# Amicus Curiae Brief On Behalf of the State of Texas — New Orleans Insurance Exchange v. United States > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385610_1000%3A4 ## Record - **Collection:** Supreme Court brief - **Document type:** Amicus Curiae Brief On Behalf of the State of Texas - **Published:** January 1, 1957 - **Citation:** 355 U.S. 22 ## Text ; bes- Supreme Coed. US. 5 FILED: 1 E FREE — ay. „. 9 r uα vant JOHN I. PEY, ! Supreme Court of the United States OCTOBER TERM, 1957 No. 399 NEW ORLEANS INSURANCE EXCHANGE, 2 Appellant a, S&S, , UNITED STATES OF AMERICA, . 0 _ Appellee On Appeal from the United States District Court for the ö Eastern Division of Louisiana, New Orleans Division _ + «AMICUS CURIAE BRIEF ON BEHALF OF THE STATE OF TEXAS “WILL WILSON Attorney General ‘State of Texas C. k. RICHARDS Assistant Attorney General OE A A 4 0 its brief as amicus curia 2 | Supreme Court of the Anited States OCTOBER. TERM, 1957 > ~~ wr 3 7 No. 399 NEW ORLEANS INSURANCE EXCHANGE, pe 5 * a . UNITED STATES OF AMERICA, Ret Ales. On Appeal from the United States District Court for the Eastern Division of Louisiana, New Orleans Division * AMICUS CURIAE BRIEF ON BEHALF OF THE STATE OF TEXAS — * a To The Honorable Supreme Court of The United States: The State of Texas, acting by and through Will Wilson, its Attorney Gen ral, respectfully submits ‘ upon the question as to whether the taxation and regulation of the business of insurance is subject to State control where a state, 1 such as Texas, has acted in accordance with the au- thority délegated to it by the Congress in the MeCar- ran-Ferguson Act, 15 U.S.C. 1011-1015. The State of Texas is gravely concerned as to whether its State Board of Insurance and Commis- sioner of Insurance may regulate the insurance busi- ness of Texas in accordance with the comprehensive Insurance Code of Texas, guided by the opinions of the Attorney General of Texas interpreting. its pro- visions, or whether such regulation may be continued without interference by the Federal Government only if conducted-in accordance with the views of the Antitrust Division of the Department of Justice. Texas has anti-trust laws as comprehensive as those of the Federal Government.’ The Attorney General of Texas and the District and County Attorneys of Texas are charged with the enforcement of its anti- trust laws’ and all citizens of the State have recourse to such laws for actual and exemplary. damages for injury resulting from any violation of the anti-trust laws of Texas.“ ae There now exists 2n uncertainty as to whether the - decision in Miley v. John Hancock Mutual Life In- The anti-trust laws of Texas, both civil and criminal, are set forth verbatim in the Appendix to this brief. The Attorney General of Texas has vigorously prosecut- ed violations of the anti-trust laws. A few examples are: State v. Standard Oil Co. 130 Tex. 313, 107 S. W. 2d 550 (Sup. Ct. 1937) ; Ford Motor Co. v. State. 142 Tex. 5, 175 S. W. 2d 230 (Sup. Ct. 1943); Arkansas Fuel Oil Co. et al v. State, 154 Tex. 573, 280 S.W. 2d 723 (Sup. Ct. 1955) ; State v. Swift and Co., 187 S.W..2d 127 (Civ. App., error refused 1945). a oer . Cline v. Insurance Exchange of Houston, 140 Tex. 175, 166 S. W. 2d 677 (Sup. Ct. 1943). ake | —3.— surance Co., et al., 148 F. Supp. 299, aff. 242 F. 2d 758, cert. den. Oetober 14, 1957, correctly declares the law in holding that in view of the McCarren-Fergu- son Act, Federal regulation is precluded in States which, like Texas, have comprehensive and complete laws regulating the insurance business, together with anti-trust laws with sweeping prohibitions against agreements cr combinations in restraint of trade. fe 1 The State Board of Insurance of Texas determines and fixes proper rates of premiums which must be adhered to in insuring motor vehicles and workmen’s compensation insurance risks, If insurance com- panies and agents fail to adhere to.such fixed rates : they are in violation of State law. Insurance com- panies may enforce rates with respect to fire r. allied lines and surety bonds only when such have been duly filed with and approved by the Bo any In addition, policy contracts for fire and allied lines, workmen’s compensation insurance, motor vehicle and surety bonds must be written on the policy con- tract forms prescribed by the Board. Even in the field of health and accident insurance there are num- _ . erous compulsory provisions which must be inserted in each policy contract. , 3 The State of Texas is submitting, in connection with this brief, copies of the Texas Insurance Code (1957 Ed.) which is published by the State Board of Insurance. This Honorable Court will note that the printed Code is a book containing 444 pages of laws applicable to the business of insurance, exclusive of the anti-trust laws. For ready reference a list of 8 some of the articles pertaining to rate and policy form control are shown below.‘ 5 Articles 1.04 (b) (e) and 1. 10 set forth the duties of the State Board of Insurance and the Commission- er of Insurance. A casual reading of these articles discloses that the Board and the Commissioner have sweeping control of insurance companies as to whether they should be permitted to transact busi- ness within the State of Texas, including the right to suspend the entire business of any company within the State which is found to be in .. . non-compli- ance with any provision of the laws relative to in- surance...” The Board and the Commissioner have not only very broad power in the control of rates and policy forms but also like eontrol in determing’ - whether insurance companies have proper reserves, ‘impairment of surplus, etc. In addition, the Board and.the Commissioner are required to report to the Attorney General of the State any violations of law which may be discovered in the exercise of the com- prehensive control of the insurance business. | Articles 2.01, et seq., give the Board and the Com- missioner exclusive control over the incorporation of insurance companies, including the determination as Art. 5.01. Board required” to fix motor vehicle rates (p. 95); Art. 5.06. Board required to prescribe Motor vehicle policy forms. Approyal by endorsements required. (p. 97). Art. 5.15. Fidelity, Guaranty and Surety bond rates must have Board approval based on factors specified dy law. (p. 100) Arts. 5.25 and 5.26.. Maximum rates fixed for fire insurance with deviation below fixed rates under certain ‘conditions. (p. 105). Art 5.35. Board prescribes uniform fire policies which all companies must use. (p. 110). Art. 5.55. Workmen’s compensation rates fixed by Board. (p. 119). Art. 5.56. All companies required to use uniform -policy forms prescribed by Board. (p. 120). to whether such companies are properly qualified to continue in business, how dividends shall be paid, and all other matters in the conduct of their business. Likewise, foreign or out-of-state companies must ob- tain permits to do business in Texas and subject themselves to the same requirements as domestie companies, which includes control 3s to reserves, in- vestments, and ownership of real estate. Articles 5.68, et seq., set forth the provisions of the Penal Code of Texas which pertain only to insurance busi- ness. It will be ngted that penalties are provided for any failure to obey the insurance laws and regula- tions issued by the Board and the Commissioner. The penal provisions are in addition to the anti-trust laws of Texas noted above. There now exists a great uncertainty and eonfu- sion as to whether the Board of Insurance and the Commissioner of Insurance, together with the At- torney General of Texas, may determine finally whether the insurance business is being properly transacted in the State of Texas, and whether the in- surance laws of Texas and regulations promulgated pursuant thereto can be enforced in accordance with. the interpretation of such laws by the Board and Commissioner and the Attorney General of Texas without interference by the Antitrust Division of the Department of Justice. N The McCarran-Ferguson Act undoubtedly was the result of congressional effort to return to the 4 states the regulation and taxation of the insurance business (provided they had comprehensive, ade- ' quate’ statutory regulation) as a result of United ‘State v. South-Eastern Underwriters Association, 322 U.S. 533 (1944). The effirmance of Miley v. 6 / * : —— John Hancock Mutual Life Insurance Co., 148 F. Supp. 299, aff. 242 F. 2d 758, cert. den. October 14, 1957, apparently declared the law to be that states which, like Massachusetts and. Texas, had compre- hensive insurance regulation, would be premitted to enforce their laws without interference from the Department of Justice. However, affirmance of the New Orleans Insurance Exchange case, 148 F. Supp. 915, seems to be squarely in conflict with the views expressed in the Miley case. The State of Texas is now confronted with this realistic problem. The State Board of Insurance fix- es rates with respect to certain lines of insurance and different rates may be applied to certain other lines only after approval by: the Board. The Attorney General of Texas will prosecute vigorously any com- pany which fails or refuses to comply with the rates provided by law: The question is: After the State of Texas, through its State Board of Insurance and the Attorney General, enforces rates and other regu- _ lations of the insurance business, will those who com- ply with such compulsory regulation be prosecuted by the Antitrust Division of the Department of Jus- ‘tice as in the South-Eastern case? The State of Texas, through its Attorneys General, 5 has for many years enforced the provisions of its anti-trust laws in the case of insurance companies. At the time of the enactment of the anti-trust laws in 1889 the business of insurance was not specifically named in the statutory provisions. In 1893 the Su- preme Court of Texas, in Queen Insurance Company v. State ex rel Attorney General, 86 Tex. 250, 24 S.W. 397, so held, and in 1903 amendatory legislation pro- vided for prosecution of anti-trust violations by in- a surance companies. Griffin v. Palatine Insurance ~— Go, 238 S. W. 637 (Comm. App. 1922). oa Although the laws of Texas provide specifically for prosecution i in the case of boycotts (Art: 7428; Vern- on's Civil Statutes, and Art. 1634, Vernon’s Penal Statutes), would a successful prosecution of a viola- tor of either or both of these statutes preclude similar action against the offender by the mann of Justice? We think not. The State of Texas has ee to enact com- prehensive laws for the regulation of the insurance business. In view of the decisions in Crafts v. Fed- eral Trade Commission, 244 F. 2d 882 (1957) and. American Hospital and Life Insurance Co. v. Fed- eral Trade Commission, 243 F. 2d 719 (1957) by the Courts of Appeal for tne ‘9th and 5th Circuits, re- spectively, the 55th Legislature of Texas in 1957 en- acted a broad and comprehensive statute governing unfair competition and unfair practices set forth as Article 21.21 of the Texas Insurance Code at pages 285-289 of the Code. Section 1 of the Act declares that the purpose of the Act is to regulate trade prac- tices in the business of insurance in accordance with. the intent of Congress as expressed in the MeCarran- Ferguson Act. The State of Texas, through its At- torney General, will vigorously prosecute all viola- tions of this statutory provision which are brought to his attention. Therefore, the State of Texas respectfully requests this Honorable Court to grant a rehearing in the New Orleans Insurance Exchange case and declare For prosecution of insurance companies under the 220 trust laws, see Potomac Fire Insurance Co. v. State, 18 S. W. 2d 929 _— eal 1929, error — the law’ as to whnther the McCarran-Ferguson Act restores to the State the right to enforce, free from Federal interference, their laws which afford com- plete regulation of the insurance business. The State of Texas respectfully suggests that, if those who observe and conform to State regulation are subject do proseeution for violation of Federal anti-trust laws, in the event the Anti-trust Division of the De- partment of Justice does not agree with the interpre- tation and enforcement of State law, the Attorneys General and regulatory agencies of the State con- cerned with enforcement-should know it. The State Board of Insurance ce of Texas and the Attorney Gen- _ eral of Texas should know whether their interpreta- tion and enforcement of State law may be accepted by the insurance business with safety, or whether they should enforce only sueh compulsory regulation as will meet with the approval of the Anti-trust Di- vision. The State of Texas should not be in a position of enforcing compliance with its regulations, and then find that such compliance is rewarded by ured cution for. violation of Federal law. The State of Texas submits that the question of law discussed in this amicus curiae brief is, of itself, so grave and substantial as to justify its considera- tion by this Court on its merits. Respectfully submitted, WILL WILSON | Attorney General State of Texas C. K. RICHARDS Assistant Attorney General State Capitol, Austin, Texas. a oot APPENDIX The following articles area tutory provisions contained in Title 126 (Trusts-Con*piracies Against Trade) contained in Vernon’s Texas Statutes (1948 Ed. Vol. 1). “Article 7426 7796 ‘Trusts’ — trust is a —— of capital, skill or aets by two or more persons, firms, corporations or associations of persons, or ‘either two or more of them for either, any or all of the — purposes: 41. Jo create, or which may y tend to ereate, or earry out restrictions in trade or commerce or aids to commerce or in the preparation of any product for market or transportation, or to create or carry out restrictions in the free pur- suit of any business authorized or permitted by laws of this State. “2. To fix, maintain, increase or reduce the price of merchandise, produce or commodities, or the cost of insurance, or of the preparation of any product for market or —.— — “To prevent or lessen competition in the manufaciure, : , transportation, sale or purchase of me ise, produce or commodi- ties or the business of insurance, or to prevent or lessen competition in aids to commerce, or in the preparation of any product for ‘market or transportation. - To fix or maintain any standard or fig ure whereby the price of any article or commod- ity of merchandise, produce or commerce, ‘or ~~ 1 O a the cost of transportation, or insurance, or the a preparation of any product for market or trans- portion, shall be in any manner affected, con- trolled or established. } „5. To make, enter into, maintain, execute or carry out any contract, obligation or ment by which the parties thereto bind, or have bound themselves not to sell, dispose of, trans- port or to prepare for market or transportation ----.any_article or commodity, or to. make any con- tract of insurance at-a-price below a common standard or figure or by which they shall agree in any manner to keep the price of such article or commodity or charge for transportation or insurance, or the cost of the preparation of any product for market or transportation at a fixed or graded figure, or by which they shall in any manner affect or maintain the price of any com- modity or article or the cost of transportation or insurance, or the cost of the preparation of any product for market or transportation between them or themselves and others, to preclude a free and unrestricted competition among themselves or others in the sale or transportation of any such article or commodity, or business of trans- portation or insurance, or the preparation of any product for market or transportation, or by which they shall agree to pool, combine or unite any interest they may have in connection with the sale or purchase of any article or com- modity, or for transportation or insur- ance or or the preparation of any pro- duct for et or t rtation v its price or such charge might be in any manner 46. To regulate, fix or limit the output of any article or commodity which may be manu- factured, mined, produced or sold, or the amount —11— of insurance ‘which may be undertaken, or the amount of work that may be done in the prep- aration of any product for — or trans- portation. cng aes 7. To abstain from e in or continu- ing business, or from the or sale of merchandise, produce or commodities partially or entirely within the State of Texas, or any portion thereof. (p. * “Art. 7427. 7797 Monopoly defined A monopoly is a combination or consolidation of two or more corporations when effected in either of the following methods: 41. When the direction of the affairs of two or more corporations is in any manner brought under the same management or control for the purpose of producing, or where such common — or control tends to create a trust as defined in the first article of this chapter. “2. Where any corporation acquires the shares or certificates of stock or bonds, fran- chise or other rights, or the physical properties f 2 * or corporations, for purpose preven or lessening, or where the effect of such tion tends to affect or lessen competition, whether such acquisition is accomplisned directly or ea — the 1 of trustees or other- p. 2082) “Art. 7428. 7798 3 83 trade Either or any of the following acts shall oOongstitute a conspiracy in restraint of trade: «1. Where any two or more persons, firms, npr or associations of * who are 6 in or selling any article of mer- . „ baying or soling any st enter into an agreement or undertaking * LET firm, co - I Il of . merchandise, produce or commodity. “2. Shan ins oth — firms corporations or associations of persons shall agree to boycott or threaten to refuse to buy _ from or sell to any person, firm, corporation or association or persons for buying from or selling to any other person, firm, corporation or associa- | tion of persons. * Where any two or more persons, 8 corporations or associations of persons shall agree to boycott, or enter into any agreement or understanding to refuse to transport, deliver, receive, accept, erect, * operate, use or work with an goods, res, merchandise, articles or p 1 2 firm, tion or association of persons; provided, however, that this sub-division of this Article shall not be construed to a y to an agreement between employees to terminate their employ- ment, or to refuse to transport, deliver, receive, 2 assemble, operate use or work with the goods wares, me or pro- ducts of their immediate employer unless such refusal is intended or calculated to induce, or shall have the effect of inducing, such employer to refrain from purchasing or from otherwise goods, wares, merchandise, articles 5 or produets from any person, firm, corporation or association of persons.“ (p. 2083) ö ills The following articles are statutory provisions , contained in Title 19 (Trusts and Conspiracies), - Vernon’s Texas Statutes (1948 Ed. Vol. 2). Article 1632 defining “Trusts” is. identical in language with Article 7426, Vernon’s Texas Civil Statutes, | supra. Article 1633 defining “Monopoly” is identi- cal with Article 7427, Vernon’s Texas Civil Statutes, supra, and Article 1634, Vernon’s Penal Code, defin- ing “Conspiracy in restraint of trade” is identical with Article 7428, Vernon’s Texas Civil Statutes, . “Art. 1635. [1466] Punishment “Whoever violates any provision of this chapter shall be confined in the penitentiary not ‘less than two nor more than ‘ten years.” (p. 340) “Art. 1637. [1470] Agreement to form trust, monopoly, ese. | Af any person shall enter into an agreement or understanding of any character to form a trust, or to form a monopoly, or to form a con- . spiracy in restraint of trade, as these offenses J are defined to this chapter or shall form a trust, — or conspiracy in restraint of trade, or a party to the formation of a trust or mo y or conspiracy in restraint of trade, or shall a party to a trust or monopoly or conspiracy in restraint of trade, or shall do any _ - act in furtherance of aid to such trust or monop- oly or conspiracy in restraint of trade, he shall be confined in the penitentiary not less than two nor more than ten years.” (p. 340). e „Art. 1638. [1471] Operating in violation of this law 8 See aoe AI any person, shall, as a member, agent, em- ploye, officer, director or stockholder of any business, firm, corporation or association of per- sons, form, in violation of the provisions.of this chapter, or shall operate, in violation of such pro- visions, any such business, firm corporation or association formed in violation of this chapter, or shall make any sale, or purchase, or any other contract, or do business for such business, firm, corporation or association, or shall do any other aet which has the effect of violating or aiding’ in the violation of any provision of this chapter, or shall, with the intent or purpose of driving out competition or for the purpose of financially injuring competitors, sell within this State at. less than cost of manufacture or production, or sell in such a way or give away within this State, produets for the purpose of driving out competi- tion or finaneially injuring competitors engaged in a similar business, or give secrete rebates on such purchase for the purpose of the aforesaid, he shall be confined in the penitentiary not less than two nor more than ten years.” (p. 340) Art. 1689 [1472] Persons outside State liable > “If any person, shall, outside of this State, doc anything which, if done within this State, would constitute the formation of a trust or monopoly or conspiracy in the restraint of trade, as defined in this chapter, and shall cause or permit the trust or monopoly 80 formed by him to do business within this State, or shall cause or permit such trust, monopoly, or conspiracy in restraint of trade to have any operation or effect —15— within this State, or, if such trust, monopoly or conspiracy in restraint of trade, having formed outside of said State, any person sha. give effect to such trust, monopoly or conspiracy © in this State, or he shall do anything to help or aid it doing business in this State, or otherwise _ violate the anti-trust laws of this State, or if any person shall buy or sell or otherwise make con- tracts for or aid any business, firm, corporation or association of persons, formed or operated in vidlation of any provision of this chapter, or so formed or operated as would be in violation of . the laws of this State, if it had been formed ithin this State, shall be confined in the peni- tenti not less than two nor more than ten years.” (p. 340) | “Art. 1640, [1473] Forming trusts, ete. If any person, employe, agent, stockholder, or officer of any person, firm, association of persons, or corporation, now doing business in this State, have formed a trust, or monopoly, as defined in this chapter, or have formed a con- — in restraint of trade, as defined in this chapter, or shall do or perfor many act of any character to carry out such trust, monopoly or — in restraint of trade, such person, employe, agent, stockholder, or officer, shall be confined in the penitentiary not less than two nor more than ten years.“ (p. 341) --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385610_1000%3A4. Public record. Not legal advice.