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

No. 92-482

JUN 8 1993

PEM Atta a £ RK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1992

THE CHASE MANHATTAN BANK, N.A..,

Petitioner,

Vv.

AMERICAN LAND TITLE ASSOCIATION, ef al.,

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Second Circuit

SUPPLEMENTAL BRIEF OF PETITIONER

THE CHASE MANHATTAN BANK, N.A.

Of Counsel: JOHN D. HAWKE, JR.

L. EDWARD SHAW, JR. DENNIS G. LYONS

KENT T. STAUFFER ROBERT E. MANNION

The Chase Manhattan Bank, HOWARD N. CAYNE *

N.A. DAVID F, FREEMAN, JR.

New York, New York 1200 New Hampshire Ave., N.W.

Washington, D.C. 20036

ARNOLD & PORTER (202) 872-6700

Washington, D.C. Attorneys for Petitioner

June 1993 * Counsel of Record

WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

PBEST AVAILABLE COPY

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TABLE OF CONTENTS

The issue is of tremendous commercial importance

TE TIT TEE nnn. soe oniccecncs conscience ens

The Courts of Appeals are divided on whether Sec-

tion 92 imposes a ban on all insurance agency

sales by banks located in towns of more than 5,000

(eat eng Se UR a 9 aR a a TEER

The conflict is overdue for decision ..... RA 2 Ss

The Second Circuit decision is internally incon-

______ RSLS PE SRE ee ie ma can ore ee OEE CEA eas

The Second Circuit departed from the teachings

gh IEE ner eA pn el ease Mee

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Page

ii

TABLE OF AUTHORITIES

Cases: Page

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

CAP, TOQB) ovvvvccccc ee ote ee Sie 5

Chevron, U.S.A., Ine. v. Natural Resources De-

fense Council, Inc., 467 U.S. 837 SN Goce. 6

Clarke v. Securities Industry Association, 479 US.

a | Sn AC ee 2) ae 6

for)

be RRND itn esi “Fea 7

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

468 (8th Cir.1984)..0 . 5

Pauley v. BethEnergy Mines, Inc., 111 S.Ct. 2524

CEO ED socket ee oT 7

Sanford v. Garamendi, 284 Cal. Rptr. 897 (Cal.

Spe. 61)... eee ee 5

surance Agents, 399 F.2d 1010 (5th Cir. 1968). 3,4

United States National Bank of Oregon et al v.

independent Insurance Agents of America, Inc.,

et al, Nos. 92-484 & 92-507 1,2

Statutes:

12 U.S.C. § 24(Seventh) PERE OY passim

am Ua. 8 OD oscar ee passim

SUPPLEMENTAL BRIEF OF PETITIONER

THE CHASE MANHATTAN BANK, N.A.

Petitioner The Chase Manhattan Bank, N.A. (“Chase”)!

submits this Supplemental Brief to advise the Court

regarding appropriate disposition of the petition in this

case in light of the decision earlier this week in the

related case of United States National Bank of Oregon

et al. v. Independent Insurance Agents of America, Inc.

et al., Nos. 92-484 & 92-507. The decision in United

States National Bank, far from disposing of the critical

issue presented in this case (on which the circuits are

divided), makes it all the more urgent for this Court to

resolve.

The petitions of Chase, No. 92-482, and of the Office

of the Comptroller of the Currency (“OCC”), No. 92-645,

present a conflict among the courts of appeals as to the

meaning of a provision of the National Bank Act that

formerly was codified at 12 U.S.C. § 92 (“Section 92”).

On December 14, 1992. this Court apparently delayed

action On our petition in order to decide in United States

National Bank of Oregon et al. v. Independent Insurance

Agenis of America, Inc. et al., Nos. 92-484 & 92-507.

cert. granted that date, the predicate question whether

Section 92 was repealed in 1918. On June 7, 1993, this

Court held in that case that Section 92 continues to

CXISt,

Now that the Court has determined that Section 92

exists, the way is clear to resolve the issue presented in

the present case—whether Section 92 is a grant of in-

surance agency powers “in addition to” those powers inci-

dental to banking transactions granted by Section 24

(Seventh) of Title 12 (as the D.C. Circuit has held and

the plain language of Section 92 indicates), or instead

'Chase’s parent and non-wholly owned subsidiary corporations

are listed at page ii of the petition.

2

impliedly bars the exercise of the powers granted by Sec-

tion 24(Seventh) (as the Second Circuit held below).

Consistent with the position of the OCC as affirmed by

the D.C. Circuit, this Court’s decision in United States

National Bank characterizes Section 92 as “granting

powers of insurance agency to some national banks.”

Slip op. 22 (emphasis added). As the Solicitor General

stated in the OCC’s petition as to this issue, review of

the Second Circuit’s decision “is warranted because of

the conflict, because the decision below is wrong, and

because the decision below calls into question a variety

of activities performed by national banks.” OCC Pet. 9.

1. The issue is of tremendous commercial importance

to the banking industry. While the question resolved by

the Court in United States National Bank of Oregon as to

the continued existence of Section 92 is perhaps of greater

abstract intellectual interest, the conflict presented by

the present case regarding the meaning of Section 92 is of

far greater practical significance. The general insur-

ance agency powers that Section 92 grants to national

banks located in small towns is of little importance to

the vast majority of the citizenry. Of far greater com-

mercial importance is whether Section 92 impliedly limits

the incidental insurance agency powers granted by Section

24(Seventh ).

Over the past four decades, the OCC has ruled that

certain specific forms of insurance agency sales activities,

such as sales of title insurance, credit life insurance,

municipal bond insurance, and annuities, are incidental

to banking and therefore authorized for all national banks

under Section 24(Seventh). Pursuant to these determi-

nations, national banks for decades have engaged in vari-

Ous insurance activities that are incidental to the business

to banking. Chase Pet. 14-18. OCC Pet. 17-18. The

nationwide injunction sought by ALTA. which would

bar the OCC from approving title insurance agency activi-

ties by any national bank, would obviously have a signifi-

3

cant impact upon the current and future operations of all

national banks nationwide.”

2. The Courts of Appeals are divided on whether

Section 92 imposes a ban on all insurance agency sales

by banks located in towns of more than 5,000 persons.

The decision of the Second Circuit below lays down a

per se rule that every insurance agency activity by a

national bank not expressly permitted by Section 92 is

prohibited. Relying upon the 1968 decision of the Fifth

Circuit in Saxon v. Georgia Association of Independent

Insurance Agents,’ which ruled that “ ‘national banks

have no power to act as insurance agents in cities of

over 5,000 population,” * the Second Circuit held that

the language of Section 92:

makes inescapable the conclusion that Congress in-

tended this provision to apply to “any .. . insurance

company,” and a title insurance company surely is

an insurance company. Thus, Section 92 impliedly

bars national banks from engaging in the title in-

surance agency business.” (Emphasis added. )

The Second Circuit refused even to consider whether.

because of its particularly close relationship to the mort-

gage lending business of national banks, title insurance

agency business is authorized by 12 U.S.C. § 24(Seventh)

as incidental to the business of banking. Chase Pet. App.

15a-16a.

“As noted by the American Bankers Association in its amicus

brief, these provisions of the National Bank Act have an impact

on the powers of state-chartered banks as well, as a result of

“borrowing” statutes in 38 states upon which state banks rely for

their powers. ABA Br. at 12.

3399 F.2d 1010 (5th Cir. 1968).

4 Chase Pet. App. 13a (emphasis added).

* Chase Pet. App. 14a.

4

In contrast, the District of Columbia Circuit held in

Independent Bankers Association vy. Heimann,® that Sec-

tion 92 does not restrict a national bank’s authority to

sell credit life insurance in towns and cities of more than

5,000 persons. It held that the sale of that type of in-

surance is incidental to banking and thus authorized by

Section 24(Seventh), and that the provisions of Section

92 authorizing the sale of any type of insurance, incidental

to banking or not, in towns of less than 5,000 people,

did not restrict the incidental insurance agency powers

granted to national banks generally by Section 24(Sev-

enth). 613 F.2d 1170.

The ruling of the Second Circuit below, adopting a

per se bar on any national bank insurance agency activi-

ties outside of small towns, simply cannot be reconciled

with the decision of the District of Columbia Circuit in

Heimann authorizing national banks to act as agent in

the sale of credit life insurance at any location. As the

Solicitor General stated, “if Section 92 impliedly bars

national banks from selling insurance, it bars them from

selling credit life insurance. . . . In fact, the Second

Circuit’s analysis is entirely incompatible with the D.C.

Circuit’s holding in Heimann.” OCC Reply Br. 5. As

stated by the Solicitor General, “the conflict between

the Second and the D.C. Circuits over the effect of Section

92 is of sufficient importance to warrant resolution by

this Court.” OCC Pet. 16.

3. The conflict is overdue for decision. The OCC’s

interpretation that Section 92 is a grant of additional

powers rather than a limit on the incidental powers of

Section 24(Seventh) dates back some thirty years or

more. The Fifth Circuit decided the Saxon case against

the OCC on this issue 25 years ago. The D.C. Circuit

decided this same issue in favor of the OCC in Heimann,

and contrary to the Fifth Circuit, fourteen years ago.

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

(1980).

5

Subsequent decisions by the Eighth Circuit,’ the D.C. Cir-

cuit,” the California State Court of Appeal,’ and the de-

cision of the Second Circuit below have divided between

the Fiith Circuit and D.C. Circuit approaches. Twenty-

five years and six appellate decisions by five separate

courts Is percolation enough for any question. It would

have been enough even had the issue as to the continued

existence of Section 92 never been raised.’’ It would

be appropriate at this date for the Court to grant the

petitions for certiorari and resolve now the question

Whether Section 92 is a grant of powers in addition to

those established by Section 24(Seventh) or is instead a

limitation upon the incidental powers granted by Section

24(Seventh).

4. The Second Circuit decision is internally inconsist-

ent. In addition to being in conflict with the decisions

of other courts, the Second Circuit decision is internally

inconsistent. The Second Circuit refused to reach the

question whether the nature of title insurance causes it

to be incidental to banking and therefore authorized

under Section 24(Seventh), holding instead that Section

92 imposes a complete ban on all forms of insurance

sales by national banks regardless of whether incidental

to banking or not. Chase Pet. App. 15a-l6a. Yet the

Second Circuit purported to distinguish away the con-

flict with Heimann by claiming that credit life insurance

is more closely incidental to banking than is title in-

7 Independent Insurance Agents v. Board of Governors of the

Federal Reserve System, 736 F.2d 468, 477 n.6 (8th Cir. 1984)

(deciding a similar issue under the Bank Holding Company Act

and stating its disagreement with the Fifth Circuit’s reading of

Section 92).

“American Ins. Ass’n V. Clarke, 865 F.2d 278 (D.C. Cir. 1988).

® Sanford V. Garamendi, 284 Cal. Rptr. 897 (Cal. App. 1991) (in-

terpreting similar provision of state law).

0 All of the federal cases just recounted assumed that Section

92 existed.

6

surance. Chase Pet. App. 14a-i5a. As the Solicitor

General states in his petition, however, under the Second

Circuit’s “interpretation of Section 92 [this] asserted dis-

tinction is irrelevant, since whatever their differences,

both title insurance and credit life insurance are forms

of insurance.” OCC Pet. 11.

5. The Second Circuit departed from the teachings

of Chevron. The OCC’s determination is entitled to

deference from the courts under Chevron and its progeny.

Chevron, U.S.A. Inc. Vv. Natural Resources Defense Coun-

cil, Inc., 467 U.S. 837 (1984); Clarke v. Securities

Industry Association, 479 U.S. 388 (1987). While

recognizing that Section 92 “obviously provides no ex-

plicit limitation on national bank activity” Chase Pet.

App. lla, the Second Circuit nonetheless held under

the maxim “expressio unius est exclusio alterius” that the

statutory language is clear and that therefore Chevron

did not require the court to defer to the OCC’s construc-

tion of the National Bank Act.

There are two fundamental flaws in the Second Cir-

cuit’s decision to ignore Chevron. First, the opening

words of Section 92 are “[t]hat in addition to the powers

now vested by law in national banking associations ... .”

That statutory language plainly states that Section 92 is

a grant of additional powers, not a limit upon powers

granted by other provisions of the National Bank Act.

That language displaces any vestige of the expressio unius

doctrine.”

Moreover, even were that language not a part of

Section 92, the expressio unius maxim does not override

this Court’s decisions in Chevron and Clarke. As this

Court has previously noted, the expressio unius maxim

is a questionable one in light of the dubious reliability

Cf. Crosby Vv. United States, 113 S.Ct. 748 (1993) (interpreting

Fed. R. Crim. Proc. 43 and holding that “express use of a limiting

phrase” in the Rule established that “the language and structure

of the Rule could not be more clear” thus rendering resort to the

expressio unius maxim unnecessary ).

5

of inferring specific intent from silence.” If the statute

here were silent—as it is not, given the “in addition to

the powers” language—statutory silence would trigger

both application of the expressio unius maxim and defer-

ence to the administrative interpretation under Chevron.

But it is in the case of statutory silence that administra-

tive agencies are called on to exercise their Chevron-

recognized powers to interpret the statutes they admin-

ister. Use of expressio unius to displace an administra-

tive agency’s interpretation of an ambiguous statute un-

dermines the whole purpose of Chevron.

CONCLUSION

For the reasons stated herein and in our petition and

reply brief, and for the reasons stated by the Solicitor

General, the petition for certiorari should be granted.

Respectfully submitted,

Of Counsel: JOHN D. HAWKE, JR.

L. EDWARD SHAW, JR. DENNIS G. LYONS

KENT T. STAUFFER ROBERT E. MANNION

The Chase Manhattan Bank, HOWARD N. CAYNE *

N.A. DAVID F. FREEMAN, JR.

New York, New York 1200 New Hampshire Ave., N.W.

Washington, D.C. 20036

ARNOLD & PORTER (202) 872-6700

Washington, D.C. Attorneys for Petitioner

June 1993 * Counsel of Record

12 Pauley v. BethEnergy Mines, Inc., 111 S.Ct. 2524, 2537-38

(1991) (quoting Sunstein, Law and Administration After Chevron,

90 Colum. L. Rev. 2071, 2109 n. 182 (1990)); accord, Herman &

MacLean Vv. Huddleston, 459 U.S. 375, 387 n.23 (1983). As stated

by the Solicitor General, “the enactment of Section 92 just shows

that Congress thought that national banks could not engage ina

general insurance agency practice: it does not show that Congress

thought that national banks were prohibited from selling products

(like title insurance) that the Comptroller of the Currency has

determined are ‘incidental’ to ‘the business of banking.’”” OCC

Reply Br. 3.