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Nature of Suit Code: 430
Nature of Suit: Banks and Banking
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 21, 2000 Decided May 16, 2000

No. 99-5158

Independent Insurance Agents of America, Inc., et al.,

Appellees

v.

John D. Hawke, Jr., Comptroller of the Currency,

and the Office of the Comptroller of the Currency,

Appellants

Appeal from the United States District Court

for the District of Columbia

(No. 98cv00562)

Douglas B. Jordan, Special Counsel, U.S. Department of

Treasury, argued the cause for appellants. With him on the

briefs were Robert B. Serino, Deputy Chief Counsel, L.

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Robert Griffin, Director, Horace G. Sneed, Assistant Director, and F. Thomas Eck, IV, Senior Trial Attorney.

Chrys D. Lemon, John J. Gill and Michael F. Crotty were

on the brief for amici curiae American Bankers Association

and Association of Banks in Insurance.

Scott A. Sinder argued the cause and was on the brief for

appellees.

Before: Sentelle, Henderson and Rogers, Circuit Judges.

Opinion for the Court filed by Circuit Judge Sentelle.

Circuit Judge Henderson concurs in the result.

Sentelle, Circuit Judge: In 1864, Congress granted national banks the power to "exercise ... all such incidental

powers as shall be necessary to carry on the business of

banking." Act of June 3, 1864, ch. 106, s 8, 13 Stat. 99, 101

(codified at 12 U.S.C. s 24 (Seventh) (1994)). Fifty-two years

later, Congress enlarged that grant by conferring the power

to act as general insurance agents to national banks located in

towns with a population not in excess of five thousand. See

Act of Sept. 7, 1916, ch. 461, 39 Stat. 752, 753-54 (codified at

12 U.S.C. s 92 (1994)). In 1999, Congress further enlarged

bank powers by allowing financial subsidiaries of "well capitalized and well managed" national banks to engage in a wide

variety of insurance activities both as an agent and broker.

Gramm-Leach-Bliley Act, Pub. L. No. 106-102, ss 103(a),

121, 113 Stat. 1338, 1342-50, 1373-81 (1999).

The Officer of the Comptroller of the Currency ("Comptroller" or "OCC"), defendant-appellant here, determined in 1997

that all national banks may sell as agent general casualty

insurance to protect against the risk of crop loss, under sole

authority of the original 1864 grant of power. Appellees,

Independent Insurance Agents of America, Inc., National

Association of Professional Insurance Agents, Inc., National

Association of Life Underwriters, National Association of

Mutual Insurance Companies, and Crop Insurance Research

Bureau (collectively "IIAA"), filed suit in the district court

claiming that this interpretation was incorrect as a matter of

law. The district court agreed and granted summary judgment for appellees in an order signed March 23, 1999. See

Independent Ins. Agents of Am., Inc. v. Hawke, 43 F. Supp.

2d 21 (D.D.C. 1999). The Comptroller appeals, joined by two

associations representing banking interests as amici curiae.

We affirm.

I. Background

A. History

National banks, being creatures of statute, possess only

those powers conferred upon them by Congress. See Texas

& Pac. Ry. Co. v. Pottorff, 291 U.S. 245, 253 (1934); First

Nat'l Bank of Charlotte v. National Exch. Bank of Baltimore,

92 U.S. 122, 128 (1875). The National Bank Act of 1864, Act

of June 3, 1864, ch. 106, 13 Stat. 99 (codified as amended in

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scattered sections of 12 U.S.C.), as amended, provides for the

chartering of national banks. As part of this statutory regime, 12 U.S.C. s 24 (Seventh) confers the following powers

upon national banks:

[National banks shall have the power] [t]o exercise ...

all such incidental powers as shall be necessary to carry

on the business of banking; by discounting and negotiating promissory notes, drafts, bills of exchange, and other

evidences of debt; by receiving deposits; by buying and

selling exchange, coin, and bullion; by loaning money on

personal security; and by obtaining, issuing, and circulating notes....

12 U.S.C. s 24 (Seventh) (1994). The most pertinent phrase

to this case is "all such incidental powers as shall be necessary to carry on the business of banking"; the following

enumeration of powers is only illustrative and the Comptroller may authorize additional activities if encompassed by a

reasonable interpretation s 24 (Seventh). See NationsBank

v. Variable Annuity Life Ins. Co., 513 U.S. 251, 258 n.2 (1995)

("VALIC"); American Ins. Ass'n v. Clarke, 865 F.2d 278,

281-82 (D.C. Cir. 1988).

The Comptroller's authority to confer "all such incidental

powers as shall be necessary to carry on the business of

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banking" has been interpreted to mean powers "convenient or

useful in connection with the performance of one of the bank's

established activities pursuant to its express powers...."

Arnold Tours, Inc. v. Camp, 472 F.2d 427, 432 (1st Cir. 1972).

Whether a particular banking device's nomenclature harkens

to traditional banking activities is not dispositive. Instead,

the "powers of national banks must be construed so as to

permit the use of new ways of conducting the very old

business of banking." M&M Leasing Corp. v. Seattle First

National Bank, 563 F.2d 1377, 1382 (9th Cir. 1977).

For example, in M&M Leasing, the Ninth Circuit upheld

the Comptroller's determination that national banks may

"lease" personal property when the transaction is functionally

identical to a secured loan. See id. at 1380, 1383. Similarly,

in American Insurance Association, we held that national

banks may offer "municipal bond insurance" which was actually the functional equivalent of a standby letter of credit, a

traditional banking device. See 865 F.2d at 281-84.

In Independent Bankers Ass'n of America v. Heimann,

613 F.2d 1164 (D.C. Cir. 1980), we recognized the right of

national banks to offer "credit life insurance." That product

names the bank as beneficiary, not the bank customer, and is

a principal form of security for consumer loans. We noted

that "[u]nlike other forms of insurance coverage ... credit

life insurance is a limited special type of coverage written to

protect loans." Id. at 1170. Because credit life insurance is

"essential where ordinary loans on personal security are

involved" and does not "involve the operations of a general

life insurance business," we approved of the activity. Id.; see

also First Nat'l Bank of Eastern Arkansas v. Taylor, 907

F.2d 775 (8th Cir. 1990) (upholding authority of banks to sell

"debt cancellation contracts" to extinguish loan debts in the

event of death).

Even in light of the interpretations of s 24 (Seventh)

upheld in the above cases, however, when the OCC has

undertaken to authorize national banks to sell general forms

of insurance it has run into trouble. In 1916, Comptroller

John Skelton Williams asked Congress to augment the powUSCA Case #99-5158 Document #517181 Filed: 05/16/2000 Page 4 of 13
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ers of national banks to offer insurance. In his view, national

banks located in "country towns and villages" were in need of

additional sources of revenue and should be allowed to more

fully compete with state chartered banks. Citing s 24 (Seventh), the Comptroller noted a hurdle to his goal: "National

banks are not given either expressly nor by necessary implication the power to act as agents for insurance companies...." To resolve this situation, the Comptroller asked

Congress to grant insurance agency power to national banks,

but only those located in small towns. In his view, "it would

be unwise and therefore undesirable to confer this privilege

generally upon banks in large cities where the legitimate

business of banking affords ample scope for the energies of

trained and expert bankers." 53 Cong. Rec. 11,001 (1916).

Congress acted on the Comptroller's request. It passed an

amendment to the Federal Reserve Act, Act of Sept. 7, 1916,

ch. 461, 39 Stat. 752 (codified at 12 U.S.C. s 92 (1994)), which

provides:

In addition to the powers now vested by law in the

national banking associations organized under the law of

the United States any such association located and doing

business in any place the population of which does not

exceed five thousand inhabitants ... 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....

12 U.S.C. s 92. Briefly put, this statute authorizes only

those national banks located in towns of 5,000 or less to sell

insurance as an agent.

In light of this statutory framework, both the Fifth and

Second Circuits have rejected attempts by the Comptroller to

authorize all national banks to sell insurance, purportedly

under the authority of the incidental powers clause of s 24

(Seventh). See Saxon v. Georgia Ass'n of Indep. Ins. Agents,

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Inc., 399 F.2d 1010 (5th Cir. 1968); American Land Title

Ass'n v. Clarke, 968 F.2d 150 (2d Cir. 1992) ("ALTA").1

In Saxon, the Comptroller decided, without further congressional authorization, that " '[i]ncidental to the powers

vested in them under 12 U.S.C. Section[ ] 24 ..., National

Banks have the authority to act as agent in the issuance of

insurance which is incident to banking transactions.' " Saxon, 399 F.2d at 1012 (quoting O.C.C. Ruling No. 7110). The

ruling was not limited to locales of less than 5,000 persons. A

group of insurance agents brought a declaratory judgment

action asking the court to hold the Comptroller's ruling

unlawful. On appellate review, the Fifth Circuit held that

s 24 (Seventh) could not confer general insurance powers

when considered in conjunction with the implications of s 92.

See id. at 1013-16. Judge Thornberry's concurrence shed

light on the basic dilemma: "From an economic standpoint, it

may be unfortunate that this Court is interfering with the

expansion of national banks ..., but the banks should look to

Congress, not the Comptroller." Id. at 1021 (Thornberry, J.,

concurring specially).

The scenario was similar in the Second Circuit ALTA case.

There, the OCC issued an interpretative letter in 1986 allowing any national bank to act as agent in the general sale of

title insurance. See ALTA, 968 F.2d at 151. Relying on this

interpretation, the Comptroller authorized a national bank to

sell title insurance as agent to borrowers and lenders in

connection with real estate loans made by the bank. The

Comptroller attempted to distinguish Saxon on the grounds

that title insurance, unlike the broader range of activities

__________

1 Two other circuits have embraced the same reading of national

banking statutes as Saxon and ALTA without discussion. See

Commissioner v. Morris Trust, 367 F.2d 794, 795 (4th Cir. 1966)

("[A] national bank is prohibited from operating an insurance

department except in towns having a population of not more than

5000 inhabitants."); First Sec. Bank of Utah, N.A. v. Commissioner, 436 F.2d 1192, 1195-96 (10th Cir. 1971) (citing Saxon and

Morris Trust), aff'd, 405 U.S. 394 (1972). The Supreme Court has

recognized this case law, but has had no occasion to pass on the

issue. See VALIC, 513 U.S. at 260-61; Commissioner v. First Sec.

Bank of Utah, N.A., 405 U.S. 394, 401-02 (1972).

authorized in Saxon, was essential to a bank's ability to

provide financing. The Second Circuit rejected this interpretation, noting that the Saxon court did not look to the nature

of the insurance activity authorized. See id. at 155-57.

Rather, the ALTA court recognized that s 92 applies to "any

... insurance company," and that "a title insurance company

is surely an insurance company." Id. at 156 (internal quotation marks omitted). The court held that even if s 24

(Seventh) could be read to encompass the general sale of title

insurance, s 92 precluded such a reading.

B. The Present Controversy

The facts of this case are a rerun of those in Saxon and

ALTA. Though the OCC is surely familiar with its past

defeats, it seems determined to repeat them.

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On December 29, 1997, the OCC issued a letter ruling that

"a national bank may offer, as agent, multiple peril crop

insurance and hail/fire insurance (collectively, 'crop insurance')...." (footnotes omitted). The product insures against

"unavoidable losses on crops, including losses due to drought,

excess moisture, insects, disease, flood, hail, wind and frost."

If a farmer's average yield drops below the insured level, the

insurance company pays the difference directly to the farmer.

The Comptroller ruled that the sale of crop insurance was

within the "business of banking" for three reasons: (1) crop

insurance is similar to credit-related insurance which banks

may offer and is a "logical outgrowth" of the bank's power to

make loans because it assists banks in making recovery from

borrowers; (2) crop insurance is something that benefits

farmers and banks by protecting against risks; and (3) the

risks are similar to those already borne by national banks in

the sale of insurance authorized under 12 U.S.C. s 92 or

elsewhere. The Comptroller further concluded that even if

the sale of crop insurance was not part of the business of

banking, it was "incidental" to that business. In a footnote,

the agency stated that the prior circuit decisions in Saxon

and ALTA were not applicable because those decisions were

only concerned with "broad forms" of insurance.

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The district court rejected the Comptroller's interpretation.

Citing Saxon and ALTA approvingly, and relying on the

interpretative cannons of giving each provision of a statute

meaning and expressio unius est exclusio alterius, the court

reasoned that s 92 was "intended to remedy what Congress

saw to be the limited powers of section 24 (Seventh)" and

thus compelled the conclusion that all national banks did not

have general insurance powers. IIAA, 43 F. Supp. 2d at 24.

The court rejected the suggestion that "crop insurance" is

actually a credit-related product, like the credit-life insurance

approved in Heimann. See id. at 25-26. Unlike the product

in Heimann, payable to the bank, crop insurance protects

farmers and does not guarantee repayment to lenders like a

traditional security device.

II. Analysis

When interpreting the meaning of a federal statute administered by a single agency, we engage in the two-step inquiry

of Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 842-43 (1984).

At the first step, we inquire into whether Congress has

directly spoken to the precise question at issue. If it has, we

must give effect to that express intent. When performing

this first step, we employ traditional tools of statutory construction. See id. at 843 n.9; INS v. Cardoza-Fonseca, 480

U.S. 421, 446 (1987). If the statute before us is silent or

ambiguous on the precise issue, we proceed to the second

step, where we will defer to the agency's interpretation of the

statute if it is reasonable and consistent with the statute's

purpose. See, e.g., Nuclear Info. Resource Serv. v. Nuclear

Regulatory Comm'n, 969 F.2d 1169, 1173 (D.C. Cir. 1992) (en

banc).2

__________

2 In Christensen v. Harris County, ___ S. Ct. ____, 2000 WL

504578 (U.S. May 1, 2000), decided after oral argument in this case,

the Supreme Court held that agency interpretations voiced in

opinion letters "do not warrant Chevron-style deference." Id. at *6.

Instead, they are "entitled to respect" under Skidmore v. Swift &

Co., 323 U.S. 134, 140 (1944), "but only to the extent that those

interpretations have the 'power to persuade.' " Christensen at *6

(quoting Arabian American Oil Co., 499 U.S. 244, 256-58 (1991)).

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In this case, our inquiry is whether the "all such incidental

powers" language of s 24 (Seventh) includes the power of

banks to sell crop insurance. While the word "incidental"

may be a poster child for ambiguity, we find that it is not

ambiguous in the context of general insurance activities. A

broad statute when passed "may have a range of plausible

meanings," but subsequent acts can narrow those meanings

"where the scope of the earlier statute is broad but the

subsequent statutes more specifically address the topic at

hand." FDA v. Brown & Williamson Tobacco Corp., 120

S. Ct. 1291, 1306 (2000); see also G.A. Endlich, A Commentary on the Interpretation of Statutes s 399 (1888) ("[T]he

special mention of one thing indicates that it was not intended

to be covered by a general provision which would otherwise

include it."). Just so here. Because s 92 expressly grants

national banks located in small towns the general power to

sell insurance as agent, reading s 24 (Seventh) to authorize

the sale of insurance by all national banks transgresses both

common sense and two traditional rules of statutory interpretation: the presumption against surplusage and expressio

unius est exclusio alterius.

A broad reading of s 24 (Seventh) to allow the general sale

of insurance by national banks would render at least two

other related statutes meaningless, in violation of the "endlessly reiterated principle of statutory construction ... that

all words in a statute are to be assigned meaning, and that

nothing therein is to be construed as surplusage." Qi-Zhuo

v. Meissner, 70 F.3d 136, 139 (D.C. Cir. 1995); see also

Halverson v. Slater, 129 F.3d 180, 185 (D.C. Cir. 1997)

("Congress cannot be presumed to do a futile thing."). Why

would Congress have passed s 92 to confer insurance authori-

__________

All parties in this case assumed that the normal Chevron framework

applied to the Comptroller's interpretation of s 24 (Seventh) contained in a letter. See Independent Ins. Agents of Am., Inc. v.

Ludwig, 997 F.2d 958 (D.C. Cir. 1993) (applying Chevron step two

to a Comptroller letter). We frame part of our analysis in terms of

whether the Comptroller's decision is "reasonable," infra at 12-13,

and our conclusions are equally applicable under the less-deferential

standard of Skidmore as under Chevron step two.

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ty to some national banks if all national banks already had

that power pursuant to s 24 (Seventh)? It would have been

completely useless. See ALTA, 968 F.2d at 155. Likewise,

the Gramm-Leach-Bliley Act authorizes financial subsidiaries

established by "well capitalized and well managed" national

banks to "[i]nsur[e] ... against loss, harm, damage, illness,

disability, or death" as agent or broker. Pub. L. No. 106-102,

ss 103(a) (listing activities that financial holding companies

may engage in), 121 (authorizing financial subsidiaries of

national banks to engage in some of these activities), 113 Stat.

1338, 1343, 1373-74. If national banks could already sell

insurance under s 24 (Seventh), Congress would have no

reason to pass a statute limiting that power to financial

subsidiaries of only "well capitalized and well managed" national banks.

In addition to the canon of avoiding surplusage, expressio

unius est exclusio alterius also points to the conclusion that

Congress did not intend for all national banks to have insurance powers under s 24 (Seventh). See Ethyl Corp. v. EPA,

51 F.3d 1053, 1061 (D.C. Cir. 1995) ("mention of one thing

implies the exclusion of another thing") (quoting American

Methyl Corp. v. EPA, 749 F.2d 827, 835-36 (D.C. Cir. 1984)).

In context, because s 92 only confers the authority to sell

insurance on banks in smaller locales, and because national

banks only have the powers granted to them by statute, s 92

strongly confirms the view that the more general grant in

s 24 (Seventh) did not include broad insurance powers. See

ALTA, 968 F.2d at 155-56; Saxon, 399 F.2d at 1013-14.

The Comptroller argues that the expressio unius maxim

cannot preclude an otherwise reasonable agency interpretation. This is not entirely correct. True, we have rejected the

canon in some administrative law cases, but only where the

logic of the maxim-that the special mention of one thing

indicates an intent for another thing not be included elsewhere-simply did not hold up in the statutory context. See

Texas Rural Legal Aid, Inc. v. Legal Servs. Corp., 940 F.2d

685, 694 (D.C. Cir. 1991); Clinchfield Coal Co. v. FMSHRC,

895 F.2d 773, 779 (D.C. Cir. 1990); Cheney R.R. Co. v. ICC,

902 F.2d 66, 68-69 (D.C. Cir. 1990). As we have noted, if

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there are other reasonable explanations for an omission in a

statute, expressio unius may not be a useful tool. See

Clinchfield, 895 F.2d at 779; see also Carter v. Director,

Office of Workers' Compensation Programs, 751 F.2d 1398,

1401-02 (D.C. Cir. 1985). But, where the context shows that

the "draftsmen's mention of one thing, like a grant of authority, does really necessarily, or at least reasonably, imply the

preclusion of alternatives," the canon is a useful aid. Shook v.

District of Columbia Finan. Responsibility and Management

Assistance Auth., 132 F.3d 775, 782 (D.C. Cir. 1998); see also

Halverson, 129 F.3d at 185-87; Michigan Citizens for an

Indep. Press v. Thornburgh, 868 F.2d 1285, 1292-93 (D.C.

Cir.), aff'd by an equally divided court, 493 U.S. 38 (1989).

In this case, the two canons upon which we rely inarguably

compel our holding that s 24 (Seventh) unambiguously does

not authorize national banks to engage in the general sale of

insurance as "incidental" to "the business of banking." The

Supreme Court employed reasoning identical to ours in Texas

& Pacific Railway Co. v. Pottorff, 291 U.S. 245 (1934).

There, the Court considered whether a national bank has the

incidental power under s 24 (Seventh) to pledge its assets to

secure a private deposit. The Court found no evidence that

such a pledge was in any way incidental to banking, and

furthermore reasoned that if this power was authorized, there

would have been no need to later alter 12 U.S.C. s 1290 to

provide a limited power to pledge. See id. at 257-59. The

pre-Chevron vintage of Pottorff is irrelevant; the High Court

had already made clear by that time that interpretations of

the Comptroller merit deference. See First Nat'l Bank in St.

Louis v. Missouri, 263 U.S. 640, 658-59 (1924).

Even in light of the inherent ambiguity of the "incidental"

phrase of s 24 (Seventh), we nonetheless do not find that the

statute is ambiguous here within the meaning of Chevron.

To the contrary, the instant case and Pottorff both suggest

that the cannons of avoiding surplusage and expressio unius

are at their zenith when they apply in tandem. Cf. Halverson, 129 F.3d at 184-86; Endlich, supra, at s 399. Under

the first step of Chevron, we hold that Congress has not

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authorized the Comptroller to permit the sale of crop insurance solely under the authority of s 24 (Seventh).

To the extent any ambiguity remains on the issue, we

conclude that the Comptroller's interpretation of s 24 (Seventh) is not reasonable. Crop insurance is a general form of

property or casualty insurance protecting farmers against

many potential disasters. It falls squarely within the types of

insurance held unauthorized in Saxon and ALTA. Unlike the

special credit-life product which we approved in Heimann,

the beneficiary of crop insurance is the farmer-insured, not

the bank. If the sale of crop insurance is "incidental" to

banking under s 24 (Seventh), there would no way of distinguishing other general forms of insurance. Agriculturalists

undoubtedly rely on banks to obtain loans, but so do other

individual and corporate borrowers who may also wish to

purchase property or casualty insurance to protect their

interests. Nothing about "crop insurance" leads to a conclusion that it can be treated differently than other general

forms of insurance under national banking laws just because

its coverage is limited to farmers.

The OCC supports its interpretation on the grounds that

the sale of crop insurance involves risks similar to those

already assumed by banks, would benefit customers, and

would be a "logical outgrowth" of current bank activities.

The Comptroller cites as support, for example, the experience

of national banks in small locales in selling all types of

insurance under 12 U.S.C. s 92. However, that activity is

statutorily authorized. While the sale of crop insurance may

be a "logical outgrowth" that national banks could apply their

prior experience to, that alone cannot constitute legal authorization. If it did, national banks would be able to constantly

expand their field of operations on an incremental basis

without congressional action. First would be the authority to

sell crop insurance, followed by whatever insurance against

business risks of a bank customer is the next "logical outgrowth." There would be no logical stopping point. Section

24 (Seventh) cannot bear the weight the Comptroller proposes to place on it under its test. The Comptroller may of

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sonable bounds," but today's interpretation is not within such

bounds. VALIC, 513 U.S. at 258 n.2.

III. Conclusion3

In the end, this case may have little practical effect.

National banks have the power to sell insurance, including

crop insurance, if they meet the requirements of the GrammLeach-Bliley Act. However, they do not have the power to

sell crop insurance solely under the authority of 12 U.S.C.

s 24 (Seventh). The judgment of the district court is

Affirmed.

__________

3 There is a pending motion by appellees to strike supplemental

exhibits of amici curiae. That motion is hereby denied.

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