Jurisdictional Statement — Consumers Union of United States, Inc. v. Siebert

a 80-801 - 17 1980

IN THE MICHAEL RODAK, JR., CLERK

Supreme Court of the United States

OCTOBER TERM, 1980

CONSUMERS UNION OF UNITED STATES, INC.

and EDWARD J. GORIN,

Appellants,

V.

MURIEL SIEBERT, Superintendent of

Banks of the State of New York,

Appellee.

On Appeal from the United States District Court

for the Southern District of New York

JURISDICTIONAL STATEMENT

MARK A. CYMROT

ALAN MARK SILBERGELD

(Counsel of Record)

1511 K Street, N.W.

Suite 1033

Washington, D.C. 20005

(202) 724-7203

KARPATKIN, POLLET, DEILIBERT

& BEIL

5 East 43 Street

New York, New York 10017

Attorneys for Appellants

aS

THE CASILLAS PRESS, INC.-1717 K Street. N. W.—Washington, 0. C.-223-1220

(i)

QUESTION PRESENTED

Does New York Banking Law § 268, by prohibiting the

sale of savings bank life insurance to most nonresidents of

New York, violate a fundamental right of those

nonresidents and create an unjustified discrimination in

New York’s life insurance market in violation of the

Privileges and Immunities Clause, Art. IV, § 2, and Com-

merce Clause Art. I, § 8, cl. 3, of the U.S. Constitution?

(iii)

TABLE OF CONTENTS

Page

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JURISDICTIONAL STATEMENT............................ l

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oo i ko bic deed nccévncccecnct..., 2

es oe eo ub ve c'e'edviccg een’ 3

Mueenumeten GP TRE CASE................................ 3

SO =. rere rr eee 3

2. Proceedings before the Three-J udge

oo dev sk oa sc is caccocescenccccc, 6

3. The Three-Judge Court’s Opinion...................... 8

Ua 6 6 oo s0 vos ce eccyccccococcececccccce, 10

go Fs vs vin cscccsccvceccecenccccnes...... 20

MESES Gece vss sccvdccvscetovscccoccccecccces., la

PREVIOUS PAGE WAS BLANK |

(iv)

TABLE OF AUTHORITIES

Cases: Page

American Commuters Ass’n v. Levitt,

279 F.Supp. 40 (S.D.N.Y., 1967) affd,

I BO 4 ic pe Saas ads ccsa bh ces eweebaws 14

Austin v. New Hampshire,

a IE eso os 5. vie Bog 60 a5 dS 0h beak en nvawnns 14, 18

Baldwin v. Fish and Game Commission of Montana,

nL eo adic c oe bn hewn ave nkaeraehees> 1,8, 10, 11

Brown v. Anderson,

ee ee, Es SN WED on. vans cee babes csee eet ness 18

Consumers Union of United States, Inc. v. Albright,

427 F.Supp. 840 (S.D.N.Y. 1977), vacated and

remanded sub nom. Consumer Union of United States, Inc.

ER be ke . Ser re ee errs e Pe

Corfield v. Coryell,

6 Fed. Cas. 546 (No. 3230) (CCED Pa. 1823) .............006. 11

Doe v. Bolton,

Mann, SENG e eo, oa ee Core et ce bce saa waenne 10

Great Atlantic & Pacific Tea Company, Inc.

cae EE ae ee ee ee 14, 16

Hicklin v. Orbeck, ;

aT OA: DONTE gdb o'vsos odin dae caso aeees 1,8, 11, 15, 16, 19

H.P. Hood & Sons, Inc. v. DuMond,

ae ee a ibs GG ate Vs by nara a kee koe ee es aN 16

Hughes v. Alexandria Scrap Corp.

a PS exe cku shy cu bbiae keke eadeee mene 8,9, 13

Hughes v. Oklahoma,

ee ee I ik os os Oa ek VA LAO Chae hae eee 14, 18

Lewis v. BT Investment Managers, Inc.,

Se: DES SVs we KS CWda OT cas eRbe iene wewnes 18

(v)

New York Savings Bank vy. Joseph,

188 N.Y.S.2d 893, 281 App. Div. 815 (1953) .................. 13

Paul v. Virginia

IN g's s 5 c's 4a Fa pee US ee velo te oP aaek 1]

Philadelphia v. New Jersey,

a cre he ct an wk ck cake tahn dee ie 13, 14, 19

Pike v. Bruce Church, Inc., allie

-cspsloenisomhcsspdin giitien OR OOL EER ET A

Reeves, Inc. v. Stake,

am ee aidan Belew 4ule 8,9, 13

Salla v. County of Monroe,

48 N.Y.2d 514, 399 N.E.2d 909 (1980),

cert. denied sub nom. Abrams v. Salla,

oi Ne ERE ee Pe error 8

Toomer v. Witsell,

Rg rn OU he oe OE 10

Travellers’ Insurance Co. v. Connecticut,

I Dc De ee a i Te 0 a end 14

Travis v. Yale & Towne Mfg. Co.,

Rae ee me eee eee oer mes 14

Ward v. Maryland,

Nee et ig, SRREEET TT TETET CERT CCE SORE T TT Seer Tee 11

U.S. Constitution:

Privileges and Immunities Clause, Art. IV, sec.2............ passim

Commenerce Clause, Art. 1, 000. 8, ch.3.. ccc cccccccccvccscs passim

Statutes:

AS MED 55's ss ob‘ Vw b WRN ER'e ws St Ragan awalew a le we 2

a STs Saris ck ch ching nde ba wks Buki web kde aaeee es 2

inate ecg EOL EEE RET RE PE EE A REE Ley re 2

PORE, 6A oa ii wwahak dd ddhame no isin ane eee eee 2

Banking Law of New York

Suny WHINE. o's ca ius oebamad cs ua bene eel uuu 1,3, 13

PM Dia Gh heen che aey ob bA dade vor cud hae ae aeeee 18

REPS EERE EeL TKDE R REL Or SEONG ta ig ee A on" 3

DY GG w sc vinadSunii on cucusnsemaledauannte 3,13

SE eh naw Geter eee. a a ee 2, 6,7

DCs Beer 6 ccer rere reerererwreereewewreseensanwanins passim

er ee TT SEXU EEE IERTIT 5, 13

ee ed Pee ee eR eee IP PAR yy ae he 5

Other:

American Council of Life Insurance

Life Insurance Fact Book 1978 (1979)... 0... 11

Louis D. Brandeis, “Life Insurance:

The Abuses and the Remedies”, published

By the Policy-Holders Protective Committee ................. 5

Louis D. Brandeis, “Savings Bank

Life Insurance For Wage-Earners,”

Pe IPE. 5A Cas choc Uap knee wed oad hb dd ek 5

“A Guide to Life Insurance,” Consumer

Reports [Jan., Feb., March, 1974 and

Cue cn, SoC eta e es + oe ane Gadi bets 4

“Insurance That Preys on

The Poor,” Consumer Reports

SU: SEE SS cus ou 20000 Weuaers Was ackcbaakouess aelelee 6

(vii)

Office of Policy and Planning,

Federal Trade Commission,

“Life Insurance Sold To The

Poor: Industrial And Other

Debit Insurance” (Jan. 1979)

S.S. Huebner & Kenneth

Black, Jr, Life Insurance

(8th Ed. 1972)

GA VARS ee ee eM RRR ee ae ea I ee ae oe ee oe oh a kh a te

IN THE

Supreme Court of the United States

OCTOBER TERM, 1980

No.

CONSUMERS UNION OF UNITED STATES, INC.

and EDWARD J. GORIN,

Appellants,

V.

MURIEL SIEBERT, Superintendent of

Banks of the State of New York,

Appellee.

On Appeal from the United States District Court

for the Southern District of New York

JURISDICTIONAL STATEMENT

This case was remanded for “further consideration in

light of Hicklin v. Orbeck, 437 U.S. 518 (1978).” 438 U.S.

901 (1978). Relying upon Baldwin v. Fish and Game Com-

mission Of Montana, 436 U.S. 371 (1978), the district

court reaffirmed its early judgment, holding that

nonresidents of New York do not have a “fundamental”

right under the Privileges and Immunities Clause, U.S.

Constitution, Art. IV § 2, to purchase life insurance from

New York savings banks. New York Banking Law, Art. .

VI-A authorizes New York savings banks to sell life in-

surance. However, under Banking Law § 268, only per-

sons who reside or regularly work in New York can pur-

2

chase this insurance. Nonresidents of New York are

denied the right to purchase a low cost, high quality life in-

surance and also are denied the benefits which competition

from savings banks could bring from other life insurers.

The district court’s decision permitting discrimination

against nonresidents of a state in the market for such an

important consumer product should be given plenary

review by this Court.

OPINIONS BELOW

The first opinion of the district court is reported at 427

F.Supp. 840 (S.D.N.Y. 1977), vacated and remanded, 438

U.S. 901 (1978). The opinion on remand is not yet

reported. It is set forth at pages la-22a herein.

JURISDICTION

This action originally «..allenged the constitutionality of

both Sections 266' and 268 of the New York Banking Law

on various constitutional grounds. Jurisdiction was based

upon 28 U.S.C. §§ 1331(a) and 1343(3). A three-judge

district court was convened pursuant to 28 U.S.C. § 2281.

Summary judgment was entered for the appellee on

February 28, 1977, and that judgment was vacated and

remanded by this Court on June 26, 1978.

On remand, summary judgment was entered in favor of

the appellee on August 14, 1980. A notice of appeal was

filed on September 17, 1980.

This Court has jurisdiction over the appeal under 28

U.S.C.§ 1253.

'Section 266 restricts the insurance on any risk to $30,000. The

judgment of the district court upholding the constitutionality of this

section was not appealed.

3

STATUTE INVOLVED

Section 268 of the New York Banking Law provides:

Geographical Limitation

No application for [savings bank life] insurance

shall be accepted except from a resident of this

state or a person working regularly therein.

STATEMENT OF THE CASE

1. Facts

On December 5, 1973, appellant Edward J. Gorin, a

resident of New Jersey employed in New Jersey, walked

into the Savings Bank of Rockland County and applied

for $30,000 of savings bank life insurance (“SBLI”). His

application was refused solely because as a nonresident

who worked in New Jersey, he was prohibited by Section

268 from purchasing SBLI. Stip.4 4.°

New York Banking Law, Art. VI-A authorizes savings

banks to “conduct the business of life insurance” by

establishing life insurance departments. Banking Law

§§ 262, 263. The savings banks may act with “all the

rights, powers, and privileges and subject to all duties,

liabilities and restrictions relating to domestic legal reserve

life insurance companies conferred or imposed by the in-

surance law. . .” /bid. One hundred twelve of New York’s

115 savings banks sell life insurance, either as issuing

banks or as agents for issuing banks. Stip.¢ 26. As of

1977, $6.8 billion of SBLI was in force, with $965.8

million sold that year. Stip.§ 38.

This life insurance is one of the best buys available

anywhere. In studies in 1974 and 1980, Consumers Union

?The factual records consists of the Stipulation on Remand (“Stip.”)

and joint appendix.

4

found only Massachusetts SBLI to be less costly in most

categories. Stip.§ 1.'Best Reports, an authoritative

publication on the characteristics of life insurance, rates

SBLI as “remarkably low” cost. Stip. 4 47. This difference

in premium costs can total many hundred of dollars over

the life of an insurance policy, even though the policies

have similar terms. Stip. 4 9; Pltfs. Exhs. 2-6. Further,

customer satisfaction appears to be high as the Banking

Department received no consumer complaints about SBLI

from 1971 to 1976, the period of the stipulation. Stip. 4

16.

Section 268 restricts the sale of SBLI to residents and

those regularly working in New York. On April 12, 1957,

the Board of Trustees of the Savings Bank Life Insurance

Fund interpreted Section 268 as restricting the sale of

SBLI to (1) natural persons who live or regularly work in

New York who insure themselves or a person with respect

to whom they have an insurable interest (the so-called

“blood relative” exception) and (2) New York corpora-

tions, foreign corporations with their principal place of

business in New York and unincorporated associations

with their principal place of business in New York if they

qualify for and purchase group policies. Those who pur-

chase SBLI may retain their policies if, subsequent to pur-

chase, they move away from the state or no longer regular-

ly work in the state. Stip.¢ 41.

The Saving Bank Life Insurance Fund was established

to provide insurance expertise for the savings banks. The

Fund acts in a fashion similar to the home office of a life

insurance company, providing all technical life insurance

services including actuarial, underwriting and medical ser-

vices. The Fund establishes uniform terms and conditions

for the policies, prescribes the standard form policies, ap-

3See, “A Guide To Life Insurance,” Consumer Reports, (January,

February, March, 1974, and February, March, 1980).

5

plications, schedules and other business records, and

establishes uniform premiums, annuity rates, loan values,

surrender charges, collection fees and reinsurance rates.

The banks sell the insurance, make the profit and retain

and invest the reserves. Banking Law §§ 270, 271. Stip.

q 28.

The Fund is supported entirely from assessments and

contributions from the savings banks and through invest-

ment of its own money. Stip. ¢ 29. Banking Law § 270

specifically prohibits the use of “public funds, moneys of

the state or under state control or subject to audit by the

state comptroller” to support the Fund or the savings

banks. The sale of SBLI is carried on through private

enterprise and for private profit. Stip. 44 29, 31, 32. The

regulation of the savings banks is designed to be as close as

practicable to the regulation of other insurers. Stip.

44 30-33. See also, Historical Note to Banking Law § 270.

Louis D. Brandeis first proposed savings bank life in-

surance in 1907 as a competitive alternative to industrial

life insurance,* which is sold in small face amounts

generally to blue-collar workers, with premiums collected

weekly or bi-monthly at the policyholder’s home. Stip.

q 12. Industrial life insurance is expensive and subject to

many abusive practices. Stip. 44 14-17. In 1905, industrial

life insurance was severaly criticized by Mr. Brandeis, as

counsel for policyholders of the Equitable Life Assurance

Society,> and by the Armstrong Committee, an in-

vestigative committee of the New York legislature. Stip.

44 14, 15. That criticism has continued through the years

as a result of several legislative inquiries and was recently

‘Louis D. Brandeis, “Savings Bank Life Insurance For Wage

Earners,” 1907 A/bany Law Journal 50. Stip. 4 19; Deft. Exh. A.

‘Louis D. Brandeis, “Life Insurance: The Abuses and the

Remedies,” published by the Policy-Holders Protective Committee.

6

renewed by Consumers Union® and by the Federal Trade

Commission’ Stip. 44 1,17. Although more strictly

regulated in recent years, $39.2 billion of this insurance

was in force nationwide in 1976. Stip. 413. No

geographical limitation is imposed by New York on the

sale of industrial life insurance.

Mr. Brandeis was convinced that workers would best be

protected from the abuses of industrial life insurance

through competition from mutual savings banks which

had been organized principally to serve the interests of

working people. Stip. ¢ 19. Massachusetts adopted the

Brandeis proposal in 1907. New York followed in 1938

after several unsuccessful efforts. Connecticut adopied an

SBLI program in 1941. No other state has authorized sav-

ings banks to sell life insurance. Stip. ¢ 20. The

geographical limitation is found in each of the state SBLI

statutes. Stip. ¢ 39.

2. Proceedings before the

Three-Judge District Court

On January 14, 1974, the appellant and Ira Furman, a

resident of New York seeking to purchase more than

$30,000 of SBLI, commenced this action against the

Superintendent of Banks of New York, Harry W.

Albright, Jr. (first succeeded by John G. Heimann and

now by Muriel Siebert). The amended complaint alleged

that Section 268 (“the geographical limitation”) and Sec-

tion 266 (“the policy ceiling”) violated various provisions

of the New York and United States constitutions. On

September 20, 1974, U.S. District Judge Lee P. Gagliardi

Insurance That Preys on the Poor,” Consumer Reports

(November 1978).

’Office of Policy and Planning, Federal Trade Commission, “Life

Insurance Sold To The Poor: Industrial And Other Debit Insurance,”

(January, 1979).

7

denied appellee’s motion to dismiss, and a three-judge

court was convened. On February 25, 1977, the three-

judge district court denied appellants’ motion for sum-

mary judgment and exercised its discretion to grant sum-

mary judgment for appellee who had not filed a cross-

motion.

Consumers Union and Edward Gorin filed a direct ap-

peal to this Court challenging the district court’s decision

upholding Section 268. Ira Furman did not appeal, and no

appeal was taken from the decision upholding Section 266.

This Court vacated the district court judgment and

remanded for further consideration in light of Hicklin v.

Orbeck, 437 U.S. 518 (1978), a decision made four days

prior to the remand. No mention was made in the remand

order of Baldwin v. Fish and Game Commission of Mon-

lana, 436 U.S. 371 (1978), a decision ,made one month

prior to Hicklin.

On remand, appellants again moved for summary judg-

ment on September 13, 1978. At the request of the court,

the parties tried and were successful in reaching a stipula-

tion of facts and joint appendix. Appellee then filed a

cross-motion for summary judgment, and briefing was

completed. Oral argument was heard on September 17,

1979. The court reaffirmed its earlier ruling, upholding the

constitutionality of Section 268 by a decision filed on

August 14, 1980.

The New York State Association of Life Underwriters

filed an amicus curiae brief in support of the geographical

limitation. The Federal Trade Commission also submitted

an amicus curiae brief setting forth the findings of its

study of industrial life insurance.* The Commission did

not take a position on the legal issue or align itself with

either party.

8See ante footnote 7.

8

Se The Three-Judge Court’s Opinions

The first district court opinion rejected appellants’

Privileges and Immunities Clause challenge on the

grounds that valid independent reasons justified the

discrimination. 427 F.Supp. 840 (S.D.M.Y. 1977). The

district court found that there would be unspecified

“harmful effects of nationwide SBLI sales” and a “threat

lo traditional banking functions that sales to persons

without a nexus to the state (work or residence) would

create.” /d. at 846. Under the district court’s analysis, the

geographical limitation failed “in privileges and im-

munities terms, to place a burden or penalty on out-of-

state citizens for the benefit of in-state citizens.” /d. at

846.

On remand, the district court never reached an analysis

of Hicklin v. Orbeck, 437 U.S. 518 (1978), as ordered by

this Court. Instead, the court found that the geographical

limitation did not infringe a “fundamental” right under

Baldwin v. Fish and Game Commission of Montana, 436

U.S. 371 (1978). App. 14a. SBLI was deemed a “legislatively

created, non-state subsidized, social welfare program.”

App. I5a. As a state “resource,” New York was free to

limit SBLI’s sale to New York residents, as set forth in the

dissent in Sa/lla v. County of Monroe, 48 N.Y.2d 514, 399

N.E.2d 909 (1980), cert. denied sub noin. Abrams v. Salla,

100 S. Ct. 1836 (1980). /bid.

To bolster this conclusion, the court relied upon Hughes

v. Alexandria Scrap Corp., 426 U.S. 794 (1976) and

Reeves, Inc. v. Stake, 100 S.Ct. 2271 (1980), where states

had entered the markets for the purchase of automobile

hulks and the production of cement, respectively.

Although New York had not entered the life insurance

market, the court viewed New York as the creator of

SBLI. /bid. The court found that in this circumstance,

9

cumstance, Alexandria Scrap “suggest[ed] a growing

judicial solicitude for efforts by states to protect the...

needs of their residents .. .” App. 16a-17a.

The Reeves decision was found instructive in two

respects. Relying upon this Court’s finding that South

Dakota did not possess unique access to the materials

needed to produce cement, 100 S.Ct. at 2281, the district

court found that “each state is free to create its own SBLI

in ‘a condition of plentitude’ and each state’s SBLI pro-

gram operates without disadvantaging any other state’s

program...” App. 18a. Thus, the district court conclud-

ed that nonresident consumers should petition their own

state legislators to create “a form of low cost high quality

industrial life insurance. App. 19a.

In further reliance on Reeves, the district court found

that SBLI was “social insurance” designed to protect the

wage-earner and that it “was a legislatively created alter-

native to commercial industrial life insurance which was

designated to eradicate certain perceived social evils.”

App. 20a, 22a. Citing this Court’s statement in Reeves that

voiding South Dakota’s resident only policy “would in-

terfere significantly with a state’s ability to structure rela-

tions exclusively with its own citizens,” 100 S.Ct. at

2279-2280, the district court found that the sale of SBLI

was properly limited to those who were the “appropriate

objects of New York’s legislative concern.” App. 22a.

Thus, the district court upheld the constitutionality of

Section 268, denied appellant’s motion for summary judg-

ment and granted appellee’s cross-motion for summary

judgment.

10

ARGUMENT

Banking Law § 268 denies most nonresidents of New

York an excellent life insurance product, as well as the

benefits of competition which this insurance would provide

to other life insurers. Both the Privileges and Immunities

clause and the Commerce Clause were designed to assure

individuals and businesses access to the goods and services

of all states and to foster competition which would serve to

protect consumers nationwide. The geographical limitation

strikes at the very heart of these purposes.

Further, by ruling that discrimination in the life in-

surance market does not touch upon a fundamental right,

the district court has potentially eliminated almost every

consumer product from consideration under the Privileges

and Immunities Clause. By ruling that New York

“created” SBLI when it authorized its sale, the district

court has suggested that discrimination against

nonresidents is broadly permitted in regulated industries.

This Court should grant plenary review due to the poten-

tially broad impact of this decision on markets for con-

sumer products, particularly on the market for life in-

surance.

New York permits nonresidents to purchase the high

priced and highly criticized industrial life insurance, as

well as every other form of life insurance except its best

product, savings bank life insurance. This discrimination

violates nonresidents’ basic right of free access to trade

which has been consistently associated with the Privileges

and Immunities Clause. The Chief Justice noted while

concurring in Baldwin v. Fish and Game Commission of

Montana, 436 U.S. 371, 394 (1978), that, “The Clause

assures noncitizens the opportunity to purchase goods and

services on the same basis as citizens . . .” See also, Doe v.

Bolton, 410 U.S. 179 (1973). Cf. Toomer v. Witsell, 334

U.S. 385 (1948). This right has been repeatedly

enumerated as a fundamental right. Hicklin v. Orbeck,

437 U.S. 518, 524 (1978); Ward v. Maryland, 12 Wall.

418, 439 (1870) (“right . . . to acquire personal property”);

Paul v. Virginia, 8 Wall. 168, 180 (1868) (“acquisition and

enjoyment of property”); Corfield v. Coryell, 6 Fed. Cas.

546, 552 (No. 3230 (CCED Pa. 1825) ) (“the right to ac-

quire and possess property of every kind”). The Fourth

Article of Confederation from which the Privileges and

Immunities Clause was derived guaranteed nonresidents

“all the privileges of trade and commerce... .” Austin v.

New Hampshire, 420 U.S. 656, 660 (1975).

If discrimination in the market for life insurance does

not touch upon a fundamental right, then few consumer

products could meet the Ba/dwin test. In 1977, 86 percent

of American families owned life insurance. The average

policy was $36,900. $2,583 billion in life insurance was in

force and $367 billion was sold in that year. Premium in-

come was $33 billion.’ Very few goods or services are as

widely purchased by consumers in all economic strata as

life insurance.

Even in limiting the market to SBLI, the fundamental

right test should be met. In 1977, approximately $6.8

billion of New York SBLI was in force and approximately

$965.8 million was sold in that year. Stip. ¢ 38. In 1974,

New York SBLI ranked 70th in insurance in force out of a

total of 1800 life insurers in the United States, and it rank-

ed 6th in the sale of individual life insurance policies

among the 114 life insurers doing business in New York.

Ibid.

Thus, the district court has erred in analogizing SBLI to

the elk hunting in Baldwin. Baldwin involves a luxury

%American Council of Life Insurance, Life Insurance Fact Book,

1978, 7-9 (1979).

12

sport which is available to only a few wealthy individuals

even without price discrimination. That discrimination

hinders few, if any, from hunting. Yet, the licensing fee is

part of a regulatory scheme to protect a scarce natural

resource, a subject matter over which the states have tradi-

tionally had broad discretion. By contrast, the

geographical limitation infringes upon the right to free

trade which has consistently been found to be “fundamen-

tal.” Further, life insurance is considered a necessity by

many consumers and involves billions of dollars of com-

merce each year. By failing to distinguish Baldwin, the

district court has suggested a broad expansion of its scope

which could serve to undermine the protection provided

by the Privileges and Immunities Clause.

This district court, however, considered SBLI’s origins

as excluding it from the scope of the Privileges and Im-

munities Clause. The gist of the district court’s analysis

can be found in its description of SBLI as “a legislatively

created, non-state subsidized, social welfare program.”

App. 15a. In the district court’s view, New York “created”

SBLI and, therefore, can limit its sale to the “appropriate

objects of New York’s legislative concern.” App. 22a.

Despite its unique history, New York “created” SBLI

only to the extent it “created” all forms of insurance, by

authorizing its sale. As stated by Theodore Fuller, Presi-

dent of the Savings Bank Life Insurance Fund:

What is Savings Bank Life Insurance? It is

regular legal reserve life insurance sold by sav-

ings banks... .!°

Statement of Theodore Fuller, President, Savings Bank Life In-

surance Fund, New York, New York before the Senate Subcommittee

on Antitrust and Monopoly, hearings on competition in life in-

surance, February 21, 1973. Stip. 4 8. Def. Exh. B.

13

Through Banking Law, Art. VI-A, New York has

authorized savings banks to enter the “business of life in-

surance.” Banking Law § 263. Tiie insurance is actually

created in private contracts between the insurer and the in-

sured. Stip. § 11. The policies are of the same kind as

policies sold by other insurers. Stip. 44 44, 45. The savings

banks bear the entire cost of its sale and pay all policy pro-

ceeds. The profits are retained by the savings banks. Stip.

4 32. The regulation of the savings banks is designed to be

as close as practicable to the regulation of other insurers.

Stip. 44 30-33. See Historical Note to Banking Law § 270.

New York Savings Bank v. Joseph, 118 N.Y.S.2d 893, 281

App. Div. 815 (1953) (savings banks taxed as mutual in-

surance companies).

The district court’s reliance on Hughes v. Alexandria

Scrap, 426 U.S. 794 (1976) and Reeves, Inc. v. Stake, 100

S.Ct. 2271 (1980) to support its “creation” theory is

misplaced. In both cases, the states using taxpayer funds

entered the markets for the products at issue. New York

has not entered the market for life insurance. The district

court found that the insurance is “non-state subsidized.”

App. 15a. New York has simply authorized savings

banks to sell life insurance and has established a

regulatory structure for its sale. Banking Law § 270 ex-

plicitly prohibits the use of state funds to support these

sales. In Reeves, this Court said that, “The basic distinc-

tion drawn in Alexandria Scrap between States as market

participants and States as market regulators makes good

sense and sound law.” 100 S.Ct. at 2277. The district court

has failed to make this distiction.

Yet, the Court has considered this distinction to be ex-

tremely important. Under the Commerce Clause, “a vir-

tual per se rule” of invalidity exists for statutes that at-

tempt to prevent goods and services from crossing states

lines. Philadelphia v. New Jersey, 437 U.S. 617, 624

14

(1978). This Court has consistently struck down state

statutes which embargo the export of products. See, e.g.,

Hughes v. Oklahoma, 441 U.S. 322 (1979) (natural min-

nows); Pike v. Bruce Church, Inc., 397 U.S. 137 (1970)

(unprocessed cantalopes); H. P. Hood & Sons, Inc. v. Du-

Mond, 336 U.S. 525 (1949) (milk). Similar harsh treatment

has faced importation bans. See, e.g., Philadelphia v. New

Jersey, supra; Great Atlantic & Pacific Tea Company,

Inc. v. Cottrell, 424 U.S. 366 (1976) (milk).

Similarly, under the Privileges and Immunities Clause,

the Court has sought to prevent limitations on the flow of

goods and services by prohibiting discrimination against

nonresidents in the general economy of the states. The

Court has authorized discriminatory taxes and fees against

nonresidents to equalize the benefits and burdens of state-

funded activities. E.g., Travellers’ Insurance Co. v. Con-

necticut, 185 U.S. 364 (1902). See also, American Coin-

muter Ass’n v. Levitt, 279 F.Supp. 40 (S.D.N.Y. 1967),

aff'd, 405 F.2d. 1148 (2d Cir. 1969). However, when these

taxes and fees have gone beyond equalizers and have

discriminated against nonresidents, they have been struck

down. Austin v. New Hampshire, 420 U.S. 656 (1975);

Toomer v. Witsell, 334 U.S. 385 (1948). The Court has

never permitted the type of discrimination found in this

case where the residents make no special contribution to

SBLI and, therefore, can limit its sale to the “appropriate

objects of New York’s legislative concern.” App. 22a.

The district court has suggested that there is no

discrimination in the geographical limitation because New

York cannot prevent other state legislatures from enacting

an SBLI statute. App. 18a. However, this argument was

specifically rejected by this Court in Austin v. New Hamp-

shire, supra and Travis. v. Yale & Towne Mfg. Co., 252

U.S. 60 (1920). In both cases, nonresident income taxes

were being challenged under the Privileges and Immunities

15

Clause. Both states argued that the resident states of the

plaintiffs could eliminate the discrimination by enacting

similar taxing statutes. The Court rejected this argument,

and in Austin said:

_. . the constitutionality of one State’s statute af-

fecting nonresidents [cannot] depend upon the

present configuration of the statute of another

stale.

Id. 420 U.S. at 668. ven if other states enacted SBLI,

there still would be discrimination in the New York

market, and no guarantee that the SBLI sold would be as

inexpensive as New York SBLI.

The district court opinion implies that expanding the

availability of SBLI will undermine a New York “social

welfare program.” App. 20a-22a. However, the appellee

has not argued — and nothing in the record suggests —

that lifting the geographical limitation will impair the

SBLI system or limit the amount of insurance available to

New Yorkers. In tact, the district court found that SBLI is

created in a “condition of plentitude.” App. 18a. Further,

a basic tenet of insurance economics is that an insurance

system is made safer by expanding the base of the risks.!!

Expanding the availability of SBLI is likely to increase

competition in the insurance markets and possibly force

other insurers to lower their prices in order to compete.

Rather than denying New Yorkers benefits, the expansion

of SBLI may create greater benefits by making a wider

variety of inexpensive insurance available. The Commerce

Clause and the Privileges and Immunities Clause were

conceived, at least in part, to encourage nationwide com-

petition. See, Hick/lin \. Orbeck, 437 U.S. at 525; Great

''§.S. Huebner & Kenneth Black, Jr., Life Insurance, 3-7 (8th Ed.

1972).

16

Atlantic & Pacific Tea Company, Inc. v. Cottrell, 424

U.S. 366 (1976); //. P. Hood & Sons, Inc. v. DuMond,

366 U.S. 525, 539 (1949). In fact, it was the salutary ef-

fects of competition which prompted Mr. Brandeis to pro-

pose SBLI. Stip. 4 19.

Thus, Banking Liaw Art. VI-A is a business regulation

which through Section 268 discriminates against nonresi-

dent consumers. If the district court is correct, New York

or any other state could similarly restrict the sale of any

form of insurance to its residents and significantly

decrease the competition which protects all consumers.

The district court’s finding that Section 268 does not infr-

inge upon a fundamental right, therefore, cannot be sus-

tained.

Further, when reaching Hicklin v. Orbeck, 437 U.S. 518

(1978), as originally ordered by this Court, the purported

justifications for the discrimination do not support the

severe discrimination in Section 268. In its first opinion,

the district court found that the geographical limitation

was adopted as a means (1) to limit the life insurance

business of savings banks, (2) to provide a benefit to those

with an economic nevus to the state, and (3) to preserve

the local character of savings banks. 427 F.Supp. at 844,

845-846. On remand, the appellee tried to bolster its case

with two additional justifications: (4) to avoid a nation-

wide market for SBL.1, and (5) to allocate competition bet-

ween savings banks and other insurers in the interstate

sales of life insurance.

Under Hicklin, discrimination against nonresidents can

be justified only when nonresidents are the “peculiar

source of the evil” at which the legislation is addressed,

437 U.S. at 525, and even assuming that they “cause or ex-

acerbate” the problem, the solution must bear a

17

“reasonable relationship between the danger represented

by nonresidents as a chiss and the... discriminations

practiced against them.” //. at 526.

The “evil” which SBI was enacted to combat was the

abuses in the sale of industrial life insurance. Stip.

44 14-21. Rather than being among the “peculiar source of

the evil,” nonresidents of New York are among the injured

class. The “evil” at which the geographical limitation is

directed is unclear. The levislative history to Banking Law,

Art. VI-A does not provide any reasons for the enactment

of this limitation. There also is no evidence that the limita-

tion was contained in Brandeis’ original proposal. Further,

Harry Albright, as Superintendent of Banks, stipulated

that he did not know any reasons for the limitation. Stip.

q 43.

On its face, the geographical limitation appears simply

to be a means of limiting the competition which savings

bank could provide to other insurers. The limitation ap-

pears to provide no apparent benefit to residents of New

York since there is no limit on the amount of life insurance

a savings bank can sell. On the other hand, Section 268 ap-

pears to limit the taxes which New York would collect

from expanded sales. While the parties have no accepted

basis for estimating ‘he untapped demand, Stip. 4 42, on

each occasion when the policy ceiling has been raised, a

sharp increase in sales has tollowed.'? Further, New York

residents are denied potential benefits which added com-

petiton in the insurance markets could provide from out-

of-state insurers.

Apparently for the purpose of this suit, New York has

conjured up six purported evils to justify the harsh

discrimination in Section 268. None of the purported evils

'2See Answers of Theodore Fuller to Plaintiffs’ Interrogatories, No.

15. Pltfs. Exh. 1.

18

are uniquely caused by nonresidents, and the total ban on-

sales to nonresidents certainly is not in proportion to their

contribution to these so-called evils.

Specifically, nonresidents are not a potential unique

source for an imbalance between savings and insurance

business in savings banks. The same imbalance could be

caused by the insurance business from New York

residents. Further, other means to this end, like the

$30,000 policy ceiling, do not infringe upon nonresident

rights.

The purpose to provide a benefit for those with an

economic nexus to the state is not undermined by permit-

ting sales to nonresidents, since SBLI is not a limited

resource. App 18a. Further, if this justification were suf-

ficient, almost any discrimination against nonresidents

could be justified since almost all statutes that

discriminate against nonresidents benefit residents, direct-

ly or indirectly. Brown v. Anderson, 202 F. Supp. 96 (D.

Alaska 1962). The Privileges and Immunities Clause was

intended to eliminate “the practice of some States denying

to outlanders the treatment that its citizens demanded for

themselves...” Austin v. New Hampshire, 420 U.S. supra

at 660-661.

The purpose to preserve the local character of savings

banks appears to be particularly contrived. No such goal is

listed in the Declaration of Policy, Banking Law § 10, and

no other provision of the statute appears to be aimed at

that goal. The same justification recently was rejected by

this Court in Lewis v. BT Investment Managers, Inc., 100

S.Ct. 2009, 2019 (1980).

The purpose to avoid a nationwide market for SBLI is a

statement of “economic Balkanization” which is contrary

to the purposes of the Privileges and Immunities Clause

and the Commerce Clause. Hughes v. Oklahoma, 441

19

U.S. supra at 325. A state cannot “overtly [block] the flow

of interest commerce at its borders.” Philadelphia v. New

Jersey, 437 U.S. supra at 624. Further, no harmful effect

of a nationwide market has been explained by appellee.

Finally as a means to allocate competition, the

geographical limitation does not meet the Hicklin test.

Consumers are entitled to be protected by the competition

among insurance companies. Nonresidents do not present

a “peculiar evil” justifying interference with vigorous com-

petitoin, Allocation of markets cannot be accomplished at

nonresidents’ expenses.

Thus, the geographical limitation infringes upon a fun-

damental right of free access to trade which is protected

under the Privileges and Immunities Clause and the Com-

merce Clause. This infringement cannot be justified under

the analysis in Hicklin v.Orbeck, supra, and therefore the

limitation should be declared unconstitutional.

20

CONCLUSION

The foregoing considered, this Court should note pro-

bable jurisdiction because of the potentially broad impact

of the district court’s decision on markets for consumer

products, particularly the insurance market.

Respectfully submitted,

MARF A. CYMROT

ALAN MARK SILBERGELD

(Counsel of Record)

1511 K Street, N.W.

Suite 1033

Washington, D.C. 20005

(202) 724-7203

KARPATKIN, POLLET, DEILIBERT

& BEIL

5 East 43 Street

New York, New York 10017

Attorneys for Appellants

21

CERTIFICATE OF SERVICE

I hereby certify that three copies of appellants’ Jurisdic-

tional Statement were served by deposit in a U.S. post of-

fice box for first class mail, with postage prepaid, upon

counsel for all of the parties required to be served: Judith

A. Gordon, Asst. Attorney General, 2 World Trade

Center, New York, N.Y. 10047; Henry Mark Holzer, Ben-

nett, Ayervas & Bertrand, 70 Pine Street, New York, N.Y.

10005; Stephen H. Meyer, Federal Trade Commission,

Bureau of Consumer Protection, Washington, D.C.

20580, on the 17th day of November 1980, in accordance

with the provisions of Rule 28.

Alan Mark Silbergeld

la

APPENDIX A

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

CONSUMERS UNION OF

UNITED STATES, INC. and

EDWARD J. GORIN,

74 Civ. 234 (LPG)

Plaintiffs,

— against — OPINION

MURIEL SIEBERT,

Superintendent of Banks

of the State of New York,

Defendants.

6 es | a = + ee ween en ne: ee + ee

APPEARANCES

MARK A. CYMROT

ALAN MARK SILBERGELD

Attorneys for Plaintiffs

1714 Massachusetts Avenue, N.W.

Washington, D.C. 20036

JOHN LE MOULT, ESQ.

KARPATKIN, POLLET & LE MOULT

1345 Avenue of the Americas

New York, N.Y., 10019

Of Counsel

2a

ROBERT ABRAMS

Attorney General of the State

of New York

Attorney for Defendant

Two World Trade Center

New York, N.Y. 10047

JUDITH A. GORDON, ESQ.

Assistant Attorney General

Of Counsel

BENNETT, AYERVAIS

& BERTRAND, ESQS.

Attorneys for Amicus Curiae

70 Pine Street

New York, N.Y. 10005

HENRY MARK HOLZER, ESQ.

Of Counsel

Before VAN GRAAFEILAND, Circuit Judge, and

GAGLIARDI and KNAPP, District Judges

GAGLIARDI, District Judge

Plaintiffs, Consumers Union of the [sic] United States, |

Inc. (“Consumers Union”), a New York non-profit corpora-

tion, Edward J. Gorin, an individual who both resides and

regularly works in New Jersey, and Ira J. Furman, an in-

dividual, who resides in New Jersey but regularly works in

New York, commenced this lawsuit against the

Superintendent of Banks of the State of New York' to en-

join the enforcement of Sections 266 and 268 of New

York’s Banking Law, N.Y. Bank Law §§ 266 & 268

(McKinney 1971), on the ground that the statutes violate

various provisions of the state and federal constitutions.

'Muriel Siebert was substituted for John G. Heiman as defendant

pursuant to Rule 25(d), Fed. R. Civ. P.

3a

Article VI-A of the New York Banking Law authorizes

any savings bank in New York to sell life insurance (“sav-

ings bank life insurance” or “SBLI”) and establishes a pro-

gram to regulate its sale. Section 266 limits the maximum

policy that may be issued to $30,000 (“the policy limita-

tion”) and Section 268 limits the sale of SBLI to residents

of New York or persons who work regularly in New York

(“the geographical limitation”).2 By opinion dated

February 27, 1977, this three judge court’ upheld the con-

stitutionality of these statutes against a variety of constitu-

tional challenges‘, denied plaintiffs’ motion for summary

judgment and entered judgment for the defendant pur-

suant to Rule 54 (c), Fed. R. Civ. P. Consumers Union

Inc. v. Albright, 427 F. Supp. 840 (S.D.N.Y. 1977). Plain-

tiffs Consumers Union and Edward Gorin appealed to the

Supreme Court that portion of the judgment upholding

the constitutionality of Section 268.5 On June 26, 1978,

the Supreme Court vacated the judgment of this court and

remanded the case “for further consideration in light of

Hicklin v. Orbeck, 437 U.S. 518 (1978),” an Article IV

privileges and immunities clause case decided four days

earlier. Consumers Union v. Heiman, 437 U.S. 901 (1978).

On remand, plaintiffs and defendant cross move for sum-

2Section 268 provides that “[n]o application for insurance shall be

accepted except from a resident of this state or a person working

regularly therein.

‘The Honorable Ellsworth A. Van Graafeiland was substituted for

the Honorable Paul R. Hays by order dated July 6, 1979.

‘By its previous decision, this court upheld the constitutionality of

Section 268 under (1) the equal protection clauses of the Federal and

New York State Constitutions, (2) the due process clause of the State

Constitution, (3) the commerce clause of the Federal Constitution,

and (4) the privileges and immunities clauses in Article IV and the

fourteenth amendment of the Federal Constitution.

‘Plaintiff Ira Furman, who challenged only the policy limitation set

forth in section 268, did not appeal.

4a

mary judgment pursuant to Rule 56, Fed. R. Civ. P. For

the reasons set forth below, this court adheres to its

previous decision and grants defendant’s motion for sum-

mary judgment.

Statement of Facts®

Commercial insurers, such as the Prudential Life In-

surance Company of America (“Prudential”) and

Metropolitan Life Insurance Company (“Metropolitan”),

have sold industrial life insurance since the 1870’s. Com-

mercial insurers have typically sold this type of life in-

surance in small face amounts (no more than $1,000) and

their agents have usually collected the weekly of bi-

monthly premiums at the policyholder’s home. Industrial

life insurance has been purchased usually by blue collar

wage earners for themselves and their dependents and has

been called “workingman’s insurance” for this reason.

Although commercial insurers other than Prudential and

Metropolitan began selling industrial life insurance in the

early portion of the twentieth century, Prudential and

Metropolitan were still writing seventy percent of the

$16.7 billion of the industrial life insurance policies in

force nationwide in 1939.

On September 5, 1905, a joint New York legislative com-

mittee, entitled the Armstrong Committee, commenced

a study of the then essentially unregulated commercial life

insurance industry in New York State. The Committee

found that “unchecked competition, particularly among

The Record before this court from which its factual recitation is

drawn consists of a stipulation entitled “Stipulation on Remand from

the Supreme Court of the United States” (hereinafter cited as “Stipula-

tion 4 ”), and a joint appendix consisting of plaintiffs’ and defen-

dant’s exhibits to the stipulation (hereinafter cited as “Joint App.”).

The stipulation expressly supersedes all Local Rule 9(g) statements

that had been previously filed in this action (Stipulation 46).

Sa

the large insurers that controlled the bulk of the business,

had produced a chaotic situation and permitted the

development of undesirable practices that were : -onsis-

tent with the public interest”. (Stipulation 414). The Com-

mittee found, infer alia, that commercial insurers earned

substantially higher profits from industrial life insurance

policies than from ordinary policies and that industrial life

insurance policyholders, compared to ordinary life in-

surance policyholders, paid higher premiums, obtained lit-

tle or no equity in their policies and held policies with

higher lapse rates.? The New York State Insurance Depart-

ment and various legislative committees made subsequent

studies of industrial life insurance between 1936 and 1939.

These studies, like the Armstrong Committee Report,

showed excessively high lapse rates for industrial life in-

surance policies and generally higher policy costs for in-

dustrial as compared with ordinary life insurance

policies. ®

’The parties agree that:

[a]pproximately 58% of industrial life policies lapsed in

the first three years they were in force compared with 42%

of ordinary life policies. Approximately one-third of in-

dustrial policies did not survive three months. Approx-

imately one-half did not survive one year. Industrially in-

sured individuals generally did not obtain equity in their

policies until the policies had been in force for five years.

(Stipulation 415).

‘Apparently very little has changed in the industry since 1939:

In January 1979, the Office of Policy and Planning of the

United States Federal Trade Commission issued a report

entitled “Life Insurance Sold to the Poor: Industrial and

Other Debit Insurance” that characterizes industrial

policies as expensive, having high lapse rates and affected

by questionable contract terms and selling practices when

compared to other (non-industrial) life insurance policies

now available.

(Stipulation 417).

6a

The New York legislature was not alone in its concern

about the undesirable practices occurring in connection

with the sale of industrial life insurance. In 1905,

policyholders of the Equitable Life Assurance Society

formed the Policyholders Protective Committee to in-

vestigate possible abuses in the management and ad-

ministration of that company and engaged Louis Brandeis

as its counsel. In 1907, Brandeis published an article in

The Albany Law Journal entitled “Savings Bank Life In-

surance for Wage Earners”.? After reviewing data regard-

ing such items as the cost and lapse rates of industrial life

insurance to both New York and Massachusetts “work-

ingmen”, Justice Brandeis concluded that:

[t]he extraordinary wastefulness of the present

system of industrial insurance is due in large part

to the fact that the business, whether conducted

by stock or by mutual companies is carried on

for the benefit of others than the policyholders.

...A life insurance company for workingmen

should, as to each policyholder, be conducted,

like a savings bank, as a benevolent institution.

(Joint App. 120-21). Brandeis proposed that “state

legislatures create an alternative form of insurance, ‘sav-

ings bank life insurance’, to be sold in competition with in-

dustrial policies through state chartered savings banks.”

(Stipulation $19). Savings banks, Brandeis contended,

were the type of institution “singularly conducive” to pro-

viding low cost, high quality life insurance to individuals

of moderate means since “the insurance department of

savings banks would open with an extensive and potent

91907 Albany Law Journal 50. Brandeis’ article refers to a similar

proposal made in 1865 by Elizur Wright. (Stipulation 410).

7a

goodwill. . . . The safety of the institution would be un-

questioned, and a small amount of advertising would soon

suffice to secure a reasonably large business without

solicitors.” (Joint App. 122). Indeed, the parties have

agreed that New York savings banks were organized prin-

cipally to provide working people with fiscally sound,

interest-bearing depositories for their savings and with

residential mortgages and loans to meet their personal and

family needs. Savings banks in the State “continue to be

known as thrift institutions because of their identification

with the economic transactions engaged in by people of

moderate means and their not-for-profit organizational

structure”. (Stipulation 4423, 24).

Massachusetts enacted SBLI legislation the same year in

which Brandeis published his article. New York, after un-

successful efforts to enact similar legislation in 1909 and

again in the early 1930's, finally did so in 1938. In 1941,

Connecticut became the third and presently the final state

to enact SBLI legislation.

New York’s law, codified at N.Y. Bank. Law §261 ef.

seq. (McKinney 1941), authorizes State chartered savings

banks to elect to establish separate insurance departments

for the purpose of selling SBLI policies.'° These depart-

ments are entitled to conduct the business of insurance

“with all the rights, powers, . . . duties, . . . and restrictions

relating to domestic legal reserve life insurance companies

conferred or imposed by the insurance law” so far as those

rights and duties are not in conflict with the State’s bank-

ing law. N.Y. Bank. Law §263 (McKinney 1971). A 1940

‘As of December 31, 1977, sixty-eight of New York’s 115 savings

banks had elected to establish insurance departments. Forty-four

other savings banks and insurance banks are agents for the sixty-eight

issuing banks. (Stipulation 426).

8a

amendment to the statutory scheme provided for the crea-

tion of the New York Savings Bank Life Insurance Fund

(“The Fund”). The Fund, acting in a fashion similar to the

home office of a life insurance company, provides par-

ticipating savings banks with a host of technical life in-

surance services. The Fund, inter alia, (1) establishes

uniform terms and conditions, including all health and ac-

ceptability standards, for the SBLI policies, (2) prescribes

the exclusive “standard form” policy and furnishes the in-

dividual insurance departments with application forms

and schedules, (3) fixes uniform premiums, annuity rates,

loan values and surrender charges, (4) provides all ac-

tuarial, underwriting and medical services, (5) approves

the issuance of every policy and the payment of every

claim and (6) handles all accounting, billing and advertis-

ing. N.Y. Bank. Law § 271 (McKinney 1971). (See also

Stipulation 428). The Fund obtains revenues from

assessments against and contributions from participating

savings banks as well as from its own investments. Not-

withstanding the variety of functions that the Fund per-

forms, each insurance department continues to own the

policies that it sells in much the same way that any other

insurance company owns its policies. Significantly, neither

the Fund nor any other aspect of the SBLI program can be

subsidized by “. . . public funds, moneys of the state or

under state control or subject to audit by the state comp-

troller.” N.Y. Bank. Law §270 (McKinney 1971).

New York SBLI insurers operate under three statutory

limitations. First, all policies must be sold by salaried bank

employees rather than commissioned insurance agents.

N.Y. Bank. Law §269 (McKinney 1971). Second, no in-

dividual policy can be issued in excess of $30,000 per risk.

N.Y. Bank. Law §266 (McKinney 1971). And finally, “[nJo

application for insurance shall be accepted except from a

resident of [New York State] or a person working regular-

9a

ly therein.” N.Y. Bank. Law §268 (McKinney 1971). By

resolution dated April 12, 1957, the Board of Trustees of

the Fund construed this provision, which has counterparts

in both the Massachusetts and Connecticut SBLI legisla-

tion, as restricting “the sale of SBLI to (1) natural persons

who live or regularly work in New York who insure

themselves or persons with respect to whom they have an

insurance interest . .. ; and (2) New York corporations,

foreign corporations with their principal place of business

in New York and unincorporated associations with their

principal place of business in New York if they qualify for

and purchase group policies.” (Stipulation 441).”'' The

geographic limitation embodied in Section 268 was part of

the original New York SBLI law. The act’s legislative

history, although it discusses the purposes of SBLI at

some length, fails to mention this provision directly.

Notwithstanding the geographic restriction on the sale

of New York SBLI, approximately $6.8 billion of SBLI

was in force in New York State in 1977. (Stipulation 438).

In 1970, New York SBLI ranked 104th in amount of in-

surance in force out of a total of 1800 commercial and

SBLI insurers in the United States. In 1971, New York

SBLI’s rank was 87th and by 1974, it moved up to 70th.

(/d.) The reason for New York SBLI’s popularity is ap-

parent. The parties agree that while “there is no difference

between New York SBLI policies and commercial life [in-

surance] policies with respect to reliability, quality or

customer satisfaction” (stipulation 445), there is a signifi-

cani difference in price. Simply put, New York SBLI is

one of the best buys in life insurance. Best Reports, an

authoritative publication on the characteristics of life in-

surance, has established various categories for the net cost

''The parties also agree that “[pJolicyholders may retain New York

SBLI if, subsequent to purchase, they move away from the state or no

longer regularly work in the state.” (Stipulation 441).

19a

of life insurance policies to policyholders. Of the ninety-

eight insurers licensed to do business in New York for

which Best’s ratings are both available and applicable,

twenty-five, including SBLI, received the most favorable

rating of “remarkably low”. Of 619 insurers doing

business nationwide in 1973, Best gave this rating to only

forty-six. New York SBLI was also rated as one of seven

insurers licensed to do business in New York whose lapse

rate received the “most favorable” rating. Only nineteen of

the over six hundred insurers doing business nationwide in

1973 received a comparable rating. The relatively low cost

of New York SBLI policies has been said to be attributable

to (1) sales by salaried bank employees, rather than com-

missioned agents, (2) relatively low lapse rates, (3) possible

expense and federal tax advantages occasioned by the

structure and operation of the insurance departments

within participating savings banks and (4) favorable yields

on investments. !?

Discussion

As a threshhold matter, we note that although the

Supreme Court remanded this case “in light of Hicklin vy.

Orbeck, 437 U.S. 518 (1978),” lower federal courts are

obligated “to consider any change, either in fact or law,

which has supervened since the original judgment was

'2Insurance departments of savings banks are subject to the same

tax obligations as commercial insurers. (Stipulation 432). Although

the investments made by insurance departments of savings banks are

governed by N.Y. Bank. Law §235, as opposed to the provisions ap-

plicable to the investments of commercial insurers, see N.Y. Ins. Law

§§ 46-a, 79, 81-84, the resulting differences “do not provide an in-

herent advantage to either of the two insurer groups over the other.”

(Stipulation 433). Over the past five years, SBLI insurers have earned

1/2% higher return on investments than the average of all commercial

life insurers. (/d.)

lla

entered.” See, e.g., Baird v. Benton County Board of

Education, 421 F.2d 700, 701 (Sth Cir. 1970) citing Bell v.

Maryland, 378 U.S. 226 (1964). A month prior to render-

ing the decision in Hicklin, the Supreme Court decided

Baldwin v. Montana Fish & Game Commission, 436 U.S.

371 (1978), which, like Hicklin, involved an Article IV

privileges and immunities clause challenge to a state

statute. Accordingly, our reconsideration of the constitu-

tionality of Section 268 of New York’s Banking Law is, as

the parties have assumed, in light of the teachings of both

Hicklin and Baldwin."

In Baldwin, non-resident hunters challenged the con-

stitutionality of a Montana statute under which they were

charged seven and one-half times as much as were Mon-

tana residents for the privilege of hunting elk and other

animals in the state. The Supreme Court, in an opinion

authored by Justice Blackmun, upheld the statute on the

ground that the interest asserted by the plaintiffs was not

protected by the privileges and immunities clause. The

Court reasoned:

Some distinctions between residents and non-

residents merely reflect the fact that this is a Na-

tion composed of individual States, and are per-

mitted; other distinctions are prohibited because

they hinder the formation, the purpose, or the

development of a single Union of those States.

Only with respect to those “privileges” and “im-

munities” bearing upon the vitality of the Nation

'SAlthough much of our discussion may be applicable to both plain-

\iffs’ commerce clauses and Article IV privileges and immunities

clause arguments, see pp. 14-15, infra citing inter alia Hicklin v.

Orbeck, 437 U.S. at 531-32, we consider the Supreme Court’s remand

to be directed at plaintiffs’ privileges and immunities clause challenge

since Hicklin, and for that matter Ba/dwin as well, did not involve a

commerce clause challenge to the statute there under attack.

12a

as asi le entity must the State treat all citizens,

resident and nonresident, equally.

Id. at 383. The Court concluded that equal access to hunt

Montana elk for recreational purposes, unlike the right to

practice one’s livelihood or to institute actions in the

courts of any state, was not a “fundamental” right and

thus was outside the scope of the privileges and immunities

clause. /d. at 389.

Hicklin v. Orbeck presented the Court with a somewhat

different issue. In Hicklin, plaintiffs challenged the con-

stitutionality of the Alaska Hire statute which required

employers to give an absolute preference to Alaska

residents for all jobs which resulted in any way from

Alaska’s decision to develop its oil and gas resources. The

Court, in a unanimous opinion by Justice Brennan, had

little difficulty with the issue of whether or not access to

employment opportunities was a protected activity under

the privileges and immunities clause. It held that plaintiffs’

appeal to the protection of the clause was “strongly sup-

ported by [the] court’s decisions holding violative of the

Clause State discrimination against nonresidents seeking

to ply their trade, practice their occupation, or pursue a

common calling within the State.” Hicklin v. Orbeck,

supra, 437 U.S. at 524. The Court, went on to declare the

statute unconstitutional because it did not satisfy the two-

prong standard first enunciated in Toomer v. Witsell, 334

U.S. 385 (1948) in that (1) there was no showing that

nonresidents were “a peculiar source of the evil” that the

statute was enacted to remedy, and (2) the discrimination

against nonresidents did not bear a “substantial relation-

ship” to the problem they allegedly presented. /d. at

526-27.'4

'4Although this language appeared in Toomer, the Toomer court

also stated, as this court noted in its previous opinion, that the clause:

13a

Baldwin and Hicklin when read together, as we believe

they must be, create a two-tier mode of analysis for resolv-

ing whether or not a statute withstands scrutiny under the

inter-state privileges and immunities clause. See generally

The Supreme Court, 1977 Term, 92 Harv. L. Rev. 57,

75-86, Salla v. County of Monroe, 48 N.Y.2d 518; 423

N.Y.S.2d 878, 399 N.E.2d 909 (1979) (U.S. appeal pend-

ing). The first step requires determining whether the right

that nonresidents are prohibited from exercising is so

“basic” or “fundamental” that interference with it “would

frustrate the purposes of the formation of the Union. . .”

Baldwin v. Montana Fish & Game Commission, supra,

436 U.S. at 387. If such a protected activity is found, the

second step involves analyzing that activity under the

“peculiar evil” and “substantial relation” tests employed in

Hicklin. This two-prong standard embodies the competing

concerns of the privileges and immunities clause: a

recognition that federalism presumes an area within which

States may legislate with little judicial oversight and the

need to remove from citizens of each state “the disabilities

of alienage of other States” when important individual

rights are involved. See Baldwin v. Montana Fish & Game

Commission, supra, 436 U.S. at 380-81 & n.19 quoting

does not preclude disparity of treatment in the many situa-

tions where there are perfectly valid independent reasons

for it. Thus the inquiry in each case must be concerned

with whether such reasons do exist and whether the degree

of discrimination bears a close relation to them. The in-

quiry must also, of course, be conducted with due regard

for the principle that the States should have considerable

leeway in analysing local evils and in prescribing ap-

propriate cures.

Consumers Union Inc. v. Albright, 427 F. Supp. at 845 citing Toomer

v. Witsell, 334 U.S. at 396 (footnotes omitted). See also note 20, in-

Sra.

14a

Paul v. Virginia; see also The Supreme Court, 1977 term,

92 Harv. L. Rev. 57, 80-81 (1978).

Our initial question therefore is whether New York’s

decision to make New York SBLI available only to in-

dividuals who live or work in the State threatens a basic or

fundamental right essential to the well-being of the Union.

“Merely to ask the question seems to provide the answer.”

Baldwin v. Montana Fish & Game Comunission, 436 U.S.

at 388. The right of equal access to a particular type of life

insurance simply is not comparable to such rights as the

right to practice one’s livelihood, Mullaney v. Anderson,

342 U.S. 415 (1952), Toomer v. Witsell, 334 U.S. 385

(1948), Ward v. Maryland, 12 Wall. 418 (1870), the right

to own and dispose of private property, Blake v. Mc-

Clung, 172 U.S. 239 (1898), or the right to institute and

maintain actions in courts of a state, Canadian Northern

R. Co. v. Egger, 252 U.S. 553 (1920). See also Corfield v.

Corvell, 6 F. Cas. 546, 552 (No. 3,230) (CCED Pa. 1825).

Relying primarily on Chief Justice Burger’s concurring

opinion in Baldwin, plaintiffs argue that the right affected

by Section 268 of New York’s Banking Law falls within

the protected sphere of the privileges and immunities

clause because the clause “assures noncitizens the oppor-

tunity to purchase goods and services on the same basis as

citizens.” Baldwin v. Montana Fish & Game Commission,

436 U.S. at 394 (Burger, C.J., concurring).'* In continu-

'SPlaintiffs also rely upon broad dicta from Ward v. Maryland, 12

Wall. 418, 430 (1870) (“. .. the clause plainly and unmistakably

secures and protects the right of a citizen of one State to pass into any

other State of the Union. . . to acquire personal property. . .”); Paul

v. Virginia, 8 Wall. 168, 180 (1868) (“the clause was intended to pro-

vide nonresidents . . . the same freedom possessed by citizens of those

states in the acquisition and enjoyment of property”); and Corfield v.

Coryell, 6 F. Cas. 546, 552 (No. 3,230) (CCED Pa. 1825) (a state may

not interfere with the “right of a citizen of one state. . . to take, hold

and dispose of property, either real or personal . . .”).

15a

ing to explain the scope of the clause, the Chief Justice

stated that “it confers the same protection upon the buyer

of luxury goods and services as upon the buyer of bread.”

Id. While we have no quarrel with these general principles,

we would distort both their meaning and the delicate

balance of the federal system if we were to hold that the

type of “goods and services” that they envision includes

New York SBLI — a legislatively created, non-state sub-

sidized, social welfare program. In asserting that the right

of equal access to New York SBLI fits within the “basic”

or “fundamental” category, plaintiffs also rely on a series

of commerce clause cases which stand for the broad prop-

osition that “a State is without power to prevent privately

owned articles of trade from being shipped and sold in in-

terstate commerce on the ground that they are required to

satisfy local demands or because they are needed by the

people of the State.” Foster-Fountain Packing Co. v.

Haydel, 278 U.S. 1, 10 (1928); see also H.P. Hood & Sons,

Inc. v. Dumond, 336 U.S. 525, 539 (1949); Pennsylvania

v. West Virginia, 262 U.S. 553, 597 (1949); West v. Kansas

Natural Gas, 221 U.S. 229, 255 (1911). We believe,

however, that “[a]n entirely different question is presented

when a state seeks to preserve for the enjoy-

ment of its citizens a ‘resource’ it has created through its

own efforts.” Salla v. County of Monroe, 48 N.Y.2d at

527; 423 N.Y.S.2d at 885, 399 N.E.2d at 916 (Gabrielli, J.,

dissenting) citing L. Tribe, American Constitutional Law

[1979 Supp.] pp. 38-39; Baldwin v. Montana Fish & Game

Commission, supra.'®

'6In Salla, the New York Court of Appeals struck down a New

York statute which required the state, its subdivisions and contractors

in their employ to give an employment preference on all public works

projects to New York residents. Judge Gabrielli, writing for himself

and Judge Cooke, dissented and reasoned as follows:

While it is true that a state may not baldly exploit its

passive ownership of a resource by indirectly using it as a

l6a

In reaching this conclusion, we draw upon cases ad-

judicated under both the privileges and immunities clause

and the commerce clause since their “mutual reinforcing

relationship”, “common origin in Article IV or the Articies

of Confederation”, and “shared vision of federalism” have

been repeatedly noted. See e.g., Hicklin v. Orbeck, 437

U.S. at 531-32 citing Baldwin vy. Montana Fish & Gaine

Commission, 436 U.S. at 379-80; Austin v. New Hainp-

shire, 420 U.S. 656, 660-61 (1975). Some initial guidance is

offered by Hughes v. Alexandria Scrap Corp., 426 U.S.

794 (1976). There, the Supreme Court was confronted

with a Maryland statute in which the State agreed to pur-

chase crushed automobile hulks from scrap processors at

premium prices in order to remove abandoned vehicles

from the State’s roadways. Virginia scrap processors

claimed that Maryland violated the commerce clause by

effectively refusing to purchase hulks from out of state

processors. After recognizing that the case presented “a

situation. . . without precedent”, id. at 807, the Court

held that Maryland’s action was not “the kind of action

with which the commerce clause [was] concerned” because

the State had not interfered with the natural functioning

of the interstate hulk market but merely had entered that

market as a purchaser which chose to give its business to

in-state sellers. /d. at 806-08. While Alexandria Scrap is

admittedly distinguishable in many respects from the case

at bar, it, at a minimum, “suggests a growing judicial

solicitude for efforts by states to protect the. . . needs of

basis for requiring discrimination against nonresidents in

private hiring, nothing in Hicklin or the case preceding it

suggests that when a state has created a resource such as

job opportunities, it cannot direct that the resource be used

to the advantage of its own citizens.

Salla v. County of Monroe, 48 N.Y.2d at 529, 423 N.Y.S.2d at 886,

399 N.E.2d at 917.

17a

their residents...” L. Tribe, American Constitutional

Law 336, 337-38 (1978).

Most recently, in Reeves, Inc. v. Stake, 48 U.S.L.W.

4746 (June 17, 1980), a concrete distributor with its

facilities in Wyoming claimed that a South Dakota owned

and operated cement plant could not, in the face of in-

creased demands and limited supply, enact a policy “of

supplying all South Dakota customers first” and allocating

the remaining volume on a first-come first-served basis.

The Supreme Court disagreed. Reaffirming the holding of

Alexandria Scrap, the Court held that the commerce

clause did not forbid South Dakota, in the absence of con-

gressional action, from participating in the market and ex-

ercising its right to favor its own citizens. Reeves, Inc. v.

Stake, 48 U.S.L.W. at 4751.

The Reeves decision is instructive in two. salient

respects.'’ First, the petitioner in Reeves argued that “if a

state ... were allowed to hoard its commodities or

'’For the purposes for which this court relies on Reeves, we need

not reach the question of whether the State of New York became a

“participant” in the industrial life insurance market by merely

creating, and not itself purchasing or selling, a form of insurance. We

note, however, that SBLI, by providing an alternative to commercial

life insurance, both responded to a public need and altered market

patterns in the industry. At the Fifth Anniversary Dinner of Savings

Bank Life Insurance, the then Superintendent of Banks noted:

[t}wo of the insurance companies which were formerly very active in

writing industrial insurance have been relaxing their efforts in this

field since savings banks in the State began to write life insurance. The

number of their industrial policies in force declined about 2,000,000 in

the four years ended December 31, 1942. The gain in ordinary life

policies of these companies during the same period fell far short of

compensating for the reduction in the number of industrial policies.

(Joint App. 157). See also Salla v. County of Monroe, 48 N.Y. 2d at

526-27; 423 N.Y.S.2d at 884-85, 399 N.E.2d at 916 (1979) (Gabrielli,

J., dissenting).

18a

resources for use of their own residents only, . . . Penn-

sylvania or Wyoming might keep their coal, the northwest

its timber, and the mining states their minerals. The result

being that embargo may be retaliated by embargo and

commerce would be halted at state lines. /d. at 4750. See

also West v. Kansas Natural Gas Co., 221 U.S. at 255.

One of the grounds upon which the Supreme Court re-

jected this argument was that the petitioner had not

demonstrated that “South Dakota possesses unique access

to the materials needed to produce cement.” Reeves, /nc.

v. Stake, 48 U.S.L.W. at 4750. In the case at bar, plain-

tiffs similarly claim that Section 268 is unconstitutional

because New York, in effect, has embargoed the exporta-

tion of SBLI. Plaintiffs’ Brief at 16-17. This claim must be

rejected, as it was in Reeves, since New York hardly has

unique access to SBLI. As the defendant cogently argues,

each state is free to create its own SBLI in “a condition of

plentitude” and each state’s SBLI program operates

without disadvantaging any other state’s program.'* Cf.

'8 Austin v. New Hampshire, 420 U.S. 656 (1975), strenuously relied

upon by the plaintiffs, is inapposite. In Austin, Maine residents who

worked in New Hampshire challenged the New Hampshire income tax

system which taxed non-residents on the income they earned in New

Hampshire but did not levy any tax on the income earned by New

Hampshire residents. The State argued that the tax did not impose any

burden on the plaintiffs and thus did not violate the privileges and im-

munities clause because Maine awarded a tax credit to its residents for

income taxes paid to another state and in so doing shielded its

residents from the effects of the New Hampshire tax. In striking down

the statute, the Court held that Maine’s tax credit provision could not

cure the constitutional defect in New Hampshire’s statute because

Maine was at liberty, and in fact even encouraged, to retaliate against

New Hampshire by eliminating its credit provision for taxes paid to

that state. /d. at 666-67. Thus, the Court stated that “the constitu-

tionality of one State’s statute affecting non-residents [cannot] depend

upon the present configuration of the statute of another state.” /d. at

668. As this court noted in its previous opinion, “[t]he affirmative

19a

Hughes v. Alexandria Scrap Corp., 426 U.S. 794 (1976)

(payment of bounties by a state in a manner that favors in-

state processors does not violate the commerce clause

when the state does not interfere with the “natural func-

tioning” of interstate market). Thus, any individual in-

eligible for New York SBLI by virtue of Section 268 re-

mains free to do precisely what his New York counterpart

did -- petition his state legislators to create a form of low

cost hight quality industrial life insurance designed to meet

the needs of its wage earners of moderate means. !9

burden of a tax as a condition for working in-state is very different

from the denial of a benefit to out-of-state citizens under Section

268.” Consumers Union v. Albright, 427 F. Supp. at 846 & n.10. One

reason for this distinction is that the former is much more likely to in-

duce retaliation than the latter. See Austin v. New Hampshire, 420

U.S. at 662-63 quoting Travis v. Yale & Towne Mfz. Co., 252 U.S. 60,

82 (1920) (“to prevent [retaliation] was one of the chief ends sought to

be accomplished by the adoption of the constitution”). A second

distinguishing feature is the type of retaliation likely to occur. The

retaliatory action envisioned in Austin involved an unwarranted

burden upon the residents of Maine by causing them to pay income

tax on the same money in two states. The type of retaliation resulting

from Section 268, in contrast, only involves leaving other states free to

enact SBLI for the benefit of individuals with an economic nexus with

those states.

'*Even if excluded nonresidents do not succeed in enacting SBLI

legislation in their states, defendant cogently argues that nonresidents

are not discriminated against by Section 268 because they are still able

to purchase some commercial life insurance policies which are just as

inexpensive and which contain similar terms and conditions as SBLI.

(Stipulation 9944-48). This court’s prior opinion assumed that SBLI

was less expensive than comparable commercial life insurance to avoid

any dispute of a material fact in deciding plaintiffs’ motion for sum-

mary judgment. Consumers Union v. Albright, 427 F. Supp. at 843

n.7. Whatever dispute existed between the parties on this point in the

prior proceedings has been resolved by the above-cited paragraphs of

the stipulation.

_

20a

This brings us to the second noteworthy aspect of

Reeves. The Reeves Court noted that voiding South

Dakota’s “residents only” policy “would interfere

significantly with a State’s ability to structure relations ex-

clusively with its own citizens” and “threaten the future

fashioning of effective and creative programs for solving

local problems”, Reeves, Inc. v. Stake, 48 U.S.LW. at

4749. See also id. at 4748-49 n.10 citing National League

of Cities v. Usery, 426 U.S. 833 (1976). We believe that

comparable considerations of the “role of each State ‘as

guardian and trustee for its people’”, id. at 4748-49, are in-

volved in this case. When Governor Lehman urged the

New York legislature to adopt SBLI, he described it as a

form of “social insurance”, much like New York’s

Workmen’s Compensation Law, Old Age Law, and the

Unemployment Insurance Law, requiring governmental

initiative to provide “a greater degree of economic security

for [o]ur low-paid wage earners” who were disadvantaged

by the industrial life insurance policies then offered. (Joint

App. 143). Notwithstanding the fact that the program did

not require, and in fact expressly prohibited state funding,

the Governor noted that the benefits of the proposed law

would not be limited to the State’s lowest paid wage

earners who were most likely to become policyholders:

To the extent that our lowest paid workers pur-

chase [SBLI], the public relief burden of the

general taxpayer will be proportionally reduced.

(/d. at 144). When SBLI legislation was finally enacted in

1938, Governor Lehman hailed the program as “a great

social experiment” which should be helpful to lower in-

come groups...” (Id. at 146). As the Supreme Court

reiterated in Reeves,:

[t]o stay experimentation in things social and

economic is a grave responsibility. Denial of the

ela

right to experiment may be fraught with serious

consequences to the Nation. It is one of the hap-

py incidents of the federal system that a single

courageous State may, if its citizens choose,

serve as a laboratory; and try novel social and

economic experiments without risk to the rest of

the country.

Reeves, Inc. v. Stake, 48 U.S.L.W. at 4749 quoting New

State Ice Co. v. Liebmann, 285 U.S. 262, 311 (1932)

(Brandeis, J. dissenting). We hold that New York’s “social

experiment” aimed at providing individuals who have an

economic tie with the State with a safe and inexpensive

form of life insurance does not contravene the inter-state

privileges and immunities clause. ?°

Plaintiffs strenuously argue that SBLI cannot be

characterized as a “state resource” or a “benefits program”

simply because New York SBLI neither requires nor can

receive state funding. Plaintiff [sic] Reply Brief at 7-11. We

2°Our analysis of the nature of the right that individuals without an

economic nexus to New York are prohibited from exercising by Sec-

tion 268 makes it unnecessary to subject the challenged statute to the

“peculiar evil” and “substantial relation” tests enunciated in Toomer

and Hicklin, We note in passing, however, that both of these cases in-

volved situations in which states sought to justify the “exclusion” of

nonresidents from a scarce resource (/.e., coastal shrimp and jobs)

when neither the exclusionary classification nor the related aspects of

the state plan served the purported purposes of the statutes. This

situation is dramatically different from the one presented by this ac-

tion in which New York has enacted a social welfare insurance pro-

gram to eliminate abusive practices in a particular industry and has

defined the benefited class to include only individuals with an

economic nexus with the State. “As in any other social or public

benefit program, the benefited class under §268 consists of individuals

who are appropriate objects of New York’s legislative concern, or

those who will receive the “good” the program will provide, rather

than those who are the source of the evil, or whose welfare is the

legitimate concern of another State.” Defendant’s Brief at 19-20 (em-

phasis added).

22a

disagree. The fact that SBLI is able to provide blue-collar

workers with a degree of economic security and reduce

New York’s relief burden without any cost to the State is a

testament to the program rather than a reason for its un-

constitutionality. Moreover, while Sections 261-263 of

New York’s Banking Law authorize savings banks to

establish life insurance departments to conduct “the

business of issuing life insurance”, New York SBLI is

much more than another form of state regulation of the

activities of state chartered savings banks. Cf. Lewis v. BT

Investinent Managers, Inc., 48 U.S.L.W. 4638, 4641 (June

9, 1980). It is a legislatively created alternative to commer-

cial industrial life insurance which was designed to

eradicate certain perceived social evils. See Stipulation 419

citing L. Brandeis, “Savings Bank Life Insurance for

Wage Earners,”, /907 Albany Law Journal 50. As such,

New York’s decision to limit the availability of SBLI to

those who are the most appropriate objects of New York’s

legislative concern does not render Section 268 unconstitu-

tional.

Conclusion

Accordingly, om remand, defendant’s motion for sum-

mary judgment is granted and the Clerk is directed to enter

judgment dismissing the complaint.

So Ordered.

Dated: New York, New York

August 14, 1980. U.S.D.J.

Emm Se F

U.S.D.J.

23a

APPENDIX B

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF NEW YORK

CONSUMERS UNION OF

UNITED STATES, INC.

and EDWARD J. GORIN,

Plaintiffs, Civil No.

)

)

)

)

)

Vv. ) 74 CIV 234 (LPG)

)

MURIEL SIEBERT, )

Superintendent of Banks )

of the State of New York )

Defendant. )

NOTICE OF APPEAL

Consumers Union and Edward Gorin hereby give notice

that pursuant to 28 U.S.C. §1253, they will appeal directly

to the United States Supreme Court from the judgments of

the three-judge district court entered August 14, 1980,

granting defendant’s motion for summary judgment oui re-

mand and denying plaintiffs’ motion for reconsideration.

Respectfully submitted,

/S/ MARK A. CYMROT

MARK A. CYMROT

P.O. Box 875

Ben Franklin Station

Washington, D.C. 20044

(202) 724-7203

Attorney for Plaintiffs

24a

CERTIFICATE OF SERVICE

I hereby certify that a copy of the Notice of Appeal was

mailed by first class, postage prepaid, on September 12,

1980, to:

Judith A. Gordon, Esq.

Assistant Attorney General

Two World Trade Center

New York, New York 10047

Henry Mark Holzer, Esq.

Bennett, Avervais & Bertrand

70 Pine Street

New York, New York 10005

/S/ MARK A. CYMROT

MARK A. CYMROT