Amicus Curiae Brief — NationsBank of North Carolina, N. A. v. Variable Annuity Life Insurance

| a ae

FILED

'

E 4 SEP 8 1994 |

iF

Nos. 93-1612, 93-1613

———

In The

Supreme Court of the United States

October Term, 1994

OFFICE OF THE CLERA |

NationsBank of North Carolina, N.A., et al.,

Petitioners,

V.

Variable Annuity Life Insurance Company,

Respondent.

Eugene Ludwig, Comptroller Of The Currency, et al.,

Petitioners,

V.

Variable Annuity Life Insurance Company,

Respondent.

On Writs of Certiorari

to the United States Court of Appeals

for the Fifth Circuit

BRIEF OF THE AMERICAN COUNCIL OF LIFE

INSURANCE AS AMICUS CURIAE IN SUPPORT

OF RESPONDENT

GARY E. HUGHES

ALLEN R. CASKIE

(Counsel of Record)

Phillip E. Stano

American Council of Life Ins.

1001 Pennsylvania Avenue, N .W.

Washington, DC 20004-2599

September 8, 1994 (202) 624-2120

—

Balmar Legal Publishing Services, Washington, D.C. (202) 682-9800

"BEST AVAILABLE COPY#™

i

TABLE OF CONTENTS

TABLE OF AUTHORITIES .............

INTEREST OF THEAMICUS CURIAE...... .

SUMMARY OF ARGUMENT ...........

A

THE COMPTROLLER’S APPROVAL

DOES NOT MERIT DEFERENCE ......

A. The Constitutional Separation Of Powers

Both Animates Chevron And Limits It . .

B. The Chevron Ruling Was Based On

Five Factors PresentIn That Case ... .

C. The Five Factors Supporting Deference

In Chevron Are Not Present Here

1. The Intent of Congress in Section

Ea ae

2. Section 92 Leaves No “Gap” for the

Compwollerto Fill ..........

3. Section 92 Establishes a Simple

Regulatory Structure ..........

4. The Compwoller’s Unilateral Action

Involved No Deliberative or

Participatory Procedures .......

5. State Insurance Regulators Are

Politically Accountable. .......

oo ee ee ee

10

12

13

Pe)

TABLE OF AUTHORITIES

CASES PAGES

Adams Fruit Co. v. Barrett, 494 U.S. 638 (1990) . . i)

American Ship Bldg. Co. v. NLRB, 380 U.S. 300

(ORD 6s 6s ho 4 > 2 bee 5

Bureau of Alcohol, Tobacco & Firearms v.

Federal Labor Relations Auth.,

OCS. Gee <b 00% 4s 6 ee eS 5

Central Nat'l Bank of Washington v. Hume,

+L 0 rere ee 12

Chemical Mfrs. Ass'n v. Natural Resources

Defense Council, Inc., 470 U.S. 116 (1985). . 7

Chevron, U.S.A., Inc. v. Natural Resources Defense

Council, Inc., 467 U.S. 837 (1984) ....... passim

City of Chicago v. Environmental Defense Fund,

5063 Ge See «és i+ ce ws eee 13

Crandon v. United States, 494 U.S. 152 (1990) .. . i)

Dole v. United Steelworkers, 494 U.S. 26 (1990) . . 6,7

FTC v. Colgate-Palmolive Co.,

SUD US. Fee Cee s sh cc aeioe cca 15

Federal Reserve Bd. v. Dimension Financial Corp.,

GEG R. SEG Gee + + 0 8 6 6s Kee 9

Grigsby v. Russell, 222 U.S. 149 (1911). ...... 12

INS v. Cardoza-Fonseca, 480 U.S. 421 (1987) ... 10

INS v. Chadha, 462 U.S. 919 (1983)... 2.2... 4

Leatherman v. Tarrant County Narcotics

Intelligence & Coordination Unit,

113 5. Ce RR Geee + oe 6 ee ee 7

MCI Telecommunications Corp. v. American Tel. &

Tel. Co., 114 S. Ct. 2223 (1994) ........ 8

iii

Marbury v. Madison, | Cranch (5 U.S.) 137 (1803) . 3,4

Martin v. Occupational Safety & Health Review

Comm'n, 499 U.S. 144(1991) ......02.2.. 13

NLRB v. Brown, 380 U.S. 278 (1965) ........

Pauley v. Bethenergy Mines, Inc., 501 U.S. 680

ES eee eee 6,8,10

Peretz v. United States, 501 U.S.923 (1991) .... 4

Presley v. Etowah County Comm'n, 112 S. Ct. 820

EE &

Skidmore v. Swift & Co., 323 U.S. 134 (1944)... . 13

United States v. Arredondo, 6 Pet. (31 U.S.) 691

EE LE 7

United States v. Brown, 381 U.S. 437 (1965) .... 4

United States v. Cronic, 466 U.S. 648 (1984) .... 13

United States v. Fulton, 475 U.S. 657 (1986) .... 7,8

United States v. Nixon, 418 U.S. 683 (1974)... .. 3,14

United States Dep't of Treasury v. Fabe,

tt 11

CONSTITUTIONAL PROVISIONS, STATUTES,

AND LEGISLATIVE MATERIALS

ee 3,14

es 5 os ye ww 5

TESTES Gus 6 eee es se 8 8 oe passim

Clean Air Amendments of 1970, Pub. L. 91-604,

ES eee 5

McCarran-Ferguson Act, 59 Stat. 34(1945) ... .. 11

Ee 7,13

Alaska Stat. § 06.05.272 (d) (1993) ......... 11

iV

Conn. Gen. Stat. Ann. § 38a-775 (West 1994)... .

Fla. Stat. Ann. § 626.988 (West 1994) .....

Ind. Code Ann. § 28-1-11-2 (Burns 1994) _. .

Me. Rev. Stat. Ann. tit. 24-A,

§ 1514-A (West 1993) ..........

Pa. Stat. Ann. tit. 40, § 281(b) (1994) .....

MISCELLANEOUS

Stephen Breyer, Judicial Review of Questions of

Law and Policy, 38 Admin. L.

ee a ew ea ew es

Denise W. DeFranco, Chevron and Canons of

Statutory Construction, 58 Geo. Wash. L.

ad og ere ee 40

Laurence H. Silberman, Chevron —

The Intersection of Law & Policy,

58 Geo. Wash. L. Rev. 821 (1990) ... .

Cass R. Sunstein, Law and Administration After

Chevron, 90 Colum. L. Rev. 2071 (1990)

. . .8,9,10,15

Nos. 93-1612, 93-1613

IN THE

Supreme Court of the Hnited States

October Term, 1994

NationsBank of North Carolina, N.A., et al,

Petitioners,

V.

Vanable Annuity Life Insurance Company,

Respondent.

Eugene Ludwig, Comptroller of the Currency, et al.,

Petitioners,

V.

Variable Annuity Life Insurance Company,

Respondent.

On Writs of Certiorari

to the United States Court of Appeals

for the Fifth Circuit

BRIEF OF THE AMERICAN COUNCIL OF LIFE

INSURANCE AS AMICUS CURIAE IN SUPPORT

OF RESPONDENT

INTEREST OF THE AMICUS CURIAE

The American Council of Life Insurance (“ACLI”) is a

non-profit trade association of 640 stock and mutual life insur-

ance companies. Collectively, ACLI member companies hold

approximately 91 percent of the life insurance in force in the

nation. ACLI member companies market fixed and variable

annuities in all fifty states, and have always regarded annuities

2

as a true insurance product. ACLI has long been active in

administrative, legislative, and litigation matters regarding the

permissible scope of insurance activities by banks.

ACLI has a strong interest in this case because its members

will suffer substantial competitive injury if all national banks

are permitted to sell annuities. In addition, the Comptroller's

determination that annuities are “financial investment instru-

ments,” and not “insurance” products, might erode the critical

distinction between “insurance” and true financial instruments

which applies under Federal tax and securities laws.

By permitting all national banks to sell annuities, the

Comptroller misinterpreted Congress’ direction in 12 U.S.C. §

92 (“Section 92”) that only national banks located in small towns

may sell insurance. The Comptroller's unilateral decision also

undermines the barriers between banking and insurance which

Congress has erected to ensure stability and fairness in financial

markets and in the insurance industry.

SUMMARY OF ARGUMENT

The Comptroller’s decision to allow all national banks to

sell annuities is contrary to law and is not entitled to deference.

Petitioners invoke this Court’s ruling in Chevron, U.S.A., Inc.

v. Natural Resources Defense Council, Inc., 467 U.S. 837

(1984) as a talisman to ward off meaningful judicial review of

the Comptroller's decision. But petitioners’ heavy reliance

upon Chevron betrays a fundamental misconception of the

proper roles of the judicial and executive branches of govern-

ment and far exceeds the logical underpinnings of that prece-

dent.

3

ARGUMENT

THE COMPTROLLER’S APPROVAL DOES NOT

MERIT DEFERENCE

The court of appeals held in this case that “[i}t is plain from

the language of the statute, and from the legislative history, that

§ 92 prohibits national banks . . . from selling insurance products

in towns with population greater than 5,000." NationsBank Pet.

App. 10a. The court of appeals also correctly concluded that

“annuities are an insurance product, both historically and func-

tionally.” /d. Finding that the intent of Congress was clear, the

court of appeals held that deference to the Comptroller’s statu-

tory interpretation was not appropniate under Chevron, U.S.A.,

Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837

(1984). NationsBank Pet. App. 9a.

Nevertheless, petitioners insist that Section 92 contains

latent ambiguities and that, under Chevron, the Comptroller’s

contrary interpretation therefore should trump the court of ap-

peals’ careful construction of Section 92. Petitioners’ invoca-

tion of Chevron far exceeds the rationale of that decision,

however, and minimizes the proper role of the judiciary in our

government.

A. The Constitutional Separation of Powers Both

Animates Chevron and Limits It

“The judicial power of the United States, shall be vested in

one supreme Court, and in such inferior Courts as the Congress

may from time to time ordain and establish.” U.S. Const. art.

III, § 1. From the founding of the Republic, this grant of

authonity has been interpreted to mean that “[i]t is emphatically

the province and duty of the judicial department to say what the

law is.” Marbury v. Madison, \ Cranch (5 U.S.) 137, 177

(1803); see also United States v. Nixon, 418 U.S. 683, 705

(1974) (“reaffirm[ing] that it is the province and duty of this

4

Court ‘to say what the law is’) (quoting Marbury). As this

Court explained in JNS v. Chadha, 462 U.S. 919, 951 (1983):

The Constitution sought to divide the delegated pow-

ers of the new Federal Government into three defined

categories, Legislative, Executive, and Judicial, to

assure, as nearly as possible, that each branch of

government would confine itself to its assigned re-

sponsibility. The hydraulic pressure inherent within

each of the separate Branches to exceed the outer limit

of its power, even to accomplish desirable objectives,

must be resisted.”

The constitutional separation of powers was not instituted

to “promote governmental efficiency” but rather “as a bulwark

against tyranny.” United States v. Brown, 381 U.S. 437, 443

(1965); Chadha, 462 U.S. at 959 (“Framers ranked other values

higher than efficiency”). Each Branch, therefore, has a consti-

tutional duty to prevent the other Branches from encroaching

upon their assigned responsibility. Indeed, the Constitution not

only enables the Branches to safeguard their powers from inva-

sion by the other Branches, but also requires “that none of the

Branches will itself alienate its assigned powers.” Peretz v.

United States, 501 U.S. 923, 956 (1991) (Scalia, J., dissenting)

(emphasis in original).

The principles articulated in Chevron derive trom separa-

tion of powers concerns, as the Court sought to accord proper

scope to the decisions of administrative officers that were based

on powers expressly delegated to those officers by Congress.

Nevertheless, there are important limits on administrative dis-

cretion which also derive from the need to preserve constitu-

tional separation of powers. Just as the constitutional structure

protects the powers of executive officials, it also ensures that

legal restrictions placed on those officials by Congress will be

enforced by the courts. Indeed, the Administrative Procedure

Act also commands that “the reviewing court shall decide all

5

relevant questions of law [and] interpret constitutional and

statutory provisions.” 5 U.S.C. § 706 (emphasis added). Thus,

courts reviewing agency interpretations of law must not “slip

into judicial inertia” or “rubber stamp” agency decisions. Bu-

reau of Alcohol, Tobacco & Firearms v. Federal Labor Rela-

tions Auth., 464 U.S. 89, 97 (1983) (quoting American Ship

Bldg. Co. v. NLRB, 380 U.S. 300, 318 (1965) and NLRB v.

Brown, 380 U.S. 278, 291-92 (1965)).

B. The Chevron Ruling Was Based On Five Factors

Present in That Case

To understand the constraints on executive discretion that

are inherent in Chevron, it is important to review the case itself,

which can be obscured by the enthusiastic pleadings of execu-

live agencies and their client entities seeking to vindicate agency

actions. Chevron considered the meaning of the term “‘station-

ary sources” as used in the Clean Air Act Amendments of 1977.

Pursuant to its statutory authority to administer and interpret the

Act, the EPA published regulations allowing states to treat all

pollution-emitting devices within the same industrial grouping

as a single “stationary source” (or “bubble’’). Although the

Court ultimately concluded that the statutory language was “not

dispositive” (467 U.S. at 862), the Court independently con-

strued the meaning of the statute before concluding that EPA’s

interpretation was sound.

After carefully examining the language and structure of the

Act and the relevant legislative history, the Court observed that

EPA’s interpretation was supported by the definition of “‘station-

ary source” in another section of the Act.! 467 U.S. at 860. The

Court also pointed to the use of the word “facility” in the Act’s

definition of “major stationary source.” Jd. at 851. The Court

held that the “ordinary meaning” of the term “facility” in those

' The statute defined “stationary source” as “any building, structure,

facility or installation which emits or may emit any air pollutant.” Clean Air

Amendments of 1970, Pub. L. 91-604, 84 Stat. 1676.

6

definitions “connote[s] an entre plant as opposed to its constitu-

ent parts.” /d. at 860. The Court observed that the definitions

“shed[{] as much light on the meaning of the word ‘source’ as

anything in the statute” and “impl[y] a bubble concept of sorts.”

Id. at 860-61. The Court also added that the “plantwide defini-

tion” adopted by EPA was “fully consistent” with the policy

concerns that motivated enactment of the statute. /d. at 863.

Having conducted its own analysis of the statute, the Court

concluded that EPA’s regulation was ‘a reasonable accommo-

dation of manifestly competing interests and is entitled to def-

erence.” Jd. at 865. The Court gave several reasons why

deference was appropriate (id. at 862, 865-66):

(1) The statute did not “reveal an actual in-

tent of Congress.”

(2) Congress expressly or implicitly left a

“gap” for the agency to fill.

(3) “[T]he regulatory scheme is technical and

complex,” the agency has “great exper-

tise,” and “[jJudges are not experts in the

field.”

(4) “[T]he agency considered the matter in a

detailed and reasoned fashion, and the de-

cision involves reconciling conflicting

policies.”

(5) The Chief Executive is accountable to the

people, but judges “are not part of either

political branch of the Government.”

Agencies, therefore, are better positioned

to make “policy choices.”

2 These reasons often have been repeated in subsequent cases applying

Chevron. See, e.g., Pauley v. Bethenergy Mines, Inc., 501 U.S. 680, 697

(1991) (statute produced “complex and highly technical regulatory program”

“requir ing] significant expertise” and exercise of policy judgments); Dole v.

7

C. The Five Factors Supporting Deference In Chevron

Are Not Present Here

Although five reasons supported deference to the agency

action in Chevron, in this case four of them militate against

judicial deference to the Comptroller’s action, and the impact of

the fifth factor is ambiguous.

1. The Intent of Congress in Section 92 Is Clear

As the court of appeals held, application of the maxim

expressio unius est exclusio alterius demonstrates that Congress

intended to limit insurance agency activities to national banks

located in small towns. NationsBank Pet App. 10a; Denise W.

DeFranco, Chevron and Canons of Statutory Construction, 58

Geo. Wash. L. Rev. 829, 839 (1990) (expressio unius canon is

particularly apt tool under Chevron to determine congressional

intent).> The legislative history confirms this conclusion. See

53 Cong. Rec. 11,001 (1916) (insurance agency “authority

should be limited to banks in small communities”). Even the

Comptroller now concedes this point. See Fed. Br. at 40-41.

The court of appeals further concluded that annuities are prop-

erly regarded as a form of insurance. NationsBank Pet. App.

10a. Since the traditional tools of statutory construction estab-

lish the intent of Congress, “that is the end of the matter,” and

this case presents no basis for deferring to the Comptroller.

Chevron, 467 U.S. at 842-43.

United Steelworkers, 494 U.S. 26, 42-43 (1990) (deference not appropriate

where intent of Congress is clear); United States v. Fulton, 475 U.S. 657,

666-667 (1986) (statute unclear on question of “interim” rate making author-

ity; conflicting policies committed to agency's care by statute); Chemical

Mfrs. Ass'n v. Natural Resources Defense Council, Inc., 470 U.S. 116, 125

(1985) (EPA “charged with administering” “complex statute’’).

* This Court has long considered expressio unius to be “an universal

maxim in the construction of statutes.” United States v. Arredondo, 6 Pet.

(31 U.S.) 691, 725 (1832); see also Leatherman v. Tarrant County Narcotics

Intelligence & Coordination Unit, 113 S. Ct. 1160, 1163 (1993) (applying

maxim).

8

Even if a court finds some ambiguity regarding Congress’

intent, deference to the agency’s view is not necessarily appro-

priate. To read Chevron as laying down a “blanket rule” that

courts must “always defer to the agency when the statute is

silent” would be “seriously overbroad, counterproductive and

sometimes senseless.” Stephen Breyer, Judicial Review of

Questions of Law and Policy, 38 Admin. L. Rev. 363, 373

(1986). As one Chevron proponent aptly observed, nearly every

Statute, if studied hard enough, can be made to yield up some

ambiguity. See Laurence H. Silberman, Chevron — The Inter-

section of Law & Policy, 58 Geo. Wash. L. Rev. 821, 826 (1990).

But if that ambiguity always means that courts must defer to

administrative interpretations, then the judicial role “to say what

the law is” will have been greatly diminished. Cf Presley v.

Etowah County Comm'n, 112 S. Ct. 820, 831 (1992) (“[dJefer-

ence does not mean acquiescence”); Pauley v. Bethenergy

Mines, Inc., 501 U.S. 680, 707 (1991) (Scalia, J., dissenting)

(Chevron is “not a declaration that, when statutory construction

becomes difficult, we will throw up our hands and let regulatory

agencies do it for us’).

The extent to which a court will defer to an administrative

interpretation should be proportional to the level of ambiguity

inherent in the statute. Deference, therefore, is most appropriate

when the agency’s interpretation is as plausible as competing

interpretations. See, e.g., United States v. Fulton, 475 U.S. 657,

667 (1986) (agency construction was “as consistent with the

bare statutory language” as alternative interpretation). Even if

an agency's interpretation is doubtful, substantial ambiguity in

the statute may prevent the court from concluding that the

agency is wrong. Cass R. Sunstein, Law and Administration

After Chevron, 90 Colum. L. Rev. 2071, 2092 (1990); cf. MCI

Telecommunications Corp. v. American Tel. & Tel. Co., 114 S.

Ct. 2223, 2231 (1994) (“an agency’s interpretation of a statute

is not entitled to deference when it goes beyond the meaning

that the statute can bear’). At some point, the agency’s view

9

becomes so stretched as to be unreasonable, and deference

ceases. Chevron, 467 U.S. at 843. But since any statutory

ambiguity in this case is small and the Compwoller’s interpre-

tation is unsupported by any statutory language, his views are

not entitled to deference.

2. Section 92 Leaves No “Gap” for the

Comptroller to Fill

Unlike Chevron and many of its progeny, Congress did not

leave a gap in Section 92 for the Comptroller to fill. “A

precondition to deference under Chevron is a congressional

delegation of administrative authority.” Adams Fruit Co. v.

Barrett, 494 U.S. 638, 649-50 (1990) (collecting authorities);

see also Crandon v. United States, 494 U.S. 152, 177 (1990)

(Scalia, J., concurring); Sunstein, at 2076. Congress has not

given the Comptroller broad authority to administer the statute

or to promulgate interpretive or legislative regulations. Nor, for

that matter, does the statute appear to leave undefined any terms

for later administrative clarification.

To the contrary, Section 92 is a straightforward declaration

on the insurance powers of national banks. Nothing in the

Statutory language or legislative history suggests that the term

“insurance” meant anything other than “its accepted ordinary

commercial usage’’: a usage that surely encompassed annuities.

Federal Reserve Bd. v. Dimension Financial Corp., 474 U.S.

361, 373 (1986) (Board’s evolving definition of “commercial

loan” was unreasonable).

The Comptroller's only role under Section 92 is to make

rules regulating the manner in which small-town national banks

may exercise their insurance agency powers. The statute pro-

vides that small-town national banks “may, under such rules and

regulations as may be prescribed by the Comptroller of the

Currency, act as agent for any... insurance company... .”” The

Comptroller’s delegated authority is thus to regulate the insur-

ance activities of these national banks in smaller communities,

10

but does not include the power the Comptroller now claims to

grant insurance powers to all of the other national banks.

3. Section 92 Establishes a Simple Regulatory

Structure

The regulatory scheme established by Congress in Section

92 is simple, not complex. Either a bank is located in a town

with a population of 5,000 or less, or it is not; either such a

small-town national bank is acting as an agent for an insurance

company in the sale of insurance, or it is not. These straightfor-

ward either-or propositions bear no resemblance to complex

regulatory schemes, such as the environmental legislation in

Chevron or the black lung benefits program in Pauley v. Bethen-

ergy Mines, Inc., 501 U.S. 680 (1991). There is no scientific

inquiry in this case; nor are there feasibility or practicability

studies or decisions to be made. In fact, Section 92 includes no

technical words or terms of art.

Because of this textual and conceptual simplicity, the

Comptroller is no better qualified to interpret the statute than is

this Court. Accurate interpretation of Section 92 does not

require knowledge peculiarly within the expertise of the Comp-

troller: it simply requires faithful adherence to the text and

cognizance of the applicable legislative history and historical

context. Deciding questions of law is what courts do best, and

is a peculiarly judicial function. See, e.g., INS v. Cardoza-Fon-

seca, 480 U.S. 421, 446 (1987) (“pure question of statutory

construction [is] for the courts to decide’’); Sunstein, at 2076,

2084-85.

To the extent that any expertise is required to interpret

Section 92, moreover, the subject of that expertise is insurance,

a topic on which the Comptroller has greater experience in

purchasing the product as a consumer than regulating it as a

public official. In fact, Congress has acknowledged that the

States, not the federal government, possess expertise in insur-

ance matters. Congress’ recognition of the “supremacy of the

11

States in the realm of insurance” is codified in the McCarran-

Ferguson Act, 59 Stat. 34 (1945). United States Dep't of

Treasury v. Fabe, 113 S. Ct. 2202, 2207 (1993). Given the

uniform view of the States that annuities are insurance, see

NationsBank Pet. App. 11a, the Comptroller's contrary deter-

mination is highly suspect.4

Indeed, the Comptroller's analysis of annuities is contrary

to basic insurance principles implemented by ACLI’s members

every day. The Comptroller discounts the risk-shifting and

risk-distributing features of annuities when he claims that an-

nuities Cannot be insurance because they do not provide indem-

nification, and when he asserts that annuities cannot be

insurance because they contain significant invesument features.°

* Amicus American Bankers Association (ABA) seeks to challenge the

court of appeals’ related determination that the sale of insurance is not

incidental to banking by suggesting in its brief (p. 13) that “as many as

thirty-four states allow their own state-chartered banks to engage in the

insurance agency business in some form or another.” The brief then directs

attention to an Appendix, which contains a chart referring to the laws or

regulations or supposed administrative practices of 45 states. This assertion

is very misleading.

Of the 34 states claimed to give insurance agency powers to state-chartered

banks, ten states have statutes like Section 92, giving insurance agency

powers only to banks in towns of 5,000 or fewer inhabitants (Arkansas,

Colorado, Florida, Georgia, Kansas, Minnesota, Missouri, New Mexico, and

Washington), or 7,000 or fewer inhabitants (Mississippi). Four more of the

States Claimed by the ABA actually prohibit insurance sales except for

grandfathered institutions (Connecticut, Kentucky, Tennessee, and Louisi-

ana). One state merely allows a bank to own up to 25 percent of an insurance

agency. Me. Rev. Stat. Ann. tit. 24-A, § 1514-A (West 1993). Another state

specifically denies state banks the power to act as agent for life insurance

companies. Ind. Code Ann. § 28-1-11-2 (Burns 1994). Contrary to the

impression created by the ABA, Alaska prohibits state-chartered banks to sell

insurance. Alaska Stat. § 06.05.272(d) (1993). Thus, out of the 34 states that

the ABA claims permit state banks to sell insurance, only half (17) do so in

a way that appreciably exceeds the scope of Section 92.

* This Court has long understood that insurance does not necessarily

involve indemnification and that insurance often performs an investment

12

os

But the ACLI members who have issued 90% of the

$ 1,041,226,000,000 of annuities currently in force know that they

have assumed concrete mortality risk with every life annuity sold.

That mortality risk is not changed in any material way because

annuities, like many forms of insurance, may also serve an invest-

ment function. Rather than assisting the Court with his superior

experience, the Comptroller largely has provided misconceptions

regarding insurance in his attempt to find statutory ambiguity where

there is none.

4. The Comptroller’s Unilateral Action Involved

No Deliberative or Participatory Procedures

There is no indication that the Comptroller heard both sides

of this dispute in order to “consider{] the matter in a detailed and

reasoned fashion” or “reconcil{e] competing policies.” Chev-

ron, 467 U.S. at 865. The Comptroller received a request from

NationsBank for insurance agency powers, and granted it.

There was no adversarial hearing, as there would been if the

Comptroller had made an adjudicative determination. There

was no opportunity for public notice and comment, as there

would have been if the Comptroller had promulgated a legisla-

tive regulation. The Comptroller's decision was reached behind

closed doors, after hearing only from NationsBank. A decision

reached through such a one-sided process neither inspires con-

fidence nor commands deference.

The absence of any truth-protecting procedural safeguards

in this case demonstrates why purely interpretive opinions of

administrative agencies should not be entitled to special defer-

ence. Although an interpretive ruling, logically presented, may

have the “power to persuade,” it cannot have the “power to

function. See, e.g., Central Nat'l Bank of Washington v. Hume, 128 U.S. 195,

205 (1888) (life insurance is not pure indemnity), Grigsby v. Russell, 222

U.S. 149, 156 (1911) (Holmes, J.) (“life insurance has become in our days

one of the best recognized forms of investment,” view that life insurance ts

indemnity “long has disappeared”’).

\

iin -

13

control.” Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944);

see also Martin v. Occupational Safety & Health Review

Comm'n, 499 U.S. 144, 157 (1991) (interpretive rules entitled

only to “some weight on judicial review’’). Last Term, the Court

expressly reserved the question whether “‘an agency interpreta-

tion expressed in a memorandum” is entitled to “less deference

under Chevron than an interpretation adopted by rule published

in the Federal Register, or by adjudication.” City of Chicago v.

Environmental Defense Fund, 114 S.Ct. 1588, 1594 n.5 (1994).

Because “truth” “is best discovered by powerful statements on

both sides of the question,” United States v. Cronic, 466 U.S.

648, 655 (1984), it makes little sense to defer to decisions, like

the Comptroller's Approval, that are reached without a full

ventilation of the issue by affected parties.

The Comptroller in this case did not even purport to balance

competing policies. His decision was motivated by a single

policy: to “provide a valuable additional source of income” to

national banks. NationsBank Pet. App. 47a. He cited Comp-

troller Williams’ 1916 letter to Congress to support this policy

(NationsBank Pet. App. 42a), but utterly ignored the competing

policies articulated by Comptroller Williams: (i) that the need

for insurance revenue was peculiar to small-town banks; (ii) that

banks should focus on banking; (iii) that confining insurance

powers to small-town national banks would not “trespass upon

outside business naturally belonging to others;” and (iv) that

banks ought not to become like “department stores.” 53 Cong.

Rec. 11,001 (1916). The Comptroller's failure to hear both

sides undercuts a central premise for deference under Chevron

since he cannot “be trusted to give a properly balanced answer.”

Breyer, supra, at 371.

5. State Insurance Regulators Are Politically

Accountable

The Comptroller is politically accountable whereas the

courts are not. The Compwroller’s comparative advantage over

14

the courts in political accountability is largely offset, however,

by the overwhelming consensus among the States, who also are

politically accountable, that annuities are insurance. See Na-

tionsBank Pet. App. 1 la; VALIC Br. at 29-30. Many states also

have adopted “anti-affiliation” statutes specifically barring

banks from selling insurance. E.g., Conn. Gen. Stat. Ann. §

38a-775 (West 1994); Fla. Stat. Ann. § 626.988 (West 1994);

Pa. Stat. Ann. tit. 40, § 281(b) (1994).

Greater political accountability, howevei. wannot be the

sole basis for special deference to statutory interpretations by

administrative agencies without doing violence to the constitu-

tional separation of powers. Indeed, the Framers carefully

preserved the political independence of the judiciary when they

provided for life tenure for federal judges. U.S. Const. art II,

§ 1. As this Court observed in United States v. Nixon, 418 U.S.

at 704 (citations omitted):

Notwithstanding the deference each branch must ac-

cord the others, the “judicial Power of the United

States” vested in the federal courts by Art. III, § 1, of

the Constitution can no more be shared with the

Executive Branch than the Chief Executive, for exam-

ple, can share with the Judiciary the veto power, or

the Congress share with the Judiciary the power to

override a Presidential veto. Any other conclusion

would be contrary to the basic concept of separation

of powers and the checks and balances that flow from

the scheme of a tripartite government. We therefore

reaffirm that it is the province and duty of this Court

“to say what the law is... .”

15

CONCLUSION

Statutes “must get their final meaning from judicial con-

struction.” FTC v. Colgate-Palmolive Co., 380 U.S. 374, 385

(1965). One leading commentator has observed that deference

taken too far not only compromises the judicial function to

interpret the law, but also threatens “the basic principle of

congressional supremacy in lawmaking, risking as it would

administrative subversion of statutory standards.” Sunstein,

supra, at 2093.

For all of the foregoing reasons, the Comptroller’s decision

to allow all national banks to broker annuities is not entitled to

deference, and the judgment of the court of appeals should be

affirmed.

Respectfully submitted,

GARY E. HUGHES

ALLEN R. CASKIE

(Counsel of Record)

Phillip E. Stano

American Council of Life Ins.

1001 Pennsylvania Avenue, N .W.

Fifth Floor

Washington, DC 20004-2599

(202) 624-2120

September 8, 1994