IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MINNESOTA

________________________________________

)

STATE OF MINNESOTA, by its )

Attorney General, Mike Hatch, )

)

Plaintiff, )

)

v. ) No. 01-CV-48 ADM/AJB

)

FLEET MORTGAGE CORPORATION, )

)

Defendant. )

________________________________________ )

MEMORANDUM OF LAW OF AMICUS CURIAE

THE FEDERAL TRADE COMMISSION

INTEREST OF AMICUS CURIAE

The Federal Trade Commission (“FTC” or “Commission”) is the federal agency with principal

responsibility for the protection of consumers from unfair and deceptive trade practices. Under the Federal

Trade Commission Act, 15 U.S.C. §§ 41 et seq., the FTC is broadly empowered to prevent such unfair

and deceptive acts in or affecting commerce, by “persons, partnerships, or corporations,” except for certain

expressly excluded entities, including “banks.” 15 U.S.C. § 45(a)(2). The FTC also has principal

responsibility for protecting the consuming public from telemarketing fraud, by promulgating regulations and

taking enforcement actions under the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15

U.S.C. §§ 6101 et seq. — although, in light of the widespread nature of telemarketing abuse and the need

for additional enforcement resources, Congress also gave overlapping enforcement authority to the States.

15 U.S.C. § 6103.

In the present case, this Court is called upon to resolve complex and important issues regarding

the authority of various government agencies to take regulatory and enforcement action with respect to

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telemarketing activities undertaken by a corporation that does not itself constitute a “bank,” but claims the

right to be treated as a “bank,” for all purposes, by virtue of its status as a subsidiary of a bank. The

question presented entails the analysis of several interrelated federal statutes, including the FTC Act, the

Telemarketing Act, and the recently-enacted Gramm-Leach-Bliley Act, in which Congress sought to bring

clarity to previously disputed jurisdictional issues regarding bank affiliates. Because the present motion to

dismiss directly addresses the FTC’s jurisdiction — and prompted in large part by its abiding concern for

the vigorous enforcement of consumer protection laws — the FTC submits this brief as amicus curiae.

ARGUMENT

I. THE PLAIN LANGUAGE OF THE PERTINENT STATUTES,

AS RECENTLY CLARIFIED BY CONGRESS, SUPPORTS

THE STATE’S AUTHORITY TO BRING THIS ACTION.

1. As all parties before the Court have acknowledged, the established “starting point” for statutory

analysis is the “plain language” of the operative provisions. See, e.g., United States v. McAllister, 225

F.3d 982, 986 (8th Cir.2000); Board of Governors of the Federal Reserve System v. Dimension

Financial Corp., 474 U.S. 361, 373-74 (1986). In the present case, even plain language analysis requires

a number of steps, in light of the need to read the pertinent language contextually. In the end, however, one

finds that Congress has indeed spoken plainly, and that its most recent pronouncement, in particular, has

provided an unambiguous answer.

The State has brought this action against defendant Fleet Mortgage Corporation (“FMC”) under

§ 6103 of the Telemarketing Act, which provides for actions by the States whenever a person has engaged

in a pattern or practice of telemarketing that “violates any rule of the Commission” under the Act. 15

U.S.C. § 6103. The Commission has promulgated regulations to implement the Act, in its Telemarketing

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Sales Rule (“TSR”), 16 C.F.R. Part 310. The application of both the TSR and the Telemarketing Act itself

is limited, however, by 15 U.S.C. § 6105(a), which provides that “no activity which is outside the

jurisdiction of [the FTC] Act shall be affected by this chapter.” In other words, the TSR applies — and

the State may maintain this action — only if the activity in question is within the normal scope of the FTC’s

authority under the FTC Act.

The scope of the Commission’s jurisdiction under the FTC Act is defined by 15 U.S.C. § 45

(a)(2), which provides a number of exceptions to the Commission’s broad authority to address unfair or

deceptive acts in or affecting commerce. The exception at issue here is, as the parties have all recognized,

entity-based — i.e., “banks,” like “savings and loan institutions,” are excluded from FTC jurisdiction. The

FTC Act further defines “banks” by reference to a listing of certain distinct types of legal entities. See 15

U.S.C. §§ 44 (final paragraph), 57a(f)(2). That list includes:

national banks

banks operating under the code of law for the District of Columbia

Federal branches of foreign banks

member banks of the Federal Reserve System

branches and agencies of foreign banks

commercial lending companies owned or controlled by foreign banks

banks insured by the Federal Deposit Insurance Corporation

insured State branches of foreign banks

15 U.S.C. § 57a(f)(2). “National banks,” while not expressly defined, are extensively addressed in

Chapter 2 of Title 12 of the United States Code, which provides for the formation and chartering of entities

organized to do business as banks under the aegis of the Office of the Comptroller of the Currency. See

12 U.S.C. §§ 21-27.

For present purposes, two aspects of these FTC Act provisions are particularly salient. First, while

§ 57a(f)(2) provides a comprehensive list of entities considered to be “banks,” that list does not include

1 This contrasts with other exceptions in the same FTC Act provision that are conditioned on the

existence of another agency’s authority under other statutory schemes — e.g., that for “persons,

partnerships, or corporations insofar as they are subject to the Packers and Stockyards Act * * * .”

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affiliates of banks, whether parents, subsidiaries, or sister corporations. Second, none of these provisions

indicates that the FTC lacks jurisdiction over a particular entity simply because OCC or one of the other

federal banking agencies has jurisdiction over it. That is, the exception is not drafted to exclude, for

example, “entities subject to supervision by a banking agency,” “entities subject to the banking laws,” or

the like.1 The courts have frequently recognized the propriety of overlapping jurisdiction, and have

repeatedly rejected arguments that the FTC may not proceed against unfair or deceptive trade practices

simply because another federal agency has concurrent authority over the same activities. See, e.g.,

Thompson Medical Co. v. FTC, 791 F.2d 189, 182 (D.C. Cir. 1986); Amrep Corp. v. FTC, 768 F.2d

1171, 1176 (10th Cir. 1985); FTC v. Texaco, Inc., 555 F.2d 862, 881 (D.C. Cir. 1977).

A straightforward application of the language of the FTC Act indicates that — even apart from the

clarifying language of the Gramm-Leach-Bliley Act discussed below — FMC falls outside the statutory

“bank” exclusion. FMC does not claim to be a national bank, or any of the other entities listed in 15

U.S.C. § 57a(f)(2). Rather, it is simply owned by a national bank, and is therefore subject to regulation

by OCC. Neither of these circumstances satisfies the language of the FTC Act, and FMC therefore falls

outside the language of the exception.

2. In its brief as amicus, OCC refers to Section 8 of the Federal Deposit Insurance Act, 12

U.S.C. § 1818, as a source of enforcement authority over banks and bank subsidiaries. OCC Br. 4-5.

That section indeed provides the federal banking agencies, including OCC, with broad authority to take

2 This is possible because the FTC Act’s substantive proscription of “unfair or deceptive acts or

practices” is set forth in a separate subsection, 15 U.S.C. § 45(a)(1), which is not subject to the jurisdictional

limitations discussed above, such as that for “banks.” Those limitations are contained in

§ 45(a)(2), which relates to the regulatory and enforcement authority of the Commission.

3 Indeed, several provisions of these and other sections of the banking law refer expressly to “a bank

or a subsidiary of a bank,” e.g., 12 U.S.C. §§ 1818(b)(3), 1818(b)(9).

4 See, e.g., Department of the Treasury News Release, “Subsidiaries v. Affiliates,” 1998 WL

240802 (May 12, 1998): “Under a fundamental, longstanding and uniform rule of corporate law, a parent

corporation is not liable for the obligations of a separately incorporated subsidiary in excess of its

investment in that subsidiary; in other words, the parent is treated like any other shareholder in a

corporation.”

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enforcement actions against covered financial institutions. Of particular relevance here is that section’s

cease-and-desist authority, which provides, in relevant part:

If, in the opinion of the appropriate Federal banking agency, any insured depository

institution * * * is engaging or has engaged * * * in an unsafe or unsound practice * * *

or is violating or has violated * * * a law, rule, or regulation, * * * the agency may issue

* * * a notice of charges in respect thereof.

12 U.S.C. § 1818(b)(1). “Depository institution” is defined in Section 3 of the same Act as including a

“bank,” which in turn includes a “national bank.” 12 U.S.C. §§ 1813(a)(1), 1818(c)(1). Under § 1818,

OCC has broad authority to take action against banks violating any “law,” and it has taken the position that

it may, among other things, enforce the FTC Act’s proscription of “unfair or deceptive acts or practices,”

15 U.S.C. § 45(a)(1).2 OCC also asserts that its supervisory authority over national banks extends to their

subsidiaries. OCC Br 1. The FTC has no occasion to question OCC’s interpretation of the breadth of

its own authority under a statute under which it operates. Nevertheless, none of the provisions cited above

expressly defines “bank” as automatically including separately incorporated subsidiaries.3 Subsidiaries are

legally separate entities from their parents.4 In any event, regardless of how these sections are viewed for

purposes of ascertaining the extent of OCC’s authority, such a view could not control the correct inter-

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pretation of the term “bank” under the FTC Act, an entirely separate statute with different focus and

purpose.

Even more important, contrary to OCC’s assertion, we know of no language in § 1818, or

elsewhere, specifying that the authority it confers on OCC is “exclusive.” The courts have consistently

recognized that the conferral of authority on one federal agency does not, in the absence of a clear

congressional directive, oust other agencies of parallel authority under other statutory schemes. See

Radzanower v. Touche Ross & Co., 426 U.S. 148, 154 (1976); Sterling Drug, Inc. v. FTC, 1973-2

Trade Cas. (CCH) ¶ 95,779, at 95,781 (S.D.N.Y. 1973) (EPA labeling jurisdiction over disinfectant did

not out FTC of jurisdiction over disease prevention claim made in advertising).

3. In 1999, Congress acted to resolve any lingering uncertainty in this area, addressing the very

question before this Court expressly and precisely. As part of the Gramm-Leach-Bliley Act, Pub. L. No.

106-102, 113 Stat. 1338 (1999), Congress enacted the following provision:

(a) CLARIFICATION OF FEDERAL TRADE COMMISSION JURISDICTION. Any

person that directly or indirectly controls, is controlled directly or indirectly by, or is

directly or indirectly under common control with, any bank or savings association (as such

terms are defined in section 3 of the Federal Deposit Insurance Act) and is not itself a bank

or savings association shall not be deemed to be a bank or savings association for

purposes of any provisions applied by the Federal Trade Commission under the Federal

Trade Commission Act.

Pub. L. No. 106-102, § 133(a), 113 Stat. 1383. Whatever may have been debatable about the preexisting

statutory language, it is difficult to imagine language that could have provided clearer guidance than

this for the present case. The first clause carefully makes clear that the provision ensuring FTC authority

applies to all three types of bank affiliates: parents, subsidiaries, and sister corporations. FMC readily

acknowledges that it is “controlled by” a bank. The second clause makes clear that the provision applies

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to any such affiliate that “is not itself a bank.” Congress did not, for example, phrase the exclusion in terms

of whether an affiliate that “is owned by a bank,” or “engages in activities permitted for a bank” or “is

regulated as if it were a bank.” Instead, it provided expressly that an affiliate is covered by this provision

unless it is “itself a bank.” FMC does not and cannot argue that it is “itself a bank.” Accordingly, Section

133(a) unambiguously provides that a subsidiary such as FMC “shall not be deemed to be a bank” for

purposes of applying the FTC Act.

Both FMC and OCC insist that, even conducting a “plain language” analysis, one must look at an

enactment as a whole. FMC Reply Br. 3-6; OCC Br. 4-5. We entirely agree with this fundamental

principle of statutory construction. See, e.g., Harmon Industries, Inc. v. Browner, 191 F.3d 894, 899

(8th Cir. 1999). We see no conflict, however, between the plain meaning of Section 133(a) and the

provision of Section 133(b) on which FMC relies. That section provides:

SAVINGS PROVISION. No provision of this section shall be construed as restricting

the authority of any Federal banking agency (as defined in section 3 of the Federal Deposit

Insurance Act) under any Federal banking law, including section 8 of the Federal Deposit

Insurance Act.

As discussed above, OCC has interpreted 12 U.S.C. § 1818 as affording it enforcement authority over

subsidiaries of banks, and the FTC does not dispute that conclusion. But recognizing concurrent FTC

authority over subsidiaries and other affiliates, as Section 133(a) dictates, does not in any way diminish the

scope of the OCC’s and other banking agencies’ authority. OCC’s arguments regarding the ostensible

loss of “exclusivity of authority” (OCC Br. 5) have two serious flaws. First, OCC points to no language

in 12 U.S.C. § 1818 (or elsewhere) providing for such exclusivity, and we are aware of none. Second,

even if there were a basis for a claim of exclusive authority on OCC’s part, the plain language of Section

133(b) does not guarantee such exclusivity or preclude concurrent FTC authority; it is a simple savings

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clause that ensures that OCC’s own authority affirmatively to act will not be cut back. This is entirely

consistent with a literal application of Section 133(a), and the two sections pose no conflict that can render

their clear terms ambiguous.

Furthermore, a fuller consideration of the context of the GLB Act should take into account its other

provisions, such as Section 505, 15 U.S.C. § 6805, which allocates enforcement responsibility for the

Act’s consumer privacy protections among a number of federal agencies. OCC, for example, is given

authority to enforce the privacy provisions as to “national banks, Federal branches and Federal agencies

of foreign banks, and any subsidiary of such entities * * * .” 15 U.S.C. § 6805(a)(1)(A) (emphasis

added). This section shows that, within the GLB Act itself, Congress paid close attention to the existence

of subsidiary corporations, took care in allocating enforcement authority with respect to them, and crafted

precise language to do so, which should be applied as Congress wrote it. The clear terms of Section

133(a) of that same enactment — which expressly guarantee the FTC’s jurisdiction over a corporation (like

FMC) that is controlled by a bank, but “is not itself a bank” — plainly answer the question at hand, and

mandate that FMC’s motion to dismiss the State’s claims under the Telemarketing Act be denied.

II. THE LEGISLATIVE HISTORY AND HISTORICAL BACKGROUND OF THE

GLB ACT DO NOT WARRANT DEPARTURE FROM ITS PLAIN LANGUAGE.

1. FMC, supported by the OCC as amicus, argues that the legislative history of the GLB Act

shows that Congress sought merely to preserve the FTC’s existing authority in the wake of the GLB Act’s

expansion of activities by bank affiliates, and that literal application of Section 133(a) would flout that intent

by effecting a dramatic expansion of FTC authority. FMC Reply Br. 4-6; OCC Br. 5-7. The essential

premise of this argument, of course, is that it was previously clearly settled that OCC had exclusive

jurisdiction over subsidiaries of banks, and that the term “bank,” as used in the FTC Act, necessarily

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included subsidiaries. Contrary to that supposition, however, the FTC — and Congress — had good

reason to view the FTC Act’s “bank” exclusion applying only to banks themselves, and to believe that the

FTC indeed had authority, concurrent with OCC, over bank affiliates including operating subsidiaries.

Considerations supporting this view included the treatment of SEC broker-dealer requirements under

analogous statutory provisions, a court ruling involving similar issues with respect to thrift subsidiaries, and

even communications from OCC itself. These factors continue to buttress the FTC’s plain language reading

of its authority over bank subsidiaries.

Perhaps the clearest pre-1999 indication of the proper application of non-banking laws to bank

operating subsidiaries is found in the treatment of such entities under the securities laws. In the Securities

Exchange Act of 1934, Congress gave the Securities and Exchange Commission (“SEC”) broad authority

over securities “brokers” and “dealers,” but in each case specified that such term “does not include a bank.”

15 U.S.C. §§ 78c(a)(4), 78c(a)(5). That Act’s definition of “bank” strongly resembled the FTC Act’s

definition, including “a banking institution organized under the laws of the United States,” comparable to

the FTC Act’s “national bank.” Although a 1985 SEC attempt to regulate broker-dealer activities by

banks themselves was rebuffed as contrary to the plain language of the 1934 Act (see American Bankers

Ass’n v. SEC, 804 F.2d 739, 742-44 (D. C. Cir. 1986)), the SEC and OCC have long been in agreement

that this exclusion of “a bank” did not extend to operating subsidiaries of banks. Accordingly, bank

operating subsidiaries engaged in securities brokerage or dealing have always been subject to the 1934

Act’s registration requirements and have been regulated by the SEC. For example, the SEC has stated,

in a letter to the Chairman of a congressional committee, that “subsidiaries and affiliates [of banks] are not

covered by the bank exclusion.” SEC No-Action Letter, 1993 WL 199082, *6 (May 6, 1993). The

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following year, the Comptroller of the Currency noted, in testimony to a congressional committee, that

where brokerage activities are conducted “in separate subsidiaries or affiliates of the bank,” such “separate

entities are regulated by the SEC and the NASD in the same manner as any other non-bank broker.” 1994

WL 589457 (F.R.B.), *8 (Mar. 3, 1994); see also id. at *12 (referring to coordination with SEC staff in

light of overlapping authority).

Thus, OCC has acknowledged that the exclusion of “banks” in the 1934 Act referred only to the

banking institutions themselves, and not to operating subsidiaries, with the result of overlapping jurisdiction.

The SEC and OCC pronouncements do not indicate that this result is driven by any special characteristic

of, or need for accommodation in, the securities context. Rather, it is a straightforward exercise in linedrawing

that is guided by the language of the statute and the understanding that subsidiary corporations are

separate legal entities from the “banks” that own them. There is no apparent textual difference between

the FTC Act and the 1934 Securities Act that would justify a different reading of the FTC Act exemption.

Moreover, OCC’s acknowledgment of concurrent SEC jurisdiction over bank operating subsidiaries belies

any notion that OCC’s enforcement authority with respect to such subsidiaries is “exclusive.” Cf. OCC

Br. 4-5.

Furthermore, the only litigated decision to address the FTC’s jurisdiction over a subsidiary of a

depository institution (there, a savings and loan institution) held that the exclusion from FTC authority

applied only to the depository institution itself, and that the FTC had authority over the subsidiary. In FTC

v. Green Tree Acceptance, Inc., Civ. No. 4-86-469-K (N.D. Tex. Sept. 30, 1987), the FTC sued a

wholly-owned subsidiary of a federal savings and loan institution, for violations of the Equal Credit

Opportunity Act, 15 U.S.C. §§ 1691 et seq. (“ECOA”), and the Fair Credit Reporting Act, 15 U.S.C.

5 FMC suggests that the Green Tree case is distinguishable from the present matter because there

the court found that the FHLBB “never had jurisdiction” over the subsidiary. FMC Reply Br. 11-12.

Obviously, if the court had viewed the “institution” as including its wholly owned subsidiary, it would have

found that the FHLBB did have jurisdiction over the subsidiary. That is, the court addressed a precisely

parallel issue to the present case: whether a jurisdictional carve-out from FTC authority for a specified

(continued...)

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§§ 1681 et seq. Those consumer credit laws have jurisdictional provisions that carve banks and specified

thrift institutions out of the FTC’s enforcement authority. The ECOA, for example, assigned to the Federal

Home Loan Bank Board authority to enforce the ECOA under specified provisions of statutes governing

thrift institutions, “in the case of any institution subject to any of those provisions.” 15 U.S.C.

§ 1691c(a)(2) (1988); see also 15 U.S.C. § 1681s(b)(2) (1988) (parallel provisions of the FCRA). The

Green Tree court recognized that the term “institution” referred not to every entity subject to FHLBB

regulatory authority, but to a specific type of legal entity provided for by the pertinent statutes, i.e., an

institution that accepted deposits. Slip op. 6. The court further recognized that a wholly-owned subsidiary

of such an institution was not itself such an “institution,” and therefore failed to come within the carve-out

for FHLBB jurisdiction. Accordingly, since those statutes provided for FTC jurisdiction except where

jurisdiction was “specifically committed” to another agency (15 U.S.C. § 1691c(c)), the court held that

there was FTC jurisdiction and denied the motion to dismiss. Id.

While the Green Tree case involved the subsidiary of a savings and loan institution rather than a

national bank, the essential point of the Green Tree court’s analysis is that language carving out from FTC

jurisdiction a specified type of financial institution is most appropriately read as referring to such institution

itself, and not to distinct legal entities such as subsidiaries. As the Green Tree court itself stated, this logic

applies equally to all “depositing institutions such as savings and loans, building and loans and banks”

referred to in the FTC Act. Id.5

5(...continued)

entity automatically includes its wholly owned, but separately incorporated, subsidiary. Accordingly,

FMC’s criticisms of the State’s reliance on Green Tree are misplaced. While it is indeed “undisputed” that

OCC has broad jurisdiction over bank operating subsidiaries by virtue of Section 8 and various provisions

of the National Bank Act, 12 U.S.C. §§ 21 et seq., that proposition does not at all undermine the Green

Tree court’s approach to the exception language found in the FTC Act and related statutes.

The FHLBB’s successor, the Office of Thrift Supervision (“OTS”), has recognized precisely this

distinction, in later legal opinions asserting authority to take enforcement action as to ECOA violations by

subsidiaries of thrifts. In concluding that it could take such actions, OTS did not attempt to shoehorn such

subsidiaries into the ECOA definition of “savings associations”; rather it relied on the broad authority

granted to it under Section 8 of the Federal Deposit Insurance Act. See OTS Memorandum, 1994 OTS

LEXIS 33 (June 14, 1994).

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In addition to the OCC statements discussed above, acknowledging concurrent SEC jurisdiction

over bank subsidiaries that act as brokers and dealers, on at least one occasion, OCC staff expressly

recognized the existence of similar concurrent FTC jurisdiction over bank subsidiaries, when such

subsidiaries engage in conduct that may violate the FTC Act. In a 1982 letter to the FTC Division of Credit

Practices, OCC staff stated, inter alia:

You note that in situations where a company is subject to the concurrent jurisdiction of the

FTC and the Comptroller’s Office, the FTC practice has been to suspend its investigation

of the organization pending an investigation by this Office. Such arrangements have been

agreed to specifically in the case of national bank operating subsidiaries.

OCC Trust Interpretive Letter, 1982 WL 170954 (O.C.C.) (July 22, 1982). While OCC presumably no

longer adheres to the views stated in this letter, it shows, at the very least, that the FTC has long asserted

authority over nonbank subsidiaries of banks, and it belies the notion that the law was plainly settled against

such authority.

Accordingly, there was substantial reason to believe, well prior to enactment of the GLB Act, that

the FTC had concurrent jurisdiction over bank subsidiaries. Admittedly, the question was not definitively

resolved, and, as FMC emphasizes (FMC Reply Br. 10-13), there is a dearth of direct authority on the

6 For the same reasons, we have no reason to question OCC’s authority to enforce the FTC Act’s

prohibition of unfair and deceptive trade practices with respect to banks, though to our knowledge it had

not exercised its authority to do so prior to last year.

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issue. This is unsurprising, however, in light of the gradual expansion of the activities of banks and bank

affiliates. The State’s claims in the present case involve allegations of misconduct in the course of

telemarketing of a sort that is far removed from traditional banking services — i.e., membership programs

involving items such as discounts for car repair, prescription drugs, and legal services. See Complaint, ¶ 9.

Although we have no reason to question FMC’s authority to engage in such conduct, this is not the sort

of activity that banks commonly engaged in until recent years. That the FTC — and States acting under

the authority of the Telemarketing Act — have not brought such cases previously is neither remarkable as

a matter of fact, nor relevant as a matter of law. See, e.g., Cooley v. FERC, 843 F.2d 1464, 1470 (D.C.

Cir.), cert. denied, 488 U.S. 933 (1988) (“even a prolonged failure to assert an agency power does not

destroy it”).6

In its submission to this Court, OCC focuses on the FTC Act’s division of rulemaking authority,

for rules that “define with specificity acts or practices which are unfair or deceptive,” as between the FTC

and the Federal Reserve Board (“FRB”). OCC Br. 2-3. That rulemaking authority is not directly relevant

to the present case, because the Commission’s Telemarketing Sales Rule, 16 C.F.R. Part 310, is

promulgated under a separate provision of the Telemarketing Act itself. See 15 U.S.C. § 6102.

Nevertheless, the FRB’s extension of its own rule to “subsidiaries” of banks is indeed anomalous, because

its rulemaking authority is limited to “banks” (and other types of institutions not relevant here) as defined

in the FTC Act. 15 U.S.C. § 57a(f)(1). In promulgating that rule, the FRB did not discuss its reasons for

interpreting the FTC Act as it did with respect to bank subsidiaries, but simply asserted such authority. See

7 Any implication that the FTC has acquiesced in the interpretation of the FTC Act now advanced

by FMC by failing to object to the FRB rule is ill-founded. In fact, regardless of the propriety of the FRB

rule as a formal matter, the FTC had little practical reason for concern. As explained above, the banking

agencies (including the FRB and OCC) unquestionably have enforcement authority as to unfair and

deceptive practices by bank affiliates, regardless of whether they have the authority to promulgate rules

under 15 U.S.C. § 57a(f)(1), comparable to FTC rules elaborating upon the statutory standards of

unfairness and deception. Accordingly, it is most unlikely that any agency effort to apply the rules in

question would have led to a result at odds with the underlying standards of § 45(a)(1), proscribing unfair

and deceptive trade practices generally.

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50 Fed. Reg. 16695 (1985). While this regulation may well reflect an understanding of the FTC Act by

the FRB that is at odds with the FTC’s own understanding, it hardly provided a definitive resolution to the

issue at hand.7

In the years just prior to passage of the GLB Act, the “legal landscape” surrounding the status of

bank subsidiaries became “even more scrambled than before.” See J. Smoot, Bank Operating Subsidiaries:

Free at Last or More of the Same?, 46 DePaul L. Rev. 651, 660 (1997). As the State has discussed

(Minn. Br. 8-11), OCC’s 1996 rules regarding operating subsidiaries emphasized the differences between

subsidiaries and banks themselves, and permitted the former to engage in a broader range of activities not

permitted for a “bank.” The point of such observations is not to cast any doubt on the authority of OCC

over operating subsidiaries, nor to question the propriety of the 1996 regulations. Cf. FMC Reply Br. 8-9.

The developments of that time do, however, plainly undermine any notion that “wholly-owned operating

subsidiaries are indistinguishable from their parent national bank.” FMC Br. 4. Moreover, the logic of

permitting subsidiaries to engage in securities activities not allowed to banks themselves required a reading

of the word “association” — as used in the Glass-Steagall Act, 12 U.S.C. § 24 (Seventh) (1994), to refer

to banks — that excluded subsidiaries. As a commentator defending the 1996 OCC regulations put it,

“[t]he plain meaning of the words of the relevant portions of Title 12 would seem to compel the conclusion

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that operating subsidiaries should be treated like affiliates, which they in fact are, and not like banks, which

they patently are not.” Smoot, supra, at 709.

2. Although the foregoing discussion shows that a court would have been on firm footing, even

prior to the GLB amendments, in concluding that the FTC had authority with respect to operating

subsidiaries of banks, this Court need not determine how it would have decided the case in 1998. The real

relevance of the foregoing is that, when Congress undertook its effort at financial restructuring in the GLB

Act, there were indeed substantial indications that the FTC had jurisdiction over bank operating

subsidiaries, concurrent with OCC, although the matter was subject to some uncertainty. Thus, at the

congressional hearings preceding passage of the Act, FTC Bureau of Competition Director William Baer

expressed concern that “the jurisdiction of the FTC would remain somewhat cloudy if banks, through

subsidiaries and affiliates, engage in the sort of activity that we address every day in other sectors of the

economy.” Financial Services Competitiveness Act of 1997, Hearings Before the Subcomm. on Finance

and Hazardous Materials, House Comm. on Commerce, 105th Cong., 1st Sess. (July 1997), FMC Exh.

11, at 122. Mr. Baer specifically made reference to telemarketing as an area of substantial FTC

experience. Id. He concluded by urging the Committee to consider “clarifying our jurisdiction.” Id. at 123.

In response, Congress helpfully provided, in Section 133(a) of the GLB Act, “Clarification of

Federal Trade Commission Jurisdiction.” As discussed above, the terms of that section are unmistakable,

and create no tension with other portions of the statute. FMC and OCC urge that the plain language should

be restricted, presumably to the activities of “financial subsidiaries” authorized by the GLB Act. See 12

U.S.C. § 24a. But if Congress had intended to effect such a limitation, within the very statute that created

and structured the category of financial subsidiary, it could easily have done so. Moreover, the Conference

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Report language that FMC relies on, which speaks generally of making clear that certain “kinds of

businesses do not fall within the bank or savings association exemption because they are owned by such

an entity,” is hardly such a clear expression of contrary congressional intent as to overcome unambiguous

statutory language. See H.R. Conf. Rep. No. 106-434, at 162 (1999), FMC Exh. 10.

Similarly, OCC’s suggestions that a plain reading of Section 133(a) would contradict the GLB

Act’s “major thrust” to “provide a single regulatory agency for different categories of financial services,”

OCC Br 5, and that the section must apply only to financial subsidiaries, OCC Br. 7, do not provide any

basis for rejecting the plain language of the section. OCC’s approach would still not eliminate overlapping

jurisdiction, because there is no question about the FTC’s jurisdiction, concurrent with various other

agencies, over financial subsidiaries.

The failures of these objections to the plain language of Section 133(a) make this case the very

archetype of the sort in which a court should heed the warnings of the Supreme Court in Dimension

Financial, supra:

The “plain purpose” of legislation * * * is determined in the first instance with reference to

the plain language of the statute itself. Application of “broad purposes” of legislation at the

expense of specific provisions ignores the complexity of the problems Congress is called

upon to address and the dynamics of legislative action. Congress may be unanimous in its

intent to stamp out some vague social or economic evil; however, because its Members

may differ sharply on the means for effectuating that intent, the final language of the

legislation may reflect hard-fought compromises.

474 U.S. at 373-74 (citation omitted). In enacting Section 133 of the GLB Act, Members of Congress

may or may not have had complete unity of intent, and may have had differing understandings of the state

of the law they were “clarifying.” In all of this, the one thing that is most clear is the statutory language that

was ultimately enacted. This Court should hew closely to that language, which plainly favors the authority

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of the FTC — and therefore of the State, in the present case — to maintain claims under the Telemarketing

Act.

III. APPLICATION OF THE GLB ACT’S PLAIN TERMS LEADS TO A

SENSIBLE RESULT, IN KEEPING WITH CONGRESSIONAL POLICY.

Apart from its reliance on the GLB Act’s limited legislative history, FMC criticizes the result that

literal application of Section 133(a) would produce as “novel and unworkable.” FMC Reply Br. 13-14.

FMC has an extraordinarily high standard to meet to prevail on such a theory, for a court is warranted in

ignoring the plain language of a congressional enactment only to avoid an “absurd or glaringly unjust” result.

See, e.g., Inter-Modal Rail Employees Ass’n v. Atchison, Topeka & Santa Fe Ry., 520 U.S. 510, 516

(1997) (quotation omitted); Cullum v. Mutual of Omaha Ins. Co., 840 F.2d 619, 621-22 (8th Cir.

1988). The issue at hand does not remotely meet that criterion. To the contrary, applying Section 133(a)

as written produces an eminently sensible result, consonant with the congressional policies of the banking

statutes as well as of the FTC Act.

FMC’s principal practical objection to coverage under the Telemarketing Act is that any concurrent

jurisdiction of the FTC and OCC would be unduly “disruptive” to its business. FMC Reply Br. 14. There

is ample precedent, however, for such overlapping authority. In light of the divergent focuses of various

federal statutes, the courts have long recognized the propriety of “overlapping agency jurisdiction under

different statutory mandates.” FTC v. Texaco, Inc., supra; Thompson Medical Co. v. FTC, supra.

Indeed, FMC itself seemingly recognizes the propriety of overlaps, because its arguments are directed

solely to certain subsidiaries of national banks; even if FMC’s arguments were accepted, there would still

be concurrent jurisdiction, by the FTC and OCC or another agency, as to other affiliates — e.g.,

subsidiaries other than operating subsidiaries, as well as any parent or sister corporation. Within the Tele-

8 There are, moreover, additional reasons why the FTC’s HSR ruling has nothing to do with the

issues presented here. The HSR provisions — which are not even part of the FTC Act — differ

substantially from Section 5(a)(2) of the FTC Act in that they do not exclude “banks” and other entities as

such, but base their exclusions expressly on the requirement for merger approval under other statutes, thus

evincing a clear congressional policy of avoiding overlapping reporting. See 15 U.S.C. §§ 18a(c)(7),

18a(c)(8).

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marketing Act itself, moreover, Congress recognized the ability of government agencies to coordinate

enforcement efforts under overlapping authority, by its decision to permit both state and federal

enforcement.

The degree to which such overlaps engender burdens on affected parties depends upon the

particular context, and the manner in which the agencies deal with the overlap. For example, the FTC has

recognized that premerger notification under both the Hart-Scott-Rodino Act (“HSR”), 15 U.S.C. § 18a,

and special statutes requiring banking agency approval of bank or holding company mergers would be

duplicative and unnecessary, since the parallel premerger schemes serve much the same purpose. See 65

Fed. Reg. 17880 (2000). Accordingly, the Commission issued guidance to minimize any overlap by

treating as exempt from the HSR reporting requirement an acquisition of a bank’s operating subsidiaries

as part of a bank acquisition that requires banking agency approval. Id. at 17883, Example 8. (Such

treatment does not apply, however, to a bank’s simple acquisition of a traditional operating subsidiary,

which does not require banking agency approval, and therefore is subject to HSR reporting requirements.

Id. at 17882, Example 5.) This straightforward administrative accommodation — by an agency that has

broad interpretive authority under that statute, 15 U.S.C. § 18a(d)(2) — comports with its own context,

but does not dictate the answer to the question at hand.8

In the present context, the two groups of federal statutes involved — the banking statutes on the

one hand, and the FTC Act and related enactments such as the Telemarketing Act on the other — serve

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complementary yet distinct public policies. As reflected in the broad enforcement provision cited by OCC,

an important focus in regulation by the banking agencies is ensuring the safety and soundness of banking

institutions, which is of vital concern to depositors and to the banking system as a whole. See, e.g., 12

U.S.C. § 1818(b)(1). The Telemarketing Act, like the consumer protection provisions of the FTC Act

itself, is targeted more specifically on protecting consumers from “deception and abuse” by businesses using

improper means to sell goods or services. See 15 U.S.C. § 6101. These legislative schemes both

ultimately serve the economic interests of the consuming public, and they certainly impose no conflicting

standards on affected businesses. Yet the existence of overlapping authority is reasonable and beneficial,

since it leaves the FTC and State consumer protection officials free to focus on consumer fraud issues,

while the banking agencies focus on broader issues regarding the safety and soundness of financial

institutions. And, to the extent that OCC or another banking agency exercises its power to enforce

consumer protection laws against entities within its purview, interested agencies are fully capable of

coordinating their efforts so as to avoid either the wasteful use of agency resources, or undue burdens on

business.

In this respect, the analogy to the SEC’s authority over broker-dealer activities by bank subsidiaries,

discussed above, is again highly pertinent. The securities laws, too, have their own focus, which

is to maintain a fair and orderly securities market and protect investors. Indeed, FMC acknowledges that

it is “logical” to subject a broker-dealer to SEC regulation when the broker-dealer operates within a bank

subsidiary. FMC Reply Br. 13. But it fails to explain why it is any less logical to subject a telemarketer

to the normal legal remedies applicable to other telemarketers, when that activity takes place within a bank

subsidiary. And, although Congress drew a line that precluded SEC authority over broker-dealer

9 In the normal course, any exposure by Fleet Bank would be limited to its investment in FMC, as

is the very nature (and often an important purpose) of using subsidiaries. See OCC Interpretive Letter No.

289, 1984 WL 63797 (O.C.C.) (May 15, 1984). This fact is an added reason why the line drawn by

Congress in the text of the GLB Act is a reasonable one, that should be applied according to its terms.

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operations of banks themselves (see American Bankers Ass’n, supra, 804 F.2d at 742-43), OCC has

acknowledged the propriety of SEC authority with respect to operating subsidiaries. Congress has drawn

the same line with respect to the FTC Act, and the same principle should apply.

The particular factual context of the present case amply demonstrates the reasonableness of

recognizing FTC and State jurisdiction. The commercial activities at issue in the present case — the

marketing of membership programs such as buyers’ clubs and similar services — are precisely the kind of

activities that Congress addressed in the Telemarketing Act. We by no means question the proposition that

OCC has properly allowed the conduct of such activities by a bank subsidiary, under the rubric of “finder”

activities. See FMC Br. 12-13. Yet, from the perspective of the consumer, it is telemarketing nonetheless,

and poses all of the concerns that prompted passage of the Act. Moreover, neither FMC nor OCC has

made any argument that the prosecution of this case by the State will impose any unfair burden on FMC

or will have any substantially adverse affect on Fleet Bank.9 Accepting FMC’s arguments, however, will

leave consumers without the protections of the Telemarketing Act. While the plain language of the pertinent

statutes indicates that Fleet Bank itself is exempt from the Telemarketing Act, and therefore could have

achieved a similar result by conducting such business directly, it chose to conduct this business through a

subsidiary and enjoy whatever business advantages flow from that choice. There is no unfairness in

subjecting FMC to the same remedies available against other telemarketers, and no irrationality in

Congress’s decision to draw the line where it did.

CONCLUSION

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For the foregoing reasons, the Court should deny FMC’s motion to dismiss the State’s claims

under the Telemarketing Act.

Respectfully submitted,

WILLIAM E. KOVACIC

General Counsel

JOHN F. DALY

Deputy General Counsel for Litigation

RACHEL MILLER DAWSON

Attorney

Federal Trade Commission

600 Pennsylvania Ave., N.W., Room 582

Washington, D.C. 20580

September 6, 2001 (202) 326-2244

CERTIFICATE OF SERVICE

I hereby certify that, on this 6th day of September, 2001, I have served copies of the foregoing

Memorandum of Law of Amicus Curiae the Federal Trade Commission, by overnight courier, on each of

the following:

Andrew L. Sandler, Esq.

Amy Sabrin, Esq.

Gary DiBiano, Esq.

Skadden, Arps, Slate, Meagher & Flom, LLP

1440 New York Avenue, N.W.

Washington, D.C. 20005

Alan H. Maclin, Esq.

Lisa Agrimonti, Esq.

Briggs and Morgan, P.A.

2200 First National Bank Building

332 Minnesota Street

Saint Paul, Minnesota 55101

Prentiss Cox, Esq.

Assistant Attorney General

445 Minnesota Street, #1400

Saint Paul, Minnesota 55101

Frederick G. Petrick, Jr., Esq.

Counsel, Litigation Division

Office of the Comptroller of the Currency

250 E Street, S.W., 8th Floor

Washington, D.C. 20219

___________________________

John F. Daly