Chavers v. Fleet Bank (RI), N.A.

FLANDERS, Justice,

dissenting.

I respectfully dissent. I would join the high courts of Massachusetts, Connecticut, and the majority of such courts in other states that have refused to exempt national banks from their state’s unfair and deceptive trade practices act and hold that G.L.1956 § 6-13.1-413 does not exempt the defendant .national bank’s credit-card activity in Rhode Island from this state’s deceptive trade practices act (DTPA). I would also hold that the second motion justice violated the law-of-the-case doctrine when he decided to rule, again, on the same legal question that the first motion justice had decided when she concluded that the DTPA exemption did not apply to the credit-card activity at issue in this case.

I

The Challenged Actions Were Not Permitted Under Laws Administered by Any State or by Any Federal Regulatory Body or Officer

Neither the Office of the Comptroller of the Currency (OCC) nor any other regulatory agency permits or regulates the activity in question (the issuing and marketing of credit cards). Although the OCC contends that it has the power to review national banks’ alleged unfair and deceptive credit-card activity on an ad-hoc basis to determine whether to initiate the enforcement of any alleged violation of law, such episodic, ad-hoc enforcement, under a questionable grant of authority to do so, does not constitute the kind of permissive regulation and continuing monitoring of an activity that is necessary to qualify for the statutory exemption under DTPA. If it were otherwise, then the ability of the state attorney general, who unquestionably is empowered to exercise ad-hoc review and institute enforcement of DTPA with respect to alleged deceptive conduct by banks and other businesses, would immunize all businesses from the reach of DTPA. If the mere power of a regulatory entity or official (for example, the OCC or the attorney general) to initiate enforcement activity with respect to the challenged conduct were enough to trigger the exemption, then the exemption would swallow the statute and render it virtually unenforceable by private parties — despite the General Assembly’s express creation of a private cause of action for DTPA violations. Such a result is not only illogical but absurd given the Legislature’s express *681creation of a private cause of action for DTPA violations.

Although the Third Circuit has held in Roberts v. Fleet Bank (R.I.), 342 F.3d 260, 270 (3d Cir.2003) that section 8(b)(1) of the Federal Deposit Insurance Act (FDIA)— codified at 12 U.S.C. § 1818(b)(1) — authorizes the OCC to initiate enforcement activity with respect to national banks’ alleged unfair and deceptive acts, national banks do not have to register with the OCC or to obtain its permission before they can issue or market credit cards. Thus, whatever review OCC may undertake of national banks’ credit-card activities is strictly to decide whether to initiate enforcement actions and not to monitor or regulate their compliance with any federal authorization to engage in such activity. Moreover, the Third Circuit has previously restricted 12 U.S.C. § 1818(b)(l)’s grant of authority to situations that threaten the financial stability of the bank in question. See, e.g., National State Bank v. Long, 630 F.2d 981, 988 (3d Cir.1980) (holding that 12 U.S.C. 1818(b)(1) is applicable to a violation of state law that directly implicates concerns in the banking field). Thus, given that the OCC does not authorize and monitor the credit-card activity of national banks as a regulator and given the murky scope of any authority it might have to initiate enforcement actions against illegal credit-card activity by national banks, we should not exempt this defendant from DTPA.

In State v. Piedmont Funding Corp., 119 R.I. 695, 699, 382 A.2d 819, 822 (1978), this Court construed the DTPA exemption as applying in situations in which the general activities of a business entity — in that case, selling insurance and securities— “were approved by various governmental agencies and regulatory bodies.” Thus, in Piedmont the activity in question (selling insurance and mutual funds) could not occur until and unless the entity in question first obtained permission from and registered with the appropriate regulatory agency. Id. Thereafter, that entity was “subject to monitoring and regulation by the appropriate regulatory agency or officer.” Id. at 700, 382 A.2d at 822. Under these circumstances, the Court held that the general activity in question was regulated and it applied the DTPA exemption to that activity when the plaintiff was unable to show that the regulation in question did not cover the specific challenged acts of the regulated entity. Id.

To determine whether the DTPA exemption would apply to future alleged DTPA violations, this Court announced a two-part test. Id. First, the party claiming the exemption must initially show that a “regulatory body or officer” regulates the general activity at issue, as in the Piedmont case, and then the opposing party must show that the regulation does not cover the specific acts in question. Id. Here, although defendant has introduced evidence that federal agencies such as the OCC generally review various activities of national banks, it has not shown that the OCC or any other agency or official regulates their specific activity of issuing and marketing credit cards. Indeed, it appears that no agency specifically approves or grants permission for banks to issue credit cards or to engage in related marketing activity. Nor is this a situation, as in Piedmont, in which a bank’s failure to comply with applicable rules and regulations relating to credit-card activity can result in a regulatory agency’s withdrawal of its license, registration, or permission to do so. Indeed, no such license, registration, or permission is required by federal authorities before banks can issue and market credit cards.

Nevertheless, it is certainly true that national banks are federal instrumentan*682ties that are subject to OCC enforcement actions.. See Michie on Banks and Banking, ch. 15, § 6 (1999). For example, under 12 U.S.C. § 1818(b)(1) of the FDIA, the OCC can issue cease-and-desist orders when a national bank engages in an “unsafe or unsound” practice, or violates a law, rule or regulation. 12 U.S.C. § 1818(b)(1). E.g., Branch v. FDIC., 825 F.Supp. 384, 391 (D.Mass.1993). When a cease-and-desist order is premised on an unsafe or unsound banking practice, however, the OCC’s enforcement authority is limited to acts directly affecting the bank’s financial stability. See First National Bank of Bellaire v. Comptroller of Currency, 697 F.2d 674, 681 (5th Cir.1983); see also Gulf Federal Savings and Loan Association v. Federal Home Loan Bank Board, 651 F.2d 259, 264, 267 (5th Cir.1981) (interpreting cease-and-desist authority of former FHLLB over federally chartered thrifts). But when the order is based on an asserted violation of a law, rule, or regulation, the alleged violation need not threaten the banks financial soundness for the OCC to properly exercise its authority under 12 U.S.C. 1818(b)(1). Arthur E. Wilmarth, Jr., The Expansion of State Bank Powers, the Federal Response, and the Case for Preserving the Dual Banking System, 58 Fordham L.Rev. 1133, 1205 (1990). But see First National Bank of Bellaire, 697 F.2d at 681 (citing Gulf Federal Savings and Loan Association, 651 F.2d at 264, 265 n. 5). And the OCCs power to enforce 5 of the Federal Trade Commission Act against national banks is questionable at best, given the absence of any specific regulations or laws promulgated by the Federal Reserve Board concerning the alleged bait- and-switeh tactics used to market credit cards that are at issue here. See 15 U.S.C. 57a(f)(l) (empowering the board to prescribe regulations defining unfair and deceptive bank practices).

Thus, as the first motion justice concluded, 12 U.S.C. 1818(b)(1) does not grant the OCC free reign to enforce any violation of law. Instead, the OCC may not be able to act until the Federal Reserve Board has promulgated a specific regulation pertaining to national banks or only when the purpose of the underlying regulation is to further the financial stability of the banking institution. The Fifth Circuit has interpreted 12 U.S.C. 1818(b)(1) more narrowly than its sister circuits, requiring that the alleged violation must actually threaten the banks financial soundness. See First National Bank of Bellaire, 697 F.2d at 681 (12 U.S.C. 1818(b) applies only to violations of law “with a reasonably direct effect on a banks financial stability”).

In any event, most state courts, when interpreting similar consumer-protection statutes such as DTP A, have declined to exempt national banks’ from their reach, despite the existence of the federal regulatory regime. In Normand Josef Enterprises, Inc. v. Connecticut National Bank, 230 Conn. 486, 646 A.2d 1289, 1306 (1994), the Supreme Court of Connecticut held that its consumer-protection statute applied to national banks allegedly unfair and deceptive acts. Like DTPA, the Connecticut statute exempted “[transactions or actions otherwise permitted under law as administered by any regulatory board or officer acting under statutory authority of the state or the United States.” Conn. Gen. Stat. Ann. 42-110c(a) (2003). While noting the extensive federal scheme for regulating banks, the Connecticut high court held that the “mere existence of generic state and federal banking regulations does not exclude [Connecticut’s consumer protection act] coverage.” Normand, 646 A.2d at 1305. The court also noted the bank’s specific challenged conduct was not regulated at all: [W]e have *683been unable to find any statute or regulation that regulates a bank’s duties with regard to its right to setoff an account when dealing with others, such as garnish-ers, who have a direct adverse interest in that same account. Id.

By declining to grant banks a blanket exemption from that state’s consumer-protection statute, the Connecticut Supreme Court aligned itself with the Massachusetts Supreme Judicial Court. In Raymer v. Bay State National Bank, 384 Mass. 310, 424 N.E.2d 515, 521 (1981), the Massachusetts high court noted that although banks are regulated by federal agencies, they are not exempt from the Massachusetts consumer-protection act, which contains exemption language almost identical to DTPA. Mass. Gen. Laws ch. 93A, 3 (2002). Similarly, the Supreme Court of New Mexico held, in Ashlock v. Sunwest Bank of Roswell, N. A, 107 N.M. 100, 753 P.2d 346, 349 (1988), that its consumer-protection statute, which contained exemption language similar to DTPA, did not exempt banks from its application. In so holding, the court reasoned that its “attention ha[d] not been directed to any federal statute or regulation that would evidence the intention of Congress or the federal regulatory branch to regúlate, to any extent, the bank’s failure to deliver goods or services as promised.” Id.

Indeed, “most state courts have determined that banks are subject to the provi1 sions of their state’s unfair or deceptive trade practices or consumer protection statutes.” Normand Josef Enterprises, Inc., 646 A.2d at 1306 (collecting cases). Generally, the few courts that have held otherwise have predicated their decisions on consumer-protection statutes that, unlike DTPA, either explicitly exempted banks or incorporated the Federal Trade Commission Acts exemption for banks. Id. Of all the cases cited by the Connecticut Supreme Court, only two have held that their consumer protection act’s did not apply to banks because “banks were sufficiently and pervasively regulated by other regulatory agencies.” Id.

Here, the evidence showed that neither the OCC nor any other federal agency permits, licenses, regulates, or monitors defendants specific act of issuing and marketing credit cards, whether in Rhode Island or elsewhere. See Perron v. Treasurer of Woonsocket, 121 R.I. 781, 786, 403 A.2d 252, 255 (1979) (holding that although a public utility is generally regulated by the Public Utilities Commission, the utility’s hookup agreement with the city was not regulated). Although, following Piedmont, we have interpreted the DTPA exemption as applying to “all activities and businesses that are subject to monitoring by state and federal regulatory bodies or officers,” Kelley v. Cowesett Hills Associates, 768 A.2d 425, 432 (R.I.2001) (per curiam); see also Piedmont Funding Corp., 119 R.I. at 699, 382 A.2d at 822, we have done so only in the context of a business that, as in Piedmont, had to obtain a regulatory agency’s permission to engage in the activity at issue. Thus, we have never held that the exemption applies to activities that are reviewed, if at all, only for mere enforcement purposes on an ad-hoc and episodic basis.

Rather than pervasively monitoring and regulating the bank’s alleged unfair and deceptive practices with respect to credit-card activity, the OCC attempts to enforce alleged violations of federal banking law only on a case-by-case basis. Significantly, it does not permit, approve of, or license banks’ credit-card activities, as was true for the regulated activities in the Piedmont case, and banks do not have to register with the OCC, obtain its approval, or become licensed before issuing or marketing credit cards, as was the case for the *684activities at issue in Piedmont. Thus, we should hold that because no regulatory-agency permits the activity at issue, the DTPA exemption does not apply to defendant’s challenged conduct.

In addition, federal circuit courts have inconsistently interpreted 12 U.S.C. § 1818(b)(1) of the FDIA, which purportedly authorizes the OCC to enforce any violation of law, including banks’ allegedly unfair or deceptive acts. Although it is not this Courts province to determine which interpretation of 12 U.S.C. 1818(b)(1) is correct, the ambiguity and conflicting federal court opinions concerning the scope of the OCCs enforcement authority also militate against exempting national banks from DTPA.

In this case, the majority relies heavily on Roberts, 342 F.3d at 270, a recent Third Circuit decision holding that “the OCC’s authority to bring enforcement actions against national banks for violations of laws or regulations” empowers the OCC “to regulate false and misleading advertising proscribed under Section 5 of the FTC [Federal Trade Commission] Act.”

Despite the Roberts court’s reliance on. the facial language of 12 U.S.C. § 1818(b)(1), the Third Circuit previously suggested that the OCC may issue a cease- and-desist order pursuant to a violation of law only when the purpose of the law is to further the financial stability of the banking institution or when the law directly implicates concerns in the banking field. See National State Bank, 630 F.2d at 988.14 This view is followed by the Ninth Circuit in Saratoga Savings and Loan Association v. Federal Home Loan Bank Board, 879 F.2d 689, 693 (9th Cir.1989), and the Fifth Circuit, which has adopted an even more restrictive interpretation, ruling that the alleged violation of law must actually threaten the banks financial soundness. First National Bank of Bellaire, 697 F.2d at 681.

Here, the purpose of DTPA is to protect consumers, not to buttress the financial stability of banks. Moreover, no one has suggested that defendants alleged violation of DTPA has threatened its financial soundness. Finally, defendants alleged violation of DTPA does not directly implicate federal regulatory concerns in the banking field, especially when the OCC has declined to take any enforcement action against defendants challenged conduct, despite numerous complaints about its alleged bait-and-switch activities in the marketing of its credit cards.

In conclusion, plaintiff has demonstrated that we should not exempt this national bank from DTPA because its involvement in the issuing and marketing of credit cards to consumers, such as this plaintiff, was not generally or specifically regulated or monitored for unfair and deceptive practices. Instead of granting permission for and thereafter monitoring national banks credit-card activities for unfair and deceptive acts in a manner consistent with *685Piedmont and the statutory language of the exemption in question, the OCC reviews these acts, if at all, only on an ad-hoc basis to determine whether to initiate enforcement activity. In addition, federal circuit courts have inconsistently interpreted the breadth of the enforcement authority granted to OCC by 12 U.S.C. 1818(b)(1), rendering uncertain its ability to enforce bank actions that allegedly violate DTPA. Therefore, we should not exempt this national banks credit-card activity from DTPA.

II

The Law of the Case Doctrine Barred the Second Motion Justice from Ruling on This Issue for a Second Time in the Same Case

I fear that the majority’s decision in this case effectively sounds the death knell for the law-of-the-case doctrine in Rhode Island. From now on, whenever any party disagrees with a decision by a first motion-calendar justice, that party should simply wait for a new justice to preside over that calendar or to take charge of the case and then refile the motion. If the other side objects on law-of-the-case grounds, simply cite this case and point out that the law of the case is no longer an obstacle to reversing the previous ruling.

Before the Court’s decision in this case, the law of the case doctrine stood for the proposition that “after one judge has decided an interlocutory matter in a pending suit, a second judge on that same court, when confronted at a later stage of the suit with the same question in the identical manner, should refrain from disturbing the first ruling.” Richardson v. Smith, 691 A.2d 543, 546 (R.I.1997). In Forte Brothers, Inc. v. State of Rhode Island Department of Transportation, 541 A.2d 1194, 1196 (R.I.1988), we stated that “a decision made by one judge of coordinate jurisdiction should not, in the absence of special circumstances, be set aside by another justice passing upon the identical question in the same case.” Accord North American Planning Corp. v. Guido, 110 R.I. 22, 24-25, 289 A.2d 423, 425 (1972) (a decision “once made by a justice of a trial court, should not again be reviewed by another justice of the same court absent the most compelling and exceptional circumstances”). In the second motion justice’s decision on February 25, 2002, he stated that the special circumstance in this lawsuit that justified a departure from the law of the case was the “need for national banking policies and a clear, singular approach to national banking regulation.” Under our case law, however, such a belief did not constitute the compelling and exceptional circumstances that would warrant one Superior Court justice overturning the decision of another Superior Court justice.

To be sure, in Paolella v. Radiologic Leasing Associates, 769 A.2d 596, 599 (R.I. 2001) (per curiam), we noted that a trial justice may properly depart from the law-of-the-case doctrine when the earlier ruling is “clearly erroneous.” Accord Christianson v. Colt Industries Operating Corp., 486 U.S. 800, 817, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988) (stating law-of-the-case doctrine does not apply when the “initial decision was ‘clearly erroneous and would work a manifest injustice’ ”); In re Estate of Speight, 739 A.2d 229, 281 (R.I.1999) (per curiam) (noting law-of-the-case doctrine “should not be used to perpetuate clear error in an earlier erroneous ruling”). But here, the first motion justice’s learned, well-reasoned, and extensively researched decision, which cited numerous authorities and relied on the conclusions reached by a majority of our sister states when they considered the scope of their analogous or identical DTPA exemptions, was not *686“clearly erroneous” by any stretch of the imagination. Thus, in my judgment, when the second motion justice granted summary judgment in favor of defendants, he flouted the law-of-the-case doctrine in doing so because he should have respected that another Superior Court justice already had ruled on this same legal issue and that nothing had changed since that first ruling that would have allowed him to revisit the question.

Moreover, the second motion justice’s disagreement with the reasoning of the first motion justice or his perception that national banks require a “singular approach' to national banking regulation” were hardly “compelling and exceptional” circumstances justifying his reconsideration of the legal issues that the first motion justice already had ruled on. Otherwise, whenever a second motion justice can be persuaded that the first motion justice got it wrong, then he or she will conclude that they have a free hand to reverse the first motion justices ruling. Even the majority acknowledges that the second motion justice “potentially undermined the publics confidence in the judiciary by reversing an earlier ruling that he expressly described as ‘well-reasoned and well-written.’ ”

But the majority’s suggested cure for the problem of allowing Superior Court justices to reverse the previous rulings of their colleagues — “the Superior Court may certify the question to this Court pursuant to G.L.1956 § 9-24-27” — is worse than the disease. Now, after this decision, Superior Court justices, instead of respecting the law of the case, will simply boot the case upstairs to this Court as a certified question, citing the majority^ decision as authority to do so. Thus, instead of having legal questions settled in any given case, unless and until a party appeals from a final judgment, this new protocol will engender numerous attempts to certify interlocutory questions of law to us whenever a trial or motion justice thinks one of his or her colleagues may have reached the wrong legal conclusions in any pretrial ruling.

Moreover, such a certification option flies in the face of what this Court has said about the limited circumstances under which certification is proper. Until now, we have

“ ‘consistently and repeatedly mandated that a trial or hearing justice should not certify a question of law to [the Supreme] Court unless and until he or she first carefully considers the question or questions sought to be certified and then, after having had the benefit of counsels’ research and informed arguments, believes that he or she is unable to resolve the question satisfactorily.’ ” Pierce v. Pierce, 770 A.2d 867, 870 (R.I.2001).

In deciding to depart from the law-of-the-case doctrine, the second motion justice referenced his earlier decision in a different case (Rossman v. Fleet), in which he arrived at a result contrary to the first motion justice’s decision in this case. A contrary decision by a Superior Court justice in another case, however, is not a sufficient basis for departing from the law-of-the-case doctrine. In Forte Brothers, Inc., 541 A.2d at 1196, we declined “to provide a rule of stare decisis regarding decisions of trial courts as having binding effects upon other members of the same or coordinate trial courts.” We further explained that “only the decisions of this [CJourt are of binding effect upon all justices of trial courts of this state.” Id. The second motion justice, therefore, improperly took it upon himself to resolve the split in the Superior Court decisions on this subject by departing from the law-of-the-case doctrine and overturning the earlier *687decision of a different justice in the same case that denied Fleet’s motion to dismiss.

Because the Rossman decision was not binding on the second motion justice, because the law of the case prevented him from revisiting the first motion justice’s decision in these circumstances, and because I believe he erred as a matter of law in how he interpreted the DTPA exemption, I would reverse, vacate the summary judgment in favor of the defendant, and remand this case for trial.

. General Laws 1956 § 6-13.1-4 provides as follows:

"Exemptions. — Nothing in this chapter shall apply to actions or transactions permitted under laws administered by the department of business regulation or other regulatory body or officer acting under statutory authority of this state or the United States."

. Specifically, the Third Circuit stated:

"[Section 1818(b)(1)] provides that the appropriate federal banking agency may initiate cease and desist proceedings against any insured bank that violates 'a law.' 12 U.S.C. 1818(b)(1). The legislative history of the Act indicates that Congress was concerned not only with federal but with state law as well, particularly as it might bear on corruption of bank officials or the financial stability of the institution. It may be that the word law’ as used in the statute is not all encompassing and may exclude matters of purely local concern. However, when state law prohibits the practice of redlining, its enforcement so directly implicates concerns in the banking field that the appropriate federal regulatory agency has jurisdiction.” National State Bank v. Long, 630 F.2d 981, 988 (3d Cir.1980). (Emphases added.)