WASHINGTON The lawyer representing consumers in a class action against Monogram Credit Card Bank of Georgia criticized a Federal Deposit Insurance Corp. rule published Tuesday as a thinly veiled government maneuver to quash the lawsuit.
Louis L. Plotkin, a partner in the Gertler, Gertler, Vincent & Plotkin law firm in New Orleans, said the FDIC had no need to issue the rule defining what is a state bank and did so solely to terminate his clients suit against Monogram, a General Electric Co. subsidiary. The suit claims that Monogram had no right to export its interest rates and late fees to customers in Louisiana because it was not technically a state bank.
It is clearly an abuse of the FDICs power to promulgate this regulation in an effort to bolster its litigation position in the Heaton v. Monogram matter, Mr. Plotkin said Tuesday. We expect the FDIC or Monogram to raise this regulation in the litigation, and we will vigorously oppose any such efforts.
FDIC officials acknowledged that the regulation is directly related to the Monogram case, but they argued that the litigation raises a major public policy concern that had to be addressed.
The agency is not doing this just because of one piece of litigation, said Douglas Jones, the agencys senior deputy general counsel.
At issue is the Federal Deposit Insurance Acts definition of state bank, requiring that such an institution be engaged in the business of receiving deposits to qualify. The FDIC rule, issued after a legal opinion last year, defines a state bank as an institution with at least one deposit totaling more than $500,000. The FDIC fears that a Louisiana court could undermine its authority by declaring that Monogram is not a state bank, thus inviting similar suits nationwide.
Mr. Jonessaid the FDIC did not see the need for an explicit rule until the Monogram case.
In the past, we had felt there was a practice that had defined the statute, he said. But this case raised the fact that the practice would not be accepted. We felt we needed to develop a single regulation that could be applied nationwide.
Though a federal judge ruled that the FDICs earlier legal opinion was insufficient, the FDIC rule would carry more weight in a court, Mr. Jones said. Our expectation is that a judge would generally give more deference to it, he said. But Im not trying to address what the court might do in the Monogram case.
Mr. Plotkin said he did not expect the FDIC to prevail with this regulation.
We hope to convince the court not to give any credence to this new regulation, he said.
The two sides are expected to duke it out in court again on Dec. 3, when the U.S. Court of Appeals for the Fifth Circuit in New Orleans hears an FDIC appeal asking that the case be kept in federal court. A similar request by Monogram was rejected by the appeals court this year in a ruling that state court was the appropriate forum; that decision was upheld by the U.S. Supreme Court. The FDIC argues that there is a federal issue at stake that must be decided in a federal court, rather than at the state level.
