Association of Banks in Ins., Inc. v. Duryee

Decision Date18 June 1999
Docket NumberNo. C-2-98-1120.,C-2-98-1120.
Citation55 F.Supp.2d 799
PartiesASSOCIATION OF BANKS IN INSURANCE, INC., et al., Plaintiffs, v. Harold T. DURYEE, Defendant.
CourtU.S. District Court — Southern District of Ohio

Kathleen M. Trafford, Porter, Wright, Morris & Arthur, Columbus, OH, for plaintiffs.

Ann Elizabeth Henkener, Ohio Attorney General, Columbus, OH, for defendant.


GRAHAM, District Judge.

This is an action for declaratory judgment and injunctive relief filed pursuant to 42 U.S.C. § 1983 and 28 U.S.C. § 2201. The plaintiffs are the Association of Banks in Insurance, Inc., the American Bankers Association, the Ohio Bankers Association, and the Huntington National Bank ("Huntington"). The defendant is Harold T. Duryee, who has been sued in his official capacity as Superintendent of the Ohio Department of Insurance. The Office of the Comptroller of the Currency of the United States ("OCC") has submitted a brief as amicus curiae. The Independent Insurance Agents of Ohio, Inc., the Ohio Association of Life Underwriters, the Ohio Association of Professional Insurance Agents, Inc., the Ohio Land Title Association, the Independent Insurance Agents of America, Inc., the National Association of Life Underwriters and the National Association of Professional Insurance Agents, Inc. (collectively referred to as "the intervenor defendants") have intervened in this action as defendants.

This action involves the right of a national bank under § 13 of the Federal Reserve Act, 12 U.S.C. § 92, to act as an insurance agent in places where the population does not exceed 5,000 inhabitants (hereinafter referred to as "small towns"). Section 92 provides in relevant part:

In addition to the powers now vested by law in national banking associations organized under the laws of the United States any such association located and doing business in any place the population of which does not exceed five thousand inhabitants, as shown by the last preceding decennial census, may, under such rules and regulations as may be prescribed by the Comptroller of the Currency, act as the agent for any fire, life, or other insurance company authorized by the authorities of the State in which said bank is located to do business in said State, by soliciting and selling insurance and collecting premiums on policies issued by such company; and may receive for services so rendered such fees or commissions as may be agreed upon between the said association and the insurance company for which it may act as agent[.]

Plaintiffs seek a declaratory judgment holding that certain provisions of the Ohio Revised Code dealing with the licensing of insurance agents in Ohio are pre-empted under the Supremacy Clause of the United States Constitution, Art. VI, cl. 2 by 12 U.S.C. § 92. Plaintiffs also seek injunctive relief enjoining the defendant Superintendent from enforcing these provisions against national banks to the extent that these provisions are pre-empted by federal law.

This matter is before the court on the plaintiffs' motion for summary judgment and the cross-motions for summary judgment filed by defendant Duryee and the intervenor defendants. The procedure for granting summary judgment is found in Fed.R.Civ.P. 56(c), which provides:

The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.

The parties appear to agree that the issues presented to the court by the motions for summary judgment are primarily questions of law, and that there are no genuine issues of material fact.

The plaintiffs argue that certain provisions of the Ohio Revised Code governing the licensing of insurance agents are in conflict with the powers given to national banks under § 92 and that therefore § 92 pre-empts these state statutes. Specifically, plaintiffs contend that Ohio Revised Code §§ 3953.21(B), 3905.02(B), 3905.02(E)(1) and (2), 3905.03(A)(5), 3905.04, 3905.18(C) and (D), and 3905.18(G)(1) and (2) are pre-empted by federal law.

National banks are brought into existence under federal legislation, and are instruments of the federal government which are subject to the paramount authority of the United States. M. Nahas Co., Inc. v. First National Bank Hot Springs, 930 F.2d 608, 610 (8th Cir.1991). Thus, it is well established that any state law limiting the operation of national banks is preempted by federal law and invalid under the Supremacy Clause if the state law "expressly conflicts with the laws of the United States, and either frustrates the purpose of national legislation or impairs the efficiency of [national banks] to discharge the duties, for the performance of which they were created." Davis v. Elmira Savings Bank, 161 U.S. 275, 16 S.Ct. 502, 40 L.Ed. 700 (1896). Congress may confer power on the states to regulate national banks or may retain that power. Independent Comm. Bankers Ass'n of South Dakota, Inc. v. Board of Governors of Federal Reserve System, 820 F.2d 428, 436 (D.C.Cir.1987). The question is one of congressional intent, that is, did Congress, in enacting the federal law, intend to exercise its constitutionally delegated authority to set aside the laws of the state? California Fed. Sav. & Loan Ass'n v. Guerra, 479 U.S. 272, 280-281, 107 S.Ct. 683, 93 L.Ed.2d 613 (1987). Absent explicit preemption language, courts must consider whether the federal statute's "structure and purpose," or nonspecific statutory language, nonetheless reveal a clear, but implicit, pre-emptive intent. Jones v. Rath Packing Co., 430 U.S. 519, 525, 97 S.Ct. 1305, 51 L.Ed.2d 604 (1977).

The Supremacy Clause "invalidates state laws that `interfere with, or are contrary to,' federal law." Hillsborough County, Fla. v. Automated Medical Labs., Inc., 471 U.S. 707, 712, 105 S.Ct. 2371, 85 L.Ed.2d 714 (1985) (quoting Gibbons v. Ogden, 9 Wheat. 1, 211, 6 L.Ed. 23 (1824)). Federal law may pre-empt state law where it is in "irreconcilable conflict" with state law. Rice v. Norman Williams Co., 458 U.S. 654, 659, 102 S.Ct. 3294, 73 L.Ed.2d 1042 (1982). This may occur where compliance with both statutes is an impossibility. Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142-143, 83 S.Ct. 1210, 10 L.Ed.2d 248 (1963). Preemption is also appropriate where state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." Lawrence County v. Lead-Deadwood School Dist. No. 40-1, 469 U.S. 256, 260, 105 S.Ct. 695, 83 L.Ed.2d 635 (1985) (quoting Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581 (1941)).

Where state and federal laws are inconsistent, the state law is pre-empted even if it was enacted by the state to protect its citizens or consumers. As the Supreme Court noted in Gade v. National Solid Wastes Management Ass'n, 505 U.S. 88, 103, 112 S.Ct. 2374, 120 L.Ed.2d 73 (1992), in holding that a state law designed to promote worker safety was pre-empted:

In determining whether state law "stands as an obstacle" to the full implementation of a federal law, Hines v. Davidowitz, 312 U.S., at 67 , "it is not enough to say that the ultimate goal of both federal and state law" is the same, International Paper Co. v. Ouellette, 479 U.S. 481, 494 [107 S.Ct. 805, 93 L.Ed.2d 883] (1987). "A state law also is pre-empted if it interferes with the methods by which the federal statute was designed to reach th[at] goal." Ibid,; see also Michigan Canners & Freezers Assn., Inc. v. Agricultural Marketing and Bargaining Bd., 467 U.S. 461, 477 [104 S.Ct. 2518, 81 L.Ed.2d 399] (1984).

See also Morales v. Trans World Airlines, Inc., 504 U.S. 374, 112 S.Ct. 2031, 119 L.Ed.2d 157 (1992) (holding that a state statute allegedly designed to prevent market distortion caused by false advertising of airfares was precluded by federal law pre-empting state regulation of the rates, routes or services of air carriers).

An additional pre-emption doctrine is relevant where the state law in question consists of insurance regulation. Under the provisions of the McCarran-Ferguson Act, "[n]o Act of Congress shall be construed to invalidate, 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[.]" 15 U.S.C. § 1012(b).

In the context of pre-emption of state laws affecting national banks, the Supreme Court held in Franklin National Bank v. New York, 347 U.S. 373, 74 S.Ct. 550, 98 L.Ed. 767 (1954) that a state statute which prohibited the use of the word "savings" in bank advertising was pre-empted by federal law that authorized national banks to receive deposits without qualification or limitation. The Court noted that "competition for business finds advertising one of the most usual and useful of weapons" within the incidental powers granted to national banks. Id. at 377, 74 S.Ct. 550. The Court concluded that, despite the fact that consumers might be misled by the peculiar meaning of the term "savings" applicable in New York, the national banks "accept and pay interest on time deposits of people's savings, and they must be deemed to have the right to advertise that fact by using the commonly understood description which Congress has specifically selected." Id. at 378, 74 S.Ct. 550.

Pre-emption in the area of national banks may occur even if compliance with both state and federal laws is possible where the state laws "infringe the national banking laws or impose an undue burden on the performance of the banks' functions." Anderson National Bank v. Luckett, 321 U.S. 233, 248, 64 S.Ct. 599, 88 L.Ed. 692 (1944). In Fidelity Federal Savings and Loan Association v. de la Cuesta, 458 U.S. 141, 102 S.Ct. 3014, 73 L.Ed.2d 664...

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