Barnett Bank of Marion County, N.A. v. Nelson, 517 U.S. 25 (1996)

Barnett Bank of Marion County, N.A. v. Nelson

No. 94-1837

Argued January 16, 1996
Decided March 26, 1996
517 U.S. 25

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

Syllabus

A 1916 federal law (Federal Statute) permits national banks to sell insurance in small towns, but a Florida law (State Statute) prohibits such banks from selling most types of insurance. When petitioner Barnett Bank, a national bank doing business in a small Florida town, bought a state licensed insurance agency, respondent State Insurance Commissioner ordered the agency to stop selling the prohibited forms of insurance. In this action for declaratory and injunctive relief, the District Court held that the State Statute was not preempted, but only because of the McCarran-Ferguson Act’s special insurance-related anti-preemption rule. That rule provides that a federal law will not preempt a state law enacted "for the purpose of regulating the business of insurance" -- unless the federal statute "specifically relates to the business of insurance." 15 U.S.C. § 1012(b) (emphasis added). The Court of Appeals affirmed.

Held: The Federal Statute preempts the State Statute. Pp. 30-43.

(a) Under ordinary preemption principles, the State Statute would be preempted, for it is clear that Congress, in enacting the Federal Statute, intended to exercise its constitutionally delegated authority to override contrary state law. The Federal and State Statutes are in "irreconcilable conflict," Rice v. Norman Williams Co., 458 U.S. 654, 659, since the Federal Statute authorizes national banks to engage in activities that the State Statute expressly forbids. Thus, the State’s prohibition would seem to "stan[d] as an obstacle to the accomplishment" of one of the Federal Statute’s purposes, Hines v. Davidowitz, 312 U.S. 52, 67, unless, as the State contends, Congress intended to limit federal permission to sell insurance to those circumstances permitted by state law. However, by providing, without relevant qualification, that national banks "may . . . act as the agent" for insurance sales, 12 U.S.C. § 92, the Federal Statute’s language suggests a broad, not a limited, permission. That this authority is granted in "addition to the powers now vested . . . in national [banks]," ibid. (emphasis added), is also significant. Legislative grants of both enumerated and incidental "powers" to national banks historically have been interpreted as grants of authority not normally limited by, but rather ordinarily preempting, contrary state law. See, e.g., First Nat. Bank of San Jose v. California, 262 U.S. 366, 368-369. Where, as here, Congress has not expressly conditioned the grant of power upon a grant of state permission, this Court has ordinarily found that no such condition applies. See Franklin Nat. Bank v. New York, 347 U.S. 373. The State’s argument that special circumstances surrounding the Federal Statute’s enactment demonstrate Congress’ intent to grant only a limited permission is unpersuasive. Pp. 30-37.

(b) The McCarran-Ferguson Act’s anti-preemption rule does not govern this case, because the Federal Statute "specifically relates to the business of insurance." This conclusion rests upon the Act’s language and purposes, taken together. The word "relates" is highly general, and, in ordinary English, the Federal Statute -- which focuses directly upon industry-specific selling practices and affects the relation of insured to insurer and the spreading of risk -- "specifically" relates to the insurance business. The Act’s mutually reinforcing purposes -- that state regulation and taxation of the insurance business is in the public interest, and that Congress’ "silence . . . shall not be construed to impose any barrier to [such] regulation or taxation," 15 U.S.C. § 1011 (emphasis added) -- also support this view. This phrase, especially the word "silence," indicates that the Act seeks to protect state regulation primarily against inadvertent federal intrusion, not to insulate state insurance regulation from the reach of all federal law. The circumstances surrounding the Act’s enactment also suggest that the Act was passed to ensure that generally phrased congressional statutes, which do not mention insurance, are not applied to the issuance of insurance policies, thereby interfering with state regulation in unanticipated ways. The parties’ remaining arguments to the contrary are unconvincing. Pp. 37-43.

43 F.3d 631, reversed.

BREYER, J., delivered the opinion for a unanimous Court.