# Amicus Curiae Brief — NationsBank of North Carolina, N. A. v. Variable Annuity Life Insurance > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385013_0506%3A18 ## Record - **Collection:** Supreme Court brief - **Document type:** Amicus Curiae Brief - **Published:** January 1, 1994 - **Citation:** 511 U.S. 1141 ## Text | 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 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 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385013_0506%3A18. Public record. Not legal advice.