Blackfeet Nat. Bank v. Nelson

• Decision Date: 05 April 1999
• Docket Number: No. 96-3021,96-3021
• Citation: 171 F.3d 1237
• Parties: BLACKFEET NATIONAL BANK, American Deposit Corp., Plaintiffs-counterdefendants-Appellants, v. Bill NELSON, as Treasurer and Insurance Commissioner of the State of Florida, Defendant-counterclaimant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1237

171 F.3d 1237

BLACKFEET NATIONAL BANK, American Deposit Corp., Plaintiffs-counterdefendants-Appellants, v. Bill NELSON, as Treasurer and Insurance Commissioner of the

State of Florida, Defendant-counterclaimant-Appellee.

No. 96-3021.

United States Court of Appeals, Eleventh Circuit.

April 5, 1999.

Thaddeus Holt, Holt Law Office, Point Clear, AL, Dennis M. Gingold, Anderson, Aukamp & Gingold, Washington, DC, for Plaintiffs-counterdefendants-Appellants.

Daniel Y. Sumner, Legal Office, David Busch, Dennis S. Silverman, Karen Asher-Cohen, Div. of Ins. Fraud, Dept. of Ins., Tallahassee, FL, for Defendant-counterclaimant-Appellee.

Ross M. Koppel, Washington, DC, for Amicus Office of the Comptroller of the Currency.

Bruce E. Clark, Sullivan & Cromwell, New York City, for Amicus New York Clearing House Ass'n.

Marc E. Sorini, David O. Stewart, Washington, DC, for Amicus American Counsel of Life Ins.

Scott A. Sinder, Washington, DC, for Amicus Nat. Ass'n of Life Underwriters.

Appeal from the United States District Court for the Northern District of Florida.

Before TJOFLAT, BIRCH and MARCUS ^*, Circuit Judges.

TJOFLAT, Circuit Judge:

Blackfeet National Bank, a national bank located in Montana, issues a product called the "Retirement CD" to the public. As part of its marketing efforts, Blackfeet has advertised these CDs in the Wall Street Journal. The Insurance Commissioner for the State of Florida, contending that offering the Retirement CD involves engaging in the business of insurance, commenced administrative proceedings against Blackfeet under the Florida Insurance Code. In response, Blackfeet sued the Insurance Commissioner, seeking a declaratory judgment that its sale of the Retirement CD was authorized by the National Bank Act (the "Bank Act"), 12 U.S.C. §§ 21-216d (1994). The district court, concluding that state regulation of the Retirement CD was permitted by the reverse preemption provisions of the McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1015 (1994), rejected Blackfeet's position and granted the Insurance Commissioner summary judgment. We affirm.

I.

Blackfeet National Bank entered into a licensing agreement with American Deposit Corporation ("ADC") to obtain marketing rights to a new banking industry product, the Retirement CD. A customer desiring to purchase the Retirement CD makes an initial deposit with Blackfeet. At the time of the initial deposit, the customer chooses a maturity date. The customer also chooses a period, from one to five years, during which the interest rate for the Retirement CD remains fixed. Thereafter, until the maturity date, the interest rate fluctuates in accordance with the cost of funds (but never falling below three percent). The customer has the option to make limited additional deposits into the Retirement CD account prior to the maturity date.

Upon maturity, the customer may make a one-time withdrawal of up to two-thirds of the balance in the Retirement CD account. The balance remaining after this initial withdrawal is disbursed to the customer in equal periodic payments for the remainder of his life. Even in the event that the Retirement CD account reaches a zero balance, the customer continues to receive the same periodic payments until death. On the other hand, should the customer die before full payment of the principal in the Retirement CD account (as determined at the maturity date), the remainder of the principal is paid to the customer's estate. To minimize the mortality risk it assumes, Blackfeet determines the amount of the periodic payments to its customers by using actuarial tables.

Under its agreement with ADC, Blackfeet obtained a non-exclusive license to market the Retirement CD throughout the United States. As part of its marketing efforts, Blackfeet placed an advertisement for the Retirement CD in the Wall Street Journal. ¹ In response to this advertisement, Tom Gallagher, ² the Insurance Commissioner of Florida (the "Commissioner"), began administrative proceedings against Blackfeet and ADC. The Commissioner maintained that the Retirement CD was in essence an insurance product, and that marketing it through the national media constituted participation in the business of insurance in Florida--in violation of Florida law. After the Commissioner commenced those proceedings, Blackfeet and ADC brought this suit. ³ Citing a letter from the Office of the Comptroller of the Currency (the "Comptroller") permitting (by not precluding) Blackfeet's issuance of the Retirement CD, Blackfeet and ADC urged the court to declare that the Commissioner lacked authority to regulate such issuance. ⁴ Concluding that the letter did not foreclose state regulation of the Retirement CD as insurance, the district court entered summary judgment for the Commissioner. Blackfeet and ADC (collectively "Blackfeet") then lodged this appeal.

II.

The district court decided this case on the cross-motions of both parties for summary judgment. As the only issues in dispute involve questions of law, we review the district court's judgment de novo. See Lasche v. George W. Lasche Basic Profit Sharing Plan, 111 F.3d 863, 865 (11th Cir.1997).

III.

Our analysis of this matter involves several inquiries. In part III.A, we address the reasonableness of the Comptroller's "no objection" letter with respect to Blackfeet's issuance of the Retirement CD. In part III.B, we assume arguendo that the Comptroller's determination was reasonable and examine the relationship between a federal law permitting the issuance of the Retirement CD by Blackfeet and a Florida law prohibiting the participation of banks in the business of insurance. We focus our attention in this part on the application of the McCarran-Ferguson Act, and in that regard we conduct a three-pronged inquiry: "(1) whether the pertinent sections of the [Florida Code] were enacted 'for the purpose of regulating the business of insurance'; (2) whether the Retirement CD is properly considered 'the business of insurance'; and (3) whether the pertinent provisions of the Bank Act 'specifically relate to the business of insurance.' " American Deposit Corp. v. Schacht, 84 F.3d 834, 838 (7th Cir.1996).

A.

Blackfeet argued to the district court that it was authorized under the Bank Act to issue the Retirement CD. Blackfeet supported its argument with a determination by the Comptroller that issuance of the Retirement CD is an authorized bank activity. ⁵ The district court, accepting as reasonable the interpretation of the Comptroller, held that the Bank Act authorized Blackfeet's actions with respect to the issuance of the Retirement CD. We disagree.

Prior to placing its ad in the Wall Street Journal, Blackfeet notified the Comptroller of its intention to market the Retirement CD to the public. The Comptroller in turn sent Blackfeet what was in essence a "no objection" ⁶ letter, which in effect authorized Blackfeet to move forward with its plans. The Comptroller concluded that the Retirement CD was a financial product of the kind normally offered by banking institutions, and that its "primary attributes [were] grounded in the Bank's expressly authorized powers." According to the Comptroller, those powers included the power "to receive deposits and enter into contracts, coupled with its powers to incur liabilities and fund its operations." 12 U.S.C. § 24(Third),(Seventh) (1994).

The Supreme Court has addressed the authority of the Comptroller to interpret and apply the provisions of the Bank Act. In NationsBank of North Carolina, N.A. v. Variable Annuity Life Insurance Co., 513 U.S. 251, 115 S.Ct. 810, 130 L.Ed.2d 740 (1995), the Court reviewed the Comptroller's decision permitting banks to act as agents selling annuities for insurance companies. The Comptroller, as the chief administrator charged with the supervision of national banks, determined that the Bank Act authorized national banks to broker annuities. See id. at 254, 115 S.Ct. at 812. As part of this determination, the Comptroller concluded that annuities were not "insurance" within the meaning of section 13 ⁷ of the Bank Act, 38 Stat. 251, 264 (1913) (codified as amended at 12 U.S.C. § 92 (1994)). See id. at 255, 115 S.Ct. at 812-13. Several insurance companies challenged this conclusion, arguing that annuities were insurance and that the Comptroller's interpretation that they were within the business of banking under the Bank Act was unreasonable.

In reaching its decision, the Court first discussed the proper inquiry for assessing the reasonableness of an administrative interpretation of a statute. See Id. at 257, 115 S.Ct. at 813. The first prong of the inquiry tests the intent of Congress; if Congress' intent is clear, "that is the end of the matter." See id. (citing Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842, 104 S.Ct. 2778, 2781, 81 L.Ed.2d 694 (1984)). If the statute is ambiguous, however, a second inquiry is required to test the reasonableness of the administrator's interpretation. See id. "If the administrator's reading fills a gap or defines a term in a way that is reasonable in light of the legislature's revealed design, we give the administrator's judgment 'controlling weight.' " Id. at 257, 115 S.Ct. at 813-14 (quoting Chevron, 467 U.S. at 844, 104 S.Ct. at 2782).

Applying that two-part test to the facts, the NationsBank Court found first that the Bank Act permits activities beyond those enumerated in the statute (thereby making it ambiguous), and second that the Comptroller's interpretation of the statute as permitting banks to broker annuities for insurance companies was a reasonable interpretation deserving of the Court's due deference. In reaching this conclusion, the Court specifically accepted the Comptroller's view that "for the purpose at hand, annuities are properly classified as investments, not 'insurance.' " Id. at 261, 115 S.Ct. at 815. The Comptroller compared putting money in an annuity to putting ...