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The Nation

Industries Get Quiet Protection From Lawsuits

Federal agencies are using arcane regulations and legal opinions to shield automakers and others from challenges by consumers and states.

February 19, 2006|Myron Levin and Alan C. Miller | Times Staff Writers

Kirkland & Ellis also represented automakers in another case against California regulators. In 2002, the industry -- backed by the Justice Department -- challenged a state rule that required production of a certain number of non-polluting vehicles.

Rosen said he did not participate in that case while he was with the law firm. The case was settled when the state agreed to remove language that the industry said amounted to regulating fuel economy.

The Bush administration also helped two industry groups overturn a regulation requiring the purchase of cleaner-running fleet vehicles such as buses and garbage trucks in Southern California.

The Engine Manufacturers Assn. and Western States Petroleum Assn. claimed the rule by the South Coast Air Quality Management District was preempted by federal law. Their challenge was rejected in federal district court and by a federal appeals court.

When the case went to the U.S. Supreme Court, the Justice Department filed a brief siding with the industry. The high court agreed that the local rules were preempted.

In the past, said California's Atty. Gen. Lockyer, when industries challenged state regulations, "the federal government abstained from those lawsuits."

Now, he said, there's "a policy of rubber-stamping whatever business wants, and that's too bad."


The idea behind another California law was simple: Tell credit cardholders on monthly bills how long it would take to retire their debt if they paid the minimum amount.

But major banks issuing most of the nation's credit cards didn't like it. In a 2002 court challenge, they attacked the state's credit disclosure law with help from a powerful ally.

The U.S. Office of the Comptroller of the Currency joined forces with the American Banking Assn., Citibank and other plaintiffs, arguing in a friend-of-the-court brief that the law interfered with federal authority to regulate national banks, and with powers granted to the banks by their federal charters.

A federal judge blocked the law from going into effect, and the state lost a subsequent appeal.

Intervention by the comptroller's office "definitely tipped the balance," said Gail Hillebrand, a lawyer for Consumers Union, which had backed the state's position.

In recent years, the comptroller's office on many occasions has helped national banks and their subsidiaries fend off investigations or enforcement actions by state officials on preemption grounds.

In 2004, for example, the agency helped to shoot down a California law that would have required customer permission before banks shared their personal information with business affiliates.

Although a U.S. District Court judge upheld the privacy law, an appeals court ruled last year that its major provisions were preempted by federal law.

Last year, the agency went to court on the side of a banking association to block an investigation by New York Atty. Gen. Eliot Spitzer into possible racial bias in the lending practices of several banks.

A federal judge agreed that Spitzer's investigation "impermissibly infringes" on the authority of the comptroller's office. The state is appealing.

Turf battles over banking regulation have occurred in the past, but the Office of the Comptroller of the Currency has become more aggressive in pushing preemption under Bush.

Agency officials say they have zero tolerance for abusive practices and bristle at complaints that they might be chasing off state watchdogs to the detriment of consumers.

The banks "have an enormous body of consumer compliance laws and regulations that we apply to them at the federal level," said Julie L. Williams, the agency's senior deputy comptroller and chief counsel.

But Arthur E. Wilmarth Jr., a George Washington University professor specializing in banking law, said, "The OCC hasn't been, shall we say, a very zealous enforcer on the consumer side.... States have been far more vigorous."

Greve, the American Enterprise Institute scholar who has been a mainstay of the conservative brain trust promoting preemption, said well-connected industry law firms were part of a policy network providing legal and political rationale for the effort.

He called them "a merry band of Washington lawyers ... who know how to push the buttons" and get things done.


Levin reported from Los Angeles and Miller from Washington. Times researcher Janet Lundblad in Los Angeles also contributed to this report.



Official ties to industry

Bush administration officials with previous ties to the auto industry:

Andrew H. Card Jr. was General Motors Corp.'s vice president of government relations. He represented GM on matters of public policy before Congress and the administration. From 1993 to 1998, Card was president and chief executive of the top auto industry trade group. He is now White House chief of staff.

Jacqueline Glassman was a senior regulatory counsel at Daimler-Chrysler Corp. She is now the acting head of the National Highway Traffic Safety Administration.

Jeffrey A. Rosen was a senior partner at Kirkland & Ellis, a law firm that has defended GM in numerous product-liability suits and represents the Alliance of Automobile Manufacturers. He is the general counsel at the U.S. Department of Transportation.

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