A New Jersey savings bank whose whole business is selling CDs for funding college costs has won a round in its battle with the state agency that does the same in Florida.

U.S. District Court in Trenton, N.J., dismissed a suit that the Florida Prepaid Postsecondary Education Expense Board had brought against College Savings Bank of Princeton, N.J.

The case centered on an accusation by the bank's chairman, Peter A. Roberts, that the state agency - its chief rival in Florida - had lied in its marketing material.

The Florida agency sued charging defamamation, trade libel, and product disparagement. The court in Trenton dismissed that suit March 22.

College Savings had earlier sued the Florida agency, charging patent infringement and false advertising. That case is scheduled for trial next year. Dismissal of the libel case is the first big legal victory for College Savings, which has no branches, makes no loans, and sells only the CollegeSure CD.

"This affirms the public's inalienable right to criticize government," Mr. Roberts said in a telephone interview last week.

F. Philip Blank, general counsel for Florida Prepaid, could not be reached by telephone, but a spokeswoman said the agency had not decided whether to appeal the dismissal of its suit.

College Savings' Mr. Roberts said that Florida Prepaid has cut into the bank's business in recent years. Launched in 1987, the bank now has 11,000 accounts with $90 million of deposits.

But Mr. Roberts said deposit growth in 1995 was a modest 10%. "When government competes, they're the 800-pound gorilla," he added.

By contrast with College Savings, Florida Prepaid has $1.99 billion of deposits in 375,546 savings contracts.

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