Brief for the Respondents in Opposition — North Little Rock Transportation Co. v. Casualty Reciprocal Exchange

No. 178 AUG 2 1950

CHARLES ELMORE CROPL

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1950

THE NORTH LITTLE ROCK TRANSPORTATION

COMPANY, INC.,

Petitioner,

versus

CASUALTY RECIPROCAL EXCHANGE, et al.,

Respondents.

BRIEF FOR RESPONDENTS NATIONAL BUREAU OF

CASUALTY UNDERWRITERS, AETNA CASUALTY &

SURETY CO., ET AL., IN OPPOSITION TO PETITION

FOR WRIT OF CERTIORARI

James B. Donovan,

New York, N. Y.

Epwarp L. Wricurt,

Little Rock, Ark.

Attorneys for Respondents

BL ALENT ERE AE IEF ORR IIT AS

INDEX

Ne ch pi eae ROSA SAS SEN ON EERO

Somarany OF ARGUMENT. ......cccccccccccssccccee

ARGUMENT:

(1) The Sherman Act is inapplicable to co-

operative action among insurers in rate making

and related matters, to the extent that such ac-

tivities are regulated by State law.............

(A) Background of the applicable prin-

ciples and statutes. ......... cess eeeeeees

(B) Wholly apart from the McCarran

Act, rating combinations do not violate the

Sherman Act if they are regulated by State

law; by that statute, Congress expressly de-

clared that State regulation of the insurance

business is in the public interest, and pro-

vided that the States may permit, under

public regulation, rating combinations and

other activities which might otherwise vio-

late the Sherman Act..........ceseeeeees

(II) The acts of these respondents were au-

thorized and regulated by valid State laws......

(III) The motion for summary judgment was

properly granted ...........ceeeecccecceeees

EES ERE TE OE PETE EO Oe ON TORT

EARS ae ape ge CRE aN RC OOM LY AR SONIC ERFE LITRE REPEL MG PPE FINE OME OE EL EI IAIN AI AOI

ane

Citations”

CasEs:

Associated Press v. United States, 332 U. 8. 392

< | rraaes Feats PEECTLREREXTL LLL LEA

Clark Distilling Co. v. Western Maryland Ry. Co.,

242 U. S. 311 (1917).......... SOS eee ree

Clark Oil Co. v. Phillips Petrolewm Co., 148 F. 2d

580 (8th Cir. 1945), cert. denied 326 U. S. 734

¢ erererereerrrrrr er reer erie Tite

Connecticut Light & Power Co. v. Federal Power

Commission, 324 U.S. 515 (1945) ...........4..

Davis v. Department of Labor, 317 U.S. 429 (1942)

Field v. Barber Asphalt Paving Co., 194 U. 8. 618

SE kia. + deere hcacepepesheows cededves seeds

International Salt Co. v. United States, 332 U. S.

Fe CIE I ck So sisikecauddnnss sauneesnaabestees

Keogh v. Chicago & Northwestern Railway Co.,

. sie. eS St. | rrr ere re ere ee

Knickerbocker Ice Co. v. Stewart, 253 U. 8. 149

fo. eeeeT CPE P ET OT TTT eR t ET TET Terie

Madeirense Do Brasil S/A v. Stulman-Emrick

Lumber Co., 147 F. 2d 399 (2d Cir. 1945), cert.

denied 325 U. S. 861 (1945) ............eeeees

McLean Trucking Co. v. United States, 321 U.S. 67

rrr oer rer ster ee eer

National Union Fire Ins. Co. v. Dickinson, 128 Ark.

367, 194 B. W. 264 (1917) 0... cece cceess

New York Central Securities Corp. v. United

States, 287 U. 8. 12 (1982) ........ceccceececs

11-12

16

9,13

14

DRIEST RAE A ect IAL nO EN Duo eA aR ae RR 8 8 ITPRE BRT ERAN ROL BG RUN Oe Bera st

ar

PAGE

North Little Rock Transportation Co. v. Casualty

Reciprocal Exchange, et al., 85 F. Supp. 961

(E. D. Ark. 1949) ; 181 F. 2d 174 (8th Cir. 1950). 2

Olsen v. Smith, 195 U. S. 332 (1904).............. 8

Osborn v. Ozlin, 310 U. S. 53 (1940)............. 9

Panhandle East. Pipe Line Co. v. Public Service

Commission, 332 U. S. 507 (1947)............. 11

Parker v. Brown, 317 U. S. 341 (1943)........... 8

Parker v. Motor Boat Sales, 314 U.S. 244 (1941)... 12

Prudential Insurance Co. v. Benjamin, 328 U. S.

Se Ene eee Nee Ck Nae Eetaeee eer eaeens 9, 12, 13

Railroad Commission of Texas v. Pullman Co., 312

Se SEED. Dieu eaWocbaneeubanbaeuees 15-16

Railroad Commission of Texas v. Rowan & Nichols

Oil Co., 310 U. S. 573; 311 U. S. 615 (1940).... 16

Red Cross Line v. Atlantic Fruit Co., 264 U. 8. 109

SR cy Ra EE KES IR LER Ee FIA eednh Heh be ies 12

Robertson v. California, 328 U. S. 440 (1946).... 11

Sunshine Anthracite Coal Co. v. Adkins, 310 U. S.

I cs rah te Eek aoe y / 13

Terminal Warehouse Co. v. Pennsylvania R.R. Co.,

ee Se SE ida bond bsckeahevnéinens 16

United States v. South-Eastern Underwriters As-

sociation, 322 U. S. 533 (1944) ............ 6, 9, 10, 14

United States Navigation Co. v. Cunard S.S. Co.,

A i I er re eee 15

Walling v. Richmond Screw Anchor Co., 154 F. 2d

780 (2d Cir. 1946), cert. denied, 328 U. S. 870

16

Rte Pen”

ia 2

y

4

STATUTES:

iv

McCarran Act, 15 U. S. C. 1011-1015; 59 Stat. 33,

34; P. L. 15, 79th Cong., Ist Sess., c. 20, Sees. 1-5,

as amended, P. L. 238, 80th Cong., Ist Sess., ¢.

SON pr re Serre FRE ro ers. 7, 8, 9, 10, 11, 12, 13, 14

Sherman Act, 15 U. S. C. 1; ¢. 647, Sec. 1, 26 Stat.

ON os hcp cnc es hs Ee Ae oe 1, 5, 6, 8, 15,17

Act No. 116, Ark. Laws, 1947 (Sees. 66-417-66-433,

cS ey rrr ere rr yer ee 13, 15

CoNnGRESSIONAL MATERIAL:

91 Cong. Res. 1442 (1945) .......ccccscccecssvcee

91 Cong. Rec. 1443 (1945) ....... ccc cceccccccees

91 Cong. Bec. 1481 (1945)... 26. occ cccceneens

91 Cong. Rec. 1486 (1945) ..... 0... ccesecscsevees

H. R. Bills 3269, 3270, 78th Cong., Ist Sess. .......

Joint Hearings on 8. 1362, H. R. 3269, H. R. 3270

before the Subcommittees of the Committees on

the Judiciary, 78th Cong., 1st and 2nd Sess.,

is Den rE een ett ere ere yo

Si. 190K, THs Com, Tat Bethe soci evccsecsanves

H. R. Rep. No. 68, 79th Cong., 1st Sess. (1945).....

H. R. Rep. No. 143, 79th Cong., Ist Sess. (1945)...

H. R. Rep. No. 213, 79th Cong., Ist Sess. (1945)...

Sen. Rep. No. 20, 79th Cong., Ist Sess. (1945).....

Sen. Rep. No. 1112, 78th Cong., 2nd Sess. (1944)...

a owe wo oo

wowowroveo eon eS

MISCELLANEOUS:

Clark and Samenow, The Summary Judgment, 38

Wake Fe Bee Ce io ka hee soe ebes cidinesnes 16

10 Fed. Rules Service (1948) (Amendments)

SOV ERC is ok ow chide hen esexianee nese 16

3 Moore, Federal Practice, (1938) Sec. 56.04...... 16

Proceedings, National Ass’n. of Insurance Com-

missioners, 77th Sess. (1946) pp. 212, 353-421... 14

3 Ark. L. Rev. 55, 61 (1948-1949) ..............66. 8, 14

OT Cad. Eee. TEA IE is cvs ke Ae dd vise tvcuen 8, 14

SB Gan. Ts 5. OS CI a vc ce dcdviediadevssaviecss 6

No. 178

Supreme Court of the United States

OCTOBER TERM, 1950

s

Tue Nortu Lirtitze Rock TRaNnspPorta-

TIoN Company, Inc.,

Petitioner,

versus .

CasuaLty Recrprocat ExcHancg,

et al.,

Respondents.

BRIEF FOR RESPONDENTS NATIONAL BUREAU OF

CASUALTY UNDERWRITERS, AETNA CASUALTY

& SURETY CO., ET AL., IN OPPOSITION TO PETI.-

TION FOR WRIT OF CERTIORARI

Statement

This is an action for treble damages and injunctive

relief, based upon an alleged violation of Section 1 of the

Sherman Act. The case was commenced on August 17, 1948

by the filing of a summons and complaint. Petitioner

thereafter, and before joinder of issue, conducted explora-

tory examinations of varivus persons to determine whether

its complaint should be amended (R. 26-150). The complaint

was not amended.

The verified answer of these respondents, in addition to

admissions and denials, contained a separate and complete

a

2

affirmative defense. All parties thereafter agreed upon the

truth of the facts contained in that affirmative defense,

together with certain additional facts (R. 15, 25, 151-155).

Virtually all the facts are matters of public record (R. 225).

The Insurance Commissioner of Arkansas, by the At-

torney General of that State, intervened on February 11,

1949. The Commissioner upheld the conduct and legal

contentions of the respondents and asked for dismissal of

the complaint (R. 24, 25).

Motions by the respondents for summary judgment were

argued before the District Court on February 15, 1949, on

which date the Court also held a pre-trial hearing. The

Court found that there was no genuine issue as to any

material fact and that all such facts were before the Court.

The Court framed the legal questions and ordered the sub-

mission of written briefs (R. 219).

On September 8, 1949 the Court granted the motions of

respondents in all respects, stating the material facts and

the reasons for its decision in a written opinion reported

in 85 F. Supp. 961. The Court of Appeals for the Bighth

Circuit unanimously affirmed, its opinion being reported in

181 F. 2d 174.

The Facts

Petitioner is a taxicab company operating in and about

Little Rock, Arkansas. The first-named respondent is the

Casualty Reciprocal Exchange, an insurer transacting the

business of casualty insurance in the State of Arkansas and

elsewhere. The other respondents are the National Bureau

of Casualty Underwriters (an unincorporated association)

and forty-nine casualty insurance companies which are

among its members and subscribers. The Casualty Recipro-

cal Exchange is not a member of or subscriber to the Na-

tional Bureau. Every respondent is authorized to transact

its respective business in the State of Arkansas (R. 221,

222, 16, 19, 25, 155).

TREEPSOE TAI AS SRIRAM LER SA YP RE 4s —

_—_

3

Respondent National Bureau of Casualty Underwriters

(hereinafter referred to as ‘‘The National Bureau’’) is a

voluntary, non-profit, unincorporated association of stock

companies engaged in casualty insurance. It is a ‘‘rating

organization’’; in conformity with law, it secures and

analyses data and thereafter establishes for its members

(and for other insurers subscribing to its rating services)

proper underwriting rules, classifications for risks, policy

provisions and other forms, manual rates, minimum pre-

miums and rating plans (R. 221, 16, 25, 155).

Under the Constitution and Regulations of the National

Bureau, every member and subscriber must comply with

its determinations except (a) when such compliance is

established to be in violation of law, or (b) when such

insurer is ordered or permitted to act otherwise by public

governmental authority duly empowered by law to issue

such order or permission. Upon proper application, any

stock company engaged in casualty insurance may become

a member of the National Bureau. Any insurer engaged

in such insurance may become a subscriber and under

National Bureau Regulations it must receive rating services

without discrimination. However, only members may vote

in Bureau meetings and be represented on Bureau com-

mittees (R. 222, 16, 25, 155).

Pursuant to applicable law, the National Bureau is

licensed and authorized to act as a rating organization for

automobile liability insurance and other kinds of insurance

by the State of Arkansas and by every other State pro-

viding for the licensing of such an organization (R. 222,

18, 25, 155).

From July 24, 1946 to May 16, 1948 petitioner was in-

sured by respondent Casualty Reciprocal Exchange for

automobile liability insurance covering its taxicab opera-

tions. While the permissible loss ratio for such insurance

is 64%, the losses incurred by petitioner during that period

amounted to 136.1%. The Exchange accordingly canceled

its policy effective May 16, 1948 (R. 222, 20, 25, 155).

4

Petitioner sought insurance from three other com-

panies but each declined to accept such a risk. It then

applied to the Arkansas Automobile Assigned Risk Plan,

a cooperative undertaking by all insurers licensed to trans-

act such business in Arkansas, under which each insurer

agrees to accept an equitable number of risks which other-

wise would be unable to obtain insurance. The Plan was

organized in 1947 pursuant to Arkansas laws and with the

approval of the Commissioner of Insurance for that State;

it is similar to other such Plans in other States. Petitioner

was assigned by the Plan to respondent Aetna Casualty

and Surety Company, a member of the National Bureau.

The Aetna accepted the risk and issued a policy effective

May 16, 1948, agreeing with petitioner to receive an initial

premium with the final premium to be computed when

proper rate-making data became available (R. 222, 18, 20,

25, 155).

In order to obtain such data, the Aetna thereafter

requested Casualty Reciprocal Exchange (through its rep-

resentatives, Heart of America Insurance Agency, Inc.) to

furnish to the Aetna a statement of the accident experi-

ence of petitioner under the Casualty Reciprocal Exchange

policies. Such exchanges of rating data are necessary and

customary within the industry in order to enable rating

organizations and insurers to determine rates which are in

accordance with the standards established by law. Certain

incomplete data was furnished to the Aetna by the Ex-

change. In conformity with National Bureau procedures,

the Aetna as a member submitted this data to the Bureau

and requested it to establish a rate for the risk. After pre-

liminary calculations by the National Bureau on the data

submitted, at the request of petitioner the Arkansas Insur-

ance Department obtained and sent to the Bureau what was

stated to be complete information on petitioner’s experience

under the Casualty Reciprocal Exchange policies. On the

basis of that information the National Bureau calculated a

rate for the risk in accordance with an appropriate rating

TAT ERMA ites Beds HSS PLS ST SEGA RNR OR Sg Od EOE

» a

plan, which was on file in the Arkansas Insurance Depart-

ment and was effective in accordance with applicable provi-

sions of law. The precise rate established for petitioner and

the basis of its calculation were filed by the National Bureau

in the Arkansas Insurance Department on or about July

16, 1948 (R. 223, 20, 25, 155).

According to the latest available statistics filed in the

Arkansas Insurance Department, members and subscribers

of the National Bureau write approximately 56% of all

automobile liability insurance written in the State of Ar-

kansas. In addition to National Bureau companies, there

are carriers writing such insurance in Arkansas which are

(a) members or subscribers of the Mutual Casualty Insur-

ance Rating Bureau, another licensed rating organization

similar to the National Bureau, or (b) insurers which are

neither members of nor subscribers to any rating bureau

and write such insurance at rates independently established

by each insurer (R. 224, 19, 155-158).

9]

On or about August 17, 1948 and without further com-

munication with respondents or the Arkansas Insurance

Department, petitioner commenced this action. The com-

plaint describes the foregoing as a ‘‘pattern of action fol-

lowed under a contract or conspiracy between them in

restraint of trade or commerce among the several states’’

and in violation of Section 1 of the Sherman Act. Treble

damages and certain injunctive relief are demanded in the

complaint (R. 224, 7, 8).

Summary of Argument

The courts below correctly decided, in accordance with

the decisions of this Court, that:

1. The Sherman Act is inapplicable to cooperative

action among insurers in rate making and related

matters, to the extent that such activities are regulated

by State law;

REMMI EDM AR Tia PIERRE Gay PMO EA TPE AMEE IEEE SOME PMN RY BZ RNY Leg LI

6

2. The acts of these respondents were authorized

and regulated by valid State laws; and

3. The motion for summary judgment should be

granted.

ARGUMENT

POINT I

The Sherman Act is inapplicable to co operative action

among insurers in rate making and related matters, to the

extent that such activities are regulated by State law.

(A) Background of the applicable principles and statutes.

On June 5, 1944 this Court determined for the first time

that (a) an insurance company conducting a substantial

part of its business across State lines is engaged in ‘‘com-

merce among the several States’’ and is subject to regula-

tion by Congress under the Commerce Clause of the Con-

stitution and (b) the Sherman Antitrust Act is applicable

to the business of insurance. United States v. South-

Eastern Underwriters Association, 322 U.S. 533.

While the S. E. U. A. case was pending before the Court,

there were introduced in both Houses of Congress com-

panion bills to exempt the business of insurance from the

Sherman and Clayton Antitrust Acts. H. R. 3270, 8. 1362,

78th Cong., 1st Sess., introduced respectively on September

20 and 21, 1943. See Note (1943) 32 Geo. L. J. 66. These

bills were still being considered at joint public meetings of

House and Senate Judiciary Subcommittees when the

S. E. U. A. decision was rendered. Joint Hearings on S.

1362, H. R. 3269, and H. R. 3270 before Subcommittees of

Committees on the Judiciary, 78th Cong., Ist and 2nd Sess.,

Parts 1-6. On January 18, 1945 Senators McCarran and

Ferguson introduced a proposal by the National Associa-

tion of Insurance Commissioners. After prolonged debate

and substantial amendment, it passed both Houses and was

SRE ARS SR NRE RLU aN SE ERIS METI OME TESA ROR sel tang MERU TE AME 0 OR

7

approved by President Roosevelt on March 9, 1945. P. L.

No. 15, 79th Cong., Ist Sess., Ch. 20, Sees. 1-5 (March 9,

1945) ; 59 Stat. 33, 34; 15 U.S. C. 1011-1015.

The pertinent text of the statute as enacted (hereinafter

referred to as ‘‘The McCarran Act’’) is as follows:

‘‘See. 1. Congress hereby declares that the con-

tinued regulation and taxation by the several States

of the business of insurance is in the public interest

and that silence on the part of the Congress shall not

be construed to impose any barrier to the regulation

or taxation of such business by the several States.

‘*Sec. 2.(a) The business of insurance, and every

person engaged therein, shall be subject to the laws

of the several States which relate to the regulation

or taxation of such business.

‘*(b) No Act of Congress shall be construed to in-

validate, impair, or supersede any law enacted by any

State for the purpose of regulating the business of

insurance, or which imposes a fee or tax upon such

business, unless such Act specifically relates to the

business of insurance: provided, That after January

1, 1948, the Act of July 2, 1890, as amended, known

as the Sherman Act, and the Act of October 15, 1914,

as amended, known as the Clayton Act, and the Act

of September 26, 1914, known as the Federal Trade

Commission Act, as amended, shall be applicable to

the business of insurance to the extent that such

business is not regulated by State law.

*‘Sec. 3.(a) Until January 1, 1948 the Act of July

2, 1890 as amended known as the Sherman Act, and

the Act of October 15, 1914, as amended, known as

the Clayton Act, and the Act of September 26, 1914,

known as the Federal Trade Commission Act, as

amended, and the Act of June 19, 1936, known as the

Robinson-Patman Antidiscrimination Act, shall not

apply to the business of insurance or to acts in the

conduct thereof.

‘*(b) Nothing contained in this Act shall render the

said Sherman Act inapplicable to any agreement to

boycott, coerce, or intimidate, or act of boycott,

coercion, or intimidation.

> ‘ eee Se negic Pests fe My et Rb

ELE LUE CELLS IP MES LORIN OP ATA SHED EE POT IP NYE RUM AE BRONTE aE SN EA

? 7

The moratorium period in the Act, originally to end

January 1, 1948, subsequently was extended by Congress to

June 30, 1948. P. L. No. 238, 80th Cong., Ist Sess. ch. 326,

appr. July 25, 1947.

During and after the moratorium every State and Terri-

tory (with the single exception of Idaho), and Congress for

the District of Columbia, enacted or revised various regula-

tory laws concerning the business of casualty insurance. See

Notes (1949) 3 Ark. L. Rev. 55 and (1947) 47 Col. L. Rev.

1314. As in Arkansas, all of these authorize rating organi-

zations and other cooperative rating activities, under public

supervision. There can be no doubt but that the object of

these statutes was to accept the invitation of Congress

expressed in the McCarran Act, to preserve State regula-

tion and to render inapplicable the Federal antitrust laws.

q (B) Wholly apart from the McCarran Act, rating combinations

4 do not violate the Sherman Act if they are regulated by

: State law; by that statute, Congress expressly declared that

; State regulation of the insurance business is in the public

3 interest, and provided that the States may permit, under

; public regulation, rating combinations and other activities

3 which might otherwise violate the Sherman Act.

| For purposes of the following discussion, we shall as-

sume that the rating activities of the National Bureau are

such that in ordinary interstate industries they would con-

stitute a violation of the Sherman Act. We also shall as-

sume, as we shall hereinafter demonstrate, that the Ar-

kansas legislature has found it to be in the public interest

to authorize such activities under State regulation, and that

no Federal regulation exists in the field.

Under such circumstances, the State-regulated activities

do not violate the Sherman Act. The acts authorized and

regulated by the State are as effective as its acts and the

Federal courts will not impute to Congress an intention

to nullify what the State legislature has determined to be

in the interests of its citizens. Parker v. Brown, 317 U. S.

341; Olsen v. Smith, 195 U. S. 332; Field v. Barber Asphalt

ty

Say,

a

*

3

‘

2

ae

i

———

9

Paving Co., 194 U. S. 618, 619, 624. See also United States

y. South-Eastern Underwriters Association, 322 U. S.

at 562.

The text and legislative history of the McCarran Act

demonstrates that Congress has intended that the States

should have plenary and exclusive power to regulate the

business of insurance. See McCarran Act, Secs. 1 and 2;

Sen. Rep. No. 1112, parts 1 and 2, September 20, 1944, 78th

Cong., 2nd Sess.; Sen. Rep. No. 20, Jan. 24, 1945, H. R.

Rep. No. 68, Feb. 8, 1945, H. R. Rep. No. 143, Feb. 13, 1940,

H. R. Rep. No. 213, Feb. 22, 1945, 79th Cong., 1st Sess.

In exempting the business of insurance from the anti-

trust laws ‘‘to the extent that it is regulated by State law’’,

Congress further intended that if the States determined

that State-regulated rating bureaus and similar activities

are in the public interest, such acts could not be held to

violate the Sherman Act or the other enumerated statutes.*

See 91 Cong. Ree. 1442, 1443, 1481, 1486 (1945).

The right of Congress to permit regulation by govern-

mental authority, rather than by the free forces of competi-

tion is well established. McLean Trucking Co. v. United

States, 321 U. S. 67. It is equally well established that gov-

ernment has a special relation to insurance and that the

business has ‘‘long been withdrawn from the benefits and

caprices of free competition’. Osborn v. Ozlin, 310 U.S.

53, 65.

Prudential Insurance Co. v. Benjamin

The history of the McCarran Act and the legislative

purposes of its enactment were thoroughly examined by this

Court in the case of Prudential Insurance Co. v. Benjamin,

328 U. S. 408. An insurance company protested an annual

*The sole exceptions to the foregoing are boycott,

coercion and intimidation, which are not involved in this

ease (R. 227).

WEAR tiun.t. —

—_ . a Ee

10

tax levied by South Carolina on foreign insurers (but

not on domestic companies) as a condition of being author-

ized to do business within the State. The tax amounts to

three per cent of the aggregate of premiums received from

business done in South Carolina, regardless of its inter-

state or local character. Citing the S. EF. U. A. decision, the

insurer contended that the tax was an unconstitutional dis-

crimination against interstate commerce in favor of local

business. This Court unanimously upheld the tax.

The late Mr. Justice Rutledge traced the winding paths

of the previous decisions, commenting that ‘‘the history of

the commerce clause has been one of very considerable

judicial oscillation’’, 328 U. S. at 420. The authorities

cited by Prudential were distinguished on the ground that

in none of them had Congress acted or purported to act,

either by way of consenting to the State’s tax or otherwise.

The Court stated (Id. at 424):

‘‘None of the decisions conceded, because none in-

volved any question of the power of Congress to

make conclusive its own mandate concerning what

is commerce. But apart from that function of defin-

ing the outer boundary of its power, whenever Con-

gress’ judgment has been uttered affirmatively to

contradict the Court’s previously expressed view

that specific action taken by the states in Congress’

silence was forbidden by the commerce clause, this

body has accommodated its previous judgment to

Congress’ expressed approval.”’

Since there was no contention by Prudential that com-

merce was not involved, the Court would give effect to the

positive expression by the McCarran Act that the ‘‘con-

tinued regulation and taxation by the several States of the

business of insurance’’ is in accord with Congress’ policy.

The court thus rejected the argument of Prudential that the

Commerce Clause ‘‘of its own force’’, and without reference

to any action by Congress, forbids discriminatory State

taxation of interstate commerce.

11

Reviewing the McCarran Act, the Court found that it

was the intention of Congress to ‘‘put the full weight of its

power behind existing and future state legislation to sus-

tain it from any attack under the commerce clause to what-

ever extent this may be done with the force of that power

behind it, subject only to the exceptions expressly provided

for.’’ The Court declared (Id. pp. 430, 431):

‘*Moreover, in taking this action [enactment of the

McCarran Act] Congress must have had full knowl-

edge of the nation-wide existence of state systems of

regulation and taxation; of the fact that they differ

greatly in the scope and character of the regulations

imposed and of the taxes enacted; and of the further

fact that many, if not all, include features which, to

some extent, have not been applied generally to other

interstate business. Congress could not have been

unacquainted with these facts and its purpose was

evidently to throw the whole weight of its power

behind the state systems, notwithstanding these

variations. ”’

South Carolina and Congress had acted in complete

coordination to sustain the tax, the Court noted, and it is

therefore ‘‘reinforced by the exercise of all the power of

government residing in our scheme’’. Id. at pp. 435, 436.

The judgment of the Supreme Court of South Carolina,

upholding the tax, accordingly was affirmed.

Other pertinent decisions of this Court are in accord.

See Robertson v. California, 328 U. S. 440, 457, 462; Pan-

handle East. Pipe Line Co. v. Pub. Serv. Comm’n., 332 U. 8S.

507, 521.

Arguments of Petitioner

Petitioner has assailed the McCarran Act as unconstitu-

tional, principally upon the ground that Conzress has

unlawfully delegated its legislative power to the States.

Analysis of the brief shows that in support of this argument

petitioner relies upon only one decision, i.e., Knickerbocker

12

Ice Co. v. Stewart, 253 U. 8. 149. The Knickerbocker case

and its related predecessors deal solely with the principles

of maritime jurisdiction under admiralty law, and cannot

be cited as authority in any other field. Parker v. Motor

Boat Sales, 314 U. S. 244, 247; Red Cross Line v. Atlantic

Fruit Co., 264 U. S. 109, 124; Davis v. Dept. of Labor, 317

U. S. 249, 252, 255. This was made manifest by the Court

itself in the Knickerbocker opinion, when it disclaimed any

intention to impair the doctrine of Congressional consent

to State legislation as expounded in Clark Distilling Co. v.

Western Maryland Ry. Co., 242 U.S. 311. Noting that the

Clark case was concerned with the power of Congress under

the Commerce Clause, this Court declared (253 U. S. at

166): ‘‘Here we are concerned with a wholly different

constitutional provision [Article 3, Section 2]—one which

for the purpose of securing harmony and uniformity, pre-

scribes a set of rules, empowers Congress to legislate to

that end, and prohibits material interference by the states.”’

The Court was careful to point out that the ‘‘distinction

between the indicated situation created by the Constitution

relative to maritime affairs and the one resulting from the

mere grant of power to regulate commerce without more,

should not be forgotten... . ’’ Id. at 161.

In any event, this Court has declared that no invalid

delegation of power is contained in the McCarran Act.

Prudential Ins. Co. v. Benjamin, 328 U. S. 408, 433, 438.

The only other constitutional argument made by peti-

tioner is that ‘‘Congress cannot suspend a general law for a

period of time except under war powers’’. This contention

is as obscure as it is irrelevant. A hodgepodge of conflict-

ing decisions are cited in the petition (pp. 10-12), most of

which serve only to confuse whatever point petitioner is

seeking to make.

Congress did not ‘‘suspend a general law’’; it rendered

the Sherman Act inapplicable to the insurance business

until June 30, 1948 and inapplicable to it thereafter ‘‘to

the extent that such business is regulatec by State law”’.

——__

13

It is well established, of course, that Congress may grant

any such exemptions from the anti-trust laws, McLean

Trucking Co. v. United States, 321 U. S. 67, 69; Sunshine

Anthracite Coal Co. v. Adkins, 310 U. S. 381, 396; N. Y.

Central Securities Corp. v. United States, 287 U. S. 12.

In enacting the McCarran Act Congress saw fit to keep

alive ‘‘the hand of state regulatory bodies’’ in the matter

of public supervision of a major interstate industry.

Connecticut L. dé P. Co. v. Federal Power Com’n., 324 U.S.

515, 530. We accordingly submit that Congressional col-

laboration of this order, established to implement a policy

determined by Congress in its legislative discretion, is free

from constitutional defect. Prudential Ins. Co. v. Benjamin,

328 U. S. 408; Connecticut L. & P. Co. v. Federal Power

Com’n., supra.

POINT Il

The acts of these respondents were authorized and

regulated by valid State laws.

The lower courts have found and it is uncontested, that

the respondents’ acts of which petitioner complains were

authorized and regulated by Act No. 116, Arkansas Laws

1947 (R. 227, 237).

The Arkansas rating law provides the system of regu-

lation most common in the United States. In broad outline

it provides that:

1. Rates must meet certain standards;

2. All rates must be filed with the State Commis-

sioner of Insurance, who is granted various powers

if rates fail to meet the statutory standards;

3. Companies may combine in rating matters but

only if their organizations for such purposes are li-

censed and supervised by the State.

a

14

Such a system of regulation for various lines of insur-

ance existed in many of the States at the time of the S. E.

U. A. decision and passage of the McCarran Act. During

the moratorium granted by Congress, the National Asso-

ciation of Insurance Commissioners and an All-Industry

Committee met to consider a model form of rate regulatory

law. After months of debate the model law was drafted

and agreed upon (the sole disagreement being with respect

to one word not relevant to this case). It is this model

law which was enacted by the Arkansas legislature and

most other States, and was adopted with varying amend-

ments in almost all remaining jurisdictions. See 47 Col.

L. Rev. 1314, 1321 (1947); 3 Ark. L. Rev. 55, 61 (1949);

Proceedings, National Assn. of Insurance Commissioners,

77th Sess., pp. 212, 353-412 (1946).

The significance of enacting such model legislation will

be apparent to the Court as establishing the reasonable-

ness and legality of the law. Such considerations were

weighed by the Supreme Court of Arkansas in National

Union Fire Ins. Co. v. Dickinson, 128 Ark. 367 at 380, 194

S. W. 254. In upholding the legality of a rating law relat-

ing to fire insurance, Wood, J. declared:

‘But the fact that the method adopted by the Ar-

kansas bureau is modeled after a bill that was recom-

mended by the National Convention of Insurance

Commissioners and enacted into law in several of the

States is a cogeat argument in support of the con-

tention of the appellees that the method of the

Arkansas bureau is not arbitrary or unreasonable.”’

Petitioner makes no effort to support its statement that

the statute violates the State Constitution and the State

antitrust laws. These points were examined and dismissed

by the Courts below (R. 227, 238).

ae

15

POINT III

The motion for summary judgment was properly

granted.

There is in effect in Arkansas a comprehensive rate

regulatory statute enacted by the State with the express

consent of the Federal government. Under that statute

rates charged in Arkansas must not be ‘‘excessive, inade-

quate or unfairly discriminatory’’. Methods of challenging

rates, in addition to the required review by the Commis-

sioner before they go into effect, are provided.

By this action, petitioner seeks to use the treble damage

provisions of the Sherman Act to challenge the legality

of its established premium rate and to be awarded ‘‘dam-

ages.’’ This cannot be done. Even assuming a violation

of the Sherman Act, the rate in effect under the Arkansas

statutes is the legal rate and petitioner is not entitled to

question it in proceedings under the Sherman Act. Keogh

v. Chicago & Northwestern Railway Co. et al., 260 U. S. 156.

In addition to the damages sought by petitioner, the

complaint also prays for certain injunctive relief. This lat-

ter plea is obviously an attempt to have the Federal courts

assume the proper duties and responsibilities of the Insur-

ance Coinmissioner of the State of Arkansas. No such plea

ean be granted. The statute provides adequate means for

the determination and correction of abuses and the Com-

missioner possesses the necessary data and ample powers

to hear and determine any complaint. Any order or deci-

sion of the Commissioner is subject to judicial review in the

State courts. See Section 5 and Subsection 6(d), Section 9

and Subsection 17(c) of Act No. 116, Arkansas Laws 1947.

Federal courts will not attempt by injunction to usurp the

authority and assume the responsibilities of duly consti-

tuted administrative officials. United States Navigation

Co., Inc. v. Cunard S. 8. Co., 284 U. 8. 474; Railroad Com’n

16

of Texas v. Pullman Co., 312 U. 8, 496 at 500, 501; Railroad

Commission of Texas v. Rowan & Nichols Oil Co., 310 U.S.

573, 311 U. S. 615; See Terminal Warehouse Co. v. Penn.

R. R. Co., 297 U. S. 500 at 513, 514.

The answer of these respondents set forth detailed facts

constituting an affirmative defense (R. 15-21). Those facts

describe the nature and pertinent operations of the National

Bureau, the company respondents, the Arkansas Auto-

mobile Assigned Risk Plan, and the exact details of all

dealings between these respondents and petitioner. The

truth of these facts has been attested by the sworn state-

ments of the appropriate officers among these respondents,

has been admitted by all parties, has been attested by the

Arkansas Commissioner of Insurance and has been estab-

lished by the trial court. (R. 23, 155, 25, 221-225). In

addition, a stipulation as to the truth of certain additional

facts was entered into between petitioner and these re-

spondents and filed with the District Court (R. 151-180).

The District Court found that all material facts were in

evidence and that no genuine issue exists as to any material

fact (R. 225).

These circumstances present precisely the type of situa-

tion in which a motion for summary judgment pursuant to

Rule 56 is appropriate. Designed as an expeditious pro-

cedural device to obtain prompt justice for all parties in

litigation, the Rule was intended to be used when there

exists no genuine dispute as to any material fact and only

questions of law are presented. Madeirense Do Brasil S/A

v. Stulman-Emrick Lumber Co., 147 F. 2d 399 (C. A. 2),

cert. denied 325 U. S. 861; Walling v. Richmond ‘'crew

Anchor Co., 154 F. 2d 780 (C. A. 2), cert. deniec 328

U. 8. 870; 3 Moore, Federal Practice, Sec. 56.04 (1938) ;

Clark and Samenow, The Summary Judgment, 38 Yale

L. J. 423 (1929). See also, 10 Fed. Rules Serv., (Amend-

ments) XCVII-XCVIII (1948). It has been specifically

upheld as appropriate in cases under the anti-trust laws.

Intern’l Salt Co. v. United States, 332 U. 3. 392; Associated

17

Press v. United States, 326 U. 8.1; Clark Oil Co. v. Phillips

Petroleum Co., 148 F. 2d 580 (C. A. 8), cert. denied 326

U. S. 734.

Conclusion

The acts of these respondents were in accordance with

statutes constituting due exercise of the governmental

powers of the United States and the State of Arkansas.

Respondents have not violated Section 1 of the Sherman

Act, which is inapplicable to the acts of which petitioner

complains.

In view of the foregoing, counsel for these respondents

respectfully submit that the petition should be denied in all

respects.

Respectfully submitted,

James B. Donovan,

New York, N. Y.

Epwarp L. Wricur,

Little Rock, Ark.

Attorneys for respondents Nationa, Bureau

or CasuaLty Unprerwriters, AETNA CasuALTY

anD Surety Company, AMERICAN GENERAL IN-

SURANCE CoMPpaANy, AMERICAN GUARANTEE AND

Liasmity Insurance CoMPANYy, AMERICAN

Surety Company or New York, Arex InpEM-

nity Company, Assocratep Emptoyers Luoyns,

Bankers InpemMNity Insurance Company,

Carotina Casuauty Insurance Company, THE

Century InpEeMNity Company, CoLumBIA

Casusity Company, CommerciaL CasuALTy

Insurance Company, Commercia, Stanparp

Insurance Company, Tue Connecticut In-

DEMNITY Company, Eactz Inpemniry Com-

PRE ROG AEST ROR G IIS! II LOTR TOES AI! AINE EA ETE to TERNATIONAL,

18

pany, EmMpLoyers CasuaLty Company, Factory

Murvuat Liasmity Insurance CoMPANY OF

America, THe Fiperity anp Casuatty Com-

pany or New York, Fipetity anp Deposit

Company or MaryLand, Firemen’s Funp In-

DEMNITY CoMPANY, GENERAL INSURANCE Cor-

PORATION, GLENS Fauus InpDEMNITY COMPANY,

Guiose INDEMNITY Company, Great AMERICAN

InpeMNITY Company, Hartrorp ACCIDENT AND

InpeMNiITY Company, THE Home INDEMNITY

Company or New York, Lonpon GuaARANTEE

anp AccipeENtT Company, Limirep, Manurac-

TURERS AND MrercHants INDEMNITY COMPANY,

Maryianp CasuaLty Company, MassacHUSETTS

Bonp1NnG AND InsuRANCE Company, THE METRO-

POLITAN CasuaLtTy INsuRANCE CoMPANY oF NEW

York, Nationa AUTOMOBILE AND CASUALTY

Insurance Company, Nationa, Surety Cor-

PORATION, New AMSTERDAM CasuaLTy CoM-

pany, New York Casuatty Company, THE

Ocean ACCIDENT AND GUARANTEE CORPORATION,

Limitep, Pactric EmMpioyers INsurANCE Com-

PANY, PHorenrx InpeMNITyY Company, RoyaL

InpemMnity Company, Service Casuatty Com-

PANY oF New York, Stanparp Accipen? [n-

SURANCE CoMPANY, TRADERS AND GENERAL [N-

SURANCE Company, THE TRAVELERS INDEMNITY

Company, THe Travecers InsuRANCE CoMPANY,

Untrep Nationa Inpemnity Company, UNITED

States Casuatty Company, Unirep STATES

Fivetiry aNnp Guaranty Company, ZURICH

GeneraL ACCIDENT AND LiaBiLity INSURANCE

Company, Limitep, CoNsoLipaTED UNDER-

writERS, Highway INsuraNcE UNDERWRITERS.