The opinion of the court was delivered by: PRATT
The above action is only the latest chapter in the long running battle for turf on the part of two powerful industries, each of which is subject to governmental regulation. In this case, the insurance industry seeks protection from incursions into its claimed territory by the commercial banking industry. On behalf of life, health, property, and casualty insurance agents throughout the United States, various trade associations brought this consolidated action for declaratory and injunctive relief against the Office of the Comptroller of the Currency ("OCC"), the Comptroller himself, and the United States.
After the complaints were filed, the United States Bank of Oregon ("USBO"), a national bank chartered under the National Bank Act, 12 U.S.C. §§ 21-216d (1988) (sometimes "NBA"), intervened as an additional defendant.
At issue is whether the Comptroller reasonably concluded that section 92 of the NBA, id. § 92,
authorized USBO, through a subsidiary bank insurance agency, to solicit and sell insurance to customers located throughout the country. Plaintiffs contend that the Comptroller's decision permits USBO and its parent, U.S. Bancorp, a bank holding company registered under the Bank Holding Company Act of 1956, id. §§ 1841-1850 (1988) (sometimes "BHCA"), to violate alleged geographic restrictions on insurance activities contained in both the NBA and the BHCA.
Id. §§ 92, 1843(c)(8). There being no dispute as to any material fact, defendants and USBO moved for summary judgment or dismissal, and plaintiffs cross-moved for summary judgment. The issues have been fully briefed by the parties and the amici curiae.
A. USBO's "New Activities" Proposal
As a national bank, USBO is subject to the regulatory jurisdiction of the Comptroller, the principal expositor of the NBA. See Clarke v. Securities Industry Association, 479 U.S. 388, 403-04, 107 S. Ct. 750, 93 L. Ed. 2d 757 (1987) (citations omitted); First National Bank v. Smith, 610 F.2d 1258, 1264 (5th Cir. 1980); 12 U.S.C. §§ 1-216d; 12 C.F.R. §§ 1.1, 4.1a-4.11 (1989). Under OCC regulations, a national bank wishing to perform "new activities" through a subsidiary must submit a written proposal to the Deputy Comptroller for the district in which the bank's principal office is located. 12 C.F.R. § 5.34(d)(1)(i). Upon receiving such a proposal, the Comptroller evaluates whether the activities would "exceed those legally permissible for a national bank operating subsidiary." Id. § 5.34(d)(1)(ii). If the Comptroller requires more than thirty days for this evaluation, he may extend the review period, in which case the bank must await "written notification" before engaging in the "new activities." Id.
U.S. Bancorp, USBO's parent, is regulated by the Federal Reserve Board (sometimes the "Board"), which administers the BHCA.
See Whitney National Bank v. Bank of New Orleans & Trust Co., 379 U.S. 411, 419, 85 S. Ct. 551, 13 L. Ed. 2d 386 (1965); Northeast Bancorp, Inc. v. Board of Governors, 270 U.S. App. D.C. 370, 849 F.2d 1499, 1501 (D.C. Cir. 1988); 12 U.S.C. §§ 1841-1849; 12 C.F.R. § 225.1. U.S. Bancorp did not submit an application to the Board concerning the proposed "new activities" of USBO. Consequently, the Board was never requested to nor did it approve U.S. Bancorp's indirect involvement in certain insurance activities.
Pursuant to OCC regulations, USBO, whose principal office is in Portland, Oregon, submitted a "new activities" proposal to the OCC's Western District on October 16, 1984. USBO sought to offer, through its subsidiary U.S. Bank Insurance Agency, Inc. ("Bank Agency"), "a full range of insurance products" from a branch office of USBO in the small town of Banks, Oregon.
Letter from T. Dalrymple to Billy C. Wood (Oct. 16, 1984). USBO relied on section 92 of the NBA and a December 1, 1983, opinion letter
to conduct the proposed activities. See id.
The primary question raised by the proposal was whether any geographic restrictions applied to the solicitation or sale of insurance authorized by section 92 of the NBA. That section provides that any national bank:
located and doing business in any place the population of which does not exceed five thousand inhabitants, as shown by the last preceding decennial census, may, under such rules and regulations as may be prescribed by the Comptroller . . ., act as the agent for any fire, life, or other insurance company authorized. . . to do business in [the state in which the bank is located], by soliciting and selling insurance and collecting premiums on policies issued by such company. . . .
12 U.S.C. § 92 (emphasis added).
A similar provision applies to bank holding companies. See id. § 1843(c)(8)(C). Section 4(c)(8) of the BHCA prohibits a bank holding company from engaging in, or acquiring and retaining "shares of any company" engaged in, nonbanking activities unless the Board determines that such activities are "so closely related to banking . . . as to be a proper incident thereto." Id. § 1843(c)(8); see Independent Insurance Agents of America, Inc. v. Board of Governors, 266 U.S. App. D.C. 356, 835 F.2d 1452, 1454 (D.C. Cir. 1987). Subject to a few limited exceptions, the BHCA precludes the Board from finding that the provision of "insurance as a principal, agent, or broker" is "closely related to banking." See 12 U.S.C. § 1843(c)(8). One exception is "any insurance agency activity in a place" with "a population not exceeding five thousand (as shown by the last preceding decennial census)." Id. § 1843(c)(8)(C); see Independent Insurance Agents, 835 F.2d at 1455 nn. 4-5. This provision was added to the BHCA in 1982,
and was "intended to conform to" Board regulations that already permitted such activity,
"as well as the authority in" section 92 of the NBA. Senate Report, supra note 8, at 38.
Since 1963, over twenty-five years ago, the Comptroller has applied section 92 to any branch office "located in a community . . . of less than 5,000," regardless of whether the bank's principal office is located in a larger community. 12 C.F.R. § 7.7100 (first codified in 1971).
Similarly, a Board regulation allows a subsidiary of a bank holding company to engage "in any insurance agency activity in a place" the population of which does not exceed 5,000, provided the subsidiary "has a lending office" there. Id. § 225.25(a), (b)(8)(iii).
It is the Board's policy, however, that solicitation and sales must be restricted to that place "and to other areas of less than 5,000 adjacent to" it. 51 Fed. Reg. 36,201, 36,206 (Oct. 9, 1986); see also First United Bancshares, Inc., 73 Fed. Res. Bull. 162 (1987).
B. The Comptroller's Approval Letter
The Comptroller notified USBO that review of its proposal would extend beyond thirty days, and that USBO could not conduct the proposed insurance activities unless the Comptroller communicated in writing that he had no objection. Letter from Rufus O. Burns, Jr., District Administrator, Western District, to T. Dalrymple (Oct. 24, 1984). Almost two years later, on August 18, 1986, the Comptroller approved USBO's proposal and, in so doing, authorized Bank Agency, the subsidiary of USBO, "to sell insurance to customers residing outside" Banks, Oregon. See Letter from Judith A. Walter, Senior Deputy Comptroller for National Operations, to T. Dalrymple at 4 (Aug. 18, 1986) [hereinafter "Approval Letter" or "Letter"].
The Approval Letter analyzed the text and legislative history of section 92, as well as relevant OCC rules and policies. Section 92, it found, was silent concerning the sale of insurance "to persons and businesses located in different states." Id. at 2-3. The Letter then explained that the original statute had included an express geographic restriction (100 miles) applicable to loans on real estate.
According to the Letter, this restriction, coupled with the absence of one on insurance activities, indicated "congressional intent not to limit geographically a bank's market area for its insurance products." Id. at 3 (relying on expressio unius est exclusio alterius).
The Approval Letter next explained that section 92's legislative history -- essentially only a 1916 letter from Comptroller Williams to the Senate Banking and Currency Committee -- did "not directly address [the] geographic limitations" at issue. Id. Williams drafted and recommended the passage of what ultimately became section 92's insurance provision. See id.; see also 53 Cong. Rec. 11001 (1916).
Based on his comments, the Approval Letter concluded that the primary purpose of the insurance provision was to provide additional sources of revenue to national banks that, due to their location in small towns, "were having problems deriving a reasonable profit from their banking business." Approval Letter at 4 (citations omitted).
Allowing sales to customers outside the local population would further this purpose, the Letter reasoned, because the local population's demand for insurance might be too small "to improve significantly the bank's profitability. . . ." Id. In this regard, the Letter emphasized that the Comptroller had never imposed any geographic restrictions on the insurance activities of small town national banks, and that no relevant restrictions existed under Oregon law. Id. The Letter did not address the proposal's legality under the BHCA.
Based on this analysis, the Approval Letter authorized Bank Agency to "sell insurance . . . to existing and potential customers regardless of where [they] are located." Id. at 5. The only qualification was that Bank Agency "could not sell insurance . . . to customers located in a state where the" underwriter was not licensed to do business. Id. Subsequently, Bank Agency began offering insurance to customers in a number of states. The Federal Reserve Board has never taken any action regarding U.S. Bancorp's indirect involvement in these activities.
Plaintiffs assert that the Approval Letter, by authorizing geographically unlimited sales of insurance, sanctions violations of section 92 of the NBA and section 4(c)(8) of the BHCA.
They seek to enjoin the Comptroller to withdraw the Approval Letter and to refrain from granting similar approval to any other national bank. While plaintiffs concede that we lack jurisdiction to adjudicate their BHCA claim,
they urge us to find that the Comptroller erroneously approved ...