ROLE IN EXERCISE: You are an Assistant Attorney General, one of the lead counsel for the State of Minnesota. TASK: Providing advocacy advice for the State. BACKGROUND INFORMATION: The Attorney General is being sued to prevent the enforcement of the Minnesota gift card law, detailed below. You are to provide advice about how to defend the suit in Minnesota Maximus Mall v. Attorney General of Minnesota. 1. The Minnesota Maximus Mall Gift Card The Card. Plastic, bright blue. Includes dollar amounts in each corner. States the applicable rules in small print on the back. Says in larger print, "Good at all Mall locations. Special discounts also available at select locations." 2. Gift Card Rules. The following statement appears on the back of the cards: The Maximus Mall Gift Cards can be purchased at any designated store or facility in the Maximus Mall. The cards expire one-year from the date of issue. There is a monthly inactivity "service" charge of $1.50 per card for each calendar month the card is not in use. The fee will be automatically assessed. The cards are supported by the BDA Bank, a national banking institution, and operate like a debit card, using the same kind of platform. BDA bank has reviewed and approved the terms of the cards, and has been paid for setting up the card and providing the debit card services. BDA, however, while technically issuing the cards, are really only providing some services in support of the cards. The gift cards instead, are offered to consumers exclusively by the Minnesota Maximus Mall, a private limited liability company, and not by the bank. There shall be a $5.00 charge to reissue lost cards. If the card expires, the balance on the card can be transferred to a completely new card, subject to a $7.50 reissuance fee. 3. Pertinent Law Minnesota State Law 4-11-C: "No gift cards or certificates offered in the State shall be subject to inactivity or dormancy fees or an expiration date." Federal Law: The National Banking Act, 12 U.S.C. Section 24 et seq., permits national banks to operate with several explicit powers regarding the issuance of credit or debit cards and implied powers "necessary to carry on the business of banking," including [55/56]the offering of "electronic stored value systems." 12 C.F.R. Section 7.5002(a)(3). These value systems, including the debit card network utilized by the Minnesota Mall for its cards, allow consumers to accumulate pre-paid value in cards outside of a conventional bank account and do not have stated limits on whether banks can include expiration dates or inactivity fees.

4. Additional Background Information Gift cards are big business. Consumers in the calendar year 2006 purchased approximately $80 billion worth of gift cards. Of that, around $8 billion will never be redeemed. See, e.g., Mark Chediak, Darden to Repay Fees on Gift Cards for Its Restaurants, Orlando Sentinel, Apr. 4, 2007 at A1. To protect consumers, several states enacted laws limiting expiration and inactivity fees. Unfortunately for consumers, the nature of the card issuer can make a difference in whether expiration dates and inactivity fees are valid. As one commentator noted: Even though retailers may stop imposing service fees and expiration dates in compliance with state law, many retailers may also choose to avoid state laws by letting national banks issue their gift cards and taking a commission from the banks. [T]he National Bank Act, [12 U.S.C. Section 21 et seq.], which governs nationally chartered banks, allows banks to charge fees of their choosing for their banking products, including gift cards. The National Bank Act was designed to create uniformity of national bank regulation and preempts any state law attempting to regulate national banks that conflicts with the main objectives of the Act. Y. Angela Lam, Note, The Gift That Keeps on Taking: How Federal Banking Laws Prevent States from Enforcing Gift Card Laws, 93 Minn. L. Rev. 311, 313 (2007). There is at least one court that supports the thesis that the National Bank Act preempts state regulation regarding both expiration dates and fees, LLC v. Ayotte, 488 F.3d 525, 531-532 (1st Cir. 2007), cert. denied, 128 S. Ct. 1258 (2008) but another court concluded that the National Bank Act limits expiration date legislation by states, but does not limit service fee regulation. SPGGC, LLC v. Blumenthal, 505 F.3d 183, 191-92 (2d Cir. 2007). Maximus Mall owner, Dan Weston, noted in an interview: "We have used this mall value card with inactivity service fees and expiration dates in Minnesota and other states with great success for several years. Just last year we issued such a card at our Ohio Maximus Mall. These cards are especially useful during the holidays and for business at other times generally. If this law is strictly construed it would not only hurt us, but lots of commerce within this state would be chilled. To that end, the Minnesota law negatively impacts interstate commerce because it conflicts with the regulations of other states. The Attorney General offered a written statement: "We interpret the State of Minnesota law to prohibit the sale of gift cards by retailers within the state when those cards have inactivity fees or expiration dates. It is noteworthy that the Minnesota law does not apply to cards that are purchased out-of-state and used in Minnesota. Thus, it is important to emphasize the law deals only with sales and not use. The object of the law is to protect Minnesota consumers from unknowingly draining the value of cards purchased in the state. Sometimes that fine print is so fine it is hard to understand." EXERCISE: The Attorney General (AG) approaches you, an Assistant Attorney General for the State of Minnesota, with three requests: (1)The AG asks you to meet with the first assistant AG, who is involved in negotiations on this case with the Mall, to provide a list of "talking points" on preemption and why it should not apply here. The Attorney General concedes that there might indeed be preemption of the Minnesota law if the BNA bank had issued the gift cards directly or was a true national bank. The AG distinguishes that kind of case from this one based on the fact that the Mall is a retail facility and the BNA bank is only providing support to a private company. The AG asks you whether you thought this distinction is valid and explain this issue to the first assistant AG. (2) The AG also asks whether you could you be responsible for part of the deposition of Dan Weston, the Maximus Mall owner. The AG wants you to write 15 questions, half advocacy questions (meaning they are leading, suggesting a yes or no answer), and half inquiry questions (meaning they are open-ended and do not suggest an answer) about the question of the law's discrimination. The AG wants you to obtain useful facts about the preemption issue and the question of whether the law discriminates against interstate commerce. You can ask 5 advocacy questions about preemption and five inquiry questions about discrimination. These questions should either pin the owner down or offer useful additional information. After you choose the questions, explain why you are asking these questions. (3)If both sides would be better off settling the case, what would you offer if you were given the authority to do so? What are some of the strengths and weaknesses of the case you would consider in determining what offer you would make to settle the case?