Citibank EBT Services had its share of ups and downs this week: There was more bad news from New York courts, but some good news from north of the border.

On Monday, the New York State Supreme Court issued a ruling that halted New York's plans for an electronic benefits transfer pilot that Citibank was implementing.

Citibank was selected in February 1996 as EBT provider for the Northeast Coalition, a consortium of seven states.

But two rivals for the EBT business challenged the process by which Citibank was selected, and four months ago the state Supreme Court overturned the contract.

The decision handed down Monday said New York must stop working with Citibank until an appeals court rules in November.

Citibank, the U.S. leader in the burgeoning EBT business, has contracts in 27 states. But if the money-center bank loses on appeal, it may lose its lucrative New York contract, and the state may be forced to rebid the project.

Citibank's seven-year contract to deliver public assistance through plastic cards, point-of-sale terminals, and automated teller machines is estimated to be worth $1 billion.

The challengers-the Check Cashers Association of New York and Transactive Corp.-were pleased with their latest victory.

"This order to stop work is extremely significant," said Marc Palazzo, a spokesman for Transactive. "This reaffirms the court's earlier decision determining the procurement was invalid."

Transactive, of Austin, Tex., runs the largest EBT program in the country. The program is based in Texas.

Marc MacKenzie, executive director of Citicorp's global cash management services, said the court decision would not affect EBT activities in other states. Mr. Palazzo disagreed, contending the ruling applies to all states in the consortium.

The issue is significant because New York-with by far the most benefits recipients of any state in the coalition-provides the volume needed to significantly lower pricing for the group.

Robert O'Connor, Connecticut's EBT project manager, said his state's contract with Citibank "is valid" despite the court ruling. Connecticut's program went live in February. By October rollout should be completed.

If New York must leave the coalition, "we would lose certain tier pricing, but we'd still be well within our budget," Mr. O'Connor said.

Massachusetts began its rollout of the Citibank EBT program in April. Vermont, New Hampshire, Rhode Island, and Maine are in various planning stages.

While legal wrangling may shave Citibank's stateside lead in EBT, a new contract abroad is in the offing.

Citibank plans to announce this week a contract in a major Canadian city that will encompass benefits delivery and biometric identification.

Citibank plans to open a data center in Canada and will actively pursue EBT business in the provinces, a bank source said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.