Court: federal privacy laws override state records act

The Washington Supreme Court barred the state's attorney general’s office from releasing financial and consumer records from a mortgage company investigation, unanimously ruling Thursday that federal privacy laws pre-empt the state Public Records Act.

In 2007, Melissa Huelsman, a lawyer specializing in predatory lending cases, filed a public records request for names, addresses, phone numbers and interest rates relating to the investigation of the Ameriquest Mortgage Co.’s lending practices. Washington’s attorney general’s office had obtained loan files, e-mails and other documents in its inquiry, which resulted in Ameriquest paying a $325 million settlement.

The attorney general’s office was willing to hand Huelsman the records, but Ameriquest sought an injunction. The mortgage company opposed releasing files that it had disclosed to the attorney general's office, citing federal privacy laws.

A trial court denied Ameriquest’s request, ruling federal law “does not preempt the state’s law on public disclosure of documents,” according to the Supreme Court’s opinion. An appellate court reversed the decision, ruling federal privacy laws do pre-empt the state’s laws.

The Washington Supreme Court affirmed the appellate ruling on the grounds that federal privacy laws prohibit a financial institution from disclosing “nonpublic personal information” to an unaffiliated third party. The attorney general's office argued the requested records were already available on the public record, through telephone books, websites and recorded mortgage filings, the court opinion said.

However, the court ruled the attorney general's office cannot disclose the records because of information that could identify customers, and could only release records that do not contain personal identifiers or redacted records if they already existed. The court held that, while the federal privacy law did not prohibit redaction, the state open records law prohibits the attorney general's office from repackaging the information in response to a request.

Deputy Solicitor General Alan Copsey, counsel for the attorney general's office, said the decision clears up confusion with federal and state privacy laws.

“It gives us the first opportunity to understand from our state Supreme Court how to look at a federal exemption in the context of a state law,” Copsey said.“This brings that federal exemption within the state act and makes it possible for citizens to work within the state act.”