It's not a word used frequently in banking, but the concept dictates the industry's legal strategy in a host of issues, ranging from insurance to securities to bank fraud.

Just ask Michael F. Crotty, the American Bankers Association's deputy general counsel for litigation. Mr. Crotty, who has filed hundreds of briefs on behalf of the ABA, said the industry asks for trouble if it ignores the lower courts.

"For the law to work, it must be consistent," Mr. Crotty said. "If one court says x means this, then that should be the guide. It isn't law and it isn't serving its purpose if you can ignore it."

Mr. Crotty said it is this fear of a faulty lower-court decision returning to haunt the industry that keeps the ABA so active in courts around the country. In 1994 alone, the ABA filed about 30 friend-of-the- court briefs and is on track to file at least as many this year.

Just one bad lower-court decision makes it substantially harder for the industry to win the case further along in the process, he said.

"You've really got to struggle hard to say why should (the judge) do it differently," Mr. Crotty said.

Once a decision is released, other litigators will rely on it during similar fights throughout the country, he said.

Robert E. Bostrom, general counsel at National Westminster Bancorp, said friend-of-the-court briefs often bring a different viewpoint before the court.

"It is often useful to have the benefit of other parties to give the judge as much information and as many viewpoints as possible," Mr. Bostrom said. "That's good for everyone."

Precedent affects banks in two ways, said Stanley Twardy, a partner at Day, Berry & Howard. First, a ruling by the Supreme Court or by the local federal appeals court directly controls what a bank can do.

If the Supreme Court says banks can sell annuities, then all courts must permit this.

Second, a decision by a state supreme court or by a nonlocal federal appeals court establishes a line of legal reasoning that often dictates how the law will develop.

Without precedent, bankers would always have to worry that a court could change its mind and rule that a particular activity is not allowed. "It establishes a safe harbor," Mr. Twardy said.

Advocating the industry's position in court is as important as fighting for it on Capitol Hill, according to Mr. Crotty. "You can spend all your membership dues to get a great lobbyist and still lose because somebody hired a lawyer and stopped you," he said.

The trade groups, including the ABA, realized this long ago, he said. "There are three branches of government under the U.S. Constitution, all of which can impact the lives and day-to-day business decisions of America," he said.

While the ABA is active, it doesn't intervene in every case. Mr. Crotty said the trade groups never gets involved in legal battles among banks. "If I've got two members fighting, then there is no chance," he said.

That keeps the ABA out of many commercial cases, such as deciding which institution is responsible for paying on a bad check.

Also, the ABA passes on cases that are a slam dunk. "Given our limited resources, why waste the time?" he said.

And it never gets involved in trials at the state court level. These decisions are rarely reported, so they never become precedent. But, he said, the agency does intervene at the state appellate court level.

Finally, he said, the case must hold a broader significance to the industry. If a decision has a limited effect on a single institution, the trade group normally will ignore the proceeding.

Bankers said the efforts are worthwhile. "I think it has been an extremely helpful process," said Joseph H. Kott, general counsel at Midlantic Corp. He added that there are scores of cases where the industry's viewpoint needs to be articulated.

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