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Dreher Tomkies LLP
Attorneys at Law
2750 Huntington Center
41 South High Street
Columbus, Ohio 43215
Telephone: 614-628-8000
Fax: 614-628-1600

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New York Attorney General Eliot Spitzer announced on March 1, 2005 that Simon Property Group, Inc. has settled the lawsuit filed in Manhattan State Supreme Court in February 2005 regarding Simon’s Giftcards. Spitzer’s complaint in that lawsuit alleged that the Giftcards, which are Visa-branded stored-value debit card issued by Bank of America, violated fee and disclosure provisions of the New York Gift Certificate Law, which took effect on October 18, 2004. Specifically, Spitzer asserted that (i) the monthly administrative fee imposed on Giftcards in the seventh month after purchase violated the state law ban on monthly service fees prior to the 13th month of dormancy and (ii) the replacement card fee was not clearly and conspicuously disclosed on the Giftcard as required by state law. Simon has agreed to comply with the fee restriction and disclosure requirement and pay to the state $100,000 in penalties and $25,000 in costs.

The Attorneys General of Connecticut, Massachusetts and New Hampshire also filed lawsuits in their respective state courts in November 2004 against Simon Property Group for violation of state gift certificate laws. The three state court actions initially were removed to federal court, but recently have been transferred back to
state courts. Simon filed suits against those three Attorney Generals in federal court shortly before the state court suits were filed seeking declaratory judgments that state laws do not apply to its Giftcard sales based on federal preemption. The federal court actions are still in the pleadings stage and there have been no decisions on the merits to date.

The Office of the Comptroller of the Currency (OCC) wrote a January 5, 2005 letter to Simon’s attorney and the Massachusetts Attorney General stating its position that state laws are not preempted by federal laws or regulations in regard to certain claims in litigation between the State of Massachusetts and Simon. Simon had sought to remove the action to federal court on the basis of the “complete preemption” doctrine, taking the position that the cards are exempt from state law because they are issued by a national bank. The OCC letter stated that Simon could not claim application of the “complete preemption” doctrine for the causes of action asserted in state court, leaving for the court’s later fact-finding whether Simon or its partner bank in fact imposed the fees that were allegedly imposed by Simon. To the extent imposed by Simon (as alleged), the OCC opined that such fees would not be subject to substantive federal preemption. The OCC did not comment in its letter on whether claims made against the card issuing bank would be preempted. Presumably, they would be substantively preempted under existing precedent.

􀂗 Mike Tomkies