No. 94-1837 In The Supreme Court of The United States OCTOBER TERM, 1995 BARNETT BANK OF MARION COUNTY, N.A., PETITIONER v. TOM GALLAGHER, FLORIDA INSURANCE COMMISSIONER, ET AL. ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT BRIEF FOR THE UNITED STATES AND THE COMPTROLLER OF THE CURRENCY AS AMICI CURIAE SUPPORTING PETITIONER JULIE L. WILLIAMS Chief Counsel L. ROBERT GRIFFIN ERNEST C. BARRETT III JOAN M. BERNOTT Attorneys Office of the Comptroller of the Currency Washington, D.C. 20219 (202)874-5200 DREW S. DAYS, III Solicitor General FRANK W. HUNGER Assistant Attorney General PAUL BENDER Deputy Solicitor General EDWARD C. DUMONT Assistant to the Solicitor General ANTHONY J. STEINMEYER JACOB M. LEWIS Attorneys Department of Justice Washington, D.C. 20530 (202)514-2217 ---------------------------------------- Page Break ---------------------------------------- QUESTION PRESENTED Whether 12 U.S.C. 92, which provides that national banks in places with no more than 5,000 inhabitants may act as insurance agents, preempts a state law that prohibits most such banks from engaging in most insurance agency activities. (I) ---------------------------------------- Page Break ---------------------------------------- TABLE OF CONTENTS Page Interest of the United States and the Comptroller of the Currency . . . . 1 Statement . . . . 2 Summary of argument . . . . 5 Argument . . . . 8 I. Section 626.988 was not enacted "for the purpose of regulating the business of insurance" . . . . II. Section 92 "specifically relates to business of insurance" . . . . 17 Conclusion . . . . 24 TABLE OF AUTHORITIES Cases: Davis v. Elmira Sav. Bank, 161 U.S. 275 (1896) . . . . 12-13, 21 Easton v. Iowa, 188 U.S. 220 (1903) . . . . 22 Elliott v. ITT Corp., 764 F. Supp. 102 (N.D. Ill. 1991) . . . . 16 FCC v. Beach Communications, Inc., 113 S. Ct. 2096 (1993) . . . . 15 FTC v. Dixie Finance Co., 695 F.2d 926 (5th Cir.), cert. denied, 461 U.S. 928 (1983) . . . . 16 Farmers' & Mechanics' Nat'l Bank v. Dearing, 91 U.S. 29 (1876) . . . . 22 Fidelity Fed. Sav. & Loan Ass'n v. de la Cuesta, 458 U.S. 141 (1982) . . . . 9 First National Bank v. California, 262 U.S. 366 (1923) . . . . 22 Glendale Fed. Sav. & Loan Ass'n v. State Dep't of Ins., 587 So.2d 534 (Dist. Ct. App. 1991), re- view denied, 599 So.2d 656 (Fla. 1992) . . . . 15 (III) ---------------------------------------- Page Break ---------------------------------------- IV Cases-Continued: Page Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205 (1979) . . . . 12 Heller v. Doe, 113 S. Ct. 2637 (1993) . . . . 15 Hines v. Davidowitz, 312 U.S. 5.2 (1941) . . . . 9 John Hancock Mut. Life Ins. Co. v. Harris Trust & Sore. Bank, 114 S. Ct. 517 (1993) . . . . 19-20 Morales v. Trans World Airlines, Inc., 504 U.S. 374 (1992) . . . . 17 NationsBank of North Carolina, N.A. v. Variable Annuity Life Ins. Co., 115 S. Ct. 810 (1995) . . . . 1 New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 115 S. Ct. 1671 (1995) . . . . 17 Owensboro Nat'l Bank v. Stephens, 44 F.3d 388 (6th Cir. 1994), petition for cert. pending, No. 95-74 . . . . 2, 9 Paul v. Virginia, 75 U.S. (8 Wall.) 168 (1869) . . . . 21 Production Credit Ass'ns v. Department of Ins., 356 So.2d 31 (Fla. Dist. Ct. App. 1978), . . . . 15 SEC v. National Securities, Inc., 393 U.S. 453 (1969) . . . . 11, 12, 16 Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983) . . . 17-18 Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119 (1982) . . . . 10, 12 United Services Auto. Ass'n v. Muir, 792 F.2d 356 (3d Cir. 1986), cert. denied, 479 U.S. 1031 (1987) . . . . 11, 16 United States Dep't of Treasury v. Fabe, 113 S. Ct. 2202 (1993) . . . . 5, 9, 10, 11, 16, 18, 22 United States v. South-Eastern Underwriters Ass'n, 322 U.S. 533 (1944) . . . . 22 Constitution and statutes: U.S. Const.: Amend. XIV . . . . 15 Art. I, 8, Cl. 3 (Commerce Clause) . . . . 20, 22 ---------------------------------------- Page Break ---------------------------------------- V Statutes continued: Page Act of Sept. 7, 1916, ch. 461, 39 Stat. 753 (12 U.S.C. 92) . . . . 21 Bank Holding Company Act of 1956, 4(d),12 U.S.C. 1843(d) . . . . 3 Competitive Equality Banking Act, Pub. L. No. 100-86, Tit. II, 201(B)(5), 101 Stat. 583 . . . . 19, 20 Federal Reserve Act, 13, 12 U.S.C. 92 . . . . passim Garn-St. German Depository Institutions Act of 1982, Pub. L. No. 97-370, Tit. IV, 403(b), 96 Stat. 1511 . . . . 21 McCarran-Ferguson Act, 2(b), 15 U.S.C. 1012(b) . . . . passim National Bank Act, 12 U.S.C. 21 et seq . . . . 1 12 U.S.C. 371 . . . . 21 12 U.S.C. 1972 . . . . 14 Fla. Stat. Ann. (West 1984 & Supp. 1995): 626.988 . . . . passim 626.988(1)(a) . . . . 11, 15 626.988(b) . . . . 15 626.9551 (West 1984) . . . . 14 Miscellaneous: Black's Law Dictionary (5th ed. 1979) . . . . 17 (6th ed. 1990) . . . . 18 91 Cong. Rec. (1945): p. 488 . . . . 23 p. 1396 . . . . 23 p. 1487 . . . . 18, 22 H.R. 27, 100th Cong., 1st Sess. (1987) . . . . 20 H.R. Conf. Rep. No. 261, 100th Cong., 1st Sess. (1987) . . . . 20 Webster's Third New International Unabridged Dictionary (1986) . . . . 18 S. Rep. No. 536, 97th Cong., 2d Sess. (1982) . . . . 21 S. Rep. No. 19, 100th Cong., 1st Sess. (1987) . . . . 19 23 Weekly Comp. Pres. Docs. 918 (1987) . . . . 20 ---------------------------------------- Page Break ---------------------------------------- In the Supreme Court of the United States OCTOBER TERM, 1995 No. 94-1837 BARNETT BANK OF MARION COUNTY, N.A., PETITIONER v. TOM GALLAGHER, FLORIDA INSURANCE COMMISSIONER, ET AL. ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT BRIEF FOR THE UNITED STATES AND THE COMPTROLLER OF THE CURRENCY AS AMICI CURIAE SUPPORTING PETITIONER INTEREST OF THE UNITED STATES AND THE COMPTROLLER OF THE CURRENCY The Comptroller of the Currency is the primary regulator of banks chartered under the National Bank Act., 12 U.S.C. 21 et seq. See NationsBank of North Carolina, N.A. v. Variable Annuity Life Ins. Co., 115 S. Ct. 810, 813 (1995). The Comptroller accordingly has an interest in assuring that national banks are able to exercise, subject to his supervision, the pow- ers granted to them by Congress, including the power to engage in insurance agency activities set out in 12 U.S.C. 92. The United States also has an interest in (1) ---------------------------------------- Page Break ---------------------------------------- 2 the proper interpretation of the McCarran-Ferguson Act, 15 U.S.C. 1011 et seq., on which the court of appeals relied in holding that Section 92 does not preempt the state law at issue here. The Comptroller participated as an amicus curiae before the court of appeals in this case, and the United States is an intervening party in Owensboro Nat'l Bank v. Stephens, 44 F.3d 388 (6th Cir. 1994), petition for cert. pending, No. 95-74, which held that Section 9.2 preempts a Kentucky statute similar to the Florida statute at issue in this case. The United States and the Comptroller filed a brief as amici curiae in support of the petition in this case. STATEMENT 1. Petitioner Barnett Bank of Marion County, N.A., is a national bank with a branch in Belleview, Florida, a town with fewer than 5,000 inhabitants. Petitioner is a wholly owned subsidiary of Barnett Banks, Inc., a Florida bank holding company. Pet. App. 20a; see also Pet. ii. In October, 1993, petitioner purchased the assets and business of Linda Clifford Insurance, Inc. (LCI), an insurance agency also located and doing business in Belleview. LCI'S employees, including Clifford, became employees of petitioner. Pet. App. 20a. Four days after the purchase, respondent Gallagher, the state Insurance Commissioner, ordered Clifford and LCI to cease and desist from engaging in any "insurance agency activity" other than sales of credit life or credit disability insurance. Id. at 19a. Respondent's order relied on Fla. Stat. Ann. 626.988 (West 1984 & Supp. 1995) (reprinted at Pet. 4-5), which generally prohibits an otherwise licensed insurance agent from engaging in "insurance agency ---------------------------------------- Page Break ---------------------------------------- 3 activities" if he or she is associated in any way with a "financial institution." Under the statute, "insur- ance agency activities" include the sale or servicing of insurance policies other than credit life or credit disability policies, and the term "financial institu- tion" includes (among other things) most banks and bank holding companies, including petitioner. Fla. Stat. Ann. 626.988(1)(a) and (b) (West 1984 & Supp. 1995). However, the definition of "financial insti- tution" excludes any bank "which is not a subsidiary or affiliate of a bank holding company and is located in a city having a population of less than 5,000." Id. 626.988(1)(a). 1. Thus, in the case of small towns, the state prohibition applies only to banks that are, like petitioner, affiliated with bank holding compan- ies; independent banks in such places are not forbid- den to act as insurance agents. 2. Petitioner sued respondents Gallagher and the Florida Department of Insurance for declaratory and injunctive relief, contending that federal law pre- empts application of Section 626.988 to prohibit peti- tioner's operation of LCI. Petitioner relied on Sec- tion 13, para. 11, of the Federal Reserve Act, 12 U.S.C. 92, which provides that any national bank located and doing business in a place with no more than 5,000 inhabitants may, under supervision by the Comptroller, "act as the agent for any fire, life, or ___________________(footnotes) 1 The definition also excludes any bank holding company exempted from regulation by the Federal Reserve Board un- der Section 4(d) of the Bank Holding Company Act of 1956, 12 U.S.C. 1843(d) (relating to companies that have held a small bank since before July 1, 1968). Neither exclusion applies to petitioner. ---------------------------------------- Page Break ---------------------------------------- 4 other insurance. company" that is authorized to do business in that State. See Pet. App. 18a. 2. The district court denied petitioner's request for relief. Pet. App. 17a-36a. The court recognized that Section 626.988 was inconsistent with Section 92. Pet. App. 23a-24a. However, the court accepted re- spondents' argument that Section 626.988 was saved from preemption by Section 2(b) of the McCarran- Ferguson Act, 15 U.S.C. 1012(b). See Pet. App. 25a- 35a. That Act. provides that federal law will not preempt a state. statute "enacted * * * for the purpose of regulating the business of insurance," unless the federal law "specifically relates to the business of insurance." 15 U.S.C. 1012(b), The district court concluded that Section 626.988 was enacted "for the purpose of regulating the business of insurance." Pet. App. 26a-32a. The court then held that Section 92 does not "specifically relate[] to the business of insurance," and otherwise "fails to manifest any express intent to preempt state insurance laws." Pet. App. 32a-35a. The court accor- dingly sustained the State's application of Section 626.988 to prevent petitioner from operating LCI. 3. The court of appeals affirmed. Pet. App. 1a-16a. The court first held that it had jurisdiction to decide petitioner's claim. Id. at 5a-6a. The court then examined Florida law (id. at 8a-13a), and concluded that the aim of Section 626.988 is to protect insurance policyholders by preventing "the loss of arm[']s- ___________________(footnotes) 2 Respondent Gallagher, joined by several associations of Florida insurance agents, counterclaimed for a judgment de- claring that petitioner was acting beyond any insurance agency authority conferred by Section 92. See Pet. App. 3a, 19a. Nei- ther court below considered or passed on that issue. See id. at 3a, 36a. ---------------------------------------- Page Break ---------------------------------------- 5 length transactions and objectivity" that might occur when "[a] bank becomes involved with insurer and insured." Pet. App. 12a. The court therefore agreed that Section 626.988 "regulates the business of insurance" for purposes of the McCarran-Ferguson Act. Turning to 12 U.S.C. 92, the court concluded (Pet. App. 13a-15a) that the history of that Section, and its relationship to the National Bank Act and the Federal Reserve Act, indicated that in enacting it "Congress was concerned with banking, not insurance." Id. at 15a. For that reason, the court agreed with the dis- trict court's determination that Section 92 neither "specifically relates to the business of insurance" nor otherwise "specifically requires" the preemption of conflicting state laws. Pet. App. 15a (quoting 15 U.S.C. 1012(b) and United States Dep't of the Treas- ury v. Fabe, 113 S. Ct. 2202,2211 (1993)). SUMMARY OF ARGUMENT As applied to petitioner in this case, Florida's prohibition on insurance agency activities by bank affiliates conflicts with 12 U.S.C. 92's authorization of such activities by certain national banks. The court of appeals erred in concluding that the McCarran-Ferguson Act, 15 U.S.C. 1012(b), saves the state law from preemption. That Act prevents preemption only if two conditions are met: the state law must have been "enacted * * * for the purpose of regulating the business of insurance," and the conflicting federal law must not "specifically relate" to that business. Neither condition is satisfied in this case. 1. Fla. Stat. Ann. 626.988 (West 1984 & Supp. 1995) was not enacted for the purpose of regulating ---------------------------------------- Page Break ---------------------------------------- 6 the business of insurance. The state law does not specify generally applicable standards or practices for insurance companies or agents, or regulate either the transfer or spreading of risk, or any other practice that is an integral part of the policy relationship between insurer and insured. Instead, it simply prohibits most financial institutions from acting as agents for the sale of most forms of insurance. The practical effect of Section 626.988 indicates that, in enacting it, the State was more concerned with restricting the activities of banks and their affiliates than with regulating the conduct of the business of insurance. The insurance-regulation motivations suggested for the State's prohibition on bank-affiliated agencies are implausible. That prohibition may be upheld only if it meets the -requirements of 15 U.S.C. 1012(b), which specifically mandates a practical and realistic inquiry into the State's "purpose" in enacting it. Such an appraisal indicates that Section 626.988 does not meet the first requirement for protection under Section 1012(b). If the State was concerned with banks' adopting coercive lending practices, or other- wise taking advantage of their banking customers, in connection with agency sales of insurance, then the provision seems best characterized as an attempt to regulate the business of banking, not the business of insurance. If, on the other hand, the State's prohibition was intended to protect other insurance agents from having to compete against agents affiliated with "banks, then it was not aimed at protecting the relationship between insurers and their insureds. In either case, the state law was not "enacted * * * for the purpose of regulating the business of insurance." 15 U.S.C. 1012(b). ---------------------------------------- Page Break ---------------------------------------- 7 2. Whether or not Section 626.988 satisfies the first condition for protection under the McCarran- Ferguson Act, 12 U.S.C. 92 "specifically relates to the business of insurance" within the meaning of that Act. The "specifically relates" standard applicable to the federal law is, as a matter of statutory language, considerably broader than the requirement that a state law have been enacted "for the purpose of regulating" the insurance business. Section 92 meets the "specifically relates" standard, because it au- thorizes certain banks to participate in the insurance business. The court of appeals' arguments to the contrary are not persuasive. The court incorrectly focused on whether, in enacting Section 92, Congress was "concerned with banking" rather than on whether the federal provision relates to the business of insur- ance. The court's reliance on the fact that Section 92 was enacted at a time when Congress was thought to lack power to regulate the insurance business is also misplaced, because there can be little question that Congress always correctly understood that it had the power to authorize national banks to engage in that business on the same terms as others. And the court failed to recognize that 15 U.S.C. 1012(b) requires only that a federal provision "specifically relate[]" to the insurance business, not that it expressly state its intent to preempt state law. Finally, respondents cannot have it both ways. If Section 626.988 was enacted by the State for the "purpose" of regulating the business of insurance because it limits the ability of some financial insti- tutions to sell insurance, then 12 U.S.C. 92 must certainly "specifically relate[]" to the business of in- surance by authorizing national banks to engage in ---------------------------------------- Page Break ---------------------------------------- 8 precisely the same activities. The court of appeals has chosen an interpretation of the two McCarran- Ferguson conditions that is internally inconsistent. Because that is `the only interpretation on which respondents could prevail in this case, the judgment below should be reversed. ARGUMENT Section 13, para. 11, of the Federal Reserve Act, 12 U.S.C. 92, provides in relevant part that national banks located and doing business in any place the pop- ulation of which does not exceed five thousand inhabitants * * * may, under such rules and regulations as may be prescribed by the Comp- troller of the Currency, act as the agent for any fire, life, or other insurance company authorized by the authorities of the State in which said bank is located to do business in said State, by soliciting and selling insurance and collecting premiums on policies issued by such company; and may receive for services so rendered such fees or commissions as may be a-greed upon between the said asso- ciation and the insurance company for which it may act as agent. Fla. Stat. Ann. 626.988 (West Supp. 1995), on the other hand, prohibits any insurance agent associated with a bank that is owned by a holding company from selling "any policy or contract of insurance other than credit life insurance or credit disability insurance." Both courts below acknowledged (see Pet. App. 3a, 8a, 23a-24a) that the state and federal laws are in irreconcilable conflict. Under 12 U.S.C. 92, any ---------------------------------------- Page Break ---------------------------------------- 9 national bank located in a place with 5,000 or fewer inhabitants "may" act as an agent for "any fire, life or other insurance company." Under Section 626.988(1)(a), however, such a bank may not undertake the same activities (other than sales of credit life or credit disability insurance) unless it is "not a subsidiary or affiliate of a bank holding company." Florida's restriction thus stands "as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress" in authorizing certain national banks to act as insurance agents. Hines v. Davidowitz, 312 U.S. 52, 67 (1941). Under normal principles of federal supremacy, the state prohibition must give way to the explicit federal authorization. See, e.g., Fidelity Fed. Sav. & Loan Ass'n v. de la Cuesta, 458 U.S. 141, 152-156 (1982); Owensboro Nat'l Bank v. Stephens, 44 F.3d 388,392 (6th Cir. 1994). The question in this case is whether those prin- ciples of preemption are superseded, in this instance, by Section 2(b) of the McCarran-Ferguson Act, 15 U.S.C. 1012(b). See United States Dep't of Treasury v. Fabe, 113 S. Ct. 2202, 2211 (1993). That Act provides that a federal law should not be held to pre- empt "any law enacted by any State for the purpose of regulating the business of insurance," unless the federal law "specifically relates to the business of insurance." 15 U.S.C. 1012(b). In applying the Act in this case, the court of appeals held that Section 626.988 was "enacted * * * for the purpose of regulating the business of insurance," and that Sec- tion 92 does not "specifically relate[] to the business of insurance." The court erred on both counts. ---------------------------------------- Page Break ---------------------------------------- 10 I. SECTION 626.988 WAS NOT ENACTED "FOR THE PURPOSE OF REGULATING THE BUSI- NESS OF INSURANCE" 1. This Court has held that state laws are enacted "for the purpose of regulating the business of insur- ance" within the meaning of the McCarran-Ferguson Act if they "possess the `end, intention, or aim' of ad- justing, managing, or controlling the business of insurance." Fabe, 113 S. Ct. at 2210. Section 626.988, however, does not affect how the insurance business is conducted in Florida. It imposes no standard, and requires or forbids no practice, related to the sub- stance of that business. It regulates neither the "transferring or spreading [of] a policyholder's risk," nor any other practice that is "an integral part of the policy relationship between the insurer and the insured." Union Labor Life Ins. Co. v. Pirenol 458 U.S. 119, 129 (1982); see also Fabe, 113 S. Ct. at 2209; id. at 2213-2216 (Kennedy, J., dissenting). Section 626.988 instead regulates the conduct of "financial institutions" including certain national banks, by generally prohibiting them from acting as or affiliating with insurance agents. That prohibition applies even if a-bank complies with all of the State's generally applicable rules and regulations governing the conduct of insurance agents or the insurance business. In this case, for example, Linda Clifford was State-licensed, active, and in good standing as a "life, health and general lines insurance agent." Pet. App. 20a. The day after petitioner acquired her agency, however, Clifford automatically lost her ability under Florida law to act as an agent in the sale of anything other than credit life or credit disability insurance-even if all her customers, and all the ---------------------------------------- Page Break ---------------------------------------- 11 insurers that underwrote the policies she sold them, remained unchanged. The McCarran-Ferguson Act "focus[es] * * * upon the relationship between the insurance company and the policyholder." Fabe, 113 S. Ct. at 2208, citing SEC v. National Securities, " Inc., 393 U.S. 453, 460 (1969) ("The relationship between insurer and insured, the type of policy which could be issued, its reliability, interpretation, and enforcement-these were the core of the `business of insurance.'"). The practical operation of Section 626.988, on the other hand, indicates that, in enacting it, the State was concerned with restricting the activities of banks and their affiliates, rather than with regulating the conduct of the business of insurance. The relation- ship proscribed in this case, between an otherwise qualified insurance agent and a bank, "has no integral connection to the relationship between the insured and insurer." United Services Auto. Ass `n v. Muir, 792 F.2d 356, 364 (3d Cir. 1986), cert. denied, 479 U.S. 1031 (1987). In this connection, it is important to note that, with respect to banks located in places with fewer than 5,000 inhabitants-that is, with respect to essentially the same banks that 12 U.S.C. 92 authorizes to act as insurance agents-Section 626.988 applies only to a bank that, like petitioner, is "a subsidiary or affiliate of a bank holding company." 626.988(1)(a). That limitation emphasizes the fact that the state pro- scription does not focus on the relationship between the insurer and insured, but on restricting the activities of banks affiliated with bank holding com- panies (as distinguished from banks that are inde- pendently owned). State regulation of that kind is remote from the concerns of the McCarran-Ferguson ---------------------------------------- Page Break ---------------------------------------- 12 Act. In that respect, this case is much like National Securities, in which this Court held that a law requiring the state insurance commissioner to certify that an insurance company merger was not inequitable to stockholders fell outside the protection of the Act. The Court there emphasized that the State was "not attempting to secure the interests of those purchasing insurance policies", but rather had "focused its attention on stockholder protection." National Securities, 393 U.S. at 460; see also Pireno, 458 U.S. at 132 (insurer's use of advisory peer review committee was "a matter of indifference to the policyholder," and not part of the "business of insur- ance"); Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 213-214 (1979) (insurer's own contracts with pharmacies to provide benefits to policyholders were not part of insurance business); Fabe, 113 S. Ct. at 2208-2209 (discussing prior cases). 2. We do not dispute that "[t]he selling * * * of policies * * * and the licensing of * * * agents" can be part of" the "business of insurance." See National Securities, 393 U.S. at 460. Many state sales and licensing regulations may indeed be "enacted * * * for the purpose of regulating" that business within the meaning of 15 U.S.C. 1012(b). Generally applicable education, experience, or financial responsibility requirements for obtaining an insurance agency license would, for example, presum- ably meet that standard. The government has never argued that Section 92 would preempt the application of such reasonable and generally applicable regu- lations, so long as they are neither designed nor ap- plied differentially to exclude national banks from undertaking insurance activities authorized by federal law. Cf. Davis v. Elmira Sav. Bank, 161 U.S. ---------------------------------------- Page Break ---------------------------------------- 13 275, 290 (1896) (national banks' activities are subject to the operation of "general and undiscriminating state laws" that "do not conflict with the letter or the general objects and purposes of Congressional legis- lation."). McCarran-Ferguson's protection would also presumably extend to reasonable categorical exclusions relevant to the protection of present or potential policyholders, such as rules prohibiting the operation of insurance agencies by convicted felons or by persons previously found to have committed fraud. The prohibition at issue in this case, however, is of a different sort. The court of appeals held that Section 626.988 "reg- ulates the business of insurance because it protects policyholders." Pet. App. 13a. It based that conclu- sion on the ground that the state law safeguards "the financial stability of insurance companies" by pre- venting improper "pressures" that "could force an insurer to assume a bad risk to quickly consummate a bank loan, or could push a bank customer to take out unnecessary insurance where the bank's only motive is profit." Id. at 12a. Those are implausible motiva- tions for prohibiting insurance agents from affiliating with banks owned by bank holding companies. It is not clear how a bank-affiliated agency could "force an insurer to assume a bad risk to quickly consummate a bank loan." Pet. App. 12a. Insurance underwriters always retain the discretion to decide which risks to insure, regardless of the wishes of their agents. The only situation we can imagine in which a bank-affiliated agency might be in a position "force" the acceptance of a bad risk would be if the loan to be "quickly consumate[d]" were a loan to the underwriter itself. That "risk" would seem to depend on two assumptions. First, the insurance company ---------------------------------------- Page Break ---------------------------------------- 14 would have to be so eager to obtain a particular bank loan that it would consider compromising its under- writing standards-which are, no doubt, themselves closely regulated by state authorities-in order to do so. Second, the bank would have to choose to take advantage of that situation by illegally "tying" a loan to the insurance company's provision of insurance to the bank's customers, rather than simply by charging a higher rate or fee for the loan. 3. Both assumptions seem quite likely. The risk that a bank-affiliated agent might "push a bank customer to take out unnecessary insurance where the bank's only motive is profit" (Pet. App. 12a) is somewhat more realistic. That risk poses no threat to "the financial stability of insurance compan- ies," however, which presumably could only be en- hanced by sales of "unnecessary" insurance. Overly zealous sales practices might be thought to threaten harm to potential insurance buyers, but that threat bears little confection to whether or not a particular agent is affiliated with a bank. All insurance agents have a profit motive for selling policies to customers, so the argument must again relate to the possibility of "tying" the sale of a policy to the approval of a bank loan (this time to the potential insurance buyer), or to some other possible abuse of the bank's relationship with its banking customers. But both state and federal law separately prohibit such tying. See Fla. Stat. Ann. 626.9551 (West 1984); 12 U.S.C. 1972. Moreover, Section 626.988 not only allows small-town banks not affiliated with a holding company, as well as ___________________(footnotes) 3 Federal law prohibits national banks from typing the extension of credit to the purchase or provision of any other product or service; 12 U.S.C. 1972. ---------------------------------------- Page Break ---------------------------------------- 15 certain bank holding companies, to act as agents for all forms of insurance, it also allows all banks to sell credit life and credit disability insurance-which could be closely linked with the bank's consumer loans, and which would therefore seem to be the most likely candidates for illegal "tying" schemes. Fla. Stat. Ann. 626.988(l)(a) and (b) (West 1984 & Supp. 1995). Those exemptions are inexplicable if, as the court below posited (Pet. App. 12a), the state prohibition was intended to protect consumers from particular dangers inherent in the sale of insurance by banks. We do not mean to suggest that the legislative goals suggested by the court of appeals are so insub- stantial that the state law is not a rational exercise of the State's general Legislative powers. If challenged under the Fourteenth Amendment, a State's economic and commercial regulations are presumed to be valid, any inquiry into the legislature's "actual" purposes is generally inappropriate, and the question is only whether "there is any reasonably conceivable state of facts that could provide a rational basis for the clas- sification." Heller v. Doe, 113 S. Ct. 2637, 2642-2643 (1993), quoting FCC v. Beach Communications, Inc., 113 S. Ct. 2096, 2101 (1993). As the court of appeals pointed out (Pet. App. 11a-12a), two state appellate decisions have held that Section 626.988 meets that standard, based on possible legislative purposes much like those posited by the court in this case. Glendale Fed. Sav. & Loan Ass'n v. State, 587 So. 2d 634, 536- 537 & n.1 (Dist. Ct. App. 1991), review denied, 599 So. 2d 656 (Fla. 1992); Production Credit Ass'ns v. Department of Insurance, 356 So. 2d 31 (Fla. Dist. Ct. App. 1978). ---------------------------------------- Page Break ---------------------------------------- 16 This case involves quite a different challenge. The state law in question, as applied to petitioner, con- flicts directly with a federal law. Its application to petitioner may therefore be upheld only if the law meets the special requirements of the McCarran- Ferguson Act, which specifically mandates an inquiry into the State's actual "purpose" in enacting it. 15 U.S.C. 1012(b); see Fabe, 113 S. Ct. at 2209-2210 & n.6 (emphasizing "purpose" requirement). That inquiry is practical and realistic, not purely conjectural. Cf. National Securities, 393 U.S. at 457, 460 (focusing on State's actual purpose in enacting law restricting insurance company mergers]. Such an appraisal of Section 626.988 indicates that it does not meet the first requirement for protection under Section 1012(b). If the State's concern was with banks' adopting coercive lending practices or otherwise taking advantage of their customers, then Section 626.988 is best characterized as an attempt to regulate the business of banking, not the business of insurance. See FTC v. Dixie Finance Co., 695 F.2d 926, 930 (5th Cir.) (App. A) (tying), cert. denied, 461 U.S. 928 (1983); Elliott v. ITT Corp., 764 F. Supp. 102, 105 (N.D. 111. 1991). If, on the other hand (as seems most likely), Section 626.988 was intended to protect insurance agents from having to compete against agents affiliated with banks, see United Services Auto. Ass'n v. Muir, 792 F.2d at 364, then it was not in any meaningful sense "aimed at protecting or regulating," even "indirectly," "the relationship between the insurance company and its policy- holders." Fabe, 113 S. Ct. at 2208; see National Securities, 393 U.S. at 460 ("The crucial point is that here the State * * * is not attempting to secure the interests of those purchasing insurance policies."). ---------------------------------------- Page Break ---------------------------------------- 17 In either case, Section 626.988 was not "enacted * * * for the purpose of regulating the business of insurance" within the meaning of the McCarran- Ferguson Act. II. SECTION 92 "SPECIFICALLY RELATES TO THE BUSINESS OF INSURANCE" Even if the court of appeals was correct in concluding that Section 626.988 satisfied the first requirement for protection from preemption under the McCarran-Ferguson Act, 12 U.S.C. 92 none- theless preempts application of the state law to petitioner. McCarran-Ferguson defeats the normal preemptive effect of federal law only if a state law was enacted for the purpose of regulating the business of insurance and if the conflicting federal law does not specifically relate to that business. 15 U.S.C. 1012(b). We believe that Section 92 does "specifically relate[]" to the insurance business for these purposes. In all events, if Section 626.988 was enacted for the purpose of regulating that business, as the court of appeals concluded, then Section 92 certainly "specifically re- lates" to the insurance business for McCarran- Ferguson purposes. 1. As this Court has recognized, the term "relating to" is a broad one, meaning "to stand in some relation; to have bearing or concern, to pertain; refer; to bring into association with." Morales v. Trans World Airlines, Inc., 504 U.S. 374, 383 (1992) (quoting Black's Law Dictionary 1158 (5th ed. 1979)); see also New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 115 S. Ct. 1671, 1677-1680 (1995) (interpreting term "relate to" in preemption provision of Employee Retirement Income Security Act of 1974 (ERISA)); Shaw v. Delta Air Lines, Inc., , ---------------------------------------- Page Break ---------------------------------------- 18 463 U.S. 85, 96-98 & nn.16 & 19 (1983). The term plainly encompasses more than is included by the use of the word "regulate," which connotes control, direction, or governance of an ongoing activity, rather than mere relationship. See Black's Law Dictionary 1286 (6th ed. 1990); Webster's Third New International Unabridged Dictionary 1913 (1986). See Fabe, 113 S. Ct. at 2210 (equating "regulating" with "adjusting, managing, or controlling"). Under Section 1012(b) a federal law must also "specifically relate[]" to the business of insurance in order to preempt a contrary state rule. As this Court has noted, the history of the McCarran-Ferguson Act confirms that by using that limiting language, the Act's drafters intended that federal laws "merely * * * relating to interstate commerce" would not preempt state insurance laws by implication. Instead, before preemption was authorized, the drafters "want- ed to be sure that the Congress, in its wisdom, [had] act[ed] specifically with reference to insurance in enacting the [federal] law." Fabe, 113 S. Ct. at 2211 n.7 (quoting 91 Cong. Rec. 1487 (1945) (statement of Sen. Ferguson)). Although Section 92 does not appear to regulate the business of insurance, it clearly meets the "specifi- cally relates" standard. Section 92 authorizes certain national banks to "act as the agent for any fire, life, or other insurance company" otherwise authorized to do business in the relevant State, "by soliciting and selling insurance and collecting premiums on poli- cies," and to "receive for services so rendered such fees or commissions as may be agreed upon * * * with the insurance company for which [the bank] may act as agent." 12 U.S.C. 92. Apart from authorizing the Comptroller to prescribe "such rules and regu- ---------------------------------------- Page Break ---------------------------------------- 19 lations" as he deems necessary to regulate those activities, Congress added two specific provisos: The bank may guarantee neither the payment of any premium on a policy issued through its agency, nor the truth of any statement made by a customer in applying for insurance. Section 92 therefore both permits banks to operate insurance agencies, and places specific limits on a bank's ability to interpose itself, as agent, in the relationship between insurer and insured. Those statutory functions unques- tionably "specifically relate[]" to the business of in- surance for the preemption-related purposes of the McCarran-Ferguson Act. 4. See John Hancock Mut. ___________________(footnotes) 4 In recent years the banking and insurance industries, and their respective Legislative supporters, have focused in part on Section 92, precisely because it has been seen as specifically authorizing at least some degree of incursion by banks into "the business of insurance." In 1987, Congress imposed a one-year moratorium on, among other things, any expansion of a nation- al bank's "insurance agency activities pursuant to the Act of September 7, 1916 (12 U.S.C. 92), into places where [the bank] was not conducting such activities as of March 5, 1987." Competitive Equality Banking Act of 1987 (CEBA), Pub. L. No. 100-86, Tit. II, 201(b)(5), 101 Stat. 583. The Senate Bank- ing committee's report on that legislation, including strongly worded dissenting views, indicates that dispute over the proper interpretation of Section 92 was one aspect of a fierce legis- lative struggle over continuing limitations on banks' ability to enter and compete in the securities, real estate, and insurance businesses. See, e.g., S. Rep. No. 19, 100th Cong., 1st Sess. 3-4, 16-17 (specifically noting dispute over scope of insurance agency authority conferred by Section 92), 86-87 (dissenting views), 89-93 (dissenting views) (1987). Senator Garn's dissent- ing views, for example, complained that the proposed legis- lation would "coddle[] the securities, insurance, and real estate industries by moving backwards toward protected, segmented markets and easy profits," id. at 89, and specifically empha- ---------------------------------------- Page Break ---------------------------------------- 20 Life Ins. Co. v. Harris Trust & Sav. Bank, 114 S. Ct. 517, 525 (1993). (ERISA "obviously and specifically relates to the business of insurance"). 2. The court of appeals held that Section 92 did not "specifically relate[]" to the insurance business, in part because the court concluded that in enacting the statute "Congress was concerned with banking, not insurance." Pet. App. 15a. That is a non sequitur. Unlike the first part of the McCarran-Ferguson pre- emption test, which requires inquiry into the exis- tence of a legislative "purpose to regulate the busi- ness of insurance," the second part focuses on wheth- er the provision in question has some objective rela- tionship to the insurance business. We may certainly assume that in authorizing national banks in small towns to sell insurance, Congress's primary purpose was to regulate banking. But the regulation Con- gress imposed gave certain banks the authority to act as agents for the sale of insurance. Whatever its primary regulatory purpose, such a law plainly and ___________________(footnotes) sized that "the involvement of state-chartered [as opposed to national] banks in the insurance business has produced dem- onstrable competitive benefits to consumers in those states; yet, the bill's moratorium moves squarely in the direction of ending that for the benefit of a protected insurance industry" (id. at 92). See also CEBA 201(d) ("Nothing in this [moratorium] section may be construed to increase or reduce the insurance authority of * * * national banks under current law.") and 201(e) (dealing with "insurance activities" of state-chartered banks); H.R. Conf. Rep. No. 261, 100th Cong., 1st Sess. 147-150 (1987); Statement by President Ronald Reagan upon Signing H.R. 27, 100th Cong., 1st Sess., 23 Weekly Comp. Pres. Dots. 918 (1987) (criticizing "retrogressive moratorium on the ability of Federal bank regulators to authorize [banks to offer] new real estate, securities, and insurance products and services to consumers"). ---------------------------------------- Page Break ---------------------------------------- 21 specifically relates to the business of insurance by permitting some banks to engage in one aspect of that business. 5. The court of appeals also reasoned that Section 92 could not relate to the business of insurance because it was passed at a time when the regulation of that business was thought to lie beyond the scope of con- gressional power under the Commerce Clause. Thus, "Congress could not have been attempting to regulate a business that it believed it had no power to regulate." Pet. App. 15a (citing Paul v. Virginia, 75 U.S. (8 Wall.) 168, 183 (1868)). That analysis, however, again confuses the McCarran-Ferguson inquiry whether a state law seeks to regulate the business of insurance with the question whether the conflicting federal law "specifically relates" to that business. Whatever else Congress may have intended when it enacted Section 92, it surely sought to authorize national banks operating in small towns to act as insurance agents. There is no reason to doubt that Congress has always correctly understood that it had the power to grant such authority to national banks, which have, since their creation, been recognized ___________________(footnotes) 5 Section 92 formerly also authorized small-town national banks also to "act as the broker or agent for others in making or procuring loans on real estate located within one hundred miles of the place in which said bank may be located." Act of Sept. 7, 1916, ch. 461, 39 Stat. 753; see 12 U.S.C. 92 note. Congress deleted that language in 1982. Garn-St. German Depository Institutions Act of 1982, Pub. L. No. 97-320, Tit. IV, 403(b), 96 Stat. 1511. The change conformed Section 92 to the amended provisions of 12 U.S.C. 371, which "simplified] the statutory framework by which national banks are authorized to engage in real estate activities" by deleting "rigid statutory standards" and authorizing the Comptroller to promulgate regulations. S. Rep. No. 536, 97th Cong., 2d Sess. 60 (1982). ---------------------------------------- Page Break ---------------------------------------- 22 "instruments designed to be used to aid the [national] government in. the administration of an important branch of public service." Farmers' & Mechanics' Nat'l Bank v. Dearing, 91 U.S. 29, 33 (1876); see also, e.g., First Nat'l Bank v. California, 262 U.S. 366, 368-69 (1923); Easton v. Iowa, 188 U.S. 220, 238 (1903); Davis v. Elmira Sav. Bank, 161 U.S. at 283. 6. Finally, the court of appeals read too much into this Court's statement in Fabe that the McCarran- Ferguson Act "is, in effect, a clear statement rule" that state laws regulating the insurance business "do not yield to conflicting federal statutes unless a federal statute specifically requires otherwise." Pet. App. 13a (quoting Fabe, 113 S. Ct. at 2211). The Act itself requires only that a federal law "specifically relate[]" to the ,business of insurance; it does not re- quire, as the opinion below suggests, that the pro- vision expressly state that conflicting state laws will be preempted. Indeed, such a requirement would make little sense. The McCarran-Ferguson Act was intended, at the time of its passage, to provide preemp- tion rules for both existing and future laws. Fabe, 113 S. Ct. at 2211 (quoting 91 Cong. Rec. 1487 (1945) (statements of Sens. Ferguson and O'Mahoney)). Other than by coincidence, however, past laws would have been unlikely to contain language complying with a drafting requirement that was not imposed until after their enactment. And future laws that ___________________(footnotes) 6 In United States v. South-Eastern Underwriters Ass`n, 322 U.S. 533, 556-559 (1944), which upheld a price-fixing suit against an association of insurance companies, this Court rejected the argument that Congress must have intended to exclude the insurance business from the Sherman Act because at the time that Act was passed Congress was thought to have no power to regulate that business under the Commerce Clause. ---------------------------------------- Page Break ---------------------------------------- 23 specify their preemptive effect upon state law have no need for the sort of general preemption rule that McCarran-Ferguson provides. 7. 3. Finally, if the court of appeals was correct to conclude that Section 626.988 was enacted "for the purpose of regulating the business of insurance" within the meaning of McCarran-Ferguson, then Sec- tion 92 must certainly "specifically relate[]" to that business for purposes of the Act. Section 92 and Section 626.988 conflict because they are in large part mirror images, one authorizing and one forbidding certain insurance agency activities on the part of certain national banks. If Florida's effort to preclude small-town banks (when owned by or affiliated with holding companies) from selling insurance is a regu- lation of "the business of insurance," then Congress's express permission for them to do so must certainly "specifically relate[]" to the same business. The court of appeals' holding to the contrary is internally inconsistent. As discussed above, in our view Section 622.988 was not enacted for the purpose of regulating the insurance business, while Section 92 specifically relates to that business. That analysis depends on the fact that the term "relates" is con- siderably broader in application than the term "regu- late." It might be plausible to hold that both Florida's attempt to restrict banks from acting as insurance ___________________(footnotes) 7 As originally approved, the Act stated that "[n]o act of Congress * * * shall be construed to invalidate, impair or supersede" state laws "enacted for the purpose of regulating the business of insurance * * * unless such act specifically so provides." 91 Gong. Rec. 488 (1945) (Senate); id. at 1085 (House) (emphasis added). That language was rejected in conference, and replaced by the "specifically relates" language of the present Section 1012(3). 91 Cong. Rec. 1396 (1945). ---------------------------------------- Page Break ---------------------------------------- 24 agents, and Section 92's limited permission to certain banks to do so, "concern banking, not insurance." Pet. App. 14a-15a. In that case, the McCarran- Ferguson Act would have no application, and federal law would prevail. Alternatively, one might possibly conclude that the state law was enacted to regulate, and that the federal law specifically relates to, "the business of insurance," in which case McCarran- Ferguson allows preemption by its terms. It is wholly implausible, however, to treat the state law at issue here as one enacted to regulate the insurance business, while holding that a directly conflicting federal law does not even "relate" to that business, That implausible interpretation is the only one under which respondents could prevail in this case. CONCLUSION The judgment of the court of appeals should be reversed. Respectfully submitted. JULIE L. WILLIAMS Chief Counsel L. ROBERT GRIFFIN ERNEST C. BARRETT, III JOAN M. BERNOTT Attorneys Office of the Comptroller of the Currency DREW S. DAYS, III Solicitor General FRANK W. HUNGER Assistant Attorney General PAUL BENDER Deputy Solicitor General EDWARD C. DUMONT Assistant to the Solicitor General ANTHONY J. STEINMEYER JACOB M. LEWIS Attorneys NOVEMBER 1995 ---------------------------------------- Page Break ---------------------------------------- No. 94-1837 In The Supreme Court of The United States OCTOBER TERM, 1995 BARNETT BANK OF MARION COUNTY, N.A., PETITIONER v. TOM GALLAGHER, FLORIDA INSURANCE COMMISSIONER, ET AL. ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT BRIEF FOR THE UNITED STATES AND THE COMPTROLLER OF THE CURRENCY AS AMICI CURIAE SUPPORTING PETITIONER JULIE L. WILLIAMS Chief Counsel L. ROBERT GRIFFIN ERNEST C. BARRETT III JOAN M. BERNOTT Attorneys Office of the Comptroller of the Currency Washington, D.C. 20219 DREW S. DAYS, III Solicitor General FRANK W. HUNGER Assistant Attorney General PAUL BENDER Deputy Solicitor General EDWARD C. DUMONT Assistant to the Solicitor General ANTHONY J. STEINMEYER JACOB M. LEWIS Attorneys Department of Justice Washington, D.C. 20530 (202)514-2217 ---------------------------------------- Page Break ---------------------------------------- QUESTION PRESENTED Whether 12 U.S.C. 92 ( Supp. V 1993), which pro- vides that national banks in places with no more than 5,000 inhabitants may act as insurance agents, pre- empts a state law that prohibits most such banks from engaging in most insurance agency activities. (I) ---------------------------------------- Page Break ---------------------------------------- TABLE OF CONTENTS Page Interest of the United States and the Comptroller of the Currency . . . . 1 Statement . . . . 2 Argument . . . . 5 Concision . . . . 19 TABLE OF AUTHORITIES Cases: Davis v. Elmira Sav. Bank, 161 U.S. 275 (1896) . . . . 14 Easton v. Iowa 188 U.S. 220 (1903) . . . . 14 FCC v. Beach Communications, Inc., 113 S. Ct. 2096 (1993) . . . . 11 Farmers' & Mechanics' Nat'l Bank v. Dearing, 91 U.S. 29 (1875) . . . . 14 First Advantage Ins., Inc. v. Green, 652 So. 2d 562 (La. Ct. App.), review denied, 654 So. 2d 331 (La. 1995) . . . . 17 First Nat'l Bank of E. Arkansas v. Taylor, 907 F.2d 775 (8th Cir.), cert. denied, 498 U.S. 972 (1990) . . . . 7, 8, 15 Glendale Fed. Sav. & Loan Ass'n v. State, 587 So. 2d 534 (Dist. Ct. App. 1991), review denied, 599 So. 2d 656 (Fla. 1992) . . . . 11 Hartford Fire Ins. Co. v. California, 113 S. Ct. 2891 (1993) . . . . 2 Heller v. Doe, 113 S. Ct. 2637 (1993) . . . . 11 Independent Bankers Ass'n of America V. Heimann, 613 F.2d 1164 (D.C. Cir. 1979), cert. denied, 449 U.S. 823 (1980) . . . . 8-9, 15 NationsBank of North Carolina, N.A. v. Variable Annuity Life Ins. Co., 115 S. Ct. 810 (1995) . . . . 1, 2, 17 Owensboro Nat'l Bank v. Owensboro, 173 U.S. 664 (1899) . . . . 14 Owensboro Nat'l Bank v. Stephens, 44 F.3d 388 (6th Cir. 1994) . . . . 2, 7, 15, 16, 18 Production Credit Ass'ns of Florida v. Department of Insurance, 356 So. 2d 31 (Fla. Dist. Ct. App. 1978) . . . . 11 (III) ---------------------------------------- Page Break ---------------------------------------- IV Cases-Continued: Page SEC v. National Securities, Inc., 393 U.S. 453 (1969) . . . . 9, 1l, l2, l5 Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119 (1982) . . . . 7 United Services Auto. Ass'n v. Muir, 792 F.2d 356 (3d Cir. 1986), cert. denied, 479 U.S. 1031 (1987) . . . . 8, 12 ,15 United States Dep't of Treasury v. Fabe, 113 S. Ct. 2202 (1993) . . . . 2, 5, 9, 11, 12, 15 United States Nat'l Bank of Oregon v. Independent Ins. Agents of America, Inc., 113 S. Ct. 2173 (1993) . . . . 2 United States v. South-Eastern Underwriters Ass'n 322 U.S. 533 (1944) . . . . 15 Constitution and statutes: U.S. Const: Art. I, 8, Cl. 3 (Commerce Clause) . . . . 13 Amend. XIV . . . . 10 Bank Holding Company Act of 1956, 4 (d), 12 U.S.C. 1843 (d) . . . . 3 Federal Reserve Act 13, para. 9, 12 U.S.C. 92 (Supp. V 1993) . . . . passim McCarran-Ferguson Act, 15 U.S.C. 1011 et seq . . . . 2 2(b), 15 U.S.C. 1012(b) . . . . 4, 5, 6, 8, 9, 11, 12, 14, 16 National Bank Act, 12 U.S.C. 21 et seq . . . . 1, 13 12 U.S.C. 24 Seventh (1988 &. Supp. V 1993) . . . . 8 12 U.S.C. 1972 (1988 & Supp. V 1993) . . . . 10 Fla. Stat. Ann. (West): 626.9551 (1984) . . . . 10 626.988 (Supp. 1995) . . . . 3, 4, 6, 9, 10 ,11, 12, 13 626.988 (1) (a) (Supp. 1995) . . . . 3, 10 626.988 (1) (b) (Supp. 1995) . . . . 3 626.988 (3) (Supp. 1995) . . . . 10 Ky. Rev. Stat. Ann. 287.030(4) (Michie 1988) . . . . 15 Miscellaneous: 91 Cong. Rec. 1442 (1945) . . . . 15 H.R. Rep. No. 143, 79th Cong., 1st Sess. (1945) . . . . 15 ---------------------------------------- Page Break ---------------------------------------- In the Supreme Court of the United States OCTOBER TERM, 1995 No. 94-1837 BARNETT BANK OF MARION COUNTY, N.A., PETITIONER v. TOM GALLAGHER, FLORIDA INSURANCE COMMISSIONER, ET AL. ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT BRIEF FOR THE UNITED STATES AND THE COMPTROLLER OF THE CURRENCY AS AMICI CURIAE SUPPORTING PETITIONER INTEREST OF THE UNITED STATES AND THE COMPTROLLER OF THE CURRENCY The Comptroller of the Currency is the primary regulator of banks chartered under the National Bank Act, 12 U.S.C. 21 et seq. See NationsBank of North Carolina, N.A. v. Variable Annuity Life Ins. Co., 115 S. Ct. 810, 813 (1995). The Comptroller accord- ingly has an interest in assuring that national banks are able to exercise, subject to his supervision, the powers granted to them by Congress, including the power to engage in insurance agency activities set out in 12 U.S.C. 92 (Supp. V 1993). The United States (1) ---------------------------------------- Page Break ---------------------------------------- 2 also has an interest in the proper interpretation of the McCarran-Ferguson Act, 15 U.S.C. 1011 et seq., on which the court of appeals relied in holding that Section 92 does not preempt the state law at issue here. The Comptroller participated as an amicus curiae before the court of appeals in this case. The United States, on the Comptroller's behalf, also intervened as a party in Owensboro Nat'l Bank v. Stephens, 44 F.3d 388 (6th Cir. 1994) (time for filing petition for a writ of certiorari extended, No. A-916 (June 1, 1995)), which held that Section 92 preempts a Ken- tucky statute that purports to restrict the insurance agency activities of national banks in much the same way as the Florida statute at issue in this case. The Comptroller has participated as a party in two re- cent cases in this Court concerning the validity and scope of Section 92. See NationsBank of North Caro- lina, supra; United States Nat'l Bank of Oregon v. Independent Ins. Agents of America, Inc., 113 S. Ct. 2173 (1993). The United States has participated in numerous cases involving interpretation of the McCarran-Ferguson Act. See, e.g., Hartford Fire Ins. Co. v. California, 113 S. Ct. 2891 (1993) ; United States Dep't of Treasury v. Fabe, 113 S. Ct. 2202 (1993). STATEMENT 1. Belleview, Florida, is a town with fewer than 5,000 inhabitants. Petitioner Barnett Bank of Marion County; N.A., is a national bank with a branch in Belleview. Petitioner is a wholly owned subsidiary of Barnett Banks, Inc., a Florida bank holding company. Pet. App. 20a; see also Pet. ii. In October, 1993, petitioner purchased the assets and business of Linda Clifford Insurance, Inc. (LCI), an insurance agency also located and doing business ---------------------------------------- Page Break ---------------------------------------- 3 in Belleview. LCI's employees, including Clifford herself, became employees of petitioner. Pet. App. 20a. Four days after the purchase, respondent Gal- lagher, the state Insurance Commissioner, ordered Clifford and LCI to cease and desist from engaging in any "insurance agency activity." Id. at 19a. Re- spondent relied on Fla. Stat. Ann. 626.988 (West Supp. 1995) (reprinted at Pet. 4-5), which generally prohibits an otherwise licensed insurance agent from engaging in "insurance agency activities" if he or she is associated in any way with a "financial insti- tution." Under the statute, "insurance agency activi- ties" include the sale or servicing of insurance policies other than credit life or credit disability policies, and the term "financial institution" includes (among other things) most banks and bank holding compa- nies, including petitioner. Fla. Stat. Ann. 626.988 (1) (a) and (b) (West Supp. 1995). 1. 2. Petitioner sued respondents Gallagher and the Florida Department of Insurance for declaratory and injunctive relief, contending that federal law preempts application of Section 626.988 to prohibit petitioner's operation of LCI. Petitioner relied on Section 13, para. 9, of the Federal Reserve Act, 12 U.S.C. 92 ( Supp. V 1993), which provides that any national bank located and doing business in a ___________________(footnotes) 1 The statute excludes from the definition of "financial institution" any bank holding company exempted from regu- lation by the Federal Reserve Board under Section 4(d) of the Bank Holding Company Act of 1956, 12 U.S.C. 1843(d) (relating to companies that have held a small bank since before July 1, 1968), and any bank "which is not a subsidiary or affiliate of a bank holding company and is located in a city having a population of less than 5,000." Fla. Stat. Ann. 626.988(1) (a) (West 1995). Neither exclusion applies to petitioner. ---------------------------------------- Page Break ---------------------------------------- 4 place with no more than 5,000 inhabitants may, under supervision by the Comptroller, "act as the agent for any fire, life, or other insurance company" that is authorized to do business in that State. See Pet. App. 18a. The district court denied petitioner's request for relief. Pet. App. 17a-36a. The court recognized that Section 626.988 was inconsistent with Section 92. Pet. App. 23a-24a. However, the court accepted re- spondents' argument that Section 626.988 was saved from preemption by Section 2(b) of the McCarran- Ferguson Act, 15 U.S.C. 1012 (b). See Pet. App. 25a-35a. That Act provides that federal law will not preempt a state statute "enacted * * * for the pur- pose of regulating the business of insurance," unless the federal law "specifically relates to the `business of insurance." 15 U.S.C. 1012 (b). The district court first concluded that Section 626.988 was enacted "for the purpose of regulating the business of insurance." Pet. App. 26a-32a. The court then held that Section 92 does not "specifically relate[] to the business of insurance," and that it "fails to manifest any ex- press intent to preempt state insurance laws." Id. at 32a-35a. The court accordingly sustained the State's application of Section 626.988 to prevent petitioner from operating LCI. 3. The court of appeals affirmed. Pet. App. la- 16a. The court first held that it had jurisdiction to decide petitioner's claim. Id. at 5a-6a. The court then examined Florida law (id. at 8a-13a), and con- cluded that the aim of Section 626.988 is to protect insurance policyholders by preventing "the loss of arm ['] s-length transactions and objectivity" that might occur when "[a] bank becomes involved with insurer and insured." Pet. App. 12a. The court therefore agreed that Section 626.988 "regulates the ---------------------------------------- Page Break ---------------------------------------- 5 business of insurance" for purposes of the McCarran- Ferguson Act. Turning to 12 U.S.C. 92 (Supp. V 1993), the court concluded (Pet. App. 13a-15a) that the history of that Section, and its relationship to the National Bank Act and the Federal Reserve Act, indicated that in enacting it "Congress was concerned with banking, not insurance." Id. at 15a. On that basis, the court also agreed with the district court's deter- mination that Section 92 neither "specifically relates to the business of insurance" nor otherwise "specifi- cally requires" the preemption of conflicting state laws. Pet. App. 15a (quoting 15 U.S.C. 1012(b) and United States Dep't of Treasury v. Fabe, 113 S. Ct. 2202, 2211 (1993)). ARGUMENT The decision below is incorrect, and conflicts with a decision of another federal court of appeals. The question presented is one of substantial importance to the Comptroller of the Currency, as the primary regulator of banks chartered under the National Bank Act; to national banks themselves; to those engaged in the business of insurance; to the state regulators primarily charged with regulating that business; and to consumers of insurance products throughout the country. The matter therefore war- rants review and resolution by this Court. 1. Section 13, para. 9, of the Federal Reserve Act, 12 U.S.C. 92 (Supp. V 1993), provides in relevant part that national banks located and doing business in any place the popu- lation of which does not exceed five thousand in- habitants * * * may, under such rules and regu- lations as may be prescribed by the Comptroller of the Currency, act as the agent for any fire, ---------------------------------------- Page Break ---------------------------------------- 6 life, or other insurance company authorized by the authorities of the State in which said bank is located to do business in said State, by solicit- ing and selling insurance and collecting premi- ums on policies issued by such company; and may receive for services so rendered such fees or commissions as may be agreed upon between the said association and the insurance company for which it may act as agent. Petitioner, a national bank doing business in a small Florida town, relied on the explicit federal-law au- thority reflected in Section 92 when it acquired and attempted to operate a local insurance agency. It was prevented from conducting the agency's business by state insurance authorities, who relied on a state law that prohibits sales of most types of insurance by agents associated with a small-town bank that, like petitioner (and like most other national banks), is owned by a bank holding company. Fla. Stat. Ann. 626.988 (West Supp. 1995) . As both courts below acknowledged (see Pet. App. 3a, 8a, 23a-24a), the federal and state laws on which the parties respectively rely are in irreconcilable con- flict. Resolution of the question presented therefore depends on whether normal principles of preemption are superseded by Section 2(b) of the McCarran- Ferguson Act, 15 U.S.C. 1012 (b). In applying McCarran-Ferguson to this case, the court of appeals held that Fla. Stat. Ann. 626.988 (West Supp. 1995) was "enacted * * * for the purpose of regulating the business of insurance," and that 12 U.S.C. 92 (Supp. V 1993) does not "specifically relate[] to the business of insurance." The court et-red on both counts, a. Section 626.988 does not affect how the insur- ance business is conducted in Florida. It imposes no ---------------------------------------- Page Break ---------------------------------------- 7 standard, and requires or forbids no practices, re- lated to the substance of that business. It regulates neither the "transferring or spreading [of] a policy- holder's risk," nor any other practice that is "an integral part of the policy relationship between the insurer and insured." See Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129 (1982); Owensboro Nat'l Bank v. Stephens, 44 F.3d 388, 391-392 (re- printed at Pet. App. 39a, 46a-47a). Instead, it regu- lates the conduct of "financial institutions," includ- ing certain national banks, by prohibiting them, under most circumstances, from acting as or affiliat- ing with insurance agents, even if they comply with all the State's generally applicable rules and regula- tions governing the conduct of such agents or the insurance business. Moreover, in the case of small- town banks, that prohibition applies only to banks that are "subsidiar[ies] or affiliate[s] of a bank holding company," and therefore amounts to regula- tion, not of the bank's insurance activities, but of its ownership structure. Section 626.988 was therefore not "enacted * * * for the purpose of regulating the business of insurance" within the meaning of the McCarran-Ferguson Act; it was enacted for the pur- pose of regulating the business of banking. With the exception of the court below in this case, the federal courts of appeals have uniformly con- cluded that state laws restricting the insurance ac- tivities of national banks do not regulate the business of insurance, and therefore do not fall within McCarran-Ferguson's protections. In addition to the Owensboro decision, discussed below, which conflicts directly with the decision in this case, the court in First Nat'l Bank of E. Arkansas v. Taylor, 907 F.2d 775, 779-780 (8th Cir.), cert. denied, 498 U.S. 972 (1990), concluded that a State could not apply its ---------------------------------------- Page Break ---------------------------------------- 8 restrictions on the sale of insurance to the sale of debt cancellation contracts by national banks, pri- marily because the Comptroller had construed the general banking powers conferred by 12 U.S.C. 24 Seventh (1988 & Supp. V 1993) to permit national banks to sell such contracts. The court rejected the State's argument that McCarran-Ferguson prevented preemption of its rules, observing that that Act "was not directed at the activities of national banks," and that where contract sales were authorized by federal law they "[did] not constitute the `business of in- surance'" within the meaning of Section 1012(b). First Nat'l Bank of E. Arkansas, 907 F.2d at 779. Similarly, in United Services Auto. Ass'n v. Muir, 792 F.2d 356 (3d Cir. 1986), cert. denied, 479 U.S. 1031 (1987), the court of appeals considered an in- surance company's suit to enjoin state regulators from revoking the company's license on the ground that its purchase of a bank was in violation of a state statute prohibiting mergers between financial insti- tutions and insurance companies. In rejecting the State's claim that the McCarran-Ferguson Act pro- tected its statute from preemption, the court em- phasized that "affiliation between insurers and banks has no integral connection to the relationship between the insured and insurer." 792 F.2d at 364. As the court concluded, laws such as Pennsylvania's "have no part in the business of insurance under McCarran- Ferguson." Ibid. See also Independent Bankers Ass'n of America v. Heimann, 613 F.2d 1164, 1170-1171 (D.C. Cir. 1979) (upholding Comptroller's regulation of disposition of income from sale of credit life in- surance by national banks: "Nothing in the Mc- Carran-Ferguson Act was intended to affect the power of the Comptroller under authority of Congress to regulate `unsafe and unsound' banking practices ---------------------------------------- Page Break ---------------------------------------- 9 of national banks."), cert. denied, 449 U.S. 823 (1980). In holding that Section 626.988 was enacted "for the purpose of regulating the business of insurance," the court of appeals here purported to apply the standards set out by this Court in United States Dep't of Treasury v. Fabe, 113 S. Ct. 2202 (1993), and SEC v. National Securities, Inc., 393 U.S. 453, 460 (1969). See Pet. App. 9a-13a. As both Fabe and National Securities make clear, however, "the focus of McCarran-Ferguson is upon the relationship be- tween the insurance company and its policyholders." Fabe, 113 S. Ct. at 2208; see National Securities, 393 U.S. at 460 ("The relationship between insurer and insured, the type of policy which could be issued, its reliability, interpretation, and enforcement-these [are] the core of the `business of insurance.'"). On that basis, Fabe held that a state law governing priority of claims in bankruptcy came within the scope of McCarran-Ferguson only to the extent that it protected policyholders, because to that extent it was "integrally related to the performance of insur- ance contracts." 113 S. Ct. at 2209. National Securi- ties held that a law requiring the state insurance commissioner to certify that an insurance company merger was not inequitable to stockholders fell out- side the scope of Section 1012(b), because in requir- ing that approval the State was "not attempting to secure the interests of those purchasing insurance policies," but rather had "focused its attention on stockholder protection." 393 U.S. at 460. In this case, the court of appeals held that Section 626.988 "protects policyholders" because it safeguards "the financial stability of insurance companies" by preventing improper "pressures" that "could force an insurer to assume a bad risk to quickly consum- ---------------------------------------- Page Break ---------------------------------------- 10 mate a bank loan, or could push a bank customer to take out unnecessary insurance where the bank's only motive is profit." Pet. App. 12a-13a. Those are implausible motivations for the enactment of a broad ban on bank-related insurance agencies. The risk that an agent might sell customers "unnecessary in- surance" (which could, of course, only enhance the "financial stability" of the insurer) has no evident connection to whether or not the agent is somehow related to a bank (let alone to whether the bank, in turn, is owned by or affiliated with a bank holding company). Similarly, it is unlikely -that in enacting Section 626.988 the State was actually concerned with the speculative risk that a bank might attempt to "tie" the availability of a commercial loan to an insurer's willingness to take imprudent underwriting risks, let alone the even more remote risk that it might succeed in doing so. 2. We do not mean to suggest that the legislative goals suggested by the court of appeals are so insubstantial that the state law, considered by itself, is not a rational exercise of the State's general legislative powers. If challenged under the Fourteenth Amend- ment, a State's economic and commercial regulations ___________________(footnotes) 2 State law separately prohibits tying the extension of credit to the purchase of insurance. Fla. Stat. Ann. 626.9551 (West 1984). And federal law prohibits national banks from tying the extension of credit to the purchase of any other product. 12 U.S.C. 1972 (1988 & Supp. V 1993). We also note that Section 626.988's restrictions do not apply to any small-town bank not owned by a holding company; to certain exempted bank holding companies; or to agents affiliated with non-bank subsidiaries engaged in certain insurance agency ac- tivities permitted under the Bank Holding Company Act. Fla. Stat. Ann. 626,988(1) (a) and (3) (West Supp. 1995). The court of appeals offered no explanation for those exceptions. ---------------------------------------- Page Break ---------------------------------------- 11 are presumed to be valid; any inquiry into the legis- lature's "actual" purposes is generally inappropriate, and the question is only whether "there is any rea- sonably conceivable state of facts that could pro- vide a rational basis for the classification." Heller v. Doe, 113 S. Ct. 2637, 2642-2643 (1993) (quoting FCC v. Beach Communications, Inc., 113 S. Ct. 2096, 2101 (1993) ). As the court of appeals pointed out (Pet. App. 11a-12a), a state appellate court has twice held that Section 626.988 meets that undemanding standard, based on hypothetical legislative purposes much like those posited by the court in this case. Glendale Fed. Sav. & Loan Ass'n v. State, 587 So. 2d 534, 536-537 & n.1 (Dist. Ct. App. 1991), review denied, 599 So. 2d 656 (Fla. 1992); Production Credit Ass'ns of Florida v. Department of Insurance, 356 So. 2d 31 (Fla. Dist. Ct. App. 1978). This case involves quite a different sort of chal- lenge. The state law in question, as applied to peti- tioner, conflicts with a federal law, and to that extent it is presumptively invalid. Its application to peti- tioner may be upheld only if the law meets the re- quirements of 15 U.S.C. 1012(b), which specifically mandates an inquiry into the State's "purpose" in en- acting it. See Fabe, 113 S. Ct. at 2209-2210 & n.6 (emphasizing "purpose" requirement). That inquiry is practical and realistic, not merely conjectural. Cf. National Securities, 393 U.S. at 457, 460 (focusing on State's actual purpose in enacting law restricting insurance company mergers ). "The selling * * * of policies * * * and the licens- ing of * * * agents" can be part of the "business of insurance" for purposes of the McCarran-Fergu- son Act. See National Securities, 393 U.S. at 460. In this case, however, Section 626,988 precludes an entire class of otherwise qualified (indeed, otherwise ---------------------------------------- Page Break ---------------------------------------- 12 already licensed) insurance agents from selling al- most any kind of insurance, solely because they are affiliated with a national bank that is owned, in turn, by a bank holding company. If the State was ac- tually concerned, as the court of appeals suggested (Pet. App. 12a), either with coercive bank lending practices or with banks' taking advantage of their customers, then Section 626.988 is best characterized (as discussed above) as an effort to regulate the business of banking, not the business of insurance. The most plausible explanation for the rule against bank affiliation is, however, a desire to protect other insurance agents from competition from agents affi- liated with banks. See United Services Auto. Ass'n v. Muir, 792 F.2d at 364. Such a law is not "aimed at protecting or regulating," even "indirectly," "the relationship between the insurance company and its policyholders." Fabe, 113 S. Ct. at 2208; see Na- tional Securities, 393 U.S. at 460 ("The crucial point is that here the State * * * is not attempting to secure the interests of those purchasing insurance pol- icies."); Muir, 792 F.2d at 364 (('affiliation between insurers and banks has no integral connection to the relationship between the insured and insurer"). In either case, Section 626.988 was not "enacted * * * for the purpose of regulating the business of insur- ance" within the meaning of Section 1012 (h). b. Thus, we think the court of appeals erred in concluding that Section 626.988 satisfied the first re- quirement for protection from preemption under the McCarran-Ferguson Act. If the court of appeals was correct, however, then 12 U.S.C. 92 ( SUPP. V 1993) nonetheless preempts application of the state law to petitioner. McCarran-Ferguson defeats the preemp- tive effect of federal law only if the state law was enacted for the, purpose of regulating the business of ---------------------------------------- Page Break ---------------------------------------- 13 insurance and if the federal law does not specifically relate to that business. If the court of appeals was correct that Section 626.988 regulates "the business of insurance" within the meaning of McCarran- Ferguson, then Section 92 "specifically relates to the business of insurance" for purposes of that Act. Section 92 provides that any national bank located in a place with no more than 5,000 inhabitants may "act as the agent for any fire, life, or other insur- ance company" otherwise authorized to do business in the relevant State, "by soliciting and selling in- surance and collecting premiums on policies," and "may receive for services so rendered such fees or commissions as may be agreed upon * * * [with] the insurance company for which [the bank] may act as agent." Apart from authorizing the Comp- troller to prescribe "such rules and regulations" as he deems necessary to regulate those activities, the statute adds two specific provisos: The bank may guarantee neither the payment of any premium on a policy issued through its agency, nor the truth of any statement made by a customer in applying for insur- ance. The word "insurance" appears in the statute five times. Despite these detailed provisions concern- ing the insurance agency activities in which certain national banks may engage, the court of appeals con- cluded (Pet. App. 13a-15a) that Section 92 does not "specifically relate [] to the business of insurance." The court emphasized Section 92's relationship to the National Bank Act and the Federal Reserve Act, and remarked that "[b]oth Acts concern banking, not insurance." The court also observed that when Congress enacted Section 92, regulation of the busi- ness of insurance was thought to lie beyond the scope of federal power under the Commerce Clause. The court then held that, in enacting Section 92, "Con- ---------------------------------------- Page Break ---------------------------------------- 14 gress could not have been attempting to regulate a business that it believed it had no power to regu- late." Rather, in the court's view, "Congress was concerned with banking, not insurance." Pet. App. 14a-15a. The court's reasoning is unpersuasive. Section 1012 (b) permits preemption by any federal law that "specifically relates" to the insurance business. What- ever else Congress may have thought when it enacted Section 92, it surely sought to authorize national banks located in small towns to act as insurance agents. 3. If Florida's effort to preclude such banks (when owned by or affiliated with holding companies) from selling insurance is correctly characterized as being for the purpose of regulating "the business of insurance," then Congress's express permission for them to do so must certainly "specifically relate []" to the same business. The court's contrary holding is internally inconsist- ent. It would be plausible to hold that both Florida's attempt to restrict banks from acting as insurance agents, and Section 92's limited permission to certain banks to do so, are laws that "concern banking, not insurance." Pet. App. 14a-15a. In that case, the McCarran-Ferguson Act has no application, and fed- ___________________(footnotes) 3 Nor is or was there any question of Congress's power to grant that authorization, subject both to supervision by the Comptroller and to the operation of "general and undiscrimi- nating state laws" that "do not conflict with the letter or the general objects and purposes of Congressional legislation." Davis v. Elmira Sav. Bank, 161 U.S. 275,290 (1896); see also, e.g., id. at 283; Farmers' & Mechanics' Nat'l Bank v. Dearing, 91 U.S. 29, 33 (1.875); Easton v. Iowa, 188 U.S. 220, 238 (1903); Owensboro Nat'l Bank v. Owensboro, 173 U.S. 664, 667-668 (1899). ---------------------------------------- Page Break ---------------------------------------- 15 eral law prevails. Alternatively, one could plausibly conclude both that the state law was enacted to reg- ulate, and that the federal law relates to, "the busi- ness of insurance," in which case McCarran-Ferguson allows preemption by its terms. It is wholly implausi- ble, however, to treat the state law at issue here as one enacted to regulate the insurance business, while holding that the conflicting federal law does not even "relate" to that business. And the McCarran-Ferguson Act, which was enacted 32 years after Section 92 in an effort to restore the status quo concerning state insurance regulation after this Court's decision in United States v. South-Eastern Underwriters Ass'n, 322 U.S. 533 (1944), could not have been intended to allow individual States to override an express (and previously unquestioned) congressional grant of au- thority to national banks. See First Nat'l Bank of E. Arkansas, 907 F.2d at 779-780. 4. 2. The decision below conflicts directly with the Sixth Circuit's decision in Owensboro Nat'l Bank v. Stephens, supra (reprinted at Pet. App. 39a-64a). 5. Owensboro held that Section 92 preempts a Kentucky statute, Ky. Rev. Stat. Ann. 287.030(4) (Michie 1988), to the extent that the state law would other- wise prohibit national banks in small towns from ___________________(footnotes) 4 With respect to the purposes underlying enactment of the McCarran-Ferguson Act see, e.g., Fabe, 113 S. Ct. at 2207; National Securities, 393 U.S. at 459; H.R. Rep. No. 143, 79th Cong., 1st Sess. 3 (1945); 91 Cong. Rec. 1442 (1945) (state ment of Sen. McCarran). 5 As discussed above, the decision is also in substantial tension with the decisions in First Nat'l Bank of E. Arkansas v. Taylor, supra; United Services Auto. Ass'n v. Muir, supra; and Independent Bankers Ass'n of America v. Heimann, supra. ---------------------------------------- Page Break ---------------------------------------- 16 "act[ing] as insurance agent or broker with respect to any insurance" except credit life, credit health, or mortgage-related real property insurance. In contrast to the court in this case, the Sixth Circuit held that a state law restricting the ability of banks and bank holding companies to act as insurance agents does not have the "purpose of regulating the business of in- surance" for purposes of 15 U.S.C. 1012(b). "Ex- cluding a person from participation in an activity," the court explained, "is different from regulating the manner in which that activity is conducted. The former is the regulation of the person; the latter is the regulation of the activity." Pet. App. 48a. Be- cause the Kentucky law "in no way governs the man- ner in which the activities constituting the 'business of insurance' are conducted," the court concluded, it was "enacted for the purpose of regulating certain conduct by bank holding companies, not the business of insurance." Id. at 49a. Owensboro's holding cannot be reconciled with that of the court below. As construed for purposes of de- cision (see Pet. App. 44a), the state statutes involved in this case and in Owensboro differ only in insignifi- cant details. The Sixth Circuit's conclusion that Ken- tucky's non-affiliation law did not fall within the scope of the McCarran-Ferguson Act was not based on any special feature of that law, and there is no reason to believe that the Owensboro court would have found the Act any more relevant to the Florida statute at issue in this case. 6. ___________________(footnotes) 6 The Sixth Circuit's resolution of the first question under the McCarran-Ferguson Act made it unnecessary for the court to consider whether Section 92 "specifically relates" to the business of insurance for purposes of that Act. ---------------------------------------- Page Break ---------------------------------------- 17 The decisions in these cases thus leave national banks, the Comptroller, state insurance regulators, and consumers subject to different legal regimes from State to State. Moreover, because the issue is one of considerable commercial importance, it can be ex- pected to arise in other States and in other circuits. See Pet. 6 n.1 (citing state laws imposing restric- tions in apparent conflict with Section 92) ; First Ad- vantage Ins., Inc. v. Green, 652 So. 2d 562 (Ct. App. ) (McCarran-Ferguson protects Louisiana stat- ute from preemption by Section 92), review denied, 654 So. 2d 331 (La. 1995); Shawmut Bank v. Googins, No. 3:94-CV-146 (JAC) (D. Conn.) (mo- tion for summary judgment pending). The existing conflict is therefore only likely to deepen over time. Moreover, there is no reason to believe that further exploration of the matter in the lower courts would materially assist this Court in its consideration of the issue. 3. The decision below permits significant and un- warranted state interference with activities that Con- gress has specifically authorized national banks to undertake, and with the Comptroller of the Cur- rency's discharge of his "primary responsibility" for the supervision and regulation of those activities. See NationsBank of North Carolina, N.A. v. Variable Annuity Life Ins. Co., 115 S. Ct. 810, 813 (1995); see also 12 U.S.C. 92 (Supp. V 1993) (subjecting banks' insurance activities to "such rules and regu- lations as may be prescribed by the Comptroller"). The Comptroller believes that agency sales of insur- ance represent a safe and important line of business for banks that can contribute materially to their over- all safety and soundness. Moreover, in the Comp- troller's view, state restrictions that prevent national banks located in small towns from exercising the in- ---------------------------------------- Page Break ---------------------------------------- 18 surance agency powers specified in Section 92 can put those banks at a serious disadvantage in the in- creasingly competitive market for financial services of all kinds. Finally, both the Comptroller and the United States are concerned that state restrictions of the type at issue here may operate to restrict com- petition, to the detriment of consumers, without sig- nificant countervailing consumer protection benefits. The question presented is therefore of considerable importance, and warrants resolution by this Court. 4. The appellants below in Owensboro have sought and obtained an extension of time "to complete prep- aration of [their] petition for a writ of certiorari" in that case, A-916 App. for Ext. of Time 4 (granted June 1, 1995). The Comptroller was a respondent below in Owensboro, and we will respond to any pe- tition that is filed in that case. In our view, how- ever, this case is a better vehicle than Owensboro for this Court's consideration of the preemption issue, for two reasons. First, the court of appeals in this case, unlike the court in Owensboro, found it neces- sary to reach both of the questions that may be per- tinent under the McCarran-Ferguson Act: Whether the state law in question was "enacted * * * for the purpose of regulating the business of insurance," and whether Section 92 "specifically relates" to that busi- ness. Although this Court might well, like the Owens- boro court, resolve this case on the basis of the first question, it would appear preferable to grant review in a case in which the court below considered and decided both questions. Second, we note that Owensboro was decided on the assumption that the state law at issue in that case, which by its terms applies to bank holding com- panies, also applied to the national bank plaintiffs. ---------------------------------------- Page Break ---------------------------------------- 19 See Pet. App. 44a. While we have no reason to ques- tion that assumption, it appears that the question has not been settled as a matter of state law. Ibid. The Owensboro court noted that there appeared to be no question of justifiability, id. at 42a n.1, but it might be preferable for this Court to grant review in a case in which the applicability of the challenged state statute to the party before it is unmistakably clear. CONCLUSION The petition for a writ of certiorari should be granted. Respectfully submitted. JULIE L. WILLIAMS Chief Counsel L. ROBERT GRIFFIN ERNEST C. BARRETT III JOAN M. BERNOTT Attorneys Office of the Comptroller Attorneys of the Currency Drew S. DAYS, III Solicitor General FRANK W. HUNGER Assistant Attorney General PAUL BENDER Deputy Solicitor General EDWARD C. DUMONT Assistant to the Solicitor General ANTHONY J. STEINMEYER JACOB M. LEWIS Attorneys JULY 1995 * U.S. GOVERNMENT PRINTING OFFICE; 1995 387147 20092 ---------------------------------------- Page Break ----------------------------------------