Amicus Curiae Brief — American Ins. Assn. v. Garamendi
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No. 02-722
In the Supreme Court of the United States
AMERICAN INSURANCE ASSOCIATION, ET AL.,
PETITIONERS
Vv.
JOHN GARAMENDI, INSURANCE COMMISSIONER,
STATE OF CALIFORNIA
ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
BRIEF FOR THE UNITED STATES
AS AMICUS CURIAE SUPPORTING PETITIONERS
PAUL D. CLEMENT
Acting Solicitor General
Counsel of Record
— ROBERT D. MCCALLUM, JR.
1 TAR r. N Assistant Attorney General
egal Adviser — — —
Department of State EDwWINS. KNEEDLER
Washington, D.C. 20520 Deputy Solicitor General
f BARBARA MCDOWELL
Assistant to the Solicitor
General
MARK B. STERN
DOUGLAS HALLWARD-DRIEMEIER
Attorneys
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217
QUESTION PRESENTED
Whether a California statute that requires an insurance
company doing business in the State to retrieve, compile,
and disclose information about each insurance policy issued
by that company or an affiliate in Europe that was in effect
between 1920 and 1945 (1) impermissibly intrudes upon the
national government’s exclusive power over foreign affairs
and foreign commerce or (2) regulates extraterritorially in
violation of the Commerce Clause, the Due Process Clause,
or both.
TABLE OF CONTENTS
Interest of the United States
Statement
Summary of argument
Argument:
I. HVIRA impermissibly intrudes into matters of
foreign relations and foreign commerce reserved to
the national government
A. Under our constitutional system, the Pre-
sident and Congress exercise exclusive
authority over foreign relations and foreign
B. HVIRA regulates in an area exclusively
reserved to the national government
II. HVIRA violates constitutional prohibitions on
extraterritorial state regulation
A. The Commerce Clause and the Due Process
Cause prohibit States from regulating
B. HVIRA, by imposing disclosure require-
ments exclusively with respect to foreign
transactions between foreign parties, is an
impermissible extraterritorial regulation
TABLE OF AUTHORITIES
Cases:
BMW of N. Am, Inc. v. Gore, 517 U.S. 559 (1996)
10
10
12
21
21
8
Page
22, 23,
24, 25, 26, 27
Barclays Bank PLC v. Franchise Tax Bd.,
512 U.S. 298 (1994)
Brown-Forman Distillers Corp. v. New York State
Liquor Auth., 476 U.S. 573 (1986)
(IID)
19
IV
Cases—Continued: Page
Chy Lung v. Freeman, 92 U.S. 275 (1875) 12
Crosby v. National Foreign Trade Council, 530 U.S.
363 (2000) 12, 13, 15-16, 18, 19
Dames & Moore v. Regan, 453 U.S. 654 (1981) 9, 11, 12
Deutsch v. Turner Corp, 317 F.3d 1005 (9th Cir.
2003) 7,11
Dole v. United Steelworkers of Am., 494 U.S. 26
(1990) 26
EEOC v. Arabian Am. Oil Co., 499 U.S. 244 (1991) ....... 23
FTC v. Travelers Health Ass un, 362 U.S. 293
(1960) 29
Gerling Global Reinsurance Corp. of Am. v.
Gallagher, 267 F.3d 1228 (11th Cir. 2001) 21, 26
Healy v. Beer Inst., Inc., 491 U.S. 324 (19899 9, 22,
24, 25, 27
Hines v. Davidowitz, 312 U.S. 52 (1941) 10, 12
Home Ins. Co. v. Dick, 281 U.S. 397 (1930) .......... 9, 23, 24, 30
Japan Line, Ltd. v County of Los Angeles, 441 U.S.
434 (1979) 10, 12, 23, 25
Oldfield v. Marriott, 51 U.S. (10 How.) 146 (1850) 10
Phillips Petroleum Co. v. Shutts, 472 U.S. 797
(1985) 23, 24
Quill Corp. v. North Dakota, 504 U.S. 298 (1992) 30
Societe Internationale Pour Participations Industrielles
Et Commerciales v. Rogers, 357 U.S. 197 (1958) 17
Societe Nationale Industrielle Aerospatiale v. United
States District Court, 482 U.S. 522 (1987) 17
Taiheiyo Cement Corp. v. Superior Court, 105 Cal.
App. 4th 498 (2003) 7
United States Dep't of the Treas. v. Fabe,
508 U.S. 491 (1993) 28, 29
United States v. Curtiss-Wright Export Corp.,
299 U.S. 304 (1936) 14-15
United States v. Pink, 315 U.S. 203 (1942) 10,11
V
Cases Continued: Page
United States v. South-Eastern Underwriters Ass 'n,
322 U.S. 533 (1944) 28
Ware v. Hylton, 3 U.S. (3 Dall.) 199 (1796) 11
Zschernig v. Miller, 389 U.S. 429 (1988) 12, 14, 18
US. Const.
Art. I 11
98 11
Cl. 1 11
Cl. 3 11
Cl. 10 11
Cl. 11 11
910 11
Art. II 11
92 11
93 11
Amend. XIV:
Commerce Clause passim
Due Process Clause 8, 9, 21, 23, 24, 26, 30
McCarran-Ferguson Act, 15 U.S.C. 1011 et seq. ............000+. 28
15 U.S.C. 1012(a) 7,29
15 U.S.C. 1012(b) 29
U.S. Holocaust Assets Commission Act of 1998,
Pub. L. No. 105-186, 112 Stat. 611 19
§ 2(a), 112 Stat. 611 19
§ 3(aX(1), 112 Stat. 612 19
§ 3(a4)(A), 112 Stat. 613 20
§ 3(a)(4)(B), 112 Stat. 613 20
§ 3(d)(1), 112 Stat. 614 .. 5 20
Holocaust Victim Insurance Relief Act of 1999,
Cal. Ins. Code §§ 13800 et seg. (West Supp. 2003) 4-5
§ 13801 14
§ 13801(d) 27
§ 13801(e) 27
§ 13801(f) 5
VI
Statutes—Continued:
§ 13802(c)
§ 13803
§ 13804
§ 13804(a)
§ 13804(a)(1)
§ 13804(b)
§ 13806
Cal. Civ. Pro. Code (West Supp. 2003):
§ 354.3
§ 354.5(a)
§ 354.5(b)
§ 354.5(c)
§ 354.6
Cal. Ins. Code (West 1993):
§ 717(h)
§ 733
§ 791.13
§ 1215.6
Cal. Ins. Code (West Supp. 2003):
§ 790.15(a)
§ 790.15(b)(1)
§ 12967(a)(1)
§ 12967(a)(2)
Assembly Bill No. 1334, 1998 Cal. Stat. ch. 43
Senate Bill No. 1530, 1998 Cal. Stat. ch. 963
10 Barclays Cal. Code Reg. § 2278.1(a)
Miscellaneous:
Between the International Comm 'n on
Holocaust Era Insurance Claims, the Foundation
“Remembrance, Responsibility, and the Future” and
the German Ins. Ass'n (Oct. 16, 2000) <http//www.
icheic.org/eng/press.html>
David Bender, Privacy Law, 717 PLI/PAT 563 (2002) ...
Exchange of Notes (Jan. 23, 2001) <http://www.
usembassy. at/ en /poliey / annexa htmo
a |
BRR ADO * n n N N
E enen
—
VII
Miscellaneous Continued:
The Federalist No. 80 (Alexander Hamilton) (J. Cook
ed., 1961)
Governors Veto Message, A.B. 1715 (Sept. 17, 1998)
<http://www.leginfo.ca.gov/pub/97-98/bill/asm/ab_
1701-1705/ab_1715_vt_19980927.html>
H.R. Rep. No. 143, 79th Cong., Ist Sess. (1945)
Joint Statement Between the Government of the
United States of America and the Government of
the Swiss Confederation (Jan. 29, 2000) <http://
www.us.embassy.ch/N EWS/jointstatement.htm> .........
Tracie B. Loring, An Analysis of the Informational
Privacy Protection Afforded by the European
Union and the United States, 37 Tex. Int'l LJ.
421 (2002)
Office of the Spokesman, U.S. Dep’t of State, Holocaust
Insurance Agreement Signed (Oct. 17, 2002)
Office of the Spokesman, U.S. Dep’t of State, Inter-
national Commission on Holocaust Era Insurance
Claims Begins World-Wide Effort to Identify Unpaid
Claims (Feb. 15, 2000)
Presidential Advisory Commission on Holocaust
Assets in the United States, Plunder and Restitu-
tion: The U.S. and Holocaust Victims’ Assests
(Dec. 2000)
2-3
In the Supreme Court of the United States
No. 02-722
AMERICAN INSURANCE ASSOCIATION, ET AL.,
PETITIONERS
V.
JOHN GARAMENDI, INSURANCE COMMISSIONER,
STATE OF CALIFORNIA
ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
BRIEF FOR THE UNITED STATES
AS AMICUS CURIAE SUPPORTING PETITIONERS
INTEREST OF THE UNITED STATES
The United States has engaged in extensive diplomatic
efforts to assure that the nations and enterprises responsible
for the Holocaust provide some measure of justice to their
victims. In so doing, the United States has consistently en-
couraged the use of voluntary, non-adversarial mechanisms
for resolving Holocaust victims’ claims. California has
adopted a different approach. The State has enacted a series
of related statutes, including the one challenged here, to
provide a separate means of resolving those claims. Such
state laws directly interfere with the national government’s
authority over foreign affairs and foreign commerce.
STATEMENT
I. a. Since the end of World War II, the United States has
committed substantial diplomatic resources to achieving
(1)
some measure of justice for the victims of Nazism. The
United States and its allies entered into treaties with the
post-War governments of Germany and Austria that re-
quired them to pay compensation to such persons. See Pet.
App. 97a-98a. More recently, the United States has engaged
in extensive international discussions concerning claims of
Holocaust victims and their heirs. As a result of those dis-
cussions, the United States has entered into executive
agreements with Germany and Austria and has issued a joint
statement with Switzerland.
As with Holocaust-related claims generally, the United
States has sought to encourage the resolution of insurance
claims of Holocaust victims and their heirs “through coop-
erative means outside of litigation.” Office of the Spokes-
man, U.S. Dep’t of State, Holocaust Insurance Agreement
Signed (Oct. 17, 2002). The United States has promoted the
expeditious disposition of such claims in accordance with the
procedures established by the International Commission on
Holocaust Era Insurance Claims (ICHEIC).
ICHEIC is a voluntary organization formed by five Euro-
pean insurance companies, the State of Israel, Jewish organi-
zations, and the National Association of Insurance Commis-
sioners. The United States has observer status in ICHEIC,
as do several European countries, including Germany,
France, Italy, Poland, and the Czech Republic. ICHEIC is
chaired by former Secretary of State Lawrence S. Eagle-
burger. Through ICHEIC, Holocaust victims’ insurance
claims are processed and checked against European insurers’
records in a manner consistent with participating insurers’
concerns that they not violate European data privacy laws.
The United States has repeatedly stated that ICHEIC
“should be recognized as the exclusive remedy for all insur-
ance claims that date to the Nazi era” and has encouragſed]
all insurance companies that wrote policies during the Nazi
era to join the ICHEIC.” Office of the Spokesman, U.S.
— — — — — — —
Dep't of State, International Commission on Holocaust Era
Insurance Claims Begins World-Wide Effort to Identify
Unpaid Claims (Feb. 15, 2000); see Pet. App. 177a (state-
ment of Ambassador Randolph M. Bell, Special Envoy for
Holocaust Issues) (reiterating United States’ position that
ICHEIC should be viewed as “the exclusive remedy for
unresolved insurance claims from the National Socialist era
and World War II“).
b. The United States’ approach to resolving Holocaust
victims’ claims, including insurance claims, is reflected in the
executive agreement entered into between the United
States and Germany in 2000. See Pet. App. 153a-168a. That
agreement recognizes the creation of a foundation in Ger-
many, funded with $5 billion from public and private sources,
to address Holocaust-era claims against German companies
that were not addressed by earlier measures. The German
government agreed to supervise the activities of the founda-
tion. Jd. at 155a-156a. The United States, in turn, agreed to
inform its courts that “it would be in [its] foreign policy
interests * * * for the Foundation to be the exclusive
remedy and forum for resolving [Holocaust-era] claims as-
serted against German companies.” Id. at 156a. The United
States also agreed to “use its best efforts” to promote the
objectives of the agreement, including the achievement of an
“all-embracing and enduring legal peace” with respect to
such claims. Ibid.
The agreement specifically endorses ICHEIC as the
proper vehicle for resolving Holocaust-era insurance claims.
Germany agreed that all claims by or on behalf of Holocaust
victims against German insurance companies would be pro-
cessed based on ICHEIC procedures and additional proce-
dures to be agreed upon among ICHEIC, the foundation,
and the German Insurance Association. Pet. App. 156a.
The additional procedures recently established by
ICHEIC and the German entities provide, among other
things, for potential claims to be checked agaist insurance
companies’ records in a manner consistent with German
privacy law. ICHEIC publishes a list that includes only the
names of policyholders who are believed to have been Holo-
caust victims (based on information from various sources
such as German census records) and those policyholders’
years of birth. See Agreement between the International
Comm ’n on Holocaust Era Insurance Claims, the Founda-
tion “Remembrance, Responsibility, and the Future” and
the German Ins. Ass’n Annex H, Para. IV (Oct. 16, 2002)
<http://www.icheic.org/eng/press.html>.
2. The State of California has taken a different approach
to securing compensation for Holocaust victims and their
families. In a series of closely related statutes, including the
one challenged in this case, the State has sought to use its
regulatory authority to compel resolution of Holocaust-era
insurance claims.
a. The statute at issue here, the Holocaust Victim Insur-
ance Relief Act of 1999 (HVIRA), Cal. Ins. Code §§ 13800 et
1 The executive agreement between the United States and Austria,
which consists of an exchange of diplomatic notes and annexes, contains
nearly identical undertakings. See Exchange of Notes Annex A, Para. 14
(Jan. 23, 2001) <http://www.usembassy.at/en/policy/annex_a.htm>. The
joint statement of the United States and Switzerland similarly endorses
ICHEIC and notes the “potentially disruptive and counterproductive
effects of investigative initiatives or the threat or actual use of sanctions
on a sub-federal level against insurers, including those that are * * *
participants in [ICHEIC).” Joint Statement Between the Government of
the United States of America and the Government of the Swiss Confedera-
tion (Jan. 29, 2000) <http://www.us-embassy.ch/NEWS/ jointstatement.
htm>.
——ué—— — —
— 2
r
seq. (West Supp. 2003), requires each insurance company
doing business in the State to disclose for publication de-
tailed information concerning policies issued by the company
or its affiliates in Europe decades ago. See id. §§ 13803,
13804. HVIRA requires disclosure of information concern-
ing “life, property, liability, health, annuities, dowry, educa-
tional, or casualty insurance policies” that were sold “di-
rectly or through a related company, to persons in Europe,
which were in effect between 1920 and 1945.” Id. § 13804(a).
As to each policy, the insurer must disclose It Ihe holder,
beneficiary, and current status,” the policyholder’s “city of
origin, domicile, or address,” id. 13804(a)(1), whether the
policy proceeds have been paid, id. § 13804(b), and, if not, the
policy’s value, id. §§ 13802(c), 13804(b). A domestic insurer
is required to disclose such information about any such
policies sold by its European affiliates, “whether the sale
occurred before or after the insurer and the related company
became related.” Id. § 13804(a). The information is to be
entered in a Holocaust Era Insurance Registry that is
accessible to the public. Jd. § 13803. The Commissioner of
Insurance must suspend the license of any insurer that fails
to provide the information. Id. § 13806.
HVIRA declares that its requirements are “necessary to
protect the claims and interests of California residents,”
including some 5600 Holocaust survivors living in the State,
and “to encourage the development of a resolution to these
issues through the international process or through direct
action by the State.” Cal. Ins. Code § 13801(f) (West Supp.
2003). HVIRA’s requirements apply to every insurance
policy issued in Europe during the relevant period, however,
without regard to whether the policyholder or the
beneficiary ever resided in California.
b. In 1998, the California Legislature approved not only
HVIRA, which was initially vetoed by the Governor and did
6
not become law until the following year,” but also two related
measures that did become law. See Assembly Bill No. 1334,
1998 Cal. Stat. ch. 43; Senate Bill No. 1530, 1998 Cal. Stat. ch.
963.
Assembly Bill No. 1334, which was designed “to provide
just compensation to aging Holocaust victims,” 1998 Cal.
Stat., ch. 43, § 3, authorizes suits on Holocaust-era insurance
policies in California courts, Cal. Civ. Proc. Code § 354.5(b)
(West Supp. 2003). It permits suits to be brought against
any insurer that is “related” to the insurer that issued the
policy. Id. § 354.5(a) and (b). It also abolishes any statute-of-
limitations defense if the suit is brought by 2010, id.
§ 354.5(b) and (c), declares that forum-selection provisions in
Holocaust-era policies are unenforceable, 1998 Cal. Stat., ch.
43, § 1(b), and provides that the policies, although issued in
Europe, are “subject to California law,” ibid.
Senate Bill No. 1530, in turn, directs the Commissioner of
Insurance to “work to recover information and records that
will strengthen the claims of California residents” with
respect Holocaust-era policies by undertaking “a coordinated
approach to gather, review, and analyze the archives of
insurers and other archives and records.” Cal. Ins. Code
§ 12967(a)(1) and (2) (West Supp. 2003). That measure also
requires the Commissioner to suspend the license of any
California insurer if it “or any affiliate * * * has failed to
pay any valid claim” of Holocaust victims or their heirs,
2 Governor Pete Wilson vetoed the original HVIRA as unnecessary
and unduly broad. Governor’s Veto Message, A.B. 1715 (Sept. 27, 1998).
HVIRA was reintroduced and passed in 1999 with only minor modifica-
tions. The accompanying committee report explained that HVIRA was a
necessary supplement to existing laws because it provides for dissemina-
tion of policy information to potential claimants, so that they “can take
direct action on their own behalf.” Gerling Appellees’ C.A. Reh’g Pet.,
Exh. J.
— —-— —
whether or not the claimant is a resident of the State. Id.
9 790. 15(a) and (b)).
3. a. Petitioners, insurers that do business in California
and that have European affiliates, brought suit to challenge
the constitutionality of HVIRA. The district court entered a
preliminary injunction against enforcement of the statute.
The court held that petitioners had shown a probability of
succeeding on their claims that HVIRA impermissibly “in-
terferes with the national government’s exclusive power
over external affairs,” Pet. App. 95a-105a, and regulates
extraterritorially in violation of the Commerce Clause, id. at
106a-110a.
b. The court of appeals rejected each of the constitutional
grounds on which the preliminary injunction was based. Pet.
App. 34a-60a. The court held that HVIRA, as an insurance
regulation, is exempted from Commerce Clause scrutiny by
the McCarran-Ferguson Act, 15 U.S.C. 1012(b). See Pet.
App. 4la-45a. The court also suggested that HVIRA does
not, in any event, regulate extraterritorially because
HVIRA “requires California companies only to provide
California has enacted other laws to assist private individuals’ claims
arising out of events that occurred abroad during World War II. In 1999,
California enacted a statute that creates a cause of action, with uniquely
favorable substantive and procedural rules, for “any Second World War
slave labor victim” or “Second World War forced labor victim,” or the
heirs of such victim, against “any entity or successor in interest thereof for
whom that labor was performed, either directly or through a subsidiary or
affiliate.” Cal. Civ. Proc. Code § 354.6 (West Supp. 2003). The Ninth Cir-
cuit recently struck down that statute as an impermissible intrusion into
matters of international relations reserved to the national government.
Deutsch v. Turner Corp., 317 F.3d 1005 (2003); but see Taiheiyo Cement
Corp. v. Superior Court, 105 Cal. App. 4th 398 (2003) (upholding statute).
In 2002, California enacted a further statute that permits Holocaust
victims to bring suit in California to recover looted artwork, regardless of
whether the property is located in the State. See Cal. Civ. Proc. Code
§ 354.3.
information about” Holocaust-era policies. Jd. at 43a. The
court also held that HVIRA does not impermissibly inter-
fere with the national government’s authority over foreign
affairs. Id. at 58a-59a. The court remanded the case for
consideration of petitioners’ due process claim.
4. a. On remand, the district court permanently enjoined
the enforcement of HVIRA. The court held that HVIRA
violates the Due Process Clause by suspending insurers’
licenses for not making the required disclosures without
enabling them to raise defenses such as a foreign-law pro-
hibition on disclosure. Pet. App. 78a-83a.
b. The court of appeals reversed. Pet. App. la-33a. The
court held that HVIRA does not violate due process con-
straints on state legislative jurisdiction because HVIRA
merely regulates the insurance industry within California.
Pet. App. 9a. The court also held that HVIRA does not
violate due process by denying insurers an opportunity to
defend against the suspension of their licenses. Id. at 20a-
29a. The court reiterated its earlier holdings rejecting chal-
lenges to HVIRA under the Commerce Clause and the
foreign affairs power. Id. at 29a.
SUMMARY OF ARGUMENT
This case arises out of an attempt by a single State to
extend its regulatory authority into other nations, thereby
undermining the foreign policy of the United States. Califor-
nia, in HVIRA, has sought to compel the disclosure of vast
amounts of information contained in foreign archives con-
cerning foreign transactions among foreign parties. It has
done so for the express purpose of enabling victims of Nazi
Germany to pursue claims with respect to insurance policies
issued in Europe before and during the Second World War.
HVIRA exceeds several distinct, but complementary, con-
straints that the Constitution imposes on a State’s regula-
tory authority, all of which serve to avoid unseemly conflict
with the national government, with other States, and with
other nations acting within the sphere of their own
authority.
I. HVIRA impermissibly intrudes into a field—the con-
duct of the United States’ diplomatic and commercial rela-
tions with other nations—that is exclusively reserved to the
President and Congress. The national government’s author-
ity over external relations includes the authority to resolve
claims arising out of, or in connection with, international
conflicts. See, e.g., Dames & Moore v. Regan, 453 U.S. 654,
679-680 (1981).
California has sought in HVIRA to establish its own
separate mechanisms for resolving such claims. HVIRA is
specifically concerned with gathering information concerning
Eurepean insurance transaction in order to facilitate claims
by and on behalf of victims of Nazi Germany. Moreover,
HVIRA threatens to impair the United States government’s
own approach to the resolution of Holocaust victims’ claims
—an approach that encourages the use of voluntary non-
adversarial mechanisms, in contrast to coercive regulation
and litigation. The United States’ ability to persuade foreign
governments and foreign enterprises to participate in volun-
tary mechanisms is undermined by state regulations such as
HVIRA, which impose additional obligations on foreign
enterprises, through their domestic affiliates, for the pur-
pose of aiding the assertion of claims against those foreign
enterprises in California judicial proceedings or elsewhere.
Indeed, HVIRA has generated the very tension with our
European allies that the United States has sought to avoid.
Il. HVIRA also regulates extraterritorially in violation of
both the Commerce Clause and the Due Process Clause.
Those Clauses impose similar constraints on a State’s ability
to regulate activity that occurs outside its borders. See, e.g.,
Healy v. Beer Inst., Inc., 491 U.S. 324, 336 (1989); Home Ins.
Co. v. Dick, 281 U.S. 397, 407-408 (1930). HVIRA compels
10
the retrieval, compilation, and public disclosure of informa-
tion located outside the State, concerning transactions that
occurred outside the State, between parties who were not
residents of the State. Accordingly, even if the statute
applied to policies issued in New York to New York resi-
dents, rather than to policies issued in Europe to Europeans,
it would exceed the State’s authority.
ARGUMENT
I. HVIRA IMPERMISSIBLY INTRUDES INTO MAT-
TERS OF FOREIGN RELATIONS AND FOREIGN
COMMERCE RESERVED TO THE NATIONAL
GOVERNMENT
A. Under Our Constitutional System, The President
And Congress Exercise Exclusive Authority Over
Foreign Relations And Foreign Commerce
As the Court has emphasized, “{i)n international relations
and with respect to foreign intercourse and trade the people
of the United States act through a single government with
unified and adequate national power.” Japan Line, Ltd. v.
County of Los Angeles, 441 U.S. 434, 448 (1979); see, e. g.,
Hines v. Davidowitz, 312 U.S. 52, 63 (1941) (“The Federal
Government * * * is entrusted with full and exclusive re-
sponsibility for the conduct of affairs with foreign sovereign-
ties.”). It necessarily follows that Iplower over external
affairs is not shared by the States,” but instead “is vested in
the national government exclusively.” United States v.
Pink, 315 U.S. 208, 233 (1942). ;
The national government’s preeminent role in acting for
the United States in the international arena was forged out
of the experience under the Articles of Confederation, when
the States had undermined the national government’s efforts
to engage in political and commercial relations with other
nations. See, e.g., Oldfield v. Marriott, 51 U.S. (10 How.)
146, 163-165 (1850). The Constitution’s reservation of such
11
powers exclusively to the national government is reflected in
its express grants of power to Congress,‘ and to the Presi-
dent, and in its express restrictions on the States“ Those
provisions serve to set matters of foreign commerce, foreign
relations, and war in a field apart. It is a field that the States
may not enter.
The national government has traditionally exercised its
foreign relations and war powers with respect to the resolu-
tion of private parties’ claims arising out of international
conflicts. See, e.g., Dames & Moore, 453 U.S. at 679 ([The
United States has repeatedly exercised its sovereign author-
ity to settle the claims of its nationals against foreign coun-
tries.”); Pink, 315 U.S. at 240 (Frankfurter, J., concurring)
(“That the President’s control of foreign relations includes
the settlement of claims is indisputable.”); Ware v. Hylton, 3
U.S. (3 Dall.) 199, 230 (1796); Deutsch v. Turner Corp., 317
F.3d 1005, 1025 (9th Cir. 2003) (The Constitution allocates
the power over foreign affairs to the federal government ex-
clusively, and the power to make and resolve war, including
4 Those include Congress’s power? to “provide for the common De-
fence,” “regulate Commerce. with foreign Nations,” “define and punish
Piracies and Felonies committed on the high Seas, and Offenses against
the Law of Nations,” and “declare War, grant Letters of Marque and
Reprisal, and make Rules concerning Captures on Land and Water.” U.S.
Const. Art. I, § 8, Cis. 1, 3, 10, 11.
5 Those include the President’s powers to serve as “Commander in
Chief of the Army and Navy,” “make Treaties” and “appoint Ambassadors
land] other public Ministers and Che u,t' with the advice and consent of
the Senate, and “receive Ambassadors.” U.S. Const. Art. II. $§ 2, 3.
Those include restrictions on the States’ enterſing] into any Treaty,
Alliance, or Confederation,” “grant{ing) Letters of Marque and Reprisal,”
“lay(ing] any Imposts or Duties on Imports or Exports,” enterling] into
any Agreement or Compact * * * with a foreign Power,” and “en-
gagiing) in War.” U.S. Const. Art. I. § 10.
12
the authority to resolve war claims, is central to the foreign
affairs power in the constitutional design.”).
In light of the “imperative[{] * that federal power in
the field affecting foreign relations be left entirely free from
local interference,” Hines, 312 U.S. at 63, state “regulations
must give way if they impair the effective exercise of the
Nation’s foreign policy,” Zschernig v. Miller, 389 U.S. 429,
440 (1968), or prevent the United States from “speak[ing]
with one voice when regulating commercial relations with
foreign governments,” Japan Line, 441 U.S. at 449. This
Court has struck down state laws that engaged a State in
matters affecting the Nation’s external affairs “even in [the]
absence of a treaty” or an Act of Congress, Zschernig, 389
U.S. at 441, as inconsistent with the Constitution’s assign-
ment to the national government of the authority to conduct
foreign relations or, in the commercial area, as inconsistent
with the Foreign Commerce Clause. See, e. g., Japan Line,
441 U.S. at 452-453; Zschernig, 389 U.S. at 436; CH/ Lung v.
Freeman, 92 U.S. 275, 279-281 (1875); ef. Crosby v. National
Foreign Trade Council, 530 U.S. 363, 381-382 n.16 (2000)
(noting such cases).
B. HVIRA Regulates In An Area Exclusively Reserved
To The National Government
HVIRA intrudes into the field of foreign relations
reserved exclusively to the national government. This Court
has repeatedly recognized that the President and Congress
have the sole authority to resolve, or to establish the mecha-
nisms to resolve, the claims of United States nationals aris-
ing out of international conflicts. See, e.g., Dames & Moore,
453 U.S. at 679. It follows a fortiori that the resolution of
claims of foreign nationals arising out of, or in connection
with, an international conflict is also a matter reserved
exclusively to the President and Congress. A State is
without authority to pursue its own independent approach to
13
such claims, even if the United States and the State “share
the same goals,” because It he fact of a common end hardly
neutralizes conflicting means.” Crosby, 530 U.S. at 379. The
conflict between the means chosen by the United States and
by California to resolve Holocaust victims’ insurance claims
is quite evident.
1. As explained above (at 1-4), with respect to still-
unresolved claims against foreign enterprises arising out of
the Holocaust, the United States has determined that those
claims should be pursued through voluntary, non-adversaria!
processes rather than through coercive regulation and liti-
gation. The United States has concluded that such an
approach serves the interests of Holocaust victims and their
families throughout the world, including the interests of
elderly survivors of the Holocaust in obtaining some meas-
ure of justice within their lifetimes. The United States has
also concluded that a non-adversarial approach serves impor-
tant interests of the Nation in cooperative relations with its
European allies.
More particularly, the United States, in its executive
agreements with Germany and Austria and its other recent
diplomatic efforts, has encouraged the use of ICHEIC as the
exclusive mechanism for resolving Holocaust-era insurance
claims. Those agreements do not, of their own force, extin-
guish any claims that Holocaust victims or their families
might assert in court against foreign insurance companies.’
They do make clear, however, that United States policy
disfavors the imposition of further obligations on companies
7 Because the claims almost exclusively concern persons and trans-
actions that had no relation to the United States at the time of the conduct
at issue, it is understandable that the United States government did not
seek to extinguish or resolve the claims under the laws or international
agreements of this Nation or by coercive processes under our laws, and
instead sought to promote resolution by other means.
14
subject to the agreements, whether through regulation or
litigation, beyond the obligations contemplated by the agree-
ments themselves. Thus, the executive agreement between
the United States and Germany recognizes that it is “in the[]
interests” of the two governments for the designated claims
process “to be the exclusive remedy and forum for the reso-
lution of all claims that have been or may be asserted against
German companies arising from the National Socialist era
and World War II.” Pet. App. 155a.
HVIRA poses a direct threat to “the effective exercise,”
Zschernig, 389 U.S. at 440, of United States policy with
respect to Holocaust victims’ insurance claims. HVIRA is
not a law of general applicability with only an incidental
effect on matters outside the State or the United States, or
on the national government’s ongoing efforts in the inter-
national arena. To the contrary, HVIRA imposes disclosure
requirements that are applicable only to insurance policies
issued “to persons in Europe” during the period leading up
to and including the Second World War. Cal. Ins. Code
§ 13804 (West Supp. 2003); see 10 Barclays Cal. Code Regs.
§ 2278.1(a) (defining term “Europe” in HVIRA as those
parts of Europe “occupied or controlled by Nazi Germany,
its allies or sympathizers”). HVIRA imposes those require-
ments for the express purpose of assisting Holocaust victims
and their families in pursuing claims with respect to those
policies, whether through “international process” or through
judicial proceedings or enforcement actions by the State.
See Cal. Ins. Code § 13801(b) (HVIRA is intended “to en-
courage the development of a resolution to these issues
through the international process or through direct action by
the State”). California has thereby thrust itself into the field
of foreign relations and foreign commerce that is reserved
exclusively to Congress and the President, who “is the sole
organ of the nation in its external relations, and its sole
representative with foreign nations.” United States v.
—
15
Curtiss-Wright Export Corp., 299 U.S. 304, 319 (1936)
(quoting statement of John Marshall).
California has proceeded, moreover, in a manner that
conflicts with the approach that the national government has
elected to pursue. HVIRA not only requires the disclosure
of Holocaust-era policy information to an entity in addition to
ICHEIC, but also requires the disclosure of information
substantially in addition to that required by ICHEIC. And
HVIRA imposes a significant economic penalty—suspension
of a license to do business—on California affiliates of insur-
ers that fail to make those disclosures. HVIRA thus estab-
lishes “a different, state system of economic pressure,”
Crosby, 530 U.S. at 376, that conflicts with the ICHEIC
system endorsed by the United States, and that threatens to
impede its implementation and operation.
At a minimum, such state iaws “compromise the very
capacity of the President to speak for the Nation with one
voice in dealing with other governments.” Crosby, 530 U.S.
at 381. The United States has stated that participation in
the voluntary processes that it has endorsed should “give[]
those companies cooperating with [ICHEIC] ‘safe haven’
from sanctions, subpoenas, and hearings relative to the Holo-
caust period.” Testimony of Stuart E. Eizenstat, Deputy
Secretary of the Treasury, before the Senate Foreign
Relations Committee (Apr. 5, 2000) (Pet. App. 136a); see Pet.
App. 156a (United States undertakes in its agreement with
Germany to “use its best efforts * * * with state and local
governments” to achieve an “all-embracing and enduring
legal peace”). HVIRA, however, makes no exception even
for companies that participate in ICHEIC or similar organi-
zations. Indeed, HViRA and the related California statutes
appear designed to facilitate continuing litigation. HVIRA
thereby undermines the United States’ ability to persuade
foreign governments and foreign companies to participate
voluntarily in organizations such as ICHEIC. See Crosby,
16
530 U.S. at 377 (recognizing that the President’s “economic
and diplomatic leverage” is reduced by state laws that seek
to penalize foreign govern mans or foreign commerce); see
also Joint Statement Between ihe Government of the United
States of America and the Government of the Swiss Confed-
eration (Jan. 29, 2000) (noting the “potentially disruptive and
counterproductive effects” of laws such as HVIRA); Letter
from Stuart E. Eizenstat, Deputy Secretary of the Treasury,
to Gray Davis, Governor (Nov. 30, 1999) (Pet. App. 123a-
125a) (observing that HVIRA could “undermine” the
ICHEIC claims resolution process and “de[r]ail” negotia-
tions between the United States and Germany concerning
claims of Nazi slave and forced laborers).
The potential for HVIRA to complicate the United States’
diplomatic efforts is illustrated by contrasting the infor-
mation that insurers are required to disclose under the
ICHEIC procedures endorsed by the United States with the
information that insurers are required to disclose under
HVIRA. As contemplated by the United States and Ger-
many in their executive agreement, ICHEIC, the German
foundation, and the German Insurance Association devel-
oped rules to govern what information about Holocaust-era
insurance policies must be made available in order to provide
adequate notice to potential claimants while safeguarding
the privacy interests of other persons under German (or
other European) law. Those rules require the disclosure
8 Many European countries, like California and other States, limit the
disclosure of personal information obtained through commercial trans-
actions, including insurance transactions. See, e.g., Tracie B. Loring, An
Analysis of the Informational Privacy Protection Afforded by the Euro-
pean Union and the United States, 37 Tex. Int'l L.J. 421, 423-425, 434-439
(2002) (describing the development of laws protecting personal informa-
tion in the nations comprising the European Union). European laws have
been described as more comprehensive in their protection of personal data
than are laws in the United States. See id. at 425 (“Unlike the European
m
17
only of the name of any policyholder who is believed to have
been a Holocaust victim and that person’s year of birth. See
p. 4, supra. Insurers are not required to provide other
information, such as the value of a policy or the named bene-
ficiary, with respect to policies issued to Holocaust victims,
and are not required to provide any information about
policies issued to other persons. HVIRA is not so limited.
See p. 5, supra (information that must be disclosed under
HVIRA). Thus, whereas the United States’ diplomatic ef-
forts have sought to resolve Holocaust victims’ claims while
accommodating the interests of Germany and other nations
to minimize conflict with European privacy laws, HVIRA
strikes a different balance that fails to account for those
interests.
Union’s omnibus, centralized approach to informational privacy, which
reflects the notion that data protection must be ensured by comprehensive
legislation, data protection regulation in the United States is decentral-
ized, fragmented, ad hoc, and narrowly tailored to target specific
sectors.”); David Bender, Privacy Law, 717 PLI/Pat 563, 579 (2002) (“In
contrast to the piecemeal U.S. approach that relies largely on self-regula-
tion, the European Union in 1995 adopted a data protection directive
* * * that required each of the 15 member states to enact comprehensive
data protection legislation.”).
As this Court has recognized, when information is sought in the
United States from a foreign individual or entity, the data privacy stat-
utes of the foreign party’s own government are not controlling. See
Societe Nationale Industrielle Aerospatiale v. United States District
Court, 482 U.S. 522, 544-545 n.29 (1987); Societe Internationale Pour
Participations Industrielles Et Commerciales v. Rogers, 357 U.S. 197,
204-206 (1958). Thus, for example, a foreign “blocking” statute does “not
deprive an American court of the power to order a party subject to its
jurisdiction to produce evidence even though the act of production may
violate that statute.” Aerospatiale, 482 U.S. at 544 n.29. Here, in con-
trast, the constitutional deficiency in HVIRA is not merely that it imposes
disclosure obligations on foreign insurers that may conflict with their own
governments’ privacy laws, but rather that it conflicts with the United
States government's approach to the resolution of Holocaust victims’
18
HVIRA has generated the very tensions in international
relations that the United States has sought to avoid, prompt-
ing protests from the governments of Germany and Switzer-
land concerning HVIRA’s application to insurance policies
written in those countries. See Zschernig, 389 U.S. at 437
n.7 (relying on similar protests to conclude that state statute
impermissibly interfered with national government’s author-
ity over foreign affairs); ef. Crosby, 530 U.S. at 382-384. It is
not for respondents to trivialize the potential implications of
those protests for United States foreign policy (see Supp. Br.
in Opp. 2), especially at a time of international tension when
relations between this Nation and its European allies are at
their most sensitive. State government officials, who are not
part of the process through which the Nation formulates and
conducts its international relations, are not well positioned to
evaluate what adverse impact their actions may have for
those relations. They cannot, for example, be expected to
make an informed assessment of whether, or how, or when a
foreign government might respond to provocative state
legislation, or how detrimental the response might be to
various important interests of the United States as a whole.
“Experience has shown that international controversies of
the gravest moment, sometimes even leading to war, may
arise from real or imagined wrongs to another’s subjects in-
flicted, or permitted, by a government.” Zschernig, 389 U.S.
at 441.
The proliferation of laws in California and other States
that seek to facilitate claims against the United States’ cur-
rent allies or their citizens arising out of past international
conflicts (see, e.g., note 3, supra) demonstrates the danger of
allowing States, which are not simultaneously dealing with
foreign governments on many other important initiatives, to
claims against those insurers, an approach that is itself more deferential to
European privacy concerns.
2
— —
19
pursue their own foreign policies. As the Court recently re-
affirmed, the Framers were determined that, because “(t]he
union will undoubtedly be answerable to foreign powers for
the conduct of its members,” “the peace of the WHOLE
ought not to be left at the disposal of a PART.” Crosby, 530
U.S. at 381-382 n.16 (quoting The Federalist No. 80, at 535-
536 (Alexander Hamilton) (J. Cooke ed., 1961)).
2. The court of appeals erred in refusing, based on a mis-
understanding of Barclays Bank PLC v. Franchise Tax
Board, 512 U.S. 298 (1994), to consider the Executive
Branch’s views regarding HVIRA’s foreign policy ramifica-
tions. See Pet. App. 55a. As this Court has explained,
Barclays addressed an unusual situation in which Congress
and the Executive had taken divergent positions. See
Crosby, 530 U.S. at 385-386; Barclays, 512 U.S. at 324-330.
Crosby reaffirms the central importance in other situations
of the President’s views in exercising his constitutional
responsibility “to speak for the Nation with one voice in
dealing with other governments.” 530 U.S. at 381, 385-386.
Contrary to the view of the court of appeals (see Pet. App.
47a-50a), the U.S. Holocaust Assets Commission Act of 1998,
Pub. L. No. 105-186, 112 Stat. 611, does not authorize States
to enact statutes such as HVIRA. That Act, in fact, confirms
that California has departed from the course charted by the
United States. As relevant here, the Act established a
“Presidential Advisory Commission on Holocaust Assets in
the United States” to investigate the disposition of certain
Holocaust-era assets that “came into the possession or con-
trol of the Federal Government” after January 30, 1933. Id.
§§ 2(a) and 3(a)(1), 112 Stat. 611, 612. The Act, among other
things, directed the Commission to “encourage the National
Association of Insurance Commissioners to prepare a report
on the Holocaust-related claims practices of all insurance
companies, both domestic and foreign, doing business in the
United States at any time after January 30, 1933,” that
20
issued an insurance policy to “any individual on any list of
Holocaust victims.” Id. & 3(a)(4)(A), 112 Stat. 613.
Nothing in the federal Act imposes disclosure obligations
on insurers under threat of sanctions. Nor does the Act
confer any authority on the States to do so. To the contrary,
the Act contemplates the gathering of information only “to
the degree [it] is available.” Pub. L. No. 105-186,
§ 3(a)(4)(B), 112 Stat. 613, 614. Moreover, unlike HVIRA,
which is explicitly directed at facilitating individual claims
against European insurers, the federal Act is concerned,
among other things, with collecting information on “the
Holocaust-related claims practices” of insurers “doing busi-
ness in the United States,” to assist the Commission in pre-
paring a report to the President containing “recommenda-
tions for such legislative, administrative, or other action as it
deems necessary or appropriate.” Id. § 3(a)(4)(A) and
3(d)(1), 112 Stat. 613, 614 (emphasis added). And, whereas
HVIRA seeks specific information about each policy issued
by each European insurer during the relevant period, the
federal Act seeks more general information, such as “(t]he
number of policies issued by each company” to Holocaust
victims. Id. & 3(a)(4)(B), 112 Stat. 613. Although the federal
Act does seek information on the value of each such policy, it
does not require the policyholder or beneficiary to be
identified. It thus does not present the same privacy con-
cerns as does HVIRA.”
10 The federal Commission’s final report does not disclose any private
information regarding the insurance policies issued by European insurers
to Holocaust victims. To the contrary, the report discusses such policies
only in general terms, such as by describing the ways in which Nazi re-
gimes confiscated the insurance assets of Holocaust victims. See Presi-
dential Advisory Comm'n on Holocaust Assets in the United States,
Plunder and Restitution: The U.S. and Holocaust Victims’ Assets SR-15
(Dec. 2000) (Nazis “confiscat[ed] insurance monies” of “Jews fleeing Ger-
many”); id. at SR-17 (Nazis confiscatſed] payments from insurers that
A
21
Thus, the federal Act takes a deliberately cautious ap-
proach, seeking to gather available information and to pro-
duce recommendations for the President as to what further
measures might be appropriate. It provides no authority for
California to pursue its own foreign policy, inconsistent with
that pursued by the President, with respect to the resolution
of claims under insurance policies issued by European com-
panies to European individuals who became victims of the
Holocaust.
II. HVIRA VIOLATES CONSTITUTIONAL PROHIBI-
TIONS ON EXTRATERRITORIAL STATE REGU-
LATION
Both the Commerce Clause and the Due Process Clause of
the Fourteenth Amendment prohibit a State from regulating
activity outside its borders. HVIRA is such an extra-
territorial regulation. HVIRA focuses exclusively on trans-
actions that occurred in Europe between Europeans many
decades ago. It compels the disclosure of extensive private
information about those transactions, even though they have
“no jurisdictionally-significant relationship to [the State].”
Gerling Global Reinsurance Corp. of Am. v. Gallagher, 267
F.3d 1228, 1238 (11th Cir. 2001). A State may not project its
regulatory authority into other Nations in this fashion.
A. The Commerce Clause And The Due Process Clause
Prohibit States From Regulating Transactions
Outside Their Borders
1. Under familiar Commerce Clause principles, Califor-
nia may not require corporations to adhere to its standards
in other States or nations as a condition of doing business in
California. The Commerce Clause “precludes the application
were intended to compensate property owners for their damages” from
the Kristallnacht pogrom). Nor does the report recommend any legis-
lative or administrative action with respect to such insurance policies.
22
of a state statute to commerce that takes place wholly out-
side of the State’s borders, whether or not the commerce has
effects within the State.” Healy v. Beer Inst., Inc., 491 U.S.
324, 336 (1989); see BMW of N. Am., Inc. v. Gore, 517 U.S.
559, 572 (1996) (“[I]t follows from the[] principles of state
sovereignty and comity” reflected in, inter alia, the Com-
merce Clause that “a State may not impose economic sanc-
tions on violators of its laws with the intent of changing the
[violator’s] lawful conduct in other States.“). A state law
does not cease to be impermissibly “extraterritorial” under
the Commerce Clause merely because it has some nexus to
domestic persons or activities. “The critical inquiry is
whether the practical effect of the regulation is to control
conduct beyond the boundaries of the State.” Healy, 491
U.S. at 336; accord, e.g., Brown-Forman Distillers Corp. v.
New York State Liquor Auth., 476 U.S. 573, 583 (1986).
The Court’s decision in Healy is illustrative. There, the
Court struck down a Connecticut statute that required beer
distributors, as a condition of doing business in the State, to
file monthly statements with state authorities affirming that
their prices in Connecticut did not exceed their prices in any
neighboring State. 491 U.S. at 328 & n.5. The statute did
not, by its terms, require or prohibit any conduct outside
Connecticut. The Court nonetheless recognized that the
“practical effect” of the statute was to constrain the distribu-
tors’ ability to adjust their prices in other States in response
to local market conditions. See id. at 337-339. Accordingly,
the Court held that the statute was an impermissible extra-
territorial regulation of commerce. Id. at 340.
The Commerce Clause’s prohibition on a State’s regula-
tion of conduct beyond its borders protects against “inconsis-
tent legislation arising from the projection of one state
regulatory regime into the jurisdiction of another State.”
Healy, 491 U.S. at 336-337. When, as here, a State seeks to
project its regulatory regime not merely beyond its own
23
borders, but into the jurisdiction of another nation, the
potential is particularly great for inconsistent legislation and
resulting conflict, as well as for interference with United
States foreign policy. Cf. Japan Line, 441 U.S. at 447-449
(noting that a state tax on instrumentalities of foreign com-
merce poses special concerns under the Commerce Clause
because, unlike in the domestic context, no authoritative
tribunal exists to assure that such instrumentalities are not
subject to double taxation). Indeed, even Acts of Congress
are presumed not to apply extraterritorially, unless Con-
gress clearly indicates otherwise, to “protect against unin-
tended clashes between our laws and those of other nations
which could result in international discord.” EEOC v. Ara-
bian Am. Oil Co., 499 U.S. 244, 248 (1991).
2. A State is also constrained by the Due Process Clause
from regulating transactions that do not have a significant
relationship to its legitimate interests. See, e. g., BMW, 517
U.S. at 568-574; Phillips Petroleum Co. v. Shutts, 472 U.S.
797, 818-819 (1985); Home Ins. Co. v. Dick, 281 U.S. 397, 407-
408 (1930).
In Dick, for example, the Court held that a Texas insur-
ance statute could not, consistent with due process, be
applied to invalidate a provision contained in a policy that
had been issued in Mexico and was to be performed there.
See 281 U.S. at 408. The Court explained that, because all
acts relating to the making and performance of the policy
occurred outside the State, “Texas was therefore without
power to affect the terms of contracts so made.” Ibid.; see
id. at 408 n.5 (A] State is without power to impose either
public or private obligations on contracts made outside of the
state and not to be performed there.”); see also Shutts, 472
U.S. at 821 (a State cannot apply its own law to “a trans-
action with little or no relationship to the [State]”). Simi-
larly, in BMW, the Court held that a state court could not,
consistent with due process, impose punitive damages de-
24
signed to punish conduct that occurred in other States. The
Court explained that a State “would be infringing on the
policy choices of other States” by penalizing “conduct that
was lawful where it occurred and that had no impact on [the
State] or its residents.” 517 U.S. at 572-573.
Those s make clear a State cannot apply its law to an
out-of-state transaction simply because a party to the trans-
action resides within the State. Indeed, the policyholder in
Dick was a citizen and permanent resident of Texas,
although all conduct relevant to the policy had occurred in
Mexico. The Court held that Texas did not have a sufficient
relationship to the policy to permit the State to regulate it.
See 281 U.S. at 408. And, in Shutts, the Court held that
Kansas could not apply its law to out-of-state plaintiffs’
claims with respect to out-of-state leases, even though the
defendant did business in the State. See 472 U.S. at 818-819.
B. HVIRA, By Imposing Disclosure Requirements Ex-
clusively With Respect To Foreign Transactions Be-
tween Foreign Parties, Is An Impermissible Extra-
territorial Regulation
1. Whether analyzed under the Commerce Clause or the
Due Process Clause, HVIRA is an impermissible extra-
territorial regulation. Its “practical effect” is to compel “con-
duct beyond the boundaries of the State,” Healy, 491 U.S. at
336—specifically, to compel the retrieval, compilation, and
public disclosure of detailed information, presumably located
in Europe, concerning transactions that occurred many
decades ago in Europe between European parties. There is
no nexus between those transactions and any legitimate
interest of California that would permit the State to exercise
regulatory authority over them.
As noted above (at 14), HVIRA is not a generally applica-
ble law that focuses on domestic matters and simply happens
to have an extraterritorial effect in certain applications. Cf.
25
Japan Line, supra (invalidating local taxing laws even in
that situation when they interfered with the Nation’s ability
to speak with one voice). Rather, HVIRA is specifically and
exclusively directed at transactions that occurred in Europe.
It is thus especially evident that HVIRA exceeds the proper
legislative jurisdiction of the State. Indeed, HVIRA is
inconsistent with California’s own general privacy rules,
which prohibit, with respect to insurance policies issued in
California, the same sorts of disclosures that HVIRA
mandates with respect to European policies. See Cal. Ins.
Code § 791.13 (West 1993).
The conclusion that HVIRA is an unconstitutional
exterritorial regulation is confirmed by “considering how
{such laws] may interact with the legitimate regulatory
regimes of other States” and nations. Healy, 491 U.S. at 336
(noting relevance of such an inquiry); ef. BMW, 517 U.S. at
572 (a State cannot “attempt[] to alter [a business's] nation-
wide policy” in a manner that infringſes] on the policy
choices of other States”). It is plain that HVIRA has the
potential to interfere with other jurisdictions’ laws limiting
the disclosure of personal information gathered in connection
with the issuance of insurance policies. See note 8, supra
(discussing European data privacy laws). German officials
have, in fact, opined that a German insurer would violate
German privacy laws by complying with HVIRA, at least
with respect to the disclosure of information about policy-
holders who are not believed to be Holocaust victims. See
Gerling Appellees’ C.A. Reh’g Pet., Exh. C. Yet, as the
court of appeals recognized, an insurer that fails to disclose
the information required by HVIRA will have its California
license suspended, even if “disclosure pursuant to HVIRA
[would] violateſ] European data protection laws.” Pet. App.
25a.
2. a. The court of appeals suggested that HVIRA does not
regulate extraterritorially because it does “not seek to regu-
late the substance of out-of-state transactions.” Pet. App.
15a (addressing due process challenge); accord id. at 43a
(addressing Commerce Clause challenge). In the court’s
view, HVIRA is constitutional because it “requires Califor-
nia insurers only to disclose information about their foreign
transactions or those of their affiliates.” Id. at 16a.
The court of appeals’ reasoning rests on the erroneous
premise that “[a] request for information is simply not
equivalent” to a regulation. Pet. App. 16a. A requirement
that a person disclose, or refrain from disclosing, confidential
information is regulatory in nature. It imposes a substantive
obligation, the violation of which carries adverse conse-
quences, in order to advance a government policy objective.
See Dole v. United Steelworkers of Am., 494 U.S. 26, 28
(1990) (describing “rules which require regulated entities to
disclose information” as lalmong the regulatory tools avail-
able to [the] Government”); see also BMW, 517 U.S. at 571
n.15 (“Federal disclosure requirements are, of course, a
familiar part of our law.”) (citing examples). Indeed, when
the Court explained in BMW that “no single State could
* * * impose its own policy choice on neighboring States,”
the Court was referring to a State’s policy choice “requiring
full disclosure of every presale repair to a car.” 517 U.S. at
570-571 (emphasis added); see Gallagher, 267 F.3d at 1238
(observing that the disclosure provisions of Florida’s version
of HVIRA “pertain to, and as a practical matter unques-
tionably seek to regulate,” Holocaust-era policies). Indeed,
the regulatory nature of HVIRA’s disclosure requirements
is underscored by the substantive and regulatory nature of
the converse interest in protecting privacy. The existence of
data privacy laws, such as the European laws invoked by
petitioners here, belies any claim that laws governing dis-
closure or non-disclosure of information do not regulate or
implicate the Commerce Clause and the Due Process Clause.
27
b. The court of appeals also suggested that HVIRA is
constitutionally justified by the State’s purpose to “protect([]
its residents from insurance companies that have not paid
valid claims.” Pet. App. 16a. A State cannot evade constitu-
tional limits on extraterritorial legislation merely by deem-
ing a corporation’s conduct outside the State relevant to its
ability to perform within the State. See BMW, 517 U.S. at
573-574 (State cannot base punitive damages award on
conduct that is lawful in other jurisdictions); see generally
Healy, 491 U.S. at 336 (LA] statute that directly controls
commerce occurring wholly outside the boundaries of a State
* * * is invalid regardless of whether the statute’s extra-
territorial reach was intended by the legislature.”); id. at 337
n.14 (noting that only a statute that “regulates even-
handedly” and “has only indirect effects on interstate com-
merce” may be justified by a sufficiently important state
interest).
In any event, the express purpose of HVIRA is to
facilitate the resolution of claims on policies issued in Europe
more than 50 years ago rather than to assess the fitness of
insurers to do business in California today. See Cal. Ins.
Code § 13801(d) and (e) (West Supp. 2003) (HVIRA is
designed “to ensure the rapid resolution of * * * questions”
concerning “insurance policies held by Holocaust victims and
survivors,” so as to “eliminat[e] the further victimization of
these policyholders and their families“). By contrast,
HVIRA makes no mention of the purpose that the court
posited. Nor do any other features of HVIRA suggest that
its purpose or primary operative effect is to enable the Com-
missioner of Insurance to ascertain whether an insurance
company will deal fairly with California consumers. See
BMW, 517 U.S. at 572 (state regulation “must be supported
by the State’s interest in protecting its own consumers and
its own economy”). The information that HVIRA requires
insurers to disclose is too remote, too dated, and, at the same
28
time, too detailed to support the court of appeals’ posited
purpose. The disclosure obligation is tailored to enable
individuals—only a small fraction of whom may even now
have any connection at all to California—to pursue claims
under policies issued in Europe many decades ago. It is not
tailored to assessing insurers’ current performance in the
State.
Indeed, state statutes in effect at the time of HVIRA’s
enactment already provided the Commissioner of Insurance
with all of the tools necessary to investigate insurers’ busi-
ness practices. Cal. Ins. Code § 717(h) (West 1993) (pro-
viding Commissioner with the authority to gather informa-
tion to assess the “fairness and honesty of methods of doing
business” of any insurer seeking to do business in the State);
id. § 733 (authority to examine “all [the insurer's] affairs”);
id. § 1215.6 (authority to obtain documents in possession of
“the insurer or its affiliates”). HVIRA was described by its
supporters not as a means of obtaining information needed
by the Commissioner, but as a means of obtaining infor-
mation needed by individual claimants. See note 2 supra.
e. Contrary to the court of appeals’ holding, the
McCarran-Ferguson Act, 15 U.S.C. 1011 et seg., does not
immunize HVIRA from scrutiny under the Commerce
Clause. The McCarran-Ferguson Act provides no authority
for a State to extend its regulation of insurance into other
States or nations.
The McCarran-Ferguson Act was enacted in response to
this Court’s decision in United States v. South-Eastern Un-
derwriters Ass’n, 322 U.S. 533 (1944), which held that insur-
ance is “commerce,” with the consequence that the States’
ability to regulate insurance was circumscribed by the Com-
merce Clause. See United States Dep't of the Treasury v.
Fabe, 508 U.S. 491, 499-500 (1993). Congress, however,
viewed insurance as “a local matter, to be subject to and
regulated by the laws of the several States.” H.R. Rep. No.
29
143, 79th Cong., Ist Sess. 2 (1945). Thus, Congress enacted
the McCarran-Ferguson Act to ensure that the States would
continue to have primary responsibility for regulating insur-
ance and that state laws regulating and taxing insurance
would be preempted only when Congress stated a clear
intent to do so. See Fabe, 508 U.S. at 500, 507.
The McCarran-Ferguson Act removes Commerce Clause
limitations only with respect to a State’s regulation and
taxation of the insurance business within its own borders.
This Court held in FTC v. Travelers Health Ass’n, 362 U.S.
293, 301 (1960), that the Act was not intended to authorize
state regulation of extraterritorial activities. The Court ex-
plained that Congress “viewed state regulation of insurance
solely in terms of regulation by the law of the State where
occurred the activity sought to be regulated.” Id. at 300.
The Court reasoned that a contrary construction of the Act
would raise serious constitutional questions, id. at 302, and
undermine Congress’s “basic motivating policy” of leaving
the regulation of insurance to those “in close proximity to”
the people and policies regulated, id. at 301-302."
'! The Court was specifically concerned in Travelers with an exception
to the MeCarran-Ferguson Act that, among other things, allows the
Federal Trade Commission to regulate insurance to the extent that it is
not regulated by state law. See 15 U.S.C. 1012(b). The Court’s reasoning
applies equally, however, to the Act's general rule that authorizes state
regulation of insurance. See 15 U.S.C. 1012(a). The two provisions are
complementary. The general rule is that It he business of insurance” is
“subject to the laws of the * * * States which relate to the regulation
* * * of such business.” 15 U.S.C. 1012(a). The exception provides that
the Federal Trade Commission Act, among other Acts, “shall be applicable
to the business of insurance to the extent that such business is not regu-
lated by State law.” 15 U.S.C. 1012(b). Under Section 1012(b), the Fed-
eral Trade Commission Act applies unless the aspect of the insurance
business at issue is already regulated by the State as contemplated in
Section 1012(a). As Travelers makes clear, extraterritorial state regula-
tion is not within the authority delegated to the States by Section 1012(a).
30
Finally, whatever the extent to which the McCarran-Fer-
guson Act immunizes state insurance regulations from scru-
tiny under the Commerce Clause, the Act provides no
immunity from other constitutional provisions, including the
Due Process Clause. See Quill Corp. v. North Dakota, 504
U.S. 298, 305 (1992). Accordingly, even if the Act were
understood to provide a Commerce Clause immunity for
extraterritorial state regulation of insurance, HVIRA would
nonetheless be invalid as exceeding the Due Process
Clause’s independent limitations on a State’s authority “to
impose * * * obligations on contracts made outside of the
State and not to be performed there.” Dick, 281 U.S. at 408
n. 5.
CONCLUSION
The judgment of the court of appeals should be reversed.
Respectfully submitted.
PAUL D. CLEMENT’
Acting Solicitor General
ROBERT D. MCCALLUM, JR.
WILLIAM H. TaFT, IV Assistant Attorney General
Legal Adviser EDWIN S. KNEEDLER
Department of State Deputy Solicitor General
BARBARA MCDOWELL
Assistant to the Solicitor
General
MARK B. STERN
DOUGLAS HALLWARD-DRIEMEIER
Attorneys
FEBRUARY 2003
Y
* ‘The Solicitor General is recused in this case. 2
8
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.