Court Opinion

ID: 185151
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:28:21+00
Date Added: 2024-06-11T09:05:50.278093
License: Public Domain

211 F.3d 638 (D.C. Cir. 2000)
Independent Insurance Agents of America, Inc., et al., Appelleesv.John D. Hawke, Jr., Comptroller of the Currency, and the Office of the Comptroller of the Currency, Appellants
No. 99-5158
United States Court of AppealsFOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued January 21, 2000Decided May 16, 2000

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. 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:

1
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-BlileyAct, Pub. L. No. 106-102, SS 103(a),  121, 113 Stat. 1338, 1342-50, 1373-81 (1999).

2
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

3
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  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:

4
[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....

5
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 Nations Bank  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).

6
The Comptroller's authority to confer "all such incidental  powers as shall be necessary to carry on the business of 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).

7
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 ofcredit, a  traditional banking device.  See 865 F.2d at 281-84.

8
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).

9
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 powers 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 § 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).

10
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:

11
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
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.

13
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 § 24  (Seventh).  See Saxon v. Georgia Ass'n of Indep. Ins. Agents, Inc., 399 F.2d 1010 (5th Cir. 1968);  American Land Title  Ass'n v. Clarke, 968 F.2d 150 (2d Cir. 1992) ("ALTA")1.

14
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).

15
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 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 § 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

16
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.

17
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.

18
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.

19
The district court rejected the Comptroller's interpretation. Citing Saxon andALTA 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

20
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.

21
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.

22
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 violationof 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 authority 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.

23
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.

24
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 there are other reasonable explanations for an omission in a  statute, expressio unius may not be a useful tool.  See  Clinch field, 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).

25
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.  TheCourt 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).

26
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 authorized the Comptroller to permit the sale of crop insurance solely under the authority of S 24 (Seventh).

27
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.

28
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  course authorize activities under S 24 (Seventh) "within reasonable bounds," but today's interpretation is not within such  bounds.  VALIC, 513 U.S. at 258 n.2.

III. Conclusion3

29
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 cropinsurance solely under the authority of 12 U.S.C. S 24 (Seventh).  The judgment of the district court is

30
Affirmed.

Notes:

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).

2
 In Christensen v. Harris County, U.S., 120 S.Ct. 1655, L.Ed.2d (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 1662-63.  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 1663  (quoting Arabian American Oil Co., 499 U.S. 244, 256-58 (1991)).  All parties in this case assumed that the normal Chevron framework  applied to the Comptroller's interpretation of § 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.

3
 There is a pending motion by appellees to strike supplemental  exhibits of amici curiae.  That motion is hereby denied.