WASHINGTON -- Citibank and the Federal Deposit Insurance Corp. continue to wage their long-running legal battle between over the government's right to repudiate the contracts of failed banks.

Early this month a federal judge here rejected in part the FDIC's appeal of an April 1993 decision that appeared to favor Citibank.

Citibank will have to go back to court and prove it suffered damages before it can collect any money from the FDIC.

Ruling Came May 4

"It remains to be seen what damages the FDIC's repudiation has caused Citibank," wrote U.S. District Court Judge Thomas F. Hogan in a May 4 decision.

The case began in January 1992 when Citibank charged the FDIC with illegally allowing Fleet Financial Group to solicit the credit card customers of the failed Bank of New England.

Citibank sought $44 million in damages. FDIC has vigorously fought the case, defending its right to terminate contracts of failed banks.

Citibank bought Bank of New England's credit card portfolio in 1990 with a no-competition clause that barred the Boston bank from soliciting its 590,000 customers for four years.

But Bank of New England failed the next year and the FDIC seized the bank and sold it to Providence-based Fleet. FDIC permitted Fleet to go after those credit card customers.

In April 1993, Citibank appeared to win the case, but the judge did not decide how much the FDIC had to pay. The two sides tried to arrive at a mutually agreeable figure. But the FDIC didn't bite and appealed the case.

Judge Hogan's decision this month reaffirmed most of his original ruling, but did note that if Bank of New England's assets and liabilities "are now so disaggregated as to preclude Fleet from using them to compete for Citibank's credit card business, it would be difficult to see how Citibank has suffered actual compensable damages."

Judge Hogan added that any notion that his original April 1993 "had been decided in favor of Citibank, the court expressly disavows that implication."

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