Amicus Curiae Brief — Chase Manhattan Bank, N. A. v. American Land Title Ass'n

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Nos. 92-182, 92-645 WOW 12 BR

IN THE ‘ORRGE OF THE CLERK

Supreme Court of the Wuited States

OCTOBER TERM, 1992

THE CHASE MANHATTAN BANK, N.A.,

ig tition rs

Vv.

AMERICAN LAND TITLE ASSOCIATION, ef al,.

4 ;

ACSpowdedrts,

STEPHEN R. STEINBRINK,

ACTING COMPTROLLER OF THE CURRENCY, ef al..

Petit f A

On Petitions fora Writ of Certiorarito the

United States Court of Appeals

for the Second Circuit

BRIEF AMICUS CURIAE OF THE

INDEPENDENT INSURANCE AGENTS OF AMERICA,

INC., NATIONAL ASSOCIATION OF CASUALTY &

SURETY AGENTS, NATIONAL ASSOCIATION OF LIFE

UNDERWRITERS, AND NATIONAL ASSOCIATION

OF PROFESSIONAL INSURANCE AGENTS,

IN SUPPORT OF RESPONDENTS

JONATHAN B. SALLET *

ANN M. KAPPLER

JENNER & BLOCK

601 Thirteenth Street, N.W.

Twelfth Floor

Washington, D.C. 20005

(202) 639-6000

November 1992 Counsel for Amic:

QUESTION PRESENTED

Whether national banks may engage in the title in-

surance agency business outside of the limitation estab-

lished by Congress in 12 U.S.C. 92 Y"

enactment to address the permissible scope of insurance

agency activities by national banks?

(1)

TABLE OF CONTENTS

Page

QUESTION PRESENTED ue i

PM TPIT ME) FE RRMPERE © LEUED oo cccceccccaccsecccccccveccccvecescconnsucss V

INTEREST OF AMICI y)

INTRODUCTION AND SUMMARY OF ARGU-

MENT 2

ARGUMENT Pas 5

I. THERE IS NO REASON TO ADDRESS THE

CONTINUED EXISTENCE OF SECTION 92 5

A. There Is No Meaningful Conflict Between the

Circuits . both faeces ae. 5

B. The Second Circuit’s Ruling, in Dicta, and

the D.C. Circuit’s Ruling Regarding Section

92’s Existence Do Not Create Conflicting

Obligations or Rights for Any Entity 9

C. The Issue Is Currently Percolating in the

Couris letee 10

Il. THERE IS NO NEED FOR THIS COURT TO

ADDRESS THE ISSUE OF THE INTERAC-

TION OF SECTIONS 92 AND 24 (SEVENTH)

OF THE NATIONAL BANK ACT . . 12

A. There Is No Real Conflict With Any Other

Court a Be 12

RB. Petitioners’ Dire Predictions of Threatened

National Bank Powers As a Result of the

Second Circuit’s Decision Are Pure, Un-

founded Speculation 14

C. None of Petitioners’ Arguments That the

Second Circuit’s Decision Is Wrong Is Per-

suasive 15

(iil)

iv

TABLE OF CONTENTS—Continued

Page

Il. THE ISSUES ON WHICH PETITIONERS

SEEK REVIEW ARE NOT CLEANLY ]

SENTED

IV. THE CONTROVERSY REGARDING THE IN-

SURANCE-RELATED POWERS OF NA-

TIONAL BANKS SHOULD BE LEFT TO

CONGRESS

20)

CONCLUSION

Vv

TABLE OF AUTHORITIES

Cases Page

American Ins, Ass’n v. Clarke, 865 F.2d 278 (D.C.

Cir. 1988) - a. mae

American Fidelity Bank & Trust Co. v. Heimann,

683 F.2d 999 (6th Cir. 1982) _.........00000000cccccc cc. 19

American Land Tulle Ass'n v. Clarke, 968 F 24 150

Coe QaP. BP aicccss ee arte earn PRE At passim

Black v. Cutter Laboratories, 25] U.S. 292 (1956).. 18

Board of Governors v. Dimension Fin. Corp., 474

oP Se 3s). | nen oe ee naan 19

Botany Worsted Mills v. U ited States. 278 U. S.

Be CRORE ise sseaeeeeee 8

Independent Ins. Agents o ‘in erica, Inc. v. C Naph é,

955 F.2d 731, reh’g, en oe denied, “ F.2d

1077 (D.C. Cir. 1992) (petitions for cert. pend-

ing) . sch Bedsddncétsaiiasrae ee ee passim

Independent Bankers Ass'n of America v. He imann,

613 F.2d 1164 (1979), cert. denied, 449 U.S. 823

E RTI D ove ccnuercnsacccsoncrioncseaavelael tee 12,13

2 ogan Count fy N t 7. Daal v. Tow HSE —y 139 U. Ss.

a: ee eo iene ccs neee cee 6

Midland Telecasting v. Midessa Te le vision Co., 617

F.2d 1141 (Sth Cir.), cert. denied, 449 US. 954

(1980) Pe EN Ne Roney rT Tt 8

National R. Passenger Corp. Netinaal Ass’n of

R. Passengers, 414 U.S. 168 (1974) a 8

Neuberger v. Commissioner, 311 U.S. 83 (1940)... 16

Owensboro Nat'l Bank v. Moore, No. 91-3 (E.D.

Ky. Aug. 4, 1992) (appeals pending) scanvocse ale ae

Ross v. Moffitt, 417 U.S. 600 (1974) eee 15

Savon v. Georgia Ass'n of Ind. Ins. Agents, Inec.,

399 F.2d 1010 (Sth Cir. 1968) . See 1,9

Stemnbrink v. Independent Ins. Agents of Am.,

Inc., No. 92-507 vi ein eyed ne ees 2,5

Texas & Pac. Ry. fac . Pottorf, 9294 U.S. 245

(1934) “Ad LEN atsoneee et ee 5, 6,8

United States National Sid of ee gon dia

pendent Ins. Agents of Am., Inc., No. ob me 2

Variable gsi Life Ins. Co. v. Clarke, 786 F.

Supp. 639 (S.D. Tex. 1991), appeal pending, No.

92-2010 Pi NMR 5d heeetcsscectea a caeearaanas Ecsb padeens 2,11,14

Qty f } )

Pave

\ct of Keb >). LRG ( } ) 1] I? stat. 665

ACT OI 8S plember 7, 1916, Pub ,, No. 64 270. 39

stat. 752

7 -

xX" ]

National

‘

Bank Act

section 92

~ pa Ad

United States Code

o7T.e rs C F

12 | ee 8S 24 { ( eT) } pa yr

4 ’ ) . ‘ ard ‘

Ky. Rev. Stat. 287.030 0)

M NC ¢ llane OlSs

*) 4" ) > . nel rw ’ " ‘ -_

2 Fed. Reg. Bull. 73 (Feb. 1, 1916) 6,7

ro ‘ > ‘ y Py ’ “7 : . -— : =

v8 Cong. Rec. 11001 (daily ed July 14 Q16) 6.7.9

IN THE

Supreme Court of the United States

OcroBper TERM, 1992

NO 92 182

Pre CHA HATTAN BANK, N.A.,

Petitione i.

AMERICAN LAND THLE ASSOCIATION, ef al.,

Ree sponde Ht I; .

G f Pe TROLLER OF THE CURRENCY, ef al

Pe fifiopie -

» TITLE ASSOCIATION, ef al,

Respondents,

On Petitions fora Writ of Certiorari to the

United States Court of Appeals

for the Second Circuit

BRIEF AMICUS CURIAE OF THE

INDEPENDENT INSURANCE AGENTS OF AMERICA,

INC. NATIONAL ASSOCTATION OF CASUALTY &

SURETY AGENTS, NATIONAL ASSOCIATION OF LIFE

UNDERWRITERS, AND NATIONAL ASSOCIATION

OF PROFESSIONAL INSURANCE AGENTS,

IN SUPPORT OF RESPONDENTS

9

INTEREST OF AMICI

Amici curiae Independent Insurance Agents of Amer-

ica, Inc., National Association of Casualty & Surety

Agents, National Association of Life Underwriters, and

National Association of Professional Insurance Agents

are non-profit national trade associations that represent

hundreds of thousands of insurance agents and their em-

ployees throughout the United States. Amici are respond-

ents in United States National Bank of Oregon v. Inde-

pendent Ins. Agents of Am., Inc., No. 92-484, and

Steinbrink v. Independent Ins. Agents of Am., Inc., No.

92-507, which the Solicitor General has suggested should

be treated the same as this case.

Amici have long maintained that their members’ in-

terest in sustaining and improving the insurance business

environment is served by endorsing the separation of

banking and insurance as provided under current law.

In this regard, amici and their state affiliates have par-

ticipated as parties and amici in numerous federal ac-

tions concerning the power of banks to engage in the

business of insurance, including several cases that peti-

tioners contend are relevant here. See Owensboro Nat’l

Bank v. Moore, No. 91-3 (E.D.Ky. Aug. 4, 1992) (ap-

peals pending) ; Variable Annuity Life Ins. Co. v. Clarke,

786 F. Supp. 639 (S.D. Tex. 1991), appeal pending, No.

92-2010 (5th Cir.) ; and American Ins. Ass’n 1. Clarke,

865 F.2d 278 «D.C. Cir. 1988).

Amici fully support the arguments presented by Re-

spondents and submit this brief to supplement those

arzuments.'

INTRODUCTION AND SUMMARY OF ARGUMENT

In its decision below, the United States Court of Ap-

peals for the Second Circuit unanimously held that. na-

1 All the parties to this action have consented to the filing of this

amicus brief in support of Respondents. Their letters of consent

have been lodged with the Court.

3

tional banks are not empowered by the National Bank

Act (the “Act”) to act as agents for insurance companies

in the sale of title insurance. American Land Title Ass’n

“. Clarke, 968 F.2d 150 (2d Cir. 1992) (“ALTA”). The

court ruled that Section 92 of the National Bank Act

limits national banks’ incidental powers under Section 24

(Seventh) of the Act. The Court concluded that “the

language of Section 92 evinces Congress’ intent to bar

national banks that fall outside of the provision’s geo-

graphical restrictions from acting as insurance agents.”

Id. at 155. The Court further concluded that the con-

temporaneous legislative history “indicate|s| that when

Congress enacted Section 92, it did so in the belief that

under existing banking law (specifically 12 U.S.C. § 24

(Seventh!) national banks had no authority to engage in

insurance agency activities. Furthermore, the Comptrol-

ler’s [1916] letter provides evidence that Congress in-

tended to withhold from national banks, located in towns

with over 5,000 inhabitants, the authority to sell insur-

ance.” /d. at 156.

Without having received briefing or hearing argument

on the issue, the Second Circuit, as a preliminary point,

sua sponte concluded that Section 92 had not been re-

pealed, disagreeing with the D.C. Circuit's contrary hold-

ing in Independent lus. Ayents of America v. Clarke, 955

F.2d iol, rely, Ch baie, deni d, 965 F.2d 1077 (Ee... Cir.

1992) (“/14A") ‘petitions pending). By contrast, the

D.C. Cireuit, sitting en hance, considered fully-briefed

arguments on both sides of the issue before declining to

vacate the //AA panel’s ruling that Section 92 no longer

exists... The D.C. Circuit’s well-reasoned decision in IJAA.

effectively endorsed by the full court sitting en bane,

correctly resolves the issue of Section 92's continued

existence.

There is no meaningful conflict on this issue. Petition-

ers misread the Second Circuit’s decision below in assert-

“No member of the full D.C. Circuit court voted io rehear the

panel’s decision regarding the existence of Section 92.

4

ing that there is such a conflict. To be sure the court, in

dicta, disagreed with the D.C. Cireuit’s conclusion that

Section 92 does not exist. But the key to the court’s

reasoning is that Section 92 was enacted in the first in-

stance—a conclusion that no one challenges. Having en-

acted Section 92, Congress made clear its view that See-

tion 24 (Seventh) does not provide for any insurance

powers. The subsequent history of Section 92—whatever

it is—sheds no additional light on the meaning of Section

24 (Seventh!. Thus, the Second Cireuit’s decision below

would be no different even if it had concluded that Sec-

tion 92 was repealed. Moreover, the issues presented to

the two courts, and the court's holdings, are very differ-

ent. No one-is subject to conflicting directives as a

result of the two decisions. Further, the question of See-

tion 92’s continued existence may arise in two other Cir-

cuits and there is no need to address the issue now.

Nor does that portion of the Second Circuit's reasoning

concerning the interaction of Section 92 and Section 24

(Seventh) warrant review by this Court. Contrary to

petitioners’ assertions, there is no real or direct conflict

With the decisions of other courts; the reasoning is con-

sistent with the language and legislative history of the

Act; and the decision does not threaten national banks’

previously-authorized insurance-related activities.

Petitioners’ belief that national banks should be per-

mitted to engage in a wide range of non-banking activi-

ties—including the sale of title insurance-——should be

addressed to Congress. This Court is not the forum for

effectuating policy changes.

»

ARGUMENT

I. THERE IS NO REASON TO ADDRESS THE CON-

TINUED EXISTENCE OF SECTION 92.

The Chase Manhattan Bank, N.A. (“Chase”) alone re-

quests review of the Second Circuit’s conclusion that

Section 92 of the National Bank Act continues to exist.

The Solicitor General, on behalf ef the Office of the

Comptroller of the Currency (‘Comptroller’), pointedly

refrains from raising that issue here, asking this Court

instead to review the D.C. Cireuit’s ruling in //AA.

Steinbrink v. Independent Ins. Agents of Am., Ine., No.

92-507. The issue does not warrant this Court’s review

in either case." ;

A. There Is No Meaningful Conflict Between the

Circuits.

Contrary to petitioners’ representations, there is no

meaningful conflict between the Second Cireuit and the

D.C. Circuit. The Second Circuit’s conclusion below was

dicta: the court need not have resolved the issue of Sec-

tion 92’s continued existence in order to conclude that

national banks are not empowered to act as agents for

title insurance companies. It is the enactment of Section

92 that evinces Congress’ intent to limit national banks’

power to sell insurance. Its subsequent history, however

construed, cannot change this conclusion. Regardless

Whether Section 92 exists or nct, national banks are not

permitted to engage in the sale of title insurance as

agents for insurance companies. For that reason, there

Was no necessity for the court to decide whether Section

92 had been repealed.

It is well-established that national banks are limited to

those activities authorized them by law. E.g., Texas &

* Amiei, respondents to the petitions seeking review of the D.C.

Cireuit’s decision in J7AA, will more fully address the reasons why

review of this issue is not warranted in their opposition brief. in

ITAA, That brief is due to be filed on November 21, 1992.

6

Pac. Ry. Co. ve. Pottor ff, 291 US, 245, 253 (19384): Logan

Cow) iif Nat'l Bank v. Townsend. 139 U.S. 67, 73 t1sS91).

Congress enacted the predecessor of Section 24 (Seventh)

In 1863. Act of Feb. 25, 1863, Ch. 58, $ 11, 12 Stat. 665,

bbS. Like the current version, the statute identified a

series of express powers, and included the provision. of

“incidental” and “necessary” powers. See 12 U.S.C. § 24

(Seventh).

In 1916, then-Comptroller of the Currency, John Skelton

Williams, wrote a letter to the Senate Banking and Cur-

rency Committee requesting that national banks located

In small towns be permitted to act as insurance agents.

93 Cong. Ree. 11001 (daily ed. July 14, 19161." The

Comptroller expressed a desire to find a statutory mecha-

nism whereby “the powers of small national banks might

be enlarged so as to provide them with additional sources

of revenue and to place them in a position where they

could better compete with local State banks and. with

companies Which are sometimes authorized under the law

to do a class of business not strictly that of commercial

banking.” Id. ‘emphasis added). The Comptroller stated,

however, that “from the standpoint of public policy and

banking efficiency this authority should be limited to

banks in small communities.” /d. Accordingly, the Comp-

troller proposed an amendment to the National Bank Act.

explicitly noting that national banks were conferred “‘in-

cidental” and “necessary” powers, Comptroller Williams

explained that his proposed amendment was nevertheless

required because “|n]ational banks are not given either

expressly or by necessary implication the power to act as

agents for insurance companies.” /d... Comptroller Wil-

‘The letter was entered into the congressional record by Sena

This view conformed with the opinion of the Board of Gove rnors

i. ee . , i } | } -

ft the Federal Reserve, which held in 1915 that national banks had

no authority, express or implied, to engave in insurance agence.

écese *y* , P ] > ] | es 4 . .

activities The Board ruled that tiny such evtension of the

poWers of national banks must be left to the consideration of Con-

liams therefore clearly understood that a national bank’s

acting as agent for an insurance company was not an

“incidental power... necessary to carry on the business

of banking.” /d.

In response, Congress enacted Comptroller Williams’

proposed amendment. Act of September 7, 1916, Pub. L.

No. 64-270, 39 Stat. 752-53 (the “1916 Act”). The critical]

language of the 1916 Act, provides:

Section fifty-two hundred and two of the Revised

Statutes of the United States |Section 13 of the Fed-

eral Kheserve Act of 1913] is hereby amended so as to

“That by addition to thie pow? PS pow vested by law

in national banking associations organized under the

laws of the United States any such association located

and doing business in any place the population of

Which does not exceed five thousand inhabitants, as

shown by the last preceding decennial census, may,

under such rules and regulations as may be pre-

scribed by the Comptroller of the Currency, act as the

agent for any fire, life, or other insurance company

authorized by the authorities of the State in which

said bank is located to do business in said State, by

soliciting and selling insurance and collecting pre-

miums on policies issued by such company; 4

(fi mphasis added).

As the Fifth Circuit has recognized, prior to enactment

of Section 92, ‘no national bank possessed any power to

act as insurance agents.” Sawvon v. Georgia Ass’n of Ind.

Ins, Agents, 8399 F.2d 1010, 1016 (5th Cir. 1968) (em-

phasis in original). By its explicit addition to national

gress.” 2 Fed. Reg. Bull. 73, 74 (Feb. 1, 1916) (emphasis added

At the time-——as now— national banks were ¢ranted the power “[t lo

+

exercise ... all such incidental powers as shall be necessary to carry

»

,

on the business of banking.” See fd. at

8

banks’ powers, Section 92 constituted the sole source of

authority for national banks to engage in’ insurance-

agency activities.” Section 92 was thought necessary pre-

cisely for the reason that, as was universally understood,

national banks otherwise had neither the express nor in-

cidental power to sell insurance. Section 92 thus reflects

Congress’ understanding that insurance-ageney powers

were beyond the powers conveyed by the other provisions

of the National Bank Act-—including the grant of “such

incidental powers as shall be necessary to carry on the

business of banking.” See Tewas & Pac. Ry. Co. +. Pot-

torff, 291 US. at 258 & n.13 ‘amendment to National

Bank Act to provide limited power to pledge assets to

secure deposits “indicates that Congress believed that the

original act had not granted general power to pledge as-

sets to secure deposits”) (citing legislative history simi-

lar to that of Section 92).

In 1918, as the D.C. Circuit correctly ruled in //AA,

Congress repealed Section 92. Section 92 is the only stat-

utory enactment that has ever addressed the insurance

agency powers of national banks. The effect of Congress’

8 See Botany Worsted Mills +. United States, 278 U.S, 282. 289

(1929) (“When a statute limits a thing to be done in a particular

mode, it includes the negative of any other mode.’): National R

Passe nger Corp. ». Natronal Ass'n of R. Passe YYETS, 114 U.S: 453.

158 (1904) (same); Midland Telecasting v. Midessa Television Co.

617 F.2d 1141, 1145 n.7 (Sth Cir.) (“The existence of 2 Specific

statutory | exemption covering certain acts is evidence that Con

yress did not intend to grant in munity to other acts not covered 1)

the explicit exemptions.”), cert. denied, 449 U.S. 954 (1980

* The Court noted in Pottor# that the fact that Congress enacted

the limited power in a separate section, rather than as an amend

ment to Section 24( Seventh), indicates that ¢ ongress did not mean

merely to clarify that the power of a national bank to pledge its

assets to secure deposits was contained in the grant of “incidental”

powers. 2917 U.S. at 259. Similarly, the enactment of the limited

insurance-agency authority in a separate statutory provision (Se

tion 92) refutes any suggestion that it was me rely a clarification

of powers already conferred by Section 24(Seventh

gy

repeal of Section 92 is thus plain: there is no longer any

authority for national banks to sell insurance. The repeal

of Section 92 reinforces Congress’ intention to deprive

national banks of even the limited authority to sell insur-

ance in small towns that it briefly permitted from 1916

to 1918. Congress thus reinstated the law as it existed

prior to Section 92’s enactment: “no national bank pos-

sesse[s] avy power to act as insurance agents.” Saaon,

399 F.2d at 1016 (emphasis in original).

Yet the Comptroller, in his decision at issue in this

case, has authorized national banks to engage in this

very activity. He has authorized Chase to act as agent

for title insurance companies. This is precisely the power

once permitted (in small towns only) that Congress re-

scinded in 1918. As Comptroller Williams recognized 75

years ago, “the Comptroller of the Currency has no right

to authorize or permit a national bank to exercise powers

not conferred upon it by law.” 53 Cong. Rec. 11001

(daily ed. July 14, 1916).

Thus, contrary to petitioners’ assertions, even if. this

Court were to grant review and determine that the Second

Circuit incorrectly ruled on Section 92’s continued exist-

ence, that determination would not alter the outcome of

the Second Circuit's decision.

Bb. The Second Circuit’s Ruling, in Dicta, and the D.C.

Circuit’s Ruling Regarding Section 92’s Existence

Do Not Create Conflicting Obligations or Rights for

Any Entity.

In /JAA, these amici challenged the Comptroller’s rul-

ing permitting the United States National Bank of Ore-

gon to sell insurance from its office located in a town of

less than 5,000 to customers located throughout the

United States, pursuant to Section 92 of the National

Bank Act. Amici argued, in JJAA, that a national bank’s

insurance-agency activities must be confined to the “small

town” in which it is located. The D.C. Circuit held that

10

Section 92 no longer exists. Because the Comptroller had

cited no other authority for its challenged ruling, the

court concluded that the ruling was not in accordance

with law. 955 F.2d at 739. That is, the D.C. Cireuit held

that the Comptroller cannot invoke Section 92 as a source

of authority to permit national banks to sell insurance

from ‘“‘smail towns.”’

By contrast, the decision below presents and addresses

only the narrow issue of national banks’ authority to sell

title insurance. The Second Circuit held that, given Sec-

tion 92, the Comptroller cannot invoke Section 24 (Sev-

enth) as a source of authority to permit national banks

to sell title insurance from offices that are not located in

small towns.

The two decisions address very different issues. And

the two holdings concern entirely different topics. <Ac-

cordingly, neither the Comptroller nor any other entity

is subject to conflicting directives from or accorded dif-

ferent rights by the two courts.

C. The Issue Is Currently Percolating in the Courts.

In contrast to the Second Circuit’s decision below, the

issue of Section 92’s continued existence is squarely pre-

sented in a case currently pending before the Sixth Cir-

euit. In Owensboro Nat'l Bank v. Moore, three national

banks with small town offices, invoking Section 92 of the

National Bank Act, sought to be licensed to sell insurance

in Kentucky. When they were denied license applications,

the national banks brought suit against the Kentucky

Commissioner of Insurance and Department of Insurance,

alleging that Section 92 pre-empts Ky. Rev. Stat. 287.030,

which the Commissioner had interpreted as prohibiting

any bank—state or national—from being licensed to sell

insurance in the Commonwealth. While cross-motions for

summary judgment were pending, the D.C. Circuit’s deci-

sion issued in /JAA and the district court asked the par-

ties to brief the issue of Section 92’s continued existence.

Before the court reached its decision, the Second Circuit

1]

issued its opinion below. The district court eventually

concluded that Section 92 exists, expressly adopting the

Second Circuit’s analysis, and held that Section 92 pre-

empts the more restrictive Kentucky law. Owensboro

Nat'l Bank v. Moore, No. 91-3 (E.D.Ky. Aug. 4, 1992).

Amic?’s Kentucky affiliates, intervenor-defendants in

the case, and the state defendants have appealed to the

Sixth Circuit.. One of the issues on appeal is the exist-

ence of Section 92. If the Sixth Circuit rules that Section

92 was repealed, the non-existent statute cannot then

pre-empt any state law and the district court’s decision

will be reversed. Such a holding, in contrast to the Sec-

ond Circuit’s decision below, will directly address the

powers of national banks pursuant to Section 92, and

will be consistent with the D.C. Circuit’s holding in //AA.

If, on the other hand, the Sixth Circuit affirms, it will

hold that the national banks are entitled to sell insurance

pursuant to Section 92. That holding—wnlike the decision

below—will directly conflict with the D.C. Circuit’s deci-

sion in J/AA.,

At a minimum, this Court should await the decision of

the Sixth Circuit, which may provide clarification and

additional assistance to this Court in considering whether

there is a need to address the issue of Section 92’s con-

tinued existence."

*The United States is appearing as an intervenor-plaintiff in the

case,

* The issue may also arise in a case currently ponding before the

Fifth Circuit. Variable Annuity Life Ins. Co. v. Clarke, No. 92-

2010 (“VALIC"). VALIC concerns the Comptroller’s ruling that na-

tional banks may sell annuities pursuant to Section 24( Seventh).

Appellant has argued that the Fifth Circuit should follow its deci-

sion in Savon and the Second Circuit's reasoning here and hold that

Section 92 restrains the “incidental” insurance powers of national

banks. Before reaching this issue, the Fifth Circuit, like the See-

ond Circuit, may feel compelled to address the question of Section

92's continued existence,

is

Hl. THERE IS NO NEED FOR THIS COURT TO AD-

DRESS THE ISSUE OF 'THE INTERACTION OF

SECTIONS 92 AND 24 (SEVENTH) OF THE NA-

TIONAL BANK ACT.

socth the Solicitor General and Chase ask this Court

to review a portion of the Second Circuit’s reasoning be-

low—the court’s determination that “{Slection 92. im-

pliedly bars national banks in towns with more than 5,000

inhabitants from engaging in insurance agency activities

in general.” 968 F.2d at 156." Petitioners claim that the

Second Circuit’s reasoning conflicts with the decisions of

other Circuit Courts; that the reasoning is erroneous: and

that it “calls into question a variety of activities per-

formed by national banks.” OCC Pet. 9. As Respondents

make clear, all of petitioners’ claims are wrong. Amici

fully embrace Respondents’ arguments and offer the fol-

lowing additional points.

A. There Is No Real Conflict With Any Other Court.

The Second Circuit addressed a narrow issue of. first

impression: whether national banks are empowered to

act as agent in the sale of title insurance. Other than the

district court in the same case, no other court before or

since has addressed this issue. Thus, there ean be no di-

rect conflict with the Second Circuit’s holding.

Petitioners do not seek review of the Second Circuit’s

narrowly confined holding. Rather, they seek review of a

more wmorphous portion of the court’s reasoning in reach-

ing its decision, contending that it “conflicts” with the

reasoning of other courts. But the purported disagree-

ment in reasoning does not warrant this Court’s review.

In contending that the Second Cireuit reasoning conflicts

with the decision of the D.C. Cireuit in Tndependent

Bankers Ass'n of America v, Heimann, 613 F.2d 1164

The court went on to inquire “whether this prohibition applies

to title insurance activities in particular.” Jd.

13

(19791, cert. denied, 449 U.S. 823 (1980), petitioners

misrepresent the Heimann court’s reasoning and ruling."

That case concerned bankers’ challenge to a Comptroller

regulation preventing insiders of national banks from

benefitting personally by the regular receipt of credit life

insurance income sold to borrowers of such banks. Plain-

tiffs alleged that the regulation, by approving various

methods which enable national banks to sell credit. life

insurance, violated Section 92. The D.C. Circuit. dis-

agreed: “|ul|nlike other forms of insurance coverage...

credit life insurance is a limited special type of coverage

written to protect loans. In no way does it involve the

operations of a general life insurance business whether

written in a town of over or under 5,000 inhabitants.”

Id. at 1170. That is, the Heimann court concluded that

credit life insurance does not fall within the ambit of

Section 92.'° This reasoning is not irreconcilable with

the Second Circuit’s view that, when national banks’

insurance-related activity does come within the meaning

of Section 92, Section 92 constrains that activity.

As the Heimann court stated with regard to Savon,

Heimann is “simply not in point” here. 613 F.2d at 1170.

The case before the Second Circuit had nothing to do with

credit life insurance, and the court carefully distinguished

the Heimann decision. Therefore, petitioners cannot

plausibly contend that the Heimann case would have come

out differently under the Second Circuit’s reasoning.

Even if there were a clear disagreement between the

courts as to the effect of Section 92 on national banks’

'' This is the only “conflict” the Solicitor General identifies,

Chase strains to find other purported “conflicts.”

In a footnote the Court stated that “lb]y its own terms. the

statute does not address the authority of national banks in larger

towns or cities to act as agents for life insurance companies,” Td.

at 1170 n.18. But, contrary to petitioners’ suggestions, the court

did not go on to hold--even in dicta— that Section 92 does not

impliedly bar national bank insurance-agency activities outside small

towns.

14

insurance-agency powers pursuant to Section 24 (Seventh)

—and there is not—it has no practical impact.

Nor, contrary to Chase’s suggestion, is there any con-

flict with the reasoning of the D.C. Cireuit in American

Ins. Ass’n v. Clarke, 865 F.2d 278 (D.C. Cir. 1988), in

Which the court upheld the Comptroller's ruling that na-

tional banks may use standby credits to insure municipal

bonds pursuant to Section 24 (Seventh). Section 92 is

not even mentioned in the court’s decision. Rather, after

expressly reserving the question whether the product at

issue “meets the legal criteria for insurance under various

regulatory schemes,” id. at 280, the court concluded that

the sale of this sort of “municipal bond insurance” was

“within the business of banking” because it was the funce-

tional equivalent of issuance of standby letters of credit.

And in Variable Annuity Life Ins. Co. v. Clarke, 786

F. Supp. 639 1S.D. Tex. 1991) (appeal pending), the

district court upheld the ruling of the Comptroller that

fixed and variable annuities constitute “financial invest-

ment instruments” and not “insurance” for purposes of

the National Bank Act, and that therefore national banks

are permitted to sell annuities pursuant to their Section

24i Seventh) “incidental powers.” If, in fact, annuities

are not “Insurance” ‘a point with which amici disagree),

it is not clear that their sale by national banks would be

threatened by the Second Cirecuit’s view of Section 92. In

any event, the Fifth Circuit has yet to review the case.

B. Petitioners’ Dire Predictions of Threatened Na-

tional Bank Powers As a Result of the Second Cir-

cuit’s Decision Are Pure, Unfounded Speculation.

Perhaps because they recognize that the practical im-

pact of the Second Circuit's decision is minimal,’ peti-

™ The Court held only that national banks located in towns with

populations exceeding 5,000 may not sell title insurance. Neither

petitioner suggests that there are large numbers of such banks

selling or intending to sell title insurance or that such sales produce

substantial ] rofits for the banks. The Second Circuit's dec ‘sion does

t 4) uN } - (tat)

not upset well-settled expectations.

15

tioners contend that the decision “calls into question the

ability of national banks to sell a host of other products

they have long offered to their customers.” OCC Pet. 17.

But petitioners offer nothing short of speculation as to

how a future, unknown court might or might not rule on

an as-yet-unmounted challenge to national bank activity

other than that involved in this case. Certainly nothing

in the Second Cireuit opinion ealls into question these

other activities; the court did not command that any of

the previously-authorized activities be ceased. To. the

contrary, to the extent the court discussed “insurance-

related” activities other than the sale of title insurance,

the court was careful not to disagree with the Heimann

court’s conclusion that national banks may sell credit

life insurance.

If the Second Circuit decision does engender “uncer-

tainty” in the future about other national bank activi-

ties, there will be opportunity for this Court to address

the problem when it arises. The Court should not expend

its limited resources to reach out to address contingency

that may never occur.

C. None of Petitioners’ Arguments That the Second

Circuit’s Decision is Wrong Is Persuasive.

Without a real and direct conflict, petitioners resort to

asking this Court to sit as a court of error and correct

What they view to be the Second Circuit’s erroneous deci-

sion. Not only have they miscast this Court in that role,

see Ross w. Moffitt, 417 U.S. 600, 616-17 (1974), but

their arguments are meritless.

Contrary to petitioners’ contention, Congress’ use of the

introductory phrase “in addition to” is entirely consistent

with the Second Circuit’s reasoning. The phrase demon-

strates that insurance-agency activities were “in addition

to” the powers granted by Section 24‘) Seventhi, which

cannot, therefore, include insurance-agency activities. In-

16

deed, petitioners can make their statutory language argu-

ment only by separating it from their discussion of the

legislative history of Section 92. That history conclusively

demonstrates that the 1916 Congress had precisely the

understanding echoed by the Second Cireuit—that Section

92 was needed to confer insurance-agency powers “in ad-

dition to” the powers granted by Section 24(Seventh)

because Section 24'Seventh) does not permit the exercise

of any insurance-agency activities. Sce supra at 6-8

(discussing legislative history). By splitting their dis-

cussion of the statutory language and the legislative his-

tory, petitioners distort both."

Focussing on a much narrower issue, the Solicitor Gen-

eral tries to perform a verbal sleight-of-hand with his

argument that the phrase “agent for any fire, life or

other insurance company,” demonstrates that Section 92

addresses, at the most, only the sale of “broad forms of

insurance.” OCC Pet. 13-14. The Solicitor General ap-

the term “other” with “broad’—a word

that appears nowhere in the statute or the legislative

history, and whose meaning he does not define in this

context.'” But there is no linguistic or logical relation

pears to equate

44 The above discussion exposes the fallacy of petitioners’ argu-

ment that the Second Circuit “misused” the principal of statutory

construction, CL DrEssto mius est ¢ rcelusio alteriis. The Solicitor

General notes that the principle “can never override ciear and con-

trary evidence of Congressional intent.” Newherger ve Commis-

‘oner, BIL U.S. 8&3, 88 (1940). But the only expression of con

gressional intent the legislative history-—is entirely consistent

with the Second Circuit’s ruling. And the “in addition to” intro-

ductorv language, at a minimum, does not demonstrate that the

Md } ’ M : . ] my _

second Circult was clearly wrong.

1s The Solicitor General seems to draw a distinction between

“broad” forms of insurance and “more specialized forms of insur-

ance.” OCC Pet. 12. But —other than asserting that title insurance

falls into the later category—he makes no attempt to give a reasoned

explanation of this distinction or explain how a court might go

i } d =

about discerning the difference in a given case,

17

between the two terms. “Other,” as used in section 92,

means simply any form of insurance com pany other than

one that provides fire or life insurance. A title insurance

company clearly meets that definition.

Neither Chase nor ee Solicitor General presents a

coherent interpretation of the National Bank Act. The

Solicitor General — that “jnjo party has argued

that the power of national banks to engage In insurance

agency activities incidental to the business of banking

under Section 24(Seventh) authorizes banks to engage in

an unlimited insurance agency business.” OCC Pet. at

15. But he offers no clear vision of precisely what insur-

ance-related activities are authorized by Section 24(Sey-

enth) and how those powers could be reconciled With

section 92’s limited authorization. See also supra n.15.

Chase’s attempt to distinguish large town banks’ inability

to engage in “the full range of general insurance agency

activities authorized by section 92” from their purported

ability to engage in “specific insurance agency activities

that are incidental to banking under section 24 Seventh)’

fairs no better. Chase Pet. 23. Chase, like the Solicitor

General, is reaching for a result, not presenting a con-

sistent legal theory.

+.

II. THE ISSUES ON WHICH PETITIONERS SEEK

REVIEW ARE NOT CLEANLY PRESENTED.

There are many issues buried in this case. and peti-

tioners disingenuously suggest that this Court can mean-

ingfully address the questions they present for review.

The first issue is whether Section 92 was repealed in

1918; this was decided by the D.C. Circuit, and ruled on

in dicta by the Second Circuit, but is currently before

both the Fifth and Sixth Cireuits. The second issue is

Whether Section 92, if in existence, constitutes a limita-

tion on Section ert this issue was decided by

the Second Circuit, but is current ly pending before the

18

Fifth Circuit in VALIC, where the rule was first enun-

ciated in Savon, and the court may or may not adhere

to the Savon reasoning. The third issue is whether Sec-

tion 92, even if repealed, constitutes a limitation on Section

24 (Seventh) as a result of its initial passage; the Sec-

ond Cireuit did not reach this issue, which is presented

to the Fifth Circuit in VALIC, but would have to do so

if this Court were to grant review and reverse the Second

Cireuit’s conclusion that Section 92 still exists. Sec supra

at 5-9. The fourth issue is whether, standing alone, Sec-

tion 24(Seventh! can be interpreted to permit any insur-

ance activities as “incidental and necessary” to banking

and, if so, what activities, including the sale of title in-

surance, does it permit; this issue was presented to the

Second Circuit below, but it concluded that it need not

reach the question. ALTA, 968 F.2d at 157.

As noted above, even if this Court were to grant review

and conclude that Section 92 had been repealed, Section 92’s

enactment must nonetheless be construed as limiting the au-

thority of Section 24(Seventh)—a conclusion which does

not alter the result below. Even if this Court were to

conclude that Section 92 poses no such limitation, whether

in existence or not, that conclusion still would not mean

that the decision below must be reversed. Rather, the

court below would go on to determine whether “the general

grant of power contained in Section 24(Seventh) [is|

sufficiently broad to encompass the title insurance agency

business.” ALTA, 968 F.2d at 157. in short, even if this

Court were to grant the petitions and rule entirely in pe-

titioners’ favor, that decision would not resolve this case.

See Black v. Cutter Lahoratorie &, 3o1 US. 292, 297-98

(1956) (“This Court... reviews judgments, not state-

ments in opinions.”’).

i

19

IV. TRE CONTROVERSY REGARDING THE INSUR-

ANCE-RELATED POWERS OF NATIONAL BANKS

SHOULD BE LEFT TO CONGRESS.

In the end, both Chase and the Comptroller disagree,

as a matter of policy, with the restrictions placed on na-

tional banks’ insurance-related powers by Congress as in-

terpreted by the Second Circuit’s decision. Chase’s peti-

tion demonstrates precisely why this controversy should

be left to Congress. Chase argues that the result below

is unfair because national banks would be left at a com-

petitive disadvantage vis-a-vis state financial institutions.

Chase Pet. 25. Chase contends that it should be granted

existence of the dual banking system." Similarly, Chase

argues that “(t]he increasing competition posed by non-

bank financial institutions to the banking industry diec-

lates that national banks not be judicially restrained

from exercising the full range of their statutory powers.”

Chase Pet. 25. Chase contends that it should be granted

the power to sell title insurance in order to enable it ‘‘to

compete profitably in today’s extremely competitive fi-

nancial services marketplace.” Jd. 26.

Arguments about competitive advantages for and profit-

ability of national banks should be presented to Con-

gress, not this Court. Although the Comptroller and

Chase might wish that national banks had been given a

broader grant of authority, their remedy is to seek con-

gressional action, rather than asking this Court to make

policy. See Board of Governors v. Dimension Fin. Corp.,

474 U.S. 361, 364 (1986) (holding that it is for Congress,

not the agency or courts, to remedy any perceived fault

with federal statute).

“Ours is a dual banking system in the sense that state and

national banks have existed side by side and in direet competition

With each other for many vears.” American Fidelity Bank & Trust

Co. v. Heimann, 683 F.2d 999, 1000 (6th Cir. 1982).

7 :

November

1QQ99

LUIS

20

CONCLUSION

he Solicitor General that the peti-

n // | hi ud De reated simi a)

Ce rarl should be denied

Resvectfully submitted,

JONATHAN B. SALLET

ANN M. KAPPLER

JENNER & BLOCK

601 Thirteenth Street, N.W.

Twelfth Floor

Washington, D.C. 20005

(202) 639-6000

(,OMDISE }0O) lm (

Guptems Sourt, U.S.

BLUE E 2

o !

No. 92-482 > 1992

——_—_—

IN THE GFFICE OF THE CLERK |

Supreme Court of the Anited States

OCTOBER TERM, 1992

THE CHASE MANHATTAN BANK, N.A.,

Petitioner,

V.

AMERICAN LAND TITLE ASSOCIATION, et al.,

Respondents.

On Petition for Writ of Certiorari

To the United States Court of Appeals

For the Second Circuit

BRIEF OF THE AMICI CURIAE

AMERICAN BANKERS ASSOCIATION, ET AL.,*

IN SUPPORT OF THE PETITIONER

JOHN J. GILL III

Counsel of Record

MICHAEL F. Crottry

AMERICAN BANKERS ASSOCIATION

1120 Connecticut Avenue, N.W.

Washington, D.C. 20036

(202) 663-5026

Attorneys for Amici Curiae

November 12, 1992

(“Complete list of sponsoring organizations and counsel on

inside of cover.|

PRESS OF BYRON S. ADAMS, WASHINGTON, D.C. (202) 347-8203

RICHARD M. WHITING

ASSOCIATION OF BANK HOLDING COMPANIES

730 15th Street, N.W.

Washington, D.C. 20005

(202) 398-1158

JAMES T. MCINTYRE

McNAIR LAW FIRM

1155 15th Street, N.W.

Washington, D.C. 20005

(202) 659-3900

Attorney for Association of

Banks in Insurance

MARCIA Z. SULLIVAN

CONSUMER BANKERS ASSOCIATION

1000 Wilson Boulevard

Arlington, Virginia 22209

(703) 276-1750

JOHN S. JACKSON

MINNESOTA BANKERS ASSOCIATION

730 Second Avenue South

Minneapolis, Minnesota 55402

(612) 338-5137

WADE L. NASH

MISSOURI BANKERS ASSOCIATION

207 E. Capitol

Jefferson City, Missouri 65101

(314) 636-8151

JOHN E. KNIGHT

BOARDMAN, SUHR, CURRY & FIELD

P.O. Box 927

Madison, Wisconsin 53701

(608) 257-9521

Attorney for Wisconsin Bankers

Association

QUESTION PRESENTED

Whether Section 92 of the National Bank Act,

granting insurance agency powers to national banks

in small towns that are ‘‘in addition to the powers

now vested by law in national banking associations,”’

constitutes an implied limitation upon the incidental

powers of national banks, granted elsewhere in the

statute, where such banks are located in larger towns.

TABLE OF CONTENTS

nnn WEE ccs atu chee iaabiaaieeeuieuenuanens

Be ee I scr sctcecounslcceasnesturcossasdasansakens

SCRTORE OF CG ATIC TUTIRG scccsicsssesesscvsecsssesccsoves

Reasons for Granting the Writ ................ eee

1. The Conflicts Among the Circuits ...............

II. The Important Question of Federal Law

III fone arca tacks cptasaakuitank aicesseanccnsap eel daies

ill

TABLE OF AUTHORITIES

Cases:

American Insurance Association v. Clarke, 865 F.2d

BIO (IVC. Civ, TORR) coccccccscscessesecesaxccercanecassecsds

American Land Title Association v. Clarke, 772 F.

Supp. 1353 (S.D. N.Y. 1991) wocceccccceeeceseeeeee

American Land Title Association v. Clarke, 968

Be LGO (Sa Cir. TOD) rciviccsvecsscccsecessacereacsuce

Board of Governors of the Federal Reserve System

v. Dimension Financial Corp., 474 U.S. 361

CRUE shieisossncneheanccatciacacanebehe See ura ee

Clarke v. Securities Industry Association, 479 U.S.

SOE CED s creresscomnncnusaniestahseaeee en Renee

Crawford Fitting Company v. J.T. Gibbons Inc., 482

ath Se EMRE yhrserntnmeatanaie ee ee

First National Bank of Eastern Arkansas v. Taylor,

907 F.2d 775 (8th Cir.), cert. denied, 111 S.Ct.

Ge GEREE tcematindanaaseie eee ee

Independent Bankers Association of America v. Hei-

mann, 613 F.2d 1164 (D.C. Cir. 1979), cert.

denied, 449 U.S. 823 (1980) occ cccccccccceceeeee.

Independent Insurance Agents of America v. Board

of Governors of the Federal Reserve System,

736 F.2d 468 (8th Cir. 1984) occ cccceccccee.

Independent Insurance Agents of America v. Clarke.

955 F.2d 731 (D.C. Cir. 1992) oo cceeccccceceee.

Saxon v. Georgia Association of Independent Insur-

ance Agents, 399 F.2d 1010 (5th Cir. 1968) ...

Securities Industry Association v. Clarke, 885 F.2d

1035 (2d Cir. 1989), cert. denied, 493 U.S. 1070

SRIND scipeceevch taubiaG erate tetas eee oe:

Variable Annuity Life Insurance Co. v. Clarke, 786

F. Supp. 639 (S.D. Tex. 1991), appeal pending,

No. 92-2010 (5th Cir.) ..cccccccccccccscscssesecccccceecs,

Page

5,10

Table of Authorities Continued

Page

Statutes:

Be Blethen Oe CO UOROND i iccSoiiiseassosessscgesscsoasavees passim

ea Ai TOP h copesvarsvimcrsicnccianen ake ee passim

Act of Sept. 7, 1916, ch. 461, 39 Stat. 752

RII <sedininnnrnschsovcdchessdavauaee bee iGeiens eae 2

Miscellaneous:

Comptroller Interp. Letter No. 499 [1989-90 Trans-

fer Binder] Federal Banking Law Rep. (CCH)— -

BOP COD, 10, BODO) csscscesnsssercsnciascsersotrine 1]

Comptroller Interp. Letter No. 331 [1985-87 Trans-

fer Binder] Federal Banking Law Rep. (CCH)—

Beek GAOT 4, TORO) ccissarccsissoasiadnedn 1]

McFadden American Bank Directory, Spring, 1992

EPP URED x scruskccvncnecsupunousnladin le eadaiecaneae eae ll

IN THE

Supreme Court of the United States

OCTOBER TERM, 1992

No.92-482

THE CHASE MANHATTAN BANK. N.A..,

Petitioner,

Vv.

AMERICAN LAND TITLE ASSOCIATION, et al.,

Respondents.

On Petition for Writ of Certiorari

To the United States Court of Appeals

For the Second Circuit

BRIEF OF THE AMICI CURIAE

AMERICAN BANKERS ASSOCIATION, ET AL..

IN SUPPORT OF THE PETITIONER

The American Bankers Association, et al. hereby

respectfully submit this brief as amici curiae in sup-

port of the Petitioner in accordance with the provi-

sions of Rule 37.2 of the Supreme Court Rules. All

parties have consented to this filing, and their written

consents are filed with this brief.

INTEREST OF THE AMICI CURIAE

The American Bankers Association, Association of

Bank Holding Companies, Association of Banks in In-

ro

surance and Consumer Bankers Association are all

national trade associations of the commercial banking

industry. A large majority of commercial banks in the

United States, their employees or the bank holding

companies that own them are members of one o”

more of the associations. The Minnesota, Missouri and

Wisconsin Bankers Associations are the principe]

trade associations for the banking industry within

their respective ‘states. All of the associations rep-

resent the interests of both national banks and state-

chartered banks in the legislatures, regulatory agen-

cies and in the courts on issues that are of widespread

importance to the industry. This is such a case for

the reasons set forth below.

REASONS FOR GRANTING THE WRIT

I. The Conflicts Among the Circuits

There are two conflicts among the circuits pre-

sented in this case. The first is whether or not Section

92 of the National Bank Act continues to exist: the

second is over how to construe Section 92 assuming

it does exist. For purposes of this case, the second

is the more important of the two.

Section 92 of the National Bank Act was enacted

in 1916. It was designed to grant to those national

banks located and doing business in small towns the

power to engage in the general insurance agency busi-

ness. The opening clause of Section 92 provided that

this power was to be “‘in addition to the powers now

vested by law in national banking associations.’”!

Among the powers then and now vested in national

banking associations was the power to exercise “all

‘Act of Sept. 7, 1916, ch. 461, 39 Stat. 752, 753 (1916)

such incidental powers as shall be necessary to carry

on the business of banking.’’? The Comptroller of the

Currency is charged with the interpretation and en-

forcement of these and other provisions of the Na-

tional Bank Act. Clarke v. Securities Industry

Association, 479 U.S. 388, 403-04 (1987).

In this case, Chase Manhattan, located and doing

business in New York City, sought and received the

approval of the Comptroller to engage in the business

of selling title insurance as agent, as an exercise of

its ‘incidental powers.”’ The District Court upheld the

Comptroller’s action. American Land Title Associa-

tion v. Clarke, 772 F. Supp. 1853 (S.D.N.Y. 1991).

On appeal, the Second Circuit reversed. In doing

so, each of the court’s two key holdings place the

Circuit’s decision in direct and irreconcilable conflict

with decisions of other U.S. Courts of Appeals.

The most obvious conflict is with a District of Co-

lumbia Circuit opinion handed down four months ear-

lier in Independent Insurance Agents of America v.

Clarke, 955 F.2d 731 (D.C. Cir. 1992), and it concerns

the very existence of Section 92 of the National Bank

Act. Because of two arguably misplaced quotation

marks in the statute enacting Section 92, subsequent

legislation, enacted only two years later and on an

entirely unrelated subject, is said to have repealed

Section 92. The District of Columbia Circuit concluded

that Congress did what it did, and that “section 92

has ceased to exist.’”’ Jd. at 739. The Second Circuit.

in the case below, explicitly disagreed with the Dis-

trict of Columbia Circuit, holding that whatever hap-

#12 U.S.C. § 24 (Seventh).

pened in 1918 did not effect a repeal of Section 92.

American Land Title Association v. Clarke, 968 F.2d

150, 152 (2d Cir. 1992).

Obviously, this conclusion by the Second Circuit is

absolutely critical to its ultimate holding. If Section

92 does not exist, then there is no basis upon which

the court could find a “limitation” upon the incidental

powers of national banks. It would have to have

reached the question (which it declined to reach)

whether title insurance agency activities fit within the

incidental powers clause of the National Bank Act,

and the decision cannot stand.

The respondent title associations, the Comptroller

of the Currency, and your amici all take the position

that the Second Circuit’s decision upholding the con-

tinued existence of Section 92 is correct. Chase Man-

hattan- does not take a contrary position. (See Chase

Manhattan Bank v. American Land Title Association,

No. 92-482, Pet. for Cert. at 12-18). The conflict be-

tween the Second and the District of Columbia Cir-

cuits is before the Court on petitions for writ of

certiorari to review the District of Columbia Circuit

opinion in the Independent Insurance Agents case.

Steinbrink v. Independent Insurance Agents of Amer-

wa, No. 92-507; U.S. National Bank v. Independent

Insurqncee Agents of America, No. 92-484. The Court

can and should resolve the conflict over the existence

of the statute in the context of those cases.

But doing so will not resolve the second conflict

among the circuits that is created by the decision

below in this case. If Section 92 does exist, is it an

implied limitation upon the insurance powers of na-

tional banks in large towns or is it an independent

grant of insurance powers to national banks in small

towns? That conflict is separate and distinct, and sur-

vives the outcome of the dispute over the existence

of Section 92.

The Petitions for Writ of Certiorari in this and its

companion case correctly point out that the decision

of the Second Circuit here and of the Fifth Circuit

in Saxon v. Georgia Association of Independent In-

surance Agents, 399 F.2d 1010 (5th Cir. 1968) both

construe Section 92 of the National Bank Act as a

limitation upon the rights of national banks located

in larger jurisdictions to engage in the insurance busi-

ness, whether or not the particular insurance business

in question might be considered ‘‘incidental’’ to bank-

ing. On the other hand, the District of Columbia Cir-

cuit, in Independent Bankers Association of America

v. Hevmann, 613 F.2d 1164 (D.C. Cir. 1979), cert.

denied, 449 U.S. 823 (1980), and the Eighth Circuit,

in Independent Insurance Agents of America v. Board

of Governors of the Federal Reserve System, 736 F.2d

468 (8th Cir. 1984), both have clearly rejected the

idea that there is that kind of negative inference to

be drawn from Section 92.

While your amici agree with the Petitioners on this

point, we respectfully suggest that this particular con-

flict between the circuits is even deeper_and perhaps

more subtle than it appears at first blush. The conflict

has to do with the order in which the respective courts

analyze the applicable or arguably applicable statutes

in cases testing the powers of banks under the Na-

tional Bank Act, and the priorities that are assigned

to different sections of the law.

Here, the Second Circuit looked first at Section 92

of the Act. Having done so, it opted for an easy

answer: Title insurance is insurance; insurance can

only be offered by those national banks located in

small towns; Chase Manhattan is located in a large

town, so it cannot offer title insurance; all other con-

siderations are irrelevant. Had the Second Circuit in-

stead looked first to Section 24 (Seventh) of the

National Bank Act, it would have to have analyzed

the question whether title insurance agency sales fit

within the business of banking or, more precisely,

whether the Comptroller of the Currency was within

his rights in so concluding. If the court then had

decided that title insurance was part of the business

of banking, it could have dismissed sections of the

law governing nonbanking activities as irrelevant—

including Section 92. Other courts—even including an-

other panel of the Second Circuit—have done precisely

that, and the Second Circuit’s failure to do so in this

case creates a conflict in the framework for analysis

of this particular issue and related ones.

In First National Bank of Eastern Arkansas v.

Taylor, 907 F.2d 775 (8th Cir.), cert. denied, 111 S.Ct.

442 (1990), the bank proposed to offer ‘debt cancel-

lation contracts” to its customers, alleging (with the

agreement of the Comptroller of the Currency and

the Comptr6tier’s support as amicus curiae before the

Eighth Circuit) that such contracts were within the

incidental powers of national banks. The contracts

provided that, for a fee, the bank would cancel a

borrower’s then outstanding indebtedness upon the

borrower’s death or disability. The Arkansas Insur-

ance Department directed the bank to cease and des-

ist, claiming that the contracts were the functional

equivalent of credit life insurance policies and, as such

were subject to regulation by the Department, could |

not be sold without an insurance license, and that

Mccsaintinnsas

insurance licenses could not be issued to banks in

Arkansas. The bank argued that, as a national bank,

its powers were governed by preemptive federal law:

the Department countered that the federal McCarran-

Ferguson Act left regulation of the insurance business

exclusively to the states.

The Eighth Circuit looked first to Section 24 (Sev-

enth) of the National Bank Act to determine the pow-

ers of the national bank in question. It concluded that

debt cancellation contracts fit within the incidental

powers of banks. The court then turned to the statute

governing nonbanking activities to determine its appl-

icability to the case at hand. It did not deny that

debt cancellation contracts might be “‘insurance”’ for

state law purposes, but concluded that that was an

irrelevant consideration: “Because debt cancellation

contracts offered by FNB fall within the incidental

powers granted by the National Bank Act, they do

not constitute ‘the business of insurance’ under the

McCarran-Ferguson Act.” Jd., 907 F.2d at 779.

Had the Eighth Circuit looked first at the statute

governing nonbanking activities, as the Second Circuit

-did in this case, it could well have determined that

debt cancellation contracts were insurance and left to

the regulation of the Insurance Department, never

reaching the “incidental powers’ issue. That court

examined the arguably applicable statutes in the re-

verse order from the Second Circuit’s, the two de-

cisions therefore being in conflict with one another.

In Securities Industry Association v. Clarke, 885

F.2d 1034 (2d Cir. 1989), cert. denied, 493 U.S. 1070

(1990), Security Pacific National Bank proposed to

pool its mortgage loans and sell participations in that

pool to investors. The Comptroller of the Currency

approved, and a trade association of the securities

industry sued, claiming that the bank would be en-

gaged in underwriting and selling securities in vio-

lation of the Glass-Steagall Act. The Second Circuit

upheld the Comptroller’s approval. It looked first at

Section 24 (Seventh) of the National Bank Act, and

found that that Section granted explicit powers to

national banks to negotiate promissory notes or other

evidences of debt, and that is precisely what Security

Pacific was doing. The Court then reached the pro-

visions of law governing the securities business, and

found them inapplicable because it had already deter-

mined the activities to be authorized by the statute

governing the banking business: -

Activity that falls within the “business of

banking”’ is not subject to the restrictions the

latter part of section 16 places on a bank’s

“business of dealing in securities and stock.”

Thus, the issues concerning the definitions of

“securities” and ‘‘underwriting”’ only become

relevant if the activity constitutes ‘“‘the busi-

ness of dealing in securities and stock.”’ If

the activity constitutes ‘“‘the business of bank-

ing,”’ then the Glass-Steagall Act prohibitions

SIA claims are violated here do not apply.

Id., 885 F.2d at 1048.

In this case, where the court looked first to the

statute governing nonbanking activities to determine

the powers of a bank, it has acted in conflict with a

different panel of the same court.

Obviously, this is not to say that the grant of power

to national banks to engage in the business of banking

DOO

found in Section 24 (Seventh) can overcome explicit

statutory prohibitions against banks engaging in a

particular business or in a particular way. But there

is no such prohibition here. Even if the Second Circuit

is right in holding that the law gives a power in one

section of the law and takes it away in another by

negative inference, there must still be some principled

way to choose which of those two sections actually

governs the outcome of a particular case. Here, the

Second Circuit claims to follow the rule of statutory

construction that the statute addressing the matter

under consideration in specific terms controls over

one that does so in a general manner. 968 F.2d at

157 (citing Crawford Fitting Company v. J.T. Gibbons

Inc., 482 U.S. 437, 445 (1987)). That is an entirely

fitting and proper rule of statutory construction where

it is applicable. It is not applicable here. There is no

reason to think that the term “act as the agent for

any fire, life, or other insurance company” found in

Section 92 is any more (or less) “‘specific’”’ than is the

term “carry on the business of banking’’ found in

Section 24 (Seventh), nor does the Second Circuit

opinion state why that court believes the former to

be more specific than the latter. It merely premises

its decision upon the unsupported assumption that it

is so.

The more appropriate rule of statutory construction ;

to follow—the one that is applicable in this case—is

the rule that requires courts to give effect to the

plain language of the statute. See, e.g. Board of Gov-

ernors of the Federal Reserve System v. Dimension

Financial Corp., 474 U.S. 361, 373-75 (1986). Here,

the court believed it was faced with the prospect of

choosing between Section 24 (Seventh) and Section

10

92. One of those sections directs the answer by its

own terms. The powers that are granted by Section

92 are “in addition to the powers now vested by law

in national banking associations.’’ With plain statu-

tory language like that, it would seem incumbent upon

the courts to decide—first—what those ‘‘other pow-

ers” might be. That would require looking—first—at

Section 24 (Seventh). The fact that the Second Circuit

here performed the statutory analysis upside down

| places it not only in conflict with the decisions of

other circuits, but also in conflict with this Court’s

“plain language’”’ rule of statutory construction.

II. The Important Question of Federal Law

The Petitions for Writ of Certiorari in this case

and-its companion case correctly point out the impact

that the Second Circuit’s decision will have upon the

operations of a great many national banks if the de-

cision stands and, particularly, if it is followed as

precedent elsewhere.

Literally thousands of national banks act as agent

in the sale of credit-related insurance—credit life and

credit disability—in the exercise of their incidental

powers, with the approval of the Comptroller of the

Currency (12 C.F.R. § 2.6 (1991)) and the courts,

without regard for the size of the jurisdiction in which

they are located and doing business. Independent

Bankers Association of America v. Hermann, supra,

613 F.2d 1164.

A substantial and growing number of national banks

sell both fixed and variable rate annuities as agents,

over the objection by representatives of the insurance

industry that annuities are “‘insurance”’ products. Such

sales are likewise approved by the Comptroller of the

— <x rrr

11

Currency as an exercise of the incidental powers of

national banks, again without regard to the size of

the town in which the bank operates (Comptroller

Interp. Letter No. 499 [1989-90 Transfer Binder] Fed-

eral Banking Law Rep. (CCH) { 83,090 (Feb. 12,

1990); Comptroller Interp. Letter No. 331 [1985-87

Transfer Binder] Federal Banking Law Rep. (CCH)

§85,501 (April 4, 1985), and approved by the U.S.

District Court in the only challenge to the Comp-

troller’s approvals. Variable Annuity Life Insurance

Co. v. Clarke, 786 F. Supp. 639 (S.D. Tex. 1991),

appeal pending, No. 92-2010 (5th Cir.).

The Comptroller of the Currency has approved the

sale of municipal bond insurance by national banks,

including a national bank in New York City, as an

exercise of incidental powers of the banks, and the

courts have upheld that action. American Insurance

Association v. Clarke, 865 F.2d 278 (D.C. Cir. 1988).

The Comptroller approved the sale of debt cancel-

lation contracts by national banks as an incidental

power. The Eighth Circuit upheld that action in First

National Bank of Eastern Arkansas, supra, 907 F.2d

775, even though the bank in question is located in

Forrest City, Arkansas, population 13,364.°

The Second Circuit’s decision is incompatible with

all of the above regulatory action and court decisions

and, if nothing else, casts doubt upon the validity of

considerable portions of the activities of national

banks of long standing, undertaken in reliance upon

earlier regulatory and judicial approval.

3 McFadden American Bank Directory, Spring, 1992 (Arkan-

sas) page 23. ;

|e —— :

12

But national banks are not the only banks with an

important interest in the outcome of this matter. State

chartered banks are affected by it as well. In as many

as 37 states, there are so-called ‘‘wild card” or “‘par-

ity’”’ statutes.‘ With quite a few variations, these stat-

utes generally provide that state chartered banks may

have and exercise any powers that may be exercised

by national banks located in the same state, notwith-

standing other provisions of state law. In many ju-

risdictions, the “‘wild card’’ statute is the only source

of authority for state-chartered banks to engage in

one or more of the ‘‘incidental’’ functions described

above for national banks. Consequently, if the Second

Circuit decision remains unreviewed and unreversed,

the loss of “incidental” powers by national banks shali

inevitably result in the loss of comparable powers by

a great many state chartered banks as well. Like their

national brethren, state-chartered banks have invested

in the development of “‘incidental”’ business and es-

tablished business relationships with customers over

a long period of time in justified reliance upon fa-

vorable regulatory and judicial action. The Second

Circuit’s decision threatens to disrupt much of settled

practice, to the great detriment of both national and

state chartered banks and their customers. It there-

fore presents a question of federal law of sufficient

importance to warrant review by this Court, even

independent of the two conflicts among the circuits

that are created by the Second Circuit’s decision.

‘See Appendix to this brief for complete listing.

ne ve

13

CONCLUSION

For all of the reasons stated herein and in the

Petition for Writ of Certiorari, the writ should be

granted.

Respectfully submitted,

JOHN J. GILL

Counsel of Record

MICHAEL F. CROTTY

AMERICAN BANKERS ASSOCIATION

1120 Connecticut Avenue, N.W.

Washington, D.C. 20036

(202) 663-5026

Attorneys for Amici Curiae

November 12, 1992

APPENDIX

Alaska

Arizona

Arkansas

Colorado

Florida

Georgia

Hawaii

Idaho

Illinois

Kansas

Kentucky

Louisiana

Maine

Maryland

Minnesota

Mississippi

Missouri

Montana

Nevada

New Hampshire

New Jersey

New Mexico

North Dakota

Ohio

Oklahoma

Oregon

South Carolina

South Dakota

Tennessee

Texas

Utah

Vermont

la

APENDIX

Wild Card/Parity Statutes

Sec. 06.01.020

Sec. 6-184(2)

Sec. 23-32-701(16)

Sec. 11-2-103

See. 655.057

Sec. 7-1-61(a)1)

Sec. 403-47.1

Sec. 26-1101(3)

Ch. 311.95(11)

Sec. 9-1715

Sec. 287.020

Tit. 6, §242(A\15), Revised Stat.

Tit. 9B, §416

Sec. 5-504 of Fin. Inst. Art.

Sec. 48.15 (Subd. 2)

Sec. 81-5-1(10)

Sec. 362.105.3

Sec. 32-1-362

Sec. 662.015(1\f)

Ch. 394-A

Sec. 17:9A-24a and 17:9A-25(12)

Sec. 58-1-54

Sec. 6-03-38

Sec. 1125.23

T.6, §203

Sec. 707.340

Sec. 34-1-110

Sec. 51A-2-14

Sec. 45-2-601

Sec. 342-113(aX4) of Civil

Statutes

Sec. 7-1-301(3)

‘T.8, §1163

Virginia Sec. 6.1-5.]

Washington Sec. 30.04.215

West Virginia Sec. 31A-3-2(ay5\B)

Wisconsin Sec. 220.04(8)

Wyoming Sec. 13-3-704