CenTra, Inc. v. Chandler Ins. Co., Ltd.

• Decision Date: 01 December 1995
• Docket Number: No. S-93-964,S-93-964
• Parties: CENTRA, INC., A DELAWARE CORPORATION, et al., Appellants, v. CHANDLER INSURANCE COMPANY, LTD., A CAYMAN ISLANDS CORPORATION, et al., Appellees.
• Court: Nebraska Supreme Court

Page 318

540 N.W.2d 318

248 Neb. 844

CENTRA, INC., A DELAWARE CORPORATION, et al., Appellants, v. CHANDLER INSURANCE COMPANY, LTD., A CAYMAN ISLANDS CORPORATION, et al., Appellees.

No. S-93-964.

Supreme Court of Nebraska.

Dec. 1, 1995.

Syllabus by the Court

1. Courts: Attorney and Client. The courts have a duty to maintain public confidence in the legal system and to protect and enhance the attorney-client relationship in all its dimensions.

2. Trial: Attorneys at Law: Appeal and Error. A motion to disqualify an attorney is addressed to the discretion of the trial court, whose findings will not be disturbed absent evidence of abuse.

3. Actions: Attorneys at Law: Appeal and Error. An attorney disqualification matter is ancillary to the main case, whether the main case is at law, in equity, or is a special proceeding; thus, factual findings in disqualification cases will not be disturbed on appeal if substantial evidence supports those findings.

4. Mandamus: Attorneys at Law: Conflict of Interest. Mandamus is a viable means of addressing perceived attorney conflicts of interest.

5. Attorneys at Law: Mandamus: Appeal and Error. When an appeal from an order denying attorney disqualification involves issues collateral to the basic controversy, and when an appeal from a judgment dispositive of the entire case would not be likely to protect the client's interests, the party should seek mandamus or other interlocutory review.

6. Administrative Law: Statutes: Insurance. An administrative body such as the Department of Insurance has only that authority specifically conferred upon it by statute or by construction necessary to achieve the purpose of the relevant act.

7. Administrative Law: Statutes. An agency must administer a statute in accordance with the standards prescribed in the statute and may not exceed those standards.

8. Administrative Law: Statutes: Appeal and Error. On review, an appellate court determines the meaning of a statute independently of the determination made by an administrative agency. However, the court accords deference to an agency's interpretation of its own regulations unless that interpretation is plainly erroneous or inconsistent.

9. Administrative Law: Insurance. The Legislature has granted to the Department of Insurance general supervision, control, and regulation of insurance companies, associations, and societies and the business of insurance in Nebraska.

10. Statutes. In construing a statute, a court must look to the statutory objective to be accomplished, the evils and mischiefs sought to be remedied, and the purpose to be served, and then must place on the statute a reasonable or liberal construction that best achieves the statute's purpose, rather than a construction that defeats the statutory purpose.

11. Administrative Law: Insurance. It is the responsibility of the Department of Insurance to manage and oversee the regulation of insurers and the protection of policyholders in Nebraska, and the department must have powers adequate to carry out that responsibility.

12. Administrative Law: Insurance: Corporations. Pursuant to the grants of plenary authority contained in Neb.Rev.Stat. §§ 44-2139 and 44-2153 (Reissue 1993), the director of the Department of Insurance may issue the necessary protective orders until policyholders' interests are no longer jeopardized by outlaw corporate raiders.

13. Constitutional Law: Statutes: Appeal and Error. Whether a statute is unconstitutional is a question of law. Accordingly, this court is obligated to reach a conclusion independent of the decision reached by the trial court.

14. Constitutional Law: Statutes: Proof. The unconstitutionality of a statute must be clearly demonstrated before this court can declare the statute unconstitutional, and all reasonable doubts will be resolved in favor of its constitutionality.

15. Constitutional Law: Statutes. Even when a law may be constitutionally suspect, a court will attempt to interpret it in a manner consistent with the Constitution.

16. Constitutional Law: Federal Acts: Insurance: States. The McCarran-Ferguson Act permits states to regulate insurance companies within their boundaries and removes all Commerce Clause limitations upon that authority.

17. Federal Acts: Insurance: States. The McCarran-Ferguson Act grants states authority to regulate insurers only to the extent that state law governs the business of insurance.

18. Federal Acts: Insurance. The inquiry of whether a practice is part of the business of insurance under the McCarran-Ferguson Act has been reduced to a three-part test: (1) The practice must relate to the transferring and spreading of risk, (2) the practice must be an integral part of the policy relationship between the insurer and the insured, and (3) the practice must be limited to entities within the insurance industry.

19. Insurance: Corporations: Stock: Tender. A restriction on stock disposition issued pursuant to the Insurance Holding Company System Act relates, albeit indirectly, to the transferring and spreading of risk because the act and its implied powers are triggered only when a person who makes a tender offer for voting securities of a domestic insurer would acquire control of that domestic insurer.

20. Insurance: Corporations. The Insurance Holding Company System Act affords the Director of Insurance a chance to review the financial stability of an acquiring company and the opportunity to bring any threatened change of control under his own control so that he can consider the impact of such a change on policyholders.

21. Insurance: Corporations. Since a change of control of an insurer can affect the quality and stability of policies, the Insurance Holding Company System Act satisfies the requirement that it relates to the transferring and spreading of risk.

22. Insurance: Corporations. The review and evaluation by the director of the Department of Insurance involves the relationship between an insurance company and its policyholders.

23. Insurance: Corporations. The Insurance Holding Company System Act concerns itself solely with the acquisition of domestic insurance companies. It affects entities outside the insurance industry only insofar as those entities choose to enter this rightly regulated arena.

24. Constitutional Law: Federal Acts: Insurance. The Insurance Holding Company System Act relates to the business of insurance and thereby qualifies for the protection of the McCarran-Ferguson Act against a Commerce Clause challenge.

25. Constitutional Law: Statutes. Where a statute regulates evenhandedly to effectuate a legitimate local public interest and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits. If a legitimate local purpose is found, then the burden that will be tolerated will, of course, depend on the nature of the local interest involved and on whether it could be promoted as well with a lesser impact on interstate activities.

26. Constitutional Law: Corporations: Discrimination. The mere fact that the burden of a state regulation falls on some interstate companies does not, by itself, establish a claim of discrimination against interstate commerce.

27. Constitutional Law: Insurance: Statutes: Corporations: Discrimination. The Insurance Holding Company System Act applies equally, regardless of whether the would-be acquiring party is a Nebraska resident. As such, the act does not resemble the principal objects of dormant Commerce Clause scrutiny, which are statutes that discriminate against interstate commerce.

28. Insurance: Corporations. The Nebraska Insurance Holding Company System Act poses no threat of inconsistent regulations, since it regulates only the internal affairs of insurers registered in Nebraska.

29. Constitutional Law: Statutes: Insurance. The local purpose of protecting Nebraska insurance policyholders is legitimate and qualifies as a valid use of police power.

Alan E. Peterson, Lincoln and Henry E. Pfeiffer, of Cline, Williams, Wright, Johnson & Oldfather, Omaha, for appellants.

William M. Lamson, Jr., Michael J. Dugan, and Raymond E. Walden, of Kennedy Holland DeLacy & Svoboda, Omaha and Kenneth N. McKinney, Robert L. Roark, and Mary E. Nelson, of McKinney Stringer & Webster, P.C., Oklahoma, OK, for appellees Chandler Insurance Co. et al.

Don Stenberg, Attorney General, and Fredrick F. Neid, Lincoln, for appellee Nebraska Department of Insurance.

WHITE, C.J., and CAPORALE, FAHRNBRUCH, LANPHIER, CONNOLLY, and GERRARD, JJ.

WHITE, Chief Justice.

This appeal from the Lancaster County District Court arises from a corporate takeover battle wherein the Nebraska Department of Insurance (the department) denied the application of the appellant corporations (applicants) to acquire National American Insurance Company (NAICO). Applicants assign error to two holdings of the district court, which affirmed the decision of the department to deny the application for acquisition. Applicants allege error in the court's refusal to disqualify counsel for Chandler Insurance Company, Ltd., and its subsidiaries, and in the court's refusal to find that the Director of Insurance exceeded his statutory and constitutional authority in requiring applicants to seek department approval before selling or otherwise alienating their Chandler stock. We affirm.

I. THE PARTIES

CenTra, Inc., is a Delaware corporation whose principal place of business is in Michigan. CenTra is a holding company primarily concerned with motor freight transportation. Its subsidiaries and related entities include Can-Am Investments, Ltd., a Bahamian corporation whose directors are also the directors of CenTra; Ammex, Inc., a Michigan corporation; and DuraRock Underwriters, Ltd., a Barbados corporation and reinsurance company. Ownership and control of each of these entities traces back to one Manuel J. Moroun, an...