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

Nos. 95.482 and 92-645 | Sure = ———

_ YS

IN THE NOV iz 1699

Supreme Court of the United SPbate ss

OCTOBER TERM, 1992 See

THE CHASE MANHATTAN BANK, N.A.,

Petitioner,

v. -

AMERICAN LAND TITLE ASSOCIATION, er ai.,

Respondents.

STEPHEN R. STEINBRINK, IN HIS OFFICIAL CAPACITY AS

ACTING COMPTROLLER OF THE CURRENCY, AND

THE OFFICE OF THE COMPTROLLER OF THE CURRENCY,

Petitioners,

Vv.

AMERICAN LAND TITLE ASSOCIATION, er ai.,

Respondents.

ON PETITIONS FOR A WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

BRIEF OF THE NEW YORK CLEARING HOUSE ASSOCIATION

AS AMICUS CURIAE IN SUPPORT OF PETITIONERS

JOHN L. WARDEN

H. RODGIN COHEN Counsel of Record for

MICHAEL M. WISEMAN The New York Clearing House

THEODORE EDELMAN Association, Amicus Curiae

ANNA YANG 125 Broad Street,

SULLIVAN & CROMWELL wal oils 10004.

Of Counsel —

NORMAN R. NELSON

General Counsel

The New York Clearing

House Association

Of Counsel

November 12, 1992

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au _ A. a — Geta

a8

TABLE OF CONTENTS

TABLE GF AUTIORITIRS <2 6. ch thw Re eS

INTEREST OF AMICUS CURIAE ........ A

SUMMARY OF ARGUMENT .............

ARGUMENT .

A. THE CONFLICT BETWEEN THE SECOND AND

D.C. CIRCUITS REGARDING THE EXISTENCE

OF SECTION 92 CREATES CONFUSION FOR THE

COMMERCIAL BANKING INDUSTRY. ........

B. THE SECOND CIRCUIT’S DECISION

CONFLICTS WITH THE D.C. CIRCUIT’S

DETERMINATION THAT SECTION 92

DoES NOT BAR NATIONAL BANKS IN

TOWNS OF MORE THAN 5,000

INHABITANTS FROM ENGAGING IN

CERTAIN INSURANCE-RELATED

ACTIVITIES, AND ENGENDERS

UNCERTAINTY FOR NATIONAL BANKS. ......

C. THE DECISION BELOW FAILS TO FOLLOW

THE PRINCIPLES OF JUDICIAL DEFERENCE

OUTLINED IN CHEVRON AND UNDERMINES

THE RELIABILITY OF OCC INTERPRETATIONS

OF THE NBA.

CONCLUSION

Page

ll

TABLE OF AUTHORITIES

Cases Page(s)

Chevron U.S.A. Inc. v. Natural Resources

Defense Council, Inc., 467 U.S. 837 (1984) . . . passim

Clarke v. Securities Indus. Ass’n,

O79 1.2. 28 ASE) oe eee 13

Commissioner of Internal Revenue v. First

Security Bank of Utah, 405 U.S. 394 (1971) .. 6

Commissioner of Internal Revenue v. Morris

Trust, 367 F.2d 794 (4th Cir. 1966) ........ 7

Federal Trade Commission v. Ticor Title

Insurance Co., 112 S. Ct. 2169 (1992) ...... 10

First National Bank of Lamarque v. Smith,

610 F.26 1256 8) Cit. 1908) Sc ak ee 7

Independent Bankers Ass’n of America v.

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

cert. denied, 449 U.S. 823 (1980) ......... ey

Independent Ins. Agents of America v.

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

petition for cert. pending,

Nos. 92-484 antl Sa-S0l 3 nk he ew eee 3, 6

iil

Independent Ins. Agents of America,

inc. v. Board of Governors, 736 F.2d 468

re

Owensboro National Bank v. United States,

No. 91-3 (E.D. Ky, Aug. 4, 1992) ......

Saxon v. Georgia Ass’n of Independent ins.

Agents, Inc., 399 F.2d 1010 (Sth Cir. 1968)...

Statutes

gE

Act of June 3, 1864, Ch. 106, 13 Stat. 99

(1864) (codified, as amended, in sections

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te Sant. © oe COVER) 2 wi es

Se EE Ss ks Ah won aN es kle ahah

Page(s)

Page(s)

Miscellaneous

Comptroller Interpretive Ltr. No. 499,

reprinted in [1989-90 Transfer

Binder] Fed. Banking

L. Rep. (CCH) ¢ 83,090

(Feb. 12, 1990)

Howard H. Hackley, Our Baffling Banking

System - Part Ill, 52 Va. L. Rev.

771 (1966)

Richard M. Whiting & James E. Scott,

A Guide to the Federal Law of Banking

amd Insurance (1991) . oo. ct we 7

IN THE

Supreme Court of the Cinited States

October Term, 1992

Nos. 92-482 and 92-645

cisincntaihaniatingnsiccemee Ay aciiestanincemticinnpaient

THE CHASE MANHATTAN BANK, N.A.,

Petitioner,

ws

AMERICAN LAND TITLE ASSOCIATION, ef al.,

Respondents.

STEPHEN R. STEINBRINK, IN HIS OFFICIAL CAPACITY AS

ACTING COMPTROLLER OF THE CURRENCY, AND THE

OFFICE OF THE COMPTROLLER OF THE CURRENCY,

Petitioners,

Vv.

AMERICAN LAND TITLE ASSOCIATION, ef al.,

Respondents.

ON PETITIONS FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

+

BRIEF OF THE NEW YORK CLEARING HOUSE

ASSOCIATION AS AMICUS CURIAE IN SUPPORT

OF PETITIONERS

With the consent of the parties pursuant to Rule 37.2 of

this Court, amicus curiae The New York Cleanng House

2

Association (the “Clearing House”) respectfully submits this

brief in support of the petitions for a writ of certiorari (the

“Petitions”) filed, respectively, by The Chase Manhattan

Bank, N.A. (“Chase”) and by the Solicitor General on behalf

of the Acting Comptroller of the Currency and the Office of

the Comptroller of the Currency (the “OCC”).

INTEREST OF AMICUS CURIAE

The Clearing House is an unincorporated association of

eleven leading commercial banks in the City of New York,

including Chase.' Five of the Clearing House member banks

are national banking associations subject to the National Bank

Act (the “NBA”)? and the supervision and guidance of the

OCC. The Clearing House regularly appears as an amicus

curiae in cases concerning important questions of law relating

to banking.

The Clearing House’s interest in the issues presented in

the Petitions derives both from the member banks’ interest

and involvement in the sale of title insurance and other types

of insurance-related products that are incidental to the

business of banking, and from the member banks’ shared

concern for the recognition and consistent application of clear

and certain rules of law to the business of banking.

In addition to Chase, other Clearing House member banks

are interested in acting as agents for the sale of title

' The other members of the Clearing House are The Bank of New

York, Citibank, N.A., Chemical Bank, Morgan Guaranty Trust

Company of New York, Bankers Trust Company, Marine Midland

Bank, N.A., United States Trust Company of New- York, National

Westminster Bank USA, European American Bank, and Republic

National Bank of New York.

> Ch. 106, 13 Stat. 99 (1864) (codified, as amended, in sections

of 12 U.S.C.)

3

insurance. Member banks are also interested in the sale of

other insurance-related products permitted under Section 24

(Seventh) of the NBA, 12 U.S.C. § 24 (Seventh) (“Section

24 (Seventh)”). The products that national banks are

authorized to sell include municipal bond insurance, credit

life insurance, credit disability insurance, mortgage life

insurance and mortgage disability insurance.

The Second Circuit’s decision here creates a double con-

flict with decisions of the United States Court of Appeals for

the D.C. Circuit that gives rise to crippling uncertainty within

the commercial banking industry. Specifically, the decision

below conflicts directly with the D.C. Circuit’s holding in

Independent Ins. Agents of America v. Clarke, 955 F.2d 731

(D.C. Cir. 1992), petitions for cert. pending, Nos. 92-484 &

92-507, that Congress has repealed 12 U.S.C. § 92 (“Section

92”). In addition, the Second Circuit’s holding that Section

92 impliedly bars national banks in jurisdictions of more than

5,000 inhabitants from engaging in insurance-related activities

that are incidental to the business of banking is inconsistent

with the D.C. Circuit’s determination in Independent Bankers

Ass’n of America v. Heimann, 613 F.2d 1164, 1170 (D.C.

Cir. 1979), cert. denied, 449 U.S. 823 (1980), that

Section 92 does not prohibit national banks, wherever

located, from brokering credit life insurance. The exercise of

this Court’s plenary jurisdiction is necessary to resolve both

conflicts.

Clearing House member banks and other national banks

that are engaged in the sale of insurance-related products are

now left to guess as to the scope of their authority and the

stability of the business relationships into which they have

entered. Such confusion inevitably deters national banks from

exercising the full extent of their powers under the NBA and

thereby impedes their ability to compete effectively with other

financial institutions in a difficult economic environment and

4

inhibits them from pursuing potentially lucrative commercial

opportunities.

SUMMARY OF ARGUMENT

This Court should grant certiorari to settle the uncertainty

concerning the permissible scope of national bank powers

under Sections 92 and 24 (Seventh). The decision below

creates a conflict between the Second and D.C. Circuits as to

whether Section 92 was repealed by Congress and, if not,

whether Section 92 impliedly bars national banks located in

municipalities with more than 5,000 inhabitants from acting

as agents for the sale of title insurance and other insurance-

related products. This conflict has created confusion within

the commercial banking community as to the permissible

scope of national bank powers and uncertainty regarding the

insurance-related activities in which Clearing House member

banks and other national banks currently engage.

At a minimum, the conflict of authority engenders

anomalous geographic distinctions resulting in competitive

inequities. National banks in the Second Circuit are

authorized to engage in the range of activities permitted by

Section 92, whereas national banks located in circuits that

follow the D.C. Circuit’s holding would lack such authority.

By contrast, attempts could be made to extend the Second

Circuit’s construction of Section 92 to prohibit national banks

in the Second Circuit from conducting banking activities

under Section 24 (Seventh) that are available to national

banks in other jurisdictions. The Second Circuit’s opinion

would, thus, allow matters that are of importance to the

financial community to depend upon the happenstance of a

bank’s location. Aside from these conflicts, the Second

Circuit’s misconstruction of Section 92 potentially has serious

adverse consequences for all national banks because it could

provide the basis for litigation seeking to deprive national

5

banks of the power to engage in a wide range of activities

that have been authorized, and are being conducted, as

incidental to the business of banking under Section 24

(Seventh).

In addition, the Second Circuit’s disregard for and sharp

departure from established principles of judicial deference to

administrative interpretations and for the precedent

interpreting Section 92 undermine the ability of banks to

proceed, frequently expending significant time and money, in

reliance on the interpretations of the OCC and other banking

agencies. In its opinion below, the Second Circuit

acknowledged its obligation to defer, in the absence of clear

congressional intent to the contrary, to the reasonable

interpretation of a statute by the agency charged with its

administration. However, the court then proceeded to ignore

this obligation and the explicit language of Section 92

supporting the OCC’s determination in this matter and to

substitute its own construction of the statute. By paying mere

lip service to the principle of judicial deference while

undercutting its application, the Second Circuit has opened

the door to inconsistent interpretations and applications of the

rules governing commercial banking relations and has robbed

national banks of essential confidence in the determinations

of the OCC.

ARGUMENT

A. THE CONFLICT BETWEEN THE SECOND

AND D.C. CIRCUITS REGARDING THE

EXISTENCE OF SECTION 92 CREATES

CONFUSION FOR THE COMMERCIAL

BANKING INDUSTRY.

In holding that Section 92 remains valid law, The Second

Circuit disagreed with a recent decision of the D.C. Circuit

which had held that that section had been repealed by the

6

omission of the pertinent text from a 1918 reenactment of

Section 5202 of the Revised Statutes of the United States. See

Independent Ins. Agents of America v. Clarke, 955 F.2d 731

(D.C. Cir. 1992), petitions for cert. pending, Nos. 92-484 &

92-507. This dispute as to the existence of Section 92 will

likely recur in other circuits,’ and creates intolerable confu-

sion for all national banks. Moreover, the resolution of this

conflict could have a significant impact on judicial

construction of the scope of the powers granted to national

banks under Section 24 (Seventh). If this Court were to hold

that Section 92 had been repealed, that statute could not —

contrary to the Second Circuit’s holding — “impliedly bar”

national banks in municipalities of more than 5,000 inhabi-

tants from brokering title insurance. The only remaining

issue, then, would be the one that the Second Circuit declined

to reach, /.e., whether national banks are permitted to act as

agents for the sale of title insurance under Section 24

(Seventh). (See Chase Petition at 13).

The uncertainty as to the existence of a provision of the

NBA that was enacted more than seventy-five years ago is

plainly detrimental to the coherent development and applica-

tion of the rules governing the activities of national banks.‘

’ See, e.g., Owensboro National Bank v. United States, No. 91-

3 (E.D. Ky, Aug. 4, 1992), in which the court rejected a challenge to

the validity of Section 92 that had been raised “[rJelatively late in the

briefing of [that] case,” and agreed “with the rationale of the Second

Circuit” below. /d., slip op. at 14-15.

* Although courts and commentators have previously acknow-

ledged that there may be some doubt as to Section 92’s repeal, no

direct conflict between circuits has arisen until now. Prior to this

conflict, the courts and the OCC generally assumed that Section 92

continues to exist. For example, in Commissioner of Internal

Revenue v. First Security Bank of Utah, 405 U.S. 394, 401, n.12

(continued...)

As a result, the split of authority creates confusion as to the

Stability of existing arrangements entered into by national

banks pursuant to Section 92 and the ability of national banks

to continue to engage in such activities in the future.

Currently, approximately 179 national banks in fifteen states

conduct insurance-related activities pursuant to Section 92.

See Owensboro National Bank v. United States, No. 91-3,

slip. op. at 10 (E.D. Ky. Aug. 4, 1992). The conflict

between the circuit courts is especially significant because

these national banks have expended, and continue to expend,

substantial effort and expense to develop pregrams and busi-

ness relationships for providing the products and services

permitted under Section 92. Unless this Court resolves this

*(...continued)

(1971), this Court noted without further comment:

Section 92 of the National Bank Act was enacted in 1916.

When the statutes were revised in 1918 and re-enacted, § 92

was omitted. The revisers of the United States Code have

omitted it from recent editions of the Code. However, the

Comptroller of the Currency considers § 92 to be effective

and he still incorporates the provision in his Regulations, 12

C.F.R. §§ 2.1-2.5 (1971).

See also First National Bank of Lamarque v. Smith, 610 F.2d 1258,

1261 n.6 (Sth Cir. 1980); /ndependent Ins. Agents of America, Inc. v.

Board of Governors, 736 F.2d 468, 476-77 (8th Cir. 1984);

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

1170 (D.C. Cir. 1979), cert denied, 449 US. 823 (1980);

Commissioner of Internal Revenue v. Morris Trust, 367 F.2d 794, 795

n.3 (4th Cir. 1966).

Commentators similarly have expressed the view that Section 92

technically was repealed as a result of the “error of a careless

codifier,” but remains valid law. Howard H. Hackley, Our Baffling

Banking System - Part Il, 52 Va. L. Rev. 771, 778 (1966); see also

Richard M. Whiting & James E. Scott, A Guide to the Federal Law

of Banking and Insurance § 4.2(a), at 81 n.31] (1991).

conflict, national banks would be left with the unenviable

dilemma of either refraining from pursuing this significant

source of revenue or continuing to engage in activities that

are now subject to question.

The conflict also engenders arbitrary geographic distinc-

tions within the commercial banking industry. National banks

located in towns of fewer than 5,000 inhabitants within the

Second Circuit, or in any circuit that does not follow the

D.C. Circuit’s holding, would continue to be able to offer

their customers general forms of insurance, such as fire and

life insurance, pursuant to Section 92. By contrast, any court

applying or following the D.C. Circuit's holding would

prohibit national banks in similar locations from engaging in

such activities.

Indeed, the conflict may well impair the ability even of

national banks located within the Second Circuit to engage in

insurance activities under Section 92. In view of the

intercircuit conflict, the OCC may be reluctant to lend

necessary interpretive guidance concerning the application of

Section 92. Moreover, because, under 28 U.S.C. § 1391(e),

venue for actions against the OCC or the Comptroller of the

Currency could lie in the District of Columbia, even an OCC

authorization to a national bank in the Second Circuit to sell

certain forms of insurance could be challenged in the courts

of the D.C. Circuit, which may prohibit the bank from

engaging in such activities. As a result, the possibilities for

unseemly forum shopping created by the conflict are obvious.

More importantly, national banks located in the Second

Circuit are now confronted with constant uncertainty as to

whether their authority to engage in acts permitted by their

home circuit could be revoked through chance litigation in a

distant court.

The conflict between the circuits regarding the existence

of Section 92 has created disruptive confusion and clearly

impairs the orderly recognition and coherent application of

rules of banking law. Only review by this Court can restore

the necessary certainty and uniformity.

B. THE SECOND CIRCUIT’S DECISION

CONFLICTS WITH THE D.C, CIRCUIT’S

DETERMINATION THAT SECTION 92 DOES

NOT BAR NATIONAL BANKS IN TOWNS OF

MORE THAN 5,000 INHABITANTS FROM

ENGAGING IN CERTAIN INSURANCE-

RELATED ACTIVITIES, AND ENGENDERS

UNCERTAINTY FOR NATIONAL BANKS.

The Second Circuit’s holding that Section 92 “impliedly

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

from engaging in insurance agency activities in general,”

(OCC Appendix at 16a)’ conflicts with the D.C. Circuit's

determination in Independent Bankers Ass'n of America v.

Heimann, 613 F.2d 1164 (D.C. Cir. 1979), cert. denied, 449

U.S. 823 (1980), that Section 92 does not prohibit national

banks from brokering credit life insurance under th

incidental powers clause of Section 24 (Seventh). In

Heimann, the D.C. Circuit rejected the rationale that later

premised the Second Circuit's holding, concluding instead

that, “[b]y its own terms, [Section 92] does not address th

authority of national banks in larger towns or cities to act as

agents for life insurance companies.” /d. at 1170 & n.1%

le

As is the case with respect to the conflict concerning the

existence of Section 92, this division engenders irrational

geographic distinctions regarding the permissible scope of

national bank powers. National bank d

yanks located within the

fn ; , 1 ; ~li,4 . ‘ > 4 seo } ] . —

Second Circuit are precluded by the decision below trom

< —~ - . ~ ~ ~ _

¢ - ae tory ¢ =/ , a ° +h,

Citations in the form of ICC Appendix at are to the

Appendix to the Petition filed by the

10

brokering title insurance, while courts following Heimann

would not interpret Section 92 to bar such activity. Thus, the

Second Circuit’s decision unfairly deprives national banks

located within that circuit of a potentially important source of

revenue.° This discrepancy significantly prejudices the

competitive position of the Clearing House members that are

national banks, which generate billions of dollars in real

estate loans annually.

Moreover, as the Petitions demonstrate (Chase Petition at

15-16; OCC Petition at 17-18), national banks in all juris-

dictions presently engage in a wide range of other activities

that are incidental to the business of banking.’ As a result of

the current circuit conflict, however, a national bank’s

continued authority to engage in such activities could depend

solely upon the fortuity of the bank’s location. The Second

Circuit’s holding concerning the brokerage of title insurance

might improperly be extended to preclude national banks

from performing these other insurance-related activities, even

though national banks located outside the Second Circuit may

engage in such conduct. Thus, the Second Circuit’s decision

threatens to deprive national banks of important business

Opportunities and impairs their ability to compete with state

banks, savings and loan associations and other financial

institutions that are permitted to offer insurance-related

products. In any event, the uncertainty regarding the reach of

° As this Court recognized in Federal Trade Commission v. Ticor

Title Ins. Co., 112 S. Ct. 2169, 2173 (1992), the title insurance

industry earns revenues in excess of a billion dollars per year.

’ Among the insurance-related products that national banks have

been authorized to offer as agents are municipal bond insurance, credit

related life insurance, mortgage life insurance, credit disability

insurance, involuntary unemployment insurance and vendor’s single

interest insurance. (OCC Petition at 17-18; Chase Petition at 15-16).

11

the Second Circuit’s decision could mire national banks in

endless litigation that would distract them from their banking

activities and compel them to expend substantial resources to

defend against challenges to their operations.

The conflicting interpretations of Section 92 create

fundamental confusion as to both the ability of national banks

to continue to engage in these activities and the stability of

the brokerage agreements and other business arrangements

relating to these services. In reliance upon the post-Saxon*

judicial decisions construing Section 92 and the OCC’s

approval of national banks’ involvement in these activities,

national banks have _ invested—and continue to

invest—substantial effort and expense to develop programs

and commercial relationships for carrying out these activities.

The confusion resulting from the conflict between the circuits

threatens the commercial banking industry with gridlock that

could hinder, if not prevent, national banks from proceeding

with these projects and subjects current business arrangements

and relationships to uncertainty.’

8

See Saxon v. Georgia Ass'n of Indep. Ins. Agents, Inc. , 399

F.2d 1010 (Sth Cir. 1968).

» Moreover, to the extent that national banks are deterred by this

uncertainty from brokering insurance-related products that are

incidental to the business of banking under Section 24 (Seventh),

consumers of those products would be deprived of alternative sources

of those products and of the salutary benefits of competition among

the providers of those products.

12

~

C. THE DECISION BELOW FAILS TO FOLLOW

THE PRINCIPLES OF JUDICIAL DEFERENCE

OUTLINED IN CHEVRON AND UNDERMINES

THE RELIABILITY OF OCC

INTERPRETATIONS OF THE NBA.

The Second Circuit’s departure from the basic principle

of judicial deference in its unwarranted reversal of the OCC’s

determination, which was based on the OCC’s entirely

rational interpretation of the NBA, has serious adverse

repercussions for the commercial banking industry. The OCC

is the federal agency specifically charged with the supervision

and regulation of national banks and the administration of the

NBA. In the conduct of their daily business, national banks,

including a number of the Clearing House member banks, are

compelled by law and business necessity to rely on the

OCC’s interpretations of the permissible scope of national

bank activities. Regulatory predictability and stability are

indispensable to the business of commercial banking, and

judicial invalidation of entirely rational OCC determinations

is highly disruptive.

More generally, banks are subject to a comprehensive

Statutory scheme of regulation that pervades every aspect of

their operations and procedures. Many aspects of this scheme

are specifically left to implementing regulations of the

banking agencies. Other aspects of this scheme, particularly

those that were enacted many years ago, require interpre-

tation and, frequently, reinterpretation in order to account for

financial, economic and technological developments. If banks

cannot rely on the regulations and interpretations promulgated

by their regulators, they would be unable to serve the

demands and needs of their customers and their competitive

position and earnings would inevitably deteriorate.

13

This Court has long recognized the necessity of deferring

“to [a regulatory agency’s] construction of a statutory scheme

it is entrusted to administer.” Chevron U.S.A. Inc. v. Natural

Resources Defense Council, Inc., 467 U.S. 837, 844 (1984)

(footnotes omitted); See also Clarke v. Securities Indus.

Ass’n, 479 U.S. 388, 403-404 (1987) (applying the Chevron

principle to the OCC’s interpretation of federal banking

laws). Chevron establishes the following framework for

review of such agency interpretations: First, a court must

give effect to the unambiguously expressed intent of

Congress. If, however, the statute is silent or ambiguous with

respect to the issue addressed by the _ regulatory

determinations, the reviewing court should assess only

whether the agency’s interpretation is based on a “permissible

construction of the statute.” Jd. at 842-43.

The bank regulators are not, of course, immune from

judicial reversal when they depart from the clear intention of

a statute. However, the courts may substitute their judgments

for those of the regulators only in the case of such a

departure, and not when the regulators’ interpretation “is

based on a permissible construction of the statute.” Chevron

U.S.A. Inc. v. Natural Resources Defense Council, Inc. , 467

U.S. at 843 & n.11; see also, Clarke v. Securities Indus.

Ass’n, 479 U.S. at 403-404.

The OCC consistently has construed Section 92 as a

supplemental grant of authority providing additional sources

of revenue for national banks located in small towns, and not

as an exclusive source of insurance powers. See, e.g.,

Comptroller Interpretive Ltr. No. 499, reprinted in [1989-90

Transfer Binder] Fed. Banking L. Rep. (CCH) 4 83,090 at

71,213 (Feb. 12, 1990) (national banks permitted to broker

annuities). As the Petitions demonstrate (OCC Petition at 11-

13; Chase Petition at 14-17), this interpretation is supported

a

14

both by the language and legislative history of the statute and

by recent judicial interpretations of Section 92."°

The Second Circuit acknowledged its obligation under

Chevron to give effect to the unambiguously expressed intent

of Congress and recognized that, where the statute is silent or

ambiguous with respect to the matter at issue, the court

should inquire only as to whether the OCC'’s interpretation is

“arbitrary, capricious or manifestly contrary to the statute.’”

(OCC Appendix at 12a) (quoting Chevron). It nonetheless

rejected the OCC’s position, Stating simply that “we believe

that the language of section 92 evinces Congress’ intent to bar

national banks that fall outside of the provision’s geographical

restrictions from acting as insurance agents.” (OCC Appendix

at 13a). The court took this position although it conceded that

Section 92 “provides no explicit limitation on national bank

activity.” (Id. at 13a).

It is difficult to conceive of a more direct repudiation of

Chevron. In the first instance, the court ignored the explicit

statement in Section 92 that the powers conferred by that

section were “in addition to the powers vested by law in

national banking associations.” 12 U.S.C. § 92 (emphasis

added). This statement clearly indicates that Congress had

authorized national banks to engage in other insurance po'vers

in addition to those granted under Section 92.

See Independent Bankers Ass'n of America v. Heimann, 613

F.2d at 1170, n.18 (“[b]y its own terms, the statute does not address

the authority of national banks in larger towns or cities to act as agents

tor life insurance companies”): Independent Ins. Agents v. Board of

Governors, 736 F.2d 468, 477 n.6 (8th Cir. 1984) (“[t]he legislative

history indicates that Congress was concerned only with providing

small-town banks with an additional profit source, not with prohibiting

city banks from selling insurance”),

15

As the Petitions demonstrate (OCC Petition at 11-16;

Chase Petition at 19-24), the court attempted to support its

strained contrary construction of Section 92 by the maxim of

expressio untus est exclusio alterius, which it misapplied, and

the legislative history of that provision, which it

misinterpreted.

The use of these statutory construction tools is dubious at

best in view of the clear statutory language. They are totally

inappropriate under Chevron when used to overturn an

administrative agency's determination that is not precluded by

the maxim of expressio unius and can be read consistently

with the legislative history. Even if it had been appropriate to

apply the maxim of expressio unius in construing the statute,

that analysis could have demonstrated at most that Section 92

impliedly bars national banks in municipalities with more than

5,000 inhabitants from engaging in general insurance

activities if such activities are not incidental to the business

of banking. Section 92 does not address—and, thus, th

maxim cannot be invoked to restrict—the powers granted to

national banks by Section 24 (Seventh) to engage in

insurance-related activities that are incidental to the business

of banking. (See Chase Petition at 23).

1

The Second Circuit also relied on legislative history that,

in fact, demonstrates that Section 92 had been enacted to pro-

vide supplemental insurance powers to national banks in small

towns, and not to prohibit the ability of national banks to

engage in insurance-related activities that are incidental to the

business of banking under Section 24 (Seventh). (OCC Pet

tion at 12-15; Chase Petition at 23-24). In short, the legs-

lative history supports the OCC’s interpretation of Section 92

or, at least, raises sufficient ambiguity regarding the meaning

of that provision to have required the Second Circuit to defer

to the OCC’s determination. mish Chevron U.3.A. Inc. v

Natural Resources Defense Council, Inc., 467 U S. at S44

16

Thus, although the Second Circuit purported to pay heed

to the principles of judicial deference set out in Chevron, it,

in fact, impermissibly substituted its own reading of Section

92 for that of the OCC, the agency specifically charged by

Congress to interpret and administer the NBA. By failing to

defer to the OCC’s interpretation, the decision below paves

the way for courts to supplant their construction of the NBA

for the reasoned interpretations of the OCC, even where the

regulator’s interpretation is consistent with the statute’s

language and legislative history. Such an approach would

result in piecemeal and inconsistent application of the federal

banking laws and hinder the development of a coherent body

of law for the national banking community.

17

CONCLUSION

For the reasons stated in the Petitions and herein,

certiorari should be granted to review the judgment of the

United States Court of Appeals for the Second Circuit.

Respectfully submitted,

JOHN L. WARDEN

Counsel for The New York

Clearing House Association,

Amicus Curiae

125 Broad Street,

New York, New York 10004.

(212) 558-4000

H. RODGIN COHEN

MICHAEL M. WISEMAN

THEODORE EDELMAN

ANNA YANG

SULLIVAN & CROMWELL

Of Counsel

NORMAN R. NELSON

General Counsel

The New York Clearing

House Association

Of Counsel

November 12, 1992