in setting agendas for those regional
workshops." The deadline to submit comments is September 22, 2003. See, Federal
Register, August 6, 2003, Vol. 68, No. 151, at Pages 46631 - 46632.
8/1. The Office of
Management and Budget (OMB) released a
pages in PDF] regarding "Implementation Guidance for the E-Government Act of
2002". This memorandum, M-03-18, states that it "(1) outlines new E-Government
Act requirements for Federal agencies; (2) explains what agencies are expected
to provide under the E-Gov Act to support ongoing initiatives and new
activities, including reports; and (3) explains how the Act authorizes certain
ongoing governmentwide initiatives. This guidance also explains, throughout the
document, how the E-Government Act fits within existing IT policy, such as OMB
Circulars A-11 and
8/6. The U.S. District Court (EDNY)
approved two stipulated orders in cases brought by the
Federal Trade Commission (FTC) against Rhino International, Inc.
and Safety Cell, Inc. alleging the marketing on television and on the internet
of bogus cell phone radiation protection patches. The orders require the two
defendants to have adequate scientific evidence to substantiate claims about the
performance, efficacy, or benefit of any good or service, and prohibits them
prohibited from marketing or selling any product that claims to protect
consumers from harmful radiation and electromagnetic energy, unless the claims
can be substantiated by competent and reliable scientific evidence. The Rhino
order also includes a fine of $342,665. This is FTC v. Rhino
International, D.C. No. CV 03-3850 and FTC v. Safety Cell, D.C. No.
CV 03-3851. See, FTC release.
|About Tech Law Journal
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