American General Insurance Company v. FTC, Civ. A. No. 73-H-282.

• Decision Date: 05 June 1973
• Docket Number: Civ. A. No. 73-H-282.
• Citation: 359 F. Supp. 887
• Parties: AMERICAN GENERAL INSURANCE COMPANY and Fidelity and Deposit Company of Maryland, Plaintiffs, v. FEDERAL TRADE COMMISSION et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

359 F. Supp. 887

AMERICAN GENERAL INSURANCE COMPANY and Fidelity and Deposit Company of Maryland, Plaintiffs, v. FEDERAL TRADE COMMISSION et al., Defendants.

Civ. A. No. 73-H-282.

United States District Court, S. D. Texas, Houston Division.

June 5, 1973.

Leroy Jeffers, Vinson, Elkins, Searls, Connally & Smith, George F. Reed, Houston, Tex., for American Gen. Ins. Co.

Decatur H. Miller, Pipe & Marbury, Richard F. Ober, Baltimore, Md., for Fidelity and Deposit Co.

Anthony J. P. Farris, U. S. Atty., William L. Bowers, Jr., and James R. Gough, Asst. U. S. Attys., Houston, Tex., Harold D. Rhynedance, Jr., Nicholas S. Reynolds, Washington, D. C., for defendants.

MEMORANDUM AND ORDER

SEALS, District Judge.

Plaintiffs ask the Court in this action for declaratory and injunctive relief, to declare that the Federal Trade Commission is without subject matter jurisdiction to conduct proceedings in connection with In the Matter of American General Insurance Company, FTC Docket 8847, for the reason that the McCarran-Ferguson Act, 15 U.S.C. § 1011 renders § 7 of the Clayton Act, 15 U.S. C. § 18 inapplicable to the merger of American General Insurance Company and Fidelity and Deposit Company of Maryland. Plaintiffs ask that a preliminary injunction issue against the Federal Trade Commission, its present members, and the administrative law judge involved in the administrative proceedings against Plaintiff American General Insurance Company enjoining them from conducting any further proceeding in FTC Docket No. 8847 until this Court has entered a final judgment determining the merits of this complaint, and that this Court enter a permanent injunction prohibiting Defendants from conducting any further proceedings in FTC Docket No. 8847 and directing Defendants to dismiss the Complaint therein in its entirety.

In response the Defendants have moved the Court to dismiss this action on the grounds that the Court lacks jurisdiction over the subject matter and that the Complaint fails to state a claim upon which relief can be granted. After hearing before the Court and upon the briefs and other papers filed with the Court, the Court makes the following Memorandum Opinion.

I.

This case has its roots in a merger agreement worked out in 1969 between American General Insurance Company and Fidelity and Deposit Company of Maryland. American General is a Texas corporation with its principal place of business in Houston, Texas. It is primarily a holding company: its subsidiaries include life insurance companies, property-liability insurance companies and financial noninsurance institutions. Fidelity and Deposit is a Maryland corporation with its principal place of business in Baltimore, Maryland. It is engaged in the business of writing property-liability insurance, primarily for commercial customers, and the majority of its writings consist of fidelity and surety bonds.

The merger agreement was submitted to the state insurance authorities of both Maryland and Texas who approved the plan. Subsequent to approval the new company applied for and received licenses to do business in all states where the prior companies had done business.

About June 17, 1971, the Federal Trade Commission issued a complaint alleging that American General had violated Section 7 of the Clayton Act by reason of its merger with Fidelity and Deposit. The basic allegation of the complaint was that the effect of the merger might be to lessen substantially competition or to tend to create a monopoly in the business of underwriting fidelity and surety bonds in the United States and in various states and other geographic markets.

In reply, American General alleged that the Federal Trade Commission lacked jurisdiction to challenge the merger in that the McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1015 renders Section 7 of the Clayton Act, 15 U.S.C. § 18, inapplicable to the merger since the subject matter of the Commission's Complaint involves the business of insurance which is regulated by State law.¹ American General also denied the principal allegations of the administrative complaint and requested that the complaint be dismissed. Following the intervention of Fidelity and Deposit in the administrative proceedings, plaintiffs filed a motion for summary decision on the jurisdictional ground.

On March 7, 1972, the Commission's administrative law judge issued his initial decision granting the Plaintiffs' motion for summary decision and dismissing the complaint. He held that "the States of Maryland and Texas, and many of the other states, have laws, capable of being enforced, which regulate the business of insurance, within the contemplation and meaning of the McCarran-Ferguson Act," and that therefore "the Federal Trade Commission lacks jurisdiction over the subject matter of the complaint herein."

The Commission counsel supporting the administrative complaint appealed to the whole Commission and after submission of written briefs and oral argument, the Commission vacated and set aside the decision of the administrative law judge and remanded the case for further proceedings. The Commission (per Dennison, C.) held that because of territorial limitations on a state's ability to regulate, neither Texas nor Maryland, the respective domiciliary states of American General and Fidelity and Deposit, nor any other state have regulations effectively reviewing the effects of mergers of national insurance companies on the industry as a whole. The Commission held further that the merger of insurance companies is not included in the "business of insurance," the regulation of which by a state preempts federal jurisdiction under the McCarran-Ferguson Act. Thus, the Commission concluded that it was not preempted by the McCarran-Ferguson Act from challenging the instant merger. Following the Commission's action remanding the case, Plaintiffs filed the suit now pending before this Court.

II.

Before this Court can consider Plaintiffs' request for injunctive relief, it must first ascertain that it has the jurisdiction necessary to interfere in proceedings currently pending before an administrative agency such as the Federal Trade Commission. Stripped to the core, Plaintiffs' suit becomes an attempt to obtain review in this Court of the jurisdictional determination made by the Federal Trade Commission when it denied Plaintiffs' motion for summary decision. The Plaintiffs contend that such denial amounts to a final ruling within the meaning of the Administrative Procedure Act, 5 U.S.C. § 704,² and that it is therefore within the jurisdiction of this Court for review.

The position of the Defendants is that the denial of motion for summary decision is an interlocutory order, not a "final agency action for which there is no other adequate remedy in a court," 5 U. S.C. § 704, and that therefore the Plaintiffs have failed to exhaust available administrative remedies. Defendants maintain that the issue raised in Plaintiffs' complaint is one the determination of which lies exclusively within the jurisdiction of the court of appeals upon a petition for review of a final order of the Commission, if indeed any order is ultimately entered against American General at the conclusion of the administrative proceeding. Under Defendants' theory the proper forum for review of a Commission proceeding initiated under Section 7 of the Clayton Act, 15 U.S.C. § 18, is specified in Section 11(c) of the Act, 15 U.S.C. § 21(c), which provides:

(c) Any person required by such order of the commission . . . to cease and desist from any such violation may obtain a review of such order in the court of appeals of the United States . . . .

Furthermore, the jurisdiction of the Court of Appeals over Commission Clayton Act proceedings is exclusive.³

It is the opinion of this Court that the Plaintiffs, by seeking to obtain equitable relief in this Court are in reality attempting to circumvent the statutory scheme of review and avoid the adjudicatory proceedings of the Commission. It is equally clear that the Supreme Court and this Circuit have repeatedly refused to allow obstructions to the orderly and expeditious operation of the administrative process. E.g., Allen v. Grand Central Aircraft Co., 347 U.S. 535, 74 S.Ct. 745, 98 L.Ed. 933 (1954); Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 58 S.Ct. 459, 82 L.Ed. 638 (1938); Bokat v. Tidewater Equipment Co., 363 F.2d 667 (5th Cir. 1966).

For this Court to have jurisdiction in this case under the Administrative Procedures Act, the action in question must either be one made reviewable by statute or a final agency action for which there is no other adequate remedy in a court. The denial of motion for summary decision in question in this instance is neither of these. In fact, it is analogous to a denial of motion for summary judgment and is therefore most properly characterized as interlocutory. While the Commission's summary determination as to its jurisdiction establishes the law of the case, it is not res judicata. Coffman v. Federal Laboratories, Inc., 171 F.2d 94 (3rd Cir. 1948); 6 Moore's Federal Practice, § 5614(2) at 2258 and 56.20(3-4) at 2759. Certainly a denial of a motion for summary judgment is not a "final decision" as contemplated by 28 U.S.C. § 1291 such as to vest jurisdiction in an appellate forum to review the denial. It is also clear that interlocutory appeal will not lie from a summary interlocutory order which is not made appealable by statute. 6 Moore's Federal Practice § 56.20 (3.-1 at 2747).

Continuing the analogy, it is apparent that many of the considerations which support the final judgment rule with respect to appeals from interlocutory decisions of lower courts are equally applicable to actions by administrative agencies. It may be, for example, that the Commission will find in favor of American General on the merits of the administrative complaint, or that the case will be settled. However, should the Commission issue an order...