Amicus Curiae Brief — United States Nat. Bank of Ore. v. Independent Ins. Agents of America, Inc.
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Suprenie . curt, US.
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IN THE | Govees OF THE CLERK
SUPREME COURT OF THE UNITED STATES
October Term, 1992
UNITED STATES speenaden BANK
OF OREGON, - =- - - - Petitioner,
v.
INDEPENDENT INSURANCE AGENTS
OF AMERICA, INC., et al., - - Respondents.
On Petition for Writ of Certiorari to the
United States Court of Appeals for the
District of Columbia
BRIEF OF KENTUCKY BANKERS ASSOCIATION,
THE OWENSBORO NATIONAL BANK,
THE FIRST NATIONAL BANK OF LOUISA, AND
CITIZENS NATIONAL BANK OF PAINTSVILLE
AS AMICI CURIAE IN SUPPORT OF THE PETITION
M. BROOKS SENN
Counsel of Record
M. THURMAN SENN
SENN, MILLER & SMITH
First Trust Centre
Suite 100 South
200 South Fifth Street
Louisville, Kentucky 40202
(502) 585-3330
Attorneys for Amici Curiae
WESTERFIELD BONTE CO 618 W KENTUCKY-P O BOK 328! LOUISVILLE. KY
QUESTION PRESENTED
Whether the court below in 1992 correctly determined
that Congress inadvertently repealed in 1918 a statute,
enacted only two years earlier in 1916, which granted
national banks in small towns the authority to act as
insurance agents and under which national banks have
been continuously operating ever since?
il
TABLE OF CONTENTS
PAGE
QUESTION PRESENTED ...0000000000..cccccccceeeeees i
TABLE OF CONTENTS ....0000.....0.:ccccccesseeeseeeeeeeeeees il
TABLE OF AUTHORITIES .....0.0.........0.:0:ccceceee iii—v
INTEREST OF THE AMICI CURIAE.................... 2— &
REASONS FOR GRANTING THE WRIT............. %-16
I. A Decision On The Continued Existence Of
12 U.S.C. §92 Is Necessary To Resolve A
Conflict In The Courts Of Appeals On A
Substantial Question Of Federal Law ............. 8-11
Il. Immediate Review Is Appropriate Since
The D.C. Circuit’s Decision Was Seriously
Flawed And Arguments Are Being Advanced
That The Decision Will Be Effectively
Binding In Other Circuits ...................00ccceeeeeees 11-13
Ill. The D.C. Circuit’s Decision Is In Conflict
With This Court’s Decision In Commissioner
of Internal Revenue v. First Security Bank
Of CO, Bile cmncnnmmminnmeanael ante 13-15
IV. That Portion Of The D.C. Circuit’s Decision
As To The Existence Of §92 Should Be
Addressed Even If The Court Determines
That The D.C. Circuit Acted Inappropriately
In Raising The Issue Sua Sponte ......a............. 15-16
CRISES cccceccecssoncncossansscesinesesenientiinnsaaaannalnnae 16-17
RPO CET csccsssssisicsserinensereieemnnmaae la—27a
A. Memorandum Opinion and Order, Owensboro
National Bank v. Moore, No. 91-3 (E.D. Ky.
ante, ©, TED scocessecosenccthistidciasimmmaiaaannenes la—23a
B. Declaration of Rosa M. Koppel, Esq., Office
of the Comptroller of the Currency, filed
in The Owensboro National Bank v. Moore,
No. 91-3 (E.D. Ky. Apr. 14, 1992) .................. 24a-27a
TABLE OF AUTHORITIES
PAGE
Cases:
Alabama Ass'n of Ins. Agents v. Board of
Governors of the Federal Reserve System,
533 F.2d 224 (5th Cir. 1976), modified,
558 F.2d 729 (1977), cert. denied, 435 U.S.
cas rsscsnnscescccccces 10
American Land Title Ass'n v. Clarke, 968 F.2d 150
a a f}
Bankamerica Corp. v. United States, 462 U.S. 122
SIITTItidiiiiaiininrieetnersncncsncscessenccsecseccoeccoces y
Board of Governors of the Federal Reserve System
v. MCorp. Financial, Inc., U.S. ___, 112
EE 15
Braxton v. United States, _U.S.__, 111 S.Ct.
a. sc emnmescnecs % 16
Commissioner of Internal Revenue v. First
Security Bank of Utah, N.A., 405 U.S. 394
SEES Se Wet |
Commissioner of Internal Revenue v. Mary Archer
W. Morris Trust, 367 F.2d 794 (4th Cir. 1965) 5
Federal Savings and Loan Insurance Corp. v.
Ticktin, 490 U.S. 82 (1989) ..................cc eee. s
First National Bank of Lamarque v. Smith,
610 F.2d 1258 (5th Cir. 1980)............0.............. 5, 11
Genessee Trustee Corp. v. Smith, 102 F.2d 125
ETT 5, 10
Guaranty Mortgage Co. v. Z.1.D. Associates, Inc.,
506 F. Supp. 101 (S.D.N.Y. 1980) .................... 5
Independent Bankers Ass'n of America v.
Heimann, 613 F.2d 1164 (D.C. Cir. 1979) ....... 5
Independent Ins. Agents of America, Inc. v.
Clarke, 955 F.2d 731 (D.C. Cir. 1992).............. 5, 14
Kirsch Co. v. Bliss and Laughlin Industries, Inc.,
495 F. Supp. 488 (W.D. Mich. 1980) ................ 13
Owensboro National Bank v. Moore, No. 91-3
(E.D. Ky.), appeal docketed, No. 92-6330/31
i ccccenecocs 2,12
Saxon v. Georgia Ass'n of Indep. Ins. Agents., Inc.,
399 F.2d 1010 (5th Cir. 1968).....................00.... 5
Thompson v. Kerr, 555 F. Supp. 1090 (S.D. Ohio
SUTTITIIE surcisossenesiciennastiabsibieepeaneumnneniieniniseiiaduenidaasibneibianiiinie
United States v. Dawson, 576 F.2d 656 (Sth Cir.
1978), cert. denied, 439 U.S. 1127 (1979).........
United States v. Mendoza, 464 U.S. 154 (1984) ....
United States v. Welden, 377 U.S. 95 (1963) .........
Variable Annuity Life Ins. Co. v. Clarke, 786 F.
Supp. 639 (S.D. Tex. 1991), appeal docketed,
Rs eT
Wisconsin v. Illinois, 278 U.S. 367 (1928) .............
Federal Statutes:
Act of September 7, 1916, Pub. L. No. 64-270,
11
9
39 Stat. 752, 753-754 (referred to as “12 U.S.C.
fg RAR Eee eevee
Competitive Equality Banking Act of 1987, Pub.
L. No. 100-86, 101 Stat. 552 (1987):
§ 201(b)(5), 101 Stat. 581-583-0000...
Garn-St.Germain Depository Institutions Act,
Pub. L. No. 97-320, 96 Stat. 1469 (1982):
eee
National Bank Act, 12 U.S.C. §§21 et seq.:
Oe RD SII 0s cciensartondunieienmnipnipainendennessen
12 U.S.C. $51d (1952) ............... seriacitintabaioaasldabaltanial
12 <b a co ee eer
SEER RSTE eee
a deniers cerntcctrtertitinesidsidninienieanitiniaiti
S §92 (Law. Co-op. 1978 & Supp.
U.
U.
U.
U.
U.
aaa
NMMmMMM NW wd ry
. §36
U. "$961 RE nee
I sisi crticicanltiinemernmeenenent
U.S.C.S. §361 (Law. Co-op. 1992) eaaisieniaide
I laa taiaaricineniaretaane
12 U. S. eS, Cn
12 U.S.C.S. §373 (Law. Co-op. 1992) ...............
Supplemental Appropriations Act of 1975, Pub.
L. No. 93-554, 88 Stat. 1771 (1975):
Title I, Ch. III, $101, 88 Stat. 1777 ..................
War Finance Corporation Act, Pub. L.
No. 65-121, 40 Stat. 506 (1918):
Se CEE: We adininicninianastecntenmnisinndisemneeneniiinn
—
nDinnnn
12 U. S.C. §2 (1952) ESD ee aS AO ee
12 U.S.C.A. §1818(b)(1) (West 1989 and
I rice laches eae
12 U.S.C.A. §1818(h) (West 1989 and Supp.
ITE incenaseenidpanamieisienadethinetiaensitaiediitiabaidibiedaidiiiadscneesace
1992) sneer eesiennevidiniamntbliauninianieaianteiipincniniedsesueuiidnessasasess
State Statutes:
Ariz. Rev. Stat. Ann. §6-184.2 0000000000 cee
Ill. Rev. Stat. ch. 17, para. 311(11)
Md. Fin. Inst. Code Ann. §5-504
N.D. Cent. Code Ann. §6-03-38
Utah Code Ann. §7-3-10(1)
Legislative Material:
Financial Institutions Act of 1957: Hearings
Before the House Banking and Currency
Committee on S. 1451 and H.R. 7026, 85th
cg Se Ns CI tiietrentnincicsnetesonsenenesincnnminann
House Resolution No. 988, §205(c), 93rd Cong.
(Oct. 8, 1974)
Miscellaneous:
Declaration of Rosa M. Koppel, Esq., Office of the
Comptroller of the Currency, filed in Owens-
boro National Bank v. Moore, No. 91-3
Se Nala ehieeerearniasseiennietiesiradashccbaiditiahiacaiil cies
Hackley, Our Baffling Banking System — Part II,
52 Va. L. Rev. 771 (1966)
Supreme Court Rule 10.1
i ee
OPP eee eee ee eee ee
ieee eee eee eee ee ee ee
eddie
COREE eee eee
, 10
No. 92-484
IN THE
SUPREME COURT OF THE UNITED STATES
October Term, 1992
Unrrep StaTes NaTIONAL BANK OF OREGON, -_ Petitioner,
v.
INDEPENDENT INSURANCE AGENTS OF
America, INc., et al, - - - - - £=Respondents.
On Petition for Writ of Certiorari to the
United States Court of Appeals
for the District of Colombia Circuit
BRIEF OF KENTUCKY BANKERS ASSOCIATION,
THE OWENSBORO NATIONAL BANK,
THE FIRST NATIONAL BANK OF LOUISA, AND
CITIZENS NATIONAL BANK OF PAINTSVILLE
AS AMICI CURIAE IN SUPPORT OF THE PETITION
Kentucky Bankers Association, The Owensboro Nationa!
Bank, The First National Bank of Louisa, and Citizens
National Bank of Paintsville submit, with the consent of
Petitioner and Respondents, this brief as amici curice in
support of the petition for a writ of certiorari filed by peti-
tioner, United States National Bank of Oregon.
2
INTEREST OF THE AMICI CURIAE
The Owensboro National Bank, The First National Bank
of Louiza and Citizens National Bank of Paintsville are
national banking associations (i.e., national banks) orga-
nized under the laws of the United States (12 U.S.C. §§21
et seq.). Each is located and doing business in a town in
Kentucky with a population which does not exceed 5,000
inhabitants as shown by the 1990 Census.
Kentucky Bankers Association (the “KBA”) is a trade
association of banks in Kentucky. Each of the three na-
tional banks is a member of the KBA. In addition, 81 of
the 82 other national banks located in Kentucky are mem
bers of the KBA.
All four of the amici curiae (collectively referred to
herein as the “National Banks”) are parties to litigation
initially filed in the United States District Court for the
Eastern District of Kentucky and currently pending before
the United States Court of Appeals for the Sixth Circuit
concerning the right of national banks located and doing
business in towns with a population which does not exceed
5,000 inhabitants as shown by the last preceding decen-
nial census (hereinafter “qualified national banks”) to act
as the agent for any fire, life or other insurance company.
Owensboro National Bank v. Moore, No. 91-3 (E.D. Ky.),
appeal docketed, No. 92-6330/31 (6th Cir.) (hereafter the
“Kentucky Litigation”).
In the Kentucky Litigation, the National Banks seek to
(a) compel the Kentucky Department of Insurance to issue
them applications to become insurance agents for non-credit
related insurance and (b) prohibit the department from
denying their applications for insurance agent licenses on
the ground that they are submitted by banks.
The Kentucky Department of Insurance and three in-
tervening insurance trade associations (collectively referred
3
to as the “Insurance Industry”) have opposed the National
Banks on the ground that Kentucky law prohibits banks
from acting as insurance agents for non-credit related in-
surance.
In response, the National Banks argue, among other
things, that federal law preempts the Kentucky law on
which the Insurance Industry relies. The United States of
America has intervened in the case and the American
Bankers Association has appeared as amicus curiae, both
supporting the National Banks.
The federal law on which the National Banks rely was
enacted in 1916 and has historically been referred to as 12
U.S.C. §92. See Act of September 7, 1916, Pub. L. No. 64-
270, 39 Stat. 752, 753-754 (the “1916 Act”). That law
expressly provides that a national bank:
“ _. located and doing business in any place the popu-
lation of which does not exceed five thousand inhabit-
ants, as shown by the last preceding decennial cen-
sus, may, under such rules and regulations as may be
prescribed by the Comptroller of Currency, act as the
agent for any fire, life or other insurance company ... .
The National Banks use the word “historically” when
referring to 12 U.S.C. §92 since the language added by the
1916 Act was codified during the years 1926 through 1952
as Section 92 of Title 12 of the United States Code. How-
ever, in 1952, the legislation was “omitted” from the United
States Code by the unilateral action of the compiler of the
United States Code.! The compiler believed, based upon
IThe statement that §92 was “omitted” is particularly un-
usual if the compiler was correct that §92 was repealed in 1915.
That is because the 1952 Code uses the term “repealed” with
respect to other statutes which Congress “repealed”. Compa re 12
U.S.C. §2 (1952) and 12 U.S.C. §51d (1952) with 12 U.S.C. $92
(1952).
4
the placement of some quotation marks in the 1916 Act as
printed, that §20 of War Finance Corporation Act of 1918
had the effect of repealing §92.?
Obviously, the “omission” of §92 was the cause of some
concern at the time. However, upon careful examination
during Congressional hearings in 1958, Congress and the
federal banking regulators rejected the conclusion that §92
had been repealed. See Financial Institutions Act of 19.57:
Hearings Before the House Banking and Currency Commit-
tee on S. 1451 and H.R. 7026, 85th Cong., 2d Sess. (1958)
(hereinafter “1958 Hearings”). Indeed, Congress has on
two occasions since 1916 enacted legislation affecting §92."
Nevertheless, the United States Code has continued to
“omit” §92. See 12 U.S.C. §92 (1988).4 On the other hand,
$92 appears in the United States Code Service published
“See War Finance Corporation Act, Pub. L. No. 65-121, $20.
40 Stat. 506, 512 (1918).
3See Garn-St. Germain Depository Institutions Act, Pub. L. No.
97-220, §403(b), 96 Stat. 1469, 1511 (1982) (deleting language
from §92 relating to geographic limits on §92 real estate loan
brokerage activity); See also Competitive Equality Banking Act
of 1987, Pub. L. No. 100-86, §201(bX5), 101 Stat. 552, 581-583
(1987) (imposing a one-year moratorium on national banks ex-
panding §92 insurance agency activities to geographic regions
not then served).
‘Currently, 1 U.S.C. §208 (1988) provides that publication of
the United States Code is the responsibility of the Committee on
the Judiciary of the House of Representatives or such other agency
as the Congress may by concurrent resolution provide. Section
205(c) of House Resolution No. 988, 93rd Cong. (Oct. 8, 1974),
assigned responsibility to the Office of the Law Revision Coun-
sel. Effective January 2, 1975, House Resolution No. 988 was
enacted into permanent law codified at 2 U.S.C. §285 through
$285g (1988). See Supplemental Appropriations Act of 1975, Pub.
L.. No. 93-554, Title I, Ch. ITI, §101, 88 Stat. 1771, 1777 (1975).
5
by The Lawyers Co-operative Publishing Co. with the ex-
planation that the position of the compilers of the United
States Code “is not consistent with the case law.” See 12
U.S.C.S §92 (Law. Co-op. 1978 & Supp. 1992).°
The editors of the United States Code Service are cor-
rect. Until this year, every court since 1916 had treated
§92 as being in existence.® However, that unanimity ended
on February 7, 1992, when the United States Court of
Appeals for the District of Columbia Circuit issued its
opinion in this case “find[ing] sua sponte that that section
[§92] has been repealed”. Independent Ins. Agents of
America, Inc. v. Clarke, 955 F.2d 731, 732 (D.C. Cir. 1992).
This decision was highly unusual since even the plaintiffs
in that case (the Respondents here) stated during oral ar-
gument that “we have concluded that we cannot advance a
substantial argument that section 92 no longer exists.”
955 F.2d at 741 (Silberman, J., dissenting).
The D.C. Circuit’s decision was rendered only five days
before oral argument in the Kentucky Litigation on the
5Because Title 12 of the United States Code has not been
enacted into positive law, the compilation is treated as “prima
facie the laws of the United States.” 1 U.S.C. §204(a) (1988).
However, that presumption can be overcome by recourse to the
original statutes themselves. United States v. Welden, 377 U.S.
95, 98 n.4 (1963).
8 g., Commissioner of Internal Revenue v. First Security Bank
of Utah, N.A., 405 U.S. 394 (1972); First National Bank of
Lamarque v. Smith, 610 F.2d 1258, 1261 n.6 (5th Cir. 1980);
Independent Bankers Ass’n of America v. Heimann, 613 F.2d 1164,
1170 & nn.18-20 (D.C. Cir. 1979); Saxon v. Georgia Ass'n of Indep.
Ins. Agents, Inc., 399 F.2d 1010, 1013 (5th Cir. 1968); Commis-
sioner of Internal Revenue v. Mary Archer W. Morris Trust, 367
F.2d 794, 795 n.3 (4th Cir. 1965); Genessee Trustee Corp. v. Smith,
102 F.2d 125 (6th Cir. 1939); Thompson v. Kerr, 555 F. Supp.
1090, 1906 & n.6 (S.D. Ohio 1982); Guaranty Mortgage Co. v.
Z.1.D. Associates, Inc., 506 F. Supp. 101, 104 (S.D.N.Y. 1980).
6
merits of the National Banks’ preemption claim. After
being advised at the oral argument of the D.C. Circuit's
decision, the Kentucky District Court entered an order di-
recting that the parties file memoranda addressing whether
§92 had been repealed.
While the District Court in the Kentucky Litigation
was considering the memoranda submitted by the National
Banks and the other parties, the United States Court of
Appeals for the Second Circuit also felt “compelled to ad-
dress this issue [of §92’s existence]” in light of the D.C.
Circuit’s decision “even though the parties neither briefed
nor argued it.” American Land Title Ass’n v. Clarke, 968
F.2d 150, 151 (2d Cir. 1992) (“ALTA”).
At issue in ALTA was whether the Comptroller of the
Currency (the “Comptroller”) properly decided that a na-
tional bank, not located and doing business in a small
town, may engage in the title insurance agency business.
The existence of §92 was considered relevant in addressing
the legality of the Comptroller’s decision since competing
insurance trade associations argued that §92 impliedly
prohibits national banks from selling title insurance in
towns with more than 5,000 inhabitants.
On June 15, 1992, the Second Circuit flatly rejected
the D.C. Circuit’s analysis and expressly held that “the
only rational interpretation” was that Congress did not
repeal §92 in 1918. ALTA, 968 F.2d at 154.’
7Chase Manhattan Bank, N.A. and the United States of
America have filed petitions for a writ of certiorari to review the
judgment in ALTA. Chase Manhattan Bank, N.A. v. American
Land Title Ass'n, No. 92-482 (U.S. Sept. 17, 1992); Steinbrink v.
American Land Title Ass’n, No. 92-645 (U.S. Oct. 13, 1992). Those
(Footnote continued on following page)
7
On August 5, 1992, the District Court in the Kentucky
Litigation entered its Memorandum Opinion and Order
considering §92’s existence in light of the split in authority
created by the D.C. and Second Circuit decisions.
Like the Second Circuit, the District Court in the Ken-
tucky Litigation concluded that a decision that §92 had
been repealed “would be to circumvent logical statutory
construction.” Indeed, the District Court expressly adopted
the reasoning of the Second Circuit and further stated that
its own “examination of the legislative history of §92 would
have led it to the same conclusion quite apart from the
Second Circuit’s decision.” See App., infra, 15a-16a.
Having concluded that §92 exists, the District Court
further held that §92 preempted the Kentucky statute relied
upon by the Insurance Industry and enjoined the Kentucky
Department of Insurance from refusing to issue insurance
agent applications to qualified national banks.
On October 5, 1992, the Insurance Industry defendants
in the Kentucky Litigation filed notices of appeal. In their
Pre-Argument Statements filed with Sixth Circuit, the In-
(Footnote continued from preceding page)
petitions seek review of the Second Circuit's decision that §92
impliedly bars national banks not located in small towns from
acting as title insurance agents. Chase Manhattan Bank's peti-
tion also asks the Court to resolve the issue of §92’s existence.
Because all parties in the ALTA case agreed that §92 exists,
the National Banks respectfully submit that review of the D.C.
Circuit's decision (where the insurance industry respondents
ultimately argued that §92 has been repealed) is the superior
vehicle for presenting the dispute as the §92’s existence. However,
the National Banks fully support the petitions seeking review of
the Second Circuit’s decision (which the National Banks believe
is incorrect) on the title insurance power issue.
8
surance Industry states that it intends to raise the issue of
§92’s existence.
As parties to the Kentucky Litigation — a case that
concerns the preemptive effect of §92 — the National Banks
plainly have a direct and substantial interest in whether
or not §92 was repealed in 1918. That issue has festered
for almost seventy-five years and will continue to distract
affected parties and the lower federal courts until it is
definitely resolved by this Court.
Accordingly, the National Banks appear in this case to
urge this Court to issue a writ of certiorari and authorita-
tively state that §92 remains the law of these United States.
REASONS FOR GRANTING THE WRIT
I. A Decision On The Continued Existence Of 12
U.S.C. §92 Is Necessary To Resolve A Conflict In
The Courts Of Appeals On A Substantial Ques-
tion Of Federal Law.
A “principal purpose” for granting a writ of certiorari is
to “resolve conflicts among the Circuit Court of Appeals
and state courts concerning the meaning of provisions of
federal law.” Braxton v. United States, __. U.S. ___, 111
S.Ct. 1854, 1856 (1991). See also Supreme Court Rule
10.1(a). In this case, the D.C. Circuit's decision is in direct
conflict with the decision of the Second Circuit in ALTA.
Review is particularly appropriate because the conflict
has called into question the existence of a federal statute
as well as the legality of widespread and substantial insur-
ance activities of national and state banks across the coun-
try. Cf., Federal Savings and Loan Insurance Corp. v.
Ticktin, 490 U.S. 82, 83 (1989) (granting certiorari where
Court of Appeals’ decision “would require dismissal of large
number of cases concerning the integrity of our financial
institutions”).
9
The evidence presented by the Comptroller in the Ken-
tucky Litigation was that as many as 179 national banks
in fifteen states conduct insurance agency activities pursu-
ant to 12 U.S.C. §92. In addition, the Comptroller esti-
mated that at least 115 state chartered banks sell insurance
under state parity statutes that permit them to engage in
the same activities as national banks. See Declaration of
Rosa M. Koppel, Esq. 196, 7 (Apr. 14, 1992) (App., in/ra,
25a). See also Ariz. Rev. Stat. Ann. §6-184.2; Ill. Rev. Stat.
ch. 17, para. 311(11); Md. Fin. Inst. Code Ann. §5-504;
N.D. Cent. Code Ann. §6-03-38; Utah Code Ann. §7-3-10(1).
That those insurance activities have been undertaken
in reliance upon a statute that has been treated by the
Comptroller, the courts, and Congress as being in exist-
ence since 1916 makes it particularly appropriate to re-
view a decision by the D.C. Circuit suddenly invalidating
that statute. Cf. Bankamerica Corp. v. United States, 462
U.S. 122, 132 (1983) (refusing to permit the Department of
Justice to change its interpretation of the Clayton Act to
prohibit interlocking directorates between a bank and an
insurance company where the affected industry and Con-
gress had relied on the Department’s interpretation for
over 60 years); Wisconsin v. Illinois, 278 U.S. 367, 413
(1928).
Furthermore, the implications of this case extend be-
yond whether national banks in small towns may act as
insurance agents.
First, the analysis used by the D.C. Circuit to “repeal”
§92 is equally applicable to two other statutes which the
United States Code also “omits”:
(a) 12 U.S.C. §361, a paragraph contained in Sec-
tion 13 of the Federal Reserve Act of 1913 relating to
the rediscount by Federal Reserve Banks of bills of
exchange which immediately precedes the language of
10
§92 and which was slightly amended by the 1916 Act;
and
(b) 12 U.S.C. §373, a paragraph added by the 1916
Act immediately following the language of §92 and
which relates to the acceptance by member banks of
the Federal Reserve System of drafts for foreign ex-
change purposes.*
See Opinion of Robert Neill, Counsel for the Advisory Com-
mittee for the Study of Federal Statutes Governing Finan-
cial Institutions and Credits (Feb. 1, 1958), reprinted in
1958 Hearings 1010, 1022-1023.
Second, because courts have regularly resolved other
banking issues by drawing inferences from §92, a decision
that §92 does not exist inevitably calis those decisions into
question. See Commissioner of Internal Revenue v. First
Security Bank of Utah, N.A., 405 U.S. 394 (1972) (relying
on §92 to overturn a determination by the Commissioner
of Internal Revenue attributing to certain banks in large
cities income derived from the sale of insurance policies by
affiliated companies); Alabama Ass’n of Ins. Agents v. Board
of Governors of the Federal Reserve System, 533 F.2d 224
(5th Cir. 1976), modified, 558 F.2d 729 (1977), cert. denied,
435 U.S. 904 (1978) (initially relying on §92 to invalidate
Federal Reserve Board regulations which would have per-
mitted non-bank subsidiaries of bank holding companies
to sell insurance in small towns or towns with inadequate
insurance agency facilities); Genessee Trustee Corp. v.
Smith, 102 F.2d 125, 127 (6th Cir. 1939) (language of §92
5Interestingly, while the 1952 Code did “omit” 12 U.S.C. §373
(1952), it did not “omit” 12 U.S.C. §361 (1952) even though this
paragraph should be treated as repealed under the analysis which
supposedly justified omitting §92. The 1958 Code eliminated
this inconsistency and “omitted” 12 U.S.C. §361 (1958). Compare
12 U.S.C.S. §361 (Law. Co-op. 1992) (omitting section) with 12
U.S.C.S. §373 (Law. Co-op. 1992) (not omitting section).
1]
supported a determination that national banks may only
sell and indorse promissory notes on a non-recourse basis).
In addition to those final decisions, there are two other
important cases currently pending in which §92 has played
a key role. In addition to the Second Circuit's decision in
ALTA, the Fifth Circuit is considering the validity of the
Comptroller's determination that a national bank may sel!
fixed rate and variable rate annuities through a securities
subsidiary. Variable Annuity Life Ins. Co. v. Clarke, 786 F.
Supp. 639 (S.D. Tex. 1991), appeal docketed, No. 92-2010
(5th Cir. Dec. 23, 1991). The competing annuity under
writer which brought the action is arguing that annuities
are insurance products and §92 bars the Comptroller from
permitting a national bank not located in a small! town
from selling insurance products.
In light of the importance of §92 to the national bank
ing system, plenary review by this Court is plainly war
ranted.
Il. Immediate Review Is Appropriate Since The D.C.
Circuit’s Decision Was Seriously Flawed And Ar-
guments Are Being Advanced That The Decision
Will Be Effectively Binding In Other Circuits.
This is not a case where the Court should wait for
additional decisions from other Courts of Appeals. Quite
simply, and as the petitions for writ of certiorari plainly
demonstrate, the analysis of the '» C. Circuit was so seri-
ousty flawed that it should not be permitted to remain as
precedent.
There is already ample authority indicating that the
decision of D.C. Circuit was incorrect. In addition to the
recent decisions by the Second Circuit and in the Ken.
tucky Litigation, the issue of whether §92 was repealed in
1918 was found to be “moot” by the Fifth Circuit over a
decade ago. First National Bunk of Lamarque v. Smith, 610
F.2d 1258, 1261 n.6 (5th Cir. 1980).
12
Failure to review the D.C. Circuit’s erroneous decision
would be particularly perilous since the Insurance Indus-
try in the Kentucky Litigation argued (albeit incorrectly)
that the D.C. Circuit’s decision will govern the conduct of
national banks located in other circuits. Specifically, in
their memorandum filed with the District Court address-
ing the effect of the D.C. Circuit's decision, the Insurance
Industry argued:
The D.C. Circuit held that the Comptroller, the defen-
dant in [JAA v. Clarke, unlawfully authorized a na-
tional bank to sell insurance pursuant to Section
92 .... Asa result of JJAA v. Clark, the plaintiff banks
in this case [the amici curiae National Banks] cannot
obtain valid authorization from the Comptroller to se!!
non-credit insurance from the small towns in which
they have offices. Should the Comptroller grant
plaintiffs approval despite the D.C. Circuit's decision
in ITAA v. Clark, these defendants [the Insurance In-
dustry] would challenge the Comptroller's actions in
federal court in the District of Columbia. Were the
banks to attempt to sell non-credit insurance without
Comptroller authorization, these defendants would
bring a mandamus action against the Comptroller in
federal court in the District of Columbia, seeking the
agency's enforcement of the National Bank Act. In
either case, the court would be bound by the D.C.
Circuit’s decision in IJAA v. Clark: The court would
necessarily hold that Section 92 does not exist and
therefore does not authorize the plaintiff banks to sel!
non-credit insurance.
Defendant’s and Intervenors’ Joint Post-Argument Brief,
Owensboro National Bank. v. Moore, No. 91-3 (E.D. Ky.) at
5-6 (served Mar. 24, 1992) (footnotes omitted).?
°The Insurance Industry's argument as to the binding effect
on the National Banks of the D.C. Circuit's decision is incorrect.
First, the D.C. Circuit's decision is not binding with respect to
(Footnote continued on next page)
13
This Court should review the D.C. Circuit’s decision to
avoid enmeshing other national banks in the kind of en-
forcement quagmire with which the Insurance Industry
has threatened the National Banks in the Kentucky Liti-
gation.
Ill. The D.C. Circuit’s Decision Is In Conflict With
This Court’s Decision In Commissioner of Inter-
nal Revenue v. First Security Bank of Utah, N.A.
This Court’s Rule 10.1(c) provides that a reason justify-
ing review is that the lower court’s decision “decided a
federal question in a way that conflicts with applicable
decisions of this Court.” In this case, the D.C. Circuit's
decision is in conflict with the decision in Commissioner of
Internal Revenue v. First Security Bank of Utah, N.A., 405
U.S. 394 (1972).
In that case, this Court refused to permit the Commis-
sioner of Internal Revenue to reallocate to certain national
banks, for tax purposes, a portion of credit life insurance
premiums earned by affiliates of the banks. One basis for
the decision that reallocation was improper was that §92
prohibited the national banks from receiving the premiums.
(Footnote continued from preceding page)
any obligations that the United States may have toward the
National Banks who were not parties to that litigation. See
United States v. Mendoza, 464 U.S. 154 (1984) (United States
not subject to non-mutual collateral estoppel). Second, even if
the Insurance Industry could compel the Comptroller to bring an
enforcement action against the National Banks, under 12 U.S.C.A.
§1818(b\1), §1818(h), and §1818(i) (West 1989 and Supp. 1992),
any enforcement action would have to be brought in the Sixth
Circuit, and the D.C. Circuit’s decision is plainly not binding
there. United States v. Dawson, 576 F.2d 656, 659 (5th Cir. 1978),
cert. denied, 439 U.S. 1127 (1979); Kirsch Co. v. Bliss and
Laughlin Industries, Inc., 495 F Supp. 488, 492 (W.D. Mich. 1980).
14
The Supreme Court so relied on §92 even though both
the majority opinion and Justice Blackmun’s dissent called
attention to §92’s omission from the U.S. Code. See 405 U.S.
at 401 n.12,418n.2,419. Indeed, Justice Blackmun noted
the majority's “repetitive emphasis on the missing §92.”
See 405 U.S. at 419. Justice Marshall dissented on the
ground that the national banks were violating §92, and he
made no mention of the repeal issue. See 405 U.S. at 411-
414.
The D.C. Circuit attempted to distinguish the Supreme
Court's analysis by stating that the Supreme Court only
assumed §92’s validity and “never directly addressed” the
issue of its alleged repeal. Independent Insurance Agents,
955 F.2d at 737-739.
While this Court never explicitly held that §92 had not
been repealed, it is difficult to square the Court’s repeated
discussion of §92 with the conclusion that §92 no longer
existed (particularly when the Court was plainly aware of
the issue). Thiz difficulty is particularly true when Justice
Blackmun cited pages 777 through 779 of Howard Hackley’s
article Our Baffling Banking System — Part II, 52 Va. L.
Rev. 771 (1966). See First Security Bank, 405 U.S. at 418
n.2. In his article, Hackley, who was then General Coun-
sel to the Board of Governors of the Federal Reserve Sys-
tem, wrote:
[T]he Comptroller was clearly correct [that §92 was
not repealed in 1918]. The provisions in question were
omitted from the United States Code in 1952 (not in
1918) by a careless codifier simply because an inad-
vertently misplaced quotation mark in a 1918 amend-
ment to Section 5202 of the Revised Statutes relating
to an entirely different subject. Unquestionably the
codifier was wrong and the provision authorizing na-
tional banks to act as insurance agents is still in force.
52 Va. L. Rev. at 778.
15
Even assuming the D.C. Circuit’s reading is correct,
this Court's discussion of §92 in First Security Bank is in-
formative for what was not said. This Court did not say
that the issue of §92 repeal was so clear that it could not
rely on §92. On the other hand, the Court did say that the
Comptroller's “administrative interpretation [of the mean-
ing of §92] over many years is entitled to great weight.”
Id. at 403 n.16.
At the very least, the D.C. Circuit’s opinion is very
questionable in light of the First Security Bank decision and
review is appropriate to resolve the confusion.
IV. That Portion Of The D.C. Circuit’s Decision As
To The Existence Of §92 Should Be Addressed
Even If The Court Determines That The D.C.
Circuit Acted Inappropriately In Raising The
Issue Sua Sponte.
Petitioner, United States National Bank of Oregon, also
seeks review on whether or not the D.C. Circuit acted erro.
neously by sua sponte raising the issue of §92’s existence
when the litiganis did not address the question before the
District Court or initially in the D.C. Circuit. See Petition of
the United States National Bank of Oregon, Question Pre-
sented #2.
Conceivably this Court could reverse on the ground
that it was inappropriate for the D.C. Circuit to consider
the issue of §92’s repeal. Cf. Board of Governors of the
Federal Reserve System v. MCorp. Financial, Inc., ___ U.S.
__, 112 S.Ct. 459 (1991) (reversing Court of Appeal’s deci-
sion which invalidated the Federal Reserve Board's “source
of strength” regulation on the ground that Court of Ap-
peals did not have jurisdiction to consider the merits).
However, the National Banks strongly urge that this
Court exercise its certiorari power and resolve the issue of
16
the existence of §92 regardless of the Court’s view as to
whether or not it was proper for the D.C. Circuit to address
the matter.
Ever since the unilateral decision in 1952 by the codifier
of the United States Code to “omit” §92, the issue of §92's
repeal has been a recurring concern. A reversal of the
D.C. Circuit’s decision on jurisdictional grounds will only
serve to further muddy the waters. Litigants will still be
able to argue that the D.C. Circuit's analysis was correct.'”
Quite simply, in 1972, this Court left unresolved the
question of §92’s existence when it noted the issue in Com-
missuoner of Internal Revenue v. First Security Bank of
Utah, N.A., 405 U.S. 394, 401 n.12 (1972), but did not ren-
der a clearly authoritative decision. The issue has again
arisen and has put in disarray the authority for qualified
national banks to act as insurance agents. This Court
should not permit the issue to fester further. It should
resolve the matter once and for all.
CONCLUSION
In light of the conflict in the circuits, the importance of
the issue, and the reoccurring nature of the dispute, this
Court should grant the petition for a writ of certiorari and
should decide whether Congress repealed 12 U.S.C. §92 in
1918.
0That Congress could enact legislation plainly reenacting
§92 also is not a sufficient reason for delaying review. See Braxton
v. United States, _ U.S. ___, 111 S.Ct. 1854, 1857 (1991) (the
task of clarifying federal statutes is “initially and primarily”
that of the Supreme Court).
17
Respectfully submitted,
M. Brooks SENN
Counsel of Record
M. THURMAN SENN
SENN, MILLER & Smitru
First Trust Centre
Suite 100 South
200 South Fifth Street
Louisville, Kentucky 40202
(502) 585-3330
Attorneys for Amici Curiae
November 21, 1992
APPENDIX
la
APPENDIX A
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
FRANKFORT
Civil Action No. 91-3
THE OWENSBORO NATIONAL BANK, etal., - - Plaintiffs,
and
UniTep STATES OF AMERICA, - - Intervening Plaintiff,
v. MEMORANDUM OPINION AND ORDER
RonniE C. Moore, Commissioner, - - ~- Defendant,
and
KENTUCKY STATE ASSOCIATION OF LIFE
UNDERWRITERS, et al., - - Intervening Defendants.
This matter is before the court upon several pending
motions. The defendant, Ronnie C. Moore, the Commis-
sioner of the Kentucky Department of Insurance (the Com-
missioner), has moved to dismiss the complaint. [Record
#4]. The intervening defendants (collectively referred to
as “the associations”) have also filed a motion to dismiss.
[Record #7]. The plaintiffs have moved for summary judg-
ment, [Record #14], as have the Commissioner and the
associations. [Record #28]. Finally, the United States has
moved for summary judgment on its intervening complaint.
[Record #60]. These motions have been fully briefed and
argued to the court, and this matter is ready for consider-
ation.
2a
I. Factual Background
The underlying facts of this case are undisputed. The
plaintiff banks are national banking associations organized
under the laws of the United States. Two of the plaintiffs,
The First National Bank of Louisa, and Citizens National
Bank of Paintsville are located in Kentucky towns with
less than 5,000 inhabitants, as shown by the 1990 Decennial
Census. The other banking plaintiff, The Owensboro Na-
tional Bank, maintains a branch in Whitesville, Kentucky,
which also has a 1990 population of less than 5,000 persons.
Each plaintiff bank is owned by a bank holding company.
In the fall of 1990, the plaintiff banks communicated to
the Commissioner their wish to apply for licenses to act as
general lines and life insurance agents. Responding by
letter dated January 10, 1991, the Commissioner declined
to immediately provide the requested applications, stating
that “such a dramatic change in our long-standing inter-
pretation of both statutory and case law should not be
lightly granted.” Letter from Commissioner Elizabeth
Wright to M. Brooks Senn (January 10, 1991) [Record #16,
Tab 6]. Rather, the Commissioner scheduled a public
hearing for February 13, 1991, to determine “whether or
not the Kentucky Department of Insurance shall issue the
insurance agents licenses requested . . . upon completion of
the applicable licensing procedures as set forth in KRS
304, Subtitle 9... .” [Record #30, Tab 2].
On January 24, 1991, the plaintiffs filed the present
action in this court seeking a declaration of rights and
injunctive relief. [Record #1]. Specifically, the plaintiffs
asked this court to require the Commissioner’s compliance
with 12 U.S.C. § 92, which purportedly permits national
banks having an office in towns with less than 5,000 in-
habitants to act as insurance agents.
The day prior to filing suit, one of the plaintiffs, the
Kentucky Bankers Association (the KBA), apparently dis-
3a
tributed a memorandum to its members stating that the
Commissioner's hearing “could prove to be a circus”, and
may be “nothing more than a ‘name-calling’ session.”
Memorandum from Ballard W. Cassady, Jr. to KBA Mem-
bers (January 23, 1991) [Record #5, Exhibit C]. The KBA
urged its members not to attend the hearing. Nevertheless,
the plaintiffs did attend, but called no witnesses. Rather,
they submitted written objections to the hearing itself, and
restated their legal arguments.
No resolution was attained at the hearing, and the
hearing officer permitted the Commissioner to engage in
limited discovery, over plaintiffs’ objection. [Record #11,
Tabs 5 & 6]. The hearing was recessed until April 8, 1991,
and at that time additional evidence was presented by the
Commissioner. No final action ever resulted from the
hearing, and further proceedings in the Department of In-
surance were eventually stayed, pending the outcome of
this litigation, by order of the Franklin Circuit Court.
[Record #24, Exhibit 1].
This matter has been submitted to this court on cross-
motions for summary judgment, and the parties have pre-
sented arguments on those motions. However, the Com-
missioner and the associations have asserted that this court
does not have subject matter jurisdiction over this action.
That assertion must be addressed prior to any consideration
of the motions for summary judgment.
II. Justiciability
The Commissioner and the associations raise several
arguments in support of their contention that this court
lacks subject matter jurisdiction. They contend that this
matter is not ripe for decision as no final action has been
taken by the Commissioner. They further assert that the
plaintiffs have not exhausted their state remedies. Fi-
nally, they argue that this court should abstain from adju-
4a
dicating this action because to do so would interfere with
ongoing state proceedings, and because the plaintiffs’ claims
raise unsettled questions of state law.
A. Ripeness
This court is limited to the adjudication of actual cases
or controversies. U.S. Const. art. III, §2. For this court to
exercise jurisdiction over this case, it must be ripe for deci-
sion. The doctrine of ripeness “dictates that the courts
should decide only existing, substantial controversies, not
hypothetical questions or possibilities.” City Communica-
tions, Inc. v. City of Detroit, 888 F.2d 1081, 1089 (6th Cir.
1989). In the context of administrative action, this doctrine
prevents courts from becoming involved in disagreements
over administrative policies and protects agencies from ju-
dicial interference until an administrative decision has been
formalized and its effects felt in a concrete way by the
challenging parties. Abbott Laboratories v. Gardner, 387
U.S. 136, 148 (1967).
Here, the Commissioner and the associations argue that
because the Department of Insurance was not permitted to
complete its administrative process before this suit was
filed, the dispute is not ripe for decision. It is true that
this action was filed on January 24, 1991, after the plaintiffs
received notice of the public hearing on their request for
applications, but before the hearing was held. However,
as will be seen in detail later, the Commonwealth of Ken-
tucky, acting through its Attorney General and/or the
Commissioner, has long taken the position that the plaintiff
banks are not authorized to act as insurance agents in
Kentucky.
In addressing the issue of ripeness, the court is per-
suaded by the reasoning of the Supreme Court in Columbia
Broadcasting System v. United States, 316 U.S. 407 (1942).
In CBS, the Federal Communications Commission had is-
sued a regulation which would have prevented the issu-
5a
ance of radio licenses to stations which signed network
affiliation contracts with certain provisions. Although no
license had been revoked and the FCC had not refused to
grant any license based upon the regulation, the Court
held that a challenge to the regulation was ripe. The court
specifically noted that the FCC action was no less
reviewable because promulgation of the regulation itself
did not deny or cancel a license. It was enough that failure
to comply with the regulation would penalize the licensees,
and ultimately CBS, the contracting network. Id, at 417; see
also United States v. Storer Broadcasting Co., 351 U.S. 192
(1956).
The present situation is similar. Although the Com
missioner has not taken final action with respect to the
plaintiff banks’ requests for applications, his longstanding
view of the questions involved constitute action which is
sufficiently final to concretely affect the plaintiffs [sic] in-
terests. This view is amply supported by the aggressive
stance the Commissioner has taken in this litigation in
setting forth his view of both federal and state law in this
area and the interaction between both spheres. Ripeness
is now viewed as a matter of cornmon sense, and the court
is convinced that absolutely no purpose would be served by
permitting the Commissioner to continue with his charade
of evaluation before this court addresses the merits of this
litigation. See McCoy-Elkhorn Coal Corp. v. United States
Environmental Protection Agency, 622 F.2d 260, 264 (6th
Cir. 1980).
This decision comports with the Supreme Court's two
part ripeness test articulated in Abbott Laboratories. There
the Court determined that ripeness depends upon both the
fitness of the issues for judicial decision and the hardship
to the parties of withholding court consideration. Abbott
Laboratories, 387 U.S., at 149. This action presents purely
legal questions which are fit for judicial decision at this
6a
time. In addition, this court has no difficulty concluding
that hardship to the plaintiffs would result if judicial con-
sideration were withheld. This matter is ripe for decision
by this court.
B. Exhaustion
When the actions of an administrative agency are in-
volved, exhaustion of remedies is generally required to
prevent premature interference with agency processes, so
that the agency may function efficiently and correct its
own mistakes, to afford the parties and the court the benefit
of the agency's expertise, and to compile an adequate record
for judicial review. Weinberger v. Salfi, 422 U.S. 749, 765
(1975). However, when the issue is solely one of statutory
interpretation, judicial review is permitted since resolution
of the issue requires no special expertise on the part of the
involved agency. McKart v. United States, 395 U.S. 185,
198-99 (1969).
Here, the issues before the court involve questions of
law and statutory interpretation. There is no requirement
that the plaintiffs exhaust their administrative remedics
under these circumstances. Since the Commissioner has
admitted that the plaintiffs meet the location requirements
of 12 U.S.C. § 92, [Record #11, Tab 4], any further consid-
eration by the Commissioner would involve the same
evaluation of legal issues performed by this court. The
plaintiffs’ failure to exhaust their state administrative
remedies does not prevent this court from exercising juris-
diction over this matter. Shawnee Coal Co. v. Andrus, 661
F.2d 1083, 1093 (6th Cir. 1981).
C. Abstention
The Commissioner and the associations point to two
lines of abstention cases in support of their argument that
this court should decline to exercise its jurisdiction in this
matter. The court will address each line of cases sepa
rately.
7a
1. Younger Abstention
Ordinarily, federal courts should not issue declarative
or injunctive relief which would interfere with ongoing state
proceedings. Younger v. Harris, 401 U.S. 37 (1971). How-
ever, the Commissioner and the associations are incorrect
in arguing that Younger applies in the present case.
The ultimate question in this litigation is whether state
law is preempted by federal law. In that circumstance,
abstention is not required. Hawaii Housing Authority v.
Midkiff, 467 U.S. 229, 237 (1984). This case neither re-
quires the interpretation of state law nor the making of
findings on disputed facts. The considerations which would
require Younger abstention are not present. Norfolk &
Western Railway Co. v. Public Utilities Comm. of Ohio, 926
F.2d 567, 573 (6th Cir. 1991).
2. Burford Abstention
This court should also abstain from granting equitable
relief that interferes with proceedings in state administra-
tive agencies which involve complex state regulatory polli-
cies, such as ratemaking. Burford v. Sun Oil Co., 319 U.S.
315 (1943). However, like the Younger doctrine, Burford
does not prevent this court from addressing issues of fed-
eral preemption of state law. New Orleans Public Service,
Inc. v. Council of the City of New Orleans, 491 U.S. 350
(1989). This case does not implicate Burford abstention.
D. The Motions to Dismi
The motions to dismiss of the Commissioner and the
associations are without merit for the reasons stated above.
Both motions will be denied.
Ill. Legal Framework
Prior to evaluating the merits of the cross-motions for
summary judgment, it is essential to set forth the legal
Ra
framework for the discussion. Both federal and state law
are involved, and the court will briefly discuss each.
A. Federal Law
The plaintiff banks are national banking associations
organized under the laws of the United States. See 12
U.S.C. § 1 et seg. The National Banking Act constitutes
the paramount authority for the operation of national
banking associations, and, by itself, constitutes a complete
system for the establishment and government of national
banks. First National Bank in Plant City, Fla. v. Dickinson,
396 U.S. 122 (1969); Deitrick v. Greaney, 309 U.S. 190
(1940). However, national banks are also subject to state
laws, so long as those state laws do not conflict with or
frustrate the purpose of laws of the United States. Starr
vy. O'Connor, 118 F.2d 548 (6th Cir. 1941).
The National Banking Act was enacted in 1864. Act of
June 3, 1864, c. 106, 13 Stat. 99. In 1913, Congress enacted
the Federal Reserve Act, Act of December 23, 1913, c. 6, 38
Stat. 251, to foster a flow of credit and money, through
both federal and state chartered institutions, which would
facilitate orderly economic growth. Collateral Lenders
Committee v. Board of Governors of the Federal Reserve
System, 281 F.Supp. 899, 904 (S.D.N.Y. 1968).
In 1916, Congress amended the Federal Reserve Act,
adding, among other sections, 12 U.S.C. § 92.' This section
was added at the request of the Comptroller of the Cur-
rency, and allowed national banks located in towns with
less than 5,000 inhabitants to sell insurance under certain
IThe question of whether this section continues to exist will
be addressed later in this memorandum opinion and order.
9a
circumstances.’ The Comptroller has issued a regulation
which provides that this section is applicable to any branch
of a national bank which is located in a town with less
than 5,000 inhabitants, even though the principal office of
the national bank may be in a town with a population
greater than 5,000 persons. 12 C.F.R. § 7.7100 (1971).
Although there-is a question as to whether 12 U.S.C. § 92
was repealed in 1918, the Comptroller has continued to
assume that the section remains in force. See e.g., Letter
from First Deputy Comptroller for Policy Robert Bloom to
Oklahoma Insurance Commissioner Gerald Grimes (No-
vember 14, 1975) [Record #11, Tab 8]; and Letter from
Chief Counsel Paul Allen Schott to Louisiana Insurance
The full text of this section is as follows:
In addition to the powers now [Sept. 7, 1916] vested by law
in national banking associations organized under toy Se
yd he States - such association located in and
ing business in any place the population of which does
not exceed five thousand inhabitants, as shown by the last
preceding decennial census, may, under such rules and
regulations as may be prescribed by the Comptroller of the
Currency, act as the agent for any fire, life, or other insur-
ance 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 ser-
vices so rendered such fees between the said association
and the insurance company for which it may act as agent;
sega also act as the en agent for others in mak-
procuring loans on estate located within one
hundred miles of the place in which said bank may be
located, receiving for such services a reasonable fee or com-
mission: Provided, however, That no such bank shal! in
any case guarantee either the principal or interest of any
such loans or assume or guarantee the payment of any
premium on insurance policies issued through its agency
by its principal: And provided further, That the bank shal!
not guarantee the truth of any statement made by an as.
sured in filing his application for insurance.
(Sept. 7, 1916, c. 461, 39 Stat. 753).
10a
Commissioner Douglas D. Green (October 30, 1990) [Record
#16, Tab 27].
Presently, approximately 179 national banks in fifteen
states are conducting insurance activities pursuant to 12
U.S.C. § 92. Affidavit of Rosa M. Koppel, [Record #61,
Exhibit 1]. None of these national banks are located in
Kentucky. Jd.
B. Kentucky Law
Despite the enactment of 12 U.S.C. § 92, and quite
apart from any debate over its continued existence, the
Commissioner contends that national banks located in
Kentucky may not engage in insurance activities, except in
limited circumstances. The Commissioner presently finds
support for this position in Ky. Rev. Stat. 287.030(4), which
provides:
No person who after July 13, 1984, owns or acquires
more than one-half (1/2) of the capital stock of a bank
shall act as insurance agent or broker with respect to
any insurance except credit life insurance, credit health
insurance, insurance of the interest of a real property
mortgagee in mortgaged property, other than title in-
surance.
In an opinion addressing an earlier version of this stat-
ute, the Kentucky Attorney General concluded that a pro-
vision prohibiting one person from holding controlling in-
terest in a bank was applicable to national banks doing
business in Kentucky. Ky. OAG 70-643. Statutory lan-
guage similar to the present language prohibiting insur-
ance activities by persons owning more than one-half of
the stock of a bank was added in 1972. 1972 Kentucky
Acts ch. 174. In 1981, the Kentucky Attorney General
issued an opinion, based upon this statute, which concluded
that a bank holding company could not acquire 100% of
the outstanding stock of an insurance agency. Ky. OAG
lla
81-173. In 1984, the present language was enacted as a
part of the Kentucky Bank Holding Company Act. 1984
Kentucky Acts ch. 130.
Since 1984, the Commissioner has taken the position
that the present version of the statute, as set forth above.
is applicable to national banks, and has used the 1970
Attorney General's Opinion as support for his position. See
Letter from Assistant Genera! Counsel Stephen B. Cox to
David F. Presser (February 28, 1986) [Record #16, Tab 7].°
The Commissioner has also taken the position that 12
U.S.C. § 92 only provides that the sale of insurance by a
national bank is not ultra vires to the bank’s charter, and
does not convey a unilateral right to engage in the business
of insurance.
Having provided the legal framework for the discus-
sion, the court will now turn to the substantive claims of
the parties. A very narrow question is presented: May the
Commissioner, consistent with federal law, refuse to per-
mit national banks to apply for insurance licenses?
IV. The Bank Holding Company Act
The Commissioner and the associations maintain that
the Bank Holding Company Act (BHCA), 12 U.S.C. § 1841
et seq., allows states to regulate bank holding companies
and their subsidiaries, including national banks, in the
manner prescribed in Ky. Rev. St. 287.030(4). If true, this
conclusion would obviate the need to address the questions
presented under 12 U.S.C. § 92.4
*The Commissioner likely took this position prior to 1984, as
well, although no documents to that effect have been presented
to the court.
‘In addressing this argument, this court will assume, with.
out deciding, the continued existence of 12 U.S.C. §92. This is
consistent with the position of the Commissioner and the asso-
ciations that the court may decide the BHCA issue without
reaching the question of the statute's continued existence.
12a
The BHCA was enacted in 1956, to provide federal
regulation of bank holding companies and the type of as-
sets appropriate for such companies to control. S. Rep. Wo.
1095, 84th Cong., lst. Sess. 1 (1955). Unlike national
banks, which are primarily regulated by the Comptroller
of the Currency, primary regulatory authority for bank
holding companies was placed with the Board of Gover-
nors of the Federal Reserve System (Federal Reserve
Board). 12 U.S.C. § 1842. The BHCA is divided into two
principal areas. Section 3, 12 U.S.C. § 1842, governs the
authority of the Federal Reserve Board with respect to
banking subsidiaries of bank holding companies. Section
4, 12 U.S.C. § 1843, governs the acquisition of non-banking
subsidiaries.
The Commissioner and the associations argue that Sec-
tion 7 of the BHCA, 12 U.S.C. § 1846, permits the applica-
tion of Ky. Rev. St. 287.030(4) to the plaintiff banks.° Sec-
tion 7 provides, “No provision of this chapter shall be
construed as preventing any State from exercising such
powers and jurisdiction which it now has or may hereafter
have with respect to companies, banks, bank holding com-
panies, and subsidiaries thereof.” 12 U.S.C. § 1846. The
Commissioner and the associations both misread and mis-
interpret this section.
This section did not grant any additional regulatory
powers to the states. It merely preserved the powers extant
at the time of enactment and such powers as may exist In
the future. It neither enlarged nor diminished state regu-
latory powers with respect to national banks or bank hold-
ing companies. American Trust Co., Inc. v. South Carolina
5In addressing this argument, the court again notes that
each of the plaintiff banks is a wholly owned subsidiary of a
bank holding company. [Record #25, 26, 27]. It is not clear
whether these holding companies are Kentucky corporations.
13a
State Board of Bank Control, 381 F.Supp. 313, 324 (D.S.C.
1974). The legislative history of the BHCA clearly reflects
Congressional intent that it have a neutral effect on the
dual system of banking regulation. This was the purpose
for the inclusion of Section 7. See Control and Regulation
of Bank Holding Companies: Hearings on H.R. 2674 Before
the House Comm. on Banking and Currency, 84th Cong., 1st
Sess. 366-67 (1955). |
Since McCullough v. Maryland, 4 Wheat. 316 (1819), it
has been beyond doubt that Congress can establish and
regulate a national system of banks. Only where Congress
has explicitly provided for state regulation of national banks
has such regulation been permitted. Otherwise, a state
cannot prevent a national bank from exercising its express
powers. See Franklin Nat. Bank v. New York, 347 U.S. 373,
378 (1954).
Congress has typically permitted state regulation when
it acts to preserve the dual system of banking in the United
States, such as in Congressional treatment of branch
banking for national banks. See 12 U.S.C. § 36; First Nat.
Bank in Plant City Fl. v. Dickinson, 396 U.S. 122 (1969).
Congress could have permitted national banks to conduct
branching activities regardiess of state law. Cf Lyons
Savings & Loan Ass’n v. Federal Home Loan Bank Board,
377 F.Supp. 11, 20 (N.D. Ill. 1974). However, it chose not
to give national banks a competitive advantage over state
banks.
In contrast, this case concerns an express power of cer-
tain national banks; a power granted by Congress, in the
exercise of its unquestioned power to regulate the national
banking system. The statute granting the power to sell
insurance contains no language permitting states to abso-
lutely prohibit of the exercise of this power by national
banks. The only condition placed on the ability of these
national banks to sell insurance is the requirement that
l4a
the involved insurer be licensed to do business in the state
by the appropriate state authorities. In short, 12 U.S.C. §
92 grants an express power to national banks which states
could not eliminate when the BHCA was enacted, and can-
not eliminate now.
Having determined that 12 U.S.C. §1846 does not grant
additional power to directly regulate national banks, the
question then becomes whether states can regulate indi-
rectly what they cannot regulate directly. This would be
the end result if states were permitted to veto an express
power of a national bank by virtue of their ability to regulate
bank holding companies. This is an illogical result.
There is absolutely no doubt that Ky. Rev. St. 287.030(4)
is a permissible regulation of bank holding companies.
However, there is also no doubt that a statute which ex-
pressly prohibited all banks operating in Kentucky from
selling insurance would be an unconstitutional violation of
the Supremacy Clause. U.S. Const., art. VI, cl. 2. Such a
statute would directly conflict with federal law, and a na-
tional bank would not be subject to such regulation. Na-
tional State Bank, Elizabeth, N.J. v. Long, 630 F.2d 981, 987
(2nd Cir. 1980). The authority given to states to regulate
bank holding companies does not give them any additional
authority to regulate national banks simply because the
national bank may happen to be a subsidiary of a bank
holding company. Any authority a state has to regulate a
national bank derives either from a specific grant of au-
thority under federal law, or from the lack of an inconsistent
federal law. It does not derive from the bank’s form of
ownership.
The Commissioner may regulate bank holding compa-
nies and their national bank subsidiaries. However, the
BHCA does not permit the Commissioner to prohibit the
exercise of an express power granted by Congress, without
limitation, to national banks. Refusal to provide the re-
15a
quested applictions [sic] constitutes such an improper pro-
hibition. This argument is without merit.®
V. The Existence-of 12 U.S.C. §92
Relatively late in the briefing of this case, an issue was
presented to the court regarding the continued existence of
12 U.S.C. § 92. In Independent Insurance Agents of
America, Inc. v. Clarke, 955 F.2d 731 (D.C. Cir. 1992), the
court concluded that Congress inadvertently repealed this
section in 1918. One other court has addressed this issue,
reaching the opposite result. See American Land Title Ass’n
v. Clarke, Docket No. 91-6235 (2nd Cir. June 15, 1992).
Not surprisingly, each side in the present case argues
strenuously that the case which supports their position
was correctly decided, while the other decision was poorly
reasoned. This leaves the court with little choice but to
examine the issue anew.
. *The authority cited by the Commissioner and the associa-
tions in support of this argument is inapposite since the cases
either deal with a state’s ability to regulate bank holding compa-
nies or to exercise regulatory authority over national banks as
permitted under federal law. This court takes issue with neither
of those state powers. See Commercial Nat. Bank of Little Rock
v. Board of Governors of the Federal Reserve System, 451 F.2d 86
(8th Cir. 1971) (regulation of bank holding companies and branch
banking); Bank of New Orleans & Trust Co. v. Saxon, 221 F.Supp.
576 (D.D.C. 1962), affd 323 F.2d 290 (D.C. Cir. 1963); rev’d on
jurisdictional grounds, 379 U.S. 411 (1965) (regulation of bank
holding companies); Security Nat. Bank & Trust Co. v. First W.
Va. Bancorp, Inc., 277 S.E.2d 613 (W. Va. 1981), appeal dis-
missed, 454 U.S. 1131 (1982) (regulation of bank holding compa-
nies); Whitney Nat. Bank in Jefferson Parish v. James, 189 So.2d
430 (La. App.), appeal denied, 191 So.2d 140 (1966) (regulation
of bank holding companies and branch banking); Braeburn Secu-
rities Corp. v. Smith, 153 N.E.2d 806 (Ill. 1958), appeal dis-
missed, 359 U.S. 311 (1959) (regulation of bank holding compa-
nies).
16a
For the sake of brevity, the court will not engage in a
lengthy explication of the relevant legislative history.
Rather, the court will simply state that it has examined
the materials provided by the parties in support of their
respective positions. Having reviewed the legislative history
and studied the reasoned opinions of both the District of
Columbia Circuit Court of Appeals and the Second Circuit
Court of Appeals, this court agrees with the rationale of
the Second Circuit. Accordingly, that part of the Second
Circuit Opinion headed “A. Validity of 12 U.S.C. § 92” is
adopted by this court the same as if set forth herein. /d.,
at 2-10.
This court’s examination of the legislative history of §
92 would have led it to the same conclusion quite apart
from the Second Circuit’s decision. To determine that § 92
has been repealed would be to circumvent logical statutory
construction. This court also holds that “section 92 re-
mains valid law.” Id., at 10.
VI. Preemption
Having determined that 12 U.S.C. § 92 continues to
exist with the full force of law, the court now turns to the
question of whether this section preempts Ky. Rev. St.
287.030(4). At the outset, the court again notes that § 92
grants to national banks located in towns with less than
5,000 persons the express power to act as insurance agents.
National banks are not subject to attempted state control
which would directly conflict with laws of the United States.
Starr v. O’Connor, 118 F.2d, at 555.’
7The court takes no position on whether the express |an-
guage of Ky.Rev.Stat. 287.030(4) permits its application directly
to national banks. It is sufficient for the purpose of this inquiry
that the Commissioner has applied it in such a manner.
17a
In addressing the question of preemption, the Commis-
sioner and the associations are correct that the standard
for preemption does not change simply because national
banks are involved. Under the Supremacy Clause of the
Constitution, Art. VI, cl. 2, any state law which conflicts
with federal law is “without effect.” Maryland v. Louisiana,
451 U.S. 725, 746 (1981). However, “consideration of issues
arising under the Supremacy Clause ‘start[s] with the as-
sumption that the historic police powers of the States [are]
not to be superseded by . . . Federal Act unless that [is] the
clear and manifest purpose of Congress.” Cipollone v.
Liggett Group, Inc., 60 U.S. L.W. 4703, 4706 (1992), quoting
Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947).
Accordingly, the Congressional purpose for the enactment
is the ultimate determining factor in the preemption
analysis. Malone v. White Motor Corp., 435 U.S. 497, 504
(1978).
As articulated in Cipollone, there are three principal
ways for Congress to signal the paramount authority of
federal law in a particular area. Cipollone, 60 U.S.L.W., at
4706-07. First, Congressional intent of supremacy may be
expressly stated in the language of the statute or implic-
itly contained in its structure and purpose. Jones v. Ruth
Packing Co., 430 U.S. 519, 525 (1977). Second, in the ab-
sence of express Congressional guidance, state law will be
preempted if it actually conflicts with federal law. Pacific
Gas & Elec. Co. v. Energy Resources Conversation and De-
velopment Comm'n, 461 U.S. 190, 204 (1983). Finally, con-
trary state laws may be preempted if federal law has so
thoroughly occupied a field as to allow a reasonable infer-
ence that Congress intended no state law to supplant fed-
eral authority. Fidelity Federal Savings & Loan Ass'n v.
De la Cuesta, 458 U.S. 141, 153 (1982).
The Commissioner and the associations are correct that
there is no express statement of supremacy in § 92, nor
18a
has Congress occupied the entire field of national bank
regulation. However, § 92 does appear to squarely conflict
with Ky. Rev. St. 287.030(4), as it has been interpreted by
the Commissioner.
The Commissioner and the associations contend that
there is no actual conflict between § 92 and the state stat-
ute and raise three arguments in support of that position.
For an actual conflict to exist, it must be a physical impos-
sibility to comply with both the federal and state statutes.
Hillsborough County, Fla. v. Automated Medical Labs, Inc.,
471 U.S. 707, 713 (1985).
First, the Commissioner and the associations maintain
that the two statutes can be easily reconciled. This argu-
ment attempts to weaken the express language of § 92, by
massaging the Commissioner’s 1986 position that § 92
merely provides that this insurance activity is not ultra vires
to a national bank’s charter. See Letter from Assistant
General Counsel Stephen B. Cox to David F. Presser (Feb-
ruary 28, 1986) [Record #16, Tab 7]. Section 92 itself
disposes of this argument. If a national bank meeting the
requirements of § 92 wishes to exercise the power granted
to it under this statute, it cannot do so under the present
interpretation of Kentucky law by the Kentucky Insurance
Commissioner.
Indeed, the scant legislative history of § 92 itself re-
veals that the primary intent of § 92 was not to place
national banks on the same footing as state banks in states
where state banks were permitted to sell insurance. Rather,
the primary intent was to strengthen small national banks
by providing them with an additional source of revenue.
See Letter from Comptroller John Skelton Williams to
Senator Robert Owen (June 8, 1916) [included at 53 Cong.
Rec. 11001]. There is no indication that Congress intended
that § 92 would only apply where it was needed to allow
national banks to compete with state banks. There is ab-
19a
solutely no authority for the Commissioner's pseudo ultra
vires argument. It is indeed impossible to reconcile these
two provisions.
Second, the Commissioner and the associations contend
that Ky.Rev. St. 287.030(4) does not purport to regulate
national banks. Instead, they contend that the statute
only regulates the licensure of insurance agents within the
Commonwealth, based upon their affiliation with bank
holding companies. This argument is disingenuous at best,
and erroneous at worst. The section is included within a
statute addressed to limitations on the powers of banks,
and is contained in the chapter of the Kentucky Revised
Statutes dedicated to banks and trust companies. {: is an
attempt to regulate bank holding companies, and, by inter-
pretation, their national bank subsidiaries. It is, at best.
an indirect regulation of insurance licenses. As interpreted
by the Commissioner, it is in direct conflict with a federal
statute and is preempted.
Finally, the Commissioner and the associations argue
that Ky. Rev. Stat. 287.030(4) is consistent with the objec-
tives of Congress in enacting § 92. This relies upon a
statement in Comptroller Williams’ letter which refers to
allowing national banks to become more competitive with
state banks which are authorized to engage in nonbanking
activities. However, this court’s reading of the Williams
letter indicates that the primary objective was to ensure
profitability for smaller national banks which would allow
them to both lend money at nonusurious rates and make a
better return to their stockholders. Comptroller Williams
did not specifically reference the ability of state banks to
engage in the business of insurance, but merely pointed
out that some state banks were able to carry on nonbanking
activities. Recognizing that fact, he could have recom-
mended that language be included which limited the exer.
cise of this power to states where both national and state
20a
banks could engage in insurance activities. However, no
such limitation was included. Reflecting the desire to pro-
vide an additional revenue source to national banks, § 92
was drafted to apply to all national banks meeting its re-
quirements. Ky. Rev. Stat. 287.030(4) is not consistent
with Congressional objectives in enacting § 92.
The court has no difficulty concluding that § 92 pre-
empts Ky. Rev. Stat. 287.030(4). To the extent that the
Ccmmissioner interprets the Kentucky statute to prohibit
national banks in Kentucky from utilizing § 92, that inter-
pretation is in direct conflict with federal law. The Com-
missioner is attempting to prevent national! banks from
participating in the sale of insurance simply because they
are banks. This is contrary to the Congressional enactment.
Congress clearly knew how to defer to state regulatory
authority over national banks. It did so in permitting
states to determine whether national banks within their
borders could engage in branch banking. 12 U.S.C. § 36.
There is no such deference contained in § 92. The state
statute, as interpreted, must give way in the face of con-
trary federal law. Davis v. Elmira Savings Bank, 161 U.S.
275 (1896). The plaintiff banks may not be prevented from
applying for insurance licenses.
VII. The McCarran-Ferguson Act
Finally, the Commissioner and the associations argue
that Ky. Rev. Stat. 287.030(4) is a valid exercise of state
authority under the McCarran-Ferguson Act. 15 U.S.C. §§
1011-1015. This act was passed in response to the Su-
preme Court’s decision in United States v. South-Eastern
Underwriters Ass’n, 322 U.S. 533 (1944), which held that
insurance companies were subject both to regulation by
Congress and to federal anti-trust laws.
2la
At issue in this case is 15 U.S.C. §1012(b) which pro-
vides:
(b) Federal regulation. No Act of Congress shall be
construed to invalidate, impair, or supersede any |aw
enacted by any State for the Purpose of regulating the
business of insurance . . . unless such Act specifically
relates to the business of insurance.
It is perhaps simpler to address this statute in reverse
order and first examine whether 12 U.S.C. § 92 is an Act
of Congress which relates to the business of insurance.
The “business of insurance” has been narrowly defined,
and it seems fairly obvious that § 92 does not constitute
Congressional regulation of that business. This section is
a part of the National Bank Act, and its function is to
grant additional powers to national banks. That the power
granted to the national banks involves insurance does not
transform this section into a regulation of the business of
insurance. Accordingly, § 92 will not invalidate the Ken-
tucky statute on these grounds.
Moreover, the other portion of 15 U.S.C. 1012(b) is
equally inapplicable to this case. Just as § 92 does not
regulate the business of insurance, neither does Ky. Rev.
Stat. 287.030(4) constitute insurance regulation. As previ-
ously mentioned, this statute regulates bank holding com.
panies, and is contained in chapter of the Kentucky Revised
Statutes regulating banks and trust companies. It does
not appear in the portion of the Kentucky Revised Statutes
which regulates insurance. It relates to the powers of
bank holding companies, not to the powers of insurance
companies or agents.
To determine whether a state law or regulation governs
the “business of insurance”, the Supreme Court has articu-
lated a three-part test. The court must consider:
22a
[F]irst, whether the practice has the effect of transfer-
ring or spreading a policyholder’s risk; second, whether
the practice is an integral part of the policy relationship
between the insurer and the insured; and third,
whether the practice is limited to entities within the
insurance industry.
Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129
(1982). Applying these criteria to the present case, the
court reaches the inescapable conclusion that Ky. Rev. St.
287.030(4) does not regulate the business of insurance. The
Kentucky statute is not concerned with transferring or
spreading the risk of any policyholders, nor does bank
holding company ownership of insurance entities consti-
tute an integral part of the policy relationship between the
insurer and the insured. Finally, bank holding companies
are not entities within the insurance industry. The
McCarran-Ferguson Act has no applicability to the issue
now before the court. See United States Auto Ass'n v.
Muir, 792 F.2d 356 (3rd Cir. 1986), cert. denied, 479 U.S.
1031 (1987).
VIII. Conclusion
Based upon the foregoing analysis, the court believes
that the Commissioner is required to provide the plaintiff
banks, and other similarly situated national banks, with
applications for insurance licenses. The Commissioner's
interpretation of law reflected in this litigation is incorrect.” _
®The court specifically declines to determine whether the
Commissioner is required to issue licenses once the completed
applications are received. Whether national banks are subject
to Kentucky’s criteria for the issuance of an insurance license is
not properly before the court, and may well implicate McCarran.
Ferguson in other respects. In any event, the court need not
reach this issue in narrowly deciding that Ky.Rev.Stat. 287.030(4),
as interpreted, is preempted by 12 U.S.C. §92, and does not
permit the Commissioner to refuse to provide the requested ap-
plications.
23a
This memorandum opinion and order contains the
court’s rulings on all pending motions except the motions
for summary judgment which will be addressed by sepa-
rate order. The court having considered the record and
being otherwise sufficiently advised,
Accordingly,
IT IS HEREBY ORDERED:
(1) that the Commissioner's motion to dismiss, [Record
#4], be, and is DENIED, in conformity with the reasons
stated herein;
(2) that the associations’ motion to dismiss [Record #7],
be, and is DENIED, in conformity with the reasons stated
herein; and
(3) that the plaintiffs’ motion for leave to file a memo-
randum of supplemental authorities, [Record #43], be, and
is GRANTED.
This 4th day of August, 1992.
/s§ Joseph M. Hood
JOSEPH M. HOOD, JUDGE
24a
APPENDIX B
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF KENTUCKY
FRANKFORT DIVISION
Civil Action No. 91-3
THE OWENSBORO NATIONAL BaNK, etal., - - Plaintiffs,
and
THE Unirep States oF America, - Intervenor-Plainti/f,
v.
ELIZABETH P. WriGHT, Commissioner,
Department of Insurance, Common-
wealth of Kentucky - - - - - Defendant,
and
KENTUCKY STATE ASSOCIATION OF LIFE
UNDERWRITERS, et al., - - - - %Intervenors.
DECLARATION
City oF WASHINGTON
ss
District oF COLUMBIA
I, ROSA M. KOPPEL, being duly sworn, depose and say:
(1) I am a Senior Trial Attorney in the Litigation Di-
vision at the offic of Comptroller of the Currency (“OCC”).
I have been employed by the OCC since July 9, 1984, and
am a member in good standing of the New York State and
District of Columbia Bars.
(2) The OCC has primary supervisory responsibility
over the activities of all national banks operating in the
United States. See 12 U.S.C. §§ 1, et seq.
On,
aa
(3) I make this declaration upon the basis of informa
tion provided to me by OCC’s Communications Division
and a letter from Michael F. Crotty, Deputy General Coun
sel for Litigation, American Bankers Association, to Lester
N. Scall, Senior Trial Attorney, dated April 3, 1992, a true
copy of which is attached hereto as Exhibit “A”.
(4) According to the most recent statistics maintained
by OCC, as of December 31, 1991, there are 3,778 national!
banks reporting to the OCC.
(5) Exhibit “A” to my declaration contains the results
of a recent survey of the various state bankers’ associations
conducted by the American Bankers Association. The pur-
pose of the survey was to determine how many national
and state banks are conducting the insurance agency ac-
tivities authorized by 12 U.S.C. § 92.
(6) According to the survey results, there are as many
as 179 national banks in fifteen states throughout the na-
tion conducting insurance agency activities pursuant to 12
U.S.C. § 92.
(7) In addition, from the information presently avail-
able, there are at least 115 state-chartered banks conducting
insurance activities pursuant to state statutes that allow
them to engage in the same activities that are authorized
for national banks.
I declare under penalty of perjury that the foregoing is
true and correct.
Executed on this 14th day of April, 1992.
/s/_ Rosa M. Koppe.
Rosa M. Koppe.
Senior Trial Attorney
Litigation Division
26a
EXHIBIT “A”
[LETTERHEAD OF AMERICAN BANKERS
ASSOCIATION]
April 3, 1992
Lester N. Scall, Esq.
Litigation Division
Office of the Comptroller of the Currency
Independence Square
250 E Street, SW
Washington, DC 20219
Re: IIAA v. Clarke
Dear Les:
This is an update of my March 9 letter to you. It
differs from the March 9 letter only in minor respects. As
I told you in that letter, the ABA has asked the various
state bankers’ associations around the country to examine
into the insurance activities of their respective members in
order to determine how many banks, nationwide, are relying
upon the authority of Section 92 of the National Bank
Act—either directly in the case of national banks or indi-
rectly in the case of state chartered banks in those states
where there is a “parity” or “wild card” statute, but no
other independent source of statutory authority for general
insurance agency powers. The results of that survey are
as follows:
National Banks State Banks
Arkansas 7 N/A
California 3 N/A
Delaware 1 N/A
Indiana 1 N/A
Iowa 17 N/A
Kansas 34
Maryland 0 4
Minnesota 50 (approximate) N/A
Missouri 2 3
New York 5 (approximate) N/A
North Dakota 16 105
Oregon 3 N/A
South Carolina 10 (approximate) N/A
South Dakota 12 N/A
Utah 0 2 or 3
Virginia 3 N/A
Washington 10 to 15 N/A
Alabama, Alaska, Arizona, Connecticut, Florida, Geor-
gia, Hawaii, Illinois, Kentucky, Louisiana, Maine, Massa-
chusetts, Michigan, Mississippi, Nebraska, Nevada, New
Hampshire, New Jersey, New Mexico, Ohio, Pennsylvania,
Rhode Island, Texas, Vermont, and West Virginia report
no known use of the “town of 5000” rule, either by national
or state chartered banks. The Kansas number is a total of
state and national banks; that state’s bankers association
is unable to differentiate between the two on short notice.
The remaining states have not supplied any useful infor-
mation to us.
Sincerely,
/sf- Micnaet F. Crorry
MICHAEL F. Crotty
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.