A U.S. district court has blocked Florida's insurance commissioner from disciplining a Montana bank for marketing an annuity-like deposit product in the state.
In granting a temporary restraining order sought by Blackfeet National Bank, the court ruled that the Florida commissioner, Tom Gallagher, may not proceed with administrative charges until a civil suit brought against him by the bank is decided on its merits.
The ruling, handed down this month by Judge Jack D. Shanstrom of the U.S. district court in Great Falls, Mont. also ordered the bank to refrain for up to 30 days from selling the socalled Retirement CD in Florida.
The civil suit, which is pending before the court's chief judge, Paul G. Hatfield, is expected to be heard within that time.
Blackfeet National, a $12 million-asset bank in Browning, Mont., has been promoting the Retirement CD in tandem with American Deposit Corp., which developed the product.
The CD, which carries federal deposit insurance but has the taxdeferred features of an annuity, has been blessed by federal banking regulators. But it has been strongly criticized in Congress and by some insurance regulators as an inappropriate expansion of bank powers.
Mr. Gallagher, whose home state has some of the nation's toughest prohibitions against bank insurance sales, has been an especially outspoken critic.
Last month, he filed administrative charges against Blackfeet National and American Deposit. alleging that they were violating Florida insurance law by offering the Retirement CD.
Mr. Gallagher ordered the two companies to demonstrate why they should be allowed to sell the product in Florida, or else face disciplinary action.
In handing down his ruling, Judge Shanstrom found that the issues raised by the Florida administrative proceedings were not pressing matters. Until the bank's civil suit can be heard. he wrote in a seven-page order, "I find that. above all else. the status quo should be maintained."
David W. Roderer, a banking lawyer who has followed the case closely, said the ruling bodes well for Blackfeet National and American Deposit.
In agreeing to hear the,case. the federal court has "derailed the insurance commissioner's efforts to put the matter in front of a state forum that has been friendly to the commissioner"' said Mr. Roderer, a law partner at Winston & Strawn in Washington.
But Florida representatives said their side had won as well. "We got what we wanted out of this," said Dennis Silverman, senior attorney in the insurance commissioner's office. The temporary restraining order "means they cannot sell to Florida consumers."
Mr. Silverman also described the allegations as "boilerplate claims" and said the insurance department is looking forward to battling the companies in Montana.
In its suit against Mr. Gallagher, Blackfeet National argued that it has authority under the National Bank Act to sell the Retirement CDs and said that power could not be preempted by any state law to the contrary.
Mr. Gallagher's efforts to suppress the bank's CD sales in Florida constitute "harassment," the bank claimed. Blackfeet National asked the court to enjoin Mr. Gallagher from blocking the sales.
The bank also sought monetary damages. the amount of which it did not disclose.
