Opinion ID: 2995911
Heading Depth: 2
Heading Rank: 1

Heading: The Power to Regulate Interstate Commerce

Text: The Court has enunciated three broad categories of activities that Congress may regulate using the power delegated to it in the Commerce Clause. E.g., United States v. Lopez, 514 U.S. 549, 558-59 (1995). First, Congress may regulate the channels of interstate commerce. 4 No. 02-1443 Id. Channels refer to the transportation of a commodity or travel in interstate commerce. See, e.g., Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241, 256 (1964) (interstate travel and places of public accommodation); United States v. Darby, 312 U.S. 100, 114 (1941) (shipment of manufactured goods); Caminetti v. United States, 242 U.S. 470, 489-91 (1917) (women and girls transported for “immoral” purposes); Lottery Case (Champion v. Ames), 188 U.S. 321 (1903) (lottery tickets). Second, Congress may regulate and protect the instrumentalities, persons, or things in interstate commerce “even though the threat may come only from intrastate activities”. Lopez, 514 U.S. at 558-59. Instrumentalities, persons, or things in interstate commerce include railroads, aircraft, and trucks. See, e.g., Mitchell v. H. B. Zachry Co., 362 U.S. 310, 323 (1960) (describing railroads, truck companies and airlines as instrumentalities of interstate commerce); Shreveport Rate Cases, 234 U.S. 342 (1914) (railroad shipping rates). Third, Congress may regulate activities having a substantial relation to or substantial affect on interstate commerce. Lopez, 514 U.S. at 558-59. An activity “substantially affects interstate commerce” either directly or when considered with other similar activities in the aggregate. See, e.g., Hodel v. Virginia Surface Mining & Reclamation Assn., Inc., 452 U.S. 264, 276-80 (1981) (coal mining); Perez v. United States, 402 U.S. 146, 156 (1971) (loan sharking); Wickard v. Filburn, 317 U.S. 111, 125-29 (1942) (growing of wheat on a local farm solely for personal consumption). As the district court found that Congress did not exceed its authority because it was regulating an instrumentality or thing in interstate commerce, we must first determine whether this conclusion is correct. The statute at issue, 18 U.S.C. § 1033, provides, in relevant part: “Whoever—acting as, or being an officer, director, agent, or employee of, any person engaged in the business of No. 02-1443 5 insurance whose activities affect interstate commerce . . . willfully embezzles, abstracts, purloins, or misappropriates any of the moneys, funds, premiums, credits, or other property of such person so engaged shall be punished as provided in paragraph (2).” 18 U.S.C. § 1033(b)(1) (emphasis added).3 The statute repeatedly refers to “the business of insurance whose activities affect interstate commerce.” 18 U.S.C. §§ 1033(a)(1), (b)(1)(A), (c)(1), (d), (e)(1)(B); see also 18 U.S.C. § 1033(f)(3) (defining “interstate commerce” as used in the statute). Furthermore, the report from the House Judiciary Committee, to whom the bill was referred, also indicates that Congress enacted the law relying upon the third category of authority. The stated purpose of the law was to deal with “interstate insurance fraud schemes” that Congress felt were too complex and that current laws, state and federal, were inadequate to deal with the problem. H.R. Rep. No. 103-468 (1994) (emphasis added). Turner inferentially bases his argument on the McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1015, where Congress explicitly allowed the States to continue regulating insurance despite the interstate effects of such regulation. 15 U.S.C. § 1012(b); Prudential Ins. Co. v. Benjamin, 328 U.S. 408, 417-19 (1946). Turner’s argument is that insurance and criminal acts such as embezzlement are the province of the States to regulate. Despite the concurrent jurisdictional grant in McCarran-Ferguson and, thereby, the recognition that insurance has intrastate and interstate effects, the business of insurance can and does affect interstate commerce. See United States v. South- 3 18 U.S.C. § 1033 was enacted as the Insurance Fraud Prevention Act as part of an amendment to the Violent Crime Control and Law Enforcement Act of 1994. Pub. L. No. 103-322, 108 Stat. 2115 (1994). To our knowledge, embezzlement from insurance companies is not a violent crime. 6 No. 02-1443 Eastern Underwriters Ass’n, 322 U.S. 533, 552-53 (1944); United States v. Robertson, 158 F.3d 1370, 1371 (9th Cir. 1998). As the business of insurance does affect interstate commerce, Congress may choose to regulate it, in whole or part, and those activities that affect the business. Although Congress chose the “affects interstate commerce” rationale to support this legislation (and we agree that insurance does affect interstate commerce) that does not mean insurance may not also be a channel from which interstate commerce flows. Banks are generally considered vehicles through which interstate commerce emanates, as banks conduct innumerable transactions with persons, companies, and banks in other states and countries. E.g., United States v. Watts, 256 F.3d 630, 634 (7th Cir. 2001); Weir v. United States, 92 F.2d 634, 636 (7th Cir. 1937). Similarly, when a person purchases insurance from a company, the company holds the money in a pool with the money of other insured persons, and later the company pays claimants. Hence, insurance companies provide a vehicle through which premiums from the insured and payments to claimants flow in interstate commerce. Cf. Black, 125 F.3d at 460-62 (finding that child support payments regularly travel in interstate commerce); Nat’l Cas. Co. v. Fed. Trade Comm’n, 245 F.2d 883, 886 (6th Cir. 1957) (noting the McCarran Act gave the FTC the authority to regulate insurance on the grounds that insurance was part of the channels of commerce). Whether we characterize the business of insurance as affecting interstate commerce or being a channel of commerce, we conclude Congress may regulate the insurance industry pursuant to Article I, § 8, clause 3. The question remaining is whether the prohibited activity, embezzlement from insurance companies, is included within this grant. Turner asserts that his actions do not touch upon interstate commerce and are outside the scope of Congress’ authority. No. 02-1443 7